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MarketScreener Homepage  >  Equities  >  Nyse  >  BlackRock    BLK

BLACKROCK (BLK)
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BLACKROCK : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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11/09/2018 | 08:48pm CET

FORWARD-LOOKING STATEMENTS


This report, 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.

BlackRock has previously disclosed risk factors in its Securities and Exchange
Commission ("SEC") reports. These risk factors and those identified elsewhere in
this report, among others, could cause actual results to differ materially from
forward-looking statements or historical performance and include: (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 ("AUM"); (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 potential for human error in connection with
BlackRock's operational systems; (10) the impact of legislative and regulatory
actions and reforms and regulatory, supervisory or enforcement actions of
government agencies relating to BlackRock or The PNC Financial Services Group,
Inc. ("PNC"); (11) changes in law and policy and uncertainty pending any such
changes; (12) 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; (13) the
ability to attract and retain highly talented professionals; (14) fluctuations
in the carrying value of BlackRock's economic investments; (15) 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; (16) BlackRock's
success in negotiating distribution arrangements and maintaining distribution
channels for its products; (17) the failure by a key vendor of BlackRock to
fulfill its obligations to the Company; (18) any disruption to the operations of
third parties whose functions are integral to BlackRock's exchange-traded funds
("ETF") platform; (19) 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 (20) the impact of
problems at other financial institutions or the failure or negative performance
of products at other financial institutions.

                                       42

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OVERVIEW


BlackRock, Inc. (together, with its subsidiaries, unless the context otherwise
indicates, "BlackRock" or the "Company") is a leading publicly traded investment
management firm with $6.44 trillion of AUM at September 30, 2018. With
approximately 14,900 employees in more than 30 countries, BlackRock provides a
broad range of investment and technology services to institutional and retail
clients worldwide.

BlackRock's diverse platform of alpha-seeking active, index and cash management
investment strategies across asset classes enables the Company to tailor
investment outcomes and asset allocation solutions for clients. Product
offerings include single- and multi-asset portfolios investing in equities,
fixed income, alternatives and money market instruments. Products are offered
directly and through intermediaries in a variety of vehicles, including open-end
and closed-end mutual funds, iShares® ETFs, separate accounts, collective
investment trusts and other pooled investment vehicles. BlackRock also offers
technology services, including the investment and risk management technology
platform, Aladdin®, Aladdin Wealth, Cachematrix and FutureAdvisor, as well as
advisory services and solutions to a broad base of institutional and wealth
management clients.

BlackRock serves a diverse mix of institutional and retail clients across the
globe. Clients include tax-exempt institutions, such as defined benefit and
defined contribution pension plans, charities, foundations and endowments;
official institutions, such as central banks, sovereign wealth funds,
supranationals and other government entities; taxable institutions, including
insurance companies, financial institutions, corporations and third-party fund
sponsors, and retail investors.

BlackRock maintains a significant global sales and marketing presence that is
focused on establishing and maintaining retail and institutional investment
management and technology service relationships by marketing its services to
investors directly and through third-party distribution relationships, including
financial professionals and pension consultants.

At September 30, 2018, PNC held 21.4% of the Company's voting common stock and 21.9% of the Company's capital stock, which includes outstanding common and nonvoting preferred stock.


The Company adopted Accounting Standards Update ("ASU") 2014-09, Revenue from
Contracts with Customers ("ASU 2014-09") effective January 1, 2018 on a full
retrospective basis. Accordingly, financial results for 2017 were recast to
reflect the adoption of the revenue recognition standard. For further
information, refer to Note 2, Significant Accounting Policies, in the condensed
consolidated financial statements.

Certain prior period presentations and disclosures, while not required to be
recast, were reclassified to ensure comparability with current period
classifications. Beginning with the second quarter of 2018, the Company changed
the title "Technology and risk management revenue" to "Technology services
revenue" on the condensed consolidated statements of income. Prior period
amounts have not changed.

OTHER DEVELOPMENTS



Acquisitions

In August 2018, the Company completed the acquisition of Tennenbaum Capital
Partners, LLC ("TCP Transaction"), a leading manager focused on middle market
performing credit and special situation credit opportunities. The Company
believes the acquisition will enhance its ability to provide clients with
private credit solutions across a range of risk level, liquidity and geography.
Total cash consideration paid at closing was approximately $393 million.

In September 2018, the Company completed the acquisition of the asset management
business of Citibanamex, a subsidiary of Citigroup Inc. ("Citibanamex
Transaction"). The Company acquired AUM across local fixed income, equity and
multi-asset products, enabling the Company to offer a full range of local and
international investment solutions for clients in Mexico. Total consideration at
closing was approximately $360 million, including contingent consideration.



                                       43

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Divestitures


In August 2018, the Company completed the sale of its minority interest in DSP
BlackRock Investment Managers Pvt. Ltd. to The DSP Group ("DSP Transaction").
The Company had a 40% stake in the joint venture, which managed and marketed a
range of co-branded mutual funds in India. The Company recorded a $40 million
pre-tax nonoperating gain in connection with the DSP Transaction.



In July 2018, the Company completed the Part VII transfer of the underlying
assets and liabilities of its UK Defined Contribution Administration and
Platform business to Aegon N.V. ("Aegon Transaction"). The Company continues to
be the primary investment manager for the clients who transferred to Aegon in
connection with the transaction. This transaction was not material to the
Company's condensed consolidated statements of financial condition or results of
operations.


United Kingdom Exit from European Union


Following the June 2016 vote to exit the European Union ("EU"), the United
Kingdom served notice under Article 50 of the Treaty on European Union on March
29, 2017 to initiate the process of exiting from the EU, commonly referred to as
"Brexit". The outcome of the negotiations between the United Kingdom and the EU
in connection with Brexit remains uncertain and information regarding the
long-term relationship continues to develop. The Company has implemented a
number of steps to seek to ensure it is prepared for various outcomes, including
applying for and receiving licenses and permissions in the EU, and engaging in
client communications.

                                       44

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EXECUTIVE SUMMARY



                                                 Three Months Ended                   Nine Months Ended
                                                    September 30,                       September 30,
(in millions, except shares and per
share data)                                    2018             2017(4)            2018             2017(4)
GAAP basis:
Total revenue                              $       3,576$       3,508$      10,764$       9,836
Total expense                                      2,180             2,119             6,553             6,067
Operating income                                   1,396             1,389             4,211             3,769
Operating margin                                    39.0 %            39.6 %            39.1 %            38.3 %
Nonoperating income (expense), less net
income (loss)
   attributable to noncontrolling
interests                                             46                (2 )              (4 )             (27 )
Income tax expense                                  (226 )            (443 )            (829 )          (1,085 )

Net income attributable to BlackRock $ 1,216 $ 944

    $       3,378$       2,657
Diluted earnings per common share          $        7.54$        5.76$       20.83$       16.17
Effective tax rate                                  15.7 %            31.9 %            19.7 %            29.0 %
As adjusted(1):
Operating income                           $       1,400$       1,393$       4,221$       3,781
Operating margin                                    44.2 %            45.1 %            44.5 %            43.9 %
Nonoperating income (expense), less net
income (loss)
   attributable to noncontrolling
interests                                             46                (2 )              (4 )             (27 )

Net income attributable to BlackRock $ 1,214 $ 966

    $       3,386$       2,685
Diluted earnings per common share          $        7.52$        5.90$       20.88$       16.34
Effective tax rate                                  16.0 %            30.6 %            19.7 %            28.5 %

Other:

Assets under management (end of period) $ 6,444,100$ 5,976,892

    $   6,444,100$   5,976,892
Diluted weighted-average common shares
outstanding(2)                               161,378,217       163,773,546       162,140,879       164,289,042
Common and preferred shares outstanding
  (end of period)                            159,804,364       161,597,770       159,804,364       161,597,770
Book value per share(3)                    $      202.84$      185.79$      202.84$      185.79
Cash dividends declared and paid per
share                                      $        3.13$        2.50$        8.89$        7.50

(1) As adjusted items are described in more detail in Non-GAAP Financial

Measures.

(2) Nonvoting participating preferred shares are considered to be common stock

equivalents for purposes of determining basic and diluted earnings per share

calculations.

(3) Total BlackRock stockholders' equity divided by total common and preferred

shares outstanding at September 30 of the respective period-end.

(4) Results for 2017 were recast to reflect the adoption of the new revenue

recognition standard. For further information, refer to Note 2, Significant

Accounting Policies, in the condensed consolidated financial statements.

THREE MONTHS ENDED SEPTEMBER 30, 2018 COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30, 2017


GAAP.  Operating income of $1,396 million increased $7 million and operating
margin of 39.0% decreased 60 bps from the third quarter of 2017. Operating
margin was impacted by higher base fees and higher technology services revenue,
partially offset by lower performance fees, higher volume-related expense and
higher general and administration expense, including $42 million of
transaction-related expense recorded in the third quarter of 2018. Nonoperating
results for the three months ended September 30, 2018 included a $40 million
pre-tax gain related to the DSP Transaction and a $10 million noncash pre-tax
gain related to the revaluation of another strategic investment.

Third quarter 2018 income tax expense reflected a reduced tax rate associated
with The Tax Cuts and Jobs Act enacted on December 22, 2017 (the "2017 Tax Act")
and included $90 million of discrete tax benefits, primarily related to changes
in the Company's organizational entity structure. Third quarter 2018 and 2017
income tax expense included a $5 million net noncash benefit and a $19 million
net noncash expense, respectively, related to the revaluation of certain
deferred income tax liabilities as a result of domestic state and local changes.
See Income Tax Expense within Discussion of Financial Results for more
information.

Earnings per diluted common share increased $1.78, or 31%, from the third quarter of 2017, driven primarily by higher nonoperating income, a lower effective tax rate and the benefit of share repurchases.

                                       45

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As Adjusted. Operating income of $1,400 million increased $7 million and operating margin of 44.2% decreased 90 bps from the third quarter of 2017. Income tax expense for the third quarter of 2018 and 2017 excluded the $5 million net noncash benefit and $19 million net noncash expense described above. Earnings per diluted common share increased $1.62, or 27%, from the third quarter of 2017.

NINE MONTHS ENDED SEPTEMBER 30, 2018 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 2017


GAAP.  Operating income of $4,211 million increased $442 million and operating
margin of 39.1% increased 80 bps from the nine months ended September 30, 2017.
Operating income and operating margin growth primarily reflected higher
year-over-year base fees and technology services revenue, partially offset by
higher compensation and benefits, higher general and administration expense, and
higher volume-related expense. Nonoperating income (expense), less net income
(loss) attributable to noncontrolling interest ("NCI"), increased $23 million
from the nine months ended September 30, 2017. Nonoperating results for the nine
months ended September 30, 2018 included a $40 million gain related to the DSP
Transaction and a $10 million noncash pre-tax gain, described above.
Nonoperating results for the nine months ended September 30, 2017 included a
"make-whole" redemption premium of $14 million related to the refinancing of
$700 million of 6.25% notes, which were repaid prior to their September 2017
maturity.

Income tax expense for the nine months ended September 30, 2018 reflected a
reduced tax rate associated with the 2017 Tax Act and included $148 million of
discrete tax benefits related to changes in the Company's organizational entity
structure and stock-based compensation awards that vested in 2018. Income tax
expense for the nine months ended September 30, 2017 included a discrete tax
benefit of $84 million related to stock-based compensation awards that vested in
2017 and the $19 million net noncash expense mentioned above. See Income Tax
Expense within Discussion of Financial Results for more information.

Earnings per diluted common share increased $4.66 to $20.83, or 29%, from the nine months ended September 30, 2017, driven primarily by higher operating income, a lower tax rate and the benefit of share repurchases.

As Adjusted. Operating income of $4,221 million increased $440 million and operating margin of 44.5% increased 60 bps from the nine months ended September 30, 2017. Income tax expense for the nine months ended September 30, 2017 excluded the $19 million net noncash expense described above. Earnings per diluted common share increased $4.54, or 28%, from the nine months ended September 30, 2017.


See Non-GAAP Financial Measures for further information on as adjusted items and
the reconciliation to accounting principles generally accepted in the United
States ("GAAP").

For further discussion of BlackRock's revenue, expense, nonoperating results and income tax expense, see Discussion of Financial Results herein.

                                       46

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NON-GAAP FINANCIAL MEASURES


BlackRock reports its financial results in accordance with 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 considers
them to be helpful, for both management and investors, in evaluating 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.
Non-GAAP measures may not be comparable to other similarly titled measures of
other companies.

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

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

(1) Operating income, as adjusted, and operating margin, as adjusted:

Management believes operating income, as adjusted, and operating margin, as adjusted, are effective indicators of BlackRock's financial performance over time and, therefore, provide useful disclosure to investors.



                                              Three Months Ended            Nine Months Ended
                                                September 30,                 September 30,
(in millions)                                2018            2017           2018          2017
Operating income, GAAP basis              $    1,396$    1,389$    4,211$   3,769
Non-GAAP expense adjustment:
PNC LTIP funding obligation                        4               4             10            12
Operating income, as adjusted                  1,400           1,393          4,221         3,781
Product launch costs and commissions               1               -             13             -
Operating income used for operating
margin measurement                        $    1,401$    1,393$    4,234$   3,781
Revenue, GAAP basis                       $    3,576$    3,508$   10,764$   9,836
Non-GAAP adjustment:
Distribution and servicing costs                (408 )          (419 )       (1,255 )      (1,230 )
Revenue used for operating margin
measurement                               $    3,168$    3,089$    9,509$   8,606
Operating margin, GAAP basis                    39.0 %          39.6 %         39.1 %        38.3 %
Operating margin, as adjusted                   44.2 %          45.1 %         44.5 %        43.9 %



• 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 PNC has been
        excluded because it ultimately does not impact BlackRock's book value.



• Operating income used for measuring operating margin, as adjusted, is

equal to operating income, as adjusted, excluding the impact of product

launch costs (e.g. closed-end fund launch costs) and related commissions.

Management believes the exclusion of such costs and related commissions is

useful because these costs can fluctuate considerably and revenue

associated with the expenditure of these costs will not fully impact

        BlackRock's results until future periods.




Revenue used for operating margin, as adjusted, excludes distribution and
servicing costs paid to third parties. Management believes such costs represent
a benchmark for the amount of revenue passed through to external parties who
distribute the Company's products. BlackRock excludes from revenue used for
operating margin, as adjusted, the costs related to distribution and servicing
costs as a proxy for such offsetting revenue.

                                       47

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(2) Net income attributable to BlackRock, Inc., as adjusted:



                                              Three Months Ended            Nine Months Ended
                                                 September 30,                September 30,
(in millions, except per share data)          2018           2017           2018          2017
Net income attributable to BlackRock,
Inc., GAAP basis                           $    1,216$     944$    3,378$   2,657
Non-GAAP adjustments:
PNC LTIP funding obligation, net of tax             3              3              9             9
Income tax matters                                 (5 )           19             (1 )          19
Net income attributable to BlackRock,
Inc., as adjusted                          $    1,214$     966$    3,386$   2,685
Diluted weighted-average common shares
outstanding (3)                                 161.4          163.8          162.1         164.3
Diluted earnings per common share, GAAP
basis (3)                                  $     7.54$    5.76$    20.83$   16.17
Diluted earnings per common share, as
adjusted (3)                               $     7.52$    5.90$    20.88$   16.34






Management believes net income attributable to BlackRock, Inc., as adjusted, and
diluted earnings per common share, as adjusted, are useful measures of
BlackRock's profitability and financial performance. Net income attributable to
BlackRock, Inc., as adjusted, equals net income attributable to BlackRock, Inc.,
GAAP basis, adjusted for significant nonrecurring items and charges that
ultimately will not impact BlackRock's book value or certain tax items that do
not impact cash flow.

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


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 adjustment. Amounts for income tax matters represent net noncash
(benefits) expense primarily associated with the revaluation of certain deferred
tax liabilities related to intangible assets and goodwill. Amounts have been
excluded from the as adjusted results as these items will not have a cash flow
impact and to ensure comparability among periods presented.

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

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





                                       48

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ASSETS UNDER MANAGEMENT


AUM for reporting purposes generally is based upon how investment advisory and
administration fees are calculated for each portfolio. Net asset values, total
assets, committed assets or other measures may be used to determine portfolio
AUM.


AUM and Net Inflows (Outflows) by Client Type

                                                              AUM                                                          Net inflows (outflows)
                                                                                                              Three                 Nine                 Twelve
                                                                                                          Months Ended          Months Ended          Months Ended
                              September 30,       June 30,        December 31,       September 30,        September 30,         September 30,         September 30,
(in millions)                     2018              2018              2017               2017                 2018                  2018                  2018
Retail                       $       663,261$   636,825$      628,377$       608,521     $           1,697     $          23,880     $          35,270
iShares ETFs                       1,853,188       1,776,765          1,752,239           1,640,437                33,673                86,133               140,933

Institutional:

Active                             1,130,921       1,123,388          1,139,308           1,105,224                (1,204 )              (3,638 )              (1,450 )
Index                              2,351,785       2,304,764          2,316,807           2,194,701               (23,554 )             (26,639 )             (14,440 )
Institutional subtotal             3,482,706       3,428,152          3,456,115           3,299,925               (24,758 )             (30,277 )             (15,890 )
Long-term                          5,999,155       5,841,742          5,836,731           5,548,883                10,612                79,736               160,313
Cash management                      443,185         457,054            449,949             425,423               (14,570 )              (6,167 )              17,239
Advisory(1)                            1,760             910              1,515               2,586                   853                   288                  (769 )
Total                        $     6,444,100$ 6,299,706$    6,288,195$     5,976,892     $          (3,105 )   $          73,857     $         176,783

AUM and Net Inflows (Outflows) by Investment Style

                                                              AUM                                                          Net inflows (outflows)
                                                                                                              Three                 Nine                 Twelve
                                                                                                          Months Ended          Months Ended          Months Ended
                              September 30,       June 30,        December 31,       September 30,        September 30,         September 30,         September 30,
(in millions)                     2018              2018              2017               2017                 2018                  2018                  2018
Active                       $     1,713,576$ 1,682,794$    1,696,005$     1,645,352     $          (1,109 )   $          12,291     $          25,253
Index and iShares ETFs             4,285,579       4,158,948          4,140,726           3,903,531                11,721                67,445               135,060
Long-term                          5,999,155       5,841,742          5,836,731           5,548,883                10,612                79,736               160,313
Cash management                      443,185         457,054            449,949             425,423               (14,570 )              (6,167 )              17,239
Advisory(1)                            1,760             910              1,515               2,586                   853                   288                  (769 )
Total                        $     6,444,100$ 6,299,706$    6,288,195$     5,976,892     $          (3,105 )   $          73,857     $         176,783

AUM and Net Inflows (Outflows) by Product Type

                                                              AUM                                                          Net inflows (outflows)
                                                                                                              Three                 Nine                 Twelve
                                                                                                          Months Ended          Months Ended          Months Ended
                              September 30,       June 30,        December 31,       September 30,        September 30,         September 30,         September 30,
(in millions)                     2018              2018              2017               2017                 2018                  2018                  2018
Equity                       $     3,482,687$ 3,366,480$    3,371,641$     3,172,465     $         (17,264 )   $         (13,125 )   $          22,656
Fixed income                       1,883,806       1,858,609          1,855,465           1,788,420                22,908                76,011               118,962
Multi-asset                          492,810         481,666            480,278             457,027                 3,228                 9,617                14,539
Alternatives:
Core                                 109,465         102,768             98,533              99,168                 2,092                 5,529                 3,958
Currency and commodities(2)           30,387          32,219             30,814              31,803                  (352 )               1,704                   198
Alternatives subtotal                139,852         134,987            129,347             130,971                 1,740                 7,233                 4,156
Long-term                          5,999,155       5,841,742          5,836,731           5,548,883                10,612                79,736               160,313
Cash management                      443,185         457,054            449,949             425,423               (14,570 )              (6,167 )              17,239
Advisory(1)                            1,760             910              1,515               2,586                   853                   288                  (769 )
Total                        $     6,444,100$ 6,299,706$    6,288,195$     5,976,892     $          (3,105 )   $          73,857  
  $         176,783





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


(2)  Amounts include commodity iShares ETFs.


                                       49

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Component Changes in AUM for the Three Months Ended September 30, 2018

The following table presents the component changes in AUM by client type and product type for the three months ended September 30, 2018.




                                                 Net
                              June 30,         inflows         Acquisitions and       Market           FX          September 30,        Average
(in millions)                   2018          (outflows)       dispositions(1)        change       impact(2)           2018             AUM(3)
Retail:
Equity                      $    232,617$     (2,889 )   $            2,137     $   6,362$     (683 )$       237,544$   235,327
Fixed income                     266,987            3,141                 14,070        (1,066 )         (253 )           282,879         271,896
Multi-asset                      119,299              789                  2,519         1,799           (102 )           124,304         121,557
Alternatives                      17,922              656                      7           (22 )          (29 )            18,534          18,164
Retail subtotal                  636,825            1,697                 18,733         7,073         (1,067 )           663,261         646,944
iShares ETFs:
Equity                         1,346,288           21,215                      -        46,621           (199 )         1,413,925       1,388,881
Fixed income                     401,731           12,914                      -        (2,094 )         (208 )           412,343         408,384
Multi-asset                        3,767               (9 )                    -            55              1               3,814           3,803
Alternatives                      24,979             (447 )                    -        (1,435 )            9              23,106          24,152
iShares ETFs subtotal          1,776,765           33,673                      -        43,147           (397 )         1,853,188       1,825,220
Institutional:
Active:
Equity                           134,986           (4,745 )               (4,296 )       3,564           (534 )           128,975         131,834
Fixed income                     550,444             (398 )                2,417           722         (1,594 )           551,591         552,157
Multi-asset                      350,545            2,471                 (1,593 )       5,932           (468 )           356,887         353,321
Alternatives                      87,413            1,468                  4,995          (164 )         (244 )            93,468          90,308
Active subtotal                1,123,388           (1,204 )                

1,523 10,054 (2,840 ) 1,130,921 1,127,620 Index: Equity

                         1,652,589          (30,845 )                

4,749 80,833 (5,083 ) 1,702,243 1,689,785 Fixed income

                     639,447            7,251                  2,051        (6,660 )       (5,096 )           636,993         640,079
Multi-asset                        8,055              (23 )                 (243 )         110            (94 )             7,805           7,914
Alternatives                       4,673               63                      1            39            (32 )             4,744           4,680
Index subtotal                 2,304,764          (23,554 )               

6,558 74,322 (10,305 ) 2,351,785 2,342,458 Institutional subtotal 3,428,152 (24,758 )

8,081        84,376        (13,145 )         3,482,706       3,470,078
Long-term                      5,841,742           10,612                 26,814       134,596        (14,609 )         5,999,155       5,942,242
Cash management                  457,054          (14,570 )                  686           630           (615 )           443,185         455,852
Advisory(4)                          910              853                      -           (10 )            7               1,760           1,308
Total                       $  6,299,706$     (3,105 )   $           27,500     $ 135,216$  (15,217 )$     6,444,100$ 6,399,402






(1) Amounts include $5.4 billion and $25.6 billion net AUM from the TCP
Transaction and the Citibanamex Transaction, respectively. In addition, amounts
include $18.6 billion and $2.3 billion AUM reclassifications and net
dispositions, respectively, related to the Aegon Transaction and $1.2 billion of
net AUM dispositions related to the DSP Transaction.

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

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

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

                                       50

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The following table presents component changes in AUM by investment style and product type for the three months ended September 30, 2018.




                               June 30,        Net inflows       Acquisitions and       Market           FX          September 30,        Average
(in millions)                    2018          (outflows)        dispositions(1)        change       impact(2)           2018             AUM(3)
Active:
Equity                        $   304,098$      (7,737 )   $           (2,160 )   $   7,729$     (881 )$       301,049$   302,744
Fixed income                      803,515             1,244                 16,487          (199 )       (1,715 )           819,332         809,629
Multi-asset                       469,845             3,260                    926         7,731           (570 )           481,192         474,878
Alternatives                      105,336             2,124                  5,002          (186 )         (273 )           112,003         108,472
Active subtotal                 1,682,794            (1,109 )               20,255        15,075         (3,439 )         1,713,576       1,695,723
Index and iShares ETFs:
iShares ETFs:
Equity                          1,346,288            21,215                      -        46,621           (199 )         1,413,925       1,388,881
Fixed income                      401,731            12,914                      -        (2,094 )         (208 )           412,343         408,384
Multi-asset                         3,767                (9 )                    -            55              1               3,814           3,803
Alternatives                       24,979              (447 )                    -        (1,435 )            9              23,106          24,152
iShares ETFs subtotal           1,776,765            33,673                      -        43,147           (397 )         1,853,188       1,825,220
Non-ETF Index:
Equity                          1,716,094           (30,742 )                4,750        83,030         (5,419 )         1,767,713       1,754,202
Fixed income                      653,363             8,750                  2,051        (6,805 )       (5,228 )           652,131         654,503
Multi-asset                         8,054               (23 )                 (243 )         110            (94 )             7,804           7,914
Alternatives                        4,672                63                      1            39            (32 )             4,743           4,680
Non-ETF Index subtotal          2,382,183           (21,952 )              

6,559 76,374 (10,773 ) 2,432,391 2,421,299 Index & iShares ETFs subtotal 4,158,948

            11,721                  6,559       119,521        (11,170 )         4,285,579       4,246,519
Long-term                       5,841,742            10,612                 26,814       134,596        (14,609 )         5,999,155       5,942,242
Cash management                   457,054           (14,570 )                  686           630           (615 )           443,185         455,852
Advisory(4)                           910               853                      -           (10 )            7               1,760           1,308
Total                         $ 6,299,706$      (3,105 )   $           27,500     $ 135,216$  (15,217 )$     6,444,100$ 6,399,402

The following table presents component changes in AUM by product type for the three months ended September 30, 2018.


                                                   Net
                               June 30,          inflows          Acquisitions and        Market            FX           September 30,         Average
(in millions)                    2018           (outflows)        dispositions(1)         change        impact(2)            2018              AUM(3)
Equity                        $ 3,366,480$    (17,264 )    $            2,590      $ 137,380$   (6,499 )$     3,482,687$ 3,445,827
Fixed income                    1,858,609            22,908                  18,538         (9,098 )        (7,151 )          1,883,806        1,872,516
Multi-asset                       481,666             3,228                     683          7,896            (663 )            492,810          486,595
Alternatives:
Core                              102,768             2,092                   4,995           (162 )          (228 )            109,465          105,918
Currency and commodities(5)        32,219              (352 )                     8         (1,420 )           (68 )             30,387           31,386
Alternatives subtotal             134,987             1,740                   5,003         (1,582 )          (296 )            139,852          137,304
Long-term                       5,841,742            10,612                  26,814        134,596         (14,609 )          5,999,155        5,942,242
Cash management                   457,054           (14,570 )                   686            630            (615 )            443,185          455,852
Advisory(4)                           910               853                       -            (10 )             7                1,760            1,308
Total                         $ 6,299,706$     (3,105 )    $           27,500      $ 135,216$  (15,217 )$     6,444,100$ 6,399,402

(1) Amounts include net AUM impact from the TCP Transaction, the Citibanamex Transaction, the Aegon Transaction and the DSP Transaction.

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

(3) Average AUM is calculated as the average of the month-end spot AUM amounts

for the trailing four months.

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

(5) Amounts include commodity iShares ETFs.



AUM increased $144.4 billion to $6.4 trillion at September 30, 2018, driven by
net market appreciation, net AUM added from strategic transactions and positive
long-term net inflows, partially offset by the impact of foreign exchange
movements.

Net market appreciation of $135.2 billion was primarily driven by higher U.S. equity markets, partially offset by market depreciation in international developed and emerging markets, which are often linked to higher fee AUM.

                                       51

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Long-term net inflows of $10.6 billion included $33.7 billion and $1.7 billion
from iShares ETFs and retail clients, respectively, partially offset by net
outflows of $24.8 billion from institutional clients. Net flows in long-term
products are described below.

     •  iShares ETFs net inflows of $33.7 billion reflected $20.3 billion and
        $13.4 billion of net inflows into Core and non-Core ETFs,
        respectively. Equity net inflows of $21.2 billion reflected demand for

Core ETFs across developed and emerging markets. Fixed income iShares net

inflows of $12.9 billion were diversified across long-duration treasuries,

        corporate bond, high-yield and emerging markets debt ETFs.




     •  Retail net inflows of $1.7 billion reflected net inflows of $2.5 billion

in the United States, partially offset by net outflows of $0.8 billion

internationally. Fixed income net inflows of $3.1 billion were diversified

across the Company's active platform, led by net inflows into municipals,

        unconstrained and high-yield strategies. Equity net outflows of $2.9
        billion reflected outflows from international active equities.



• Institutional active net outflows of $1.2 billion reflected active equity

net outflows of $4.7 billion, partially offset by active multi-asset and

alternatives net inflows. Multi-asset net inflows of $2.5 billion were

driven by ongoing demand for the LifePath® target-date series. Alternative

net inflows of $1.5 billion were led by flows into illiquid alternatives.





     •  Institutional index net outflows of $23.6 billion were driven by equity
        net outflows of $30.8 billion, reflecting client de-risking and
        re-balancing activity, partially offset by fixed income net inflows of

$7.3 billion, led by continued demand for liability-driven investing

        strategies.



Cash management AUM decreased to $443.2 billion due to net outflows of $14.6 billion, driven by a planned $23.9 billion redemption of a single escrow mandate.

AUM decreased $15.2 billion due to the impact of foreign exchange movements, primarily due to the strengthening of the U.S. dollar, largely against the British pound and the Japanese yen.

                                       52

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Component Changes in AUM for the Nine Months Ended September 30, 2018

The following table presents the component changes in AUM by client type and product for the nine months ended September 30, 2018.


                                                Net
                          December 31,        inflows         Acquisitions and        Market           FX           September 30,        Average
(in millions)                 2017           (outflows)       dispositions(1)         change        impact(2)           2018             AUM(3)
Retail:
Equity                   $      233,218$       (205 )   $            2,137     $    4,760$    (2,366 )$       237,544$   236,413
Fixed income                    257,571           19,425                 14,070         (6,684 )        (1,503 )           282,879         267,050
Multi-asset                     120,855            2,744                  2,519         (1,407 )          (407 )           124,304         121,965
Alternatives                     16,733            1,916                      7            (14 )          (108 )            18,534          17,623
Retail subtotal                 628,377           23,880                 18,733         (3,345 )        (4,384 )           663,261         643,051
iShares ETFs:
Equity                        1,329,610           52,308                   

- 37,177 (5,170 ) 1,413,925 1,375,039 Fixed income

                    395,252           32,072                      -        (12,415 )        (2,566 )           412,343         401,309
Multi-asset                       3,761               62                      -             (5 )            (4 )             3,814           3,789
Alternatives                     23,616            1,691                      -         (2,156 )           (45 )            23,106          24,886
iShares ETFs subtotal         1,752,239           86,133                      -         22,601          (7,785 )         1,853,188       1,805,023
Institutional:
Active:
Equity                          137,185           (6,255 )               (4,296 )        4,170          (1,829 )           128,975         136,050
Fixed income                    570,050           (7,387 )                2,417         (9,490 )        (3,999 )           551,591         558,285
Multi-asset                     347,825            6,270                 (1,593 )        8,795          (4,410 )           356,887         349,495
Alternatives                     84,248            3,734                  4,995          1,396            (905 )            93,468          87,890
Active subtotal               1,139,308           (3,638 )                

1,523 4,871 (11,143 ) 1,130,921 1,131,720 Index: Equity

                        1,671,628          (58,973 )                

4,749 98,283 (13,444 ) 1,702,243 1,683,996 Fixed income

                    632,592           31,901                  2,051        (14,976 )       (14,575 )           636,993         642,648
Multi-asset                       7,837              541                   (243 )         (262 )           (68 )             7,805           8,106
Alternatives                      4,750             (108 )                    1            154             (53 )             4,744           4,751
Index subtotal                2,316,807          (26,639 )                

6,558 83,199 (28,140 ) 2,351,785 2,339,501 Institutional subtotal 3,456,115 (30,277 )

8,081 88,070 (39,283 ) 3,482,706 3,471,221 Long-term

                     5,836,731           79,736                 

26,814 107,326 (51,452 ) 5,999,155 5,919,295 Cash management

                 449,949           (6,167 )                  686          1,043          (2,326 )           443,185         456,017
Advisory(4)                       1,515              288                      -             (2 )           (41 )             1,760           1,267
Total                    $    6,288,195$     73,857     $           27,500     $  108,367$   (53,819 )$     6,444,100$ 6,376,579

(1) Amounts include net AUM impact from the TCP Transaction, the Citibanamex Transaction, the Aegon Transaction and the DSP Transaction.

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

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

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

                                       53

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The following table presents component changes in AUM by investment style and product type for the nine months ended September 30, 2018.


                                                      Net
                               December 31,         inflows         Acquisitions and       Market           FX          September 30,        Average
(in millions)                      2017            (outflows)       dispositions(1)        change       impact(2)           2018             AUM(3)
Active:
Equity                        $       311,209$    (11,127 )   $           (2,160 )   $   6,268$   (3,141 )$       301,049$   309,669
Fixed income                          815,135            8,754                 16,487       (15,985 )       (5,059 )           819,332         811,651
Multi-asset                           468,679            9,014                    926         7,388         (4,815 )           481,192         471,460
Alternatives                          100,982            5,650                  5,002         1,383         (1,014 )           112,003         105,513
Active subtotal                     1,696,005           12,291                 20,255          (946 )      (14,029 )         1,713,576       1,698,293
Index and iShares ETFs:
iShares ETFs:
Equity                              1,329,610           52,308                      -        37,177         (5,170 )         1,413,925       1,375,039
Fixed income                          395,252           32,072                      -       (12,415 )       (2,566 )           412,343         401,309
Multi-asset                             3,761               62                      -            (5 )           (4 )             3,814           3,789
Alternatives                           23,616            1,691                      -        (2,156 )          (45 )            23,106          24,886
iShares ETFs subtotal               1,752,239           86,133                      -        22,601         (7,785 )         1,853,188       1,805,023
Non-ETF Index
Equity                              1,730,822          (54,306 )                4,750       100,945        (14,498 )         1,767,713       1,746,790
Fixed income                          645,078           35,185                  2,051       (15,165 )      (15,018 )           652,131         656,332
Multi-asset                             7,838              541                   (243 )        (262 )          (70 )             7,804           8,106
Alternatives                            4,749             (108 )                    1           153            (52 )             4,743           4,751
Non-ETF Index subtotal              2,388,487          (18,688 )           

6,559 85,671 (29,638 ) 2,432,391 2,415,979 Index & iShares ETFs subtotal 4,140,726

           67,445                  6,559       108,272        (37,423 )         4,285,579       4,221,002
Long-term                           5,836,731           79,736                 26,814       107,326        (51,452 )         5,999,155       5,919,295
Cash management                       449,949           (6,167 )                  686         1,043         (2,326 )           443,185         456,017
Advisory(4)                             1,515              288                      -            (2 )          (41 )             1,760           1,267
Total                         $     6,288,195$     73,857     $           27,500     $ 108,367$  (53,819 )$     6,444,100$ 6,376,579

The following table presents component changes in AUM by product type for the nine months ended September 30, 2018.


                                                     Net
                               December 31,        inflows         Acquisitions and        Market           FX           September 30,        Average
(in millions)                      2017           (outflows)       dispositions(1)         change        impact(2)           2018             AUM(3)
Equity                        $    3,371,641$    (13,125 )   $            2,590     $  144,390$   (22,809 )$     3,482,687$ 3,431,498
Fixed income                       1,855,465           76,011                 18,538        (43,565 )       (22,643 )         1,883,806       1,869,292
Multi-asset                          480,278            9,617                    683          7,121          (4,889 )           492,810         483,355
Alternatives:
Core                                  98,533            5,529                  4,995          1,407            (999 )           109,465         102,928
Currency and commodities(5)           30,814            1,704                      8         (2,027 )          (112 )            30,387          32,222
Alternatives subtotal                129,347            7,233                  5,003           (620 )        (1,111 )           139,852         135,150
Long-term                          5,836,731           79,736                 26,814        107,326         (51,452 )         5,999,155       5,919,295
Cash management                      449,949           (6,167 )                  686          1,043          (2,326 )           443,185         456,017
Advisory(4)                            1,515              288                      -             (2 )           (41 )             1,760           1,267
Total                         $    6,288,195$     73,857     $           27,500     $  108,367$   (53,819 )$     6,444,100$ 6,376,579

(1) Amounts include net AUM impact from the TCP Transaction, the Citibanamex Transaction, the Aegon Transaction and the DSP Transaction.

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

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

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

(5) Amounts include commodity iShares ETFs.

                                       54

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AUM increased $155.9 billion to $6.4 trillion at September 30, 2018, driven by net market appreciation, net inflows and net AUM added from strategic transactions, partially offset by the impact of foreign exchange movements.


Net market appreciation of $108.4 billion included $144.4 billion from equity
products due to higher U.S. equity markets, partially offset by net depreciation
from lower international developed and emerging equity markets, and $43.6
billion from fixed income strategies.

Long-term net inflows of $79.7 billion were comprised of net inflows of $86.1
billion and $23.9 billion from iShares ETFs and retail clients, respectively,
partially offset by net outflows of $30.3 billion from institutional clients.
Net flows in long-term products are described below.

• iShares ETFs net inflows of $86.1 billion reflected $73.0 billion and

$13.1 billion of net inflows into Core and non-Core ETFs, respectively.

        Equity net inflows of $52.3 billion were driven by both U.S. and
        international equity market exposures. Fixed income inflows of $32.1
        billion were led by flows into treasuries.

• Retail net inflows of $23.9 billion reflected net inflows of $19.4 billion

in the United States and $4.5 billion internationally. Retail net inflows

were led by fixed income net inflows of $19.4 billion, reflecting inflows

into emerging markets, municipal bond funds, and unconstrained strategies.

• Institutional active net outflows of $3.6 billion reflected active fixed

income and equity net outflows of $7.4 billion and $6.3 billion,

respectively, partially offset by active multi-asset and alternatives net

inflows of $6.3 billion and $3.7 billion, respectively. Multi-asset net

inflows were driven by ongoing demand for the LifePath target-date series.

Alternatives net inflows were led by flows into illiquid alternatives.

• Institutional index net outflows of $26.6 billion were primarily driven by

equity net outflows of $59.0 billion, linked to client asset allocation,

re-balancing and cash needs, partially offset by fixed income net inflows

of $31.9 billion, led by continued demand for liability-driven investment

fixed income solutions.



Cash management AUM decreased to $443.2 billion, primarily due to net outflows
of $6.2 billion, driven by a planned $23.9 billion redemption of a single escrow
mandate in the third quarter.

AUM also decreased $53.8 billion due to the impact of foreign exchange movements, primarily resulting from the strengthening of the U.S. dollar against the British pound and the Euro.









                                       55

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Component Changes in AUM for the Twelve Months Ended September 30, 2018

The following table presents the component changes in AUM by client type and product for the twelve months ended September 30, 2018.



                                                 Net
                          September 30,        inflows         Acquisitions and       Market           FX          September 30,        Average
(in millions)                 2017            (outflows)       dispositions(1)        change       impact(2)           2018             AUM(3)
Retail:
Equity                   $       225,668$        930     $           

2,137 $ 10,465$ (1,656 )$ 237,544$ 234,570 Fixed income

                     248,348           27,430                 14,070        (6,032 )         (937 )           282,879         263,376
Multi-asset                      118,062            4,734                  2,519          (726 )         (285 )           124,304         121,297
Alternatives                      16,443            2,176                      7           (31 )          (61 )            18,534          17,364
Retail subtotal                  608,521           35,270                 18,733         3,676         (2,939 )           663,261         636,607
iShares ETFs:
Equity                         1,228,395           97,196                   

- 92,086 (3,752 ) 1,413,925 1,350,595 Fixed income

                     386,267           40,744                      -       (13,023 )       (1,645 )           412,343         398,421
Multi-asset                        3,491              324                      -             3             (4 )             3,814           3,755
Alternatives                      22,284            2,669                      -        (1,815 )          (32 )            23,106          24,365
iShares ETFs subtotal          1,640,437          140,933                      -        77,251         (5,433 )         1,853,188       1,777,136
Institutional:
Active:
Equity                           130,366           (7,491 )               (4,296 )      11,829         (1,433 )           128,975         135,167
Fixed income                     562,027           (5,073 )                2,417        (4,658 )       (3,122 )           551,591         559,446
Multi-asset                      327,733            9,180                 (1,593 )      24,431         (2,864 )           356,887         345,708
Alternatives                      85,098            1,934                  4,995         2,146           (705 )            93,468          87,097
Active subtotal                1,105,224           (1,450 )                

1,523 33,748 (8,124 ) 1,130,921 1,127,418 Index: Equity

                         1,588,036          (67,979 )                

4,749 188,093 (10,656 ) 1,702,243 1,669,668 Fixed income

                     591,778           55,861                  2,051        (1,141 )      (11,556 )           636,993         633,159
Multi-asset                        7,741              301                   (243 )          67            (61 )             7,805           8,040
Alternatives                       7,146           (2,623 )                    1           254            (34 )             4,744           4,952
Index subtotal                 2,194,701          (14,440 )               

6,558 187,273 (22,307 ) 2,351,785 2,315,819 Institutional subtotal 3,299,925 (15,890 )

8,081 221,021 (30,431 ) 3,482,706 3,443,237 Long-term

                      5,548,883          160,313                 

26,814 301,948 (38,803 ) 5,999,155 5,856,980 Cash management

                  425,423           17,239                    686         1,432         (1,595 )           443,185         450,862
Advisory(4)                        2,586             (769 )                    -           (18 )          (39 )             1,760           1,494
Total                    $     5,976,892$    176,783     $           27,500     $ 303,362$  (40,437 )$     6,444,100$ 6,309,336

(1) Amounts include net AUM impact from the TCP Transaction, the Citibanamex

     Transaction, the Aegon Transaction and the DSP Transaction.


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

(3) Average AUM is calculated as the average of the month-end spot AUM amounts

     for the trailing thirteen months.


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




                                       56

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The following table presents component changes in AUM by investment style and product type for the twelve months ended September 30, 2018.




                                                       Net
                               September 30,         inflows          Acquisitions and        Market            FX           September 30,        Average
(in millions)                      2017             (outflows)        dispositions(1)         change        impact(2)            2018             AUM(3)
Active:
Equity                        $       300,176$    (12,158 )    $           (2,160 )    $  17,436$   (2,245 )$       301,049$   308,300
Fixed income                          797,840            19,387                  16,487        (10,687 )        (3,695 )            819,332         809,440
Multi-asset                           445,795            13,914                     926         23,705          (3,148 )            481,192         467,005
Alternatives                          101,541             4,110                   5,002          2,115            (765 )            112,003         104,461
Active subtotal                     1,645,352            25,253                  20,255         32,569          (9,853 )          1,713,576       1,689,206
Index and iShares ETFs:
iShares ETFs:
Equity                              1,228,395            97,196                       -         92,086          (3,752 )          1,413,925       1,350,595
Fixed income                          386,267            40,744                       -        (13,023 )        (1,645 )            412,343         398,421
Multi-asset                             3,491               324                       -              3              (4 )              3,814           3,755
Alternatives                           22,284             2,669                       -         (1,815 )           (32 )             23,106          24,365
iShares ETFs subtotal               1,640,437           140,933                       -         77,251          (5,433 )          1,853,188       1,777,136
Non-ETF Index:
Equity                              1,643,894           (62,382 )                 4,750        192,951         (11,500 )          1,767,713       1,731,105
Fixed income                          604,313            58,831                   2,051         (1,144 )       (11,920 )            652,131         646,541
Multi-asset                             7,741               301                    (243 )           67             (62 )              7,804           8,040
Alternatives                            7,146            (2,623 )                     1            254             (35 )              4,743           4,952
Non-ETF Index subtotal              2,263,094            (5,873 )           

6,559 192,128 (23,517 ) 2,432,391 2,390,638 Index & iShares ETFs subtotal 3,903,531

           135,060                   6,559        269,379         (28,950 )          4,285,579       4,167,774
Long-term                           5,548,883           160,313                  26,814        301,948         (38,803 )          5,999,155       5,856,980
Cash management                       425,423            17,239                     686          1,432          (1,595 )            443,185         450,862
Advisory(4)                             2,586              (769 )                     -            (18 )           (39 )              1,760           1,494
Total                         $     5,976,892$    176,783      $           27,500      $ 303,362$  (40,437 )$     6,444,100$ 6,309,336

The following table presents component changes in AUM by product type for the twelve months ended September 30, 2018.


                                                    Net
                             September 30,        inflows         Acquisitions and       Market           FX          September 30,        Average
(in millions)                    2017            (outflows)       dispositions(1)        change       impact(2)           2018             AUM(3)
Equity                      $     3,172,465$     22,656     $            2,590     $ 302,473$  (17,497 )$     3,482,687$ 3,390,000
Fixed income                      1,788,420          118,962                 18,538       (24,854 )      (17,260 )         1,883,806       1,854,402
Multi-asset                         457,027           14,539                    683        23,775         (3,214 )           492,810         478,800
Alternatives:
Core                                 99,168            3,958                  4,995         2,092           (748 )           109,465         101,921
Currency and commodities(5)          31,803              198                      8        (1,538 )          (84 )            30,387          31,857
Alternatives subtotal               130,971            4,156                  5,003           554           (832 )           139,852         133,778
Long-term                         5,548,883          160,313                

26,814 301,948 (38,803 ) 5,999,155 5,856,980 Cash management

                     425,423           17,239                    686         1,432         (1,595 )           443,185         450,862
Advisory(4)                           2,586             (769 )                    -           (18 )          (39 )             1,760           1,494
Total                       $     5,976,892$    176,783     $           27,500     $ 303,362$  (40,437 )$     6,444,100$ 6,309,336

(1) Amounts include net AUM impact from the TCP Transaction, the Citibanamex Transaction, the Aegon Transaction and the DSP Transaction.

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

(3) Average AUM is calculated as the average of the month-end spot AUM amounts

for the trailing thirteen months.

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

(5) Amounts include commodity iShares ETFs.



AUM increased $467.2 billion to $6.4 trillion at September 30, 2018 from $6.0
trillion at September 30, 2017, driven by net market appreciation, positive net
inflows and net AUM added from strategic transactions, partially offset by the
impact of foreign exchange movements.

Net market appreciation of $303.4 billion was primarily driven by higher U.S. and global equity markets, partially offset by $24.9 billion of net market depreciation from fixed income strategies.

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Long-term net inflows of $160.3 billion were comprised of net inflows of $140.9
billion and $35.3 billion from iShares ETFs and retail clients, respectively,
partially offset by net outflows of $15.9 billion from institutional clients.
Net flows in long-term products are described below.

• iShares ETFs net inflows of $140.9 billion reflected $101.5 billion and

$39.4 billion of net inflows into Core and non-Core ETFs, respectively.

        Equity net inflows of $97.2 billion were driven by both U.S. and
        international equity market exposures. Fixed income inflows of $40.7
        billion were led by flows into treasuries and emerging markets bond funds.

• Retail net inflows of $35.3 billion reflected net inflows of $26.8 billion

in the United States and $8.5 billion internationally. Retail net inflows

primarily reflected net inflows of $27.4 billion into fixed income

products, led by emerging markets, municipal bond funds, and unconstrained

strategies, and $4.7 billion into multi-asset products.

• Institutional active net outflows of $1.5 billion reflected active equity

and fixed income net outflows of $7.5 billion and $5.1 billion,

respectively, partially offset by active multi-asset net inflows of $9.2

billion. Multi-asset net inflows were driven by ongoing demand for the

LifePath target-date series.

• Institutional index net outflows of $14.4 billion were primarily driven by

equity net outflows of $68.0 billion, linked to client asset allocation,

re-balancing and cash needs, partially offset by fixed income net inflows

of $55.9 billion, led by continued demand for liability-driven investment

fixed income solutions.



Cash management AUM increased to $443.2 billion, driven by positive net inflows,
partially offset by the planned redemption of a single escrow mandate and the
impact of foreign exchange movements.



AUM decreased $40.4 billion due to the impact of foreign exchange movements, primarily due to the strengthening of the U.S. dollar, largely against the British pound and the Euro.




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DISCUSSION OF FINANCIAL RESULTS


The Company's results of operations for the three and nine months ended
September 30, 2018 and 2017 are discussed below. For a further description of
the Company's revenue and expense, see the Company's Annual Report on Form 10-K
for the year ended December 31, 2017 ("2017 Form 10-K") and Note 2, Significant
Accounting Policies, in the condensed consolidated financial statements.

Revenue



                                              Three Months Ended            Nine Months Ended
                                                 September 30,                September 30,
(in millions)                                 2018           2017           2018          2017
Investment advisory, administration fees
and
  securities lending revenue:
Equity:
Active                                     $      405$     418$    1,269$   1,229
iShares ETFs                                      885            835          2,722         2,332
Non-ETF Index                                     169            168            532           503
Equity subtotal                                 1,459          1,421          4,523         4,064
Fixed income:
Active                                            460            437          1,374         1,268
iShares ETFs                                      205            210            620           595
Non-ETF Index                                      98             88            292           257
Fixed income subtotal                             763            735          2,286         2,120
Multi-asset                                       298            289            889           843
Alternatives:
Core                                              185            169            539           469
Currency and commodities                           24             23             75            67
Alternatives subtotal                             209            192            614           536
Long-term                                       2,729          2,637          8,312         7,563
Cash management                                   154            144            462           408
Total base fees                                 2,883          2,781          8,774         7,971
Investment advisory performance fees:
Equity                                              7             30             68            57
Fixed income                                        -              9              2            20
Multi-asset                                         1              2             15            14
Alternatives                                      143            150            227           218
Total performance fees                            151            191            312           309
Technology services revenue                       200            169            582           481
Distribution fees:
Retrocessions                                     168            175            541           490
12b-1 fees (U.S. mutual funds
distribution fees)                                102            113            313           356
Other                                               9             10             30            31
Total distribution fees                           279            298            884           877
Advisory and other revenue:
Advisory                                           26             25             80            74
Other                                              37             44            132           124
Total advisory and other revenue                   63             69            212           198
Total revenue                              $    3,576$   3,508$   10,764$   9,836


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The table below lists the asset type mix of investment advisory, administration fees and securities lending revenue (collectively "base fees") and mix of average AUM by product type:




                                           Three Months Ended September 30,                             Nine Months Ended September 30,
                                                                 Mix of Average AUM                                          Mix of Average AUM
                                  Mix of Base Fees                by Asset Class(1)            Mix of Base Fees               by Asset Class(2)
                                 2018           2017            2018            2017          2018           2017           2018            2017
Equity:
Active                               15 %           15 %              5 %             5 %         14 %           15 %             5 %             5 %
iShares ETFs                         31 %           30 %             22 %            20 %         31 %           29 %            22 %            20 %
Non-ETF Index                         6 %            6 %             27 %            28 %          6 %            6 %            27 %            28 %
Equity subtotal                      52 %           51 %             54 %            53 %         51 %           50 %            54 %            53 %
Fixed income:
Active                               16 %           16 %             13 %            13 %         17 %           17 %            12 %            13 %
iShares ETFs                          7 %            8 %              6 %             6 %          7 %            7 %             6 %             6 %
Non-ETF Index                         3 %            3 %             10 %            10 %          3 %            3 %            10 %            10 %
Fixed income subtotal                26 %           27 %             29 %            29 %         27 %           27 %            28 %            29 %
Multi-asset                          10 %           10 %              8 %             8 %         10 %           11 %             8 %             8 %
Alternatives:
Core                                  6 %            6 %              2 %             2 %          6 %            6 %             2 %             2 %
Currency and commodities              1 %            1 %              0 %             1 %          1 %            1 %             1 %             1 %
Alternatives subtotal                 7 %            7 %              2 %             3 %          7 %            7 %             3 %             3 %
Long-term                            95 %           95 %             93 %            93 %         95 %           95 %            93 %            93 %
Cash management                       5 %            5 %              7 %             7 %          5 %            5 %             7 %             7 %
Total excluding Advisory AUM        100 %          100 %            100 %           100 %        100 %          100 %           100 %           100 %



(1) Average AUM is calculated as the average of the month-end spot AUM amounts

for the trailing four months.

(2) Average AUM is calculated as the average of the month-end spot AUM amounts

     for the trailing ten months.



Three Months Ended September 30, 2018 Compared with Three Months Ended September 30, 2017


Revenue increased $68 million, or 2%, from the three months ended September 30,
2017, driven by growth in base fees and technology services revenue, partially
offset by lower performance fees.

Investment advisory, administration fees and securities lending revenue of
$2,883 million increased $102 million from $2,781 million for the three months
ended September 30, 2017, reflecting the impact of higher markets and organic
growth on average AUM. The increase lagged the growth in average AUM as a result
of the impact of divergent beta and previously announced pricing changes to
select investment products. Securities lending revenue was $160 million in the
current quarter compared with $150 million in the third quarter of 2017.

Investment advisory performance fees of $151 million decreased $40 million from
$191 million for the three months ended September 30, 2017, primarily reflecting
lower fees from liquid alternative and long-only products.

Technology services revenue of $200 million increased $31 million from $169 million for the three months ended September 30, 2017, primarily reflecting higher revenue from institutional Aladdin.

Nine Months Ended September 30, 2018 Compared with Nine Months Ended September 30, 2017

Revenue increased $928 million, or 9%, from the nine months ended September 30, 2017, driven by growth in base fees and technology services revenue.


Investment advisory, administration fees and securities lending revenue of
$8,774 million increased $803 million from $7,971 million for the nine months
ended September 30, 2017, reflecting the impact of higher markets and organic
growth on average AUM. The increase lagged the growth in average AUM as a result
of divergent beta and previously announced pricing changes to select investment
products. Securities lending revenue was $498 million for the nine months ended
September 30, 2018 compared with $447 million for the nine months ended
September 30, 2017.

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Investment advisory performance fees of $312 million increased $3 million from the nine months ended September 30, 2017, primarily reflecting improved performance in long-only equity and single strategy hedge fund products, partially offset by lower revenue from fixed income products.


Technology services revenue of $582 million increased $101 million from $481
million for the nine months ended September 30, 2017, reflecting higher revenue
for institutional Aladdin, Aladdin Wealth and distribution technologies.

Expense



                                                 Three Months Ended           Nine Months Ended
                                                   September 30,                September 30,
(in millions)                                    2018           2017          2018          2017
Expense, GAAP:
Employee compensation and benefits            $    1,097$  1,087$    3,300$  3,106
Distribution and servicing costs:
Retrocessions                                        168           175            541          490
12b-1 costs                                          100           111            307          349
Other                                                140           133            407          391
Total distribution and servicing costs               408           419          1,255        1,230
Direct fund expense                                  249           231            774          658
General and administration:
Marketing and promotional                             77            76            253          231
Occupancy and office related                          73            68            220          202
Portfolio services                                    60            60            203          175
Technology                                            61            51            172          145
Professional services                                 42            37            111           92
Communications                                         9             8             28           24
  Foreign exchange remeasurement                       7             3             12           (3 )
  Contingent consideration fair value
adjustments                                           29             7             34           (1 )
  Product launch costs                                 1             -             12            4
Other general and administration                      54            45            144          127
Total general and administration expense             413           355          1,189          996
Amortization of intangible assets                     13            27             35           77
Total expense, GAAP                           $    2,180$  2,119$    6,553$  6,067
Less non-GAAP expense adjustments:
Employee compensation and benefits:
PNC LTIP funding obligation                            4             4             10           12
Expense, as adjusted:
Employee compensation and benefits            $    1,093$  1,083$    3,290$  3,094
Distribution and servicing costs                     408           419          1,255        1,230
Direct fund expense                                  249           231            774          658
General and administration                           413           355          1,189          996
Amortization of intangible assets                     13            27             35           77
Total expense, as adjusted                    $    2,176$  2,115$    6,543$  6,055

Three Months Ended September 30, 2018 Compared with Three Months Ended September 30, 2017


GAAP.  Expense increased $61 million from the three months ended September 30,
2017, primarily driven by higher general and administration expense, including
$42 million of transaction-related expense recorded in the three months ended
September 30, 2018, higher volume-related expense, and higher employee
compensation and benefits expense.

Employee compensation and benefits expense increased $10 million from the three
months ended September 30, 2017, primarily reflecting higher salaries, partially
offset by lower incentive compensation. Employees at September 30, 2018 totaled
approximately 14,900 compared with approximately 13,700 at September 30, 2017.

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General and administration expense increased $58 million from the three months
ended September 30, 2017, primarily due to $42 million of transaction-related
expense recorded in the three months ended September 30, 2018, consisting of
contingent consideration fair value adjustments, other general and
administration expense, and professional services.

As Adjusted.  Expense, as adjusted, increased $61 million, or 3%, to $2,176
million from $2,115 million for the three months ended September 30, 2017. The
increase in total expense, as adjusted, is driven primarily by higher general
and administration expense, higher volume-related expense, and higher employee
compensation and benefits expense.

Nine Months Ended September 30, 2018 Compared with Nine Months Ended September 30, 2017


GAAP.  Expense increased $486 million from the nine months ended September 30,
2017, primarily driven by higher employee compensation and benefits expense,
higher general and administration expense, and higher volume-related expense.

Employee compensation and benefits expense increased $194 million, or 6%, from
the nine months ended September 30, 2017, reflecting higher salaries and higher
incentive compensation, primarily driven by higher operating income and higher
headcount, partially offset by approximately $20 million of expense associated
with the strategic repositioning of the active equity platform in the nine
months ended September 30, 2017.

Distribution and servicing costs totaled $1,255 million compared with $1,230
million for the nine months ended September 30, 2017, reflecting higher average
AUM.

Direct fund expense increased $116 million from the nine months ended September 30, 2017, reflecting higher average AUM.


Amortization of intangible assets decreased $42 million from the nine months
ended September 30, 2017, primarily reflecting certain finite-lived intangible
assets being fully amortized.

As Adjusted.  Expense, as adjusted, increased $488 million, or 8%, to $6,543
million from $6,055 million for the nine months ended September 30, 2017. The
increase in total expense, as adjusted, is driven primarily by higher employee
compensation and benefit expense, higher general and administration expense, and
higher volume-related expense.

Nonoperating Results

The summary and reconciliation of GAAP nonoperating income (expense) to nonoperating income (expense), as adjusted for the three and nine months ended September 30, 2018 and 2017 was as follows:



                                               Three Months Ended               Nine Months Ended
                                                  September 30,                   September 30,
(in millions)                                 2018             2017           2018             2017
Nonoperating income (expense), GAAP
basis(1)                                   $       33$       10$       (7 )$        4
Less: Net income (loss) attributable to
NCI                                               (13 )             12             (3 )             31
Nonoperating income (expense), as
adjusted, net of
  NCI(2)(3)                                $       46$       (2 )$       (4 )$      (27 )

(1) Amounts include a loss of $9 million and a gain of $29 million for the three

months ended September 30, 2018 and 2017, respectively, attributable to

consolidated variable interest entities ("VIEs"). Amounts include a loss of

$21 million and a gain of $95 million for the nine months ended September

     30, 2018 and 2017, respectively, attributable to consolidated VIEs.


(2)  Net of income (loss) attributable to NCI.


(3)  Management believes nonoperating income (expense), as adjusted, is an
     effective measure for reviewing BlackRock's nonoperating contribution to

results. See Non-GAAP Financial Measures for further information on non-GAAP

financial measures for the three and nine months ended September 30, 2018

     and 2017.




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The components of nonoperating income (expense), as adjusted, for the three and nine months ended September 30, 2018 and 2017 were as follows:

                                               Three Months Ended              Nine Months Ended
                                                  September 30,                  September 30,
(in millions)                                 2018             2017           2018            2017
Net gain (loss) on investments(1)(2)
Private equity                             $        4$        7$       10$      21
Real assets                                        10                1             24               2
Other alternatives(3)                               1               11              5              34
Other investments(4)                               (3 )             10            (20 )            35
Subtotal                                           12               29             19              92
Other gains(5)                                     51                -             52               5
Total net gain (loss) on
investments(1)(2)                                  63               29             71              97
Interest and dividend income                       29               15             63              35
Interest expense(6)                               (46 )            (46 )         (138 )          (159 )
Net interest expense                              (17 )            (31 )          (75 )          (124 )
Nonoperating income (expense), as
adjusted(1)(2)                             $       46$       (2 )$       (4 )$     (27 )

(1) Net of net income (loss) attributable to NCI. Amounts also include net gain

(loss) on consolidated VIEs.

(2) Management believes nonoperating income (expense), as adjusted, is an

effective measure for reviewing BlackRock's nonoperating contribution to

results. See Non-GAAP Financial Measures for further information on non-GAAP

financial measures for the three and nine months ended September 30, 2018

and 2017.

(3) Amounts primarily include net gains (losses) related to direct hedge fund

strategies and hedge fund solutions.

(4) Amounts primarily include net gains (losses) related to equity and fixed

income investments.

(5) Amount for the three months ended September 30, 2018 primarily includes a

$40 million pre-tax gain related to the DSP Transaction and a $10 million

noncash pre-tax gain related to the revaluation of another strategic

investment.

(6) Amount for the nine months ended September 30, 2017 included a "make-whole"

redemption premium of $14 million related to the refinancing of $700 million

    of 6.25% notes, which were repaid prior to their September 2017 maturity.


Income Tax Expense

                                                       GAAP                                               As Adjusted
                                  Three Months Ended          Nine Months Ended          Three Months Ended          Nine Months Ended
                                     September 30,              September 30,               September 30,              September 30,
(in millions)                      2018          2017          2018         2017          2018          2017          2018         2017
Operating income(1)             $    1,396$ 1,389$    4,211$ 3,769$    1,400$ 1,393$    4,221$ 3,781
Total nonoperating income
  (expense)(1)(2)                       46           (2 )           (4 )       (27 )           46           (2 )           (4 )       (27 )
Income before income taxes(2)   $    1,442$ 1,387$    4,207$ 3,742$    1,446$ 1,391$    4,217$ 3,754
Income tax expense              $      226$   443$      829$ 1,085$      232$   425$      831$ 1,069
Effective tax rate                    15.7 %       31.9 %         19.7 %      29.0 %         16.0 %       30.6 %         19.7 %      28.5 %




(1)  See Non-GAAP Financial Measures for further information on and
     reconciliation of as adjusted items.


(2)  Net of net income (loss) attributable to NCI.




2018. The three and nine months ended September 30, 2018 income tax expense
(GAAP) reflected a reduced tax rate associated with the 2017 Tax Act and $90
million of discrete tax benefits, primarily related to changes in the Company's
organizational entity structure. The nine months ended September 30, 2018 income
tax expense (GAAP) also included a discrete tax benefit of $58 million related
to stock-based compensation awards that vested in 2018.



2017. The three and nine months ended September 30, 2017 income tax expense
(GAAP) included net noncash expense of $19 million related to the revaluation of
certain deferred income tax liabilities as a result of domestic state and local
tax changes. The nine months ended September 30, 2017 income tax expense (GAAP)
also included a discrete tax benefit of $84 million related to stock-based
compensation awards that vested in 2017.



The as adjusted effective tax rate of 30.6% and 28.5% for the three and nine
months ended September 30, 2017, respectively, excluded the net noncash expense
of $19 million mentioned above as it will not have a cash flow impact and to
ensure comparability among periods presented.



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BALANCE SHEET OVERVIEW

As Adjusted Balance Sheet


The following table presents a reconciliation of the condensed consolidated
statement of financial condition presented on a GAAP basis to the condensed
consolidated statement of financial condition, excluding the impact of separate
account assets and separate account collateral held under securities lending
agreements (directly related to lending separate account securities) and
separate account liabilities and separate account collateral liabilities under
securities lending agreements and consolidated sponsored investment products.

The Company presents the as adjusted balance sheet 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. Management views the as adjusted balance
sheet, a non-GAAP financial measure, as an economic presentation of the
Company's total assets and liabilities; however, it 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.

Separate Account Assets and Liabilities and Separate Account Collateral Held under Securities Lending Agreements


Separate account assets are maintained by BlackRock Life Limited, a wholly owned
subsidiary of the Company that is a registered life insurance company in the
United Kingdom, and represent segregated assets held for purposes of funding
individual and group pension contracts. 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's assets. The net investment income attributable to
separate account assets accrues directly to the contract owners and is not
reported on the 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
its clients.

In addition, the Company records on its condensed consolidated statements of
financial condition the separate account collateral received under BlackRock
Life Limited securities lending arrangements as its own asset in addition to an
equal and offsetting separate account collateral liability for the obligation to
return the collateral. The collateral is not available to creditors of the
Company and the borrowers under the securities lending arrangements have no
recourse to the Company's assets.

Consolidated Sponsored Investment Products


The Company consolidates certain sponsored investment products accounted for as
voting rights entities ("VREs") and VIEs, (collectively, "Consolidated Sponsored
Investment Products"). See Note 2, Significant Accounting Policies, in the notes
to the consolidated financial statements contained in the 2017 Form 10-K for
more information on the Company's consolidation policy.

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The Company cannot readily access cash and cash equivalents or other assets held
by Consolidated Sponsored Investment Products to use in its operating
activities. In addition, the Company cannot readily sell investments held by
Consolidated Sponsored Investment Products in order to obtain cash for use in
the Company's operations.



                                                              September 30, 2018
                                                         Separate          Consolidated
                                                          Account           Sponsored
                                          GAAP            Assets/           Investment           As
(in millions)                             Basis        Collateral(1)       Products(2)        Adjusted
Assets
Cash and cash equivalents               $   6,358     $             -     $           32     $    6,326
Accounts receivable                         2,682                   -                  -          2,682
Investments                                 1,760                   -                 42          1,718
Assets of consolidated VIEs:
Cash and cash equivalents                     222                   -                222              -
Investments                                 2,217                   -                449          1,768
Other assets                                  179                   -                179              -
Separate account assets and
collateral held
  under securities lending agreements     127,557             127,557                  -              -
Other assets(3)                             2,507                   -                 (1 )        2,508
Subtotal                                  143,482             127,557                923         15,002
Goodwill and intangible assets, net        31,380                   -                  -         31,380
Total assets                            $ 174,862$       127,557     $          923     $   46,382
Liabilities
Accrued compensation and benefits       $   1,611     $             -     $            -     $    1,611
Accounts payable and accrued
liabilities                                 1,403                   -                  -          1,403
Liabilities of consolidated VIEs              558                   -                558              -
Borrowings                                  4,991                   -                  -          4,991
Separate account liabilities and
collateral
  liabilities under securities
lending agreements                        127,557             127,557                  -              -
Deferred income tax liabilities(4)          3,555                   -                  -          3,555
Other liabilities                           2,114                   -               (293 )        2,407
Total liabilities                         141,789             127,557                265         13,967
Equity
Total stockholders' equity                 32,415                   -                  -         32,415
Noncontrolling interests                      658                   -                658              -
Total equity                               33,073                   -                658         32,415
Total liabilities and equity            $ 174,862$       127,557     $          923     $   46,382

(1) Amounts represent segregated client assets generating advisory fees in which

BlackRock has no economic interest or liability.

(2) Amounts primarily represent the portion of assets and liabilities of

Consolidated Sponsored Investment Products attributable to NCI.

(3) Amounts include property and equipment and other assets.

(4) Amount includes approximately $4.0 billion of deferred income tax liabilities

related to goodwill and intangibles.



The following discussion summarizes the significant changes in assets and
liabilities on a GAAP basis. Please see the condensed consolidated statements of
financial condition as of September 30, 2018 and December 31, 2017 contained in
Part I, Item 1 of this filing. The discussion does not include changes related
to assets and liabilities that are equal and offsetting and have no impact on
BlackRock's stockholders' equity.

Assets.  Cash and cash equivalents at September 30, 2018 and December 31, 2017
included $58 million and $63 million, respectively, of cash held by consolidated
VREs (see Liquidity and Capital Resources for details on the change in cash and
cash equivalents during the nine months ended September 30, 2018).

Accounts receivable at September 30, 2018 decreased $17 million from
December 31, 2017. Investments were $1,760 million at September 30, 2018 (for
more information see Investments herein). Goodwill and intangible assets
increased $771 million from December 31, 2017, primarily due to goodwill and
intangible assets acquired in the TCP and Citibanamex transactions, partially
offset by amortization of intangible assets. Other assets (including property
and equipment) increased $279 million from December 31, 2017, primarily related
to an increase in unit trust receivables (substantially offset by an increase in
unit trust payables recorded within other liabilities) and an increase in
deferred tax assets.

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Liabilities.  Accrued compensation and benefits at September 30, 2018 decreased
$542 million from December 31, 2017, primarily due to 2017 incentive
compensation cash payments in the first quarter of 2018, partially offset by
2018 incentive compensation accruals. Accounts payable and accrued liabilities
at September 30, 2018 increased $242 million from December 31, 2017 primarily
due to higher current income taxes payables. Other liabilities increased $488
million from December 31, 2017, primarily related to higher unit trust payables
(substantially offset by an increase in unit trust receivables recorded within
other assets), timing of settlements in connection with certain transactions,
and uncertain tax positions.

Investments and Investments of Consolidated VIEs


The Company's investments and investments of consolidated VIEs (collectively,
"Total Investments") were $1,760 million and $2,217 million, respectively, at
September 30, 2018. Total Investments include consolidated investments held by
sponsored investment products accounted for as VREs and VIEs. Management reviews
BlackRock's Total Investments on an "economic" basis, which eliminates the
portion of Total Investments that does not impact BlackRock's book value or net
income attributable to BlackRock. 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.

The Company presents Total Investments, as adjusted, to enable investors to understand the portion of Total Investments that is owned by the Company, net of NCI, as a gauge to measure the impact of changes in net nonoperating income (expense) on investments to net income (loss) attributable to BlackRock.


The Company further presents net "economic" investment exposure, net of deferred
compensation investments and hedged investments, to reflect another helpful
measure for investors. The economic impact of Total Investments held pursuant to
deferred compensation arrangements is offset by a change in compensation
expense. The impact of certain investments is substantially mitigated by swap
hedges. Carried interest capital allocations are excluded as there is no impact
to BlackRock's stockholders' equity until such amounts are realized as
performance fees. Finally, the Company's regulatory investment in Federal
Reserve Bank stock, which is not subject to market or interest rate risk, is
excluded from the Company's net economic investment exposure.



                                                  September 30,       December 31,
   (in millions)                                      2018                2017
   Investments, GAAP                             $         1,760     $        1,981
   Investments held by consolidated VIEs, GAAP             2,217            

1,493

   Total Investments                                       3,977            

3,474

   Investments held by consolidated VIEs                  (2,217 )          

(1,493 )

   Investments held by consolidated VREs                    (431 )          

(512 )

   Net interest in consolidated VREs                         389            

460

   Net interest in consolidated VIEs(1)                    1,768            

1,225

   Total Investments, as adjusted                          3,486            

3,154

   Federal Reserve Bank stock                                (92 )          

(91 )

   Deferred compensation investments                         (36 )          

(56 )

   Hedged investments                                       (546 )          

(587 )

   Carried interest (VIEs/VREs)                             (324 )          

(298 )

Total "economic" investment exposure $ 2,488 $

  2,122



(1) Amount includes $306 million of carried interest (VIEs) as of September 30,

2018 and $266 million as of December 31, 2017, which has no impact on the

    Company's "economic" investment exposure.




                                       66

--------------------------------------------------------------------------------

The following table represents the carrying value of the Company's economic
investment exposure, by asset type, at September 30, 2018 and December 31, 2017:



                                               September 30,      December 31,
       (in millions)                               2018               2017
       Private equity                         $           322     $         331
       Real assets                                        363               313
       Other alternatives(1)                              219               236
       Other investments(2)                             1,584             1,242
       Total "economic" investment exposure   $         2,488     $       2,122

(1) Other alternatives include direct hedge fund strategies and hedge fund

solutions.

(2) Other investments primarily include seed investments in fixed income, equity

and multi-asset mutual funds/strategies as well as U.K. government

securities, primarily held for regulatory purposes.



As adjusted investment activity for the nine months ended September 30, 2018 was
as follows:



(in millions)                                                           2018
Total Investments, as adjusted, beginning balance                  $        

3,154

Purchases/capital contributions/acquisitions                                1,183
Sales/maturities                                                             (820 )
Distributions(1)                                                           

(65 ) Market appreciation(depreciation)/earnings from equity method investments

23

Carried interest capital allocations/(distributions)                        

26

Other                                                                         (15 )
Total Investments, as adjusted, ending balance                     $        3,486

(1) Amount includes distributions representing return of capital and return on

     investments.






                                       67

--------------------------------------------------------------------------------

LIQUIDITY AND CAPITAL RESOURCES

BlackRock Cash Flows Excluding the Impact of Consolidated Sponsored Investment Products


The condensed consolidated statements of cash flows include the cash flows of
the Consolidated Sponsored Investment Products. The Company uses an adjusted
cash flow statement, which excludes the impact of Consolidated Sponsored
Investment Products, as a supplemental non-GAAP measure to assess liquidity and
capital requirements. The Company believes that its cash flows, excluding the
impact of the Consolidated Sponsored Investment Products, provide investors with
useful information on the cash flows of BlackRock relating to its ability to
fund additional operating, investing and financing activities. BlackRock's
management does not advocate that investors consider such non-GAAP measures in
isolation from, or as a substitute for, its cash flows presented in accordance
with GAAP.

The following table presents a reconciliation of the condensed consolidated
statements of cash flows presented on a GAAP basis to the condensed consolidated
statements of cash flows, excluding the impact of the cash flows of Consolidated
Sponsored Investment Products:

© Edgar Online, source Glimpses

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