Back to GetFilings.com

Table of Contents

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC  20549

FOR ANNUAL AND TRANSITION REPORTS
PUSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FORM 10-K

(Mark One)

          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.

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of the registrant’s knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

          Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2)

Table of Contents

          The aggregate market value of the voting common stock held by non-affiliates of the Registrant as of June 28, 2003, is approximately $458,900,000.  There is no non-voting common stock of the Registrant outstanding.

          As of February 28, 2003, there were 18,799,052 shares of the Registrant’s class A common stock issued and outstanding and 46,369,137 shares of the Registrant’s class B common stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

          The following documents are incorporated by reference herein:

          Portions of the definitive Proxy Statement of BlackRock, Inc. filed pursuant to Regulation 14A of the general rules and regulations under the Securities Exchange Act of 1934, as amended, for the 2003 annual meeting of stockholders to be held on May 8, 2003 (“Proxy Statement”) are incorporated by reference into Part III of this Form 10-K.  The incorporation by reference herein of portions of the Proxy Statement shall not be deemed to specifically incorporate by reference the information referred to in Item 402(a) (8) and (9) and Item 306(c) and (d) of Regulation S-K.

- i -

Table of Contents

BlackRock Inc.
Index to Form 10-K

TABLE OF CONTENTS

- ii -

Table of Contents

Part I

Overview

          BlackRock, Inc., a Delaware corporation formed in 1998 (together, with its subsidiaries, “BlackRock” or the “Company”), is one of the largest investment management firms in the United States, with $273 billion of assets under management at year-end 2002 for institutional and individual investors worldwide.  Our products span a broad spectrum of fixed income, liquidity, equity and alternative investment separate accounts and mutual funds, including our BlackRock Funds^SM and BlackRock Provident Institutional Funds^SM  (“BPIF”)families.  We also offer risk management and investment system services to institutional investors through our BlackRock Solutions^® product line.

          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.  As of December 31, 2002, PNC indirectly owned approximately 69%, the public owned approximately 17% and BlackRock employees owned approximately 14% of BlackRock.  BlackRock is headquartered in New York City and has offices in Edinburgh, Scotland; Hong Kong; Tokyo, Japan; Wilmington, Delaware; San Francisco, California; and Boston, Massachusetts.

          In 2002, BlackRock’s total assets under management increased by approximately $34 billion, or 14%, from year-end 2001 levels.  Over the past five years, assets under management have grown by over $167 billion, which represents a compound annual growth rate of 21%.  Approximately 86% of annual growth in assets under management has been derived from new business activity, as opposed to market appreciation.  At December 31, 2002, fixed income products represented 64%, money market or liquidity products represented 29%, equity products represented 5% and alternative investment products represented 2% of BlackRock’s total assets under management.  Approximately 67% of the assets are managed in separate accounts and 33% are managed in mutual funds.

Assets Under Management
By Asset Class

CAGR = Compound Annual Growth Rate

- 1 -

Table of Contents

          Our ability to generate growth in assets under management is the primary factor driving increases in revenue and earnings and ultimately stockholder value.  Our strategies to deliver growth in assets under management begin with our focus on achieving client investment performance objectives and providing “best in class” client service.  Accordingly, we dedicate significant resources to attracting and retaining talented professionals, the most critical component to maintaining a dynamic growth-oriented firm, and to the ongoing enhancement of our investment technology and operating capabilities.

          BlackRock’s business results largely reflect our position as a leading provider of fixed income and liquidity asset management services to institutional clients.  Of the $273 billion of assets we managed at December 31, 2002, approximately $244 billion, or 89%, were from institutional clients with the remaining $29 billion reflecting individual client investments in our open-end and closed-end mutual fund families.  While we direct substantial resources to our fixed income and liquidity products, we also incur significant expense and have made additional investments over the last two years to establish a quality menu of equity products which can be marketed to both institutional and individual investors.  Additionally, we have enjoyed early success to the introduction of BlackRock Solutions products in 2000, achieving sales to date in excess of our initial expectations.  For 2002, BlackRock Solutions revenue growth exceeded 50%.

          We have generated substantial increases in assets under management, which has resulted in strong revenue and earnings growth since our formation in 1998.  Our financial condition has also been enhanced with the retirement of all long-term debt in 1999 and sizable increases in corporate liquidity (cash and investments) and stockholders’ equity.

Key Financial Data

NM   =   Not Meaningful

          While we continue to operate in a global marketplace characterized by volatility and economic weakness, we believe the following factors position us well to produce solid relative returns for stockholders:

- 2 -

Table of Contents

Products

          BlackRock offers a wide variety of fixed income, liquidity, equity and alternative investment products.  Revenue from these products consists of advisory fees typically structured as a percentage of assets managed and, in some instances, performance fees expressed as a percentage of returns realized in excess of agreed-upon targets.

- 3 -

Table of Contents

Products (continued)

- 4 -

Table of Contents

Products (continued)

- 5 -

Table of Contents

Products (continued)

- 6 -

Table of Contents

Distribution

          BlackRock provides investment and risk management services to a diverse institutional and individual client base.  Client assets are managed in a broad spectrum of fixed income, liquidity, equity and alternative investment separate accounts and mutual funds.  In 2002, institutional assets increased by 18% to $244 billion while individual assets declined by 11% to $29 billion.  The following table provides an analysis of assets under management by investor type classified by amounts reported as separate accounts and mutual funds.  All international client assets are classified as institutional with high net worth client balances included in both the institutional and individual categories.

Assets Under Management
By Investor

          BlackRock’s goal is to serve our clients with competitive investment products, effective risk management solutions, and the highest quality service.  A key measure of success, net new business, totaled $35 billion in 2002 across all distribution channels other than PNC-related accounts which experienced over $10 billion of net redemptions.  We also made a number of investments during the year to expand our ability to serve middle market institutions, high net worth investors and private clients.  At the end of the year, we consolidated all of these efforts on a unified marketing and client service platform, which we believe will enable us to better leverage our relationships and cross-sell BlackRock’s products and services.

          Our largest client base continues to be domestic tax-exempt institutions, including public and private pension plans, foundations and endowments.  At year-end 2002, these investors represented 30% of our total assets under management, with $81 billion managed for 270 separate account clients.  Our new business efforts yielded $7.4 billion of inflows during the year, which included the impact of approximately $7.7 billion of outflows resulting from client rebalancing of bond/equity allocations.  We have benefited from manager consolidation by pension plans, and we continue to see tremendous opportunity to broaden our existing relationships and to attract new clients as our product line and distribution capabilities expand.

- 7 -

Table of Contents

Distribution (continued)

          Domestic institutional liquidity assets totaled $68 billion at December 31, 2002, or 25% of total assets under management.  During the year, $6.1 billion of net inflows in our U.S. institutional money market funds were offset by $5.9 billion of net outflows in securities lending and other liquidity separate accounts.  A variety of institutions use our liquidity products, including bank trusts, corporations and municipalities, and their investment activity is supported by a dedicated client service team and selected software applications.

          During 2002, assets managed for domestic taxable institutions grew to $50 billion, or 18%, of total assets under management at year-end.  Growth came principally from insurance clients, where we capitalized on the changing industry landscape and added $8.2 billion in net new business.  By offering comprehensive services, including portfolio management, strategic advice, asset/liability management, portfolio hedging and investment accounting services, we have established BlackRock as one of the largest independent managers of insurance assets in the United States.  In early 2003, we added a senior portfolio manager with extensive industry experience, enhancing our ability to serve insurers and banks as they expand their investment outsourcing activity.

          BlackRock continued to expand its global presence in 2002, increasing assets managed for international clients to $45 billion, or 16% of total assets under management at year-end.  Approximately $1 billion of these assets were managed for high net worth investors.  During the year, we raised $3.0 billion from offshore insurance companies and $7.4 billion from other institutional and high net worth investors in Europe, Asia and the Middle East through our alliances with Nomura in Japan and Westpac in Australia.  We believe BlackRock is poised to benefit from increased global focus on risk-adjusted returns and risk management capabilities, particularly as our global name recognition improves and additional local distribution capabilities are established.

          A large percentage of our separate account assets are shared relationships with institutional consultants, who advise our clients on actuarial analysis, asset allocation, manager search, selection and monitoring.  To enhance coordination and comprehensive service, we establish three-way partnerships with our clients and their consultants, sharing insights about the markets and industry trends and providing regular updates on BlackRock’s business and investment performance.  These efforts, which are supported by a dedicated consultant marketing group, have contributed substantially to our new business efforts, helping us achieve a 29% compound annual growth rate in separate account assets under management over the past five years.

          Individual investors are served through two distinct efforts that collectively represented $29 billion, or 11% of total assets under management at year-end 2002.  Our private client group focuses on wholesale distribution of BlackRock’s mutual funds and managed accounts through national and regional broker dealers, financial planners and PNC.  Our wealth management group offers traditional and alternative investments directly to high net worth investors and family offices.  New business efforts in 2002 resulted in $2.9 billion in net inflows in new closed-end funds and separate accounts for high net worth investors, which were more than offset by a 25% decline in open-end mutual fund assets resulting principally from equity market declines and $5.0 billion of outflows from PNC-related accounts.  We expect that the addition of senior professionals in both of these efforts will help us increase assets managed for individual investors over time.

- 8 -

Table of Contents

Risks

          As a leading investment management firm, risk is an inherent part of BlackRock’s business.  Global markets, by their nature, are prone to uncertainty and subject participants to a variety of risks.  As previously discussed in this report, risk management is considered to be of paramount importance to BlackRock’s day-to-day operations.  Consequently, BlackRock devotes significant resources across all its operations to the measurement, management and analysis of risk, including investments in personnel and technology.

- 9 -

Table of Contents

Risks (continued)

- 10 -

Table of Contents

Risks (continued)

- 11 -

Table of Contents

Risks (continued)

- 12 -

Table of Contents

Risks (continued)

- 13 -

Table of Contents

Risks (continued)

          The foregoing risks are not exhaustive and new risks may emerge which affect BlackRock’s businesses.  It is impossible for management to predict such risks, and therefore, forward-looking statements should not be relied upon as a prediction of actual future results.

Competition

          BlackRock competes with investment management firms, mutual fund complexes, insurance companies, banks, brokerage firms and other financial institutions that offer products that are similar to, or alternatives to, those offered by BlackRock.  In order to grow our business, BlackRock must be able to compete effectively for assets under management.  Key competitive factors include investment performance track records, investment style and discipline, client service and brand name recognition.  We have historically competed principally on the basis of our long-term investment performance track record, our investment process, our risk management and analytic capabilities and the quality of our client service.  Over the past seven years, we have succeeded in growing aggregate assets under management, and we believe that we will continue to be able to do so by focusing on strong investment performance and client service and by developing new products and new distribution capabilities.  Many of our competitors, however, have greater financial or marketing resources and better brand name recognition than BlackRock.  These factors may place BlackRock at a competitive disadvantage, and there can be no assurance that our strategies and efforts to maintain our existing assets and attract new business will be successful.

Employees

          At December 31, 2002 BlackRock had 909 full-time employees, including 186 professionals in the portfolio management group, 244 professionals in risk management and analytics, 217 professionals in the separate account and funds marketing and client service areas and 262 professionals in administrative and support departments.

Regulation

          Virtually all aspects of BlackRock’s business are subject to various federal and state laws and regulations, some of which are summarized below.  These laws and regulations are primarily intended to protect investment advisory clients, stockholders of registered investment companies, PNC’s bank subsidiaries and bank customers of PNC Bank.  Under these laws and regulations, agencies that regulate investment advisers and banks and their subsidiaries, such as BlackRock and its subsidiaries, have broad administrative powers, including the power to limit, restrict or prohibit the regulated entity from carrying on business if it fails to comply with such laws and regulations.  Possible sanctions for significant compliance failures include the suspension of individual employees, limitations on engaging in certain lines of business for specified periods of time, revocation of investment adviser and other registrations, censures and fines.

          BlackRock’s subsidiaries are subject to regulation, primarily at the federal level, by the SEC, the Department of Labor, the OCC, the Board of Governors of the Federal Reserve System (FRB), the Commodity Futures Trading Commission (CFTC) and other regulatory bodies.

          The Investment Advisers Act of 1940, as amended, imposes numerous obligations on registered investment advisers, such as BlackRock, including recordkeeping requirements, operational requirements, marketing requirements, disclosure obligations and prohibitions on fraudulent activities.  The Investment Company Act of 1940, as amended, imposes similar obligations, as well as detailed operational requirements, on investment advisers, such as BlackRock, to registered investment companies and other managed accounts.  The SEC is authorized to institute proceedings and impose sanctions for violations of the Investment Advisers Act and the Investment Company Act, ranging from fines and censure to termination of an investment adviser’s registration.  Investment advisers also are subject to certain state securities laws and regulations.

- 14 -

Table of Contents

Regulation (continued)

          BlackRock’s subsidiaries also are subject to ERISA and to regulations promulgated thereunder, insofar as they act as a “fiduciary” under ERISA with respect to benefit plan clients.  ERISA and applicable provisions of the Internal Revenue Code impose certain duties on persons who are fiduciaries under ERISA, prohibit certain transactions involving ERISA plan clients, and provide monetary penalties for violations of these prohibitions. 

          One of BlackRock’s subsidiaries is registered as a commodity pool operator and commodity trading advisor with the CFTC and the National Futures Association (NFA).  The CFTC and NFA administer a comparable regulatory system covering futures contracts and various other financial instruments in which BlackRock clients may invest.  Another subsidiary is registered with the SEC as a broker-dealer and is a member of the National Association of Securities Dealers (NASD).  Although this entity’s NASD membership agreement limits its permitted activities to the sale of investment company securities and annuities and certain private placement and financial consulting activities, it is subject to the customer dealing, reporting and other requirements of the NASD, as well as the net capital and other requirements of the SEC.

          BlackRock’s international operations are also subject to the laws of non-U.S. jurisdictions and non-U.S. regulatory agencies or bodies.  As BlackRock has expanded its international business, various of its subsidiaries and international operations have become subject to regulatory systems comparable to those affecting its operations in the U.S.  BlackRock’s international subsidiaries are subject to periodic examination by these regulatory agencies and have developed comprehensive compliance systems in order to satisfy applicable regulatory requirements.  The failure of BlackRock’s internal operations to comply with the applicable regulatory frameworks could have a material adverse effect on BlackRock.

          PNC is a bank holding company and, as discussed below, is also a “financial holding company” regulated by the FRB. PNC Bank, the indirect parent of BlackRock, is a national bank subsidiary of PNC.  As an operating subsidiary of PNC Bank, BlackRock is subject to most banking laws, regulations, and orders that are applicable to PNC Bank, and therefore to the supervision, regulation, and examination of the OCC, as well as the SEC.  The OCC and the Federal Deposit Insurance Corporation (FDIC) also have broad enforcement authority over PNC Bank and its subsidiaries, including the power to prohibit PNC Bank or any subsidiary from engaging in any activity that, in the OCC’s opinion, constitutes an unsafe or unsound practice in conducting its business, to appoint the FDIC as conservator or receiver of PNC Bank if any of a number of conditions are met, and to impose substantial fines and other penalties.  Supervision and regulation of PNC Bank and its subsidiaries are intended primarily for the protection of depositors, the deposit insurance funds of the FDIC, and the banking system as a whole, not for the protection of stockholders or creditors of national banks or their subsidiaries.  The FRB has regulatory and supervisory authority with respect to PNC’s non-U.S. activities and investments, including non-U.S. activities and investments of BlackRock, as well as with respect to its non-bank subsidiaries. 

          Because BlackRock is a subsidiary of PNC, a regulated financial services firm, PNC’s relationships and good standing with its regulators are important to the conduct of our business.  The FRB, OCC, SEC, and other domestic and foreign regulators have broad enforcement powers, and powers to approve, deny, or refuse to act upon applications or notices of PNC or its subsidiaries to conduct new activities, acquire or divest businesses or assets or reconfigure existing operations.  In addition, PNC and its bank subsidiaries are subject to examination by various regulators, which results in examination reports and ratings (which are not publicly available) that can impact the conduct and growth of our businesses.  These examinations consider not only compliance with applicable laws and regulations, but also capital levels, asset quality and risk, management ability and performance, earnings, liabilities, and various other factors.  An examination downgrade by any of the federal bank regulators of PNC or its subsidiaries potentially can result in the imposition of limitations on certain of our activities and on our growth.

          Because BlackRock is a consolidated subsidiary of PNC Bank, federal restrictions on the payment of dividends by PNC Bank might be applied to BlackRock.  Under federal law, OCC approval is needed before PNC Bank may pay dividends in any year in which the total of all dividends paid would exceed the total of PNC Bank’s net profits for that year combined with its retained net profits from the prior two years.  PNC Bank also may not pay dividends exceeding its capital surplus.

- 15 -

Table of Contents

Regulation (continued)

          As an operating subsidiary of a national bank, BlackRock may not conduct new activities, establish a subsidiary, or acquire the stock or assets of another company unless it provides notice to and/or obtains the approval of the OCC or, with respect to most non-U.S. activities or investments, the FRB.  The OCC will generally approve only those activities and investments that are legally permissible for a national bank and consistent with prudent banking principles and regulatory policy.  The FRB will approve only those activities that are usual in connection with the transaction of the business of banking or other financial operations outside of the United States.  Investment management firms with which BlackRock competes commonly invest in investment companies and private investment funds to which they provide services.  Pursuant to OCC authorization, BlackRock may invest in investment companies and private investment funds to which it provides advisory, administrative or other services, to the extent consistent with applicable law and regulatory interpretations, including applicable banking laws.  BlackRock’s current domestic and overseas activities are, with the limited exception of the activities of BlackRock’s financial subsidiaries discussed below, permissible for a national bank.

          Pursuant to the Gramm-Leach-Bliley Act (the GLB Act), which generally became effective on March 11, 2000, a qualifying bank holding company may become a financial holding company and engage in a broad range of financial activities.  A bank holding company may elect to become a financial holding company if each of its subsidiary banks is “well capitalized,” is “well managed,” and has at least a satisfactory rating under the Community Reinvestment Act.  PNC became a financial holding company as of March 13, 2000.

          The GLB Act also permits a national bank, such as PNC Bank, to engage through the formation of a “financial subsidiary” in expanded activities, including securities underwriting and dealing.

          In order to qualify to establish or acquire a financial subsidiary, a national bank and each of its depository institution affiliates must maintain “well capitalized” capital ratios, examination ratings of “1” or “2” (on a scale of “1” to “5”), and certain other criteria that are incorporated into the definition of “well managed” in the OCC’s rules, and may not have a less than satisfactory Community Reinvestment Act rating.  In addition, the total assets of all financial subsidiaries of a national bank may not exceed the lesser of 45% of the parent bank’s total assets or $50 billion.  A national bank that is one of the largest 50 insured banks in the United States, such as PNC Bank, must also have issued debt with certain minimum ratings.  In addition to calculating its risk-based capital on a generally accepted accounting principles (GAAP) basis, a national bank with one or more financial subsidiaries must also be “well capitalized” after excluding from its equity all equity investments, including retained earnings, in a financial subsidiary, and excluding from its consolidated assets the assets of the financial subsidiary.  Any published financial statement for a national bank with a financial subsidiary must provide risk-based capital information both in accordance with GAAP and as described above.  The bank must also have policies and procedures to assess financial subsidiary risks and potential liabilities and protect the bank from such risks and potential liabilities.

          Pursuant to the GLB Act, PNC Bank has filed a “financial subsidiary certification” with the OCC.  In accordance with the financial subsidiary provisions, BlackRock, while remaining an operating subsidiary of a national bank, may establish financial subsidiaries that engage in a broader range of activities than would be permissible for an operating subsidiary of a national bank.  BlackRock has utilized this authority and established two financial subsidiaries that engage in the activities of providing initial funding to mutual funds and holding certain equity interests permissible for a financial subsidiary.

          Under the GLB Act and the OCC’s proposed regulations, if a national bank that has one or more financial subsidiaries, or any depository institution affiliate of such national bank, subsequently fails to meet the “well capitalized” or “well managed” and related criteria the national bank must enter into an agreement with the OCC to correct the condition.  The OCC has the authority to limit the activities of such a national bank.  If the condition is not corrected within six months or within any additional time granted by the OCC, the national bank could be required to conform the activities of its financial subsidiaries to activities in which a national bank could engage directly.  In addition, if the bank or any insured depository institution affiliate receives a less than satisfactory Community Reinvestment Act examination rating, the national bank would not be permitted to engage in any new activities, or to make new investments, in reliance upon the financial subsidiary authority.

- 16 -

Table of Contents

Regulation (continued)

          The FRB is the “umbrella” supervisor for financial holding companies.  In addition, the financial holding company’s operating entities, such as its subsidiary broker-dealers, investment managers, investment companies, banks and other regulated institutions, are also subject to the jurisdiction of various state and federal “functional” regulators. 

          In July 2002, PNC announced that it had entered into a written agreement with the Federal Reserve Bank of Cleveland (Federal Reserve) and that its principal subsidiary, PNC Bank, had entered into a written agreement with the OCC.  These agreements address such issues as risk, management and financial controls.  PNC and PNC Bank also entered into agreements with the Federal Reserve and the OCC, respectively, requiring PNC and PNC Bank to provide a plan for PNC Bank to meet the “well capitalized” and “well managed” criteria within a 180-day period.

          As of December 19, 2002, the Federal Reserve and the OCC notified PNC and PNC Bank, respectively, that PNC Bank now met both the “well capitalized” and “well managed” criteria.  This removed the limitations placed in July 2002 on PNC engaging in new activities or making new investments and on PNC Bank’s financial subsidiary activities.  However, the written agreements remain in place, and PNC and PNC Bank (including the operating subsidiaries of PNC Bank, such as BlackRock), respectively, in certain circumstances must seek approval from the Federal Reserve or the OCC, respectively, before making acquisitions or engaging in new activities.  PNC and PNC Bank believe that they have made substantial progress to date in addressing the various requirements set forth in the written agreements.  There can be no assurance, however, as to the precise timing for determining that all required corrective actions have been taken to the appropriate satisfaction of the Federal Reserve and the OCC.

          Under federal law, PNC Bank and its subsidiaries, including BlackRock, generally may not engage in transactions with PNC or its non-bank subsidiaries, except on terms and under circumstances that are substantially the same as those prevailing for comparable transactions involving nonaffiliated companies, or, in the absence of comparable transactions, that in good faith would be offered to or would apply to nonaffiliated companies.  In addition, certain transactions, including loans and other extensions of credit, guarantees, investments, and asset purchases between PNC Bank and its subsidiaries, including BlackRock, on the one hand, and PNC and its nonbank subsidiaries, on the other hand, are limited to 10% of PNC Bank’s capital and loan loss reserve allowance for transactions with a single company and to 20% of PNC Bank’s capital and loan loss reserve allowance for aggregate transactions with PNC and all its nonbank subsidiaries and other affiliates.  In certain circumstances, federal regulatory authorities may impose more restrictive limitations.  Such extensions of credit, with limited exceptions, must be fully collateralized.  These affiliate transaction restrictions also apply in some cases to loans or other transactions between PNC Bank or BlackRock, on the one hand, and financial subsidiaries of PNC Bank or BlackRock or investment funds advised by BlackRock, on the other.

          The FDIC could be appointed as conservator or receiver of PNC Bank if the bank were to become insolvent or if other conditions or events were to occur.  As conservator or receiver, the FDIC could exercise all rights of PNC Bank as a stockholder of BlackRock.  The FDIC would also have the authority to repudiate contracts by PNC Bank, including servicing or other contracts with BlackRock, at any time within 180 days of its appointment as conservator or receiver, and would be obligated to pay BlackRock only “actual direct compensatory damages,” not including damages for lost profits or opportunity, as of the date of conservatorship or receivership as a result of such repudiation.  The FDIC could also disregard, without paying damages, any contract that tended to diminish or defeat the FDIC’s interest in any PNC Bank asset if the contract were not:

- 17 -

Table of Contents

Regulation (continued)

          In addition, the FDIC could obtain a stay of up to 90 days of any judicial action or proceeding involving PNC Bank, and could require BlackRock to exhaust its remedies under FDIC claims procedures before pursuing any available judicial remedy.

          PNC’s bank subsidiaries are subject to “cross-guarantee” provisions under federal law, which provide that if one of these banks or thrifts fails or requires FDIC assistance, the FDIC may assess a “commonly controlled” bank or thrift, such as PNC Bank, for the estimated losses suffered by the FDIC.  The FDIC’s claim is superior to the claims of affiliates, such as BlackRock, and of stockholders of the banks.  At December 31, 2002, both of PNC’s bank subsidiaries exceeded the required ratios for classification as “well capitalized” under statutory and regulatory standards.

          BlackRock is subject to the USA Patriot Act of 2001 which contains the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001.  That Act contains anti-money laundering measures affecting insured depository institutions, broker-dealers and certain financial institutions.  The Act requires U.S. financial institutions to adopt new policies and procedures to combat money laundering and grants the Secretary of the Treasury broad authority to establish regulations and to impose requirements and restrictions on financial institutions’ operations.  BlackRock has established policies and procedures designed to ensure compliance with the Act and the related regulations.

          PNC currently holds its ownership interest in BlackRock through a subsidiary of PNC Bank.  As such, BlackRock currently is not subject to regulation under the nonbanking provisions of the Bank Holding Company Act.  If PNC were instead to hold its ownership interest in BlackRock at the holding company level, BlackRock would no longer be subject to OCC supervision and regulation as a subsidiary of a national bank, but would instead become subject to FRB supervision and regulation as a nonbank subsidiary of a financial holding company.  A nonbank subsidiary of a financial holding company may engage in insurance underwriting, insurance investment, real estate investment or development, and merchant banking activities, as well as the activities permissible for a financial subsidiary of a national bank.

          Additional legislation, changes in rules promulgated by the SEC, other federal and state regulatory authorities and self-regulatory organizations, or changes in the interpretation or enforcement of existing laws and rules may directly affect the method of operation and profitability of BlackRock and its subsidiaries.  The profitability of BlackRock and it subsidiaries could also be affected by rules and regulations which impact the business and financial communities in general, including changes to the laws governing taxation, antitrust regulation and electronic commerce.

          The rules governing the regulation of financial institutions and their holding companies and subsidiaries are very detailed and technical.  Accordingly, the above discussion is general in nature and does not purport to be complete.

- 18 -

Table of Contents

Available Information

          BlackRock files annual, quarterly and current reports, proxy statements and all amendments to these reports and other information with the SEC.  BlackRock makes available free of charge on or through its website at http://www.blackrock.com BlackRock’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.  Further, BlackRock will provide, without charge upon written request, a copy of BlackRock’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports. Requests for copies should be addressed to Joseph Feliciani, Managing Director, BlackRock, Inc., 40 East 52^nd Street, New York, New York 10022.  You may read and copy any document BlackRock files at the SEC’s Public Reference Room at 450 Fifth Street N.W., Washington, D.C. 20549.  Please call 1-800-SEC-0330 for further information on the operation of the Public Reference Room.  Reports, proxy statements and other information regarding issuers that file electronically with the SEC, including BlackRock’s filings, are also available to the public from the SEC’s website at http://www.sec.gov.

          BlackRock’s principal office is located at 40 East 52nd Street, New York, New York.  BlackRock also leases office space in New York City at 345 Park Avenue and in Edinburgh, Scotland; San Francisco, California; Kingwood, Texas; White Plains, New York; Hong Kong; Tokyo, Japan and Boston, Massachusetts and owns an 84,000 square foot office building in Wilmington, Delaware.

          BlackRock and persons to whom BlackRock may have indemnification obligations, 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, although 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.

          No matters were submitted to a vote of BlackRock’s security holders during the fourth quarter of the year ended December 31, 2002.

- 19 -

Table of Contents

Part II

          BlackRock’s class A common stock is listed on the NYSE and is traded under the symbol “BLK.”  BlackRock’s class B common stock is not included for listing or quotation on any established market.  At the close of business on February 28, 2003, there were 430 class A common stockholders of record and 52 class B common stockholders of record.

          The following table sets forth for the periods indicated the high and low reported sale prices per share for the class A common stock as reported on the NYSE:

Dividends

          BlackRock has not declared any dividends on its common stock and presently intends to retain future earnings, if any, for the development of our business and therefore does not anticipate that our board of directors will declare or pay any dividends on the class A common stock and class B common stock in the foreseeable future.  The declaration and payment of dividends by BlackRock are subject to the discretion of our board of directors.  BlackRock is a holding company and, as such, our ability to pay dividends is subject to the ability of our subsidiaries to provide cash to us.  The board of directors will determine future dividend policy based on our results of operations, financial condition, capital requirements and other circumstances.  In addition, because we are a consolidated subsidiary of PNC Bank, federal banking restrictions on payments of dividends by PNC Bank may apply to us (see “Business-Regulation” in Item 1 above).

- 20 -

Table of Contents

          The consolidated financial statements of BlackRock include the “carved out” historical operating results of the asset management businesses of PNC which were consolidated under BlackRock in 1998 as if the combined operations had been a separate entity prior to the formation of BlackRock.  The selected financial data presented below has been derived in part from, and should be read in conjunction with, the consolidated financial statements of BlackRock and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this filing.