9. presentation by blackrock asset management annual ...retirement.ladwp.com/agendaitems/agenda -...

9. Presentation by BlackRock Asset ManagementAnnual Performance Review as of December 31, 2010

9

Russell 1000 Index Fund

13 April 2011

Edward Corallo, Managing DirectorCorin Frost, CFA, Managing DirectorVickie Chan, Associate

For use with institutional and professional investors only — proprietary and confidential

http://www.ladwp.com/ladwp/homepage.jsp

For use with institutional and professional investors only — proprietary and confidential 1

Table of contents

I. BlackRock Update

II. Index Investment Process and Discipline

III. Market Overview

IV. Performance Review

V. Portfolio Review and Characteristics

VI. Fee Schedule

BlackRock Update

FOR FINANCIAL PROFESSIONAL USE ONLY – NOT FOR PUBLIC DISTRIBUTION


BlackRock’s institutional philosophy

Our philosophy is to deliver investment excellence through partnership with clients

We apply our capital markets expertise to benefit clients• Investment professionals share local insights across asset classes and

regions in pursuit of generating strong risk-adjusted returns

• Our broad industry experience enables us to innovate across products, services and vehicles—including mutual funds, ETFs, commingled funds, and separate accounts

Our culture embodies risk management• Firm founded upon rigorous risk management principles

• Independent risk professionals help ensure portfolio risk is deliberate, diversified and appropriately scaled

• BlackRock Solutions® provides independent risk management and enterprise investment services for $9.5 trillion in assets*

We carefully align service with our clients’ needs• We are truly independent – never trading on our own account

• We integrate corporate governance practices to protect and enhance the economic value of the companies in which we invest

• We provide all facets of transition management services to help clients realize new investment strategies while minimizing disruption

Expertise across asset classes

Fixed Income32%

Cash Management

8%

Equity48%

Advisory4%

Multi-Asset5%

Alternatives¹3%

$3.56 trillion in assets as of 31 December 2010¹Includes commodity and currency mandates

* Assets as of 31 December 2010


Corporate Strategy • Corporate Development • Global Communications • Business Operations • Finance

Office of Mutual Funds • Legal & Compliance • Human Resources • Government Relations

Business Management Services • Corporate Services

Global Trading Platform

Financial Markets Advisory

Aladdin® Business

Business Development

Analytics

Portfolio Management Tools

BLK Relationship Management

One BlackRock platform

One BlackRock

BlackRock Solutions®Global Client Group Portfolio & Risk Management

Corporate Infrastructure

Organizational structure supports collaboration, client focus, and investment excellence

Dedicated teams address the specialized needs of each client

Aladdin® & Technology

Equity

Fixed Income

Cash Management

Alternative Investments

Multi-Asset

Transition Management

Securities Lending

Risk & Quantitative Analysis

Institutional

iShares®

International Retail

US & Canada Retail

Cash Management

Marketing

Aladdin® Development • Engineering • Technology Infrastructure • eBusiness • Corporate Systems


Innovative and extensive investment solutions

$3.56 trillion invested on behalf of institutional and individual clients across asset classes• Offer targeted strategies and outcome-based solutions to tackle specific investment challenges

• Flexibility to meet unique risk and return parameters

• Experience serving clients with diverse investment needs

1 Includes commodity and currency mandates AUM in USD as of 31 December 2010

Multiple asset classes and styles

Equity $1,694 billion

Index equity Scientific active equity

Fundamental equity Long/short strategies

Fixed Income $1,141 billion

Index fixed income Long/short strategies

Total return (enhanced and active) Directional trading

Alternatives $110 billion

Hedge fund strategies Opportunistic products

Fund of hedge fund strategies Real estate

Private Equity Partners Currency & commodity strategies

Special Situations Renewable power

Financial Markets Advisory $151 billion

Multi-Asset $186 billion

BlackRock Multi-Asset Class Solutions (Investment strategies, advisory services, and solutions)

Asset allocation/balanced

Transition Management Securities Lending BlackRock Solutions

Cash Management & Liquidity $279 billion


BlackRock has a global institutional client base

CorporationsAkzo NobelAmeren CorporationApplied MaterialsAT&T Inc.The Boeing CompanyBT Financial GroupCisco Systems (Switzerland) Investments Ltd.CitigroupCoca-Cola EnterprisesComputer Sciences CorporationCSX CorporationDell Computer CorporationDuke EnergyElectronic Arts Inc.Exelon CorporationFedEx CorporationGeneral Electric CompanyHenkel AG & Co. KGaAHome DepotHoneywellIntelInternational Paper Co.Kaiser PermanenteLiechtenstein Global TrustMacy’s, IncNorthrop Grumman CorporationPacific Gas & Electric CorporationPepsiCoPSEG Services Corp.Raytheon CompanyJ. Sainsbury PlcSears Holdings Corporation

The Swire GroupTarget CorporationUnisys CorporationUnited Technologies CorporationTKP InvestmentsValero

Public Funds Arizona State Retirement SystemCalifornia Public Employees' Retirement SystemCalifornia State Teachers' Retirement SystemCity of Cincinnati Retirement SystemCity of Miami Fire and PoliceCivil Aviation Authority (U.K.)Commonwealth of PennsylvaniaFederal Retirement Thrift Investment BoardFederal Employees Retirement SystemFlorida State Board of AdministrationIowa Public Employees' Retirement SystemLondon Pension Fund AuthorityLos Angeles County Employees Retirement AssociationMassachusetts Pension Reserves Investment Management BoardMinnesota State Board of InvestmentMunicipal Employees Retirement System of Michigan

National Rural ElectricCooperative Association (NRECA)Nebraska Investment CouncilNew York City Retirement SystemsNew York State CommonNorth Carolina Retirement SystemsOhio Public Employees’ Retirement SystemOklahoma Public Employees' Retirement SystemOregon Public Employees' Retirement SystemThe Public School & Education Employee Retirement Systemsof MissouriState of AlaskaState of WyomingState of Connecticut Trust FundsState Universities Retirement System of IllinoisTennessee Valley Authority Retirement SystemWashington State Investment Board

Army Air Force ExchangeBoy Scouts of AmericaBureau of Naval PersonnelCal Farley Boys Ranch FoundationThe California EndowmentCarnegie Mellon UniversityChildren’s Hospital of PhiladelphiaConrad N. Hilton FoundationThe Dulwich SchoolsELCA Board of PensionsGreater Glasgow NHS Endowment FundHewlett FoundationInns of CourtJ. Paul Getty EndowmentLondon School of Hygiene and Tropical MedicineThe Metropolitan Museum of ArtPrinceton UniversityPurdue UniversityRockefeller FoundationShriners HospitalsTexas A&M UniversityUniversity of ColoradoUniversity of Texas

Aegis Managing Agency LimitedAetna Inc.American ReAon CorporationAriel Reinsurance Company LimitedAspen Insurance Holdings LimitedAxis Specialty LimitedBlue Shield of CaliforniaCatlin Group LimitedHumana Inc.MAG Mutual Insurance CompanyMassachusetts Mutual Life Insurance CompanyMetLife, Inc.WellPoint Health Networks, Inc.Wilton ReZurich Financial Services

Foundations, Endowmentsand Other Funds

Union / Industry

Carpenters of Western PennsylvaniaDirectors Guild of America Midwest Operating EngineersSF Culinary, Bartenders, & Service Employees Pension TrustUnited Mine Workers of America

Insurance Companies

Official Institutions

Asian Development BankFreddie Mac

Sub-AdvisoryAbbey NationalABN AMRO Holding N.V.Commerzbank AGDeutsche Bank AGGuideStone Capital ManagementHansard Europe LimitedING Groep N.V.INVESCOInvestec Asset Management Ltd.Philips Pension FundRabobank GroupRussell Investment GroupSkandia Insurance Company Ltd.

List is a representative sampling of clients based upon investment mandate, client type, and geographic location who allow their names to be publicly disclosed.Disclosure does not indicate approval or disapproval by such client of BlackRock or of the investment advisory services provided.


BlackRock corporate governance

BlackRock is a public company• Established in 1988 and public since 1999 (NYSE: BLK)

Independent ownership structure• Board composed of 19 Directors: 11 independents, 2 BlackRock, 2 Bank of America, 2 Barclays, and 2 PNC

• No majority shareholder: 7.1% Bank of America; 19.7% Barclays PLC; 20.3% the PNC Financial Services Group, Inc.; 52.9% institutional investors, employees, and the public1

1 Denotes approximate economic ownership interest as of 15 November 2010, based on total shares outstanding at 30 September 2010. The approximate breakdown for voting common stock is as follows: PNC Bancorp and its affiliates owns 25.3%, Barclays owns 2.3%, and institutional investors, employees and the public own 72.4%.

Abdlatif Al-Hamad*

Mathis Cabiallavetta*

Dennis Dammerman*

Bill Demchak

Robert Diamond

Kenneth Dunn*

Laurence Fink

Murry Gerber*

James Grosfeld*

Robert Kapito

Board Members

David Komansky*

Sallie Krawcheck

Mark Linsz

Sir Deryck Maughan*

Thomas O’Brien*

Linda Gosden Robinson*

James Rohr

Ivan Seidenberg*

John Varley

*Independent

Laurence FinkRobert KapitoRohit BhagatJames CharringtonRobert ConnollyRobert FairbairnBen GolubCharles HallacRichard KushelAnn Marie PetachJeff SmithSusan WagnerKendrick Wilson

Global Executive Committee (GEC)

Chairman & Chief Executive OfficerPresidentHead of Asia PacificHead of Europe, Middle East, and AfricaGeneral CounselHead of Global Client GroupChief Risk OfficerChief Operating OfficerHead of Portfolio Management GroupChief Financial OfficerHead of Human ResourcesVice ChairmanVice Chairman


The LADWP Team

Account Management Anthony Freitas, CFA Managing Director Phone: (415) 670-6251 [email protected]

Obie McKenzie Managing Director Phone: (212) 810-8085 [email protected]

Vickie Chan Associate Phone: (415) 670-6156 [email protected]

Portfolio Management

Edward Corallo Managing Director Phone: (415) 670-2189 [email protected]

Corin Frost Managing Director Phone: (415) 670-7640 [email protected]

Name Title Phone Email

San Francisco Office Address

400 Howard StreetSan Francisco, CA 94105

Index Investment Process and Discipline



Amy SchioldagerGlobal Head of Index Equity

Corin Frost, CFAGlobal Head of Strategy

4 Investment Strategists

Eleanor de FreitasHead of Europe Index Equity

Edward CoralloHead of Americas Index Equity

6 Senior Portfolio Managers

1 Senior Research Officer

29 Portfolio Managers

3 Research Analysts

1 Index Analyst Manager

5 Index Analysts

1 Head of Portfolio Management

5 Senior Portfolio Managers


3 Investment Strategists

Jane Leung, CFAHead of Asia Pacific Index Equity

Hong Kong / Singapore

1 Senior Portfolio Manager


Tokyo

1 Head of Global Index Strategies

1 Senior Portfolio Manager


Debbie JelilianChief Operating Officer

By Location

San Francisco/Sao Paolo: 56

London/Munich: 30

Hong Kong/Singapore: 7

Tokyo 5

Total: 98

Global Index Equity Portfolio Management


Institutional Indexing Portfolio Management

Amy SchioldagerGlobal Head of Index Equity

Matt Lee, Ph.D.Head of Index Research

Edward CoralloHead of Americas Index Equity

Creighton Jue, CFAHead of Alternative Beta

Christopher Bliss, CFAHead of Institutional Portfolio Management

Jennifer Hsui, CFA North AmericaSenior Portfolio Manager

Tim Murray, CFAEmergingSenior Portfolio Manager

Rachel AguirreInternationalSenior Portfolio Manager

Lei Zhang, Ph.D.Research Analyst

Yuying Gao, Ph.D.Research Analyst

John Scruggs, Ph.D.Research Analyst

Stephanie AllenHead of IRG

Corette PinarocIndex Analyst

Jim MillardIndex Analyst

John HurabiellIndex Analyst

Derek DeiIndex Analyst

Jason HoltIndex Analyst6 portfolio

managers6 portfolio managers

4 portfolio managers

Corin Frost, CFAHead of Global Index Strategy

Stephanie HillInvestment Strategist

Marco Merz, CFAInvestment Strategist

Sara Shores, CFAInvestment Strategist

Heather AppersonAssistant Investment Strategist

3 portfoliomanagers


We believe that superior investment outcomes are best achieved through a disciplined, objective process to managing return, risk and cost

Return• Performance as planned with value added portfolio management

• Flexible strategies and solutions

Risk• Proprietary portfolio & risk management systems controls

investment and operational risk

Cost• Trading costs integrated into portfolio construction using

proprietary transaction cost models

• Transaction costs minimized through use of internal crossing network

• For all external trading including FX, focus on best execution

BlackRock’s Core investment philosophyTotal performance management

Total Performance Management

Risk

Cost

Return


The investment management cycleDedicated expertise and resources

Detailed knowledge of benchmark

• Daily updates from index providers• Index changes• Corporate Actions• Dividend Reinvestment• Research

Thorough performance analysis Strategy design and oversight

• Product development and innovation• Investment Review Committee• Quarterly Global Performance Review

Rigorous portfolio construction to match benchmark

• Technology• Portfolio analysis

Efficient trading

• Smart trading strategies• Economies of scale• Unit exchange opportunities• Research


BlackRock advantages and benefits Not all index managers are created equal

Better returns

Global insight into index changes, corporate actions and index flowsCoordinated global trading strategyGlobal securities lending relationshipsStable and sizeable securities lending inventory

Less risk

One global trading and technology platformBetter index methodology reflecting a practitioners’ perspective Index Research GroupStraight through processing — no manual intervention Ability to monitor/pass trades and portfolios globally

Lower cost

Currency trades with best execution Diverse client base affords crossing opportunitiesScale and leverage in negotiating market tradesProduct flexibility and special pricing Transition services Economies of scale

BlackRock Advantage Benefits


Summary of LADWP Investment Guidelines

Index: Russell 1000 Index

Fund Guidelines:

The Russell 1000 Index Fund shall be invested and reinvested in a portfolio of

Equity Securities with the objective of approximating as closely as practicable

the capitalization weighted total rate of return of the segment of the United

States market for publicly traded equity securities represented by the 1,000

largest capitalized companies. The criterion for the selection of investments

shall be the Russell 1000 Index. When deemed appropriate by the Manager, the

Manager may invest a portion of the Russell 1000® Index Fund in stock index

futures contracts for the purpose of acting as a temporary substitute for

investment in equity securities. The Russell 1000 Index Fund will not engage in

speculative futures transactions. For the purposes of these investment

guidelines the defined term "Equity Securities" shall mean common stocks and

forms of equity securities (e.g., preferred stock), American Depository

Receipts, European Depository Receipts, Global Depository Receipts and

Investment Company Shares (as defined below) where such investment

company portfolio seeks to replicate or outperform the performance of an equity

Manager.

Tracking Error: +/- 10 basis points annually

The LADWP accounts are managed in strict compliance with the Plan’s guidelines

Market Overview



Market Review for Q4 2010

Russell 1000 Index advanced 11.2% for the quarter, finishing the year up 16.1%. Growth stocks marginally outperformed value stocks as the Russell 1000 Growth Index gained 11.8% for the quarter and 16.7% for the year, while the Russell 1000 Value Index gained 10.5% for the quarter and 15.5% for the year.

US equity markets continued their rally through the fourth quarter as the economic recovery gained traction and accelerated toward year end. During the quarter, the Federal Reserve Board (the “Fed”) launched a second round of quantitative easing measures, the Republicans won control of the House of Representatives in the November election, and the Bush-era tax cuts were extended and supplemented with some fiscal sweeteners. Given these market-friendly developments, coupled with stronger economic data and continued positive surprises on the corporate earnings front, US equity markets posted strong gains for the quarter despite a correction through the month of November due to concerns about the European sovereign debt crisis and heightened geopolitical tensions in Korea. The large-cap

Recent economic data indicates that growth levels are accelerating in the United States. Third quarter gross domestic product (“GDP”) beat expectations with a 2.6% annualized growth rate, representing a marked improvement over the prior quarter growth rate of 1.7%. Growth in the third quarter was fueled by personal consumption, private inventory investment, nonresidential fixed investment, exports, and federal government spending.

The corporate sector has been an important area of strength for the US economy and consumer spending has shown improvement, although weakness in the housing and labor markets continues to burden the economy. The housing sector remains plagued with declining home prices and depressed levels of sales, starts, and overall construction activity. Excess supply and the weak labor market continue to hinder growth in the housing market.

The labor market, which remains a key variable for economic growth in the United States, has been slow to improve. The unemployment rate increased slightly in November to 9.8% while non-farm payrolls wavered over the quarter between exceeding and falling short of expectations, but initial jobless claims demonstrated an overall downward drifting trend.

Deflationary risk continues to threaten the momentum of economic growth in the United States, while inflation remains muted. The seasonally adjusted Consumer Price Index (“CPI”) was up only 0.1% in November, leaving the year-over-year rate at 1.1%. The high degree of excess capacity in labor and manufacturing leaves little potential for widespread inflation taking hold. The Fed has demonstrated its efforts to combat deflation and unemployment by maintaining an easy monetary policy for eight consecutive quarters. At its policy meeting in November, the Fed announced its second program of quantitative easing (known informally as “QE2”), which has thus far failed to make an impact on the unemployment situation, but has successfully boosted confidence and stimulated equity markets.

Performance Review



LADWP Performance Overview

Our investment objective for the Los Angeles Department of Water and Power Fund is to replicate the risk and return of the Russell 1000 Index.

Fund (Gross) Fund (Net) Index Difference

Net Assets: $889, 511,2193 Month 12.57% 12.57% 12.56% 0.01%

Year-to-Date 5.89% 5.89% 5.88% 0.01%

12 Months Trailing 22.99% 22.99% 22.94% 0.05%

2 Years Annualized 38.58% 38.56% 38.52% 0.06%

5 Years Annualized 3.19% 3.17% 3.17% 0.02%Since Inception Annualized 6.26% 6.24% 6.25% 0.01%

Source: BlackRock

As of 2/28/2011

Inception Date: 08/07/2003




Fund (Gross) Fund (Net) Index Difference

Net Assets: $889,511,2192004 11.33% 11.32% 11.40% -0.07%

2005 6.27% 6.26% 6.27% 0.00%

2006 15.62% 15.60% 15.46% 0.16%

2007 5.76% 5.74% 5.77% -0.01%

2008 -37.63% -37.65% -37.60% -0.03%

2009 28.48% 28.46% 28.43% 0.05%

2010 16.80% 16.78% 16.75% 0.05%

Since Inception Annualized* 6.26% 6.24% 6.25% 0.01%

Source: BlackRock

*Inception Date: 08/07/2003




Source: BlackRock

As of 2/28/2010


0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

Fund Gross

Fund Net

Russell 1000

Fund Gross 12.57% 5.89% 22.99% 38.58% 6.26%

Fund Net 12.57% 5.89% 22.99% 38.56% 6.24%

Russell 1000 12.56% 5.88% 22.94% 38.52% 6.25%

3 Month YTD 1 Year 2 Year *SI Ann




Source: BlackRock


-60.00%-40.00%-20.00%

0.00%20.00%40.00%

Fund GrossFund NetRussell 1000

Fund Gross 6.27% 15.62 5.76% -37.63 28.48 16.80 6.26%

Fund Net 6.26% 15.60 5.74% -37.65 28.46 16.78 6.24%

Russell 1000 6.27% 15.46 5.77% -37.60 28.43 16.75 6.25%

2005 2006 2007 2008 2009 2010 *SI

Portfolio Characteristics



LADWP Portfolio Attribution - Sectors


As this is a passive portfolio, portfolio attribution of sectors is not applicable.


LADWP Portfolio Attribution - Top Contributor/Detractors


As this is a passive portfolio, contributors/detractors are at index levels. There are no active over/underweights for attribution.


LADWP Attribution - Stock Selection


As this is a passive portfolio, stock selection is not performed. Individual securities are weighted at index levels, thereforeattribution is not applicable.


Russell 1000® Equity Index Fund Characteristics

Sector diversification

This information is unaudited and intended for analytical purposes onlySources: BlackRock, Bloomberg, Frank Russell Company

Ru-

1K-Id

x-A

-Ch

Characteristics

Strategy Russell 1000® Index

Beta vs. S&P 500® 1.06

Yield 1.79%

Assets Retirement Plan: $767,012,978Health Plan: $122,498,107

Number of holdings 976

Top 10 holdings

Fund % Index %

Exxon Mobil Corp 3.17 3.17

Apple Inc 2.34 2.34

General Electric Co 1.62 1.62

Chevron Corp 1.51 1.51

Intl Business Machines Corp 1.51 1.51

Microsoft Corp 1.48 1.48

JPMorgan Chase&Co 1.35 1.35

Procter&Gamble Co 1.32 1.32

Johnson&Johnson 1.23 1.23

AT&T Inc 1.22 1.22

0 5 10 15 20 25

Utilities

Technology

Industrial

Financial

Energy

Diversified

Consumer non-cyclical

Consumer cyclical

Communications

Basic materials

Percent

Index Fund

As of 28 February 2011


Industry Diversification

INDUSTRY WEIGHTS FUND INDEX INDUSTRY WEIGHTS FUND INDEX

Information Technology 11.14% 11.14% Medical Equipment & Services 2.34% 2.34%

Non-Renewable Energy 10.17% 10.17% Telecommunication 2.32% 2.32%

Pharmaceuticals & Biotech 6.59% 6.59% Leisure 2.07% 2.07%

Utilities 5.86% 5.86% Chemicals and Synthetics 2.06% 2.06%

Food/Beverage & Tobacco 5.26% 5.26% Health Care Services 1.84% 1.84%

Investment Banking & Brokerage Services 5.20% 5.20% Consumer Finance & Credit Services 1.65% 1.65%

Retail 4.21% 4.21% Scientific Instruments & Services 1.52% 1.52%

Transportation & Freight 4.14% 4.14% Consumer Products 1.50% 1.50%

Insurance 3.99% 3.99% Metals & Minerals 1.46% 1.46%

Banks 3.92% 3.92% Machinery 1.21% 1.21%

Manufacturing & Production 3.82% 3.82% Commercial Services 1.15% 1.15%

Media 3.38% 3.38% Auto & Auto Parts 0.96% 0.96%

Electronics 3.17% 3.17% Industrial Materials & Processes 0.66% 0.66%

Personal Care/Drug & Grocery Stores 2.82% 2.82% Consumer Services 0.53% 0.53%

Energy Equipment & Services 2.49% 2.49% Building Materials & Services 0.18% 0.18%

Real Estate 2.39% 2.39%

Source: BlackRockAs of February 28, 2011


LADWP Diversification: Comparison of Risk Exposures to Benchmark

The portfolio is fully replicating, and therefore closely matches the benchmark’s characteristics

Predicted (ex-Ante) Tracking Error: 0.02%

Number of Stocks held in Portfolio: 974

Beta: 1.00

Source: Barra, BlackRockAs of February 28, 2011

Barra Style Factors (Standard Deviation) Fund Benchmark Active

Volatility -0.09 -0.09 0.00

Momentum -0.05 -0.05 0.00

Size 0.16 0.16 0.00

Size NL 0.07 0.07 0.00

Trading Activity 0.05 0.05 0.00

Growth -0.03 -0.03 0.00

Earnings Yield 0.07 0.07 0.00

Earnings Variability -0.04 -0.04 0.00

Leverage -0.06 -0.06 0.00

Currency Sensitivity 0.04 0.04 0.00

Dividend Yield 0.04 0.04 0.00

Non Estimation 0.02 0.02 0.00

Fee Schedule



LADWP Fee Schedule

Total Assets Annual Fee (bps)

First $500,000,000 1.0

Above $500,000,000 0.75

LADWP Management Fee Schedule

Appendix



Current Equity Market Outlook

Equity Market Overview

• February was a mixed month for equities as developed markets continued to outperform their developing counterparts. The S&P 500 managed to trade above 1332; a level of significance as it is double its nadir of 666 in early 2009. Developed equities surged over the first part of the month before later falling back as geopolitical tensions in North Africa dominated headlines. These tensions led oil prices sharply higher. Developing equities were down particularly heavily in Asia while Russia gained due to commodity strength. .

• US macro data showed continued strength. Significantly, the headline unemployment rate fell to 9% despite consensus suggesting that it would print 9.5%. This is significant as the FOMC (Federal Open Market Committee) has clearly signaled that labor market conditions will play a key role in determining future policy. The month also saw both ISM (Institute for Supply Management) manufacturing and non-manufacturing surprise to the upside providing further evidence that the US recovery is continuing in a robust fashion. There was, however, some evidence of this spilling over into increased inflationary pressure as the gross domestic purchases price index printed an increase of 2.1%; ahead of consensus estimates of only 0.3%.

Equity Views

• The recent geopolitical issues in the middle-east and northern Africa have generated a lot of headlines regarding their impact for the oil price. The issues in Algeria and Libya could potentially affect approximately three million barrels per day. This is less than 3% of global requirements. Saudi Arabia alone produces nearly 9 million barrels per day. The implications for the oil price thus clearly become a lot more severe if violence spreads to Saudi Arabia.

• Before the current risks developed a few weeks ago, the global economy had pretty solid momentum, and fundamentals remain strong. At the Federal Reserve’s policy meeting last week, central bankers acknowledged the risks of higher oil prices, but also indicated that the Fed had a more upbeat assessment of the overall economy. Corporate profits have remained strong and preliminary indications are that corporations are not being negatively affected by the increase in energy costs. Indeed, corporate hiring plans have been accelerating, and we believe that jobs growth should continue.

• Regarding Japan, the current problems will no doubt act as a short-term drag on Japanese economic growth levels, but over the longer term we expect reconstruction efforts will help to make lower growth a temporary problem. As a result of all of these, we do not believe that the current risks dominating the headlines will have an overly significant impact. Should conditions worsen (particularly in terms of the nuclear crisis getting worse and/or a significant run up in oil prices) that may change, but for now we remain cautiously optimistic.

• For many investors, the shift into equity markets is still in the early stages and equity valuations are hardly stretched, suggesting that the upward moves have further to run. While pullbacks and corrections will no doubt occur along the way, we believe they should be short and shallow and should be taken advantage of to add to positions.

Source: BlackRock. As of Feb, 2011


Russell Reconstitution 2010

New Methodology Changes• Russell’s special exception to exclude Berkshire Hathaway Class B shares

(BRK.B) was lifted. The result was the addition of BRK.B at an index weight of 1.3% to the Russell 1000 index.

• Russell amended its rules regarding country classification to consider country of incorporation, headquarters, and primary exchange. Companies that were previously excluded due to their incorporation outside of the U.S. (e.g., Covidien (COV) and Ace (ACE)) were added back to the index this year.

• The rule to determine the primary vehicle for dual share class companies was amended to include the most liquid share class.

Turnover • Russell 1000 additions increased to 24 names versus 2 names in 2009.

One-way turnover was 3.92% this year versus 1.96% last year due to addition of BRK.B and re-inclusion of companies based on the new country classification rules.

• The number of Russell 2000 additions increased to 125 names versus 49 names in 2009, while one-way turnover was lower at 9.5% versus 12.25% last year.

Trading• On effective day, all baskets moved in the direction of indexer flows, with

the exception of the Russell 1000 deletes.

• BRK.B rallied on Friday and closed at the day’s high, driving the Russell 1000 add basket to close up 2.14%.

• The spread between Russell 1000 additions versus the deletions closed up 1.9% on a trade-weighted basis.

• For the second consecutive year, the Russell 2000 additions outperformed deletions on effective day, although as expected, the +2.8% spread was significantly smaller than the 21.9% spread last year.

• Despite the volatility of the rebalance, BlackRock successfully managed the 2010 Russell Reconstitution by maintaining tight risk controls and minimizing impact while adding value through specific trading strategies.

June 25 Intra-day Performance

Sources: BlackRock, Russell, Bloomberg, Barclays Capital.

Performance calculated on a trade-weight basis.


Important notes

This material is for distribution only to those types of recipients as provided below and should not be relied upon by any other persons. This material is provided for informational purposes only and does not constitute a solicitation in any jurisdiction in which such solicitation is unlawful or to any person to whom it is unlawful. Moreover, it neither constitutes an offer to enter into an investment agreement with the recipient of this document nor an invitation to respond to it by making an offer to enter into an investment agreement.This material may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections, forecasts, estimates of yields or returns, and proposed or expected portfolio composition. Moreover, certain historical performance information of other investment vehicles or composite accounts managed by BlackRock, Inc. and/or its subsidiaries (together, “BlackRock”) has been included in this material and such performance information is presented by way of example only. No representation is made that the performance presented will be achieved by any BlackRock Funds, or that every assumption made in achieving, calculating or presenting either the forward-looking information or the historical performance information herein has been considered or stated in preparing this material. Any changes to assumptions that may have been made in preparing this material could have a material impact on the investment returns that are presented herein by way of example.This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of February 28, 2011 and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. There is no guarantee that any forecasts made will come to pass. Any investments named within this material may not necessarily be held in any accounts managed by BlackRock. Reliance upon information in this material is at the sole discretion of the reader. Past performance is no guarantee of future results. In the UK issued by BlackRock Investment Management (UK) Limited (authorized and regulated by the Financial Services Authority). Registered office: 33 King William Street, London, EC4R 9AS. Registered in England No. 2020394. Tel: 020 7743 3000. For your protection, telephone calls are usually recorded. BlackRock is a trading name of BlackRock Investment Management (UK) Limited. For distribution in EMEA, Korea, and Taiwan for Professional Investors only (or “professional clients”, as such term may apply in relevant jurisdictions). In Japan, not for use with individual investors. In Canada, this material is intended for accredited investors only. This material is being distributed/issued in Australia and New Zealand by BlackRock Financial Management, Inc. ("BFM"), which is a United States domiciled entity and is exempted under Australian CO 03/1100 from the requirement to hold an Australian Financial Services License and is regulated by the Securities and Exchange Commission under US laws which differ from Australian laws. In Australia this product is only offered to "wholesale" and "professional" investors within the meaning of the Australian Corporations Act). In New Zealand, this presentation is offered to institutional and wholesale clients only. It does not constitute an offer of securities to the public in New Zealand for the purpose of New Zealand securities law. BFM believes that the information in this document is correct at the time of compilation, but no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BFM, its officers, employees or agents. Strategies or capabilities may include those of BlackRock Institutional Trust Company, N.A. (“BTC”), which is a U.S. national banking association operated as a limited purpose trust company. BTC believes that the information in this document is correct at the time of compilation, but no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BFM, its officers, employees or agents. This document contains general information only and is not intended to represent general or specific investment advice. The information does not take into account your financial circumstances. An assessment should be made as to whether the information is appropriate for you having regard to your objectives, financial situation and needs.Past performance is not a guide to future performance. The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested. Changes in the rates of exchange between currencies may cause the value of investments to fluctuate.THIS MATERIAL IS HIGHLY CONFIDENTIAL AND IS NOT TO BE REPRODUCED OR DISTRIBUTED TO PERSONS OTHER THAN THE RECIPIENT.©2010 BlackRock, Inc., All Rights Reserved

9. presentation by blackrock asset management annual ...retirement.ladwp.com/agendaitems/agenda -...

Documents