BLK BlackRock Inc

• 5% revenue growth from the second quarter of 2014 driven by growth in base fees
• 10% operating income growth from the second quarter of 2014
• 3% AUM growth from the second quarter of 2014
• $7.3 billion of long-term net outflows for the second quarter of 2015
• $23.6 billion of active and iShares net inflows drove organic base fee growth, offsetting the impact of $30.9 billion of low-fee non-ETF index net outflows
• Consistent capital management with $275 million of quarterly share repurchases

BlackRock, Inc. (NYSE:BLK):

FINANCIAL RESULTS

  (in millions, except per share data)     Q2

2015

  Q2

2014

  Change   Q1

2015

  Change   Six Months Ended June 30,                   2015       2014     Change AUM $ 4,721,294 $ 4,593,612 3 % $ 4,774,192 (1 %) $ 4,721,294   $ 4,593,612 3 %

GAAP basis:

Revenue $ 2,905 $ 2,778 5 % $ 2,723 7 % $ 5,628 $ 5,448 3 % Operating income $ 1,238 $ 1,122 10 % $ 1,067 16 % $ 2,305 $ 2,173 6 % Operating margin 42.6 % 40.4 % 220 bps 39.2 % 340 bps 41.0 % 39.9 % 110 bps Net income(1) $ 819 $ 808 1 % $ 822 0 % $ 1,641 $ 1,564 5 % Diluted EPS $ 4.84 $ 4.72 3 % $ 4.84 0 % $ 9.69 $ 9.12 6 % Weighted average diluted shares 169.1 171.2 (1 %) 169.7 0 % 169.4 171.5 (1 %)

As Adjusted:

Operating income(2) $ 1,248 $ 1,133 10 % $ 1,077 16 % $ 2,325 $ 2,195 6 % Operating margin(2) 44.9 % 42.4 % 250 bps 41.2 % 370 bps 43.2 % 41.9 % 130 bps Net income(1) (2) $ 838 $ 837 0 % $ 830 1 % $ 1,668 $ 1,599 4 % Diluted EPS(2)     $ 4.96     $ 4.89     1 %   $ 4.89     1 %   $ 9.85     $ 9.32     6 %

(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 for more information on as adjusted items and the reconciliation to GAAP.

BlackRock, Inc. (NYSE:BLK) today reported financial results for the three and six months ended June 30, 2015.

“Although continued market volatility impacted asset flows in the second quarter, BlackRock's diversified business model drove strong financial results, with revenue up 5% and operating income up 10% year-over-year,” commented Laurence D. Fink, Chairman and CEO of BlackRock. “BlackRock’s unique combination of active and index investment offerings, across all asset classes on a single platform, enables us to provide solutions for our clients’ evolving needs. Despite the impact of more than $30 billion of low-fee institutional index outflows, net inflows into higher-fee active and iShares products drove robust organic base fee growth for the quarter.

“Year-to-date, a desire to reallocate and/or address cash needs drove ten of our largest clients to redeem over $40 billion of institutional index equity assets. However, those same clients reinvested across BlackRock’s active equity and fixed income, multi-asset and alternatives strategies, resulting in a positive net revenue impact for the firm. This demonstrates the value of the deep, strategic relationships we maintain with our clients and validates the strength of our solutions-oriented business model.

“In the face of a challenging quarter for industry flows in US active mutual funds, the strength of BlackRock’s franchise positioned us to garner US retail net inflows of $7 billion – growing our domestic market share and achieving a "top-5" ranking in US retail mutual fund industry flows. Internationally, BlackRock saw more than $3 billion of net inflows and maintained its #1 position in cross-border mutual fund flows year-to-date, driven by strength in European and Asian equities.

“Executing on our plan to reinvigorate the performance of our fundamental active equity platform remains critical to our success and, while we still have work to do, we are pleased that 78% and 61% of fundamental active equity assets performed above benchmark or peer median for the one- and three-year periods ended June 30, 2015. Long-term performance in active fixed income and scientific active equities remains strong, with 89% and 95% of assets above benchmark or peer median for the three-year period, respectively.

“BlackRock’s global platform and unique product offering across investment styles and asset classes – combined with our Aladdin technology platform – enable us to deliver solutions for our clients, no matter their near- or long-term goals. This differentiated business model allowed us to produce strong financial performance in the second quarter and positions us well for stable growth in the future. I would like to thank our employees for their ongoing commitment to superior investment performance and client service as we work to create better financial futures for our clients and drive long-term value for our shareholders.”

RESULTS BY CLIENT TYPE

  (in millions), (unaudited)   Q2 2015

Net flows

  June 30, 2015

AUM

  Q2 2015

Base Fees(1)

  June 30, 2015

AUM

% of Total

  Q2 2015

Base Fees(1)

% of Total

Retail  

$10,765

  $561,062   $839   13%   34% iShares 10,850 1,075,589 884 24% 36% Institutional: Active 2,516 975,483 483 22% 20% Index (31,434)   1,824,755   252   41%   10% Total institutional (28,918)   2,800,238   735   63%   30% Total long-term   ($7,303 )   $4,436,889   $2,458   100%   100%  

RESULTS BY PRODUCT

  (in millions), (unaudited)   Q2 2015

Net flows

  June 30, 2015

AUM

  Q2 2015

Base Fees(1)

  June 30, 2015

AUM

% of Total

  Q2 2015

Base Fees(1)

% of Total

Equity   ($27,261)   $2,505,317   $1,365   56%   56% Fixed income 12,847 1,422,434 597 32% 24% Multi-asset 5,049 395,009 316 9% 13% Alternatives 2,062   114,129   180   3%   7% Total long-term   ($7,303 )   $4,436,889   $2,458   100%   100%

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

Long-Term Business Highlights

Long-term net inflows of $17.5 billion in the Americas were offset by net outflows of $24.1 billion and $0.7 billion from clients in EMEA and Asia-Pacific, respectively. At June 30, 2015, BlackRock managed 62% of its long-term AUM for investors in the Americas and 38% for clients in EMEA and Asia-Pacific.

A discussion of the Company’s net flows by client type for the second quarter of 2015 is presented below.

• Retail long-term net inflows of $10.8 billion included net inflows of $7.4 billion in the United States and $3.4 billion internationally. Net inflows were led by fixed income net inflows of $9.8 billion, which were diversified across exposures, with $2.7 billion of inflows into unconstrained strategies, $1.6 billion into the High Yield suite, and $1.2 billion into Total Return. In equities, European Equities raised $1.5 billion, while multi-asset net inflows were led by $1.6 billion into the Multi-Asset Income fund family.
• iShares® long-term net inflows of $10.9 billion included equity net inflows of $8.8 billion, driven by demand for international developed market exposures. Fixed income net inflows of $1.5 billion reflected flows into investment grade corporate, U.S. aggregate and emerging markets bonds.
• Institutional active long-term net inflows of $2.5 billion were led by multi-asset net inflows of $4.4 billion, reflecting solutions-based insurance fundings in the quarter and ongoing demand for the LifePath® target-date suite. Alternatives net inflows of $0.6 billion were led by flows into alternatives solutions and infrastructure, and included the impact of $1.0 billion of capital returned to investors.
• Institutional index long-term net outflows of $31.4 billion were driven by equity net outflows of $34.6 billion linked to asset allocation, re-balancing and cash needs.

Cash management AUM decreased 7% to $271.5 billion, driven by seasonal outflows.

Advisory AUM decreased $5.2 billion to $12.9 billion.

INVESTMENT PERFORMANCE AT JUNE 30, 2015(1)

 

 

    One-year period   Three-year period   Five-year period Fixed Income: Actively managed products above benchmark or peermedian Taxable 71 % 89 % 91 % Tax-exempt 65 % 71 % 73 % Index products within or above applicable tolerance     96 %   98 %   98 % Equity: Actively managed products above benchmark or peermedian Fundamental 78 % 61 % 52 % Scientific 85 % 95 % 96 % Index products within or above applicable tolerance     97 %   98 %   98 %

(1) Past performance is not indicative of future results. The performance information shown is based on preliminary available data. Please refer to 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 Wednesday, July 15, 2015 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 74398078). 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 Wednesday, July 15, 2015 and ending at midnight on Wednesday, July 29, 2015. 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 74398078. To access the webcast, please visit the investor relations section of www.blackrock.com.

About BlackRock

BlackRock is a leader in investment management, risk management and advisory services for institutional and retail clients worldwide. At June 30, 2015, BlackRock’s AUM was $4.721 trillion. BlackRock helps clients 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®. Headquartered in New York City, as of June 30, 2015, the firm had approximately 12,400 employees in more than 30 countries and a major presence in key 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

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SUPPLEMENTAL INFORMATION

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

                                 

 

  Three Months Ended

Three Months Ended

June 30, March 31, 2015 2014 Change 2015 Change Revenue Investment advisory, administration fees and securities lending revenue $ 2,534 $ 2,434 $ 100 $ 2,390 $ 144 Investment advisory performance fees 136 115 21 108 28 BlackRock Solutions and advisory 161 146 15 147 14 Distribution fees 13 18 (5 ) 17 (4 ) Other revenue   61     65     (4 )   61     -     Total revenue   2,905     2,778     127     2,723     182     Expense Employee compensation and benefits 1,012 948 64 981 31 Distribution and servicing costs 105 89 16 99 6 Amortization of deferred sales commissions 12 14 (2 ) 13 (1 ) Direct fund expense 191 187 4 189 2 General and administration 312 377 (65 ) 339 (27 ) Amortization of intangible assets   35     41     (6 )   35     -     Total expense   1,667     1,656     11     1,656     11     Operating income 1,238 1,122 116 1,067 171   Nonoperating income (expense) Net gain (loss) on investments

(6

)

45

(51

) 59

(65

) Net gain (loss) on consolidated variable interest entities

12

 

28

(16

) 4

8

 

Interest and dividend income 5 3 2 4 1 Interest expense   (52 )   (60 )   8     (51 )   (1 )   Total nonoperating income (expense)  

(41

)   16    

(57

)   16    

(57

)   Income before income taxes

1,197

1,138

59

1,083

114

Income tax expense   371     297     74     258     113     Net income

826

841

(15

) 825

1

 

Less: Net income (loss) attributable to noncontrolling interests  

7

 

  33    

(26

)   3    

4

 

  Net income attributable to BlackRock, Inc. $ 819   $ 808   $ 11   $ 822     ($3 )   Weighted-average common shares outstanding Basic 166,616,558 168,712,221 (2,095,663 ) 167,089,037 (472,479 ) Diluted 169,114,759 171,150,153 (2,035,394 ) 169,723,167 (608,408 ) Earnings per share attributable to BlackRock, Inc. common stockholders (4) Basic $ 4.92 $ 4.79 $ 0.13 $ 4.92 $ - Diluted $ 4.84 $ 4.72 $ 0.12 $ 4.84 $ - Cash dividends declared and paid per share $ 2.18 $ 1.93 $ 0.25 $ 2.18 $ -  

Supplemental information:

  AUM (end of period) $ 4,721,294 $ 4,593,612 $ 127,682 $ 4,774,192 ($52,898 ) Shares outstanding (end of period) 166,379,267 168,363,315 (1,984,048 ) 167,084,582 (705,315 ) GAAP: Operating margin 42.6 % 40.4 % 220 bps 39.2 % 340 bps Effective tax rate 31.2 % 26.8 % 440 bps 23.9 % 730 bps As adjusted: Operating income (1) $ 1,248 $ 1,133 $ 115 $ 1,077 $ 171 Operating margin (1) 44.9 % 42.4 % 250 bps 41.2 % 370 bps Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests (2) ($50 ) ($20 ) ($30 ) $ 11 ($61 ) Net income attributable to BlackRock, Inc. (3) $ 838 $ 837 $ 1 $ 830 $ 8 Diluted earnings attributable to BlackRock, Inc. common stockholders per share (3) (4) $ 4.96 $ 4.89 $ 0.07 $ 4.89 $ 0.07 Effective tax rate       30.1 %     24.8 %   530 bps     23.7 %   640 bps  

Note: During the second quarter of 2015, the Company adopted new accounting guidance on consolidations effective January 1, 2015 using the modified retrospective method. Upon adoption, the Company recorded a change to total nonoperating income (expense) with an equal and offsetting change to noncontrolling interests for the three months ended March 31, 2015. There was no impact to net income attributable to BlackRock, Inc. or to BlackRock’s earnings per share.

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

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SUPPLEMENTAL INFORMATION

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

                    Six Months Ended   June 30, 2015   2014 Change Revenue Investment advisory, administration fees and securities lending revenue $ 4,924 $ 4,725 $ 199 Investment advisory performance fees 244 273 (29 ) BlackRock Solutions and advisory 308 300 8 Distribution fees 30 37 (7 ) Other revenue   122     113     9     Total revenue   5,628     5,448     180     Expense Employee compensation and benefits 1,993 1,930 63 Distribution and servicing costs 204 178 26 Amortization of deferred sales commissions 25 29 (4 ) Direct fund expense 380 366 14 General and administration 651 690 (39 ) Amortization of intangible assets   70     82     (12 )   Total expense   3,323     3,275     48       Operating income 2,305 2,173 132   Nonoperating income (expense) Net gain (loss) on investments

53

121

(68

) Net gain (loss) on consolidated variable interest entities

16

 

12

4

 

Interest and dividend income 9 13 (4 ) Interest expense   (103 )   (113 )   10     Total nonoperating income (expense)  

(25

)   33    

(58

)   Income before income taxes

2,280

2,206

74

Income tax expense   629     621     8     Net income

1,651

1,585

66

Less: Net income (loss) attributable to noncontrolling interests  

10

 

  21    

(11

)   Net income attributable to BlackRock, Inc. $ 1,641   $ 1,564   $ 77     Weighted-average common shares outstanding Basic 166,851,492 168,895,801 (2,044,309 ) Diluted 169,418,964 171,540,018 (2,121,054 ) Earnings per share attributable to BlackRock, Inc. common stockholders (4) Basic $ 9.84 $ 9.26 $ 0.58 Diluted $ 9.69 $ 9.12 $ 0.57 Cash dividends declared and paid per share $ 4.36 $ 3.86 $ 0.50  

Supplemental information:

  AUM (end of period) $ 4,721,294 $ 4,593,612 $ 127,682 Shares outstanding (end of period) 166,379,267 168,363,315 (1,984,048 ) GAAP: Operating margin 41.0 % 39.9 % 110 bps Effective tax rate 27.7 % 28.4 %

(70 bps)

As adjusted: Operating income (1) $ 2,325 $ 2,195 $ 130 Operating margin (1) 43.2 % 41.9 % 130 bps Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests (2) ($39 ) $ 6 ($45 ) Net income attributable to BlackRock, Inc. (3) $ 1,668 $ 1,599 $ 69 Diluted earnings attributable to BlackRock, Inc. common stockholders per share (3) (4) $ 9.85 $ 9.32 $ 0.53 Effective tax rate       27.0 %     27.4 %   (40 bps)  

Note: During the second quarter of 2015, the Company adopted new accounting guidance on consolidations effective January 1, 2015 using the modified retrospective method. Upon adoption, the Company recorded a change to total nonoperating income (expense) with an equal and offsetting change to noncontrolling interests for the three months ended March 31, 2015. There was no impact to net income attributable to BlackRock, Inc. or to BlackRock’s earnings per share.

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

 

ASSETS UNDER MANAGEMENT

(in millions), (unaudited)

 

Current Quarter Component Changes by Client Type and Product

     

 

       

March 31,

2015

Net

inflows

(outflows)

Market change

FX impact (1)

June 30,

2015

Average AUM (2)

Retail: Equity $ 201,706 $ 300   ($400 ) $ 1,767 $ 203,373 $ 205,427 Fixed income 201,405 9,802 (2,688 ) 537 209,056 206,177 Multi-asset 128,402 714 (312 ) 384 129,188 129,864 Alternatives   19,467   (51 )   (47 )   76   19,445   19,381   Retail subtotal 550,980 10,765 (3,447 ) 2,764 561,062 560,849 iShares: Equity 824,336 8,808 (8,833 ) 3,746 828,057 833,952 Fixed income 233,183 1,544 (6,089 ) 2,097 230,735 234,884 Multi-asset 1,772 101 (31 ) 2 1,844 1,833 Alternatives   14,839   397     (329 )   46   14,953   15,006   iShares subtotal 1,074,130 10,850 (15,282 ) 5,891 1,075,589 1,085,675 Institutional: Active: Equity 128,036 (1,761 ) (518 ) 2,275 128,032 129,512 Fixed income 526,117 (760 ) (12,123 ) 4,017 517,251 524,246 Multi-asset 257,084 4,418 (9,150 ) 4,612 256,964 259,498 Alternatives   73,045   619     (953 )   525   73,236   73,190   Active subtotal 984,282 2,516 (22,744 ) 11,429 975,483 986,446 Index: Equity 1,373,052 (34,608 ) (3,072 ) 10,483 1,345,855 1,379,088 Fixed income 467,775 2,261 (18,642 ) 13,998 465,392 468,699 Multi-asset 8,054 (184 ) (926 ) 69 7,013 7,617 Alternatives   5,324   1,097     (106 )   180   6,495   5,807   Index subtotal   1,854,205   (31,434 )   (22,746 )   24,730   1,824,755   1,861,211   Institutional subtotal   2,838,487   (28,918 )   (45,490 )   36,159   2,800,238   2,847,657   Long-term   4,463,597   (7,303 )   (64,219 )   44,814   4,436,889 $ 4,494,181   Cash management 292,495 (23,890 ) 26 2,875 271,506 Advisory (3)   18,100   (5,452 )   (136 )   387   12,899   Total $ 4,774,192   ($36,645 )   ($64,329 ) $ 48,076 $ 4,721,294                              

Current Quarter Component Changes by Product (Long-term)

March 31,

2015

Net

inflows

(outflows)

Market change

FX impact (1)

June 30,

2015

Average AUM (2)

Equity: Active $

298,118

($2,079 ) ($450 ) $ 3,295 $ 298,884 $ 302,364 iShares 824,336 8,808 (8,833 ) 3,746 828,057 833,952 Non-ETF index   1,404,676   (33,990 )   (3,540 )   11,230   1,378,376   1,411,663 Equity subtotal 2,527,130 (27,261 ) (12,823 ) 18,271 2,505,317 2,547,979 Fixed income: Active 720,094 9,089 (14,621 ) 4,291 718,853 722,831 iShares 233,183 1,544 (6,089 ) 2,097 230,735 234,884 Non-ETF index   475,203   2,214     (18,832 )   14,261   472,846   476,291 Fixed income subtotal 1,428,480 12,847 (39,542 ) 20,649 1,422,434 1,434,006 Multi-asset 395,312 5,049 (10,419 ) 5,067 395,009 398,812 Alternatives: Core 89,086 1,229 (1,014 ) 653 89,954 89,582 Currency and commodities (4)   23,589   833     (421 )   174   24,175   23,802   Alternatives subtotal  

112,675

 

2,062

   

(1,435

)

 

827

 

114,129

 

113,384

  Long-term   $ 4,463,597   ($7,303 )   ($64,219 ) $ 44,814 $ 4,436,889 $ 4,494,181

 

                         

 

Current Quarter Component Changes by Investment Style (Long-term)

March 31,

2015

Net

inflows

(outflows)

Market change

FX impact (1)

June 30,

2015

Average AUM (2)

Active $

1,496,210

$ 12,711

 

($25,533

) $ 13,183 $ 1,496,571 $ 1,507,127 Index and iShares   2,967,387   (20,014 )   (38,686 )   31,631   2,940,318   2,987,054 Long-term $ 4,463,597   ($7,303 )   ($64,219 ) $ 44,814 $ 4,436,889 $ 4,494,181                                              

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

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

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

(4) Amounts include commodity iShares.

 

ASSETS UNDER MANAGEMENT

(in millions), (unaudited)

 

Year-to-Date Changes by Client Type and Product

   

December 31,

2014

 

Net

inflows

(outflows)

 

Acquisition(1)

 

Market change

 

FX impact(2)

 

June 30,

2015

 

Average AUM (3)

Retail: Equity $ 200,445 $ 631 $ - $ 4,703 ($2,406 ) $ 203,373 $ 203,459 Fixed income 189,820 22,589 - (1,726 ) (1,627 ) 209,056 200,941 Multi-asset 125,341 2,116 - 2,113 (382 ) 129,188 128,454 Alternatives   18,723   (400 )   1,293   249   (420 )   19,445   18,963   Retail subtotal 534,329 24,936 1,293 5,339 (4,835 ) 561,062 551,817 iShares: Equity 790,067 25,533 - 19,366 (6,909 ) 828,057 818,378 Fixed income 217,671 20,138 - (3,498 ) (3,576 ) 230,735 231,196 Multi-asset 1,773 83 - (1 ) (11 ) 1,844 1,838 Alternatives   14,717   573     -   (280 ) (57 )   14,953   15,000   iShares subtotal 1,024,228 46,327 - 15,587 (10,553 ) 1,075,589 1,066,412 Institutional: Active: Equity 125,143 (1,593 ) - 5,688 (1,206 ) 128,032 128,094 Fixed income 518,590 4,964 - (2,577 ) (3,726 ) 517,251 524,816 Multi-asset 242,913 16,135 - 3,400 (5,484 ) 256,964 254,528 Alternatives   72,514   995     -   140   (413 )   73,236   72,950   Active subtotal 959,160 20,501 - 6,651 (10,829 ) 975,483 980,388 Index: Equity 1,335,456 (30,891 ) - 50,287 (8,997 ) 1,345,855 1,366,131 Fixed income 467,572 1,444 - (2,458 ) (1,166 ) 465,392 469,534 Multi-asset 7,810 (493 ) - (108 ) (196 ) 7,013 7,732 Alternatives   5,286   1,312     -   (133 ) 30     6,495   5,620   Index subtotal   1,816,124   (28,628 )   -   47,588   (10,329 )   1,824,755   1,849,017   Institutional subtotal   2,775,284   (8,127 )   -   54,239   (21,158 )   2,800,238   2,829,406   Long-term   4,333,841   63,136     1,293   75,165   (36,546 )   4,436,889 $

4,447,634

  Cash management 296,353 (23,329 ) - (15 ) (1,503 ) 271,506 Advisory (4)   21,701   (7,749 )   -   391   (1,444 )   12,899   Total $ 4,651,895 $ 32,058   $ 1,293 $ 75,541   ($39,493 ) $ 4,721,294                                  

Year-to-Date Component Changes by Product (Long-term)

   

 

December 31,

2014

Net

inflows

(outflows)

Acquisition(1)

Market change

FX impact(2)

June 30,

2015

Average AUM (3)

Equity: Active $

292,802

($1,533 ) $ - $ 10,995 ($3,380 ) $ 298,884 $ 298,932 iShares 790,067 25,533 - 19,366 (6,909 ) 828,057 818,378 Non-ETF index   1,368,242   (30,320 )   -   49,683   (9,229 )   1,378,376   1,398,752 Equity subtotal 2,451,111 (6,320 ) - 80,044 (19,518 ) 2,505,317 2,516,062 Fixed income: Active 701,324 26,944 - (4,174 ) (5,241 ) 718,853 718,356 iShares 217,671 20,138 - (3,498 ) (3,576 ) 230,735 231,196 Non-ETF index   474,658   2,053     -   (2,587 ) (1,278 )   472,846   476,935 Fixed income subtotal 1,393,653 49,135 - (10,259 ) (10,095 ) 1,422,434 1,426,487 Multi-asset 377,837 17,841 - 5,404 (6,073 ) 395,009 392,552 Alternatives: Core 88,006 1,028 1,293 411 (784 ) 89,954 88,784 Currency and commodities (5)   23,234   1,452     -   (435 ) (76 )   24,175   23,749   Alternatives subtotal  

111,240

 

2,480

   

1,293

 

(24

)

(860

)

 

114,129

 

112,533

 

Long-term

$ 4,333,841 $ 63,136   $ 1,293 $

75,165

 

($36,546

)

$

4,436,889

$

4,447,634

                                 

Year-to-Date Component Changes by Investment Style (Long-term)

   

 

December 31,

2014

Net

inflows

(outflows)

Acquisition(1)

Market change

FX impact(2)

June 30,

2015

Average AUM (3)

 

 

 

 

 

 

 

Active $ 1,453,613 $ 44,256 $ 1,293 $ 12,730 ($15,321 ) $ 1,496,571 $ 1,492,182 Index and iShares   2,880,228   18,880     -   62,435   (21,225 )   2,940,318   2,955,452 Long-term $ 4,333,841 $ 63,136   $ 1,293 $ 75,165   ($36,546 ) $ 4,436,889 $ 4,447,634  

(1) Amount represents $1.3 billion of AUM acquired in the acquisition of certain assets of BlackRock Kelso Capital Advisors LLC in March 2015.

(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.

  ASSETS UNDER MANAGEMENT

(in millions), (unaudited)

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

June 30,

2014

 

Net

inflows

(outflows)

 

Acquisition (1)

 

Market change

 

FX impact (2)

 

June 30,

2015

 

Average AUM ((3))

Retail: Equity $ 216,469 ($1,493 ) $ - ($2,188 ) ($9,415 ) $ 203,373 $ 206,230 Fixed income 172,672 43,394 - (2,909 ) (4,101 ) 209,056 190,498 Multi-asset 126,392 10,813 - (6,433 ) (1,584 ) 129,188 127,589 Alternatives   18,969   36     1,293     210   (1,063 )   19,445   19,010   Retail subtotal 534,502 52,750 1,293 (11,320 ) (16,163 ) 561,062 543,327 iShares: Equity 774,053 63,589 - 11,662 (21,247 ) 828,057 798,383 Fixed income 200,519 44,049 - (4,133 ) (9,700 ) 230,735 219,806 Multi-asset 1,624 278 - (33 ) (25 ) 1,844 1,731 Alternatives   17,636   810     -     (3,259 ) (234 )   14,953   15,659   iShares subtotal 993,832 108,726 - 4,237 (31,206 ) 1,075,589 1,035,579 Institutional: Active: Equity 133,780 (7,694 ) - 9,369 (7,423 ) 128,032 129,195 Fixed income 523,665 4,191 - 9,904 (20,509 ) 517,251 522,187 Multi-asset 239,207 23,863 - 11,891 (17,997 ) 256,964 248,591 Alternatives   73,781   1,319     -     548   (2,412 )   73,236   72,828   Active subtotal 970,433 21,679 - 31,712 (48,341 ) 975,483 972,801 Index: Equity 1,338,283 (21,851 ) - 81,155 (51,732 ) 1,345,855 1,351,919 Fixed income 443,869 17,031 - 34,857 (30,365 ) 465,392 460,652 Multi-asset 7,250 5 - 766 (1,008 ) 7,013 7,498 Alternatives   6,536   1,301     -     (1,078 ) (264 )   6,495   5,857   Index subtotal   1,795,938   (3,514 )   -     115,700   (83,369 )   1,824,755   1,825,926   Institutional subtotal   2,766,371   18,165     -     147,412   (131,710 )   2,800,238   2,798,727   Long-term   4,294,705   179,641     1,293     140,329   (179,079 )   4,436,889 $ 4,377,633   Cash management 268,388 11,288 - 193 (8,363 ) 271,506 Advisory (4)   30,519   (15,131 )   -     1,094   (3,583 )   12,899   Total $ 4,593,612 $ 175,798   $ 1,293 $ 141,616   ($191,025 ) $ 4,721,294                                  

Year-over-Year Component Changes by Product (Long-term)

   

June 30,

2014

 

Net

inflows

(outflows)

 

Acquisition (1)

  Market change  

FX impact (2)

 

June 30,

2015

 

Average AUM (3)

Equity: Active $ 320,830 ($14,157 ) $ - $ 6,911 ($14,700 ) $ 298,884 $ 303,735 iShares 774,053 63,589 - 11,662 (21,247 ) 828,057 798,383 Non-ETF index   1,367,702   (16,881 )   -   81,425   (53,870 )   1,378,376   1,383,609 Equity subtotal 2,462,585 32,551 - 99,998 (89,817 ) 2,505,317 2,485,727 Fixed income: Active 689,724 46,529 - 6,490 (23,890 ) 718,853 705,640 iShares 200,519 44,049 - (4,133 ) (9,700 ) 230,735 219,806 Non-ETF index   450,482   18,087     -   35,362   (31,085 )   472,846   467,697 Fixed income subtotal 1,340,725 108,665 - 37,719 (64,675 ) 1,422,434 1,393,143 Multi-asset 374,473 34,959 - 6,191 (20,614 ) 395,009 385,409 Alternatives: Core 88,758 1,882 1,293 948 (2,927 ) 89,954 88,513 Currency and commodities (5)   28,164   1,584     -     (4,527 ) (1,046 )   24,175   24,841   Alternatives subtotal  

116,922

 

3,466

   

1,293

   

(3,579

)

(3,973

)

 

114,129

 

113,354

  Long-term $ 4,294,705 $ 179,641   $ 1,293   $ 140,329   ($179,079 ) $ 4,436,889 $ 4,377,633                                  

Year-over-Year Component Changes by Investment Style (Long-term)

   

June 30,

2014

 

Net

inflows

(outflows)

  Acquisition(1)   Market change   FX impact (2)  

June 30,

2015

  Average AUM (3) Active $ 1,468,823 $ 68,471 $ 1,293 $ 19,626

 

($61,642

) $ 1,496,571 $ 1,477,361 Index and iShares   2,825,882   111,170   -     120,703   (117,437 )   2,940,318   2,900,272   Long-term $ 4,294,705 $ 179,641 $ 1,293   $ 140,329   ($179,079 ) $ 4,436,889 $ 4,377,633                                                  

(1) Amount represents $1.3 billion of AUM acquired in the acquisition of certain assets of BlackRock Kelso Capital Advisors LLC in March 2015.

(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 thirteen months.

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

(5) Amounts include commodity iShares.

 

SUMMARY OF REVENUE

   

Three Months EndedJune 30,

  Change  

Three Months

EndedMarch 31, 2015

 

Change

 

Six Months EndedJune 30,

 

 

(in millions), (unaudited) 2015   2014  

2015

    2014 Change Investment advisory, administration fees and securities lending revenue: Equity: Active $ 447 $ 478 ($31 ) $ 422 $ 25 $ 869 $ 941 ($72 ) iShares 728 677 51 684 44 1,412 1,311 101 Non-ETF Index   190   183   7     163   27     353   341   12   Equity subtotal 1,365 1,338 27 1,269 96 2,634 2,593 41 Fixed income: Active 387 346 41 373 14 760 670 90 iShares 138 122 16 130 8 268 235 33 Non-ETF Index   72   71   1     68   4     140   129   11   Fixed income subtotal 597 539 58 571 26 1,168 1,034 134 Multi-asset 316 300 16 304 12 620 586 34 Alternatives: Core 161 161 - 154 7 315 320 (5 ) Currency and commodities   19   23   (4 )   19   -     38   45   (7 ) Alternatives subtotal   180   184   (4 )   173   7     353   365   (12 ) Long-term 2,458 2,361 97 2,317 141 4,775 4,578 197 Cash management   76   73   3     73   3     149   147   2   Total base fees 2,534 2,434 100 2,390 144 4,924 4,725 199 Investment advisory performance fees: Equity 61 31 30 37 24 98 53 45 Fixed income 3 5 (2 ) 4 (1 ) 7 13 (6 ) Multi-asset 8 10 (2 ) 8 - 16 13 3 Alternatives   64   69   (5 )   59   5     123   194   (71 ) Total performance fees 136 115 21 108 28 244 273 (29 )   BlackRock Solutions and advisory 161 146 15 147 14 308 300 8 Distribution fees 13 18 (5 ) 17 (4 ) 30 37 (7 ) Other revenue   61   65   (4 )   61   -     122   113   9   Total revenue $ 2,905 $ 2,778 $ 127   $ 2,723 $ 182   $ 5,628 $ 5,448 $ 180                                        

Highlights

• Investment advisory, administration fees and securities lending revenue increased $100 million from the second quarter of 2014 driven by organic growth and market appreciation, which outpaced the impact of foreign exchange movements. Securities lending fees of $147 million in the current quarter increased $7 million from the second quarter of 2014.Investment advisory, administration fees and securities lending revenue increased $144 million from the first quarter of 2015 reflecting organic base fee growth, the effect of one additional revenue day in the current quarter and seasonally higher securities lending fees. Securities lending fees increased $33 million from the first quarter of 2015.

• Performance fees increased $21 million from the second quarter of 2014 and $28 million from the first quarter of 2015, primarily reflecting higher fees from equity products.
• BlackRock Solutions® and advisory revenue increased $15 million from the second quarter of 2014 due to higher revenue from the Aladdin® business. BlackRock Solutions and advisory revenue included $129 million in Aladdin business revenue in the current quarter compared with $113 million in the second quarter of 2014.BlackRock Solutions and advisory revenue increased $14 million from the prior quarter due to higher Financial Markets Advisory Services revenue. BlackRock Solutions and advisory revenue included $129 million in Aladdin business revenue in the current quarter compared with $126 million in the first quarter of 2015.

SUMMARY OF OPERATING EXPENSE

                                                  Three

Months EndedJune 30,

    Three

Months

Ended

   

Six Months Ended

June 30,

  (in millions), (unaudited) 2015     2014   Change     March 31, 2015    

Change

    2015   2014   Change Operating Expense           Employee compensation and benefits $1,012 $ 948 $64 $ 981 $31 $ 1,993 $ 1,930 $ 63 Distribution and servicing costs 105 89 16 99 6 204 178 26 Amortization of deferred sales commissions 12 14 (2 ) 13 (1 ) 25 29 (4 ) Direct fund expense 191 187 4 189 2 380 366 14 General and administration 312 377 (65 ) 339 (27 ) 651 690 (39 ) Amortization of intangible assets 35   41 (6 )   35 -     70   82   (12 ) Total Operating Expense $1,667 $ 1,656 $11   $ 1,656 $11   $ 3,323 $ 3,275 $ 48                                                              

Highlights

• Employee compensation and benefits increased $64 million from the second quarter of 2014, reflecting higher headcount and higher incentive compensation driven by higher operating income, partially offset by the impact of foreign exchange movements.Employee compensation and benefits increased $31 million from the first quarter of 2015, primarily reflecting higher incentive compensation driven by higher operating income, partially offset by lower seasonal employer payroll taxes.

• General and administration expense decreased $65 million from the second quarter of 2014, primarily reflecting lower marketing and promotional expense, and lower legal and regulatory expense.General and administration expense decreased $27 million from the first quarter of 2015, primarily reflecting lower marketing and promotional expense.

INCOME TAX EXPENSE

   

ThreeMonths EndedJune 30,

       

Three

MonthsEnded

     

Six Months Ended June 30,

  (in millions), (unaudited)       2015     2014     Change     March 31, 2015    

Change

    2015     2014   Change Income tax expense     $ 371   $ 297     $ 74     $ 258     $ 113   $ 629   $ 621   $ 8    

Highlights

• Income tax expense in the second quarter of 2015 included a $3 million net noncash expense, primarily associated with the revaluation of certain deferred income tax liabilities as a result of domestic state and local tax changes.Income tax expense in the first quarter of 2015 benefited from $69 million of nonrecurring items.The second quarter 2014 GAAP tax rate included a $23 million net noncash expense, primarily associated with the revaluation of certain deferred income tax liabilities arising from the state and local tax effect of changes in the Company’s organizational structure. In addition, the second quarter 2014 GAAP tax rate benefited from an improvement in the geographic mix of earnings and included a $34 million net tax benefit related to several favorable nonrecurring items.

SUMMARY OF NONOPERATING INCOME (EXPENSE)

                       

 

 

Three Months Ended

June 30,

Three Months Ended

March 31,2015

 

Six Months Ended

June 30,

(in millions), (unaudited)        

2015

  2014   Change   Change   2015   2014   Change Nonoperating income (expense), GAAP basis

($41

) $ 16

($57

) $ 16

($57

)

($25

) $ 33

($58

) Less: Net income (loss) attributable to NCI  

7

 

  33  

(26

)   3    

4

 

 

10

 

  21  

(11

)

  Nonoperating income (expense)(1)   ($48 )   ($17 ) ($31 ) $ 13     ($61 )   ($35 ) $ 12   ($47 )  

 

 

Estimatedeconomicinvestments atJune 30, 2015(3)

 

 

Three Months Ended

June 30,

Three Months Ended

March 31,

2015

 

 

Six Months Ended

June 30,

  (in millions), (unaudited)     2015   2014   Change   Change   2015   2014 Change Net gain (loss) on investments(1) (2) Private equity 25-30% $ 9 $ 12 ($3 ) $ 1 $ 8 $ 10 $ 56 ($46 ) Real estate 5-10% 2 8 (6 ) 2 - 4 10 (6 ) Other alternatives(4) 10-15% - 14 (14 ) 4 (4 ) 4 35 (31 ) Other investments(5) 50-55%   (14 )   3   (17 )   6     (20 )   (8 )   5   (13 )   Subtotal (3 ) 37 (40 ) 13 (16 ) 10 106 (96 ) Other gains(6) - - - 45 (45 ) 45 - 45 Investments related to deferred compensation plans   2     3   (1 )   2     -     4     6   (2 )   Total net gain (loss) on investments(1) (1 ) 40 (41 ) 60 (61 ) 59 112 (53 ) Interest and dividend income 5 3 2 4 1 9 13 (4 ) Interest expense   (52 )   (60 ) 8     (51 )   (1 )   (103 )   (113 ) 10   Net interest expense   (47 )   (57 ) 10     (47 )   -     (94 )   (100 ) 6     Total nonoperating income (expense)(1) (48 ) (17 ) (31 ) 13 (61 ) (35 ) 12 (47 ) Compensation expense related to (appreciation) depreciation on deferred compensation plans   (2 )   (3 ) 1     (2 )   -     (4 )   (6 ) 2     Nonoperating income (expense), as adjusted(1)   ($50 )   ($20 ) ($30 ) $ 11     ($61 )   ($39 ) $ 6   ($45 )                                                                          

(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, 2015. Economic investment amounts at March 31, 2015 for private equity, real estate, other alternatives and other investments were $358 million, $118 million, $247 million and $688 million, respectively. See the 2015 first quarter Form 10-Q for more information.

(4) Amounts primarily include net gains (losses) related to direct hedge fund strategies and hedge fund solutions. The prior year quarter also included net gains related to opportunistic credit strategies.

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

(6) Amount primarily includes a gain related to the acquisition of certain assets of BlackRock Kelso Capital Advisors LLC.

Highlights

• Net gain (loss) on investments decreased $41 million from the second quarter of 2014 due to lower marks in the second quarter of 2015.Net gain (loss) on investments decreased $61 million from the first quarter of 2015, primarily due to lower marks in the second quarter of 2015 and a $40 million gain related to BlackRock Kelso Capital Advisors LLC recorded in the first quarter of 2015.

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.

    June 30,   December 31, (in billions), (unaudited)     2015 (Est.)   2014 Total balance sheet assets $

236

$ 240 Separate account assets and separate account collateral held under securities lending agreements

(195

) (195 ) Consolidated VIEs/sponsored investment funds(1) (1 ) (4 ) Goodwill and intangible assets, net   (30 )   (30 ) Economic tangible assets $ 10   $ 11                        

(1) During the second quarter of 2015, the Company adopted new accounting guidance on consolidations effective January 1, 2015 using the modified retrospective method. As a result of the adoption, the Company’s estimated balance sheet at June 30, 2015 reflects the deconsolidation of the Company’s previously consolidated collateralized loan obligations.

 

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) 2015   2014 2015 2015   2014 Operating income, GAAP basis $ 1,238 $ 1,122 $ 1,067 $ 2,305 $ 2,173 Non-GAAP expense adjustments: PNC LTIP funding obligation 8 8 8 16 16 Compensation expense related to appreciation (depreciation) on deferred compensation plans   2     3     2     4     6     Operating income, as adjusted 1,248 1,133 1,077 2,325 2,195 Product placement fee costs and commissions   5     -     -     5     -     Operating income used for operating margin measurement $ 1,253   $ 1,133   $ 1,077   $ 2,330   $ 2,195     Revenue, GAAP basis $ 2,905 $ 2,778 $ 2,723 $ 5,628 $ 5,448 Non-GAAP adjustments: Distribution and servicing costs (105 ) (89 ) (99 ) (204 ) (178 ) Amortization of deferred sales commissions   (12 )   (14 )   (13 )   (25 )   (29 )   Revenue used for operating margin measurement $ 2,788   $ 2,675   $ 2,611   $ 5,399   $ 5,241     Operating margin, GAAP basis   42.6 %   40.4 %   39.2 %   41.0 %   39.9 %   Operating margin, as adjusted   44.9 %   42.4 %   41.2 %   43.2 %   41.9 %  

See note (1) to the Condensed Consolidated Statements of Income and Supplemental Information 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)

    2015   2014   2015   2015   2014 Nonoperating income (expense), GAAP basis

($41

)   $ 16 $ 16

($25

)   $

33

Less: Net income (loss) attributable to NCI

7

 

 

33

    3  

10

 

  21     Nonoperating income (expense), net of NCI (48 ) (17 ) 13 (35 ) 12 Compensation expense related to (appreciation) depreciation on deferred compensation plans (2 )   (3 )   (2 ) (4 )   (6 )   Nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted ($50 )   ($20 ) $ 11   ($39 ) $ 6    

See note (2) to the Condensed Consolidated Statements of Income and Supplemental Information 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) 2015   2014 2015 2015   2014 Net income attributable to BlackRock, Inc., GAAP basis $ 819 $ 808 $ 822 $ 1,641 $ 1,564 Non-GAAP adjustments, net of tax: PNC LTIP funding obligation 6 6 5 11 12 Income tax matters   13   23   3   16   23   Net income attributable to BlackRock, Inc., as adjusted $ 838 $ 837 $ 830 $ 1,668 $ 1,599   Diluted weighted-average common shares outstanding(4) 169.1 171.2 169.7 169.4 171.5 Diluted earnings per common share, GAAP basis(4) $ 4.84 $ 4.72 $ 4.84 $ 9.69 $ 9.12 Diluted earnings per common share, as adjusted(4) $ 4.96 $ 4.89 $ 4.89 $ 9.85 $ 9.32  

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

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 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. 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 closed-end fund launch costs and product placement fee 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.

(3) Net income attributable to BlackRock, Inc., as adjusted: See aforementioned discussion regarding operating income, as adjusted, and operating margin, as adjusted, for information on the PNC LTIP funding obligation.

For each period presented, the non-GAAP adjustment related to the PNC LTIP funding obligation was tax effected at the respective blended rates applicable to the adjustments. 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. The three and six months ended June 30, 2014 included a $23 million net noncash tax expense primarily related to the revaluation of certain deferred tax liabilities. The resulting increase in income taxes has been excluded from net income attributable to BlackRock, Inc., as adjusted, as these items will not have a cash flow impact and to ensure comparability among periods presented.

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

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, 2015 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, 2015. The performance data does not include accounts terminated prior to June 30, 2015 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 U.S. retail, institutional and high net worth separate accounts as well as EMEA institutional separate accounts, and net-of-fee for European domiciled retail funds. The performance tracking shown for institutional index accounts is based on gross-of-fee 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, 2015 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.

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BlackRock, Inc.Investor RelationsTom Wojcik, 212-810-8127orMedia RelationsBrian Beades, 212-810-5596