product management, business development and client service.
Our alternatives products fall into two main categories – core, which includes hedge funds, funds of funds (hedge funds and private equity) and real estate offerings, and currency and commodities.
The products offered under the BAI umbrella are described below.
Core.  ?
Hedge Funds ended the year with $26.6 billion in AUM, down $1.4 billion as net inflows into singlestrategy hedge funds of $1.0 billion were more than offset by return of capital on opportunistic funds.
Market valuation gains contributed $1.1 billion to AUM growth.
Hedge fund AUM includes a variety of single-strategy, multi-strategy, and global macro, as well as portable alpha, distressed and opportunistic offerings.
Products include both open-end hedge funds and similar products, and closed-end funds created to take advantage of specific opportunities over a defined, often longerterm investment horizon.  ?
Funds of Funds AUM increased $6.3 billion, or 28%, to $29.1 billion at December 31, 2012, including $17.1 billion in funds of hedge funds and hybrid vehicles and $12.0 billion in private equity funds of funds.
Growth largely reflected $6.2 billion of assets from SRPEP as we expanded our fund of funds product offerings and further engage in European and Asian markets.  ?
Real Estate and Hard Assets AUM totaled $12.7 billion, down $0.1 billion, or 1%, reflecting $0.6 billion in client net redemptions and distributions and $0.5 billion in portfolio valuation gains.
Offerings include high yield debt and core, value-added and opportunistic equity portfolios and renewable power funds.
We continued to expand our real estate platform and product offerings with the launch of our first U. S.  real estate investment trust (“REIT”) mutual fund and addition of an infrastructure debt team to further increase and diversify our offerings within global infrastructure investing Currency and Commodities.
AUM in currency and commodities strategies totaled $41.4 billion at year-end 2012, flat from year-end 2011, reflecting net outflows of $1.5 billion, primarily from active currency and currency overlays, and $0.8 billion of market and foreign exchange gains.
Claymore also contributed $0.9 billion of AUM.
Currency and commodities products include a range of active and passive products.
Our iShares commodities products represented $24.3 billion of AUM, including $0.7 billion acquired from Claymore, and are not eligible for performance fees.
Cash Management Cash management AUM totaled $263.7 billion at December 31, 2012, up $9.1 billion, or 4%, from year-end 2011.
Cash management products include taxable and tax-exempt money market funds and customized separate accounts.
Portfolios may be denominated in U. S.  dollar, Euro or British pound.
At year-end 2012, 84% of cash AUM was managed for institutions and 16% for retail and HNW investors.
The investor base was also predominantly in the Americas, with 69% of AUM managed for investors in the Americas and 31% for clients in other regions, mostly EMEA-based.
We generated net inflows of $5.0 billion during 2012, reflecting continued uncertainty around future regulatory changes and a challenging investing environment.
To meet investor needs, we sought to provide new solutions and choices for our clients by launching short duration products in the United States, which both immediately address the challenge of a continuing low interest rate environment and will also be important investment options should regulatory changes occur.
In the EMEA business, and in particular for our Euro product set, we have taken action to ensure that we can provide effective cash management solutions in the face of a potentially negative yield environment by taking steps to launch new products and re-engineer our existing product set.
iShares Our industry-leading U. S.  and international iShares ETP suite is discussed below.
Component Changes in AUM – iShares
## Table 0 ##
## Table 1 ##
(1) Significant increases in 2009 (for balance sheet data and AUM) and 2010 (for income statement data) were primarily the result of the BGI Transaction that closed on December 1, 2009.
(2) BlackRock’s related party revenue includes fees for services provided to registered investment companies that it manages, which include mutual funds and exchange-traded funds, as a result of the Company’s advisory relationship.
In addition, equity method investments are considered related parties due to the Company’s influence over the financial and operating policies of the investee.
See Note 15 to the consolidated financial statements for more information on related parties.
(3) Participating preferred stock is considered to be a common stock equivalent for purposes of earnings per share calculations.
(4) Total BlackRock stockholders’ equity, excluding appropriated retained earnings, divided by total common and preferred shares outstanding at December 31 of the respective year-end.
(5) Includes separate account assets that are segregated funds held for purposes of funding individual and group pension contracts and collateral held under securities lending agreements related to these assets that have equal and offsetting amounts recorded in liabilities and ultimately do not impact BlackRock’s stockholders’ equity or cash flows.
(6) Equal and offsetting amounts, related to separate account assets and collateral held under securities lending agreements, are recorded in liabilities.
(7) Includes assets held by consolidated variable interest entities and consolidated sponsored investments funds.
(8) Data reflects the reclassification of prior period AUM into the current period presentation.
(9) Amounts include commodity iShares.
(10) Advisory AUM represents long-term portfolio liquidation assignments.
At December 31, 2012, the following balances related to consolidated VIEs including CLOs and an investment fund on the consolidated statements of financial condition:
## Table 2 ##
At December 31, 2012, BlackRock was the manager of over 20 CLOs/CDOs and other securitization entities.
In accordance with consolidation accounting guidance for VIEs, BlackRock was determined to be the PB for certain of these CLOs, which required BlackRock to consolidate these VIEs.
BlackRock was deemed to be the PB because it has the power to direct the activities of the CLO that most significantly impact the entity’s economic performance and has the right to receive benefits that potentially could be significant to the VIE.
At December 31, 2012, the Company had $2,534 million and $2,505 million in assets and liabilities, respectively, on its consolidated statement of financial condition related to these consolidated CLOs.
In addition, the Company recorded appropriated retained earnings for the difference between the assets and liabilities, as the CLO noteholders, not BlackRock, ultimately will receive the benefits or absorb the losses associated with the CLO’s assets and liabilities.
The changes in the fair value of the assets and liabilities of these CLOs have no impact on net income attributable to BlackRock or its cash flows.
Excluding outstanding management fee receivables, the Company has no risk of loss with its involvement with these VIEs.
At December 31, 2012, BlackRock was determined to be the PB of one sponsored private equity investment fund of funds in which it had a non-substantive investment and was deemed to absorb the majority of the variability due to its de-facto third-party relationships with other partners in the fund, which limits the ability of the partners to transfer or sell their interests without BlackRock’s consent as the general partner of the fund.
At December 31, 2012, the Company had recorded $3 million, $24 million and $27 million in cash and cash equivalents, private equity investments and nonredeemable noncontrolling interests of consolidated VIEs, respectively, on the consolidated statement of financial condition related to this VIE.
The changes in the fair value of the assets and liabilities of this VIE have no impact on net income attributable to BlackRock.
Excluding outstanding management fee receivables, the Company has no risk of loss with its involvement with this VIE.
Consolidation of Voting Rights Entities.
To the extent that BlackRock can exert control over the financial and operating policies of the investee, which generally exists if there is a 50% or greater voting interest or if partners or members of certain products do not have substantive rights, BlackRock consolidates the investee.
The Company, as general partner or managing member of certain sponsored investment funds, generally is presumed to control funds that are limited partnerships or limited liability companies.
Pursuant to ASC 810-20, Control of Partnerships and Similar Entities (“ASC 810- 20”), the Company reviews such investment vehicles to determine if such a presumption can be overcome by determining whether other non-affiliated partners or members of the limited partnership or limited liability company have the substantive ability to dissolve (liquidate) the investment vehicle, or otherwise to remove BlackRock as the general partner or managing member without cause based on a simple unaffiliated majority vote, or have other substantive participating rights.
If the investment vehicle is not a VIE and the presumption of control is not overcome, BlackRock will consolidate the investment vehicle.
McKESSON CORPORATION FINANCIAL REVIEW (Continued) Segment Operating Profit and Corporate Expenses:
## Table 3 ##
Segment operating profit includes gross margin, net of operating expenses, other income and gain (loss) on investments for our three business segments.
In addition to the significant items previously discussed, increases in operating profit reflect revenue growth and increased operating profit in our Pharmaceutical Solutions segment, partially offset by lower operating profit in our Medical-Surgical Solutions and Provider Technologies segments for 2005.
Increases in operating profit in 2004 reflect revenue growth and increased operating profit in our Pharmaceutical Solutions segment, combined with improved operating profits in our Medical-Surgical Solutions and Provider Technologies segments.
Operating profit, as a percentage of revenues, over the last two years decreased in our Pharmaceutical Solutions segment.
This decrease primarily reflects a net decline in gross margins, offset in part with cost reductions by leveraging the segment’s fixed cost infrastructure and productivity improvements in back-office and field operations.
In addition, in 2004, operating profit included a $30.0 million bad debt provision for a customer bankruptcy and a decrease in gains on sales of venture investments, offset in part by lower restructuring charges.
Medical-Surgical Solutions segment’s operating profit as a percentage of revenues declined in 2005 primarily reflecting an increase in gross profit margins which were more than offset by a higher proportion of operating expenses.
Operating expenses increased, in both dollars and as a percentage of revenues, primarily due to the acquisition of MMC, and a higher proportion of costs incurred to serve the segment’s alternative site customers, which have a higher cost-to-serve ratio than the segment’s other customers.
Operating profit for 2005 was also impacted by the lack of flu vaccine supply as well as a $7.4 million charge to operating expenses due to an increase in litigation reserves.
Operating profit as a percentage of revenues increased in 2004 for this segment primarily reflecting improvements in gross profit and a reduction in operating expenses.
The reduction in 2004 operating expenses reflects the removal of duplicate operating expenses as a result of the segment’s 2002/2003 distribution center network consolidation plan, as well as other operational improvements including a significant decrease in bad debt expense.
In 2003, operating profit benefited from $12.0 million in reversals of the prior year’s accrued restructuring charges as a result of a modification to the segment’s distribution center network consolidation plan.
This benefit was partially offset by an increase in bad debt expense of approximately $11 million.
Provider Technologies segment’s operating profit as a percentage of revenues decreased in 2005 and increased in 2004.
Operating profit for 2005 reflects a decrease in gross profit margin as well as an increase in operating expenses to support the segment’s revenue growth and a decrease in customer settlement reserve reversals.
Increases in operating profit as a percentage of revenues for 2004 reflects a higher gross profit margin, $66.4 million of reversals of customer settlement reserves due to favorable settlements and negotiations (or $44.1 million more than 2003), and better control of expenses.
Operating profit for 2003 reflects a $51.0 million provision for expected losses on five multi-year contracts within the segment’s international business and a $22.3 million credit for the reversal of a portion of customer settlement reserves.
McKESSON CORPORATION FINANCIAL REVIEW 28 Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
GENERAL Management’s discussion and analysis of financial condition and results of operations, referred to as the Financial Review, is intended to assist the reader in the understanding and assessment of significant changes and trends related to the results of operations and financial position of the Company together with its subsidiaries.
This discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying financial notes in Item 8 of Part II of this Annual Report on Form 10-K.
The Company’s fiscal year begins on April 1 and ends on March 31.
Unless otherwise noted, all references in this document to a particular year shall mean the Company’s fiscal year.
Certain statements in this report constitute forward-looking statements.
See Item 1 – Business – ForwardLooking Statements in Part I of this Annual Report on Form 10-K for additional factors relating to these statements; also see Item 1A – Risk Factors in Part I of this Annual Report on Form 10-K for a list of certain risk factors applicable to our business, financial condition and results of operations.
We conduct our business through two operating segments: McKesson Distribution Solutions and McKesson Technology Solutions.
See Financial Note 22, “Segments of Business,” to the consolidated financial statements appearing in this Annual Report on Form 10-K for a description of these segments.
RESULTS OF OPERATIONS
## Table 4 ##
Revenues increased over each of the last two years primarily reflecting market growth in our Distribution Solutions segment, which accounted for approximately 97% of our consolidated revenues.

<table><tr><td><i>(Dollar amounts in millions)</i></td><td>12/31/2011</td><td>Net New Business</td><td>Net  Acquired</td><td>Market /FX App (Dep)</td><td>12/31/2012</td></tr><tr><td>Equity</td><td>$419,651</td><td>$52,973</td><td>$3,517</td><td>$58,507</td><td>$534,648</td></tr><tr><td>Fixed income</td><td>153,802</td><td>28,785</td><td>3,026</td><td>7,239</td><td>192,852</td></tr><tr><td>Multi-asset class</td><td>562</td><td>178</td><td>78</td><td>51</td><td>869</td></tr><tr><td>Alternatives</td><td>19,341</td><td>3,232</td><td>701</td><td>1,064</td><td>24,338</td></tr><tr><td>Long-term</td><td>$593,356</td><td>$85,168</td><td>$7,322</td><td>$66,861</td><td>$752,707</td></tr></table>
<table><tr><td></td><td colspan="5"> December 31,</td></tr><tr><td><i>(Dollar amounts in millions)</i></td><td> 2012</td><td> 2011</td><td> 2010</td><td> 2009<sup>-1</sup></td><td> 2008</td></tr><tr><td> Assets under management:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Equity:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Active</td><td>$287,215</td><td>$275,156</td><td>$334,532</td><td>$348,574</td><td>$152,216</td></tr><tr><td><i>iShares</i></td><td>534,648</td><td>419,651</td><td>448,160</td><td>381,399</td><td>—</td></tr><tr><td>Fixed income:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Active</td><td>656,331</td><td>614,804</td><td>592,303</td><td>595,580</td><td>477,492</td></tr><tr><td><i>iShares</i></td><td>192,852</td><td>153,802</td><td>123,091</td><td>102,490</td><td>—</td></tr><tr><td>Multi-asset class</td><td>267,748</td><td>225,170</td><td>185,587</td><td>142,029</td><td>77,516</td></tr><tr><td>Alternatives<sup>-8</sup>:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Core</td><td>68,367</td><td>63,647</td><td>63,603</td><td>66,058</td><td>60,954</td></tr><tr><td>Currency and commodities<sup>-9</sup></td><td>41,428</td><td>41,301</td><td>46,135</td><td>36,043</td><td>590</td></tr><tr><td> Sub-total</td><td>2,048,589</td><td>1,793,531</td><td>1,793,411</td><td>1,672,173</td><td>768,768</td></tr><tr><td>Non-ETF Index:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Equity</td><td>1,023,638</td><td>865,299</td><td>911,775</td><td>806,082</td><td>51,076</td></tr><tr><td>Fixed Income</td><td>410,139</td><td>479,116</td><td>425,930</td><td>357,557</td><td>3,873</td></tr><tr><td> Sub-total Non-ETF Index</td><td>1,433,777</td><td>1,344,415</td><td>1,337,705</td><td>1,163,639</td><td>54,949</td></tr><tr><td> Long-term</td><td>3,482,366</td><td>3,137,946</td><td>3,131,116</td><td>2,835,812</td><td>823,717</td></tr><tr><td>Cash management</td><td>263,743</td><td>254,665</td><td>279,175</td><td>349,277</td><td>338,439</td></tr><tr><td> Sub-total</td><td>3,746,109</td><td>3,392,611</td><td>3,410,291</td><td>3,185,089</td><td>1,162,156</td></tr><tr><td>Advisory<sup>-10</sup></td><td>45,479</td><td>120,070</td><td>150,677</td><td>161,167</td><td>144,995</td></tr><tr><td> Total</td><td>$3,791,588</td><td>$3,512,681</td><td>$3,560,968</td><td>$3,346,256</td><td>$1,307,151</td></tr></table>
<table><tr><td><i>(Dollar amounts in millions)</i></td><td>CLOs</td><td>Sponsored Private Equity Fund</td><td>Total Consolidated VIEs</td></tr><tr><td>Assets of consolidated VIEs:</td><td></td><td></td><td></td></tr><tr><td>Cash and cash equivalents</td><td>$294</td><td>$3</td><td>$297</td></tr><tr><td>Bank loans, bonds and other investments</td><td>2,240</td><td>24</td><td>2,264</td></tr><tr><td>Liabilities of consolidated VIEs:</td><td></td><td></td><td></td></tr><tr><td>Borrowings</td><td>-2,402</td><td>—</td><td>-2,402</td></tr><tr><td>Other liabilities</td><td>-103</td><td>—</td><td>-103</td></tr><tr><td>Appropriated retained earnings</td><td>-29</td><td>—</td><td>-29</td></tr><tr><td>Non-controlling interests of consolidated VIEs</td><td>—</td><td>-27</td><td>-27</td></tr><tr><td>Total BlackRock net interests in consolidated VIEs</td><td>$—</td><td>$—</td><td>$—</td></tr></table>
<table><tr><td></td><td colspan="3"> Years Ended March 31,</td></tr><tr><td><i>(Dollars in millions)</i></td><td>2005</td><td>2004</td><td>2003</td></tr><tr><td>Segment Operating Profit</td><td></td><td></td><td></td></tr><tr><td>Pharmaceutical Solutions</td><td>$1,076.7</td><td>$980.1</td><td>$966.7</td></tr><tr><td>Medical-Surgical Solutions</td><td>102.1</td><td>106.4</td><td>79.4</td></tr><tr><td>Provider Technologies</td><td>106.7</td><td>128.2</td><td>101.6</td></tr><tr><td>Subtotal</td><td>1,285.5</td><td>1,214.7</td><td>1,147.7</td></tr><tr><td>Corporate Expenses, net</td><td>-207.3</td><td>-183.1</td><td>-168.2</td></tr><tr><td>Securities Litigation charge</td><td>-1,200.0</td><td>—</td><td>—</td></tr><tr><td>Interest Expense</td><td>-118.0</td><td>-120.2</td><td>-128.1</td></tr><tr><td>Income (Loss) from ContinuingOperations, Before Income Taxes</td><td>$-239.8</td><td>$911.4</td><td>$851.4</td></tr><tr><td>Segment Operating Profit Margin</td><td></td><td></td><td></td></tr><tr><td>Pharmaceutical Solutions</td><td>1.41%</td><td>1.50%</td><td>1.82%</td></tr><tr><td>Medical-Surgical Solutions</td><td>3.53</td><td>3.79</td><td>2.79</td></tr><tr><td>Provider Technologies</td><td>8.20</td><td>10.66</td><td>8.33</td></tr></table>
<table><tr><td></td><td colspan="3"> Years Ended March 31,</td><td colspan="2"> Change</td></tr><tr><td> <i>(Dollars in millions, except per share data)</i> </td><td> 2012</td><td> 2011</td><td> 2010</td><td> 2012</td><td> 2011</td></tr><tr><td>Revenues</td><td>$122,734</td><td>$112,084</td><td>$108,702</td><td>10%</td><td>3%</td></tr><tr><td>Gross Profit</td><td>$6,567</td><td>$5,970</td><td>$5,676</td><td>10%</td><td>5%</td></tr><tr><td>Operating Expenses</td><td>4,269</td><td>3,936</td><td>3,688</td><td>8</td><td>7</td></tr><tr><td>Litigation Charges (Credit), Net</td><td>149</td><td>213</td><td>-20</td><td>-30</td><td>—</td></tr><tr><td>Total Operating Expenses</td><td>4,418</td><td>4,149</td><td>3,668</td><td>6</td><td>13</td></tr><tr><td>Other Income, Net</td><td>21</td><td>36</td><td>43</td><td>-42</td><td>-16</td></tr><tr><td>Interest Expense</td><td>-251</td><td>-222</td><td>-187</td><td>13</td><td>19</td></tr><tr><td>Income from Continuing Operations Before Income Taxes</td><td>1,919</td><td>1,635</td><td>1,864</td><td>17</td><td>-12</td></tr><tr><td>Income Tax Expense</td><td>-516</td><td>-505</td><td>-601</td><td>2</td><td>-16</td></tr><tr><td>Income from Continuing Operations</td><td>1,403</td><td>1,130</td><td>1,263</td><td>24</td><td>-11</td></tr><tr><td>Discontinued Operation – gain on sale, net of tax</td><td>—</td><td>72</td><td>—</td><td>—</td><td>—</td></tr><tr><td>Net Income</td><td>$1,403</td><td>$1,202</td><td>$1,263</td><td>17</td><td>-5</td></tr><tr><td>Diluted Earnings Per Common Share</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Continuing Operations</td><td>$5.59</td><td>$4.29</td><td>$4.62</td><td>30%</td><td>-7%</td></tr><tr><td>Discontinued Operation</td><td>—</td><td>0.28</td><td>—</td><td>—</td><td>—</td></tr><tr><td>Total</td><td>$5.59</td><td>$4.57</td><td>$4.62</td><td>22</td><td>-1</td></tr><tr><td>Weighted Average Diluted Common Shares</td><td>251</td><td>263</td><td>273</td><td>-5%</td><td>-4%</td></tr></table>

Question: What is the growing rate of Income Tax Expense in the years with the least Operating Expenses?