10-Q 1 d10q.htm FORM 10-Q FORM 10-Q

FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

(Mark One)

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

For the quarterly period ended June 30, 2001

OR

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

For the transition period from ____________ to ____________
Commission file number 001-15305

BlackRock, Inc.
(Exact name of registrant as specified in its charter)
   Delaware
51-0380803
(State or other jurisdiction of
(I.R.S. Employer Identification No.)
incorporation or organization)
               
  345 Park Avenue, New York, NY 10154  
 
 
(Address of principal executive offices)
(Zip Code)
     
(212) 754-5560
 
 
(Registrant’s telephone number, including area code)
 
 
(Former name or former address, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the proceeding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes       X                    No ______

As of July 31, 2001, there were 10,313,206 shares of the registrant’s class A common stock outstanding and 53,966,524 shares of the registrant’s class B common stock outstanding.

     

BlackRock Inc.
Index to Form 10-Q

PART I

FINANCIAL INFORMATION

   
Page
  
   
 
   
 
Item 1. Financial Statements
 
  Consolidated Statements of Financial Condition
1
  
  Consolidated Statements of Income
2
  
  Consolidated Statements of Cash Flows
3
  
  Notes to Consolidated Financial Statements
4
  
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
9
  
   
 
Item 3. Quantitative and Qualitative Disclosures About Market Risk
22
  

     PART II

        OTHER INFORMATION

Item 1. Legal Proceedings
23
Item 4. Submission of Masters to a Vote of Security Holders  
23
Item 6. Exhibits and Reports on Form 8-K  
24

 

 

PART I – FINANCIAL INFORMATION
Item 1.  Financial Statements

BlackRock, Inc.
Consolidated Statements of Financial Condition
(Dollar amounts in thousands)
 
June 30,
2001
December 31,
2000
 
 
(unaudited)
  
Assets            
Cash and cash equivalents  
$99,231
    
$192,590
  
Accounts receivable  
76,786
    
81,800
  
Investments, available for sale (cost: $143,502 and $16,854, respectively)  
142,444
    
13,316
  
Property and equipment, net  
56,728
    
45,598
  
Intangible assets, net  
186,914
    
192,142
  
Receivable from affiliates  
1,430
    
1,484
  
Other assets  
7,701
    
10,073
  
   
   
 
     Total assets  
$571,234
    
$537,003
  
   
   
 
             
Liabilities and stockholders’ equity            
Accrued compensation  
$87,090
    
$130,101
  
Accounts payable and accrued liabilities            
      Affiliate  
28,569
    
14,750
  
      Other  
14,857
    
12,264
  
Acquired management contract obligation  
6,540
    
8,040
  
Other liabilities  
5,306
    
3,607
  
   
   
 
     Total liabilities  
142,362
    
168,762
  
   
   
 
Stockholders’ equity            
Common stock, class A, 10,167,290 and            
     9,487,297 shares issued, respectively  
102
    
95
  
Common stock, class B, 54,285,961 and            
     54,509,875 shares issued, respectively  
543
    
545
  
Additional paid - in capital  
183,391
    
172,156
  
Retained earnings  
251,790
    
200,064
  
Unearned compensation  
(2,512
)
  
(2,126
)
Accumulated other comprehensive loss  
(1,590
)
  
(2,477
)
Treasury stock, class A, at cost  
(2,087
)
  
(16
)
Treasury stock, class B, at cost  
(765
)
  
-
  
   
   
 
Total stockholders’ equity  
428,872
    
368,241
  
   
   
 
     Total liabilities and stockholders’ equity  
$571,234
    
$537,003
  
   
   
 
             
 
See accompanying notes to consolidated financial statements.

-1-

BlackRock, Inc.
Consolidated Statements of Income
(Dollar amounts in thousands, except share data)
(unaudited)

 
Three months ended
June 30,
Six months ended
June 30,
 
 
 
 
2001
  
2000
  
2001
  
2000
  
 
 
 
 
 
Revenue
Investment advisory and administration fees
     Mutual funds
$
54,791
$
56,228
$
109,707
$
115,328
     Separate accounts
71,624
51,204
142,009
93,974
Other income
     Affiliate
1,250
1,250
2,500
2,500
     Other
7,597
3,889
14,755
8,829
 
 
 
 
 
Total revenue
135,262
112,571
268,971
220,631
 
 
 
 
 
 
Expense
Employee compensation and benefits
55,534
42,680
110,964
83,350
Fund administration and servicing costs - affiliates
15,722
18,450
32,412
38,209
General and administration
     Affiliate
831
1,473
1,876
2,796
     Other
17,853
13,132
33,863
24,909
Amortization of intangible assets
2,614
2,514
5,228
4,927
 
 
 
 
 
Total expense
92,554
78,249
184,343
154,191
 
 
 
 
 
 
Operating income
42,708
34,322
84,628
66,440
 
Non-operating income (expense)
Investment income
2,632
1,417
4,494
2,467
Interest expense
(201
)
(86
)
(402
)
(439
)
 
 
 
 
 
Total non-operating income
2,431
1,331
4,092
2,028
 
 
 
 
 
 
Income before income taxes
45,139
35,653
88,720
68,468
Income taxes
18,909
14,796
36,994
28,414
 
 
 
 
 
Net income
$
26,230
$
$20,857
$
51,726
$40,054
 
 
 
 
 
 
Earnings per share
     Basic
$0.41
$0.33
$0.81
$0.63
     Diluted
$0.40
$0.32
$0.80
$0.62
 
Weighted-average shares outstanding
     Basic
64,248,630
63,865,770
64,204,186
63,865,076
     Diluted
64,877,389
64,492,447
64,867,348
64,423,376
                         
See accompanying notes to consolidated financial statements.

-2-

BlackRock, Inc.
Consolidated Statements of Cash Flow
(Dollar amounts in thousands)
(unaudited)

   
Six months ended June 30,
 
   
 
 
2001
    
2000
  
 
 
 
Cash flows from operating activities
       
Net income
$
51,726
  
$
40,054
  
Adjustments to reconcile net income to net cash provided by
 
 
   operating activities:
 
 
      Depreciation and amortization
12,131
  
9,535
  
      Stock-based compensation
2,911
  
328
  
      Tax benefit from stock-based compensation
5,140
  
-
  
      Changes in operating assets and liabilities:
 
 
         Decrease (increase) in accounts receivable
5,014
  
(7,298
 )
         Decrease in receivable from affiliate
54
  
886
  
         Decrease (increase) in other assets
2,372
  
(3,385
 )
         Decrease in accrued compensation
(36,987
 )
(26,400
 )
         Increase (decrease) in accounts payable and accrued liabilities
16,412
  
(4,189
 )
         Decrease in accrued interest payable to affiliates
-
  
(705
 )
         Increase (decrease) in other liabilities
1,699
  
(3,060
 )
 
 
 
Cash provided by operating activities
60,472
  
5,766
  
 
 
 
Cash flows from investing activities
 
 
Purchase of property and equipment
(18,033
 )
(10,592
 )
Purchase of investments
(127,731
 )
(7,575
 )
 
 
 
Cash used in investing activities
(145,764
 )
(18,167
 )
 
 
 
Cash flows from financing activities  
       
Repayment of note and loan payable to affiliates  
-
  
(28,200
 )
Issuance of class A common stock  
203
  
131
  
Purchase of treasury stock  
(6,472
 )
-
  
Reissuance of treasury stock  
212
  
-
  
Acquired management contract obligation payment  
(1,500
 )
-
  
 
 
 
Cash used in financing activities  
(7,557
 )
(28,069
 )
 
 
 
Effect of exchange rate changes on cash and cash equivalents  
(510
 )
(26
 )
 
 
 
Net decrease in cash and cash equivalents
(93,359
 )
(40,496
 )
Cash and cash equivalents, beginning of period
192,590
  
157,129
  
 
 
 
Cash and cash equivalents, end of period $
99,231
  
$
116,633
  
 
 
 
   
       
See accompanying notes to consolidated financial statements.            

-3-

BlackRock, Inc.
Notes to Consolidated Financial Statements
Six Months Ended June 30, 2001 and 2000
(Dollar amounts in thousands, except share data)
(unaudited)

1. Significant Accounting Policies

Basis of Presentation

The consolidated interim financial statements of BlackRock, Inc. and its subsidiaries (“BlackRock” or the “Company”) included herein have been prepared in accordance with generally accepted accounting principles for interim financial information and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. These consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2000. The Company follows the same accounting policies in the preparation of interim reports as set forth in the annual report. In the opinion of management, the consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of the financial position, results of operations and cash flows of BlackRock for the interim periods presented and are not necessarily indicative of a full year’s results.

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates.

Derivative Instruments and Hedging Activities

In 1998, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 133 “Accounting for Derivative Instruments and Hedging Activities”, as amended by SFAS No. 137 and No. 138. SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivatives embedded in other contracts and for hedging activities. SFAS No. 133 generally requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and measure those investments at fair value. SFAS No. 133 is required to be adopted for fiscal years beginning after June 15, 2000. The Company adopted the new statement as of January 1, 2001. The adoption of SFAS No. 133 has not had a material impact on the Company’s results of operations, financial position, or cash flows.

Reclassification of Prior Period’s Statements

Certain items previously reported have been reclassified to conform with the current period presentation.

-4-

Recent Accounting Pronouncements

On July 20, 2001, the FASB issued SFAS No. 141, “Business Combinations.” SFAS No. 141 requires the purchase method of accounting be used for all business combinations initiated or completed after June 30, 2001 and eliminates the pooling-of-interests method of accounting. The statement also addresses disclosure requirements for business combinations and initial recognition and measurement criteria for goodwill and other intangible assets as a result of purchase business combinations.

On July 20, 2001, the FASB also issued SFAS No. 142, “Goodwill and Other Intangible Assets,” which changes the accounting for goodwill from an amortization method to an impairment-only approach. The amortization of goodwill, including goodwill recognized relating to past business combinations, will cease upon adoption of the new standard. Impairment testing for goodwill at a reporting unit level will be required on at least an annual basis. The new standard also addresses other accounting matters, disclosure requirements and financial statement presentation issues relating to goodwill and other intangible assets. The Company will adopt SFAS No. 142 effective January 1, 2002, as required. Assuming no impairment adjustments are necessary, no future business combinations, and no other changes to goodwill, the Company expects diluted earnings per share to increase by approximately $.08 per share in 2002 resulting from the cessation of goodwill amortization.

2. Investments Available for Sale

A summary of the cost and fair market value of investments, available for sale is as follows:

 
   
Gross Unrealized
   
Fair Market
June 30, 2001
Cost
Gains
Losses
Value
Mutual funds
$128,738
           
-
        
$776
    
$127,962
  
Collateralized bond obligations
12,689
           
-
        
346
    
12,343
  
Other
2,075
           
64
        
-
    
2,139
  
 
 
$143,502
           
$64
        
$1,122
    
$142,444
  
 
December 31, 2000
           
       
   
 
                                   
Mutual funds
$8,823
           
-
        
$633
    
$8,190
  
Collateralized bond obligations
5,956
           
-
        
2,857
    
3,099
  
Other
2,075
           
-
        
48
    
2,027
  
 
 
$16,854
           
-
        
$3,538
    
$13,316
  
 

Net realized gains on the sale of investments, available for sale totaled $6 and $0 for the six months ended June 30, 2001 and June 30, 2000, respectively.

-5-

3. Common Stock

BlackRock’s class A, $0.01 par value, common shares authorized was 250,000,000 shares as of June 30, 2001 and June 30, 2000, respectively. BlackRock’s class B, $0.01 par value, common shares authorized was 100,000,000 shares as of June 30, 2001 and June 30, 2000, respectively.

The Company’s common shares issued and outstanding and related activity consists of the following:

       
 
 Shares issued
  
Shares outstanding
 
 
 
Common shares
Class
  
Treasury shares
Class
  
Class
 
 
 
 
A
  
B
 
 A
 
 B
 
A
 
B
 
 
 
December 31, 2000
9,487,297
54,509,875
(353)
-
9,486,944
54,509,875
Conversion of class B stock to
-
-
   class A stock
228,914
(228,914)
-
-
228,914
(228,914)
Issuance of shares to Nonemployee Directors
980
-
-
-
980
-
Issuance of class A common stock
450,099
-
-
-
450,099
-
Issuance of class B common stock
-
5,000
-
-
-
5,000
Treasury stock transactions
-
-
(51,387)
(129,437)
(51,387)
(129,437)
 
June 30, 2001
10,167,290
54,285,961
(51,740)
(129,437)
10,115,550
54,156,524
 
 
           

4. Comprehensive Income

     
 
Three months ended
June 30,
 
Six months ended
June 30,
 
 
 
2001
2000
  
2001
2000
 
 
 
 
Net income
$
26,230
$
20,857
  
$
51,726
  
$
40,054
Accumulated other comprehensive income gain (loss):
 
 
   Unrealized gain (loss) from investments, available for sale, net
(29)
423
  
1,397
  
174
   Foreign currency translation gain (loss)
13
(16)
  
(510)
  
(26)
 
 
 
 
Comprehensive income
$
26,214
$
21,264
  
$
52,613
  
$
40,202
 
 
 
 

-6-

5. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:

                       
   
Three months ended
    
Six months ended
   
June 30,
    
June 30,
   
   
   
2001
    
2000
    
2001
    
2000
   
   
   
   
 
 
 
 
Net income   $
26,230
     $
20,857
     $
51,726
     $
40,054
   
   
   
   
 
   
   
   
 
Basic weighted-average shares outstanding
64,248,630
  
63,865,770
  
64,204,186
  
63,865,076
 
   
   
   
 
   Dilutive potential shares from forward sales
107,277
  
175,153
  
107,277
  
175,153
   Dilutive potential shares from stock options
521,482
  
451,524
  
555,885
  
383,147
 
 
 
 
Dilutive weighted-average shares outstanding
64,877,389
  
64,492,447
  
64,867,348
  
64,423,376
   
   
   
   
                               
Basic earnings per share  
$
0.41
     $
0.33
     $
0.81
     $
0.63
   
   
   
   
     
     
     
       
Diluted earnings per share  
$
0.40
     $
0.32
     $
0.80
     $
0.62
   
   
   
   
                               

6. Supplemental Statements of Cash Flow Information

Supplemental disclosure of cash flow information:

 
Six months ended
June 30,
 
    2001     2000
 
Cash paid for interest
$
804
   $
1,058
 
 
           
Cash paid for income taxes
$
18,207
   $
26,988
 
 

Supplemental schedule of noncash transaction:

     
   
Six months ended
June 30,
 
   
2001
  
2000
 
Stock-based compensation $
6,831
  
-
 
 
         

-7-

7.  Stock Option Plan

On May 2, 2001, BlackRock’s shareholders approved an amendment to the BlackRock, Inc. 1999 Stock Award and Incentive Plan to increase the number of shares of class A common stock available under such plan to 9,000,000 shares. BlackRock’s shareholders previously authorized the issuance under the plan of up to 5.93% of the total shares of common stock outstanding.

8.  Employee Stock Purchase Plan

On May 2, 2001, BlackRock’s shareholders approved the adoption of the BlackRock, Inc. 2001 Employee Stock Purchase Plan (“ESPP”), the terms of which allow eligible employees to purchase shares of the Company’s class A common stock at 85% of the lesser of fair market value on the first or last day of each six-month offering period. No charge to earnings will be recorded with respect to the ESPP. The first offering period began on August 1, 2001. A total of 1,250,000 shares of class A common stock are available for issuance under the ESPP.

9.  Share Repurchase Program

On May 2, 2001, BlackRock’s Board of Directors authorized BlackRock to repurchase up to 500,000 of its outstanding shares of class A common stock from time to time as market and business conditions warrant in open market or privately negotiated transactions. To date, BlackRock has not purchased any shares of its outstanding class A common stock under this repurchase program.

10.  Subsequent Event

On July 20, 2001, the Company entered into a commitment to invest $5.4 million in Carbon Capital, Inc., an alternative investment fund sponsored by BlackRock.

-8-

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

BlackRock, Inc., a Delaware corporation (together with its subsidiaries “BlackRock” or the “Company”), is one of the 25 largest investment management firms in the United States with approximately $212.7 billion of assets under management at June 30, 2001. BlackRock is a majority-owned indirect subsidiary of The PNC Financial Services Group, Inc. (“PNC”), one of the largest diversified financial services companies in the United States, operating businesses engaged in regional community banking, corporate banking, real estate finance, asset-based lending, wealth management, asset management and global fund services. As of June 30, 2001, PNC indirectly owns approximately 70%, the public owns approximately 15% and BlackRock employees own approximately 15% of BlackRock.

The following table summarizes BlackRock’s operating performance for the three months ended June 30, 2001, June 30, 2000 and March 31, 2001 and the six months ended June 30, 2001 and June 30, 2000:

     BlackRock, Inc.
Financial Highlights
(Dollar amounts in thousands, except share data)
(unaudited)

Three months ended
Variance vs.
June 30,
March 31,
 June 30, 2000
March 31, 2001
2001
2000
2001
Amount
%
Amount
%
Total revenue
$135,262
$112,571
$133,709
$22,691
20%
$1,553
1%
Total expense
$92,554
$78,249
$91,789
$14,305
18%
$765
1%
Operating income
$42,708
$34,322
$41,920
$8,386
24%
$788
2%
Net income
$26,230
$20,857
$25,496
$5,373
26%
$734
3%
Diluted earnings per share
$0.40
$0.32
$0.39
$0.08
25%
$0.01
3%
Diluted cash earnings per share (a)
$0.44
$0.37
$0.43
$0.07
19%
$0.01
2%
Average diluted shares outstanding
64,877,389
64,492,447
64,897,486
384,942
1%
(20,097
 )
0%
EBITDA (b)
$51,722
$40,641
$49,531
$11,081
27%
$2,191
4%
Operating margin (c)
35.7%
36.5%
35.8%
Assets under management ($ in millions)
$212,694
$177,337
$201,636
$35,357
20%
$11,058
5%

    

Six months ended
 June 30,
Variance
2001
2000
Amount
%
Total revenue
$268,971
$220,631
$48,340
22%
Total expense
$184,343
$154,191
$30,152
20%
Operating income
$84,628
$66,440
$18,188
27%
Net income
$51,726
$40,054
$11,672
29%
Diluted earnings per share
$0.80
$0.62
$0.18
29%
Diluted cash earnings per share (a)
$0.88
$0.70
$0.18
26%
Average diluted shares outstanding
64,867,348
64,423,376
443,972
1%
EBITDA (b)
$101,253
$78,442
$22,811
29%
Operating margin (c)
35.8%
36.4%
Assets under management ($ in millions)
$212,694
$177,337
$35,357
20%
(a) Net income plus amortization expense for the period divided by average diluted shares outstanding.
(b) Earnings before interest expense, taxes, depreciation and amortization.
(c) Operating income divided by total revenue less fund administration and servicing costs – affiliates.
-9-

General

BlackRock derives a substantial portion of its revenue from investment advisory and administration fees, which are recognized as the services are performed. Such fees are primarily based on predetermined percentages of the market value of assets under management and are affected by changes in assets under management, including market appreciation or depreciation and net subscriptions or redemptions. Net subscriptions or redemptions represent the sum of new client assets, additional fundings from existing clients, withdrawals of assets from and termination of client accounts and purchases and redemptions of mutual fund shares.

Investment advisory agreements for certain separate accounts and BlackRock’s alternative investment products provide for performance fees in addition to fees based on assets under management. Performance fees are earned when investment performance exceeds a contractual threshold and, accordingly, may increase the volatility of BlackRock’s revenue and earnings.

BlackRock provides a variety of risk management and technology services to insurance companies, finance companies, pension funds, REITs, commercial and mortgage banks, savings institutions and government agencies. These services are provided under the brand name BlackRock SolutionsTM and include a wide array of risk management services and enterprise investment system outsourcing to clients. The fees earned on risk management advisory assignments are recorded as other income.

Operating expense primarily consists of employee compensation and benefits, fund administration and servicing costs-affiliates, general and administration, and amortization of intangible assets. Employee compensation and benefits expense reflects salaries, deferred and incentive compensation and related benefit costs. Fund administration and servicing costs-affiliates expense reflects payments made to PNC affiliated entities, primarily associated with the administration and servicing of PNC client investments in the BlackRock FundsSM . Intangible assets at June 30, 2001 and December 31, 2000 were $186.9 million and $192.1 million, respectively, with amortization expense of approximately $2.6 million and $2.5 million for the three months ended June 30, 2001 and June 30, 2000, respectively and $5.2 million and $4.9 million for the six months ended June 30, 2001 and June 30, 2000, respectively. Intangible assets reflect PNC’s acquisition of BlackRock Financial Management, L.P. (“BFM”) on February 28, 1995 and a management contract acquired in connection with the agreement and plan of merger of CORE Cap, Inc. with Anthracite Capital, Inc., a BlackRock managed REIT, on May 15, 2000.

-10-

Assets Under Management

Assets under management (“AUM”) increased $35.4 billion, or 20%, to $212.7 billion at June 30, 2001, compared with $177.3 billion at June 30, 2000. The growth in assets under management was attributable to increases of $28.3 billion in separate accounts and $7.0 billion in mutual fund assets. The increase in separate accounts was due to net subscriptions of $20.1 billion and market appreciation of $8.2 billion. Net subscriptions in fixed income, alternative investment products, and equity accounts were $16.7 billion, $1.7 billion and $2.7 billion, respectively, while liquidity and liquidity-securities lending separate account assets experienced net redemptions of $.3 billion and $.7 billion, respectively. The rise in fixed income and alternative investment products separate accounts was attributable to strong relative investment performance resulting in higher levels of funding from existing clients as well as increased sales to new clients. The growth in equity separate account assets primarily reflected new business generated by the European equity team. The $.3 billion decrease in liquidity separate accounts was primarily due to the loss of a large client in 2000. The $.7 billion decline in liquidity-securities lending separate accounts was primarily attributable to lower levels of cash collateral managed by BlackRock for PFPC Worldwide, Inc. (“PFPC”), a PNC affiliate, as a result of the decline in the equity markets. Market appreciation of $8.2 billion in separate accounts was primarily due to appreciation in fixed income assets of $9.8 billion, associated with the decline in market interest rates, partially offset by market depreciation of $2.0 billion in equity assets. The $7.0 billion increase in mutual fund assets reflected net subscriptions of $11.3 billion, including $2.3 billion of closed-end funds maturities, due to strong sales of BlackRock Provident Institutional FundsSM (“BPIF”) which was partially offset by market depreciation of $4.5 billion in the BlackRock Funds largely associated with a decline in the equity markets.

BlackRock, Inc.
Assets Under Management
(Dollar amounts in millions)
(unaudited)

             
Variance
   
June 30,
  
   
2001
2000
    
Amount
%
  
Separate Accounts  
   
   
 
 
   Fixed income
$
110,483
$
83,950
$
26,533
31.6%
   Liquidity
6,782
7,052
(270
)
(3.8
)
   Liquidity-Securities lending
10,004
10,655
(651
)
(6.1
)
   Equity
8,257
7,621
636
8.3
   Alternative investment products
4,479
2,394
2,085
87.1
 
   Subtotal
140,005
111,672
28,333
25.4
 
Mutual Funds
   Fixed income
12,326
13,919
(1,593
)
(11.4)
   Liquidity
48,829
35,944
12,885
35.8
   Equity
11,534
15,802
(4,268
)
(27.0
)
 
   Subtotal
72,689
65,665
7,024
10.7
 
Total
$
212,694
$
177,337
$
35,357
19.9%
 

-11-

Assets Under Management (continued)

The following tables present the component changes in BlackRock’s assets under management for the three months and six months ended June 30, 2001 and June 30, 2000, respectively. The data reflects certain reclassifications between net subscriptions (redemptions) and market appreciation (depreciation) from amounts previously reported.

For the three months and six months ended June 30, 2001, net subscriptions represented 92% and 91%, respectively, of the total increase in assets under management. Net subscriptions were $10.2 billion and $8.1 billion for the three months and six months ended June 30, 2001 and $5.1 billion and $9.6 billion for the three months and six months ended June 30, 2000, respectively.

BlackRock, Inc.
Component Changes in Assets Under Management
(Dollar amounts in millions)
(unaudited)

     

 
Three months ended
Six months ended
  
 
June 30,
June 30,
 
 
2001
2000
2001
2000
  
 
Separate Accounts                        
Beginning assets under management
$
132,711
$
105,349
$
133,743
$
99,220
Net subscriptions
6,871
5,815
3,897
9,622
Market appreciation
423
508
2,365
2,830
 
Ending assets under management
140,005
111,672
140,005
111,672
 
Mutual Funds
Beginning assets under management
68,925
67,224
70,026
65,297
Net subscriptions (redemptions)
3,301
(762
)
4,177
(2
)
Market appreciation (depreciation)
463
(797
)
(1,514
)
370
 
Ending assets under management
72,689
65,665
72,689
65,665
 
 
Total
$
212,694
$
177,337
$
212,694
$
177,337
 
 
Net subscriptions
$
10,172
$5,053
$8,074
$9,620
% of Change in AUM from net subscriptions
92.0%
106.1%
90.5%
75.0%
                         

-12-

     BlackRock, Inc.
Assets Under Management
Quarterly Trend
(Dollar amounts in millions)
(unaudited)     

 
Quarter Ended
    
 
   
 
2000
2001
 
Six  months ended
   
June 30
September 30
December 31
March 31
June 30
June 30, 2001
 
Separate Accounts  
Fixed Income  
Beginning assets under management $
77,595
$
83,950
$
96,791
$
103,561
$
107,371
$
103,561
Net subscriptions  
5,756
10,606
2,776
699
2,682
3,381
Market appreciation  
599
2,235
3,994
3,111
430
3,541
 
Ending assets under management  
83,950
96,791
103,561
107,371
110,483
110,483
 
Liquidity  
Beginning assets under management  
7,811
7,052
5,147
6,495
5,713
6,495
Net subscriptions (redemptions)  
(779
)
(1,925
)
1,321
(813
)
1,042
229
Market appreciation  
20
20
27
31
27
58
 
Ending assets under management  
7,052
5,147
6,495
5,713
6,782
6,782
 
Liquidity-Securities lending  
Beginning assets under management  
11,299
10,655
10,843
11,501
7,514
11,501
Net subscriptions (redemptions)  
(644
)
188
658
(3,987
)
2,490
(1,497
)
Market appreciation  
-
-
-
-
-
-
 
Ending assets under management  
10,655
10,843
11,501
7,514
10,004
10,004
 
Equity  
Beginning assets under management  
6,414
7,621
7,500
8,716
7,796
8,716
Net subscriptions  
1,387
442
1,282
445
488
933
Market depreciation  
(180
)
(563
)
(66
)
(1,365
)
(27
)
(1,392
)
 
Ending assets under management  
7,621
7,500
8,716
7,796
8,257
8,257
 
Alternative investment products  
Beginning assets under management  
2,230
2,394
2,818
3,470
4,317
3,470
Net subscriptions  
95
336
584
682
169
851
Market appreciation (depreciation)  
69
88
68
165
(7
)
158
 
Ending assets under management  
2,394
2,818
3,470
4,317
4,479
4,479
 
Total Separate Accounts  
Beginning assets under management
105,349
111,672
123,099
133,743
132,711
133,743
Net subscriptions (redemptions)  
5,815
9,647
6,621
(2,974
)
6,871
3,897
Market appreciation  
508
1,780
4,023
1,942
423
2,365
 
Ending assets under management $
111,672
$
123,099
$
133,743
$
132,711
$
140,005
$
140,005
 
   
Mutual Funds  
BlackRock Funds  
Beginning assets under management $
29,280
$
28,262
$
27,819
$
26,359
$
24,383
$
26,359
Net subscriptions (redemptions)  
(168
)
(455
)
1,463
65
(253
)
(188
)
Market appreciation (depreciation)  
(850
)
12
(2,923
)
(2,041
)
459
(1,582
)
 
Ending assets under management  
28,262
27,819
26,359
24,383
24,589
24,589
 
BlackRock Global Series  
Beginning assets under management  
-
-
54
75
105
75
Net subscriptions  
-
54
18
43
33
76
Market appreciation (depreciation)  
-
-
3
(13
)
(4
)
(17
)
 
Ending assets under management  
-
54
75
105
134
134
 
BPIF*  
Beginning assets under management  
25,755
25,615
27,580
36,338
37,047
36,338
Net subscriptions (redemptions)  
(140
)
1,965
4,662
709
4,907
5,616
Exchanges  
-
-
4,096
-
-
-
 
Ending assets under management  
25,615
27,580
36,338
37,047
41,954
41,954
 
Closed End  
Beginning assets under management  
7,560
7,583
7,634
6,764
6,841
6,764
Net redemptions  
(30
)
-
(954
)
-
(1,409
)
(1,409
)
Market appreciation  
53
51
84
77
8
85
 
Ending assets under management  
7,583
7,634
6,764
6,841
5,440
5,440
 
 
 
 
 
 
 
Short Term Investment Funds (STIF)*  
Beginning assets under management  
4,629
4,205
4,622
490
549
490
Net subscriptions (redemptions)  
(424
)
417
(36
)
59
23
82
Exchanges  
-
-
(4,096
)
-
-
-
 
 
 
 
 
 
 
Ending assets under management  
4,205
4,622
490
549
572
572
 
Total Mutual Funds  
Beginning assets under management  
67,224
65,665
67,709
70,026
68,925
70,026
Net subscriptions (redemptions)  
(762
)
1,981
5,153
876
3,301
4,177
Market appreciation (depreciation)  
(797
)
63
(2,836
)
(1,977
)
463
(1,514
)
 
Ending assets under management $
65,665
$
67,709
$
70,026
$
68,925
$
72,689
$
72,689
 
   
* During the fourth quarter of 2000, $4.1 billion of STIF assets under management were exchanged into the BPIF product.

-13-

Operating results for the three months ended June 30, 2001 as compared with the three months ended June 30, 2000.

Revenue

Total revenue for the three months ended June 30, 2001 increased $22.7 million or 20% to $135.3 million compared with $112.6 million for the three months ended June 30, 2000. Investment advisory and administration fees increased $19.0 million or 18% to $126.4 million for the three months ended June 30, 2001, compared with $107.4 million for the three months ended June 30, 2000. The growth in investment advisory and administration fees was primarily due to an increase in assets under management of 20% to $212.7 billion at June 30, 2001 and increased performance fees.

Three months ended
June 30,
Variance
Dollar amounts in thousands
2001
2000
Amount
%
(unaudited)
Investment advisory and administration fees:
   Mutual funds
$54,791
$56,228
($1,437
)
(2.6%
)
   Separate accounts
71,624
51,204
20,420
39.9
Total investment advisory and administration fees
126,415
107,432
18,983
17.7
Other income
8,847
5,139
3,708
72.2
Total revenue
$135,262
$112,571
$22,691
20.2%

Mutual fund advisory and administration fees decreased $1.4 million or 3% to $54.8 million for the three months ended June 30, 2001, compared with $56.2 million for the three months ended June 30, 2000. The decrease in mutual fund revenue was primarily due to a $3.7 billion or 13% decline in assets in the BlackRock Funds partially offset by strong revenue growth in the BPIF funds as assets rose $12.2 billion or 41% adjusted for exchanges. Separate account advisory fees increased $20.4 million or 40% to $71.6 million for the three months ended June 30, 2001, compared with $51.2 million for the three months ended June 30, 2000. Separate account base advisory fees increased $13.4 million or 33% to $53.7 million for the three months ended June 30, 2001 compared with $40.3 million for the three months ended June 30, 2000 primarily due to a $28.3 billion or 25% increase in assets under management. Performance fees of $17.9 million for the three months ended June 30, 2001 increased $7.0 million as compared with $10.9 million for the three months ended June 30, 2000 as a result of continued strong investment performance. This represented the fourth consecutive quarter in which alternative product performance fees reflected results that exceeded targeted returns. Other income of $8.8 million for the three months ended June 30, 2001 increased $3.7 million or 72% compared with $5.1 million for the three months ended June 30, 2000 primarily due to increased sales of BlackRock Solutions products.

 

-14-

Expense

Total expense increased $14.3 million or 18% to $92.6 million for the three months ended June 30, 2001, compared with $78.3 million for the three months ended June 30, 2000. The change was primarily the result of increases in employee compensation and benefits and general and administration expenses, partially offset by a decrease in fund administration and servicing costs-affiliates.

 
Three months ended
June 30,
Variance
  
 
 
 
Dollar amounts in thousands
2001
2000
Amount
  
%
 
 
 
(unaudited)
        
Employee compensation and benefits  
$55,534
$42,680
$12,854
  
30.1%
Fund administration and servicing costs-affiliates  
15,722
18,450
(2,728
)
  
(14.8
 )
General and administration  
18,684
14,605
4,079
  
27.9
Amortization of intangible assets  
2,614
2,514
100
  
4.0
   
 
   Total expense  
$92,554
$78,249
$14,305
  
18.3%
   
 

Employee compensation and benefits increased $12.9 million due to increased incentive compensation of $5.9 million reflecting accruals based on the growth of operating income, $2.8 million reflecting direct incentives on alternative product performance fees and $4.2 million related to salary and benefits. Salary and benefit cost increases were the result of a 19% increase in full-time employees. For the three months ended June 30, 2001, fund administration and servicing costs-affiliates of $15.7 million declined $2.7 million or 15% due to lower levels of PNC client assets invested in the BlackRock Funds. General and administration expenses increased $4.1 million or 28% to $18.7 million for the three months ended June 30, 2001 compared with $14.6 million for the three months ended June 30, 2000 largely due to new business activity, increased headcount and corporate space and technology investments.

 
Three months ended
June 30,
Variance
  
 
 
 
General and administration expense:
2001
2000
Amount
%
 
 
(unaudited)
        
Marketing and promotional  
$5,399
$4,399
$1,000
22.7%
Occupancy expense  
2,871
2,181
690
  
31.6
Technology  
3,499
2,155
1,344
62.4
Other general and administration expense  
6,915
5,870
1,045
17.8
   
   Total general and administrative expense  
$18,684
$14,605
$4,079
27.9%
   

 

-15-

 

 

Marketing and promotional expenses of $5.4 million for the three months ended June 30, 2001 increased $1.0 million or 23% primarily due to higher travel and entertainment costs associated with the Company’s institutional marketing efforts. Occupancy expense of $2.9 million for the three months ended June 30, 2001 increased $.7 million due to increased rent and related costs associated with corporate facility expansion, particularly BlackRock’s new offices in Wilmington, Delaware, Edinburgh, Scotland, 40 East 52nd Street, New York, and Hong Kong. Technology expense increased approximately $1.3 million or 62% to $3.5 million for the three months ended June 30, 2001 due to the completion of a second computer facility in Delaware and equipment purchases to support the growth of BlackRock Solutions, which resulted in higher depreciation expense. Other expenses increased $1.0 million or 18% to $6.9 million for the three months ended June 30, 2001 primarily due to professional service costs associated with new products.

Operating Income and Net Income

Operating income was $42.7 million for the three months ended June 30, 2001, representing an $8.4 million or 24% increase compared with the three months ended June 30, 2000. Non-operating income increased $1.1 million to $2.4 million for the three months ended June 30, 2001 compared with the three months ended June 30, 2000. The rise was primarily the result of an increase in investment income reflecting investment of the Company’s excess operating cash. Income tax expense was $18.9 million and $14.8 million, representing effective tax rates of 41.9% and 41.5% for the three months ended June 30, 2001 and June 30, 2000. Net income totaled $26.2 million for the three months ended June 30, 2001 compared with $20.9 million for the three months ended June 30, 2000, representing an increase of $5.3 million or 26%.

-16-

Operating results for the six months ended June 30, 2001 as compared with the six months ended June 30, 2000.

Revenue

Total revenue for the six months ended June 30, 2001 increased $48.3 million or 22% to $269.0 million compared with $220.6 million for the six months ended June 30, 2000. Investment advisory and administration fees increased $42.4 million or 20% to $251.7 million for the six months ended June 30, 2001, compared with $209.3 million for the six months ended June 30, 2000. The growth in investment advisory and administration fees was primarily due to a 20% increase in assets under management to $212.7 billion at June 30, 2001 and increased performance fees.

 

Six months ended
June 30,
Variance
Dollar amounts in thousands
2001
2000
Amount
%
(unaudited)
Investment advisory and administration fees:
   Mutual funds
$109,707
$115,328
($5,621
)
(4.9%
)
   Separate accounts
142,009
93,974
48,035
51.1
Total investment advisory and administration fees
251,716
209,302
42,414
20.3
Other income
17,255
11,329
5,926
52.3
Total revenue
$268,971
$220,631
$48,340
21.9%

Mutual fund advisory and administration fees decreased $5.6 million or 5% to $109.7 million for the six months ended June 30, 2001, compared with $115.3 million for the six months ended June 30, 2000. The decrease in mutual fund revenue was primarily due to a $13.0 million decline in advisory and administration fees in the BlackRock Funds to $64.3 million largely due to market depreciation in equity assets, which was partially offset by an $11.1 million increase in BPIF revenue to $29.7 million as a result of strong net asset growth. Separate account advisory fees increased $48.0 million or 51% to $142.0 million for the six months ended June 30, 2001, compared with $94.0 million for the six months ended June 30, 2000. Separate account base advisory fees increased $26.8 million or 34% to $105.4 million for the six months ended June 30, 2001 compared with $78.6 million for the six months ended June 30, 2000 primarily due to a $28.3 million or 25% increase in assets under management. Performance fees of $36.6 million for the six months ended June 30, 2001 increased $21.2 million compared with $15.4 million for the six months ended June 30, 2000 due to continued strong investment performance. Other income of $17.2 million increased $5.9 million or 52% for the six months ended June 30, 2001 compared with $11.3 million for the six months ended June 30, 2000 primarily due to increased sales of BlackRock Solutions products.

-17-

Expense

Total expense increased $30.1 million or 20% to $184.3 million for the six months ended June 30, 2001, compared with $154.2 million for the six months ended June 30, 2000. The change was primarily the result of increases in employee compensation and benefits and general and administration expenses, partially offset by a decrease in fund administration and servicing costs-affiliates.

                       
   
Six months ended
            
   
June 30,
    
Variance
  
   
   
 
Dollar amounts in thousands  
2001
    
2000
    
Amount
  
%
  
   
   
   
 
 
   
(unaudited)
            
                       
Employee compensation and benefits $
110,964
   $
83,350
   $
27,614
  
33.1%
  
Fund administration and servicing costs-affiliates  
32,412
    
38,209
    
(5,797)
  
(15.2)
  
General and administration  
35,739
    
27,705
    
8,034
  
29.0
  
Amortization of intangible assets  
5,228
    
4,927
    
301
  
6.1
  
 
 
 
 
 
   Total expense $
184,343
   $
154,191
   $
30,152
  
19.6%
  
 
 
 
 
 
                       

Employee compensation and benefits increased $27.6 million due to increased incentive compensation of $13.8 million reflecting accruals based on the growth of operating income, $7.7 million reflecting direct incentives on alternative product performance fees and $6.1 million related to salary and benefits. Salary and benefit cost increases were the result of a 19% increase in full-time employees. For the six months ended June 30, 2001, fund administration and servicing costs-affiliates declined $5.8 million or 15% due to lower levels of PNC client assets invested in the BlackRock Funds. General and administration expenses increased $8.0 million or 29% to $35.7 million for the six months ended June 30, 2001 compared with $27.7 million for the six months ended June 30, 2000 largely due to new business activity, increased headcount and corporate space and technology investments.

                       
   
Six months ended
            
   
 June 30,
    
  Variance 
  
 
   
 
   
2001
    
2000
    
Amount
  
  %
  
 
 
 
 
 
   
(unaudited)
            
General and administration expense:                      
Marketing and promotional
$
10,246
  
$
8,359
   $
1,887
  
22.6%
  
Occupancy expense
5,407
    
4,414
    
993
  
22.5
  
Technology
6,654
    
4,197
    
2,457
  
58.5
  
Other general and administration expense
13,432
  
10,735
    
2,697
  
25.1
  
 
 
 
 
 
   Total general and administration expense
$
35,739
  
$
27,705
   $
8,034
  
29.0%
  
 
 
 
 
 

-18-

Marketing and promotional expenses of $10.2 million for the six months ended June 30, 2001 increased $1.9 million or 23% primarily due to higher travel and entertainment costs for institutional marketing activities and new products. Occupancy expense of $5.4 million for the six months ended June 30, 2001 increased $1.0 million due to higher occupancy expenses associated with corporate facility expansion, particularly in Wilmington, Delaware, Edinburgh, Scotland, 40 East 52nd Street, New York and Hong Kong. Technology expenses increased approximately $2.5 million or 59% to $6.7 million for the six months ended June 30, 2001 as a result of higher depreciation charges associated with the completion of a second computer facility in Delaware and equipment purchases to support the growth of BlackRock Solutions. Other expenses increased $2.7 million or 25% for the six months ended June 30, 2001 primarily due to higher professional service costs associated with new products.

Operating Income and Net Income

Operating income was $84.6 million for the six months ended June 30, 2001, representing an $18.2 million or 27% increase compared with the six months ended June 30, 2000. Non-operating income increased $2.1 million to $4.1 million for the six months ended June 30, 2001 as compared with the six months ended June 30, 2000. The rise was primarily the result of an increase in interest and dividend income reflecting investment of the Company’s excess operating cash. Income tax expense was $37.0 million and $28.4 million, representing effective tax rates of 41.7% and 41.5% for the six months ended June 30, 2001 and June 30, 2000. Net income totaled $51.7 million for the six months ended June 30, 2001 compared with $40.1 million for the six months ended June 30, 2000, representing an increase of $11.6 million or 29%.

Liquidity and Capital Resources

BlackRock meets its working capital requirements through cash generated by its operating activities. Cash provided by the Company’s operating activities totaled $60.5 million for the six months ended June 30, 2001. BlackRock expects that cash flows provided by operating activities will continue to serve as the principal source of working capital for the near future.

Net cash flow used in investing activities was $145.8 million for the six months ended June 30, 2001. Capital expenditures for property and equipment was $18.0 million for the six months ended June 30, 2001 and primarily reflected construction costs for the new facility in Wilmington, Delaware, including a second computer facility, leasehold improvements and the purchase of equipment to support the growth of BlackRock Solutions. Net investments were $127.7 million for the six months ended June 30, 2001, which included a $120.0 million investment in the BlackRock Funds Intermediate Bond Portfolio, and seed investments made in certain new alternative investment products.

Net cash flow used in financing activities was $7.6 million for the six months ended June 30, 2001. Financing activities primarily represented treasury stock activity for the six months ended June 30, 2001. On January 31, 2001, in connection with the BlackRock, Inc. Long-Term Deferred Compensation Plan, BlackRock repurchased approximately 142,000 shares of class A common stock at a fair market value of $40.33 per share from certain employees to facilitate required employee income tax payments. On May 23, 2001, the Company paid $1.5 million of the acquired management contract obligation related to the agreement and plan of merger of CORE Cap, Inc. with Anthracite Capital, Inc., a BlackRock managed REIT.

-19-

On January 8, 2001, the Company entered into a commitment to invest $8.4 million in Magnetite Asset Investors III, L.L.C., an alternative investment fund sponsored by BlackRock of which $1.7 million remained unfunded as of June 30, 2001.

On May 2, 2001, BlackRock’s Board of Directors authorized BlackRock to repurchase up to 500,000 of its outstanding shares of class A common stock from time to time as market and business conditions warrant in open market or privately negotiated transactions. To date, BlackRock has not purchased any shares of its outstanding class A common stock under this repurchase program.

On July 20, 2001, the Company entered into a commitment to invest $5.4 million in Carbon Capital, Inc., an alternative investment fund sponsored by BlackRock.

Total capital at June 30, 2001 was $428.9 million and was comprised entirely of stockholders’ equity.

Interest Rates

The value of assets under management is affected by changes in interest rates. Since BlackRock derives the majority of its revenues from investment advisory fees based on the value of assets under management, BlackRock’s revenues may be adversely affected by changing interest rates. In a period of rapidly rising interest rates, BlackRock’s assets under management would likely be negatively affected by reduced asset values and increased redemptions.

Inflation

The majority of BlackRock’s revenues are based on the value of assets under management. There is no predictable relationship between the rate of inflation and the value of assets under management by BlackRock, except as inflation may affect interest rates. BlackRock does not believe inflation will significantly affect its compensation costs, as they are substantially variable in nature. However, the rate of inflation may affect BlackRock’s expenses such as information technology and occupancy costs. To the extent inflation results in rising interest rates and has other effects upon the securities markets, it may adversely affect BlackRock’s results of operations by reducing BlackRock’s assets under management, revenues or otherwise.

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Forward-looking Statements

This report and other statements by BlackRock include forward-looking statements within the meaning of the Private Securities Litigation Reform Act with respect to the outlook for earnings and revenues, other future financial or business performance, strategies and expectations. Forward-looking statements are typically identified by words or phrases such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “position,” “target,” “mission,” “assume,” “achievable,” “potential,” “strategy,” “goal,” “objective,” “plan,” “aspiration,” “outlook,” “outcome,” “continue,” “remain,” “maintain,” “strive,” “trend,” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may,” or 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 update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.

In addition to factors previously disclosed in BlackRock’s Securities and Exchange Commission (the “SEC”) reports and those identified elsewhere in this report, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: (1) the introduction, withdrawal, success and timing of business initiatives and strategies; (2) changes in economic or industry conditions, the interest rate environment or financial and capital markets, which could result in reduced demand for products or services or reduced value of assets under management; (3) the investment performance of BlackRock's advised or sponsored investment products and separately managed accounts; (4) the impact of increased competition; (5) the impact of capital improvement projects; (6) the impact of future acquisitions; (7) the extent and timing of any share repurchases; (8) the impact, extent and timing of technological changes; and (9) the impact of legislative and regulatory actions and reforms.

Exhibit 99.1 to BlackRock’s Annual Report on Form 10-K for the year ended December 31, 2000 and BlackRock’s subsequent reports filed with the Securities and Exchange Commission, accessible on the SEC’s website at http://www.sec.gov, discuss these factors in more detail and identify additional factors that can affect forward-looking statements.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the normal course of its business, BlackRock is exposed to the risk of interest rate, securities market and general economic fluctuations.

BlackRock’s investments available for sale consist primarily of BlackRock Funds and certain institutional and private placement portfolios (“alternative investment products”). Occasionally, BlackRock invests in new mutual funds (seed investments) sponsored by BlackRock in order to provide investable cash to the new mutual fund to establish a performance history. As of June 30, 2001, the fair market value of seed investments was $22.0 million. The fair market value of BlackRock’s other investments was $120.4 million as of June 30, 2001 and is comprised entirely of an investment in the Intermediate Bond Portfolio of the BlackRock Funds. The Intermediate Bond Portfolio’s assets are invested primarily in investment grade intermediate bonds with maturities from 2 to 10 years.

BlackRock does not hold any derivative securities to hedge its investments. These investments expose BlackRock to credit and interest rate risk. However, the Company does not believe that the effect of reasonably possible near-term changes in default rates or interest rates on its financial position, results of operations or cash flow would be material.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

BlackRock and its subsidiaries, in the normal course of business, are subject to various pending and threatened lawsuits in which claims for monetary damages are asserted. Management, after consultation with legal counsel, does not at the present time anticipate that the ultimate aggregate liability, if any, arising out of such lawsuits will have a material adverse effect on BlackRock's financial position. At the present time, management is not in a position to determine whether any such pending or threatened litigation will have a material adverse effect on BlackRock's results of operations in any future reporting period.

Item 4. Submission of Matters to a Vote of Security Holders

The annual meeting of stockholders of BlackRock was held on May 2, 2001, for the purpose of considering and acting upon the following:

Three Class II directors were elected and the votes cast for or against/withheld were as follows:

Aggregate Votes
Nominee                         
For
Against/Withheld
James E. Rohr
271,896,649
338,278
  
Ralph L. Schlosstein
270,280,131
1,954,796
  
Lawrence M. Wagner
271,927,059
307,868
  

Two matters were approved and the votes cast for or against and the abstentions were as follows:

 

 
Aggregate Votes
  
Matter
For
Against
Abstain
Adoption of the BlackRock, Inc.
     2001 Employee Stock Purchase
270,932,103
38,800
157,809   
     Plan
Approval of amendment to the
     BlackRock, Inc. 1999 Stock
     Award and Incentive Plan
269,228,500
1,735,361
164,851   

There were no broker non-votes.

With respect to the preceding matters, holders of BlackRock's class A common stock, and class B common stock voted together as a single class. Holders of BlackRock’s class A common stock are entitled to one vote per share. Holders of BlackRock’s class B common stock are entitled to five votes per share.

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Item 6. Exhibits and Reports on Form 8-K
(a)   

Exhibits

In addition to the exhibits listed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2000, the following exhibits are being filed for the quarter ended June 30, 2001.

Exhibit No.             Description

10.1                         Amendment No. 2 to the 1999 Stock Award and Incentive Plan. +

+   Denotes compensatory plan.
(b)   

Reports on Form 8-K

Since March 31, 2001, the Company has filed the following Current Report on Form 8-K.

Form 8-K dated as of April 12, 2001, reporting the Company’s results of operations for the three months ended March 31, 2001, filed pursuant to Item 5.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

  BLACKROCK, INC.
  (Registrant)
   
  By: _/s/ Paul L. Audet______
    Paul L. Audet
Date: August 13, 2001   Managing Director &
    Chief Financial Officer

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