Edgar Filing: BlackRock Inc.

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Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended March 31, 2012

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from to .

Commission file number 001-33099

BlackRock, Inc.

(Exact name of registrant as specified in its charter)

Delaware

32-0174431

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

55 East 52nd Street, New York, NY 10055

(Address of Principal Executive Offices)

(Zip Code)

(212) 810-5300

(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or, a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of April 30, 2012, there were 139,708,882 shares of the registrant’s common stock outstanding.

BlackRock, Inc.

Index to Form 10-Q

PART I

FINANCIAL INFORMATION


			Page
Item 1.	Financial Statements (unaudited)

		Condensed Consolidated Statements of Financial Condition		1
		Condensed Consolidated Statements of Income		3
		Condensed Consolidated Statements of Comprehensive Income		4
		Condensed Consolidated Statements of Changes in Equity		5
		Condensed Consolidated Statements of Cash Flows		7
		Notes to Condensed Consolidated Financial Statements		9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			42

Item 3.	Quantitative and Qualitative Disclosures About Market Risk			77

Item 4.	Controls and Procedures			79

PART II

OTHER INFORMATION



Item 1.	Legal Proceedings	80

Item 1A.	Risk Factors	80

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	81

Item 6.	Exhibits	82

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

BlackRock, Inc.

Condensed Consolidated Statements of Financial Condition

(Dollar amounts in millions, except share data)

(unaudited)


	March 31, 2012		December 31, 2011

Assets
Cash and cash equivalents	$	2,552	$	3,506
Accounts receivable		2,312		1,960
Due from related parties		139		142
Investments		1,951		1,631
Assets of consolidated variable interest entities:
Cash and cash equivalents		95		54
Bank loans and other investments		1,554		1,639
Separate account assets		123,167		118,871
Collateral held under securities lending agreements		22,342		20,918
Deferred sales commissions, net		34		38
Property and equipment (net of accumulated depreciation of $514 and $483 at March 31, 2012 and December 31, 2011, respectively)		545		537
Intangible assets (net of accumulated amortization of $790 and $751 at March 31, 2012 and December 31, 2011, respectively)		17,480		17,356
Goodwill		12,899		12,792
Other assets		448		452

Total assets	$	185,518	$	179,896


Liabilities
Accrued compensation and benefits	$	551	$	1,383
Accounts payable and accrued liabilities		1,260		923
Due to related parties		24		22
Short-term borrowings		100		100
Liabilities of consolidated variable interest entities:
Borrowings		1,547		1,574
Other liabilities		9		9
Long-term borrowings		4,690		4,690
Separate account liabilities		123,167		118,871
Collateral liabilities under securities lending agreements		22,342		20,918
Deferred income tax liabilities		5,429		5,323
Other liabilities		796		721

Total liabilities		159,915		154,534

Commitments and contingencies (Note 11)
Temporary equity
Redeemable non-controlling interests		79		92

BlackRock, Inc.

Condensed Consolidated Statements of Financial Condition (continued)

(Dollar amounts in millions, except share data)

(unaudited)


	March 31, 2012			December 31, 2011

Permanent Equity
BlackRock, Inc. stockholders’ equity
Common stock, $0.01 par value;		1			1
Shares authorized: 500,000,000 at March 31, 2012 and December 31, 2011;
Shares issued: 140,127,791 and 139,880,380 at March 31, 2012 and December 31, 2011, respectively;
Shares outstanding: 139,560,520 and 138,463,135 at March 31, 2012 and December 31, 2011, respectively
Preferred stock (Note 15)		—			—
Additional paid-in capital		20,107			20,275
Retained earnings		5,333			5,046
Appropriated retained earnings		57			72
Accumulated other comprehensive loss		(90	)		(127	)
Escrow shares, common, at cost (3,603 shares held at March 31, 2012 and December 31, 2011)		(1	)		(1	)
Treasury stock, common, at cost (563,668 and 1,413,642 shares held at March 31, 2012 and December 31, 2011, respectively)		(104	)		(218	)

Total BlackRock, Inc. stockholders’ equity		25,303			25,048
Nonredeemable non-controlling interests		185			184
Nonredeemable non-controlling interests of consolidated variable interest entities		36			38

Total permanent equity		25,524			25,270

Total liabilities, temporary equity and permanent equity	$	185,518		$	179,896

See accompanying notes to condensed consolidated financial statements.

BlackRock, Inc.

Condensed Consolidated Statements of Income

(Dollar amounts in millions, except per share data)

(unaudited)


	Three Months Ended March 31,
	2012			2011
Revenue
Investment advisory, administration fees and securities lending revenue
Related parties	$	1,314		$	1,357
Other third parties		663			627

Investment advisory, administration fees and securities lending revenue		1,977			1,984
Investment advisory performance fees		80			83
BlackRock Solutions and advisory		123			128
Distribution fees		19			28
Other revenue		50			59

Total revenue		2,249			2,282
Expenses
Employee compensation and benefits		825			830
Distribution and servicing costs
Related parties		1			1
Other third parties		94			108
Amortization of deferred sales commissions		16			22
Direct fund expenses		152			143
General and administration		307			340
Amortization of intangible assets		39			40

Total expenses		1,434			1,484

Operating income		815			798
Non-operating income (expense)
Net gain (loss) on investments		75			59
Net gain (loss) on consolidated variable interest entities		(12	)		(15	)
Interest and dividend income		9			9
Interest expense		(49	)		(38	)

Total non-operating income (expense)		23			15

Income before income taxes		838			813
Income tax expense		263			249

Net income		575			564
Less:
Net income (loss) attributable to redeemable non-controlling interests		1			—
Net income (loss) attributable to nonredeemable non-controlling interests		2			(4	)

Net income attributable to BlackRock, Inc.	$	572		$	568

Earnings per share attributable to BlackRock, Inc. common stockholders:
Basic	$	3.19		$	2.92
Diluted	$	3.14		$	2.89
Cash dividends declared and paid per share	$	1.50		$	1.375
Weighted-average common shares outstanding:
Basic		179,022,840			191,797,365
Diluted		181,917,864			194,296,504

See accompanying notes to condensed consolidated financial statements.

BlackRock, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Dollar amounts in millions)

(unaudited)


	Three Months Ended March 31,
	2012			2011
Net income	$	575		$	564
Other comprehensive income:
Change in net unrealized gains (losses) from available-for-sale investments, net of tax:
Unrealized holding gains (losses), net of tax		6			1
Less: reclassification adjustment included in net income		1			1

Net change in unrealized gains (losses) from available-for-sale investments, net of tax⁽¹⁾		5			—
Minimum pension liability adjustment		(1	)		—
Foreign currency translation adjustments		33			44

Other comprehensive income (loss)		37			44

Comprehensive income		612			608
Less: Comprehensive income (loss) attributable to non-controlling interests		3			(4	)

Comprehensive income attributable to BlackRock, Inc.	$	609		$	612

⁽¹⁾	The tax benefit (expense) on unrealized holding gains (losses) was ($3) million and zero during the three months ended March 31, 2012 and 2011, respectively.

See accompanying notes to condensed consolidated financial statements.

BlackRock, Inc.

Condensed Consolidated Statements of Changes in Equity

(Dollar amounts in millions)

(unaudited)


	Additional Paid-in Capital ⁽¹⁾			Retained Earnings			Appropriated Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Common Shares Held in Escrow			Treasury Stock Common			Total Stockholders’ Equity			Nonredeemable Non-controlling Interests			Nonredeemable Non-controlling Interests of Consolidated VIEs			Total Permanent Equity			Redeemable Non-controlling Interests / Temporary Equity
December 31, 2011	$	20,276		$	5,046		$	72		($	127	)	($	1	)	($	218	)	$	25,048		$	184		$	38		$	25,270		$	92
Net income		—			572			—			—			—			—			572			14			(12	)		574			1
Allocation of losses of consolidated collateralized loan obligations		—			—			(15	)		—			—			—			(15	)		—			15			—			—
Dividends paid		—			(285	)		—			—			—			—			(285	)		—			—			(285	)		—
Stock-based compensation		114			—			—			—			—			—			114			—			—			114			—
Merrill Lynch cash capital contribution		7			—			—			—			—			—			7			—			—			7			—
Issuance of common shares related to employee stock transactions		(335	)		—			—			—			—			376			41			—			—			41			—
Employee tax benefit withholdings related to employee stock transactions		—			—			—			—			—			(137	)		(137	)		—			—			(137	)		—
Shares repurchased		—			—			—			—			—			(125	)		(125	)		—			—			(125	)		—
Net tax benefit (shortfall) from stock-based compensation		46			—			—			—			—			—			46			—			—			46			—
Minimum pension liability adjustment		—			—			—			(1	)		—			—			(1	)		—			—			(1	)		—
Subscriptions (redemptions/ distributions) - non-controlling interest holders		—			—			—			—			—			—			—			(12	)		(5	)		(17	)		144
Net consolidations (deconsolidations) of sponsored investment funds		—			—			—			—			—			—			—			(1	)		—			(1	)		(158	)
Foreign currency translation adjustments		—			—			—			33			—			—			33			—			—			33			—
Change in net unrealized gain (loss) from available-for-sale investments, net of tax		—			—			—			5			—			—			5			—			—			5			—

March 31, 2012	$	20,108		$	5,333		$	57		($	90	)	($	1	)	($	104	)	$	25,303		$	185		$	36		$	25,524		$	79

⁽¹⁾	Amount includes $1 million of common stock at both March 31, 2012 and December 31, 2011.

See accompanying notes to condensed consolidated financial statements.

BlackRock, Inc.

Condensed Consolidated Statements of Changes in Equity

(Dollar amounts in millions)

(unaudited)


	Additional Paid-in Capital ⁽¹⁾			Retained Earnings			Appropriated Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Common Shares Held in Escrow			Treasury Stock Common			Total Stockholders’ Equity			Nonredeemable Non-controlling Interests			Nonredeemable Non-controlling Interests of Consolidated VIEs			Total Permanent Equity			Redeemable Non-controlling Interests / Temporary Equity
December 31, 2010	$	22,504		$	3,723		$	75		($	96	)	($	1	)	($	111	)	$	26,094		$	189		$	45		$	26,328		$	6
Net income		—			568			—			—			—			—			568			11			(15	)		564			—
Allocation of losses of consolidated collateralized loan obligations		—			—			(17	)		—			—			—			(17	)		—			17			—			—
Dividends paid, net of dividend expense for unvested RSUs		—			(272	)		—			—			—			—			(272	)		—			—			(272	)		—
Stock-based compensation		137			—			—			—			—			—			137			—			—			137			—
Merrill Lynch cash capital contribution		8			—			—			—			—			—			8			—			—			8			—
Net issuance of common shares related to employee stock transactions		(205	)		—			—			—			—			109			(96	)		—			—			(96	)		—
Net tax benefit (shortfall) from stock-based compensation		13			—			—			—			—			—			13			—			—			13			—
Subscriptions/ (redemptions/ distributions) - non-controlling interest holders		—			—			—			—			—			—			—			(12	)		(2	)		(14	)		—
Net consolidations (deconsolidations) of sponsored investment funds		—			—			—			—			—			—			—			—			—			—			(2	)
Foreign currency translation adjustments		—			—			—			44			—			—			44			—			—			44			—

March 31, 2011	$	22,457		$	4,019		$	58		($	52	)	($	1	)	($	2	)	$	26,479		$	188		$	45		$	26,712		$	4

⁽¹⁾	Amount includes $1 million of common stock and $1 million of preferred stock at both March 31, 2011 and December 31, 2010.

See accompanying notes to condensed consolidated financial statements.

BlackRock, Inc.

Condensed Consolidated Statements of Cash Flows

(Dollar amounts in millions)

(unaudited)


	Three Months Ended March 31,
	2012			2011
Cash flows from operating activities
Net income	$	575		$	564
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization		73			73
Amortization of deferred sales commissions		16			22
Stock-based compensation		114			137
Deferred income tax expense (benefit)		65			48
Net (gains) losses on non-trading investments		(39	)		(22	)
Purchases of investments within consolidated funds		(53	)		(1	)
Proceeds from sales and maturities of investments within consolidated funds		18			9
Assets and liabilities of consolidated VIEs:
Change in cash and cash equivalents		(41	)		(40	)
Net (gains) losses within consolidated VIEs		12			15
Net (purchases) proceeds within consolidated VIEs		122			42
(Earnings) losses from equity method investees		(45	)		(41	)
Distributions of earnings from equity method investees		8			5
Changes in operating assets and liabilities:
Accounts receivable		(344	)		(130	)
Due from related parties		3			—
Deferred sales commissions		(12	)		(16	)
Investments, trading		(176	)		(1	)
Other assets		24			(68	)
Accrued compensation and benefits		(853	)		(982	)
Accounts payable and accrued liabilities		320			292
Due to related parties		1			(31	)
Other liabilities		110			(31	)

Cash flows from operating activities		(102	)		(156	)

Cash flows from investing activities
Purchases of investments		(175	)		(53	)
Proceeds from sales and maturities of investments		76			104
Distributions of capital from equity method investees		12			17
Net consolidations (deconsolidations) of sponsored investment funds		(149	)		—
Acquisitions, net of cash acquired		(210	)		—
Purchases of property and equipment		(41	)		(83	)

Cash flows from investing activities		(487	)		(15	)

BlackRock, Inc.

Condensed Consolidated Statements of Cash Flows (continued)

(Dollar amounts in millions)

(unaudited)


	Three Months Ended March 31,
	2012			2011
Cash flows from financing activities
Repayments of short-term borrowings		—			(100	)
Repayments of convertible debt		—			(4	)
Cash dividends paid		(285	)		(272	)
Proceeds from stock options exercised		39			9
Proceeds from issuance of common stock		2			1
Repurchases of common stock		(262	)		(106	)
Merrill Lynch cash capital contribution		7			8
Repayments of borrowings by consolidated VIEs		(76	)		—
Net (redemptions/distributions paid) subscriptions received from non-controlling interests holders		127			(14	)
Excess tax benefit from stock-based compensation		55			13

Cash flows from financing activities		(393	)		(465	)

Effect of exchange rate changes on cash and cash equivalents		28			48

Net increase (decrease) in cash and cash equivalents		(954	)		(588	)
Cash and cash equivalents, beginning of period		3,506			3,367

Cash and cash equivalents, end of period	$	2,552		$	2,779

Supplemental disclosure of cash flow information:
Cash paid for:
Interest	$	25		$	24
Interest on borrowings of consolidated VIEs	$	18		$	15
Income taxes	$	91		$	132
Supplemental schedule of non-cash investing and financing transactions:
Issuance of common stock	$	335		$	206
Increase (decrease) in non-controlling interests due to net consolidation (deconsolidation) of sponsored investment funds	($	159	)	$	—

See accompanying notes to condensed consolidated financial statements.

BlackRock, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Business Overview

BlackRock, Inc. (together, with its subsidiaries, unless the context otherwise indicates, “BlackRock” or the “Company”) provides diversified investment management services to institutional clients, intermediary and individual investors through various investment vehicles. Investment management services primarily consist of the management of equity, fixed income, multi-asset class, alternative investment and cash management products. BlackRock offers its investment products in a variety of vehicles, including open-end and closed-end mutual funds, iShares^® exchange-traded funds (“ETFs”), collective investment trusts and separate accounts. In addition, BlackRock provides market risk management, financial markets advisory and enterprise investment system services to a broad base of clients. Financial markets advisory services include valuation services relating to illiquid securities, dispositions and workout assignments (including long-term portfolio liquidation assignments), risk management and strategic planning and execution.

On March 31, 2012, equity ownership of BlackRock was as follows:


	Voting Common Stock			Capital Stock⁽¹⁾
The PNC Financial Services Group, Inc. (“PNC”)		23.8	%		20.9	%
Barclays Bank PLC (“Barclays”)		2.2	%		19.6	%
Other		74.0	%		59.5	%

		100.0	%		100.0	%

⁽¹⁾	Includes outstanding common and non-voting preferred stock.

2. Significant Accounting Policies

Basis of Presentation. These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and include the accounts of the Company and its controlled subsidiaries. Non-controlling interests on the condensed consolidated statements of financial condition include the portion of consolidated sponsored investment funds in which the Company does not have direct equity ownership. Significant accounts and transactions between consolidated entities have been eliminated.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Certain financial information that normally is included in annual financial statements, including certain financial statement footnotes, is not required for interim reporting purposes and has been condensed or omitted herein. These financial statements should be read in conjunction with the Company’s consolidated financial statements and notes related thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, which was filed with the Securities and Exchange Commission (“SEC”) on February 28, 2012 (“2011 Form 10-K”).

The interim financial information at March 31, 2012 and for the three months ended March 31, 2012 and 2011 is unaudited. However, in the opinion of management, the interim information includes all normal recurring adjustments necessary for the fair presentation of the Company’s results for the periods presented. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year.

2. Significant Accounting Policies (continued)

Fair Value Measurements.

Hierarchy of Fair Value Inputs. The provisions of Accounting Standards Codification (“ASC”) 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”) establish a hierarchy that prioritizes inputs to valuation techniques used to measure fair value and require companies to disclose the fair value of their financial instruments according to the fair value hierarchy (i.e., Level 1, 2 and 3 inputs, as defined). The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

Assets and liabilities measured and reported at fair value are classified and disclosed in one of the following categories:

Level 1 Inputs:

Quoted prices (unadjusted) in active markets for identical assets or liabilities at the reporting date.

•

Level 1 assets may include listed mutual funds (including those accounted for under the equity method of accounting as these mutual funds are investment companies that have publicly available net asset values (“NAVs”) which, in accordance with GAAP, are calculated under fair value measures and the changes are equal to the earnings of such funds), ETFs, equities and certain exchange-traded derivatives.

Level 2 Inputs:

Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities that are not active; quotes from pricing services or brokers for which the Company can determine that orderly transactions took place at the quoted price or that the inputs used to arrive at the price were observable; and inputs other than quoted prices that are observable, such as models or other valuation methodologies. As a practical expedient, the Company relies on the NAV (or its equivalent) of certain investments as their fair value.

•

Level 2 assets may include debt securities, bank loans, short-term floating rate notes and asset-backed securities, securities held within consolidated hedge funds and certain equity method limited partnership interests in hedge funds valued based on NAV where the Company has the ability to redeem at the measurement date or within the near term without redemption restrictions, restricted public securities valued at a discount, as well as over-the-counter derivatives, including interest and inflation rate swaps and foreign currency exchange contracts that have inputs to the valuations that generally can be corroborated by observable market data.

Level 3 Inputs:

Unobservable inputs for the valuation of the asset or liability, which may include non-binding broker quotes. Level 3 assets include investments for which there is little, if any, market activity. These inputs require significant management judgment or estimation. Certain investments that are valued using a NAV and are subject to current redemption restrictions that will not be lifted in the near term are included in Level 3.

•

Level 3 assets may include general and limited partnership interests in private equity funds, funds of private equity funds, real estate funds, hedge funds and funds of hedge funds, direct private equity investments held within consolidated funds, bank loans and bonds.

Level 3 inputs may include BlackRock capital accounts for its partnership interests in various alternative investments, including distressed credit hedge funds, real estate and private equity funds, which may be adjusted by using the returns of certain market indices.

•

Level 3 liabilities include borrowings of consolidated collateralized loan obligations (“CLOs”) valued based upon non-binding single broker quotes.

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.

2. Significant Accounting Policies (continued)

Fair Value Measurements (continued)

Valuation Techniques. The fair values of certain Level 3 assets and liabilities were determined using various methodologies as appropriate, including NAVs of underlying investments, third-party pricing vendors, broker quotes and market and income approaches. These inputs are evaluated for reasonableness through various procedures, including due diligence reviews of third-party pricing vendors, variance analysis, consideration of current market environment and other analytical procedures.

As a practical expedient, the Company relies on NAV as the fair value for certain investments. The inputs to value these investments may include BlackRock capital accounts for its partnership interests in various alternative investments, including distressed credit hedge funds, real estate and private equity funds, which may be adjusted by using the returns of certain market indices. The various partnerships are investment companies, which record their underlying investments at fair value based on fair value policies established by management of the underlying fund. Fair value policies at the underlying fund generally require the fund to utilize pricing/valuation information, including independent appraisals from third-party sources. However, in some instances, current valuation information for illiquid securities or securities in markets that are not active may not be available from any third-party source or fund management may conclude that the valuations that are available from third-party sources are not reliable. In these instances, fund management may perform model-based analytical valuations that may be used as an input to value these investments.

A significant amount of inputs used to value equity, debt securities and bank loans are sourced from well-recognized third-party pricing vendors. Generally, prices obtained from pricing vendors are categorized as Level 1 inputs for identical securities traded in active markets and as Level 2 for other similar securities if the vendor uses observable inputs in determining the price. Annually, BlackRock’s internal valuation committee or other designated groups review both the valuation methodology, including the general assumptions and methods used to value various asset classes, and operational process with these vendors. In addition, on a quarterly basis meetings are held with the vendors to identify any significant changes to the vendors’ processes.

In addition, quotes obtained from brokers generally are non-binding and categorized as Level 3 inputs. However, if the Company is able to determine that market participants have transacted for the asset in an orderly manner near the quoted price or if the Company can determine that the inputs used by the broker are observable, the quote is classified as a Level 2 input.

Fair Value Option. ASC 825-10, Financial Instruments (“ASC 825-10”), provides a fair value option election that allows companies an irrevocable election to use fair value as the initial and subsequent accounting measurement attribute for certain financial assets and liabilities. ASC 825-10 permits entities to elect to measure eligible financial assets and liabilities at fair value on an ongoing basis. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. The decision to elect the fair value option is determined on an instrument-by-instrument basis, must be applied to an entire instrument and is irrevocable once elected. Assets and liabilities measured at fair value pursuant to ASC 825-10 are required to be reported separately from those instruments measured using another accounting method.

Derivative Instruments and Hedging Activities. ASC 815-10, Derivatives and Hedging (“ASC 815-10”), establishes accounting and reporting standards for derivative instruments, including certain derivatives embedded in other contracts, and for hedging activities. ASC 815-10 generally requires an entity to recognize all derivatives as either assets or liabilities on the condensed consolidated statements of financial condition and to measure those investments at fair value.

The Company does not use derivative financial instruments for trading or speculative purposes. The Company uses derivative financial instruments primarily for purposes of hedging: (i) exposures to fluctuations in foreign currency exchange rates of certain assets and liabilities, (ii) market exposures for certain seed investments and (iii) future cash flows on floating rate notes. The Company may also use derivatives within separate account assets, which are segregated funds held for purposes of funding individual and group pension contracts, or in connection with capital support agreements with affiliated investment companies. In addition, certain consolidated sponsored investment funds may also invest in derivatives as a part of their investment strategy.

Changes in the fair value of the Company’s derivative financial instruments generally are recognized in earnings and, where applicable, are offset by the corresponding gain or loss on the related foreign-denominated assets or liabilities or hedged investments, on the condensed consolidated statements of income.

Collateral Assets Held and Liabilities Under Securities Lending Agreements. The Company facilitates securities lending arrangements whereby securities held by separate account assets maintained by BlackRock’s registered life insurance company are lent to third parties. In exchange, the Company receives collateral, principally cash and securities, with minimums generally ranging from approximately 102% to 112% of the value of the securities lent in order to reduce counterparty risk. Under the Company’s securities lending arrangements, the Company can resell or re-pledge the collateral and the borrower can re-sell or re-pledge the loaned securities. The securities lending transactions entered into by the Company are accompanied by an agreement that entitles the Company to request the borrower to return the securities at any time; therefore, these transactions are not reported as sales under ASC 860, Transfers and Servicing.

As a result of the Company’s ability to resell or repledge the collateral combined with the fact the activity is in a registered life insurance company, the Company records on its condensed consolidated statements of financial condition the collateral received under these arrangements (both cash and non-cash) as its own asset in addition to an equal and offsetting collateral liability for the obligation to return the collateral. At March 31, 2012 and December 31, 2011, the fair value of loaned securities held by separate account assets was approximately $20.7 billion and $19.5 billion, respectively, and the collateral held under these securities lending agreements was approximately $22.3 billion and $20.9 billion, respectively. During the three months ended March 31, 2012 and 2011, the Company had not sold or repledged any of the collateral received under these arrangements.

Appropriated Retained Earnings. Upon adoption of Accounting Standards Update (“ASU”) 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (“ASU 2009-17”), on January 1, 2010, BlackRock consolidated three CLOs and recorded a cumulative effect adjustment to appropriated retained earnings on the condensed consolidated statement of financial condition equal to the difference between the fair value of the CLOs’ assets and the fair value of their liabilities. Such amounts are recorded as appropriated retained earnings as the CLO noteholders, not BlackRock, ultimately will receive the benefits or absorb the losses associated with the CLOs’ assets and liabilities. Subsequent to the adoption of ASU 2009-17, the net change in the fair value of the CLOs’ assets and liabilities has been recorded as net income (loss) attributable to nonredeemable non-controlling interests and as an adjustment to appropriated retained earnings. In addition, on September 30, 2011, BlackRock consolidated one additional CLO, resulting in $19 million of additional appropriated retained earnings upon the initial consolidation.

Accounting Policies Adopted in the Three Months Ended March 31, 2012

Amendments to Fair Value Measurements and Disclosures. On January 1, 2012, the Company adopted the applicable provisions of ASU 2011-04, Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 clarified existing fair value measurement guidance and changed certain principles or requirements for measuring fair value or disclosing information about fair value measurements. The adoption of ASU 2011-04 did not materially impact BlackRock’s condensed consolidated financial statements.

3. Investments

A summary of the carrying value of total investments is as follows:


*(Dollar amounts in millions)*	March 31, 2012		December 31, 2011
Available-for-sale investments	$	134	$	52
Held-to-maturity investments		109		105
Trading investments:
Consolidated sponsored investment funds		202		214
Other equity securities and debt securities		14		7
Deferred compensation plan mutual funds		49		46

Total trading investments		265		267
Other investments:
Consolidated sponsored investment funds		443		373
Equity method investments		584		457
Deferred compensation plan hedge fund equity method investments		12		19
Cost method investments⁽¹⁾		338		337
Carried interest		66		21

Total other investments		1,443		1,207

Total investments	$	1,951	$	1,631

⁽¹⁾	Amounts primarily include Federal Reserve Bank Stock

At March 31, 2012, the Company consolidated $645 million of investments held by consolidated sponsored investment funds (non-VIEs) of which $202 million and $443 million were classified as trading investments and other investments, respectively. At December 31, 2011, the Company consolidated $587 million of investments held by consolidated sponsored investment funds (non-VIEs) of which $214 million and $373 million were classified as trading investments and other investments, respectively.

3. Investments (continued)

Available-for-Sale Investments

A summary of the cost and carrying value of investments classified as available-for-sale investments is as follows:


*(Dollar amounts in millions)*
			Gross Unrealized					Carrying Value
March 31, 2012	Cost		Gains		Losses			Carrying Value
Equity securities:
Sponsored investment funds	$	127	$	5	($	1	)	$	131
Collateralized debt obligations (“CDOs”)		1		—		—			1
Debt securities:
Asset-backed debt		1		1		—			2

Total available-for-sale investments	$	129	$	6	($	1	)	$	134


			Gross Unrealized					Carrying Value
December 31, 2011	Cost		Gains		Losses			Carrying Value
Equity securities:
Sponsored investment funds	$	52	$	—	($	2	)	$	50
CDOs		1		—		—			1
Debt securities:
Asset-backed debt		1		—		—			1

Total available-for-sale investments	$	54	$	—	($	2	)	$	52

Available-for-sale investments included seed investments in BlackRock sponsored investment mutual funds.

Held-to-Maturity Investments

The carrying value of held-to-maturity investments was $109 million and $105 million at March 31, 2012 and December 31, 2011, respectively. Held-to-maturity investments included foreign government debt held for regulatory purposes and the amortized cost (the carrying value) of these investments approximates fair value. The amortized cost of debt securities classified as held-to-maturity at March 31, 2012 by maturity date was as follows:


*(Dollar amounts in millions)*	1 Year or less		After 1 Year through 5 Years		After 5 Years through 10 Years		After 10 Years		Total
Foreign government debt	$	100	$	—	$	—	$	9	$	109

3. Investments (continued)

Trading Investments

A summary of the cost and carrying value of trading investments is as follows:


	March 31, 2012				December 31, 2011
*(Dollar amounts in millions)*	Cost		Carrying Value		Cost		Carrying Value
Trading investments:
Deferred compensation plan mutual funds	$	45	$	49	$	45	$	46
Equity securities		188		194		174		169
Debt securities:
Foreign debt		—		—		12		12
Corporate debt		23		22		39		40

Total trading investments	$	256	$	265	$	270	$	267

At March 31, 2012, trading investments included $180 million of equity securities and $22 million of debt securities held by consolidated sponsored investment funds, $49 million of certain deferred compensation plan mutual fund investments and $14 million of equity and debt securities held in separate investment accounts for the purpose of establishing an investment history in various investment strategies before being marketed to investors.

Other Investments

A summary of the cost and carrying value of other investments is as follows:


	March 31, 2012				December 31, 2011
*(Dollar amounts in millions)*	Cost		Carrying Value		Cost		Carrying Value
Other investments:
Consolidated sponsored investment funds	$	388	$	443	$	345	$	373
Equity method		566		584		487		457
Deferred compensation plan hedge fund equity method investments		15		12		17		19
Cost method investments:
Federal Reserve Bank stock		329		329		328		328
Other		9		9		9		9

Total cost method investments		338		338		337		337
Carried interest		—		66		—		21

Total other investments	$	1,307	$	1,443	$	1,186	$	1,207

Consolidated sponsored investment funds include third-party private equity funds, direct investments in private companies and third-party hedge funds held by BlackRock sponsored investment funds.

Equity method investments include BlackRock’s direct investments in BlackRock sponsored investment products.

Cost method investments include non-marketable securities, including Federal Reserve Bank stock, which is held for regulatory purposes and is restricted from sale. As of March 31, 2012, there were no indicators of impairments on these investments.

Carried interest represents allocations to BlackRock general partner capital accounts for certain funds. These balances are subject to change upon cash distributions, additional allocations or reallocations back to limited partners within the respective funds.

4. Consolidated Sponsored Investment Funds

The Company consolidates certain sponsored investment funds primarily because it is deemed to control such funds in accordance with GAAP. The investments owned by these consolidated sponsored investment funds are classified as trading or other investments. The following table presents the balances related to these consolidated funds that were included on the condensed consolidated statements of financial condition as well as BlackRock’s net interest in these funds:


*(Dollar amounts in millions)*	March 31, 2012			December 31, 2011
Cash and cash equivalents	$	99		$	196
Investments:
Trading investments		202			214
Other investments		443			373
Other assets		9			5
Other liabilities		(38	)		(37	)
Non-controlling interests		(264	)		(276	)

BlackRock’s net interests in consolidated investment funds	$	451		$	475

BlackRock’s total exposure to consolidated sponsored investment funds of $451 million and $475 million at March 31, 2012 and December 31, 2011, respectively, represents the value of the Company’s economic ownership interest in these sponsored investment funds. Valuation changes associated with these consolidated investment funds are reflected in non-operating income (expense) and partially offset in net income (loss) attributable to non-controlling interests for the portion not attributable to BlackRock.

In addition, at both March 31, 2012 and December 31, 2011, four consolidated CLOs and one other consolidated sponsored investment fund, which were deemed to be variable interest entities (“VIEs”), were excluded from the balances in the table above as the balances for these investment products are reported separately on the condensed consolidated statements of financial condition. See Note 6, Variable Interest Entities, for further discussion on these consolidated products.

The Company may not be readily able to access cash and cash equivalents held by consolidated sponsored investment funds to use in its operating activities. In addition, the Company may not be readily able to sell investments held by consolidated sponsored investment funds in order to obtain cash for use in its operations.

5. Fair Value Disclosures

Fair Value Hierarchy

Total assets measured at fair value on a recurring basis of $147.4 billion at March 31, 2012 were as follows:


	Assets measured at fair value
*(Dollar amounts in millions)*	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Other Assets Not Held at Fair Value⁽¹⁾		March 31, 2012
Assets:

Investments
Available-for-sale:
Equity securities (funds and CDOs)	$	131	$	—	$	1	$	—	$	132
Debt securities		—		2		—		—		2

Total available-for-sale		131		2		1		—		134
Held-to-maturity:
Debt securities		—		—		—		109		109
Trading:
Deferred compensation plan mutual funds		49		—		—		—		49
Equity/Multi-asset class mutual funds		189		5		—		—		194
Debt securities		—		22		—		—		22

Total trading		238		27		—		—		265
Other investments:
Consolidated sponsored investment funds:
Hedge funds / Funds of funds		—		43		53		—		96
Private / public equity		18		—		329		—		347

Total consolidated sponsored investment funds		18		43		382		—		443
Equity method:
Hedge funds / Funds of hedge funds		—		68		197		24		289
Private equity investments		—		—		89		21		110
Real estate funds		—		—		95		20		115
Fixed income mutual funds		27		—		—		—		27
Equity/Multi-asset class, alternative mutual funds		43		—		—		—		43

Total equity method		70		68		381		65		584
Deferred compensation plan hedge fund equity method investments		—		12		—		—		12
Cost method investments		—		—		—		338		338
Carried interest		—		—		—		66		66

Total investments		457		152		764		578		1,951
Separate account assets:
Equity securities		84,677		—		13		—		84,690
Debt securities		—		32,240		—		—		32,240
Derivatives		—		406		—		—		406
Money market funds		3,781		—		—		—		3,781
Other		—		1,045		—		1,005		2,050

Total separate account assets		88,458		33,691		13		1,005		123,167
Collateral held under securities lending agreements:
Equity securities		14,537		—		—		—		14,537
Debt securities		—		7,805		—		—		7,805

Total collateral held under securities lending agreements		14,537		7,805		—		—		22,342
Other assets⁽²⁾		—		12		—		—		12
Assets of consolidated VIEs:
Bank loans		—		1,332		47		—		1,379
Bonds		—		94		44		—		138
Private / public equity		4		5		28		—		37

Total assets of consolidated VIEs		4		1,431		119		—		1,554

Total	$	103,456	$	43,091	$	896	$	1,583	$	149,026

⁽¹⁾

Amounts comprised of investments held at cost, amortized cost, carried interest and equity method investments, which include investment companies and other assets, which in accordance with GAAP are not accounted for under a fair value measure. In accordance with GAAP, certain equity method investees do not account for both their financial assets and financial liabilities under fair value measures; therefore, the Company’s investment in such equity method investees may not represent fair value.

⁽²⁾	Amount includes company-owned and split-dollar life insurance policies.

5. Fair Value Disclosures (continued)

Fair Value Hierarchy (continued)

Liabilities measured at fair value on a recurring basis at March 31, 2012 were as follows:


*(Dollar amounts in millions)*	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		March 31, 2012
Liabilities:
Borrowings of consolidated VIEs	$	—	$	—	$	1,547	$	1,547
Collateral liabilities under securities lending agreements		14,537		7,805		—		22,342
Other liabilities⁽¹⁾		13		4		—		17

Total liabilities measured at fair value	$	14,550	$	7,809	$	1,547	$	23,906

⁽¹⁾	Amounts included credit default swap (Pillars) (see Note 7, Derivatives and Hedging, for more information) and securities sold within consolidated investment funds recorded within other liabilities on the condensed consolidated statement of financial condition.

5. Fair Value Disclosures (continued)

Fair Value Hierarchy (continued)

Total assets measured at fair value on a recurring basis of $141.6 billion at December 31, 2011 were as follows:


	Assets measured at fair value
*(Dollar amounts in millions)*	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Other Assets Not Held at Fair Value⁽¹⁾		December 31, 2011
Assets:

Investments
Available-for-sale:
Equity securities (funds and CDOs)	$	50	$	—	$	1	$	—	$	51
Debt securities		—		1		—		—		1

Total available-for-sale		50		1		1		—		52
Held-to-maturity:
Debt securities		—		—		—		105		105
Trading:
Deferred compensation plan mutual funds		46		—		—		—		46
Equity securities		163		6		—		—		169
Debt securities		—		52		—		—		52

Total trading		209		58		—		—		267
Other investments:
Consolidated sponsored investment funds:
Hedge funds / Funds of funds		—		20		22		—		42
Private / public equity		18		—		313		—		331

Total consolidated sponsored investment funds		18		20		335		—		373
Equity method:
Hedge funds / Funds of hedge funds		—		33		193		14		240
Private equity investments		—		—		85		21		106
Real estate funds		—		—		88		20		108
Equity mutual funds		3		—		—		—		3

Total equity method		3		33		366		55		457
Deferred compensation plan hedge fund equity method investments		—		19		—		—		19
Cost method investments		—		—		—		337		337
Carried interest		—		—		—		21		21

Total investments		280		131		702		518		1,631

Separate account assets:
Equity securities		74,088		—		3		—		74,091
Debt securities		—		38,596		7		—		38,603
Derivatives		8		1,487		—		—		1,495
Money market funds		2,845		—		—		—		2,845
Other		—		920		—		917		1,837

Total separate account assets		76,941		41,003		10		917		118,871
Collateral held under securities lending agreements:
Equity securities		14,092		—		—		—		14,092
Debt securities		—		6,826		—		—		6,826

Total collateral held under securities lending agreements		14,092		6,826		—		—		20,918
Other assets⁽²⁾		—		11		—		—		11
Assets of consolidated VIEs:
Bank loans		—		1,376		83		—		1,459
Bonds		—		105		40		—		145
Private / public equity		4		4		27		—		35

Total assets of consolidated VIEs		4		1,485		150		—		1,639

Total	$	91,317	$	49,456	$	862	$	1,435	$	143,070

⁽¹⁾

⁽²⁾	Amount includes company-owned and split-dollar life insurance policies.

5. Fair Value Disclosures (continued)

Fair Value Hierarchy (continued)

Liabilities measured at fair value on a recurring basis at December 31, 2011 were as follows:


*(Dollar amounts in millions)*	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		December 31, 2011
Liabilities:
Borrowings of consolidated VIEs	$	—	$	—	$	1,574	$	1,574
Collateral liabilities under securities lending agreements		14,092		6,826		—		20,918
Other liabilities⁽¹⁾		15		11		—		26

Total liabilities measured at fair value	$	14,107	$	6,837	$	1,574	$	22,518

⁽¹⁾	Amounts included credit default swap (Pillars) (see Note 7, Derivatives and Hedging, for more information) and securities sold short within consolidated sponsored investment funds recorded within other liabilities on the condensed consolidated statement of financial condition

Separate Account Assets. The separate account assets are maintained by a wholly owned subsidiary of the Company which is a registered life insurance company in the United Kingdom, and represent segregated assets held for purposes of funding individual and group pension contracts. In accordance with GAAP, the Company records equal and offsetting separate account liabilities. The separate account assets are not available to creditors of the Company and the holders of the pension contracts have no recourse to the Company. The net investment income attributable to separate account assets accrues directly to the contract owners and is not reported on the Company’s condensed consolidated statements of income. While BlackRock has no economic interest in these assets or liabilities, BlackRock earns an investment advisory fee for the service of managing these assets on behalf of the clients.

Level 3 Assets. Level 3 assets recorded within investments, which include equity method investments and consolidated investments of real estate funds, private equity funds and funds of private equity funds, are valued based upon valuations, including capital accounts, received from internal as well as third-party fund managers. Fair values of the underlying funds are based on a combination of methods, which may include third-party independent appraisals and discounted cash flow techniques.

Direct investments in private equity companies held by private equity funds totaled $65 million at March 31, 2012. Direct investments in private equity companies may be valued using the market approach or the income approach, or a combination thereof and were valued based on an assessment of each underlying investment, incorporating evaluation of additional significant third- party financing, changes in valuations of comparable peer companies, the business environment of the companies, market indices, assumptions relating to appropriate risk adjustments for nonperformance and legal restrictions on disposition among other factors. The fair value derived from the methods used are evaluated and weighted, as appropriate, considering the reasonableness of the range of value indicated. Under the market approach, fair value may be determined by reference to multiples of market comparable companies or transactions, including earnings before interest, taxes, depreciation and amortization multiples. Under the income approach, fair value may be determined by discounting the cash flows to a single present amount using current market expectations about those future amounts. Unobservable inputs used in a discounted cash flow model may include projections of operating performance generally covering a five-year period and a terminal value of the private equity direct investment. Significant increases (decreases) in the unobservable inputs used to value direct investments in private equity companies held by private equity funds could result in a significantly higher or lower fair value. See Note 2, Significant Accounting Policies, for more information on valuation process.

Level 3 assets recorded within separate account assets include single broker non-binding quotes for fixed income securities and equity securities that have unobservable inputs due to certain corporate actions.

Level 3 assets of consolidated VIEs include bank loans and bonds valued based on single broker non-binding quotes and direct private equity investments and private equity funds valued based upon valuations received from internal as well as third-party fund managers, which may be adjusted by using the returns of certain market indices.

Level 3 Liabilities. Level 3 liabilities recorded as borrowings of consolidated VIEs include CLO borrowings valued based upon single-broker non-binding quotes.

5. Fair Value Disclosures (continued)

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended March 31, 2012


*(Dollar amounts in millions)*	December 31, 2011		Realized and unrealized gains (losses) in earnings and OCI			Purchases		Sales and maturities			Issuances and other settlements⁽¹⁾			Transfers into Level 3		Transfers out of Level 3			March 31, 2012		Total net gains (losses) included in earnings⁽²⁾
Assets:
Investments
Available-for-sale:
Equity securities (CDOs)	$	1	$	—		$	—	$	—		$	—		$	—	$	—		$	1	$	—
Consolidated sponsored investment funds:
Hedge funds / Funds of funds		22		1			27		—			—			3		—			53		1
Private equity		313		29			5		(18	)		—			—		—			329		27
Equity method:
Hedge funds / Funds of hedge funds		193		16			—		—			(12	)		—		—			197		16
Private equity investments		85		4			2		—			(2	)		—		—			89		4
Real estate funds		88		—			7		—			—			—		—			95		—

Total Level 3 investments		702		50			41		(18	)		(14	)		3		—			764		48
Separate account assets:
Equity securities		3		1			1		(3	)		—			11		—			13
Debt securities		7		—			—		(6	)		—			—		(1	)		—

Total Level 3 separate account assets		10		1			1		(9	)		—			11		(1	)		13		n/a	⁽³⁾

Assets of consolidated VIEs:
Bank loans		83		—			7		(6	)		—			5		(42	)		47
Bonds		40		2			2		—			—			—		—			44
Private equity		27		3			—		(2	)		—			—		—			28

Total Level 3 assets of consolidated VIEs		150		5			9		(8	)		—			5		(42	)		119		n/a	⁽⁴⁾

Total Level 3 assets	$	862	$	56		$	51	($	35	)	($	14	)	$	19	($	43	)	$	896

Liabilities:
Borrowings of consolidated VIEs	$	1,574	($	49	)	$	—	$	—		($	76	)	$	—	$	—		$	1,547		n/a	⁽⁴⁾

n/a – not applicable

⁽¹⁾	Amount includes distributions from equity method investees and repayments of borrowings of consolidated VIEs.

⁽²⁾	Earnings attributable to the change in unrealized gains (losses) relating to assets still held at the reporting date.

⁽³⁾	The net investment income attributable to separate account assets accrues directly to the contract owners and is not reported on the Company’s condensed consolidated statements of income.

⁽⁴⁾	The net gain (loss) on consolidated VIEs is solely attributable to non-controlling interests on the Company’s condensed consolidated statements of income.

5. Fair Value Disclosures (continued)

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended March 31, 2011


*(Dollar amounts in millions)*	December 31, 2010		Realized and unrealized gains (losses) in earnings and OCI			Purchases		Sales			Issuances and other settlements⁽¹⁾			Transfers into Level 3		Transfers out of Level 3			March 31, 2011		Total net gains (losses) included in earnings⁽²⁾
Assets:
Investments:
Available-for-sale:
Equity securities (funds and CDOs)	$	2	$	—		$	—	$	—		$	—		$	—	$	—		$	2	$	—
Consolidated sponsored investment funds:
Hedge funds / Funds of funds		19		3			—		(1	)		—			—		(1	)		20		3
Private equity		299		12			1		(7	)		—			—		—			305		12
Equity method:
Hedge funds / Funds of hedge funds		226		16			2		(1	)		(16	)		—		—			227		16
Private equity investments		68		1			1		—			—			—		—			70		1
Real estate funds		36		1			4		—			—			—		—			41		1

Total Level 3 investments		650		33			8		(9	)		(16	)		—		(1	)		665		33
Separate account assets:
Equity securities		4		(1	)		3		(3	)		—			38		—			41
Debt securities		170		(1	)		96		(70	)		—			—		(87	)		108

Total Level 3 separate account assets		174		(2	)		99		(73	)		—			38		(87	)		149		n/a	⁽³⁾

Assets of consolidated VIEs:
Bank loans		32		(2	)		5		(3	)		—			14		(8	)		38
Private equity		30		2			—		—			—			—		—			32

Total Level 3 assets of consolidated VIEs		62		—			5		(3	)		—			14		(8	)		70		n/a	⁽⁴⁾

Total Level 3 assets	$	886	$	31		$	112	($	85	)	($	16	)	$	52	($	96	)	$	884

Liabilities:
Borrowings of consolidated VIEs	$	1,278	($	19	)	$	—	$	—		$	—		$	—	$	—		$	1,297		n/a	⁽⁴⁾

n/a – not applicable

⁽¹⁾	Amount includes distributions from equity method investees.

⁽²⁾	Earnings attributable to the change in unrealized gains or (losses) relating to assets still held at the reporting date.

⁽³⁾	The net investment income attributable to separate account assets accrues directly to the contract owners and is not reported on the Company’s condensed consolidated statements of income.

⁽⁴⁾	The net gain (loss) on consolidated VIEs is solely attributable to non-controlling interests on the Company’s condensed consolidated statements of income.

5. Fair Value Disclosures (continued)

Realized and Unrealized Gains (Losses) for Level 3 Assets and Liabilities. Realized and unrealized gains (losses) recorded for Level 3 assets and liabilities are reported in non-operating income (expense) on the Company’s condensed consolidated statements of income. A portion of net income (loss) for consolidated investments and all of the net income (loss) for consolidated VIEs are allocated to non-controlling interests to reflect net income (loss) not attributable to the Company.

Transfers in and/or out of Levels. Transfers in and/or out of levels are reflected when significant inputs, including market inputs or performance attributes, used for the fair value measurement become observable / unobservable, or when the Company determines it has the ability, or no longer has the ability, to redeem in the near term certain investments that the Company values using a NAV (or a capital account), or when the book value of certain equity method investments no longer represents fair value as determined under fair value methodologies.

Separate Account Assets. In the three months ended March 31, 2012, there were $11 million of transfers of equity securities into Level 3 from Level 1. The transfers into Level 3 were primarily due to market inputs no longer being considered observable.

In the three months ended March 31, 2011, there were $87 million of transfers out of Level 3 to Level 2 related to debt securities held within separate account assets. The transfers out of Level 3 primarily were due to availability of observable market inputs, including additional inputs from pricing vendors and brokers.

In the three months ended March 31, 2011, there were $38 million of transfers of equity securities held within separate account assets into Level 3 from Level 1. The transfers into Level 3 were primarily due to market inputs no longer being considered observable.

Assets of Consolidated VIEs. In the three months ended March 31, 2012 and 2011, there were $42 million and $8 million, respectively, of transfers out of Level 3 to Level 2 related to bank loans. In addition, in the three months ended March 31, 2012 and 2011 there were $5 million and $14 million, respectively, of transfers into Level 3 from Level 2 related to bank loans. The transfers in and out of Levels were primarily due to availability/ unavailability of observable market inputs, including inputs from pricing vendors and brokers.

Significant Other Settlements. For the three months ended March 31, 2012 and 2011, there were $14 million and $16 million, respectively, of distributions from equity method investees categorized in Level 3.

5. Fair Value Disclosures (continued)

Disclosures of Fair Value for Additional Financial Instruments. As of March 31, 2012 and December 31, 2011, the fair value of the Company’s financial instruments are categorized in the table below:


	March 31, 2012				December 31, 2011
*(Dollars in millions)*	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value		Fair Value Hierarchy
Financial Assets:
Cash and cash equivalents	$	2,552	$	2,552	$	3,506	$	3,506		Level 1	⁽¹	⁾
Accounts receivable		2,312		2,312		1,960		1,960		Level 1	⁽²	⁾
Due from related parties		139		139		142		142		Level 1	⁽²	⁾
Cash and cash equivalents of consolidated VIEs		95		95		54		54		Level 1	⁽²	⁾

Financial Liabilities:
Accounts payable and accrued liabilities		1,260		1,260		923		923		Level 1	⁽²	⁾
Due to related parties		24		24		22		22		Level 1	⁽²	⁾
Short-term borrowings		100		100		100		100		Level 1	⁽²	⁾
Long-term borrowings		4,690		5,129		4,690		5,057		Level 2	⁽³	⁾

⁽¹⁾

Cash and cash equivalents are carried at either cost or amortized cost that approximates fair value due to their short-term maturities. Money market funds are valued through the use of quoted market prices, or $1.00, which generally is the NAV of the fund. At March 31, 2012 and December 31, 2011, approximately $46 million and $123 million, respectively, of money market funds were recorded within cash and cash equivalents on the Company’s condensed consolidated statements of financial condition.

⁽²⁾	The carrying amounts of accounts receivable, due from related parties, accounts payable and accrued liabilities, due to related parties and short-term borrowings approximate fair value due to their short term nature.

⁽³⁾

Long-term borrowings are recorded at amortized amounts. The fair value of the Company’s long-term borrowings, including the current portion of long-term borrowings, is estimated using market prices at the end of March 2012 and December 2011, respectively. See Note 10, Borrowings, for the fair value of each of the Company’s long-term borrowings.

The fair value of marketable investments is based on quoted market prices or broker quotes. If investments are not readily marketable, fair values primarily are determined based on NAVs (or capital accounts) of investments in limited partnerships/limited liability companies or by the Company based on management’s assumptions or estimates, taking into consideration financial information of the investment, market indices or valuation services from third-party service providers. At March 31, 2012 and December 31, 2011, with the exception of certain equity and cost method investments and carried interest investments that are not accounted for under a fair value measure, the carrying value of investments approximated fair value.

5. Fair Value Disclosures (continued)

Investments in Certain Entities that Calculate Net Asset Value Per Share. As a practical expedient to value certain investments that do not have a readily determinable fair value and have attributes of an investment company, the Company relies on NAV as the fair value for certain investments. The following tables list information regarding all investments that use a fair value measurement to account for both their financial assets and financial liabilities in their calculation of a NAV per share (or its equivalent).

March 31, 2012

(Dollar amounts in millions)

Ref

Fair Value

Total
Unfunded
Commitments

Redemption
Frequency

Redemption
Notice Period

Trading:

Equity

(a)

—

Daily (100%)

none

Consolidated sponsored investment funds:

Private equity funds of funds

(b)

264

n/r

Other funds of hedge funds

(c)

—

Monthly (35%),

Quarterly (28%)

Annual (1%)

n/r (36%)

30 – 90 days

Equity method:⁽¹⁾

Hedge funds/funds of hedge funds

(d)

264

Monthly (3%),
Quarterly (24%)

n/r (73%)

15 – 90 days

Private equity funds

(e)

n/r

Real estate funds

(f)

n/r

Deferred compensation plan hedge fund investments

(g)

—

Monthly (25%),
Quarterly (75%)

60 – 90 days

Consolidated VIE:

Private equity fund

(h)

n/r

Total

832

117

n/r – not redeemable

(1)	Comprised of equity method investments, which include investment companies, which in accordance with GAAP account for both their financial assets and financial liabilities under fair value measures; therefore, the Company’s investment in such equity method investees approximates fair value.

5. Fair Value Disclosures (continued)

Investments in Certain Entities that Calculate Net Asset Value Per Share (continued)

December 31, 2011

(Dollar amounts in millions)

Ref

Fair Value

Total
Unfunded
Commitments

Redemption
Frequency

Redemption
Notice Period

Trading:

Equity

(a)

—

Daily (100%)

none

Consolidated sponsored investment funds:

Private equity funds of funds

(b)

258

n/r

Other funds of hedge funds

(c)

—

Monthly (25%)

Quarterly (54%)

n/r (21%)

30 – 90 days

Equity method:⁽¹⁾

Hedge funds/funds of hedge funds

(d)

226

Monthly (2%)

Quarterly (15%)

n/r (83%)

15 – 90 days

Private equity funds

(e)

n/r

Real estate funds

(f)

n/r

Deferred compensation plan hedge fund investments

(g)

—

Monthly (16%)

Quarterly (84%)

60 – 90 days

Consolidated VIE:

Private equity funds

(h)

n/r

Total

729

115

n/r – not redeemable

(1)	Comprised of equity method investments, which include investment companies, which in accordance with GAAP account for both their financial assets and financial liabilities under fair value measures; therefore, the Company’s investment in such equity method investees approximates fair value.

(a)

This category includes consolidated offshore feeder funds that invest in master funds with multiple equity strategies to diversify risks. The fair values of the investments in this category have been estimated using the NAV of master offshore funds held by the feeder funds. Investments in this category generally can be redeemed at any time, as long as there are no restrictions in place by the underlying master funds.

(b)

This category includes the underlying third-party private equity funds within consolidated BlackRock sponsored private equity funds of funds. The fair values of the investments in the third-party funds have been estimated using capital accounts representing the Company’s ownership interest in each fund in the portfolio as well as other performance inputs. These investments are not subject to redemption; however, for certain funds, the Company may sell or transfer its interest, which may need approval by the general partner of the underlying funds. Due to the nature of the investments in this category, the Company reduces its investment by distributions that are received through the realization of the underlying assets of the funds. It is estimated that the underlying assets of these funds will be liquidated over a weighted-average period of approximately eight years at both March 31, 2012 and December 31, 2011. The total remaining unfunded commitments to other third-party funds were $41 million and $44 million at March 31, 2012 and December 31, 2011, respectively. The Company was contractually obligated to fund $33 million at both March 31, 2012 and December 31, 2011 to the consolidated funds, while the remaining unfunded balances in the tables above are required to be funded by capital contributions from non-controlling interest holders.

5. Fair Value Disclosures (continued)

Investments in Certain Entities that Calculate Net Asset Value Per Share (continued)

(c)

This category includes consolidated funds of hedge funds that invest in multiple strategies to diversify risks. The fair values of the investments in this category have been estimated using the NAV of the fund’s ownership interest in partners’ capital of each fund in the portfolio. The majority of the underlying funds in this category can be redeemed as long as there are no restrictions in place. At March 31, 2012, the underlying funds that are currently restricted from redemptions within one year will be redeemable in approximately 12-24 months.

(d)

This category includes hedge funds and funds of hedge funds that invest primarily in equities, fixed income securities, distressed credit and mortgage instruments and other third-party hedge funds. The fair values of the investments in this category have been estimated using the NAV of the Company’s ownership interest in partners’ capital. It was estimated that the investments in the funds that are not subject to redemption will be liquidated over a weighted-average period of approximately six years at both March 31, 2012 and December 31, 2011.

(e)

This category includes several private equity funds that initially invest in non-marketable securities of private companies, which ultimately may become public in the future. The fair values of these investments have been estimated using capital accounts representing the Company’s ownership interest in the funds as well as other performance inputs. The Company’s investment in each fund is not subject to redemption and is normally returned through distributions as a result of the liquidation of the underlying assets of the private equity funds. It was estimated that the investments in these funds will be liquidated over a weighted-average period of approximately six years at both March 31, 2012 and December 31, 2011.

(f)

This category includes several real estate funds that invest directly in real estate and real estate related assets. The fair values of the investments in this category have been estimated using capital accounts representing the Company’s ownership interest in the funds. The majority of the Company’s investments in this category is not subject to redemption or is not currently redeemable and is normally returned through distributions as a result of the liquidation of the underlying assets of the real estate funds. It was estimated that the investments in these funds not subject to redemptions will be liquidated over a weighted-average period of approximately seven years at both March 31, 2012 and December 31, 2011.

(g)

This category includes investments in certain hedge funds that invest in energy and health science related equity securities. The fair values of the investments in this category have been estimated using capital accounts representing the Company’s ownership interest in partners’ capital as well as performance inputs. The investments in these funds will be liquidated upon settlement of certain deferred compensation liabilities.

(h)

This category includes the underlying third-party private equity funds within one consolidated BlackRock sponsored private equity fund of funds. The fair values of the investments in the third-party funds have been estimated using capital accounts representing the Company’s ownership interest in in each fund in the portfolio as well as other performance inputs. These investments are not subject to redemption; however, for certain funds the Company may sell or transfer its interest, which may need approval by the general partner of the underlying third-party funds. Due to the nature of the investments in this category, the Company reduces its investment by distributions that are received through the realization of the underlying assets of the funds. It is estimated that the underlying assets of these funds will be liquidated over a weighted-average period of approximately three and four years at March 31, 2012 and December 31, 2011, respectively. Total remaining unfunded commitments to other third-party funds is $2 million at both March 31, 2012 and December 31, 2011, which are required to be funded by capital contributions from non-controlling interest holders.

5. Fair Value Disclosures (continued)

Fair Value Option. Upon the initial consolidation of four CLOs, the Company elected to adopt the fair value option provisions for eligible assets and liabilities, including bank loans and borrowings of the CLOs to mitigate accounting mismatches between the carrying value of the assets and liabilities and to achieve operational simplifications. To the extent there is a difference between the change in fair value of the assets and liabilities, the difference will be reflected as net income (loss) attributable to nonredeemable non-controlling interests on the condensed consolidated statements of income and offset by a change in appropriated retained earnings on the condensed consolidated statements of financial condition.

The following table presents the fair value of those assets and liabilities for which the fair value option was elected as of March 31, 2012 and December 31, 2011:


*(Dollar amounts in millions)*	March 31, 2012		December 31, 2011
CLO Bank Loans:
Aggregate principal amounts outstanding	$	1,409	$	1,522
Fair value		1,379		1,459

Aggregate unpaid principal balance in excess of fair value	$	30	$	63
Unpaid principal balance of loans more than 90 days past due	$	4	$	4
Aggregate fair value of loans more than 90 days past due		—		—

Aggregate unpaid principal balance in excess of fair value for loans more than 90 days past due	$	4	$	4
CLO Borrowings:
Aggregate principal amounts outstanding	$	1,705	$	1,781
Fair value	$	1,547	$	1,574

At March 31, 2012, the principal amounts outstanding of the borrowings issued by the CLOs mature between 2016 and 2019.

During the three months ended March 31, 2012 and 2011, the change in fair value of the bank loans and bonds held by the CLOs resulted in a $56 million gain and a $20 million gain, respectively, which were offset by a $67 million loss and a $34 million loss, respectively, from the change in fair value of the CLO borrowings.

The net gains (losses) were recorded in net gain (loss) on consolidated VIEs on the condensed consolidated statements of income.

The change in fair value of the assets and liabilities included interest income and expense, respectively.

6. Variable Interest Entities

In the normal course of business, the Company is the manager of various types of sponsored investment vehicles, including CDOs/CLOs and sponsored investment funds, which may be considered VIEs. The Company receives advisory fees and/or other incentive-related fees for its services and may from time to time own equity or debt securities or enter into derivatives with the vehicles, each of which are considered variable interests. The Company enters into these variable interests principally to address client needs through the launch of such investment vehicles. The VIEs are primarily financed via capital contributed by equity and debt holders. The Company’s involvement in financing the operations of the VIEs generally is limited to its equity interests.

The primary beneficiary (“PB”) of a VIE that is an investment fund that meets the conditions of ASU 2010-10, Amendments to Statement 167 for Certain Investment Funds (“ASU 2010-10”), is the enterprise that has a variable interest (or combination of variable interests, including those of related parties) that will absorb a majority of the entity’s expected losses, receive a majority of the entity’s expected residual returns or both. In order to determine whether the Company is the PB of a VIE, management must make significant estimates and assumptions of probable future cash flows of the VIEs. Assumptions made in such analyses may include, but are not limited to, market prices of securities, market interest rates, potential credit defaults on individual securities or default rates on a portfolio of securities, pre-payments, realization of gains, liquidity or marketability of certain securities, discount rates and the probability of certain other outcomes.

6. Variable Interest Entities (continued)

The PB of a CDO/CLO or other entity that is a VIE that does not meet the conditions of ASU 2010-10 is the enterprise that has the power to direct activities of the entity that most significantly impact the entity’s economic performance and has the obligation to absorb losses or the right to receive benefits that potentially could be significant to the entity.

VIEs in which BlackRock is the PB. At both March 31, 2012 and December 31, 2011, BlackRock was the PB of five VIEs. The VIEs included CLOs in which BlackRock did not have an investment; however, BlackRock, as the collateral manager, was deemed to have both the power to control the activities of the CLOs and the right to receive benefits that could potentially be significant to the CLOs. In addition, BlackRock was the PB of one sponsored private equity investment fund in which it had a non-substantive investment, which absorbed the majority of the variability due to its de facto third-party relationships with other partners in the fund. The assets of these VIEs are not available to creditors of the Company. In addition, the investors in these VIEs have no recourse to the credit of the Company. At March 31, 2012 and December 31, 2011, the following balances related to these VIEs were consolidated on the Company’s condensed consolidated statements of financial condition:


*(Dollar amounts in millions)*	March 31, 2012			December 31, 2011
Assets of consolidated VIEs:
Cash and cash equivalents	$	95		$	54
Bank loans		1,379			1,459
Bonds		138			145
Other investments		37			35

Total bank loans, bonds and other investments		1,554			1,639
Liabilities of consolidated VIEs:
Borrowings		(1,547	)		(1,574	)
Other liabilities		(9	)		(9	)
Appropriated retained earnings		(57	)		(72	)
Non-controlling interests of consolidated VIEs		(36	)		(38	)

Total net interests in consolidated VIEs	$	—		$	—

For the three months ended March 31, 2012, the Company recorded a non-operating loss of $12 million offset by a $12 million net loss attributable to nonredeemable non-controlling interests on the Company’s condensed consolidated statements of income.

For the three months ended March 31, 2011, the Company recorded a non-operating loss of $15 million offset by a $15 million net loss attributable to nonredeemable non-controlling interests on the Company’s condensed consolidated statements of income.

At March 31, 2012 and December 31, 2011 the weighted-average maturities of the bank loans and bonds were approximately 4.2 years.

6. Variable Interest Entities (continued)

VIEs in which the Company holds significant variable interests or is the sponsor that holds a variable interest but is not the PB of the VIE. At March 31, 2012 and December 31, 2011, the Company’s carrying value of assets and liabilities and its maximum risk of loss related to VIEs in which it holds a significant variable interest or is the sponsor that holds a variable interest, but for which it was not the PB, were as follows:

At March 31, 2012


	Variable Interests on the Condensed Consolidated Statement of Financial Condition
*(Dollar amounts in millions)*	Investments		Advisory Fee Receivables		Other Net Assets (Liabilities)			Maximum Risk of Loss
CDOs/CLOs	$	1	$	3	($	4	)	$	21
Other sponsored investment funds:
Collective trusts		—		197		—			197
Other		16		60		—			76

Total	$	17	$	260	($	4	)	$	294

The size of the net assets of the VIEs that the Company does not consolidate related to CDOs/CLOs and other sponsored investment funds, including collective trusts, was as follows:

•

CDOs/CLOs - approximately ($2) billion, comprised of approximately $5 billion of assets at fair value and $7 billion of liabilities, primarily comprised of unpaid principal debt obligations to CDO/CLO debt holders.

•

Other sponsored investments funds – approximately $1.3 trillion to $1.4 trillion of net assets

•

This amount includes approximately $1.2 trillion of collective trusts. Each collective trust has been aggregated separately and may include collective trusts that invest in other collective trusts.

•

The net assets of these VIEs primarily are comprised of cash and cash equivalents and investments offset by liabilities primarily comprised of various accruals for the sponsored investment vehicles.

At March 31, 2012, BlackRock’s maximum risk of loss associated with these VIEs primarily relates to: (i) advisory fee receivables, (ii) BlackRock’s investments and (iii) $17 million of credit protection sold by BlackRock to a third-party in a synthetic CDO transaction.

6. Variable Interest Entities (continued)

VIEs in which BlackRock holds significant variable interests or is the sponsor that holds a variable interest but is not the PB of the VIE (continued)

At December 31, 2011


	Variable Interests on the Condensed Consolidated Statement of Financial Condition
*(Dollar amounts in millions)*	Investments		Advisory Fee Receivables		Other Net Assets (Liabilities)			Maximum Risk of Loss
CDOs/CLOs	$	1	$	2	($	3	)	$	20
Other sponsored investment funds:
Collective trusts		—		184		—			184
Other		18		54		(5	)		72

Total	$	19	$	240	($	8	)	$	276

The size of the net assets of the VIEs that the Company does not consolidate related to CDOs/CLOs and other sponsored investment funds, including collective trusts, was as follows:

•

Other sponsored investments funds – approximately $1.2 trillion to $1.3 trillion of net assets

•

This amount includes approximately $1.0 trillion of collective trusts. Each collective trust has been aggregated separately and may include collective trusts that invest in other collective trusts.

•

The net assets of these VIEs primarily are comprised of cash and cash equivalents and investments offset by liabilities primarily comprised of various accruals for the sponsored investment vehicles.

At December 31, 2011, BlackRock’s maximum risk of loss associated with these VIEs primarily related to: (i) advisory fee receivables, (ii) BlackRock’s investments and (iii) $17 million of credit protection sold by BlackRock to a third-party in a synthetic CDO transaction.

7. Derivatives and Hedging

The Company entered into a designated cash flow hedge in May 2011 consisting of a $750 million interest rate swap maturing in 2013 to hedge future cash flows on floating rate notes due in 2013. Interest on this swap is at a fixed rate of 1.03% payable semi-annually on May 24 and November 24 of each year commencing November 24, 2011. The fair value of the interest rate swap as of March 31, 2012 was not material to the Company’s condensed consolidated financial statements.

The Company maintains a program to enter into total return swaps to economically hedge against market price exposures with respect to certain seed investments in sponsored investment products. At March 31, 2012 and December 31, 2011, the Company had eight and six outstanding total return swaps, respectively, with an aggregate notional value of approximately $148 million and $43 million, respectively. The fair value of the outstanding total return swaps as of March 31, 2012 and December 31, 2011 was not material to the Company’s condensed consolidated financial statements.

Market risk from forward foreign currency exchange contracts is the effect on the value of a financial instrument that results from a change in currency exchange rates. The Company manages certain exposure to market risk associated with foreign currency exchange contracts by establishing and monitoring parameters that limit the types and degrees of market risk that may be undertaken. At March 31, 2012, the Company had one outstanding forward foreign currency exchange contract with an aggregate notional value of approximately $44 million. The fair value of the forward foreign currency exchange contract as of March 31, 2012 was not material to the Company’s condensed consolidated financial statements. At December 31, 2011, the Company did not have any outstanding forward foreign currency exchange contracts.

The Company acts as the portfolio manager in a series of credit default swap transactions, referred to collectively as the Pillars synthetic CDO transaction (“Pillars”). The Company has entered into a credit default swap with Citibank, N.A. (“Citibank”), providing Citibank credit protection of approximately $17 million, representing the Company’s maximum risk of loss with respect to the provision of credit protection. The Company’s management has performed an assessment of its variable interest in Pillars (a collateral management agreement and the credit default swap) under ASC 810-10, Consolidation, and has concluded the Company is not Pillars’ PB. Pursuant to ASC 815-10, the Company carries the Pillars credit default swap at fair value based on the expected future cash flows under the arrangement.

On behalf of clients of the Company’s registered life insurance company which maintains separate accounts representing segregated funds held for the purpose of funding individual and group pension contracts, the Company invests in various derivative instruments, which may include futures and forward foreign currency exchange contracts, interest rate swaps and inflation rate swaps. Net realized and unrealized gains and losses attributable to derivatives held by separate account assets accrue directly to the contract owners and are not reported in the Company’s condensed consolidated statements of income.

The following table presents the fair value at March 31, 2012 and December 31, 2011 of derivative instruments not designated as hedging instruments:


	March 31, 2012				December 31, 2011
*(Dollar amounts in millions)*	Assets		Liabilities		Assets		Liabilities
Credit default swap (Pillars)
Other liabilities	$	—	$	4	$	—	$	3
Separate account derivatives
Separate account assets		406		—		1,495		—
Separate account liabilities		—		406		—		1,495

Total	$	406	$	410	$	1,495	$	1,498

The fair value of the derivatives held by separate account assets is equal to and offset by a separate account liability.

7. Derivatives and Hedging (continued)

The following table presents gains (losses) recognized in income on derivative instruments for the three months ended March 31, 2012 and 2011:


	Three Months Ended March 31,
*(Dollar amounts in millions)*	2012			2011
Total return swaps⁽¹⁾	($	12	)	($	1	)

⁽¹⁾	Gains (losses) on total return swaps are included in non-operating income (expense).

Gains (losses) on the interest rate swap, forward foreign currency exchange contract and Pillars were immaterial for the three months ended March 31, 2012 and 2011.

The Company consolidates certain sponsored investment funds, which may utilize derivative instruments as a part of the fund’s investment strategy. The fair value of such derivatives as of March 31, 2012 and December 31, 2011 was not material to the Company’s condensed consolidated financial statements. The change in fair value of such derivatives, which is recorded in non-operating income (expense), was not material to the Company’s condensed consolidated financial statements for the three months ended March 31, 2012 and 2011.

8. Goodwill

Goodwill activity during the three months ended March 31, 2012 was as follows:


*(Dollar amounts in millions)*
December 31, 2011	$	12,792
Claymore Investments, Inc⁽¹⁾		112
Excess tax basis amortization⁽²⁾		(5	)

March 31, 2012	$	12,899

⁽¹⁾	Amount represents goodwill resulting from the Company’s acquisition of the Canadian exchange-traded products (“ETP”) provider, Claymore Investments, Inc. (the “Claymore Transaction”) on March 7, 2012 for approximately $210 million.

⁽²⁾

At March 31, 2012, the balance of the Quellos tax-deductible goodwill in excess of book goodwill was approximately $347 million. Goodwill related to the acquisition of the fund-of-funds business of Quellos Group, LLC (the “Quellos Transaction”) will continue to be reduced in future periods by the amount of tax benefits realized from tax-deductible goodwill in excess of book goodwill from the Quellos Transaction.

9. Intangible Assets

The carrying amounts of identifiable intangible assets are summarized as follows:


*(Dollar amounts in millions)*	Indefinite-lived intangible assets		Finite-lived intangible assets			Total intangible assets
December 31, 2011	$	16,597	$	759		$	17,356
Claymore Transaction		163		—			163
Amortization expense		—		(39	)		(39	)

March 31, 2012	$	16,760	$	720		$	17,480

In March 2012, in connection with the Claymore Transaction, the Company acquired $163 million of indefinite-lived ETP management contracts.

10. Borrowings

Short-Term Borrowings

2012 Revolving Credit Facility. In March 2011, the Company entered into a five-year $3.5 billion unsecured revolving credit facility (the “2011 credit facility”). In March 2012, the 2011 credit facility was amended to extend the maturity date by one year to March 2017 and in April 2012 the amount of the aggregate commitment was increased to $3.785 billion (the “2012 credit facility”.) The 2012 credit facility permits the Company to request an additional $1.0 billion of borrowing capacity, subject to lender credit approval, increasing the overall size of the 2012 credit facility to an aggregate principal amount not to exceed $4.785 billion. Interest on borrowings outstanding accrues at a rate based on the applicable London Interbank Offered Rate (“LIBOR”) plus a spread. The 2012 credit facility requires the Company not to exceed a maximum leverage ratio (ratio of net debt to earnings before interest, taxes, depreciation and amortization, where net debt equals total debt less unrestricted cash) of 3 to 1, which was satisfied with a ratio of approximately 1 to 1 at March 31, 2012.

The 2012 credit facility provides back-up liquidity, funds ongoing working capital for general corporate purposes and funds various investment opportunities. At March 31, 2012, the Company had $100 million outstanding under this facility at an interest rate of 1.12% and a maturity in April 2012. During April 2012, the Company rolled over the $100 million in borrowings at an interest rate of 1.12% and a maturity in May 2012.

As of March 31, 2012, Barclays had $214 million participation under the 2012 credit facility. In April 2012, the amount of Barclays’ participation under the 2012 credit facility was increased to $255 million.

Commercial Paper Program. On October 14, 2009, BlackRock established a commercial paper program (the “CP Program”) under which the Company could issue unsecured commercial paper notes (the “CP Notes”) on a private-placement basis up to a maximum aggregate amount outstanding at any time of $3.0 billion. On May 13, 2011, BlackRock increased the maximum aggregate amount that may be borrowed under the CP Program from $3.0 billion to $3.5 billion. The CP Program currently is supported by the 2012 credit facility.

As of March 31, 2012 and December 31, 2011, BlackRock had no CP Notes outstanding.

Long-Term Borrowings

The carrying value and fair value of long-term borrowings determined using market prices at the end of March 2012 included the following:


*(Dollar amounts in millions)*	2.25% Notes due 2012		Floating Rate Notes due 2013		3.50% Notes due 2014			6.25% Notes due 2017			5.00% Notes due 2019			4.25% Notes due 2021			Total Long-term Borrowings
Maturity amount	$	500	$	750	$	1,000		$	700		$	1,000		$	750		$	4,700
Unamortized discount		—		—		(1	)		(3	)		(2	)		(4	)		(10	)

Carrying value	$	500	$	750	$	999		$	697		$	998		$	746		$	4,690

Fair value	$	506	$	753	$	1,071		$	849		$	1,147		$	803

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