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 September 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 incorporation or organization)	(I.R.S. Employer Identification No.)

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 October 31, 2001, there were 10,784,510 shares of the registrant’s class A common stock outstanding and 53,606,862 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		11
Item 3. Quantitative and Qualitative Disclosures About Market Risk		24
PART II OTHER INFORMATION
Item 1. Legal Proceedings		25
Item 6. Exhibits and Reports on Form 8-K		25

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

BlackRock, Inc.

Consolidated Statements of Financial Condition

(Dollar amounts in thousands)

	September 30, 2001		December 31, 2000
	(unaudited)
Assets
Cash and cash equivalents	$152,832		$192,590
Accounts receivable	94,984		81,800
Investments, available for sale (cost: $142,054 and $16,854, respectively)	140,708		13,316
Property and equipment, net	61,142		45,598
Intangible assets, net	184,301		192,142
Receivable from affiliates	2,282		1,484
Other assets	7,521		10,073
Total assets	$643,770		$537,003
Liabilities and stockholders’ equity
Accrued compensation	$115,785		$130,101
Accounts payable and accrued liabilities
Affiliate	41,899		14,750
Other	16,746		12,264
Acquired management contract obligation	7,344		8,040
Other liabilities	4,474		3,607
Total liabilities	186,248		168,762
Stockholders’ equity
Common stock, class A, 10,638,163 and        9,487,297 shares issued, respectively	106		95
Common stock, class B, 53,785,961 and        54,509,875 shares issued, respectively	538		545
Additional paid-in capital	182,080		172,156
Retained earnings	279,166		200,064
Unearned compensation	(2,212	)	(2,126	)
Accumulated other comprehensive loss	(1,391	)	(2,477	)
Treasury stock, class A, at cost	—		(16	)
Treasury stock, class B, at cost	(765	)	—
Total stockholders’ equity	457,522		368,241
Total liabilities and stockholders’ equity	$643,770		$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 September 30,				Nine months ended September 30,
	2001		2000		2001		2000
Revenue
Investment advisory and administration fees
Mutual funds	$  52,751		$  57,745		$162,458		$173,073
Separate accounts	71,430		63,539		213,439		157,513
Other income
Affiliate	1,250		1,250		3,750		3,750
Other	9,351		5,167		24,106		13,996
Total revenue	134,782		127,701		403,753		348,332
Expense
Employee compensation and benefits	53,932		53,272		164,896		136,622
Fund administration and servicing costs—affiliates	15,016		19,313		47,428		57,522
General and administration
Affiliate	829		960		2,705		3,462
Other	19,860		14,617		53,723		39,820
Amortization of intangible assets	2,613		2,613		7,841		7,540
Total expense	92,250		90,775		276,593		244,966
Operating income	42,532		36,926		127,160		103,366
Non-operating income (expense)
Investment income	2,890		2,197		7,384		4,664
Interest expense	(172	)	(215	)	(574	)	(654	)
Total non-operating income	2,718		1,982		6,810		4,010
Income before income taxes	45,250		38,908		133,970		107,376
Income taxes	17,874		16,147		54,868		44,561
Net income	$  27,376		$  22,761		$  79,102		$  62,815
Earnings per share
Basic	$     0.43		$      0.36		$      1.23		$      0.98
Diluted	$     0.42		$      0.35		$      1.22		$      0.97
Weighted-average shares outstanding
Basic	64,284,768		63,884,410		64,231,342		63,871,568
Diluted	64,947,840		64,651,300		64,897,087		64,524,607

See accompanying notes to consolidated financial statements.

2

BlackRock, Inc.

Consolidated Statements of Cash Flow

(Dollar amounts in thousands)

(unaudited)

	Nine months ended September 30,
	2001		2000
Cash flows from operating activities
Net income	$   79,102		$  62,815
Adjustments to reconcile net income to net cash provided by        operating activities:
Depreciation and amortization	18,899		14,992
Stock-based compensation	3,784		528
Deferred income taxes	2,619		1,425
Tax benefit from stock-based compensation	5,230		70
Changes in operating assets and liabilities:
Increase in accounts receivable	(13,184	)	(12,809	)
(Increase) decrease in receivable from affiliate	(798	)	1,005
Decrease (increase) in other assets	2,552		(3,857	)
(Decrease) increase in accrued compensation	(8,292	)	6,148
Increase (decrease) in accounts payable and accrued liabilities	29,012		(4,235	)
Decrease in accrued interest payable to affiliates	—		(705	)
Increase (decrease) in other liabilities	867		(523	)
Cash provided by operating activities	119,791		64,854
Cash flows from investing activities
Purchase of property and equipment	(26,602	)	(22,453	)
Purchase of investments	(126,305	)	(11,671	)
Cash used in investing activities	(152,907	)	(34,124	)
Cash flows from financing activities
Repayment of note and loan payable to affiliates	—		(28,200	)
Issuance of class A common stock	281		131
Purchase of treasury stock	(6,472	)	—
Reissuance of treasury stock	246		—
Acquired management contract obligation payment	(696	)	—
Cash used in financing activities	(6,641	)	(28,069	)
Effect of exchange rate changes on cash and cash equivalents	(1	)	(862	)
Net (decrease) increase in cash and cash equivalents	(39,758	)	1,799
Cash and cash equivalents, beginning of period	192,590		157,129
Cash and cash equivalents, end of period	$ 152,832		$158,928

See accompanying notes to consolidated financial statements.

3

BlackRock, Inc.

Notes to Consolidated Financial Statements

Nine Months Ended September 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 was 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 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.

In August 2001, the FASB issued SFAS No. 143, “Accounting for Obligations Associated with the Retirement of Long-Lived Assets,” which requires that the fair value of a liability be recognized when incurred for the retirement of a long-lived asset and the value of the asset be increased by that amount. The statement also requires that the liability be maintained at its present value in subsequent periods and outlines certain disclosures for such obligations. The adoption of this statement, which is effective January 1, 2003, is not expected to have a material impact on the Company’s financial statements.

In October 2001, the FASB also issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which replaces SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Assets to Be Disposed Of.” This statement primarily defines one accounting model for long-lived assets to be disposed of by sale, including discontinued operations and addresses implementation issues. The adoption of this statement, which is effective January 1, 2002, is not expected to have a material impact on the Company’s financial statements.

5

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 Value
September 30, 2001	Cost	Gains	Losses
Mutual funds	$128,712	$1,700		—	$130,412
Collateralized bond obligations	12,689	—		3,074	9,615
Other	653	28		—	681
	$142,054	$1,728		$3,074	$140,708
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 $77 and $11 for the nine months ended September 30, 2001 and September 30, 2000, respectively, and $71 and $11 for the three months ended September 30, 2001 and 2000, respectively.

3.    Property and Equipment

Property and equipment consists of the following:

	September 30, 2001		December 31, 2000
Land		$     3,564		$   3,564
Building		16,946		—
Building improvements		5,264		—
Equipment and computer software		49,312		37,157
Leasehold improvements		8,681		9,361
Furniture and fixtures		10,091		7,262
Construction in progress		9,440		19,826
		103,298		77,170
Less accumulated depreciation		42,156		31,572
Property and equipment, net		$   61,142		$45,598

6

3.    Property and Equipment (continued)

Building and building improvements reflect the new building located in Wilmington, Delaware. The remaining balance in the construction in progress account primarily represents expenditures associated with occupying a new headquarters site in New York City located at 40 East 52^nd Street.

Depreciation expense was approximately $4,155, and $2,844 for the three months ended September 30, 2001 and 2000, respectively and $11,058 and $7,452 for the nine months ended September 30, 2001 and 2000, respectively.

4.    Commitments

a) Lease Commitments

The Company leases its primary office space under agreements which expire through 2017. Future minimum commitments under these operating leases, net of rental reimbursements of $5,884 through 2005 from a sublease arrangement, are as follows:

2001	$     2,097
2002	10,372
2003	10,449
2004	10,362
2005	10,283
Thereafter	130,070
	$173,633

In connection with certain lease agreements, the Company is responsible for escalation payments.

On September 4, 2001, the Company entered into a lease agreement for additional space at 40 East 52^nd Street, New York, New York. Under the lease, BlackRock will occupy this space on or about January 2002. The lease will terminate on February 28, 2017. Total rent payments over the lease term will approximate $24,198.

Occupancy expense amounted to $3,682 and $3,038 for the three months ended September 30, 2001 and 2000, respectively and $9,088 and $7,453 for the nine months ended September 30, 2001 and 2000, respectively.

7

5.    Common Stock

BlackRock’s class A, $0.01 par value, common shares authorized was 250,000,000 shares as of September 30, 2001 and December 31, 2000, respectively. BlackRock’s class B, $0.01 par value, common shares authorized was 100,000,000 shares as of September 30, 2001 and December 31, 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	680,992	(728,914	)	47,922		—		728,914		(728,914	)
Issuance of shares to Nonemployee        Directors	980	—		2,346		—		3,326		—
Issuance of class A common stock	468,894	—		—		—		468,894		—
Issuance of class B common stock	—	5,000		—		—		—		5,000
Treasury stock transactions	—	—		(49,915	)	(129,437	)	(49,915	)	(129,437	)
September 30, 2001	10,638,163	53,785,961		—		(129,437	)	10,638,163		53,656,524

6.    Comprehensive Income

	Three months ended September 30,				Nine months ended September 30,
	2001		2000		2001		2000
Net income	$27,376		$22,761		$79,102		$62,815
Other comprehensive income gain (loss):
Unrealized gain (loss) from investments,                available for sale, net	(310	)	107		1,087		281
Foreign currency translation gain (loss)	509		(836	)	(1	)	(862	)
Comprehensive income	$27,575		$22,032		$80,188		$62,234

8

7.    Earnings Per Share

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

	Three months ended September 30,		Nine months ended September 30,
	2001	2000	2001	2000
Net income	$27,376	$22,761	$79,102	$62,815
Basic weighted-average shares outstanding	64,284,768	63,884,410	64,231,342	63,871,568
Dilutive potential shares from forward sales	107,277	175,153	107,277	175,153
Dilutive potential shares from stock options	555,795	591,737	558,468	477,886
Dilutive weighted-average shares outstanding	64,947,840	64,651,300	64,897,087	64,524,607
Basic earnings per share	$     0.43	$     0.36	$     1.23	$     0.98
Diluted earnings per share	$     0.42	$     0.35	$     1.22	$     0.97

8.    Supplemental Statements of Cash Flow Information

Supplemental disclosure of cash flow information:

	Nine months ended September 30,
	2001	2000
Cash paid for interest	$    804	$  1,058
Cash paid for income taxes	$23,085	$42,514

Supplemental schedule of noncash transactions:

	Nine months ended September 30,
	2001	2000
Stock-based compensation	$6,831	—

9

9.    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.

10.    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.

11.    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

I tem 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 $225.6 billion of assets under management at September 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 September 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 September 30, 2001, September 30, 2000 and June 30, 2001 and the nine months ended September 30, 2001 and September 30, 2000:

BlackRock, Inc.

Financial Highlights

(Dollar amounts in thousands, except share data)

(unaudited)

	Three months ended						Variance vs.
	September 30,				June 30,		September 30, 2000				June 30, 2001
	2001		2000		2001		Amount		%		Amount			%
Total revenue	$134,782		$127,701		$135,262			$  7,081	6	%		$    (480	)	0	%
Total expense	$  92,250		$  90,775		$  92,554			$  1,475	2	%		$    (304	)	0	%
Operating income	$  42,532		$  36,926		$  42,708			$  5,606	15	%		$    (176	)	0	%
Net income	$  27,376		$  22,761		$  26,230			$  4,615	20	%		$  1,146		4	%
Diluted earnings per share	$      0.42		$      0.35		$      0.40			$    0.07	20	%		$    0.02		5	%
Diluted cash earnings per share (a)	$      0.46		$      0.39		$      0.44			$    0.07	18	%		$    0.02		5	%
Average diluted shares outstanding	64,947,840		64,651,300		64,877,389			296,540	0	%		70,451		0	%
EBITDA (b)	$  52,190		$  44,580		$  51,722			$  7,610	17	%		$     468		1	%
Operating margin (c)	35.5	%	34.1	%	35.7	%
Assets under management        ($ in millions)	$225,596		$190,808		$212,694			$34,788	18	%		$12,902		6	%
	Nine months ended September 30,				Variance
	2001		2000		Amount		%
Total revenue	$403,753		$348,332		$55,421			16%
Total expense	$276,593		$244,966		$31,627			13%
Operating income	$127,160		$103,366		$23,794			23%
Net income	$  79,102		$  62,815		$16,287			26%
Diluted earnings per share	$      1.22		$      0.97		$    0.25			26%
Diluted cash earnings per share (a)	$      1.34		$      1.09		$    0.25			23%
Average diluted shares outstanding	64,897,087		64,524,607		372,480			1%
EBITDA (b)	$153,443		$123,022		$30,421			25%
Operating margin (c)	35.7	%	35.5	%
Assets under management        ($ in millions)	$225,596		$190,808		$34,788			18%

(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.

11

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, foundations, REITs, commercial and mortgage banks, savings institutions and government agencies. These services are provided under the brand name BlackRock Solutions^TM 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 Funds^TM. Intangible assets at September 30, 2001 and December 31, 2000 were $184.3 million and $192.1 million, respectively, with amortization expense of approximately $2.6 million for the three months ended September 30, 2001 and September 30, 2000, respectively, and $7.8 million and $7.5 million for the nine months ended September 30, 2001 and September 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.

Assets Under Management

Assets under management (“AUM”) increased $34.8 billion, or 18%, to $225.6 billion at September 30, 2001, compared with $190.8 billion at September 30, 2000. The growth in assets under management was attributable to increases of $23.4 billion or 19% in separate accounts and $11.4 billion or 17% in mutual fund assets.

12

Assets Under Management (continued)

The increase in separate accounts at September 30, 2001, as compared with September 30, 2000, was the result of net subscriptions of $13.3 billion and market appreciation of $10.1 billion. Net subscriptions in fixed income, alternative investment products, equity and liquidity accounts were $9.1 billion, $1.9 billion, $3.4 billion and $1.7 billion, respectively, while liquidity-securities lending separate account assets experienced net redemptions of $2.8 billion. The rise in fixed income, liquidity and alternative investment products separate accounts was primarily attributable to strong relative investment performance resulting in higher levels of funding from existing clients as well as increased sales to new clients. Net subscriptions of fixed income accounts included a redemption of approximately $1.4 billion resulting from a merger related termination. The growth in equity separate account assets primarily reflected new business generated by the European equity team. The $2.8 billion decline in liquidity-securities lending separate accounts was primarily attributable to lower levels of cash collateral managed by BlackRock for PFPC Worldwide, Inc., a PNC affiliate, as a result of the decline in the equity markets. Market appreciation of $10.1 billion in separate accounts was due to appreciation in fixed income assets of $12.4 billion, partially offset by market depreciation of $2.7 billion in equity assets.

The $11.4 billion year over year increase in mutual fund assets reflected net subscriptions of $17.6 billion, which was partially offset by market depreciation of $6.1 billion in the BlackRock Funds largely associated with a decline in the equity markets. Net subscriptions in BlackRock Provident Institutional Funds^TM (“BPIF”) and BlackRock Funds were $17.2 billion and $1.3 billion, respectively, while the closed end funds experienced net redemptions of $1.2 billion. The increase in BPIF assets was the result of strong sales driven in part by the decline in short-term interest rates and investors’ flight to quality. Although economic and market uncertainty persist, management does not assume that the current level of BPIF assets will be sustained long-term. The decline in closed end funds was the result of approximately $2.4 billion in term trust maturities partially offset by the Company’s offering of five perpetual closed end municipal bond funds, which resulted in incremental assets of approximately $1.2 billion exclusive of subsequent issuances of preferred stock.

BlackRock, Inc.

Assets Under Management

(Dollar amounts in millions)

(unaudited)

	September 30,		Variance
	2001	2000	Amount			%
Separate Accounts
Fixed income	$118,336	$  96,791		$21,545		22.3	%
Liquidity	6,987	5,147		1,840		35.7
Liquidity-Securities lending	8,069	10,843		(2,774	)	(25.6	)
Equity	8,185	7,500		685		9.1
Alternative investment products	4,879	2,818		2,061		73.1
Subtotal	146,456	123,099		23,357		19.0
Mutual Funds
Fixed income	13,985	13,983		2		—
Liquidity	56,221	37,896		18,325		48.4
Equity	8,934	15,830		(6,896	)	(43.6	)
Subtotal	79,140	67,709		11,431		16.9
Total	$225,596	$190,808		$34,788		18.2	%

13

Assets Under Management (continued)

The following tables present the component changes in BlackRock’s assets under management for the three months and nine months ended September 30, 2001 and September 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 nine months ended September 30, 2001, net subscriptions represented 85% and 87%, respectively, of the total increase in assets under management. Net subscriptions were $11.0 billion and $19.1 billion for the three months and nine months ended September 30, 2001 and $11.6 billion and $21.2 billion for the three months and nine months ended September 30, 2000, respectively.

BlackRock, Inc.

Component Changes in Assets Under Management

(Dollar amounts in millions)

(unaudited)

	Three months ended September 30,				Nine months ended September 30,
	2001		2000		2001		2000
Separate Accounts
Beginning assets under management	$140,005		$111,672		$133,743		$   99,220
Net subscriptions	2,775		9,647		6,672		19,269
Market appreciation	3,676		1,780		6,041		4,610
Ending assets under management	146,456		123,099		146,456		123,099
Mutual Funds
Beginning assets under management	72,689		65,665		70,026		65,297
Net subscriptions	8,231		1,981		12,408		1,979
Market appreciation (depreciation)	(1,780	)	63		(3,294	)	433
Ending assets under management	79,140		67,709		79,140		67,709
Total	$225,596		$190,808		$225,596		$190,808
Net subscriptions	$   11,006		$   11,628		$   19,080		$   21,248
% of Change in AUM from net subscriptions	85.3	%	86.3	%	87.4	%	80.8	%

14

BlackRock, Inc.

Assets Under Management

Quarterly Trend

(Dollar amounts in millions)

(unaudited)

	Quarter Ended
	2000						2001							Nine months ended September 30, 2001
	September 30			December 31			March 31		June 30		September 30
Separate Accounts
Fixed Income
Beginning assets under management		$   83,950			$   96,791		$103,561		$107,371			$110,483			$103,561
Net subscriptions		10,606			2,776		699		2,682			2,959			6,340
Market appreciation		2,235			3,994		3,111		430			4,894			8,435
Ending assets under management		96,791			103,561		107,371		110,483			118,336			118,336
Liquidity
Beginning assets under management		7,052			5,147		6,495		5,713			6,782			6,495
Net subscriptions (redemptions)		(1,925	)		1,321		(813	)	1,042			181			410
Market appreciation		20			27		31		27			24			82
Ending assets under management		5,147			6,495		5,713		6,782			6,987			6,987
Liquidity-Securities lending
Beginning assets under management		10,655			10,843		11,501		7,514			10,004			11,501
Net subscriptions (redemptions)		188			658		(3,987	)	2,490			(1,935	)		(3,432	)
Market appreciation		—			—		—		—			—			—
Ending assets under management		10,843			11,501		7,514		10,004			8,069			8,069
Equity
Beginning assets under management		7,621			7,500		8,716		7,796			8,257			8,716
Net subscriptions		442			1,282		445		488			1,144			2,077
Market depreciation		(563	)		(66	)	(1,365	)	(27	)		(1,216	)		(2,608	)
Ending assets under management		7,500			8,716		7,796		8,257			8,185			8,185
Alternative investment products
Beginning assets under management		2,394			2,818		3,470		4,317			4,479			3,470
Net subscriptions		336			584		682		169			426			1,277
Market appreciation (depreciation)		88			68		165		(7	)		(26	)		132
Ending assets under management		2,818			3,470		4,317		4,479			4,879			4,879
Total Separate Accounts
Beginning assets under management		111,672			123,099		133,743		132,711			140,005			133,743
Net subscriptions (redemptions)		9,647			6,621		(2,974	)	6,871			2,775			6,672
Market appreciation		1,780			4,023		1,942		423			3,676			6,041
Ending assets under management		$123,099			$133,743		$132,711		$140,005			$146,456			$146,456
Mutual Funds
BlackRock Funds
Beginning assets under management		$   28,262			$   27,819		$   26,359		$   24,383			$   24,589			$   26,359
Net subscriptions (redemptions)		(455	)		1,463		65		(253	)		49			(139	)
Market appreciation (depreciation)		12			(2,923	)	(2,041	)	459			(1,848	)		(3,430	)
Ending assets under management		27,819			26,359		24,383		24,589			22,790			22,790
BlackRock Global Series
Beginning assets under management		—			54		75		105			134			75
Net subscriptions		54			18		43		33			1			77
Market appreciation (depreciation)		—			3		(13	)	(4	)		(8	)		(25	)
Ending assets under management		54			75		105		134			127			127
BPIF*
Beginning assets under management		25,615			27,580		36,338		37,047			41,954			36,338
Net subscriptions		1,965			4,662		709		4,907			6,935			12,551
Exchanges		—			4,096		—		—			—			—
Ending assets under management		27,580			36,338		37,047		41,954			48,889			48,889
Closed End
Beginning assets under management		7,583			7,634		6,764		6,841			5,440			6,764
Net subscriptions (redemptions)		—			(954	)	—		(1,409	)		1,212			(197	)
Market appreciation		51			84		77		8			76			161
Ending assets under management		7,634			6,764		6,841		5,440			6,728			6,728
Short Term Investment Funds (STIF)*
Beginning assets under management		4,205			4,622		490		549			572			490
Net subscriptions (redemptions)		417			(36	)	59		23			34			116
Exchanges		—			(4,096	)	—		—			—			—
Ending assets under management		4,622			490		549		572			606			606
Total Mutual Funds
Beginning assets under management		65,665			67,709		70,026		68,925			72,689			70,026
Net subscriptions		1,981			5,153		876		3,301			8,231			12,408
Market appreciation (depreciation)		63			(2,836	)	(1,977	)	463			(1,780	)		(3,294	)
Ending assets under management		$   67,709			$   70,026		$   68,925		$   72,689			$   79,140			$   79,140

* During the fourth quarter of 2000, $4.1 billion of STIF assets under management were exchanged into the BPIF product.

15

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

Revenue

Total revenue for the three months ended September 30, 2001 increased $7.1 million or 6% to $134.8 million compared with $127.7 million for the three months ended September 30, 2000. Investment advisory and administration fees increased $2.9 million or 2% to $124.2 million for the three months ended September 30, 2001, compared with $121.3 million for the three months ended September 30, 2000. The growth in investment advisory and administration fees was primarily due to an 18% increase in assets under management to $225.6 billion at September 30, 2001 partially offset by a decrease in performance fees. Other income of $10.6 million for the three months ended September 30, 2001 increased $4.2 million or 65% compared with $6.4 million for the three months ended September 30, 2000 primarily due to increased sales of BlackRock Solutions products.

	Three months ended
	September 30,		Variance
	2001	2000	Amount			%
Dollar amounts in thousands	(unaudited)
Investment advisory and administration fees:
Mutual funds	$52,751	$57,745		$(4,994	)	(8.6	%)
Separate accounts	71,430	63,539		7,891		12.4
Total investment advisory and administration fees	124,181	121,284		2,897		2.4
Other income	10,601	6,417		4,184		65.2
Total revenue	$134,782	$127,701		$  7,081		5.5	%

Mutual fund advisory and administration fees decreased $5.0 million or 9% to $52.7 million for the three months ended September 30, 2001, compared with $57.7 million for the three months ended September 30, 2000. The decrease in mutual fund revenue was primarily due to a $5.0 billion or 18% decline in assets in the BlackRock Funds associated with declining equity markets partially offset by strong revenue growth in the BPIF funds as assets rose $17.2 billion or 54% adjusted for exchanges.

Separate account advisory fees increased $7.9 million or 12% to $71.4 million for the three months ended September 30, 2001, compared with $63.5 million for the three months ended September 30, 2000. The increase in separate account revenue resulted from a $23.4 billion or 19% increase in assets under management and included a $4.5 million decrease in performance fees, which totaled $14.0 million for the three months ended September 30, 2001 compared with $18.5 million for the three months ended September 30, 2000. Base advisory fees on separate accounts increased $12.4 million or 28% to $57.4 million for the three months ended September 30, 2001 compared with $45.0 million for the three months ended September 30, 2000 primarily due to strong growth in institutional assets, which increased $23.4 billion or 19%.

16

Expense

Total expense increased $1.5 million or 2% to $92.3 million for the three months ended September 30, 2001, compared with $90.8 million for the three months ended September 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 September 30,		Variance
	2001	2000	Amount			%
Dollar amounts in thousands	(unaudited)
Employee compensation and benefits	$53,932	$53,272		$    660		1.2	%
Fund administration and servicing costs-affiliates	15,016	19,313		(4,297	)	(22.2	)
General and administration	20,689	15,577		5,112		32.8
Amortization of intangible assets	2,613	2,613		—		—
Total expense	$92,250	$90,775		$1,475		1.6	%

Employee compensation and benefits increased $.7 million due to increases in salary and benefits and incentive compensation offset by a decrease in direct incentives associated with alternative product performance fees. Salaries and benefits increased $3.4 million primarily due to a 15% increase in full-time employees and incentive compensation increased $2.2 million reflecting accruals based on the growth of operating income. Incentives directly associated with alternative product performance fees decreased $4.9 million as a result of lower third quarter fees. For the three months ended September 30, 2001, fund administration and servicing costs-affiliates of $15.0 million declined $4.3 million or 22% due to lower levels of PNC client assets invested in the BlackRock Funds. General and administration expenses increased $5.1 million or 33% to $20.7 million for the three months ended September 30, 2001 compared with $15.6 million for the three months ended September 30, 2000 largely due to new business activity, increased headcount and corporate space and technology investments.

	Three months ended September 30,		Variance
	2001	2000	Amount		%
Dollar amounts in thousands	(unaudited)
General and administration expense:
Marketing and promotional	$5,227	$4,810		$417	8.7	%
Occupancy expense	3,682	3,038		644	21.2
Technology	3,632	2,447		1,185	48.4
Other general and administration expense	8,148	5,282		2,866	54.3
Total general and administration expense	$20,689	$15,577		$5,112	32.8	%

17

Expense (continued)

Marketing and promotional expenses of $5.2 million for the three months ended September 30, 2001 increased $.4 million or 9% primarily due to higher expenditures on new products as well as increased travel and entertainment costs associated with the Company’s institutional marketing efforts. Occupancy expense of $3.7 million for the three months ended September 30, 2001 increased $.6 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 52^nd Street, New York, and Hong Kong. Technology expense increased approximately $1.2 million or 48% to $3.6 million for the three months ended September 30, 2001 due to the completion of a second computer facility in Delaware and additional depreciation on capitalized investments to support the growth of BlackRock Solutions. Other expense increased $2.9 million or 54% to $8.1 million for the three months ended September 30, 2001 primarily due to increased professional service costs and sub-advisory fees associated with new products and higher office furniture and equipment expenses related to the expansion of office space and increased headcount.

Operating Income and Net Income

Operating income was $42.5 million for the three months ended September 30, 2001, representing a $5.6 million or 15% increase compared with the three months ended September 30, 2000. Non-operating income increased $.7 million to $2.7 million for the three months ended September 30, 2001 compared with the three months ended September 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 $17.9 million and $16.1 million, representing effective tax rates of 39.5% and 41.5% for the three months ended September 30, 2001 and September 30, 2000. The lower effective income tax rate was primarily a result of the consolidation of mutual fund activities in Delaware. Net income totaled $27.4 million for the three months ended September 30, 2001 compared with $22.8 million for the three months ended September 30, 2000, representing an increase of $4.6 million or 20%.

18

Operating results for the nine months ended September 30, 2001 as compared with the nine months ended September 30, 2000.

Revenue

Total revenue for the nine months ended September 30, 2001 increased $55.4 million or 16% to $403.7 million compared with $348.3 million for the nine months ended September 30, 2000. Investment advisory and administration fees increased $45.3 million or 14% to $375.9 million for the nine months ended September 30, 2001, compared with $330.6 million for the nine months ended September 30, 2000. The growth in investment advisory and administration fees was primarily due to an 18% increase in assets under management to $225.6 billion at September 30, 2001 and increased performance fees. Other income of $27.9 million increased $10.1 million or 57% for the nine months ended September 30, 2001 compared with $17.8 million for the nine months ended September 30, 2000 primarily due to increased sales of BlackRock Solutions products.

	Nine months ended September 30,		Variance
	2001	2000	Amount		%
Dollar amounts in thousands	(unaudited)
Investment advisory and administration fees:
Mutual funds	$162,458	$173,073	$  (10,615	)	(6.1	%)
Separate accounts	213,439	157,513	55,926		35.5
Total investment advisory and administration fees	375,897	330,586	45,311		13.7
Other income	27,856	17,746	10,110		57.0
Total revenue	$403,753	$348,332	$   55,421		15.9	%

Mutual fund advisory and administration fees decreased $10.6 million or 6% to $162.5 million for the nine months ended September 30, 2001, compared with $173.1 million for the nine months ended September 30, 2000. The decrease in mutual fund revenue was due to declines in BlackRock Funds fees and closed end fund fees of $21.5 million and $3.5 million respectively, partially offset by a $13.8 million increase in BPIF and short-term investment fund revenue resulting from strong sales. The decrease in BlackRock Funds revenue was largely due to market depreciation of equity assets. Closed end fund revenue declined due to $2.4 billion in term trust maturities and was partially offset by the Company’s offering of five perpetual closed end municipal bond funds during the third quarter.

Separate account advisory fees increased $55.9 million or 36% to $213.4 million for the nine months ended September 30, 2001, compared with $157.5 million for the nine months ended September 30, 2000. Excluding performance fees, advisory fees on separate accounts increased $39.3 million or 32% to $162.8 million for the nine months ended September 30, 2001 compared with $123.5 million for the nine months ended September 30, 2000 primarily due to a $23.4 billion or 19% increase in assets under management. Performance fees of $50.6 million for the nine months ended September 30, 2001 increased $16.7 million or 49% compared with $33.9 million for the nine months ended September 30, 2000 due to strong investment performance.

19

Expense

Total expense increased $31.6 million or 13% to $276.6 million for the nine months ended September 30, 2001, compared with $245.0 million for the nine months ended September 30, 2000. The change primarily reflects increases in employee compensation and benefits and general and administration expenses, partially offset by a decrease in fund administration and servicing costs-affiliates.

	Nine months ended September 30,		Variance
	2001	2000	Amount			%
Dollar amounts in thousands	(unaudited)
Employee compensation and benefits	$164,896	$136,622		$28,274		20.7	%
Fund administration and servicing costs-affiliates	47,428	57,522		(10,094	)	(17.5	)
General and administration	56,428	43,282		13,146		30.4
Amortization of intangible assets	7,841	7,540		301		4.0
Total expense	$276,593	$244,966		$31,627		12.9	%

Employee compensation and benefits increased $28.3 million due to increased incentive compensation of $12.0 million reflecting accruals based on the growth of operating income, $6.8 million reflecting direct incentives on alternative product performance fees and $9.5 million related to salary and benefits. Salary and benefit cost increases were the result of a 15% increase in full-time employees. For the nine months ended September 30, 2001, fund administration and servicing costs-affiliates declined $10.1 million or 18% due to lower levels of PNC client assets invested in the BlackRock Funds. General and administration expenses increased $13.1 million or 30% to $56.4 million for the nine months ended September 30, 2001 compared with $43.3 million for the nine months ended September 30, 2000 largely due to new business activity, increased headcount and corporate space and technology investments.

	Nine months ended September 30,		Variance
	2001	2000	Amount		%
Dollar amounts in thousands	(unaudited)
General and administration expense:
Marketing and promotional	$15,473	$13,169		$   2,304	17.5	%
Occupancy expense	9,089	7,452		1,637	22.0
Technology	10,286	6,644		3,642	54.8
Other general and administration expense	21,580	16,017		5,563	34.7
Total general and administration expense	$56,428	$43,282		$13,146	30.4	%

20

Expense (continued)

Marketing and promotional expenses of $15.5 million for the nine months ended September 30, 2001 increased $2.3 million or 18% primarily due to higher expenditures on new products as well as increased travel and entertainment costs for institutional marketing activities. Occupancy expense of $9.1 million for the nine months ended September 30, 2001 increased $1.6 million due to higher expenses associated with corporate facility expansion, particularly in Wilmington, Delaware, Edinburgh, Scotland, 40 East 52^nd Street, New York and Hong Kong. Technology expenses increased approximately $3.6 million or 55% to $10.3 million for the nine months ended September 30, 2001 as a result of higher depreciation charges associated with the completion of a second computer facility in Delaware and capitalized investments to support the growth of BlackRock Solutions. Other expense increased $5.6 million or 35% for the nine months ended September 30, 2001 primarily due to higher professional service costs and sub-advisory fees associated with new products, and increased office furniture and equipment related expenses due to office space expansion and increased headcount.

Operating Income and Net Income

Operating income was $127.2 million for the nine months ended September 30, 2001, representing an $23.8 million or 23% increase compared with the nine months ended September 30, 2000. Non-operating income increased $2.8 million to $6.8 million for the nine months ended September 30, 2001 as compared with the nine months ended September 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 $54.9 million and $44.6 million, representing effective tax rates of 41.0% and 41.5% for the nine months ended September 30, 2001 and September 30, 2000, respectively. The lower effective income tax rate was primarily a result of the consolidation of mutual fund activities in Delaware. Net income totaled $79.1 million for the nine months ended September 30, 2001 compared with $62.8 million for the nine months ended September 30, 2000, representing an increase of $16.3 million or 26%.

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 $119.8 million for the nine months ended September 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 $152.9 million for the nine months ended September 30, 2001. Capital expenditures for property and equipment was $26.6 million for the nine months ended September 30, 2001 and primarily reflected construction costs for the new building in Wilmington, Delaware, including a second computer facility as well as 40 East 52^nd Street and the purchase of equipment to support the growth of BlackRock Solutions. Net investments were $126.3 million for the nine months ended September 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.

21

Liquidity and Capital Resources (continued)

Net cash flow used in financing activities was $6.6 million for the nine months ended September 30, 2001. Financing activities primarily represented treasury stock activity for the nine months ended September 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 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 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 September 30, 2001.

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, which remained unfunded at September 30, 2001.

Total capital at September 30, 2001 was $457.5 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.

22

Forward Looking Statements

This report and other statements made 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 and 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 variations of such words 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 political, 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 unfavorable resolution of legal proceedings; (8) the extent and timing of any share repurchases; (9) the impact, extent and timing of technological changes; and (10) the impact of legislative and regulatory actions and reforms. Terrorist activities, including the September 11 terrorist attacks, may adversely affect the general economy, financial and capital markets, specific industries, and PNC. PNC cannot predict the severity or duration of effects stemming from such activities or any actions taken in connection with them.

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.

23

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 or advisory accounts (seed investments) sponsored by BlackRock in order to provide investable cash to the new mutual fund or account to establish a performance history. As of September 30, 2001, the fair market value of seed investments was $17.0 million. The fair market value of BlackRock’s other investments was $123.7 million as of September 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.

24

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 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 September 30, 2001.

Exhibit No.	Description
10.1	Agreement of Lease, dated September 4, 2001, between 40 East 52nd Street L.P. and the Registrant.

(b)  Reports on Form 8-K

25

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
Date: November 9, 2001	Paul L. Audet
	Managing Director & Chief Financial Officer

26

EX-10.1

Exhibit 10.1

ADDITIONAL SPACE AGREEMENT

AGREEMENT made as of the 4^th day of September, 2001, between 40 EAST 52^ND L.P., a Delaware limited partnership having its principal office at 345 Park Avenue, Borough of Manhattan, City, County and State of New York, as landlord (referred to herein as “Owner”), and BLACKROCK, INC., a Delaware corporation having an office at 40 East 52^nd Street, Borough of Manhattan, City, County and State of New York, as tenant (referred to herein as “Tenant”).

W I T N E S S E T H :

WHEREAS:

1.    Under date of May 3, 2000, Owner and Tenant entered into a lease initially affecting the entire second (2^nd) floor in the building known as 40 East 52^nd Street, New York, New York, (referred to herein as the “Building”), Borough of Manhattan, City, County and State of New York; and

2.    Said lease, as modified by various written agreements, (referred to herein, collectively, as the “Lease”) is for a term (referred to herein as the “Demised Term”) which shall end on February 28, 2017, unless sooner terminated pursuant to any of the terms, covenants or conditions of the Lease or pursuant to law; and the premises so leased to Tenant pursuant to the provisions of the Lease, together with all appurtenances, fixtures, improvements, additions and other property attached thereto or installed therein at any time during the Demised Term other than Tenant’s Personal Property (as defined in the Lease), are referred to herein, collectively, as the “Demised Premises”; and

3.    Tenant now desires to lease and add to the Demised Premises the entire seventeenth (17^th) and eighteenth (18^th) floors of the Building, and Owner is willing to lease said entire seventeenth (17^th) and eighteenth (18^th) floors to Tenant, subject to the provisions of this Agreement (said entire seventeenth (17^th) and eighteenth (18^th) floors of the Building, together with all appurtenances, fixtures, improvements, additions and other property attached thereto or installed therein at any time during the Demised Term, other than Tenant’s Personal Property as defined in the Lease, are referred to herein, collectively, as the “Additional Space”); and

4.    In addition to the foregoing, Owner and Tenant desire to revise various provisions of the Lease, including the following:

(a) The Fixed Rent (as defined in the Lease) payable pursuant to the provisions of the Lease; and

(b) The provisions of Articles 23 of the Lease; and

(c) Such other provisions as set forth herein.

5.    (a) Owner and Tenant hereby agree that the foregoing preambles and any exhibit annexed to this Agreement are a material part of this Agreement and the parties desire to set forth herein all of their understandings with respect to the Lease.

2

(b)    Owner and Tenant hereby further agree that, except as modified by this Agreement, any term used in the Lease shall have the same meaning in this Agreement as that term has in the Lease.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties agree as follows:

FIRST: The Lease is hereby modified as follows:

A.    Owner hereby leases to Tenant and Tenant hereby hires from Owner the Additional Space for a term to commence, subject to the provisions of Paragraph B of this Article FIRST, on the date Owner notifies Tenant that Owner has substantially completed Owner’s Work (defined herein) and to end on the Expiration Date of the Lease, i.e. February 28, 2017, unless the Demised Term shall sooner terminate pursuant to any of the terms, covenants or conditions of the Lease or pursuant to law (the date on which the term applicable to the Additional Space shall commence is sometimes referred to herein as the “Additional Space Commencement Date”).

B.    (i)    Tenant acknowledges that Owner has made no representations to Tenant as to the condition of the Additional Space and Tenant agrees to accept possession of the Additional Space in the condition which shall exist on the Additional Space Commencement Date “as is” and further agrees that Owner shall have no obligation to perform any work or make any installations in order to prepare the Additional Space for Tenant’s occupancy, except as otherwise provided in subparagraph (ii) to the contrary.

3

(ii)    Owner’s Work:    Owner shall perform the following work in the Additional Space and place the Additional Space in so-called “broom clean condition” (referred to herein as “Owner’s Work”): demolish the presently existing interior Alterations in the Additional Space in accordance with the demolition plans (“Tenant’s Demolition Plans”), which have been received by Owner, but which are subject to Owner’s reasonable approval, and prepared in accordance with the provisions of the Lease and all Legal Requirements, and Owner shall also remove any asbestos from all portions of the Additional Space to be occupied by Tenant in accordance with Legal Requirements so as to be able to deliver to Tenant a Form ACP-5 with respect to the Additional Space upon Tenant’s submission to Owner of plans which are in compliance with all Legal Requirements and the provisions of this Lease. As part of Owner’s Work, Owner shall perform re-fire proofing where necessary after demolition (excluding planned removal of fire proofing by Tenant in Tenant’s Demolition Plans).

(b)    Owner’s Work required to be performed and made by Owner pursuant to the provisions of this Subparagraph (ii) shall be equal to standards adopted by Owner for the Building and shall constitute a single, non-recurring obligation on the part of Owner. In the event this Lease is renewed or extended for a further term by agreement or operation of law, Owner’s obligation to perform such work shall not apply to such renewal or extension.

4

(iii)    Tenant’s Initial Installation.    Promptly after the Additional Space Commencement Date, Tenant shall, at Tenant’s cost and expense, perform various Alterations in the Additional Space required for Tenant’s occupancy and use thereof and conduct of its business therein. Such Alterations (referred to herein as “Tenant’s Initial Installation”) shall be made and performed in accordance with the provisions of the Lease, including, without limitation, the provisions of Article 3 and Article 6. Tenant shall prosecute Tenant’s Initial Installation to completion with all reasonable diligence.

(iv)    Owner’s Contribution.    A.    Subject to the provisions and requirements of Article 3 of the Lease, and provided that Tenant is not then in default under any of the terms, covenants or conditions of the Lease on the part of Tenant to be observed or performed beyond applicable grace periods, Owner shall contribute the sum of not more than SEVEN HUNDRED FORTY-SEVEN THOUSAND EIGHT HUNDRED FIFTY and 00/100 ($747,850.00) DOLLARS in the aggregate toward the cost and expense actually incurred by Tenant with respect to Tenant’s Initial Installation including the cost of all architectural, engineering and designers fees incurred by Tenant in connection therewith. Owner’s contribution on account of Tenant’s Initial Installation is referred to as “Owner’s Work Contribution”. Irrespective of the actual cost and expense of Tenant’s Initial Installation, in no event shall Owner’s Work Contribution exceed the aggregate sum of SEVEN HUNDRED FORTY-SEVEN THOUSAND EIGHT HUNDRED FIFTY and 00/100 ($747,850.00).

B.    Provided that Tenant is not then in default under any of the terms, covenants or conditions of the Lease on Tenant’s part to be observed and performed beyond applicable grace periods, Owner shall distribute Owner’s Work Contribution on account of Tenant’s Initial Installation as the work with respect thereto progresses, within twenty (20) days of Tenant’s submission to Owner of (i) vouchers or bills, in form reasonably acceptable to Owner, for the cost and expense of Tenant’s Initial Installation, and (ii) partial waivers of mechanic’s liens from all contractors, subcontractors, materialmen and laborers who performed any services or delivered any materials in connection with Tenant’s Initial Installation and which services or materials were the subject of the previous month’s distribution by Owner to Tenant of Owner’s Work Contribution, provided however that (a) at no time shall Owner be required to pay more than the value of the work in place or stored off-site, (b) except with respect to disbursements solely for architectural and engineering services rendered, that any such work shall comply with any plans and specifications previously approved by Owner and shall otherwise comply with the requirements of the Lease and Tenant’s request for distribution shall be accompanied by a certification of Tenant’s architect or designer to that effect and (c) in the event that Owner fails to distribute to Tenant an installment of Owner’s Work Contribution on or before the date that Owner is required to do so under the terms and provisions of this subparagraph B, Tenant shall be entitled to collect interest on such installment at a rate equal to two (2%) percent per annum above the then current prime rate (as defined in Section 31.03 of the Lease) for the period from the date that such installment of Owner’s Work Contribution was due until such installment is paid to Tenant. Distributions of Owner’s Work Contribution shall be made not more than monthly.

5

C.    The making of the Owner’s Work Contribution by Owner shall constitute a single nonrecurring obligation on the part of Owner. In the event the Lease is renewed or extended for a further term by agreement or operation of law, Owner’s obligation to give Owner’s Work Contribution or any part thereof shall not apply to any such renewal or extension.

D.    If upon completion of Tenant’s Initial Installation in accordance with the plans and specifications approved by Owner and otherwise in accordance with the provisions of the Lease and complete payment by Tenant of all of the costs and expenses thereof there shall remain unused portions of Owner’s Work Contribution, then, provided Tenant is not in default under any of the terms, covenants or conditions of the Lease on the part of Tenant to be observed or performed beyond applicable grace periods, the amount of such unused Owner’s Work Contribution shall be applied as a rent credit against the next accruing installments of Fixed Rent payable by Tenant under the Lease.

E.    Tenant acknowledges and agrees that Owner is merely acting on behalf of Tenant in connection with the disbursement of the Owner’s Work Contribution in accordance with the provisions of this paragraph (iv) to Tenant for the contractors, suppliers and materialmen employed in connection with Tenant’s Initial Installation, and that Owner shall have no obligation, liability or responsibility to any of the contractors, suppliers or materialmen seeking any of the Owner’s Work Contribution pursuant to any of the aforesaid contracts or agreements with such contractors, suppliers or materialmen or otherwise, provided that Owner shall be obligated to disburse such Owner’s Work Contribution only as expressly provided by the provisions of this paragraph (iv). Nothing contained in this subparagraph (iv) shall relieve Tenant of any obligations or liabilities to such contractors, suppliers or materialmen under such contracts, agreements or otherwise. Nothing contained in this Article shall relieve Tenant of any obligations of Tenant under Sections 3.02. or 3.03. of the Lease. Tenant shall indemnify Owner and Owner’s Indemnities from all loss, cost, liability and expense, including but not limited to reasonable counsel fees, incurred in connection with, or arising from, any claims or actions by any contractors, suppliers or materialmen employed in connection with Tenant’s Initial Installation.

C.    From and after the Additional Space Commencement Date, the Lease shall be deemed modified, as follows:

(i)    The Demised Premises shall include the Additional Space (together with all appurtenances, fixtures, improvements, additions and other property attached thereto or installed therein at the commencement of the term applicable to the Additional Space or at any time during said term, other than Tenant’s Personal Property) for all purposes of this Lease;

(ii)    The Fixed Rent reserved in the Lease shall be increased by the sum of ONE MILLION FOUR HUNDRED NINETY-FIVE THOUSAND SEVEN HUNDRED and 00/100 ($1,495,700.00) DOLLARS per

7

annum from the Additional Space Commencement Date to the last day of the First Rent Period; ONE MILLION SIX HUNDRED FIFTEEN THOUSAND THREE HUNDRED FIFTY-SIX and 00/100 ($1,615,356.00) DOLLARS per annum for the Second Rent Period and ONE MILLION SEVEN HUNDRED SIXTY-FOUR THOUSAND NINE HUNDRED TWENTY-SIX and 00/100 ($1,764,926.00) DOLLARS per annum for the Third Rent Period, and the monthly installments of Fixed Rent shall be increased accord­ingly to conform with such increases in the Fixed Rent. In the event the Additional Space Commencement Date shall occur on a date other than the first (1st) day of any calendar month, Tenant shall pay to Owner, on the first (1st) day of the month next succeeding the month during which the Additional Space Commencement Date shall occur, a sum equal to FOUR THOUSAND ONE HUNDRED FIFTY-FIVE and 00/100 ($4,155.00 ) DOLLARS, multiplied by the number of calendar days in the period from the Additional Space Commence­ment Date to the last day of the month in which the Additional Space Commencement Date shall occur, both dates inclusive;

(iii)    The term “Demised Premises Area” as set forth in Section 23.01E of the Lease shall be increased by 29,914 square feet and Tenant’s Proportionate Share as set forth in Section 23.01G of the Lease shall be increased accordingly.

D.    Rent Holiday:    Notwithstanding anything to the contrary contained in the Lease, Tenant shall not be required to pay any portion of the Fixed Rent applicable to the Additional Space leased to Tenant hereunder, or increases therein pursuant to Article 23, with respect to the period (the “Rent Holiday Period”) from the Additional Space Commencement Date to and including the date one hundred eighty (180) days next following the Additional Space Commencement Date but, during such period of one hundred eighty (180 ) days Tenant shall otherwise be required to comply with all of the other terms, covenants and conditions of the Lease on Tenant’s part to be observed and performed. The date next following the expiration of the Rent Holiday Period is referred to as the “Rent Commencement Date”.

SECOND:    Notwithstanding anything contained in the Lease to be contrary, Owner’s obligation to institute possession proceedings against the occupant(s) of the ninth (9^th) floor portion of the Demised Premises shall be waived until December 1, 2001.

THIRD:    Tenant represents and warrants to Owner that Cushman & Wakefield, Inc. is the sole broker with whom Tenant has negotiated or otherwise dealt with in connection with the Additional Space or in bringing about this Agreement. Owner agrees to pay the Broker a brokerage commission pursuant to the provisions of a separate agreement between Owner and Broker. Tenant shall indemnify Owner from all loss, cost, liability, damage and expenses, including, but not limited to, reasonable counsel fees and disbursements, arising from any breach of the foregoing representation and warranty.

FOURTH:    Except to the extent expressly modified by the foregoing provisions of this Agreement, the Lease is hereby ratified and confirmed in all respects.

7

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

8

IN WITNESS WHEREOF, the parties hereto have here unto set their hands and seals as of the day and year first above written.

	40 EAST 52ND STREET L.P.,
By:	40 EAST 52nd STREET, LLC, general partner
By:	/s/    William Rudin
	Owner
	Name:    William Rudin
	Title:      Managing Member
	BLACKROCK, INC.,
By:	/s/    Paul L. Audet
	Tenant
	Name:    Paul L. Audet
	Title:      Managing Director &
	Chief Financial Officer

9