Exhibit 99.1

 

Tom Wojcik, Investor Relations		Brian Beades, Media Relations
212.810.8127		212.810.5596

 

 

BlackRock Reports Second Quarter 2016 Diluted EPS of $4.73, or $4.78 as adjusted

 

•

AUM of $4.9 trillion, up 4% year-over-year and 3% sequentially

•

$2 billion of long-term net inflows in the second quarter of 2016, and $126 billion over the last twelve months, demonstrate strength of diversified business model

•

2% decline in base fees year-over-year, driven by mix shift from equities to fixed income and cash

•

13% growth in Aladdin® revenue from the second quarter of 2015 reflects continued demand for risk management

•

2% decline in diluted EPS (4% as adjusted) year-over-year reflects mix shift and lower performance fees

•

Consistent capital management with $275 million of quarterly share repurchases

FINANCIAL RESULTS

 

(in millions, except per share data)		Q2 2016				Q2 2015				Change				Q1 2016				Change				Six Months Ended June 30,
																						2016				2015				Change
AUM		$	4,890,121			$	4,721,294				4	%		$	4,737,165				3	%		$	4,890,121			$	4,721,294				4	%
GAAP basis:
Revenue		$	2,804			$	2,905				(3	)%		$	2,624				7	%		$	5,428			$	5,628				(4	)%
Operating income		$	1,173			$	1,238				(5	)%		$	963				22	%		$	2,136			$	2,305				(7	)%
Operating margin			41.8	%			42.6	%			(80	) bps			36.7	%			510	bps			39.4	%			41.0	%			(160	) bps
Net income(1)		$	789			$	819				(4	)%		$	657				20	%		$	1,446			$	1,641				(12	)%
Diluted EPS		$	4.73			$	4.84				(2	)%		$	3.92				21	%		$	8.66			$	9.69				(11	)%
Weighted average diluted shares			166.6				169.1				(1	)%			167.4				—	%			167.0				169.4				(1	)%
As Adjusted:
Operating income(2)		$	1,179			$	1,248				(6	)%		$	1,047				13	%		$	2,226			$	2,325				(4	)%
Operating margin(2)			43.9	%			44.9	%			(100	) bps			41.6	%			230	bps			42.8	%			43.2	%			(40	) bps
Net income(1) (2)		$	797			$	838				(5	)%		$	711				12	%		$	1,508			$	1,668				(10	)%
Diluted EPS(2)		$	4.78			$	4.96				(4	)%		$	4.25				12	%		$	9.03			$	9.85				(8	)%

 

(1)	Net income represents net income attributable to BlackRock, Inc.

(2)	See notes (1) through (4) to the Condensed Consolidated Statements of Income and Supplemental Information on pages 13 through 15 for more information on as adjusted items and the reconciliation to GAAP.

New York, July 14, 2016 — BlackRock, Inc. (NYSE: BLK) today reported financial results for the three and six months ended June 30, 2016.

“Our clients are facing unprecedented challenges as they attempt to navigate the current investment environment,” said Chairman and Chief Executive Officer Laurence D. Fink. “Political and macroeconomic uncertainty, historically low yields and elevated market volatility are leading clients to pause, as evidenced by more than $55 trillion in bank deposits in the US, China and Japan alone.

“BlackRock generated $2 billion of long-term net flows in the quarter and $126 billion of inflows over the last twelve months, despite the impact of market headwinds and a slowdown in client activity. Beta and mix shift favored fixed income and cash relative to equities, and impacted second quarter base fees year-over-year.

“This market environment is creating greater opportunities for BlackRock to engage with clients – leading to more frequent and substantive conversations than ever before. Clients are seeking advice, goal-oriented investment solutions and risk management and technological expertise. The differentiated platform we have purposely built at BlackRock is resonating with clients. Our combination of active, index and alternative investment capabilities, powered by Aladdin’s industry-leading technology and risk management, positions us well to capture flows when client activity accelerates.

“We are seeing increasing evidence that our recent strategic investments are driving growth. iShares generated $16 billion of net new business during the quarter, with significant strength in fixed income and ‘smart-beta’ ETFs, as clients utilize these tools to manage risk and minimize volatility. We saw another strong quarter of capital raising in infrastructure, bringing total invested and committed capital to $8 billion, providing clients access to attractive long-term returns and stimulating needed economic growth. Finally, Aladdin revenue grew 13% year-over-year. The increasing

 

-1-

---

impact of technology on our industry continues to drive demand, as we signed one of our largest ever institutional clients during the quarter, and we remain focused on meeting the growing need for technology solutions in the retail sector.

“Now more than ever, BlackRock is uniquely positioned to provide innovative solutions to our clients’ complex investment and technology needs. Our focus remains on investing for the future so BlackRock can help clients meet their financial goals and deliver long-term value for shareholders.”

 

RESULTS BY CLIENT TYPE   (in millions), (unaudited)		Q2 2016 Net flows				June 30, 2016 AUM				Q2 2016 Base Fees(1)				June 30, 2016 AUM % of Total				Q2 2016 Base Fees(1) % of Total
Retail		$	(6,292	)		$	544,427			$	806				12	%			34	%
iShares			15,675				1,154,122				845				26	%			36	%
Institutional:
Active			(6,717	)			1,009,721				479				22	%			20	%
Index			(1,129	)			1,796,654				240				40	%			10	%
Total institutional			(7,846	)			2,806,375				719				62	%			30	%
Total long-term		$	1,537			$	4,504,924			$	2,370				100	%			100	%

 

RESULTS BY PRODUCT TYPE   (in millions), (unaudited)		Q2 2016 Net flows				June 30, 2016 AUM				Q2 2016 Base Fees(1)				June 30, 2016 AUM % of Total				Q2 2016 Base Fees(1) % of Total
Equity		$	(2,215	)		$	2,432,558			$	1,236				54	%			52	%
Fixed income			5,494				1,566,656				655				34	%			28	%
Multi-asset			(3,099	)			386,520				291				9	%			12	%
Alternatives			1,357				119,190				188				3	%			8	%
Total long-term		$	1,537			$	4,504,924			$	2,370				100	%			100	%

 

RESULTS BY INVESTMENT STYLE   (in millions), (unaudited)		Q2 2016 Net flows				June 30, 2016 AUM				Q2 2016 Base Fees(1)				June 30, 2016 AUM % of Total				Q2 2016 Base Fees(1) % of Total
Active		$	(12,812	)		$	1,510,424			$	1,277				34	%			54	%
Index and iShares			14,349				2,994,500				1,093				66	%			46	%
Total long-term		$	1,537			$	4,504,924			$	2,370				100	%			100	%

 

(1)	Base fees include investment advisory, administration fees and securities lending revenue.

Long-Term Business Highlights

Long-term net inflows of $4.1 billion and $9.3 billion from clients in the Americas and EMEA regions, respectively, were partially offset by net outflows of $11.9 billion from clients in Asia-Pacific. At June 30, 2016, BlackRock managed 63% of its long-term AUM for investors in the Americas and 37% for clients in EMEA and Asia-Pacific.

A discussion of the Company’s net flows by client type for the second quarter of 2016 is presented below.

 

¡

Retail long-term net outflows of $6.3 billion reflected net outflows of $2.7 billion and $3.6 billion from the United States and internationally, respectively. Fixed income saw net inflows of $2.3 billion, paced by flows into municipals and core bond funds. Equity net outflows of $4.9 billion were primarily related to outflows from international equities driven by market uncertainty and de-risking. Multi-asset net outflows of $2.6 billion were largely due to outflows from world allocation strategies.

 

¡

iShares long-term net inflows of $15.7 billion were driven by fixed income net inflows of $10.0 billion, diversified across corporate, emerging market and municipal bond funds. Equity net inflows of $3.4 billion reflected strong flows into the Core Series and Minimum Volatility funds. Commodities iShares generated $2.1 billion of net inflows.

 

¡

Institutional active long-term net outflows of $6.7 billion were primarily due to fixed income net outflows of $7.0 billion, driven by client re-allocation activity.

 

¡

Institutional index long-term net outflows of $1.1 billion reflected equity net outflows of $1.2 billion.

Cash management AUM increased 28% to $374.7 billion, primarily reflecting $80.6 billion in AUM acquired in the BofA^® Global Capital Management transaction.

Advisory AUM ended the second quarter at $10.5 billion.

 

-2-

---

INVESTMENT PERFORMANCE AT JUNE 30, 2016 ⁽¹⁾ 

 

		One-year period				Three-year period				Five-year period
Fixed Income:
Actively managed AUM above benchmark or peer median
Taxable			53	%			80	%			91	%
Tax-exempt			46	%			48	%			70	%
Index AUM within or above applicable tolerance			93	%			99	%			99	%
Equity:
Actively managed AUM above benchmark or peer median
Fundamental			63	%			67	%			51	%
Scientific			40	%			82	%			92	%
Index AUM within or above applicable tolerance			96	%			98	%			98	%

 

(1)	Past performance is not indicative of future results. The performance information shown is based on preliminary available data. Please refer to page 16 for performance disclosure detail.

Teleconference, Webcast and Presentation Information

Chairman and Chief Executive Officer, Laurence D. Fink, and Chief Financial Officer, Gary S. Shedlin, will host a teleconference call for investors and analysts on Thursday, July 14, 2016 at 8:30 a.m. (Eastern Time). Members of the public who are interested in participating in the teleconference should dial, from the United States, (800) 374-0176, or from outside the United States, (706) 679-8281, shortly before 8:30 a.m. and reference the BlackRock Conference Call (ID Number 38298849). A live, listen-only webcast will also be available via the investor relations section of www.blackrock.com.

Both the teleconference and webcast will be available for replay by 12:30 p.m. (Eastern Time) on Thursday, July 14, 2016 and ending at midnight on Thursday, July 28, 2016. To access the replay of the teleconference, callers from the United States should dial (855) 859-2056 and callers from outside the United States should dial (404) 537-3406 and enter the Conference ID Number 38298849. To access the webcast, please visit the investor relations section of www.blackrock.com.

About BlackRock

BlackRock is a global leader in investment management, risk management and advisory services for institutional and retail clients. At June 30, 2016, BlackRock’s AUM was $4.890 trillion. BlackRock helps clients around the world meet their goals and overcome challenges with a range of products that include separate accounts, mutual funds, iShares^® (exchange-traded funds), and other pooled investment vehicles. BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions^®. As of June 30, 2016, the firm had approximately 12,700 employees in more than 30 countries and a major presence in global markets, including North and South America, Europe, Asia, Australia and the Middle East and Africa. For additional information, please visit the Company’s website at www.blackrock.com | Twitter: @blackrock_news | Blog: www.blackrockblog.com | LinkedIn: www.linkedin.com/company/blackrock

 

3

---

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SUPPLEMENTAL INFORMATION

(in millions, except shares and per share data), (unaudited)

 

														Three Months
		Three Months Ended												Ended
		June 30,												March 31,
		2016				2015				Change				2016				Change
Revenue
Investment advisory, administration fees and securities lending revenue		$	2,489			$	2,534			$	(45	)		$	2,359			$	130
Investment advisory performance fees			74				136				(62	)			34				40
BlackRock Solutions and advisory			172				161				11				171				1
Distribution fees			11				13				(2	)			11				—
Other revenue			58				61				(3	)			49				9
Total revenue			2,804				2,905				(101	)			2,624				180
Expense
Employee compensation and benefits			977				1,012				(35	)			947				30
Distribution and servicing costs			109				105				4				97				12
Amortization of deferred sales commissions			9				12				(3	)			10				(1	)
Direct fund expense			195				191				4				188				7
General and administration			316				312				4				318				(2	)
Restructuring charge			—				—				—				76				(76	)
Amortization of intangible assets			25				35				(10	)			25				—
Total expense			1,631				1,667				(36	)			1,661				(30	)
Operating income			1,173				1,238				(65	)			963				210
Nonoperating income (expense)
Net gain (loss) on investments			20				6				14				(2	)			22
Interest and dividend income			6				5				1				5				1
Interest expense			(51	)			(52	)			1				(51	)			—
Total nonoperating income (expense)			(25	)			(41	)			16				(48	)			23
Income before income taxes			1,148				1,197				(49	)			915				233
Income tax expense			353				371				(18	)			268				85
Net income			795				826				(31	)			647				148
Less:
Net income (loss) attributable to noncontrolling interests			6				7				(1	)			(10	)			16
Net income attributable to BlackRock, Inc.		$	789			$	819			$	(30	)		$	657			$	132
Weighted-average common shares outstanding
Basic			164,758,612				166,616,558				(1,857,946	)			165,388,130				(629,518	)
Diluted			166,639,290				169,114,759				(2,475,469	)			167,398,938				(759,648	)
Earnings per share attributable to BlackRock, Inc. common stockholders (4)
Basic		$	4.79			$	4.92			$	(0.13	)		$	3.97			$	0.82
Diluted		$	4.73			$	4.84			$	(0.11	)		$	3.92			$	0.81
Cash dividends declared and paid per share		$	2.29			$	2.18			$	0.11			$	2.29			$	—
Supplemental information:
AUM (end of period)		$	4,890,121			$	4,721,294			$	168,827			$	4,737,165			$	152,956
Shares outstanding (end of period)			164,463,297				166,379,267				(1,915,970	)			165,174,069				(710,772	)
GAAP:
Operating margin			41.8	%			42.6	%			(80	) bps			36.7	%			510	bps
Effective tax rate			30.9	%			31.2	%			(30	) bps			29.0	%			190	bps
As adjusted:
Operating income (1)		$	1,179			$	1,248			$	(69	)		$	1,047			$	132
Operating margin (1)			43.9	%			44.9	%			(100	) bps			41.6	%			230	bps
Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests (2)		$	(31	)		$	(50	)		$	19			$	(38	)		$	7
Net income attributable to BlackRock, Inc. (3)		$	797			$	838			$	(41	)		$	711			$	86
Diluted earnings attributable to BlackRock, Inc. common stockholders per share (3) (4)		$	4.78			$	4.96			$	(0.18	)		$	4.25			$	0.53
Effective tax rate			30.6	%			30.1	%			50	bps			29.6	%			100	bps

See pages 13-15 for the reconciliation to GAAP and notes (1) through (4) for more information on as adjusted items.

 

-4-

---

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SUPPLEMENTAL INFORMATION

(in millions, except shares and per share data), (unaudited)

 

		Six Months Ended
		June 30,
		2016				2015				Change
Revenue
Investment advisory, administration fees and securities lending revenue		$	4,848			$	4,924			$	(76	)
Investment advisory performance fees			108				244				(136	)
BlackRock Solutions and advisory			343				308				35
Distribution fees			22				30				(8	)
Other revenue			107				122				(15	)
Total revenue			5,428				5,628				(200	)
Expense
Employee compensation and benefits			1,924				1,993				(69	)
Distribution and servicing costs			206				204				2
Amortization of deferred sales commissions			19				25				(6	)
Direct fund expense			383				380				3
General and administration			634				651				(17	)
Restructuring charge			76				—				76
Amortization of intangible assets			50				70				(20	)
Total expense			3,292				3,323				(31	)
Operating income			2,136				2,305				(169	)
Nonoperating income (expense)
Net gain (loss) on investments			18				69				(51	)
Interest and dividend income			11				9				2
Interest expense			(102	)			(103	)			1
Total nonoperating income (expense)			(73	)			(25	)			(48	)
Income before income taxes			2,063				2,280				(217	)
Income tax expense			621				629				(8	)
Net income			1,442				1,651				(209	)
Less:
Net income (loss) attributable to noncontrolling interests			(4	)			10				(14	)
Net income attributable to BlackRock, Inc.		$	1,446			$	1,641			$	(195	)
Weighted-average common shares outstanding
Basic			165,073,371				166,851,492				(1,778,121	)
Diluted			167,023,559				169,418,964				(2,395,405	)
Earnings per share attributable to BlackRock, Inc. common stockholders (4)
Basic		$	8.76			$	9.84			$	(1.08	)
Diluted		$	8.66			$	9.69			$	(1.03	)
Cash dividends declared and paid per share		$	4.58			$	4.36			$	0.22
Supplemental information:
AUM (end of period)		$	4,890,121			$	4,721,294			$	168,827
Shares outstanding (end of period)			164,463,297				166,379,267				(1,915,970	)
GAAP:
Operating margin			39.4	%			41.0	%			(160)	bps
Effective tax rate			30.1	%			27.7	%			240	bps
As adjusted:
Operating income (1)		$	2,226			$	2,325			$	(99	)
Operating margin (1)			42.8	%			43.2	%			(40)	bps
Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests (2)		$	(69	)		$	(39	)		$	(30	)
Net income attributable to BlackRock, Inc. (3)		$	1,508			$	1,668			$	(160	)
Diluted earnings attributable to BlackRock, Inc. common stockholders per share (3) (4)		$	9.03			$	9.85			$	(0.82	)
Effective tax rate			30.1	%			27.0	%			310	bps

See pages 13-15 for the reconciliation to GAAP and notes (1) through (4) for more information on as adjusted items.

 

-5-

---

ASSETS UNDER MANAGEMENT

(in millions), (unaudited)

Current Quarter Component Changes by Client Type and Product

 

		March 31, 2016				Net inflows (outflows)				Acquisition (1)				Market Change				FX impact (2)				June 30, 2016				Average AUM (3)
Retail:
Equity		$	193,436			$	(4,887	)		$	—			$	6,091			$	(2,660	)		$	191,980			$	194,197
Fixed Income			217,209				2,317				—				5,250				(1,066	)			223,710				221,062
Multi-Asset			113,291				(2,581	)			—				1,271				(525	)			111,456				112,902
Alternatives			18,730				(1,141	)			—				(162	)			(146	)			17,281				17,971
Retail subtotal			542,666				(6,292	)			—				12,450				(4,397	)			544,427				546,132
iShares:
Equity			818,104				3,431				—				7,661				(2,428	)			826,768				826,127
Fixed Income			291,132				10,026				—				5,720				(1,982	)			304,896				297,883
Multi-Asset			2,166				122				—				41				(1	)			2,328				2,255
Alternatives			16,152				2,096				—				1,915				(33	)			20,130				17,905
iShares subtotal			1,127,554				15,675				—				15,337				(4,444	)			1,154,122				1,144,170
Institutional:
Active:
Equity			118,833				482				—				2,529				(1,717	)			120,127				120,312
Fixed Income			544,244				(6,977	)			—				13,064				(645	)			549,686				545,509
Multi-Asset			262,010				(131	)			—				7,024				(3,966	)			264,937				263,270
Alternatives			75,104				(91	)			—				526				(568	)			74,971				75,404
Active subtotal			1,000,191				(6,717	)			—				23,143				(6,896	)			1,009,721				1,004,495
Index:
Equity			1,277,802				(1,241	)			—				20,404				(3,282	)			1,293,683				1,292,312
Fixed Income			472,568				128				—				30,198				(14,530	)			488,364				477,717
Multi-Asset			7,776				(509	)			—				330				202				7,799				7,570
Alternatives			6,003				493				—				487				(175	)			6,808				6,406
Index subtotal			1,764,149				(1,129	)			—				51,419				(17,785	)			1,796,654				1,784,005
Institutional subtotal			2,764,340				(7,846	)			—				74,562				(24,681	)			2,806,375				2,788,500
Long-term			4,434,560				1,537				—				102,349				(33,522	)			4,504,924				4,478,802
Cash Management			291,986				5,015				80,635				8				(2,960	)			374,684				353,432
Advisory (4)			10,619				(48	)			—				15				(73	)			10,513				10,624
Total		$	4,737,165			$	6,504			$	80,635			$	102,372			$	(36,555	)		$	4,890,121			$	4,842,858
Current Quarter Component Changes by Product (Long-term)
		March 31, 2016				Net inflows (outflows)				Acquisition				Market Change				FX impact (2)				June 30, 2016				Average AUM (3)
Equity:
Active		$	276,281			$	(3,880	)		$	—			$	7,093			$	(3,146	)		$	276,348			$	278,552
iShares			818,104				3,431				—				7,661				(2,428	)			826,768				826,127
Non-ETF index			1,313,790				(1,766	)			—				21,931				(4,513	)			1,329,442				1,328,269
Equity subtotal			2,408,175				(2,215	)			—				36,685				(10,087	)			2,432,558				2,432,948
Fixed income:
Active			753,711				(4,987	)			—				17,962				(1,255	)			765,431				758,738
iShares			291,132				10,026				—				5,720				(1,982	)			304,896				297,883
Non-ETF index			480,310				455				—				30,550				(14,986	)			496,329				485,550
Fixed income subtotal			1,525,153				5,494				—				54,232				(18,223	)			1,566,656				1,542,171
Multi-asset			385,243				(3,099	)			—				8,666				(4,290	)			386,520				385,997
Alternatives:
Core			91,639				(1,153	)			—				313				(887	)			89,912				91,072
Currency and commodities (5)			24,350				2,510				—				2,453				(35	)			29,278				26,614
Alternatives subtotal			115,989				1,357				—				2,766				(922	)			119,190				117,686
Long-term		$	4,434,560			$	1,537			$	—			$	102,349			$	(33,522	)		$	4,504,924			$	4,478,802
Current Quarter Component Changes by Investment Style (Long-term)
		March 31, 2016				Net inflows (outflows)				Acquisition				Market Change				FX impact (2)				June 30, 2016				Average AUM (3)
Active		$	1,499,128			$	(12,812	)		$	—			$	33,714			$	(9,606	)		$	1,510,424			$	1,506,836
Index and iShares			2,935,432				14,349				—				68,635				(23,916	)			2,994,500				2,971,966
Long-term		$	4,434,560			$	1,537			$	—			$	102,349			$	(33,522	)		$	4,504,924			$	4,478,802

 

(1)	Amount represents $80.6 billion of AUM acquired in the BofA Global Capital Management transaction in April 2016.

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

(3)	Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing four months.

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

(5)	Amounts include commodity iShares.

 

-6-

---

ASSETS UNDER MANAGEMENT

(in millions), (unaudited)

Year-to-Date Changes by Client Type and Product

 

		December 31, 2015				Net inflows (outflows)				Acquisition (1)				Market Change				FX impact (2)				June 30, 2016				Average AUM (3)
Retail:
Equity		$	193,755			$	(5,282	)		$	—			$	5,380			$	(1,873	)		$	191,980			$	190,233
Fixed Income			212,653				4,438				—				6,701				(82	)			223,710				217,268
Multi-Asset			115,307				(4,217	)			—				782				(416	)			111,456				112,436
Alternatives			19,410				(1,591	)			—				(613	)			75				17,281				18,472
Retail subtotal			541,125				(6,652	)			—				12,250				(2,296	)			544,427				538,409
iShares:
Equity			823,156				(1,255	)			—				2,120				2,747				826,768				805,871
Fixed Income			254,190				37,508				—				12,519				679				304,896				283,690
Multi-Asset			2,730				(464	)			—				54				8				2,328				2,289
Alternatives			12,485				4,133				—				3,480				32				20,130				16,068
iShares subtotal			1,092,561				39,922				—				18,173				3,466				1,154,122				1,107,918
Institutional:
Active:
Equity			121,442				(1,288	)			—				1,005				(1,032	)			120,127				117,890
Fixed Income			514,428				3,907				—				28,240				3,111				549,686				534,858
Multi-Asset			252,041				1,131				—				12,011				(246	)			264,937				257,134
Alternatives			74,941				331				—				(17	)			(284	)			74,971				74,909
Active subtotal			962,852				4,081				—				41,239				1,549				1,009,721				984,791
Index:
Equity			1,285,419				(12,067	)			—				15,021				5,310				1,293,683				1,266,701
Fixed Income			441,097				11,814				—				50,001				(14,548	)			488,364				463,891
Multi-Asset			6,258				(117	)			—				1,246				412				7,799				7,186
Alternatives			6,003				635				—				408				(238	)			6,808				6,237
Index subtotal			1,738,777				265				—				66,676				(9,064	)			1,796,654				1,744,015
Institutional subtotal			2,701,629				4,346				—				107,915				(7,515	)			2,806,375				2,728,806
Long-term			4,335,315				37,616				—				138,338				(6,345	)			4,504,924				4,375,133
Cash Management			299,884				(3,140	)			80,635				(13	)			(2,682	)			374,684				328,543
Advisory (4)			10,213				(145	)			—				(107	)			552				10,513				10,433
Total		$	4,645,412			$	34,331			$	80,635			$	138,218			$	(8,475	)		$	4,890,121			$	4,714,109
Year-to-Date Component Changes by Product (Long-term)
		December 31, 2015				Net inflows (outflows)				Acquisition				Market Change				FX impact (2)				June 30, 2016				Average AUM (3)
Equity:
Active		$	281,319			$	(7,850	)		$	—			$	4,257			$	(1,378	)		$	276,348			$	273,821
iShares			823,156				(1,255	)			—				2,120				2,747				826,768				805,871
Non-ETF index			1,319,297				(10,787	)			—				17,149				3,783				1,329,442				1,301,003
Equity subtotal			2,423,772				(19,892	)			—				23,526				5,152				2,432,558				2,380,695
Fixed income:
Active			719,653				7,928				—				34,272				3,578				765,431				744,516
iShares			254,190				37,508				—				12,519				679				304,896				283,690
Non-ETF index			448,525				12,231				—				50,670				(15,097	)			496,329				471,501
Fixed income subtotal			1,422,368				57,667				—				97,461				(10,840	)			1,566,656				1,499,707
Multi-asset			376,336				(3,667	)			—				14,093				(242	)			386,520				379,045
Alternatives:
Core			92,085				(973	)			—				(683	)			(517	)			89,912				91,079
Currency and commodities (5)			20,754				4,481				—				3,941				102				29,278				24,607
Alternatives subtotal			112,839				3,508				—				3,258				(415	)			119,190				115,686
Long-term		$	4,335,315			$	37,616			$	—			$	138,338			$	(6,345	)		$	4,504,924			$	4,375,133
Year-to-Date Component Changes by Investment Style (Long-term)
		December 31, 2015				Net inflows (outflows)				Acquisition				Market Change				FX impact (2)				June 30, 2016				Average AUM (3)
Active		$	1,462,672			$	(4,266	)		$	—			$	50,688			$	1,330			$	1,510,424			$	1,481,289
Index and iShares			2,872,643				41,882				—				87,650				(7,675	)			2,994,500				2,893,844
Long-term		$	4,335,315			$	37,616			$	—			$	138,338			$	(6,345	)		$	4,504,924			$	4,375,133

 

(1)	Amount represents $80.6 billion of AUM acquired in the BofA Global Capital Management transaction in April 2016.

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

(3)	Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing seven months.

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

(5)	Amounts include commodity iShares.

 

-7-

---

ASSETS UNDER MANAGEMENT

(in millions), (unaudited)

Year-over-Year Component Changes by Client Type and Product

 

		June 30, 2015				Net inflows (outflows)				Acquisition (1)				Market Change				FX impact (2)				June 30, 2016				Average AUM (3)
Retail:
Equity		$	203,373			$	2,630			$	—			$	(9,364	)		$	(4,659	)		$	191,980			$	193,092
Fixed Income			209,056				12,963				—				2,736				(1,045	)			223,710				214,434
Multi-Asset			129,188				(7,639	)			366				(9,441	)			(1,018	)			111,456				117,523
Alternatives			19,445				(1,029	)			—				(1,039	)			(96	)			17,281				19,089
Retail subtotal			561,062				6,925				366				(17,108	)			(6,818	)			544,427				544,138
iShares:
Equity			828,057				51,620				—				(49,596	)			(3,313	)			826,768				804,479
Fixed Income			230,735				67,678				—				8,511				(2,028	)			304,896				265,625
Multi-Asset			1,844				527				—				(35	)			(8	)			2,328				2,098
Alternatives			14,953				3,620				—				1,601				(44	)			20,130				15,033
iShares subtotal			1,075,589				123,445				—				(39,519	)			(5,393	)			1,154,122				1,087,235
Institutional:
Active:
Equity			128,032				(158	)			—				(3,722	)			(4,025	)			120,127				120,420
Fixed Income			517,251				4,634				—				29,597				(1,796	)			549,686				529,160
Multi-Asset			256,964				3,406				—				9,684				(5,117	)			264,937				256,501
Alternatives			73,236				2,445				560				(332	)			(938	)			74,971				74,607
Active subtotal			975,483				10,327				560				35,227				(11,876	)			1,009,721				980,688
Index:
Equity			1,345,855				(14,886	)			—				(29,110	)			(8,176	)			1,293,683				1,284,269
Fixed Income			465,392				201				—				54,776				(32,005	)			488,364				465,324
Multi-Asset			7,013				(635	)			—				1,066				355				7,799				7,068
Alternatives			6,495				1,117				—				(384	)			(420	)			6,808				6,277
Index subtotal			1,824,755				(14,203	)			—				26,348				(40,246	)			1,796,654				1,762,938
Institutional subtotal			2,800,238				(3,876	)			560				61,575				(52,122	)			2,806,375				2,743,626
Long-term			4,436,889				126,494				926				4,948				(64,333	)			4,504,924				4,374,999
Cash Management			271,506				27,698				80,635				270				(5,425	)			374,684				306,240
Advisory (4)			12,899				(2,025	)			—				(36	)			(325	)			10,513				11,097
Total		$	4,721,294			$	152,167			$	81,561			$	5,182			$	(70,083	)		$	4,890,121			$	4,692,336
Year-over-Year Component Changes by Product (Long-term)
		June 30, 2015				Net inflows (outflows)				Acquisition (1)				Market Change				FX impact (2)				June 30, 2016				Average AUM (3)
Equity:
Active		$	298,884			$	(2,106	)		$	—			$	(14,478	)		$	(5,952	)		$	276,348			$	280,032
iShares			828,057				51,620				—				(49,596	)			(3,313	)			826,768				804,479
Non-ETF index			1,378,376				(10,308	)			—				(27,718	)			(10,908	)			1,329,442				1,317,749
Equity subtotal			2,505,317				39,206				—				(91,792	)			(20,173	)			2,432,558				2,402,260
Fixed income:
Active			718,853				16,912				—				31,538				(1,872	)			765,431				736,047
iShares			230,735				67,678				—				8,511				(2,028	)			304,896				265,625
Non-ETF index			472,846				886				—				55,571				(32,974	)			496,329				472,871
Fixed income subtotal			1,422,434				85,476				—				95,620				(36,874	)			1,566,656				1,474,543
Multi-asset			395,009				(4,341	)			366				1,274				(5,788	)			386,520				383,190
Alternatives:
Core			89,954				2,079				560				(1,305	)			(1,376	)			89,912				91,148
Currency and commodities (5)			24,175				4,074				—				1,151				(122	)			29,278				23,858
Alternatives subtotal			114,129				6,153				560				(154	)			(1,498	)			119,190				115,006
Long-term		$	4,436,889			$	126,494			$	926			$	4,948			$	(64,333	)		$	4,504,924			$	4,374,999
Year-over-Year Component Changes by Investment Style (Long-term)
		June 30, 2015				Net inflows (outflows)				Acquisition (1)				Market Change				FX impact (2)				June 30, 2016				Average AUM (3)
Active		$	1,496,571			$	11,987			$	926			$	15,933			$	(14,993	)		$	1,510,424			$	1,483,802
Index and iShares			2,940,318				114,507				—				(10,985	)			(49,340	)			2,994,500				2,891,197
Long-term		$	4,436,889			$	126,494			$	926			$	4,948			$	(64,333	)		$	4,504,924			$	4,374,999

 

(1)

Amounts represent $560 million of AUM acquired in the Infraestructura Institucional acquisition in October 2015, $366 million of AUM acquired in the FutureAdvisor acquisition in October 2015 and $80.6 billion of AUM acquired in the BofA Global Capital Management transaction in April 2016. The FutureAdvisor acquisition amount does not include AUM that was held in iShares holdings.

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

(3)	Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing thirteen months.

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

(5)	Amounts include commodity iShares.

 

-8-

---

SUMMARY OF REVENUE

 

		Three Months Ended June 30,								Change				Three Months Ended March 31, 2016				Change				Six Months Ended June 30,
(in millions), (unaudited)		2016				2015																2016				2015				Change
Investment advisory, administration fees and securities lending revenue:
Equity:
Active		$	406			$	447			$	(41	)		$	386			$	20			$	792			$	869			$	(77	)
iShares			656				728				(72	)			623				33				1,279				1,412				(133	)
Non-ETF Index			174				190				(16	)			164				10				338				353				(15	)
Equity subtotal			1,236				1,365				(129	)			1,173				63				2,409				2,634				(225	)
Fixed income:
Active			414				387				27				396				18				810				760				50
iShares			172				138				34				152				20				324				268				56
Non-ETF Index			69				72				(3	)			70				(1	)			139				140				(1	)
Fixed income subtotal			655				597				58				618				37				1,273				1,168				105
Multi-asset			291				316				(25	)			284				7				575				620				(45	)
Alternatives:
Core			168				161				7				164				4				332				315				17
Currency and commodities			20				19				1				17				3				37				38				(1	)
Alternatives subtotal			188				180				8				181				7				369				353				16
Long-term			2,370				2,458				(88	)			2,256				114				4,626				4,775				(149	)
Cash management			119				76				43				103				16				222				149				73
Total base fees			2,489				2,534				(45	)			2,359				130				4,848				4,924				(76	)
Investment advisory performance fees:
Equity			42				61				(19	)			11				31				53				98				(45	)
Fixed income			2				3				(1	)			5				(3	)			7				7				—
Multi-asset			2				8				(6	)			3				(1	)			5				16				(11	)
Alternatives			28				64				(36	)			15				13				43				123				(80	)
Total performance fees			74				136				(62	)			34				40				108				244				(136	)
BlackRock Solutions and advisory			172				161				11				171				1				343				308				35
Distribution fees			11				13				(2	)			11				—				22				30				(8	)
Other revenue			58				61				(3	)			49				9				107				122				(15	)
Total revenue		$	2,804			$	2,905			$	(101	)		$	2,624			$	180			$	5,428			$	5,628			$	(200	)

Highlights

 

•

Investment advisory, administration fees and securities lending revenue decreased $45 million from the second quarter of 2015 reflecting mix shift from equities to fixed income and cash products, partially offset by lower yield-related waivers on certain money market funds and the effect of AUM acquired in the BofA Global Capital Management transaction. Securities lending revenue of $151 million in the current quarter increased $4 million from the second quarter of 2015.

Investment advisory, administration fees and securities lending revenue increased $130 million from the first quarter of 2016, driven by higher average AUM.

 

•

Performance fees decreased $62 million from the second quarter of 2015, primarily reflecting lower fees from alternative and equity products, and increased $40 million from the first quarter of 2016.

 

•

BlackRock Solutions® and advisory revenue increased $11 million from the second quarter of 2015. BlackRock Solutions and advisory revenue included $146 million of Aladdin® revenue in the current quarter compared with $129 million in the second quarter of 2015 and $141 million in the first quarter of 2016.

 

-9-

---

SUMMARY OF OPERATING EXPENSE

 

		Three Months Ended June 30,												Three Months Ended								Six Months Ended June 30,
(in millions), (unaudited)		2016				2015				Change				March 31, 2016				Change				2016				2015				Change
Operating Expense
Employee compensation and benefits		$	977			$	1,012			$	(35	)		$	947			$	30			$	1,924			$	1,993			$	(69	)
Distribution and servicing costs			109				105				4				97				12				206				204				2
Amortization of deferred sales commissions			9				12				(3	)			10				(1	)			19				25				(6	)
Direct fund expense			195				191				4				188				7				383				380				3
General and administration			316				312				4				318				(2	)			634				651				(17	)
Restructuring charge			—				—				—				76				(76	)			76				—				76
Amortization of intangible assets			25				35				(10	)			25				—				50				70				(20	)
Total Operating Expense		$	1,631			$	1,667			$	(36	)		$	1,661			$	(30	)		$	3,292			$	3,323			$	(31	)

Highlights

 

•

Employee compensation and benefits decreased $35 million from the second quarter of 2015, reflecting lower incentive compensation, driven primarily by lower operating income and performance fees.

Employee compensation and benefits increased $30 million from the first quarter of 2016, reflecting higher incentive compensation, driven by higher operating income and performance fees, partially offset by lower seasonal employer payroll taxes.

 

•

A restructuring charge of $76 million, primarily comprised of severance and accelerated amortization expense of previously granted deferred compensation awards, was recorded in the first quarter of 2016 in connection with a project to streamline and simplify the organization.

INCOME TAX EXPENSE

 

		Three Months Ended June 30,												Three Months  Ended								Six Months Ended June 30,
(in millions), (unaudited)		2016				2015				Change				March 31, 2016				Change				2016				2015				Change
Income tax expense		$	353			$	371			$	(18	)		$	268			$	85			$	621			$	629			$	(8	)

Highlights

 

•

The second quarter 2016 and 2015 income tax expense included a $4 million and $13 million net noncash expense, respectively, primarily related to the revaluation of certain deferred income tax liabilities as a result of domestic state and local tax changes.

 

•

The first quarter 2016 income tax expense included a $4 million net noncash benefit, primarily related to the revaluation of certain deferred income tax liabilities, including the effect of tax legislation enacted in Japan and domestic state and local tax changes.

 

-10-

---

SUMMARY OF NONOPERATING INCOME (EXPENSE)

 

				Three Months Ended June 30,												Three Months Ended March 31, 2016								Six Months Ended June 30,
(in millions), (unaudited)				2016				2015				Change								Change				2016				2015				Change
Nonoperating income (expense), GAAP basis				$	(25	)		$	(41	)		$	16			$	(48	)		$	23			$	(73	)		$	(25	)		$	(48	)
Less: Net income (loss) attributable to NCI					6				7				(1	)			(10	)			16				(4	)			10				(14	)
Nonoperating income (expense)(1)				$	(31	)		$	(48	)		$	17			$	(38	)		$	7			$	(69	)		$	(35	)		$	(34	)
		Estimated economic investments at June 30, 2016(3)		Three Months Ended June 30,												Three Months Ended March 31, 2016								Six Months Ended June 30,
(in millions), (unaudited)				2016				2015				Change								Change				2016				2015				Change
Net gain (loss) on investments(1) (2)
Private equity		20-25%		$	7			$	9			$	(2	)		$	2			$	5			$	9			$	10			$	(1	)
Real assets		5-10%			1				2				(1	)			2				(1	)			3				4				(1	)
Other alternatives(4)		15-20%			4				—				4				—				4				4				4				—
Other investments(5)		50-55%			2				(12	)			14				4				(2	)			6				(4	)			10
Subtotal					14				(1	)			15				8				6				22				14				8
Other gains(6)					—				—				—				—				—				—				45				(45	)
Total net gain (loss) on investments(1)					14				(1	)			15				8				6				22				59				(37	)
Interest and dividend income					6				5				1				5				1				11				9				2
Interest expense					(51	)			(52	)			1				(51	)			—				(102	)			(103	)			1
Net interest expense					(45	)			(47	)			2				(46	)			1				(91	)			(94	)			3
Total nonoperating income (expense)(1)					(31	)			(48	)			17				(38	)			7				(69	)			(35	)			(34	)
Compensation expense related to (appreciation) depreciation on deferred compensation plans					—				(2	)			2				—				—				—				(4	)			4
Nonoperating income (expense), as adjusted(1)				$	(31	)		$	(50	)		$	19			$	(38	)		$	7			$	(69	)		$	(39	)		$	(30	)

 

(1)	Net of net income (loss) attributable to noncontrolling interests (“NCI”).

(2)	Amounts include net gain (loss) on consolidated variable interest entities.

(3)

Percentages represent estimated percentages of BlackRock’s corporate economic investment portfolio at June 30, 2016. Economic investment amounts at March 31, 2016 for private equity, real assets, other alternatives and other investments were $360 million, $104 million, $227 million and $871 million, respectively.

(4)	Amounts primarily include net gains (losses) related to direct hedge fund strategies and hedge fund solutions.

(5)	Amounts include net gains (losses) related to equity and fixed income investments, and BlackRock’s seed capital hedging program.

(6)	Amount for the six months ended June 30, 2015 primarily includes a gain related to the acquisition of certain assets of BlackRock Kelso Capital Advisors LLC.

Highlights

 

•

Net gain (loss) on investments increased from the second quarter of 2015 and first quarter of 2016 due to higher marks in the second quarter of 2016.

 

-11-

---

ECONOMIC TANGIBLE ASSETS

The Company presents economic tangible assets as additional information to enable investors to exclude certain assets that have equal and offsetting liabilities or noncontrolling interests that ultimately do not have an impact on stockholders’ equity or cash flows. In addition, goodwill and intangible assets are excluded from economic tangible assets.

Economic tangible assets include cash, receivables, seed and co-investments, regulatory investments and other assets.

 

(in billions), (unaudited)		June 30, 2016 (Est.)				December 31, 2015
Total balance sheet assets		$	222			$	225
Separate account assets and separate account collateral held under securities lending agreements			(179	)			(182	)
Consolidated sponsored investment funds			(1	)			(1	)
Goodwill and intangible assets, net			(31	)			(30	)
Economic tangible assets		$	11			$	12

 

-12-

---

RECONCILIATION OF U.S. GAAP OPERATING INCOME AND OPERATING MARGIN TO OPERATING INCOME AND OPERATING MARGIN, AS ADJUSTED

 

		Three Months Ended												Six Months Ended
		June 30,								March 31,				June 30,
(in millions), (unaudited)		2016				2015				2016				2016				2015
Operating income, GAAP basis		$	1,173			$	1,238			$	963			$	2,136			$	2,305
Non-GAAP expense adjustments:
Restructuring charge			—				—				76				76				—
PNC LTIP funding obligation			6				8				8				14				16
Compensation expense related to appreciation (depreciation) on deferred compensation plans			—				2				—				—				4
Operating income, as adjusted			1,179				1,248				1,047				2,226				2,325
Product launch costs and commissions			—				5				—				—				5
Operating income used for operating margin measurement		$	1,179			$	1,253			$	1,047			$	2,226			$	2,330
Revenue, GAAP basis		$	2,804			$	2,905			$	2,624			$	5,428			$	5,628
Non-GAAP adjustments:
Distribution and servicing costs			(109	)			(105	)			(97	)			(206	)			(204	)
Amortization of deferred sales commissions			(9	)			(12	)			(10	)			(19	)			(25	)
Revenue used for operating margin measurement		$	2,686			$	2,788			$	2,517			$	5,203			$	5,399
Operating margin, GAAP basis			41.8	%			42.6	%			36.7	%			39.4	%			41.0	%
Operating margin, as adjusted			43.9	%			44.9	%			41.6	%			42.8	%			43.2	%
See note (1) to the Condensed Consolidated Statements of Income and Supplemental Information on page 14 for more information on as adjusted items and the reconciliation to GAAP.
RECONCILIATION OF U.S. GAAP NONOPERATING INCOME NET OF NCI TO NONOPERATING INCOME NET OF NCI, AS ADJUSTED
		Three Months Ended												Six Months Ended
		June 30,								March 31,				June 30,
(in millions), (unaudited)		2016				2015				2016				2016				2015
Nonoperating income (expense), GAAP basis		$	(25	)		$	(41	)		$	(48	)		$	(73	)		$	(25	)
Less: Net income (loss) attributable to NCI			6				7				(10	)			(4	)			10
Nonoperating income (expense), net of NCI			(31	)			(48	)			(38	)			(69	)			(35	)
Compensation expense related to (appreciation) depreciation on deferred compensation plans			—				(2	)			—				—				(4	)
Nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted		$	(31	)		$	(50	)		$	(38	)		$	(69	)		$	(39	)
See note (2) to the Condensed Consolidated Statements of Income and Supplemental Information on page 14 for more information on as adjusted items and the reconciliation to GAAP.
RECONCILIATION OF U.S. GAAP NET INCOME ATTRIBUTABLE TO BLACKROCK TO NET INCOME ATTRIBUTABLE TO BLACKROCK, AS ADJUSTED
		Three Months Ended												Six Months Ended
		June 30,								March 31,				June 30,
(in millions, except per share data), (unaudited)		2016				2015				2016				2016				2015
Net income attributable to BlackRock, Inc., GAAP basis		$	789			$	819			$	657			$	1,446			$	1,641
Non-GAAP adjustments:
Restructuring charge, net of tax			—				—				53				53				—
PNC LTIP funding obligation, net of tax			4				6				5				9				11
Income tax matters			4				13				(4	)			—				16
Net income attributable to BlackRock, Inc., as adjusted		$	797			$	838			$	711			$	1,508			$	1,668
Diluted weighted-average common shares outstanding(4)			166.6				169.1				167.4				167.0				169.4
Diluted earnings per common share, GAAP basis(4)		$	4.73			$	4.84			$	3.92			$	8.66			$	9.69
Diluted earnings per common share, as adjusted(4)		$	4.78			$	4.96			$	4.25			$	9.03			$	9.85

See notes (3) and (4) to the Condensed Consolidated Statements of Income and Supplemental Information on page 15 for more information on as adjusted items and the reconciliation to GAAP.

 

-13-

---

NOTES TO CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SUPPLEMENTAL INFORMATION (unaudited)

BlackRock reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP”); however, management believes evaluating the Company’s ongoing operating results may be enhanced if investors have additional non-GAAP 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. Management also uses non-GAAP financial measures as a benchmark to compare its performance with other companies and to enhance the comparability of this information for the reporting periods presented. Non-GAAP measures may pose limitations because they do not include all of BlackRock’s revenue and expense. 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.

Management uses both GAAP and non-GAAP financial measures in evaluating BlackRock’s financial performance. Adjustments to GAAP financial measures (“non-GAAP adjustments”) include certain items management deems nonrecurring or that occur infrequently, transactions that ultimately will not impact BlackRock’s book value or certain tax items that do not impact cash flow.

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

(1) Operating income, as adjusted, and operating margin, as adjusted: 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, includes non-GAAP expense adjustments. A restructuring charge comprised of severance and accelerated amortization expense of previously granted deferred compensation awards has been excluded to provide more meaningful analysis of BlackRock’s ongoing operations and to ensure comparability among periods presented. 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 The PNC Financial Services Group, Inc. (“PNC”) has been excluded because it ultimately does not impact BlackRock’s book value. 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 nonoperating income (expense).

 

•

Operating income used for measuring operating margin, as adjusted, is equal to operating income, as adjusted, excluding the impact of product launch costs (e.g. closed-end fund launch costs) and related commissions. Management believes the exclusion of such costs and related commissions is useful because these costs can fluctuate considerably and revenue associated with the expenditure of these costs will not fully impact BlackRock’s results until future periods.

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 the Company earns. 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 revenue.

(2) Nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted: Nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted, equals nonoperating income (expense), GAAP basis, less net income (loss) attributable to NCI, adjusted for compensation expense associated with (appreciation) depreciation on investments related to certain BlackRock deferred compensation plans. The compensation expense offset is recorded in operating income. This compensation expense has been included in nonoperating 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 nonoperating income (expense), GAAP basis.

Management believes nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted, provides comparability of information among reporting periods and is an effective measure for reviewing BlackRock’s nonoperating contribution to results.

 

-14-

---

(3) Net income attributable to BlackRock, Inc., as adjusted: Management believes net income attributable to BlackRock, Inc., 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, Inc., as adjusted, equals net income attributable to BlackRock, Inc., GAAP basis, adjusted for significant nonrecurring items, charges that ultimately will not impact BlackRock’s book value or certain tax items that do not impact cash flow.

See aforementioned discussion regarding operating income, as adjusted, and operating margin, as adjusted, for information on the PNC LTIP funding obligation and restructuring charge.

For each period presented, the non-GAAP adjustment related to the restructuring charge and PNC LTIP funding obligation was tax effected at the respective blended rates applicable to the adjustments. The three months ended June 30, 2016 and March 31, 2016 reflected a $4 million noncash expense and $4 million noncash tax benefit, respectively, primarily associated with the revaluation of certain deferred tax liabilities related to intangible assets and goodwill. The three and six months ended June 30, 2015 included $13 million and $16 million, respectively, of net noncash tax expense primarily related to the revaluation of certain deferred tax liabilities. Amounts have been excluded from the as adjusted results as these items will not have a cash flow impact and to ensure comparability among periods presented.

Per share amounts reflect net income attributable to BlackRock, as adjusted divided by diluted weighted average common shares outstanding.

(4) Nonvoting participating preferred stock is considered to be a common stock equivalent for purposes of determining basic and diluted earnings per share calculations.

 

-15-

---

Forward-looking Statements

This earnings release, 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 earnings release, 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, information and cyber 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 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.

BlackRock’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and BlackRock’s subsequent filings with the SEC, accessible on the SEC’s website at www.sec.gov and on BlackRock’s website at www.blackrock.com, discuss these factors in more detail and identify additional factors that can affect forward-looking statements. The information contained on the Company’s website is not a part of this earnings release.

Performance Notes

Past performance is not indicative of future results. Except as specified, the performance information shown is as of June 30, 2016 and is based on preliminary data available at that time. The performance data shown reflects information for all actively and passively managed equity and fixed income accounts, including U.S. registered investment companies, European-domiciled retail funds and separate accounts for which performance data is available, including performance data for high net worth accounts available as of May 31, 2016. The performance data does not include accounts terminated prior to June 30, 2016 and accounts for which data has not yet been verified. If such accounts had been included, the performance data provided may have substantially differed from that shown.

Performance comparisons shown are gross-of-fees for institutional and high net worth separate accounts, and net-of-fees for retail funds. The performance tracking shown for index accounts is based on gross-of-fees performance and includes all institutional accounts and all iShares funds globally using an index strategy. AUM information is based on AUM available as of June 30, 2016 for each account or fund in the asset class shown without adjustment for overlapping management of the same account or fund. Fund performance reflects the reinvestment of dividends and distributions.

Source of performance information and peer medians is BlackRock, Inc. and is based in part on data from Lipper Inc. for U.S. funds and Morningstar, Inc. for non-U.S. funds.

 

-16-