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SECURITIES AND EXCHANGE COMMISSION


Washington, DC 20549





---




FORM 10-Q


(Mark One)


|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|- |  | -----------------------------------------------------------------------------------------




For the quarterly period ended March 31, 2002





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





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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.)





40 East 52nd Street, New York, NY 10022


(Address of principal executive offices)


(Zip Code)





(212) 754-5300


(Registrants telephone number, including area code)





345 Park Avenue, New York, NY 10154


(Former name, former address and for new fiscal year, 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 April 30, 2002, there were 17,299,173 shares of the registrants class A common stock outstanding and 47,421,701
shares of the registrants class B common stock outstanding.





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##### Table of Contents

BLACKROCK INC.





INDEX TO FORM 10-Q





PART I





FINANCIAL INFORMATION





PageItem 1.    
Financial Statements

3Consolidated Statements of Financial Condition

3Consolidated Statements of Income

4Consolidated Statements of Cash Flows

5Notes to Consolidated Financial Statements

6Item 2.    
Managements Discussion and Analysis of Financial Condition and Results of Operations

12Item 3.    
Quantitative and Qualitative Disclosures About Market Risk

31PART II  OTHER
INFORMATIONItem 6.    
Exhibits and Reports on Form 8-K

32




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##### Table of Contents




PART IFINANCIAL INFORMATION





Item 1.Financial Statements





BLACKROCK, INC.





CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


(Dollar amounts in thousands)





March 31, 2002


December 31, 2001(unaudited)ASSETSCash and cash equivalents

$
111,828


$
186,451Accounts receivable


102,628



94,090Investments (cost: $175,870 and $143,600, respectively)


170,245



139,126Property and equipment, net


79,420



70,510Intangible assets (net of accumulated amortization of $67,423 and $67,222, respectively)


181,487



181,688Receivable from affiliates


11,822



2,569Other assets


9,214



10,044Total assets

$
666,644


$
684,478LIABILITIES AND STOCKHOLDERS EQUITYAccrued compensation

$
75,207


$
146,019Accounts payable and accrued liabilitiesAffiliate


32,828



15,972Other


17,406



19,075Acquired management contract obligation


7,344



7,344Other liabilities


10,855



9,951Total liabilities


143,640



198,361Stockholders equityCommon stock, class A, 17,237,595 and 15,916,944 shares issued, respectively


172



159Common stock, class B, 47,727,614 and 48,674,607 shares issued, respectively


477



487Additional paidin capital


193,148



184,041Retained earnings


338,897



307,498Unearned compensation


(1,652
)


(1,927
)Accumulated other comprehensive loss


(4,906
)


(3,537
)Treasury stock, class B, at cost 247,388 and 125,633 shares issued, respectively


(3,132
)


(604
)Total stockholders equity


523,004



486,117Total liabilities and stockholders equity

$
666,644


$
684,478





See accompanying notes to consolidated financial statements




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BLACKROCK, INC.





CONSOLIDATED STATEMENTS OF INCOME


(Dollar amounts in thousands, except share data)


(unaudited)





Three months ended March 31,2002


2001RevenueInvestment advisory and administration feesMutual funds

$
55,259


$
54,916Separate accounts


76,516



70,385Other incomeAffiliate


1,250



1,250Other


13,088



7,158Total revenue


146,113



133,709ExpenseEmployee compensation and benefits


60,387



55,430Fund administration and servicing costsaffiliates


13,178



16,690General and administrationAffiliate


1,900



2,293Other


20,512



14,762Amortization of intangible assets


201



2,614Total expense


96,178



91,789Operating income


49,935



41,920Non-operating income (expense)Investment income


3,020



1,862Interest expense


(183
)


(201
)Total non-operating income


2,837



1,661Income before income taxes


52,772



43,581Income taxes


21,373



18,085Net income

$
31,399


$
25,496Earnings per shareBasic

$
0.49


$
0.40Diluted

$
0.48


$
0.39Weighted-average shares outstandingBasic


64,648,511



64,159,248Diluted


65,219,988



64,897,486





See accompanying notes to consolidated financial statements.




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BLACKROCK, INC.





CONSOLIDATED STATEMENTS OF CASH FLOW


(Dollar Amounts In thousands)


(Unaudited)





Three months ended March 31,2002


2001Cash flows from operating activitiesNet income

$31,399


$25,496Adjustments to reconcile net income to net cash used in operating activities:Depreciation and amortization

5,001


5,749Stock-based compensation

2,348


2,098Deferred income taxes

3,722


4,679Tax benefit from stock-based compensation

5,882


5,127Purchase of investments, trading, net

(17,350
)

Net gain on investments

(325
)

Changes in operating assets and liabilities:Increase in accounts receivable

(8,538
)

(3,192
)(Increase) decrease in receivable from affiliate

(9,253
)

46Decrease in other assets

830


2,326Decrease in accrued compensation

(65,262
)

(71,521
)Increase in accounts payable and accrued liabilities

11,465


4,851Increase (decrease) in other liabilities

904


(2,118
)Cash used in operating activities

(39,177
)

(26,459
)Cash flows from investing activitiesPurchase of property and equipment

(13,710
)

(8,195
)Purchase of investments

(14,402
)

(5,961
)Cash used in investing activities

(28,112
)

(14,156
)Cash flows from financing activitiesIssuance of class A common stock

328


203Purchase of treasury stock

(8,942
)

(6,472
)Reissuance of treasury stock

1,691


194Cash used in financing activities

(6,923
)

(6,075
)Effect of exchange rate changes on cash and cash equivalents

(411
)

(523
)Net decrease in cash and cash equivalents

(74,623
)

(47,213
)Cash and cash equivalents, beginning of period

186,451


192,590Cash and cash equivalents, end of period

$111,828


$145,377





See accompanying notes to consolidated financial statements.




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BLACKROCK, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Three Months Ended March 31, 2002 and 2001


(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 accounting principles generally accepted in the United States of America 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, 2001. 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.





Investments





The Companys investments are classified
as trading and available for sale. Investments, trading represent matching investments made by, and held in a Rabbi Trust for, the Company with respect to the BlackRock Voluntary and Involuntary Deferred Compensation Plans and are recorded at fair
market value with unrealized gains and losses included in the accompanying consolidated statements of income as non-operating investment income or loss. Investments, available for sale consist primarily of investments in BlackRock funds and certain
institutional and private placement portfolios (alternative investment products), and are stated at quoted market values. Securities, which are not readily marketable (alternative investment products), are stated at their estimated fair
market value as determined by the Companys management. The resulting unrealized gains and losses on investments, available for sale are included in the accumulated other comprehensive loss component of stockholders equity, net of tax.
Realized gains and losses on investments and interest and dividend income are included in investment income (expense) in the accompanying consolidated statements of income.The Companys management periodically assesses impairment on
investments to determine if they are other than temporary. Any impairment on investments is recorded in earnings.




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##### Table of Contents



BLACKROCK INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)







Business Combinations





On July 20, 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (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.





Intangible Assets





Intangible assets are comprised of
goodwill and management contract acquired. For the three months ended March 31, 2001, goodwill was amortized on a straight-line basis over 25 years. On July 20, 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible Assets,
which changed 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, ceases upon adoption of the new standard.
Impairment testing for goodwill at a reporting unit level is 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 adopted SFAS No. 142, effective on 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 as a result of the cessation of goodwill amortization. Management contract acquired is amortized in proportion to and over the period of contract revenue, which is ten years. The
Company regularly evaluates the carrying value of intangible assets. Any impairment would be recognized when the future operating cash flows expected to be derived from such intangible assets are less than their carrying value. In such instances,
impairment, if any, is measured on a discounted future cash flow basis.





Accounting for Obligations Associated with the
Retirement of Long-Lived Assets





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.





Accounting for the Impairment or Disposal of Long-Lived Assets





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.




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BLACKROCK INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)







Reclassification of Prior Periods Statements





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





2.    Investments, Trading and Available for Sale





A summary of the cost and fair market value of investments, are as follows:





Gross Unrealized

Fair Market ValueMarch 31, 2002

Cost

Gains

LossesTrading

$
17,350

$
208




$
17,558Total investments, trading


17,350


208





17,558Mutual funds


143,055





3,037


140,018Collateralized bond obligations


13,951





2,787


11,164Other


1,514





9


1,505Total investments, available for sale


158,520





5,833


152,687Total investments, trading and available for sale

$
175,870

$
208

$
5,833

$
170,245





December 31, 2001Mutual funds

$
129,304




$
1,882

$
127,422Collateralized bond obligations


12,689





2,607


10,082Other


1,607


15





1,622Total investments, available for sale

$
143,600

$
15

$
4,489

$
139,126





BlackRock acts as investment advisor for all investments.





Net realized gains on the sale of investments totaled $325 and $6 for the three months ended March 31, 2002 and March 31, 2001, respectively.





3.    Intangible Assets





a)  Goodwill





The consolidated financial statements reflect the results
of operations of the former BlackRock Financial Management, L.P. and BFM Advisory L.P., which were acquired by PNC on February 28, 1995. Goodwill recognized at acquisition approximated $240,000 and was amortized on a straight-line basis over 25
years. On July 20, 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible Assets, which changed 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, ceased upon adoption of the new standard. Impairment testing for goodwill at a reporting unit level is required on at least an annual basis.




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BLACKROCK INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)







b)  Management Contract Acquired





On May 15, 2000, BlackRock entered into a contract in connection with the agreement and plan of merger of CORE Cap, Inc. with Anthracite Capital, Inc.,
a BlackRock managed REIT. This agreement assigns the managerial rights and duties of CORE Cap, Inc.s former manager to BlackRock for consideration in the amount of $12,500 to be paid by BlackRock over a ten-year period. The present value of
the acquired contract using an imputed interest rate of 10% was $8,040 on the date of acquisition. This amount is recorded as an intangible asset and is being amortized on a straight-line basis over ten years.





Goodwill

Management Contract Acquired

Total Intangible AssetsBalance at December 31, 2001

$
240,797

$
8,040

$
248,837Accumulated amortization at March 31, 2002


65,842


1,508


67,350Balance at March 31, 2002

$
174,955

$
6,532

$
181,487





The following table reflects the adoption of SFAS No. 142, Goodwill and
Other Intangible Assets, which changed the accounting for goodwill from an amortization method to an impairment-only approach:





Quarter ended March 31,2002

2001Reported net income

$
31,399

$
25,496Goodwill amortization, net of tax





1,284Adjusted net income

$
31,399

$
26,780Basic earnings per share:Reported

$
0.49

$
0.40Goodwill amortization, net of tax





0.02Adjusted

$
0.49

$
0.42Diluted earnings per share:Reported

$
0.48

$
0.39Goodwill amortization, net of tax





0.02Adjusted

$
0.48

$
0.41





The Company expects amortization expense to be $603 for the remainder of 2002 and
$804 annually for 2003 through 2006.




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BLACKROCK INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)







4.    Common Stock





BlackRocks class A, $0.01 par value, common shares authorized was 250,000,000 shares as of March 31, 2002 and March 31, 2001, respectively. BlackRocks class B, $0.01 par
value, common shares authorized was 100,000,000 shares as of March 31, 2002 and March 31, 2001, respectively.





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





Shares issued


Shares outstandingCommon shares Class


Treasury shares Class


ClassA

B


A


B


A


BDecember 31, 2001

15,916,944

48,674,607





(125,633
)

15,916,944


48,548,974Conversion of class B stock to class A stock

883,544

(946,993
)

63,449





946,993


(946,993
)Issuance of shares to Nonemployee Directors

986










986


Issuance of class A common stock

430,159










430,159


Treasury stock transactions

5,962




(63,449
)

(121,755
)

(57,487
)

(121,755
)March 31, 2002

17,237,595

47,727,614





(247,388
)

17,237,595


47,480,226








5.    Comprehensive Income





Three months ended March 31,2002


2001Net income

$
31,399


$
25,496Other comprehensive income gain (loss):Unrealized gain (loss) from investments, available for sale, net


(957
)


1,426Foreign currency translation loss


(412
)


(523
)Comprehensive income

$
30,030


$
26,399




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BLACKROCK INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)







6.    Earnings Per Share





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





Three months ended March 31,2002

2001Net income

$
31,399

$
25,496Basic weighted-average shares outstanding


64,648,511


64,159,248Dilutive potential shares from forward sales


53,639


107,277Dilutive potential shares from stock options


517,838


630,961Dilutive weighted-average shares outstanding


65,219,988


64,897,486Basic earnings per share

$
0.49

$
0.40Diluted earnings per share

$
0.48

$
0.39





7.    Supplemental Statements of Cash Flow Information





Supplemental disclosure of cash flow information:





Three months ended March 31,2002

2001Cash paid for income taxes

$
9,555

$
3,451





Supplemental schedule of noncash transactions:





Three months ended March 31,2002

2001Stock-based compensation

$
5,550

$
6,024




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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 largest publicly traded investment management firms in the United States with approximately $238.1
billion of assets under management at March 31, 2002. BlackRock manages assets on behalf of institutional and individual investors worldwide through a variety of equity, fixed income, liquidity and alternative investment separate accounts and mutual
funds, including BlackRock Funds and BlackRock Provident Institutional Funds(BPIF). In addition, BlackRock provides risk management and investment system services and products to institutional investors under the
BlackRock Solutions name. 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 March 31, 2002, PNC indirectly owns approximately 69%, the public owns
approximately 16% and BlackRock employees own approximately 15% of BlackRock.





The following table summarizes BlackRocks
operating performance for the three months ended March 31, 2002, March 31, 2001 and December 31, 2001:





BLACKROCK, INC.





FINANCIAL HIGHLIGHTS


(Dollar amounts in thousands,
except share data or otherwise stated)


(unaudited)





Three months ended


Variance vs.March 31,


December 31,


March 31, 2001

December 31, 20012002


2001


2001


Amount

%

Amount


%($ in millions)Total revenue

$
146,113


$
133,709


$
129,391


$
12,404

9%

$
16,722


13%Total expense

$
96,178


$
91,789


$
86,375


$
4,389

5%

$
9,803


11%Operating income

$
49,935


$
41,920


$
43,016


$
8,015

19%

$
6,919


16%Net income

$
31,399


$
25,496


$
28,332


$
5,903

23%

$
3,067


11%Diluted earnings per share

$
0.48


$
0.39


$
0.44


$
0.09

23%

$
0.04


9%Average diluted shares outstanding


65,219,988



64,897,486



65,050,738



322,502

0%


169,250


0%EBITDA(a)

$
57,956


$
49,531


$
54,330


$
8,425

17%

$
3,626


7%Operating margin(b)


37.6
%


35.8
%


37.1
%Assets under management ($ in millions)

$
238,116


$
201,636


$
238,584


$
36,480

18%

$
(468
)

0%


---

|(a) |  | Earnings before interest expense, taxes, depreciation and amortization.
|--- |  | -----------------------------------------------------------------------

|(b) |  | Operating income divided by total revenue less fund administration and servicing costs-affiliates.
|--- |  | --------------------------------------------------------------------------------------------------



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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 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, and general and administration expense. 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. Intangible assets at March
31, 2002 and December 31, 2001 were $181.5 million and $181.7 million, respectively, with amortization expense of approximately $0.2 million and $2.6 million for the three months ended March 31, 2002 and 2001, 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. On July 20, 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible Assets, which changed 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, ceases upon adoption of the new standard. Impairment testing for goodwill at a reporting unit level is 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 adopted SFAS No. 142, effective on 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.





Assets Under Management





Assets under management (AUM) increased $36.5 billion, or 18%, to $238.1 billion at March 31, 2002, compared with $201.6 billion at March 31, 2001. The growth in assets under management was attributable to
increases of $21.2 billion or 16% in separate accounts and $15.3 billion or 22% in mutual fund assets.




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The increase in separate accounts at March 31, 2002, as compared with March 31, 2001, was the
result of net subscriptions of $16.9 billion and market appreciation of $4.3 billion. Net subscriptions in fixed income, equity, liquidity-securities lending and alternative investment products accounts were $11.8 billion, $2.2 billion, $2.0
billion, and $1.2 billion, respectively, while liquidity separate account assets experienced net redemptions of $0.3 billion. The rise in fixed income and alternative investment products separate account assets was attributable to new client sales
and increased fundings from existing clients associated with solid investment performance and client service. Fixed income net subscriptions since March 31, 2001 totaled $11.8 billion including approximately $11.0 billion of merger related
terminations and market rebalancing outflows. The growth in equity separate account assets primarily reflected new business from international equity mandates of $2.5 billion. The increase in liquidity-securities lending separate accounts represents
higher levels of cash collateral managed by BlackRock for PFPC Worldwide, Inc., a PNC affiliate. Market appreciation of $4.3 billion in separate accounts largely reflected appreciation in fixed income assets of $4.8 billion due to declining interest
rates, partially offset by market depreciation in equity assets of $0.6 billion.





The $15.2 billion increase in mutual fund
assets since March 31, 2001 reflected net subscriptions of $16.2 billion, which was partially offset by $1.0 billion of market depreciation in the BlackRock Funds associated with the decline in the equity markets. Net subscriptions in BPIF
and closed-end funds since March 31, 2001 were $15.5 billion and $1.8 billion, respectively, and was partially offset by $1.3 billion in net redemptions in the BlackRock Funds. 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. Management does not assume that the current level of BPIF assets will be sustained as the economy improves and short-term interest rates stabilize or begin to
rise. The increase in closed-end funds was the result of the Companys offering of new closed-end funds. Net redemptions in the BlackRock Fundssince March 31, 2001 was primarily due to PNC-related net redemptions for the first quarter
of 2002 of approximately $2.0 billion.





BlackRock experienced $0.3 billion in net redemptions for the first quarter of 2002
reflecting separate account net subscriptions of $1.9 billion offset by $2.2 billion of mutual fund redemptions. Fixed income and alternative product separate accounts exhibited strong growth with net subscriptions of $4.6 billion which was
partially offset by $2.6 billion of redemptions in lower fee security lending and liquidity separate account assets. Mutual fund net redemptions for the first quarter of 2002 was primarily attributable to $1.9 billion in net redemptions in the
BlackRock Funds exclusively associated PNC related clients and a $0.6 billion redemption in the BPIF funds. Liquidity asset balances experienced significant volatility in the first quarter of 2002, which could continue through the balance of
2002 to the extent that the economy improves and interest rates rise.




14




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##### Table of Contents




BLACKROCK, INC.





ASSETS UNDER MANAGEMENT


(Dollar amounts in millions)


(unaudited)





March 31,

Variance2002

2001

Amount


%All AccountsFixed income

$
140,253

$
120,971

$
19,282


15.9
%Liquidity


74,979


57,479


17,500


30.4Equity


17,343


18,869


(1,526
)

(8.1
)Alternative investment products


5,541


4,317


1,224


28.4Total

$
238,116

$
201,636

$
36,480


18.1
%Separate AccountsFixed income

$
123,983

$
107,371


16,612


15.5
%Liquidity


5,441


5,713


(272
)

(4.8
)Liquidity-Securities lending


9,544


7,514


2,030


27.0Equity


9,445


7,796


1,649


21.2Alternative investment products


5,541


4,317


1,224


28.4Subtotal


153,954


132,711


21,243


16.0Mutual FundsFixed income


16,270


13,600


2,670


19.6Liquidity


59,994


44,252


15,742


35.6Equity


7,898


11,073


(3,175
)

(28.7
)Subtotal


84,162


68,925


15,237


22.1Total

$
238,116

$
201,636

$
36,480


18.1
%




15




---

##### Table of Contents




The following tables present the component changes in BlackRocks assets under management
for the three months ended March 31, 2002 and 2001, respectively. The data reflects certain reclassifications to conform with the current years presentation.





BLACKROCK, INC.





COMPONENT CHANGES IN ASSETS UNDER MANAGEMENT


(Dollar amounts in millions)


(unaudited)





Quarter ended March 31,2002


2001All AccountsBeginning assets under management

$
238,584


$
203,769Net redemptions


(311
)


(2,098
)Market depreciation


(157
)


(35
)Ending assets under management

$
238,116


$
201,636Separate AccountsBeginning assets under management

$
151,986


$
133,743Net subscriptions (redemptions)


1,889



(2,974
)Market appreciation


79



1,942Ending assets under management


153,954



132,711Mutual FundsBeginning assets under management


86,598



70,026Net subscriptions (redemptions)


(2,200
)


876Market depreciation


(236
)


(1,977
)Ending assets under management


84,162



68,925Total

$
238,116


$
201,636




16




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##### Table of Contents




BLACKROCK, INC.





ASSETS UNDER MANAGEMENT


QUARTERLY TREND


(Dollar amounts
in millions)


(unaudited)





Quarter Ended2001


2002March 31


June 30


September 30


December 31


March 31Separate AccountsFixed IncomeBeginning assets under management

$
103,561


$
107,371


$
110,483


$
118,336


$
119,488Net subscriptions


699



2,682



2,959



1,731



4,437Market appreciation (depreciation)


3,111



430



4,894



(579
)


58Ending assets under management


107,371



110,483



118,336



119,488



123,983LiquidityBeginning assets under management


6,495



5,713



6,782



6,987



6,831Net subscriptions (redemptions)


(813
)


1,042



181



(171
)


(1,395
)Market appreciation


31



27



24



15



5Ending assets under management


5,713



6,782



6,987



6,831



5,441Liquidity-Securities lendingBeginning assets under management


11,501



7,514



10,004



8,069



10,781Net subscriptions (redemptions)


(3,987
)


2,490



(1,935
)


2,712



(1,237
)Ending assets under management


7,514



10,004



8,069



10,781



9,544EquityBeginning assets under management


8,716



7,796



8,257



8,185



9,577Net subscriptions (redemptions)


445



488



1,144



675



(80
)Market appreciation (depreciation)


(1,365
)


(27
)


(1,216
)


717



(52
)Ending assets under management


7,796



8,257



8,185



9,577



9,445Alternative investment productsBeginning assets under management


3,470



4,317



4,479



4,879



5,309Net subscriptions


682



169



426



411



164Market appreciation (depreciation)


165



(7
)


(26
)


19



68Ending assets under management


4,317



4,479



4,879



5,309



5,541Total Separate AccountsBeginning assets under management


133,743



132,711



140,005



146,456



151,986Net subscriptions (redemptions)


(2,974
)


6,871



2,775



5,358



1,889Market appreciation


1,942



423



3,676



172



79Ending assets under management

$
132,711


$
140,005


$
146,456


$
151,986


$
153,954Mutual FundsFixed IncomeBeginning assets under management

$
13,317


$
13,600


$
12,326


$
13,985


$
15,754Net subscriptions (redemptions)


118



(1,207
)


1,397



2,000



644Market appreciation (depreciation)


165



(67
)


262



(231
)


(128
)Ending assets under management


13,600



12,326



13,985



15,754



16,270LiquidityBeginning assets under management


43,190



44,252



48,829



56,221



62,141Net subscriptions (redemptions)


1,062



4,577



7,392



5,920



(2,147
)Ending assets under management


44,252



48,829



56,221



62,141



59,994EquityBeginning assets under management


13,519



11,073



11,534



8,934



8,703Net redemptions


(304
)


(69
)


(558
)


(1,040
)


(697
)Market appreciation (depreciation)


(2,142
)


530



(2,042
)


809



(108
)Ending assets under management


11,073



11,534



8,934



8,703



7,898Total Mutual FundsBeginning assets under management


70,026



68,925



72,689



79,140



86,598Net subscriptions (redemptions)


876



3,301



8,231



6,880



(2,200
)Market appreciation (depreciation)


(1,977
)


463



(1,780
)


578



(236
)Ending assets under management

$
68,925


$
72,689


$
79,140


$
86,598


$
84,162







17




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##### Table of Contents




BLACKROCK, INC.





ASSETS UNDER MANAGEMENT


QUARTERLY TREND


(Dollar amounts
in millions)


(unaudited)





Quarter Ended2001


2002March 31


June 30


September 30


December 31


March 31Mutual FundsBlackRock FundsBeginning assets under management

$
26,359


$
24,383


$
24,589


$
22,790


$
24,195Net subscriptions (redemptions)


65



(253
)


49



755



(1,830
)Market appreciation (depreciation)


(2,041
)


459



(1,848
)


650



(189
)Ending assets under management


24,383



24,589



22,790



24,195



22,176BlackRock Global SeriesBeginning assets under management


75



105



134



127



149Net subscriptions


43



33



1



13



95Market appreciation (depreciation)


(13
)


(4
)


(8
)


9



3Ending assets under management


105



134



127



149



247BPIFBeginning assets under management


36,338



37,047



41,954



48,889



53,167Net subscriptions (redemptions)


709



4,907



6,935



4,278



(633
)Ending assets under management


37,047



41,954



48,889



53,167



52,534Closed EndBeginning assets under management


6,764



6,841



5,440



6,728



8,512Net subscriptions (redemptions)






(1,409
)


1,212



1,865



149Market appreciation (depreciation)


77



8



76



(81
)


(50
)Ending assets under management


6,841



5,440



6,728



8,512



8,611Short Term Investment Funds (STIF)Beginning assets under management


490



549



572



606



575Net subscriptions (redemptions)


59



23



34



(31
)


19Ending assets under management


549



572



606



575



594Total Mutual FundsBeginning assets under management


70,026



68,925



72,689



79,140



86,598Net subscriptions (redemptions)


876



3,301



8,231



6,880



(2,200
)Market appreciation (depreciation)


(1,977
)


463



(1,780
)


578



(236
)Ending assets under management

$
68,925


$
72,689


$
79,140


$
86,598


$
84,162




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##### Table of Contents




Operating results for the three months ended March 31, 2002 as compared with the three
months ended March 31, 2001.





Revenue





Total revenue for the three months ended March 31, 2002 increased $12.4 million or 9% to $146.1 million compared with $133.7 million for the three months ended March 31, 2001. Investment advisory and administration
fees increased $6.5 million or 5%to $131.8 million for the three months ended March 31, 2002, compared with $125.3 million for the three months ended March 31, 2001. The growth in investment advisory and administration fees was primarily due
to increased assets under management. Other income of $14.3 million increased $5.9 million or 71% for the three months ended March 31, 2002 compared with $8.4 million for the three months ended March 31, 2001 primarily due to increased sales of
BlackRock Solutionsproducts and included approximately $2.5 million of performance and other one-time fees.





Three months ended March 31,

Variance2002

2001

Amount

%Dollar amounts in thousands(unaudited)Investment advisory and administration fees:Mutual funds

$
55,259

$
54,916

$
343

0.6
%Separate accounts


76,516


70,385


6,131

8.7Total investment advisory and administration fees


131,775


125,301


6,474

5.2Other income


14,338


8,408


5,930

70.5Total revenue

$
146,113

$
133,709

$
12,404

9.3
%





Mutual fund advisory and administration fees increased $0.3 million to $55.3
million for the three months ended March 31, 2002, compared with $54.9 million for the three months ended March 31, 2001. The increase in mutual fund revenue was the result of increases in BPIF, closed-end fund and STIF revenue of $5.4 million, $2.0
million and $0.1 million, respectively which was partially offset by a decrease of $7.2 million in BlackRock Funds revenue. The increase in BPIF revenue was due to increases in assets under management of $15.5 billion or 42% at March 31, 2002
and was the result of strong sales driven in part by the decline in short-term interest rates and investors flight to quality. The rise in closed-end fund revenue was a result of an increase in assets of $1.8 billion or 26% at March 31, 2002
due to the Companys new fund offerings. The decrease in BlackRock Funds revenue was attributable to a decrease in assets of $2.2 billion or 9% primarily due to market depreciation and net redemptions in PNC related assets during the
first quarter of 2002 of $2.0 billion.




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---

##### Table of Contents




Separate account revenue increased $6.1 million or 9% to $76.5 million for the three months
ended March 31, 2002, compared with $70.4 million for the three months ended March 31, 2001. Excluding performance fees, advisory fees on separate accounts increased $10.8 million or 21% to $62.5 million for the three months ended March 31, 2002
compared with $51.7 million for the three months ended March 31, 2001, as a result of a $21.2 billion or 16% increase in separate account assets under management. Performance fees of $14.0 million for the three months ended March 31, 2002 decreased
$4.7 million or 25% compared with $18.7 million for the three months ended March 31, 2001 due to lower performance fees in the Companys alternative investment products.





Three months ended March 31,

Variance2002

2001

Amount


%Dollar amounts in thousands(unaudited)Mutual funds revenueBlackRock Funds

$
25,694

$
32,863

($
7,169
)

(21.8
%)Closed End Funds


9,488


7,458


2,030


27.2BPIF


19,875


14,459


5,416


37.5STIF


202


136


66


48.5Total mutual funds revenue


55,259


54,916


343


0.6Separate accounts revenueSeparate accounts base fees


62,499


51,715


10,784


20.9Separate accounts performance fees


14,017


18,670


(4,653
)

(24.9
)Total separate accounts revenue


76,516


70,385


6,131


8.7Total investment advisory and administration fees


131,775


125,301


6,474


5.2Other income


14,338


8,408


5,930


70.5Total revenue

$
146,113

$
133,709

$
12,404


9.3
%





Expense





Total expense increased $4.4 million or 5% to $96.2 million for the three months ended March 31, 2002, compared with $91.8 million for the three months ended March 31, 2001. 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 and amortization of intangible assets.




20




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##### Table of Contents




Three months ended March 31,

Variance2002

2001

Amount


%Dollar amounts in thousands(unaudited)Employee compensation and benefits

$
60,387

$
55,430

$
4,957


8.9
%Fund administration and servicing costs-affiliates


13,178


16,690


(3,512
)

(21.0
)General and administration


22,412


17,055


5,357


31.4Amortization of intangible assets


201


2,614


(2,413
)

(92.3
)Total expense

$
96,178

$
91,789

$
4,389


4.8
%





Employee compensation and benefits increased $5.0 million primarily due to
increased incentive compensation of $3.7 million reflecting accruals based on the growth of operating income and $3.4 million in salary and benefits, partially offset by a decrease of $2.1 million related to direct incentives on alternative product
performance fees. Salary and benefit cost increases were the result of a 7% increase in full-time employees. For the three months ended March 31, 2002, fund administration and servicing costs-affiliates declined $3.5 million or 21% due to lower
levels of PNC client assets invested in the BlackRock Funds. General and administration expenses increased $5.4 million or 31% to $22.4 million for the three months ended March 31, 2002 compared with $17.1 million for the three months ended
March 31, 2001 largely due to new business activity and corporate space and technology investments. Amortization of intangible assets decreased due to the adoption of Statement of Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets effective on January 1, 2002, which changed the accounting for goodwill from an amortization method to an impairment-only approach.





Three months ended March 31,

Variance2002

2001

Amount

%Dollar amounts in thousands(unaudited)General and administration expense:Marketing and promotional

$
5,916

$
4,847

$
1,069

22.1
%Occupancy expense


4,722


2,536


2,186

86.2Technology


4,397


3,155


1,242

39.4Other general and administration


7,377


6,517


860

13.2Total general and administration expense

$
22,412

$
17,055

$
5,357

31.4
%




21




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##### Table of Contents




Marketing and promotional expenses of $5.9 million for the three months ended March 31, 2002
increased $1.1 million or 22% primarily due to increased costs for institutional marketing activities and costs associated with launching the new closed-end funds. Occupancy expense of $4.7 million for the three months ended March 31, 2002 increased
$2.2 million due to higher expenses associated with corporate facility expansion, particularly at 40 East 52 nd Street,
New York, Wilmington, Delaware, San Francisco, California, Boston, Massachusetts and Hong Kong. Technology expenses increased approximately $1.2 million or 39% to $4.4 million for the three months ended March 31, 2002 as a result of higher
depreciation charges associated with the corporate facility expansion, the completion of a second computer facility in Delaware and capitalized investments to support the growth of BlackRock Solutions. Other expense increased $0.9 million or 13% for
the three months ended March 31, 2002 primarily due to increased communications, equipment and other office related expenses due to office space expansion.





Operating Income and Net Income





Operating income was $49.9 million for the three months ended March 31, 2002,
representing a $8.0 million or 19% increase compared with the three months ended March 31, 2001. Non-operating income increased $1.2 million to $2.8 million for the three months ended March 31, 2002 as compared with the three months ended March 31,
2001. The rise was due to increases in income on investments of the Companys available operating cash. Income tax expense was $21.4 million and $18.1 million, representing effective tax rates of 40.5% and 41.5% for the three months ended March
31, 2002 and March 31, 2001, respectively. Net income totaled $31.4 million for the three months ended March 31, 2002 compared with $25.5 million for the three months ended March 31, 2001, representing an increase of $5.9 million or 23%.





Liquidity and Capital Resources





BlackRock meets its working capital requirements through cash generated by its operating activities. Cash used in the Companys operating activities totaled $39.2 million for the three months ended March 31, 2002. Operating activities
included net purchases of investments, trading of approximately $17.4 million for the three months ended March 31, 2002 which represented initial investments related to the Companys Voluntary and Involuntary Deferred Compensation Plans.





Net cash flow used in investing activities was $28.1 million for the three months ended March 31, 2002. Capital expenditures
for the three months ended March 31, 2002 for property and equipment was $13.7 million and primarily reflected construction costs for 40 East 52nd Street and the purchase of equipment to support corporate expansion and the growth of BlackRock
Solutions. Net purchases of investments, available for sale were $14.4 million for the three months ended March 31, 2002, including $20.1 million in the BlackRock Funds Low Duration Bond Portfolio and $2.4 million in seed investments
partially offset by a net redemption of approximately $7.5 million in the BlackRock Funds Intermediate Bond Portfolio.




22




---

##### Table of Contents




Net cash flow used in financing activities was $6.9 million for the three months ended March
31, 2002. Financing activities primarily represented treasury stock activity for the three months ended March 31, 2002. On January 31, 2002, in connection with the BlackRock Long-term Deferred Compensation Plan, BlackRock repurchased approximately
150,000 shares of class A common stock at a fair market value of $42.33 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. In connection with the BlackRock 2001 Employee Stock Purchase Plan (ESPP), the Company reissued approximately 44,000 shares of class A treasury stock to its participants on January 31, 2002.
During February 2002, the Company also purchased class B common stock from a former BlackRock employee in the amount of $2.1 million.





Total capital at March 31, 2002 was $523.0 million and was comprised entirely of stockholders equity.





Contractual Obligations and
Commercial Commitments





The Company leases office space in New York, New York, Edinburgh, San Francisco, California, and
Boston, Massachusetts under agreements which expire through 2017. Future minimum commitments under all operating leases are $174.9 million.





In connection with the management contract acquired associated with the agreement and plan of merger of CORE Cap, Inc. with Anthracite Capital, Inc., a BlackRock managed REIT, the Company recorded an $8.0 million
liability using an imputed interest rate of 10%. At March 31, 2002, the future commitment under the agreement is $11.0 million.





As of March 31, 2002 and 2001, the Company has an unused revolving line of credit, which will expire in December 2002, with PNC Bank whereby the Company may borrow principal amounts up to $175 million at prime rate (4.75% at March 31,
2001).





The Company enters into various contractual commitments with BlackRock sponsored funds. Total commitments were
approximately $7.7 million, of which $6.7 million remained unfunded at March 31, 2002.





Summary of Commitments:





Total

2002

2003

2004

2005

2006

Thereafter(Dollar amounts in thousands)Lease Commitments

$
174,881

$
8,090

$
10,814

$
10,727

$
10,648

$
10,825

$
123,777Acquired Management Contract


11,000


1,500


1,500


1,500


1,500


1,000


4,000Investment Commitments


6,700


6,700














Line of Credit with PNC




















Total Commitments

$
192,581

$
16,290

$
12,314

$
12,227

$
12,148

$
11,825

$
127,777




23




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##### Table of Contents




Long-term Incentive and Retention Plan-Status





BlackRock and PNC are currently evaluating a new long-term incentive and retention program for key employees in anticipation of the lapse of all employment agreements and final vesting
of substantially all restricted stock on December 31, 2002. Managements intention is to finalize and announce a new program during the first half of 2002. While there are numerous program terms and conditions subject to final agreement, the
program is expected to have the following key attributes:





| |  |  | Program term of five years;
| | - |  | ---------------------------




| |  |  | Stock option awards which would ratably vest at the end of years four and five; and
| | - |  | -----------------------------------------------------------------------------------




| |  |  | Cash awards (substantially funded by PNC) which could vest during the last two years subject to BlackRocks achievement of certain financial performance targets.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------




Critical Accounting Policies





Significant intercompany accounts and transactions between the consolidated entities have been eliminated. The preparation of the consolidated financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The Company follows the same accounting policies in the preparation of interim reports as set forth in the Annual
Report on Form 10-K for the year ended December 31, 2001. Management considers the following accounting policies critical to an informed review of BlackRocks consolidated financial statements.





Investments





The
Companys investments are classified as trading and available for sale. Investments, trading represent matching investments made by, and held in a Rabbi Trust for, the Company with respect to the BlackRock Involuntary and Voluntary Deferred
Compensation Plans and are recorded at fair market value with unrealized gains and losses included in the accompanying consolidated statements of income as non-operating income or loss. Investments, available for sale consist primarily of
investments in BlackRock funds and certain institutional and private placement portfolios (alternative investment products) and are stated at quoted market values. Securities, which are not readily marketable, (alternative investment
products) are stated at their estimated fair market value as determined by the Companys management. The resulting unrealized gains and losses on investments, available for sale are included in the accumulated other comprehensive loss component
of stockholders equity, net of tax. Realized gains and losses on investments and interest and dividend income are included in investment income (expense) in the accompanying consolidated statements of income. The Companys management
periodically assesses impairment on investments to determine if they are other than temporary. Any impairment on investments is recorded in earnings.




24




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##### Table of Contents




Intangible Assets





Intangible assets are comprised of goodwill and management contract acquired. For the three months ended March 31, 2001, goodwill was amortized on a straight-line basis over 25 years. On
July 20, 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible Assets, which changed 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, ceased upon adoption of the new standard. Impairment testing for goodwill at a reporting unit level is 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 adopted 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 as a result of the cessation of goodwill amortization. Management contract acquired is
amortized in proportion to and over the period of contract revenue, which is ten years. The Company continually evaluates the carrying value of intangible assets. Any impairment would be recognized when the future operating cash flows expected to be
derived from such intangible assets are less than their carrying value. In such instances, impairment, if any, is measured on a discounted future cash flow basis.





Software Costs





The Company has adopted Statement
of Position (SOP) 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. SOP 98-1 requires the capitalization of certain costs incurred in connection with developing or obtaining software
for internal use. Qualifying software costs are being amortized over an estimated useful life of three years.





Stock-based
Compensation





The Company follows Statement of Financial Accounting Standards (SFAS) No. 123,
Accounting for Stock-based Compensation, and has adopted the intrinsic value method for all arrangements under which employees receive shares of stock or other equity instruments of the employer or the employer incurs liabilities to
employees in amounts based on the price of its stock. Fair value disclosures are included in the notes to the consolidated financial statements as stated in the Companys Annual Report on Form 10-K for the year ended December 31, 2001.





Pursuant to SFAS No. 123, the Company has elected to account for its 1999 Stock Award and Incentive Plan and shares issued
under the BlackRock 2001 Employee Stock Purchase Plan under Accounting Principles Board Opinion No. (APB) 25, Accounting for Stock Issued to Employees, and adopt the disclosure only provisions of SFAS No. 123.





Revenue Recognition





Investment advisory and administration fees are recognized as the services are performed. Such fees are primarily based on predetermined percentages of the market values of the assets under management. Investment
advisory and administration fees for mutual funds are shown net of fees waived pursuant to expense limitations.




25




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##### Table of Contents




The Company also receives performance fees or an incentive allocation from alternative
investment products and certain separate accounts. These performance fees are earned upon attaining specified investment return thresholds. Such fees are recorded as earned. Should the alternative investment products and separate accounts subject to
performance fees not continue to meet specified investment return thresholds, performance fees and related employee compensation expense previously recorded may be subject to reversal. At March 31, 2002, no performance fees recorded by the Company
are subject to reversal.





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 Solutions 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.





In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements. SAB No. 101 provides
guidance on applying generally accepted accounting principles to revenue recognition issues in financial statements. The Company adopted SAB No. 101 as required in the first quarter of 2000. The adoption of SAB No. 101 did not have a material effect
on the Companys consolidated results of operations and financial position.





Accounting for Off-Balance Sheet
Activities





BlackRock has equity interests in collateralized bond obligations (CBO), which are reflected in
investments in the accompanying consolidated statements of financial condition. These investments are periodically assessed to determine whether the underlying assets and liabilities should be consolidated. See Off-Balance Sheet
Activities.





Related Party Transactions





The Company and its consolidated subsidiaries provide investment advisory and administration services to the BlackRock Funds, BPIF, the BlackRock Closed-end Funds and other commingled funds.




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Revenues for services provided to these mutual funds are as follows:





Three months ended March 31,2002

2001(Dollar amounts in thousands)Investment advisory and administration fees:BlackRock Open-end Funds

$
25,694

$
32,863BlackRock Closed-end Funds


9,488


7,458BlackRock Provident Institutional Funds*


19,875


14,459Commingled Funds


202


136$
55,259

$
54,916


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|* |  | Includes the International Dollar Reserve Fund, I, Ltd, a Cayman Islands open ended limited liability company.
|- |  | --------------------------------------------------------------------------------------------------------------




The Company provides investment advisory and administration services to certain PNC subsidiaries and affiliates for a fee, based on assets under
management. In addition, the Company provides risk management and model portfolio services to PNC.





Revenues for such services
are as follows:





Three months ended March 31,2002

2001(Dollar amounts in thousands)Investment advisory and administration fees:Separate accounts

$
2,845

$
3,076Model Portfolio Services


1,100


1,098Other income-risk management


1,250


1,250Fixed income trading services


282


282$
5,477

$
5,706




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The Company has entered into various memoranda of understanding and co-administration
agreements with affiliates of PNC pursuant to which the Company pays administration fees for BPIF and certain other commingled funds and service fees for PNC Advisors (PNCs wealth management business) clients invested in the BlackRock
Funds.





PNC also provides general and administration services to the Company. Charges for such services were based on actual
usage or on defined formulas, which in managements view, resulted in reasonable allocations. Aggregate expenses included in the consolidated financial statements for transactions with related parties are as follows:





Three months ended March 31,2002

2001(Dollar amounts in thousands)Fund administration and servicing costs-affiliates

$
13,178

$
16,690General and administration


1,600


2,293General and administration-consulting


300


$
15,078

$
18,983





Additionally, an indirect wholly-owned subsidiary of PNC acts as a financial
intermediary associated with the sale of back-end loaded shares of certain BlackRock funds. This entity finances broker sales commissions and receives all associated sales charges.





Payable to affiliates was $32,828 and $15,972 at March 31, 2002 and December 31, 2001, respectively. These amounts primarily represent income taxes payable and fund administration and
servicing costs-affiliates payable. These amounts do not bear interest.





Included in accounts receivable is approximately $3,208
and $4,427 at March 31, 2002 and December 31, 2001, respectively, which primarily represents investment and administration services provided to PNC subsidiaries and affiliates.





Receivable from affiliates was approximately $11,822 and $2,569 at March 31, 2002 and December 31, 2001, respectively. The amount primarily represents reimbursed expenses due from the
BlackRock Funds and affiliates as well as a deferred tax receivable.




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Off-Balance Sheet Activities





As an investment manager of alternative and traditional investment products, the Company has investments in and/or may provide investment management, advisory or administrative services
to funds and other investment companies organized as limited liability companies (LLC), corporations or business trusts.





Specifically, BlackRock acts as the collateral manager for four CBO funds organized as corporations or limited liability companies. At March 31, 2002, aggregate assets and debt in the CBOs approximated $1.9 billion and $1.6 billion,
respectively. BlackRocks equity ownership was approximately $14.7 million at March 31, 2002.





BlackRock serves as the
investment manager for two fixed income hedge funds (Obsidian Funds) that engage in the trading of fixed income securities through both an LLC and corporate structure. BlackRock serves as the managing member for the LLC, which had total
assets and liabilities of approximately $26.0 billion and $25.4 billion, respectively. BlackRocks equity ownership was approximately $0.1 million at March 31, 2002.





Under current accounting principles generally accepted in the United States, the Company has not consolidated the CBOs or Obsidian because non-affiliated parties have sufficient
equity ownership and BlackRock has not guaranteed any of their obligations nor is it contractually liable for any of their obligations. Accordingly, the statements of financial condition and results of operations of the CBOs and the LLC are
not included in BlackRocks financial statements with the exception of BlackRocks equity ownership.





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 made by BlackRock may contain 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, prospects,
opportunity, expectations, optimistic, pessimistic, 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; (10) the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to BlackRock or PNC; and
(11) terrorist activities, including the September 11 terrorist attacks, which may adversely affect the general economy, financial and capital markets, specific industries, and BlackRock. BlackRock cannot predict the severity or duration of effects
stemming from such activities or any actions taken in connection with them.




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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, trading represent matching investments made by, and held in a Rabbi Trust for, the Company with respect to the BlackRock Voluntary and Involuntary Deferred Compensation Plans. As of March 31, 2002, the fair
market value of these investments was $17.6 million. BlackRocks investments, available for sale, consist primarily of investments in BlackRock funds and certain institutional and private placement portfolios (alternative investment
products). Occasionally, the Company 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
March 31, 2002, the fair market value of seed investments was $54.8 million. The fair market value of BlackRocks other investments included in the mutual funds total, as stated below, was $96.8 million as of March 31, 2002 and is primarily
comprised of $76.9 million in the Intermediate Bond Portfolio and $19.9 million in the BlackRock Funds Low Duration Bond Portfolio. These investments expose BlackRock to equity price risk. BlackRock does not hold any derivative securities to
hedge its investments. The following table summarizes the fair values of the investments and provides a sensitivity analysis of the estimated fair values of these financial instruments assuming a 10% increase or decrease in equity prices:





Fair market value

Fair market value assuming 10% increase in market price value

Fair market value assuming 10% decrease
in market price value(Dollar amounts in thousands)March 31, 2002Trading

$
17,558

$
19,314

$
15,802Total investments, trading


17,558


19,314


15,802Mutual funds


140,018


154,020


126,016Collateralized bond obligations


11,164


12,280


10,048Other


1,505


1,656


1,355Total investments, available for sale


152,687


167,956


137,419Total investments, trading and available for sale

$
170,245

$
187,270

$
153,221




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PART IIOTHER INFORMATION





Item 6.Exhibits and Reports on Form 8-K





(a)Exhibits





Exhibit No.

Description





(b)  Reports on Form 8-K





Since December 31, 2001, the Company has filed the following Current Reports on Form 8-K: Form 8-K dated as of February 28, 2002, reporting Changes in
Registrants Certifying Accountant, filed pursuant to Item 4 of Form 8-K.




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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 AUDETPaul L. Audet Managing Director & Chief Financial
Officer





Date:  May 13, 2002




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