PNC Bank 2002 Annual Report Download - page 38

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36
BLACKROCK
Year ended December 31
Dollars in millions 2002 2001
INCOME STATEMENT
Investment advisory and
administrative fees $519 $495
Other income 58 38
Total revenue 577 533
Operating expense 321 292
Fund administration
and servicing costs – affiliates 40 61
Amortization of goodwill and other
intangible assets 110
Total expense 362 363
Operating income 215 170
Nonoperating income 911
Pretax earnings 224 181
Income taxes 91 74
Earnings $133 $107
PERIOD-END BALANCE SHEET
Intangible assets $183 $182
Other assets 681 502
Total assets $864 $684
Liabilities $229 $198
Stockholders’ equity 635 486
Total liabilities and
stockholders’ equity $864 $684
PERFORMANCE DATA
Return on equity 24% 25%
Operating margin (a) 40 36
Diluted earnings per share $2.04 $1.65
OTHER INFORMATION
Average FTEs 823 758
ASSETS UNDER MANAGEMENT(b)
Separate accounts
Fixed income $157 $119
Liquidity 67
Liquidity – securities lending 611
Equity 10 10
Alternative investment products 55
Total separate accounts 184 152
Mutual funds (c)
Fixed income 19 16
Liquidity 66 62
Equity 49
Total mutual funds 89 87
Total assets under management $273 $239
(a) Excludes the impact of fund administration and servicing costs - affiliates.
(b) December 31 – in billions.
(c) Includes BlackRock Funds, BlackRock Provident Institutional Funds, BlackRock Closed
End Funds, Short Term Investment Fund and BlackRock Global Series Funds.
The financial information presented above reflects BlackRock
on a stand-alone basis. BlackRock is approximately 69%
owned by PNC and is consolidated into PNC’s financial
statements. Accordingly, approximately 31% of BlackRock’s
earnings were recognized as a minority interest expense in the
Consolidated Statement Of Income.
BlackRock is one of the largest publicly traded investment
management firms in the United States with approximately
$273 billion of assets under management at December 31,
2002. BlackRock manages assets on behalf of institutions and
individuals worldwide through a variety of fixed income,
liquidity and equity mutual funds, separate accounts and
alternative investment products. Mutual funds include the
flagship fund families - BlackRock Funds and BlackRock
Provident Institutional Funds. In addition, BlackRock
provides risk management and investment system services to
institutional investors under the BlackRock Solutions brand
name. BlackRock continues to focus on delivering superior
relative investment performance to clients while pursuing
strategies to build on core strengths and to selectively expand
the firm’s expertise and breadth of distribution.
BlackRock earned $133 million in 2002 compared with
$107 million in 2001. Total revenue for 2002 increased $44
million, or 8%, compared with 2001 as a result of higher fees
from separate account assets, institutional liquidity fund assets
and new closed-end fund offerings. BlackRock also benefited
in the comparison from the cessation of goodwill amortization
expense in 2002.
Excluding goodwill amortization, expenses increased $8
million, or 2%, in the year-to-year comparison in support of
revenue growth and business expansion. Operating expense
growth in 2002 was partially offset by lower fund
administration and servicing costs-affiliates.
The lower levels of PNC client assets invested in the
BlackRock Funds and the effect of the revised investment
services agreement resulted in a reduction in fund
administration and servicing costs-affiliates of approximately
$21 million for the year ended December 31, 2002. In July
2002, BlackRock and the Corporation entered into a revised
agreement with respect to investment management services.
The agreement includes a reduction in the rate of fees paid to
PNC Advisors based on current market conditions and the
impact of a reduction in the level of PNC Advisors’ customer
assets managed by BlackRock. PNC client-related assets
subject to fund administration and servicing payments
declined approximately $4.8 billion for the year ended
December 31, 2002.
During 2002, BlackRock adopted a new long-term
incentive and retention program for key employees, subject to
approval by BlackRock’s stockholders at their next annual
meeting in May 2003. The program seeks to provide
continuity of the management team while promoting
development of the firm's future leaders. See BlackRock Long-
Term Incentive and Retention Plan in this Financial Review
for further information.
BlackRock is listed on the New York Stock Exchange
under the symbol BLK. Additional information about
BlackRock is available in its SEC filings at www.sec.gov.