BLACKROCK, INC. Forward-looking Statements
This report, and other statements that BlackRock may make, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, with respect to BlackRock's future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as "trend," "potential," "opportunity," "pipeline," "believe," "comfortable," "expect," "anticipate," "current," "intention," "estimate," "position," "assume," "outlook," "continue," "remain," "maintain," "sustain," "seek," "achieve," and similar expressions, or future or conditional verbs such as "will," "would," "should," "could," "may" and 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 and does not undertake 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. BlackRock has previously disclosed risk factors in itsSecurities and Exchange Commission ("SEC") reports. These risk factors and those identified elsewhere in this report, among others, could cause actual results to differ materially from forward-looking statements or historical performance and include: (1) a pandemic or health crisis, including the COVID-19 pandemic, and its continued impact on financial institutions, the global economy or capital markets, as well as BlackRock's products, clients, vendors and employees, and BlackRock's results of operations, the full extent of which may be unknown; (2) the introduction, withdrawal, success and timing of business initiatives and strategies; (3) changes and volatility in political, economic or industry conditions, the interest rate environment, foreign exchange rates or financial and capital markets, which could result in changes in demand for products or services or in the value of assets under management ("AUM"); (4) the relative and absolute investment performance of BlackRock's investment products; (5) BlackRock's ability to develop new products and services that address client preferences; (6) the impact of increased competition; (7) the impact of future acquisitions or divestitures; (8) BlackRock's ability to integrate acquired businesses successfully; (9) the unfavorable resolution of legal proceedings; (10) the extent and timing of any share repurchases; (11) the impact, extent and timing of technological changes and the adequacy of intellectual property, information and cyber security protection; (12) attempts to circumvent BlackRock's operational control environment or the potential for human error in connection with BlackRock's operational systems; (13) the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to BlackRock; (14) changes in law and policy and uncertainty pending any such changes; (15) any failure to effectively manage conflicts of interest; (16) damage to BlackRock's reputation; (17) terrorist activities, civil unrest, international hostilities and natural disasters, which may adversely affect the general economy, domestic and local financial and capital markets, specific industries or BlackRock; (18) the ability to attract and retain highly talented professionals; (19) fluctuations in the carrying value of BlackRock's economic investments; (20) the impact of changes to tax legislation, including income, payroll and transaction taxes, and taxation on products or transactions, which could affect the value proposition to clients and, generally, the tax position of the Company; (21) BlackRock's success in negotiating distribution arrangements and maintaining distribution channels for its products; (22) the failure by a key vendor of BlackRock to fulfill its obligations to the Company; (23) operational, technological and regulatory risks associated with BlackRock's major technology partnerships; (24) any disruption to the operations of third parties whose functions are integral to BlackRock's exchange-traded funds ("ETF") platform; (25) the impact of BlackRock electing to provide support to its products from time to time and any potential liabilities related to securities lending or other indemnification obligations; and (26) the impact of problems at other financial institutions or the failure or negative performance of products at other financial institutions. OverviewBlackRock, Inc. (together, with its subsidiaries, unless the context otherwise indicates, "BlackRock" or the "Company") is a leading publicly traded investment management firm with$8.68 trillion of AUM atDecember 31, 2020 . With approximately 16,500 employees in more than 30 countries, BlackRock provides a broad range of investment and technology services to institutional and retail clients in more than 100 countries across the globe. For further information see Note 1, Business Overview, and Note 27, Segment Information, in the notes to the consolidated financial statements contained in Part II, Item 8. The following discussion includes a comparison of BlackRock's results for 2020 and 2019. For a discussion of BlackRock's results for 2018 and a comparison of results for 2019 and 2018, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of the Company's Annual Report on Form 10-K for the year endedDecember 31, 2019 , which was filed with theSEC onFebruary 28, 2020 . OnMay 15, 2020 , a subsidiary of The PNC Financial Services Group, Inc. ("PNC") completed the secondary offering of 31,628,573 shares of the Company's common stock at a price of$420 per share, which included 823,188 shares of common stock issued upon the conversion of the Company's Series B Convertible Participating Preferred Stock and 2,875,325 shares of common stock under the fully exercised underwriters' option to purchase additional shares. Also onMay 15, 2020 , PNC completed the sale of 2,650,857 shares to the Company at a price of$414.96 per share. The shares repurchased by the Company were in addition to the share repurchase authorization under the Company's existing share repurchase program. The secondary offering and the Company's share repurchase resulted in PNC's exit of its entire ownership position in the Company.
Certain prior period presentations and disclosures, while not required to be recast, were reclassified to ensure comparability with current period classifications.
33
--------------------------------------------------------------------------------
United Kingdom Exit from
OnDecember 31, 2020 , theUnited Kingdom ("UK") left theEuropean Union ("EU"), and theUK and EU reverted to being distinct regulatory, legal and customs territories. Although an "EU-UK Trade and Cooperation Agreement" was agreed to in connection with theUK's departure from the EU, it does not include any substantive provisions with respect to financial services. As a result, fromJanuary 1, 2021 , cross-border financial services trade between theUK and the EU will be governed by their respective financial services regulations and market access regimes. BlackRock has implemented a number of steps to prepare for this outcome. These steps, which are and have been time consuming and costly and may add complexity to BlackRock's future European operations, include effecting organizational, governance and operational changes, applying for and receiving additional licenses and permissions in the EU, and engaging in client communications. In addition, depending on how the future relationship between theUK and the EU develops, BlackRock may experience further organizational and operational challenges and incur additional costs in connection with its European operations, particularly with regards to delegation and outsourcing, which may impede the Company's growth or impact its financial performance.
Other Development
OnFebruary 13, 2020 , BlackRock announced the establishment ofThe BlackRock Foundation (the "Foundation") and the contribution of its remaining 20% stake in PennyMac Financial Services, Inc. ("PennyMac") to the Foundation and theBlackRock Charitable Fund , which BlackRock established in 2013 (together, the "Charitable Contribution"). The Charitable Contribution resulted in an operating expense of$589 million , which was offset by a$122 million noncash, nonoperating pre-tax gain on the contributed shares and a tax benefit of$241 million in the consolidated statement of income for the year endedDecember 31, 2020 . The Charitable Contribution provides long-term funding for BlackRock's philanthropic investments and partnerships. The general and administration expense, nonoperating gain and associated tax benefit related to the Charitable Contribution have been excluded from as adjusted results.
Business Outlook
BlackRock's framework for long-term value creation is predicated on generating differentiated organic growth, leveraging scale to increase operating margins over time, and returning capital to shareholders on a consistent basis. BlackRock's diversified platform, in terms of style, product, client and geography, enables it to generate more stable cash flows through market cycles, positioning BlackRock to invest for the long-term by striking an appropriate balance between investing for future growth and prudent discretionary expense management. The COVID-19 pandemic continues to result in governmental authorities taking numerous measures to contain the spread and impact of COVID-19, such as travel bans and restrictions, quarantines, shelter in place orders, and limitations on business activity, including closures. These measures may continue to, among other things, severely restrict global economic activity, which can disrupt supply chains, lower asset valuations, significantly increase unemployment and underemployment levels, decrease liquidity in markets for certain securities and cause significant volatility and disruption in the financial markets. Towards the end of the first quarter of 2020 the pandemic began to impact BlackRock's business. While global markets have significantly recovered since then, the effects of the pandemic are ongoing, and such impact may continue in future quarters if conditions persist or worsen. The aggregate extent to which COVID-19, and the related global economic crisis, affect BlackRock's business, results of operations and financial condition, will depend on future developments that are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and any recovery period, future actions taken by governmental authorities, central banks and other third parties (including new financial regulation and other regulatory reform) in response to the pandemic, and the effects on BlackRock's products, clients, vendors and employees. See Part I, Item 1A - Risk Factors herein for information on the possible future effects of the COVID-19 pandemic on our results. In addition, although the forthcoming environment remains uncertain, BlackRock's business may be impacted by governmental changes, as well as potential regulations, foreign and trade policies and fiscal spending that may arise as a result of such changes. BlackRock's investment management revenue is primarily comprised of fees earned as a percentage of AUM and, in some cases, performance fees, which are normally expressed as a percentage of fund returns to the client. Numerous factors, including price movements in the equity, debt or currency markets, or in the price of real assets, commodities or alternative investments in which BlackRock invests on behalf of clients, could impact BlackRock's AUM, revenue and earnings. BlackRock is currently voluntarily waiving a portion of its management fees on certain money market funds to ensure that they maintain a minimum level of daily net investment income. These waivers result in a reduction of management fees, a portion of which is partially offset by a reduction of BlackRock's distribution and servicing costs paid to financial intermediaries. BlackRock has provided voluntary yield support waivers in prior periods and may increase or decrease the level of fee waivers in future periods. BlackRock manages$4.4 trillion of equity assets across markets globally. Beta divergence between equity markets, where certain markets perform differently than others, may lead to an increase in the proportion of BlackRock AUM weighted toward lower fee equity products, resulting in a decline in BlackRock's effective fee rate. Divergent market factors may also erode the correlation between the growth rates of AUM and investment advisory, administration fees and securities lending revenue (collectively "base fees"). BlackRock's highly diversified multi-product platform was created to meet client needs in all market environments. BlackRock is positioned to provide alpha-seeking active, index and cash management investment strategies across asset classes and geographies. In addition, BlackRock leverages its world-class risk management, analytics and technology capabilities, including the Aladdin platform, on behalf of clients. BlackRock serves a diverse mix of institutional and retail clients across the globe, including investors in iShares ETFs, maintaining differentiated client relationships and a fiduciary focus. The diversity of BlackRock's platform facilitates the generation of organic growth in various market environments, and as client preferences evolve. Client demand continues for ETFs and illiquid alternatives, which are two areas of focus for BlackRock. The index investing industry has been growing rapidly - with ETFs as a major beneficiary - driven by structural tailwinds including the migration from commission-based to fee-based wealth management, clients' focus on value for money, the use of ETFs as alpha tools and the growth of all-to-all networked trading. iShares ETFs' growth strategy is centered on increasing scale and pursuing global growth themes in client and 34 --------------------------------------------------------------------------------
product segments, including Core, Strategic, which includes Fixed Income, Factors, Sustainable and Megatrends ETFs, and Precision Exposures.
As the wealth management landscape shifts globally from individual product selection to a whole-portfolio approach, BlackRock's retail strategy is focused on creating outcome-oriented client solutions. This includes having a diverse platform of alpha-seeking active, index and alternative products, as well as enhanced distribution and portfolio construction technology offerings. Digital wealth tools are an important component of BlackRock's retail strategy, as BlackRock scales and customizes model portfolios, extends Aladdin Wealth and digital wealth partnerships globally, and helps advisors build better portfolios through portfolio construction and risk management, powered by Aladdin. InFebruary 2021 , BlackRock acquiredAperio , a pioneer in customizing tax-optimized index equity SMAs, to enhance our wealth platform and provide whole-portfolio solutions to ultra-high net worth advisors. By combiningAperio with BlackRock's existing SMA franchise, the Company plans to expand the breadth of personalization capabilities available to wealth managers from BlackRock via tax-managed strategies across factors, broad market indexing, and investor Environmental, Social, and Governance preferences across all asset classes. BlackRock continues to invest in technology services offerings, which enhance the ability to manage portfolios and risk, effectively serve clients and operate efficiently. Anticipated industry consolidation and regulatory requirements should continue to drive demand for holistic and flexible technology solutions. BlackRock's Aladdin platform provides clients with an ability to manage portfolios and risk across public and private asset classes on a single platform. Across BlackRock, more clients are focusing on the impact of sustainability on their portfolios. This shift has been driven by an increased understanding of how sustainability-related factors can affect economic growth, asset values, and financial markets as a whole. As a fiduciary, BlackRock is committed to helping clients build more resilient portfolios. Since sustainable investment options have the potential to offer clients better outcomes, the Company is making sustainability integral to the way BlackRock manages risk, constructs portfolios, designs products, and engages with companies. Over the past several years, BlackRock has been deepening the integration of sustainability into technology, risk management, and product choice across BlackRock, and plans to accelerate those efforts. 35
--------------------------------------------------------------------------------
Executive Summary (in millions, except shares and per share data) 2020 2019 GAAP basis: Total revenue$ 16,205 $ 14,539 Total expense 10,510 8,988 Operating income$ 5,695 $ 5,551 Operating margin 35.1 % 38.2 % Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests 475
186
Income tax expense (1,238 ) (1,261 ) Net income attributable to BlackRock$ 4,932 $
4,476
Diluted earnings per common share$ 31.85 $ 28.43 Effective tax rate 20.1 % 22.0 % As adjusted(1): Operating income$ 6,284 $ 5,551 Operating margin 44.9 % 43.7 % Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests $ 353 $
186
Net income attributable to BlackRock$ 5,237 $
4,484
Diluted earnings per common share$ 33.82 $
28.48
Effective tax rate 21.1 % 21.9 % Other: Assets under management (end of period)$ 8,676,680 $
7,429,633
Diluted weighted-average common shares outstanding(2) 154,840,582
157,459,546
Shares outstanding (end of period) 152,532,885
155,198,968
Book value per share(3)$ 231.31 $
216.15
Cash dividends declared and paid per share$ 14.52 $ 13.20
(1) As adjusted items are described in more detail in Non-GAAP Financial
Measures.
(2) Nonvoting participating preferred shares are considered to be common stock
equivalents for purposes of determining basic and diluted earnings per share
calculations. As of
stock outstanding.
(3) Total BlackRock stockholders' equity, divided by total shares outstanding at
2020 Compared with 2019
GAAP. Operating income of$5,695 million increased$144 million and operating margin of 35.1% decreased 310 bps from 2019. Operating income and operating margin reflected higher base fees, performance fees and technology services revenue, which were more than offset by higher expense, including the impact of$589 million related to the Charitable Contribution, higher compensation and benefits expense, and higher product launch costs in 2020. Product launch costs in 2020 included$87 million and$83 million associated with the close of the$2.3 billion BlackRock Health Sciences Trust II and the$2 billion BlackRock Capital Allocation Trust, respectively. Product launch costs for 2019 included$61 million associated with the close of the$1.4 billion BlackRock Science and Technology Trust II. Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests ("NCI"), increased$289 million from 2019 driven by the impact of a pre-tax gain of approximately$240 million in connection with a recapitalization of iCapitalNetwork, Inc. ("iCapital") and$122 million pre-tax gain related to the Charitable Contribution, partially offset by lower mark-to-market gains onun -hedged seed capital investments and lower interest income. Income tax expense for 2020 included a discrete tax benefit of$241 million recognized in connection with the Charitable Contribution, partially offset by a noncash net expense of approximately$79 million associated with the revaluation of certain deferred income tax assets and liabilities related to the legislation enacted in theUnited Kingdom increasing its corporate tax rate and state and local income tax changes. Income tax expense for 2020 also included$139 million of net discrete tax benefits, including benefits related to changes in the Company's organizational entity structure and stock-based compensation awards. Income tax expense for 2019 included$28 million of discrete tax benefits, primarily related to stock-based compensation awards. Diluted earnings per common share increased$3.42 , or 12%, from 2019, reflecting higher revenue and nonoperating income and a lower diluted share count, partially offset by the impact of the Charitable Contribution and higher product launch costs for 2020. As Adjusted. Operating income of$6,284 million increased$733 million and operating margin of 44.9% increased 120 bps from 2019. Diluted earnings per common share increased$5.34 , or 19%, from 2019, primarily due to higher operating and nonoperating income and a lower diluted share count in 2020. The financial impact related to the Charitable Contribution and the noncash net tax expense associated with the revaluation of certain deferred income tax assets and liabilities described above has been excluded from as adjusted results.
See Non-GAAP Financial Measures for further information on as adjusted items.
For further discussion of BlackRock's revenue, expense, nonoperating results and income tax expense, see Discussion of Financial Results herein.
36
--------------------------------------------------------------------------------Non-GAAP Financial Measures
BlackRock reports its financial results in accordance with accounting principles generally accepted inthe United States ("GAAP"); however, management believes evaluating the Company's ongoing operating results may be enhanced if investors have additional non-GAAP financial measures. Management reviews non-GAAP financial measures to assess ongoing operations and considers them to be helpful, for both management and investors, in evaluating BlackRock's financial performance over time. Management also uses non-GAAP financial measures as a benchmark to compare its performance with other companies and to enhance the comparability of this information for the reporting periods presented. Non-GAAP measures may pose limitations because they do not include all of BlackRock's revenue and expense. BlackRock's management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Non-GAAP measures may not be comparable to other similarly titled measures of other companies.
Management uses both GAAP and non-GAAP financial measures in evaluating BlackRock's financial performance. Adjustments to GAAP financial measures ("non-GAAP adjustments") include certain items management deems nonrecurring or that occur infrequently, transactions that ultimately will not impact BlackRock's book value or certain tax items that do not impact cash flow.
Computations for all periods are derived from the consolidated statements of income as follows:
(1) Operating income, as adjusted, and operating margin, as adjusted:
(in millions) 2020 2019 Operating income, GAAP basis$ 5,695 $ 5,551 Non-GAAP expense adjustments: Charitable Contribution 589 - Operating income, as adjusted 6,284 5,551 Product launch costs and commissions 172
61
Operating income used for operating margin measurement$ 6,456 $ 5,612 Revenue, GAAP basis$ 16,205 $ 14,539 Non-GAAP adjustments: Distribution fees (1,131 ) (1,069 ) Investment advisory fees (704 ) (616 ) Revenue used for operating margin measurement$ 14,370 $
12,854
Operating margin, GAAP basis 35.1 % 38.2 % Operating margin, as adjusted 44.9 % 43.7 % Management believes operating income, as adjusted, and operating margin, as adjusted, are effective indicators of BlackRock's financial performance over time and, therefore, provide useful disclosure to investors. Management believes that operating margin, as adjusted, reflects the Company's long-term ability to manage ongoing costs in relation to its revenues. The Company uses operating margin, as adjusted, to assess the Company's financial performance and to determine the long-term and annual compensation of the Company's senior-level employees. Furthermore, this metric is used to evaluate the Company's relative performance against industry peers, as it eliminates margin variability arising from the accounting of revenues and expenses related to distributing different product structures in multiple distribution channels utilized by asset managers.
• Operating income, as adjusted, includes non-GAAP expense adjustments. In 2020,
the Charitable Contribution expense of
operating income, as adjusted, due to its nonrecurring nature.
• Operating income used for measuring operating margin, as adjusted, is equal to
operating income, as adjusted, excluding the impact of product launch costs
(e.g. closed-end fund launch costs) and related commissions. Management
believes the exclusion of such costs and related commissions is useful because
these costs can fluctuate considerably and revenue associated with the
expenditure of these costs will not fully impact BlackRock's results until
future periods.
• Revenue used for calculating operating margin, as adjusted, is reduced to
exclude all of the Company's distribution fees, which are recorded as a
separate line item on the consolidated statements of income, as well as a
portion of investment advisory fees received that is used to pay distribution
and servicing costs. For certain products, based on distinct arrangements,
distribution fees are collected by the Company and then passed-through to
third-party client intermediaries. For other products, investment advisory
fees are collected by the Company and a portion is passed-through to
third-party client intermediaries. However, in both structures, the
third-party client intermediary similarly owns the relationship with the
retail client and is responsible for distributing the product and servicing
the client. The amount of distribution and investment advisory fees fluctuates
each period primarily based on a predetermined percentage of the value of AUM
during the period. These fees also vary based on the type of investment
product sold and the geographic location where it is sold. In addition, the
Company may waive fees on certain products that could result in the reduction
of payments to the third-party intermediaries.
(2) Nonoperating income (expense), less net income (loss) attributable to NCI,
as adjusted:
(in millions) 2020 2019
Nonoperating income (expense), GAAP basis $ 829 $ 236
Less: Net income (loss) attributable to NCI 354
50
Nonoperating income (expense), net of NCI 475
186
Less: Gain related to the Charitable Contribution 122
-
Nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted
$ 353 $
186
Management believes nonoperating income (expense), less net income (loss)
attributable to NCI, as adjusted, is an effective measure for reviewing
BlackRock's nonoperating contribution to its results and provides comparability
of this information among reporting periods. Management believes nonoperating
income (expense), less net income (loss) attributable to NCI, as adjusted,
provides a useful measure, for both management and investors, of BlackRock's
nonoperating results, which ultimately impact BlackRock's book value. In 2020,
the noncash,
37
-------------------------------------------------------------------------------- nonoperating pre-tax gain of$122 million related to the Charitable Contribution has been excluded from nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted, due to its nonrecurring nature.
(3) Net income attributable to
(in millions, except per share data) 2020 2019 Net income attributable to BlackRock, Inc., GAAP basis$ 4,932 $ 4,476 Non-GAAP adjustments: Charitable Contribution, net of tax 226 - Income tax matters 79 8 Net income attributable to BlackRock, Inc., as adjusted$ 5,237 $ 4,484 Diluted weighted-average common shares outstanding (4) 154.8 157.5 Diluted earnings per common share, GAAP basis (4)$ 31.85 $ 28.43 Diluted earnings per common share, as adjusted (4)$ 33.82 $ 28.48 Management believes net income attributable toBlackRock, Inc. , as adjusted, and diluted earnings per common share, as adjusted, are useful measures of BlackRock's profitability and financial performance. Net income attributable toBlackRock, Inc. , as adjusted, equals net income attributable toBlackRock, Inc. , GAAP basis, adjusted for significant nonrecurring items, charges that ultimately will not impact BlackRock's book value or certain tax items that do not impact cash flow. See aforementioned discussion regarding operating income, as adjusted, operating margin, as adjusted, and nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted for information on the Charitable Contribution. In 2020, a discrete tax benefit of$241 million was recognized in connection with the Charitable Contribution. The discrete tax benefit has been excluded from as adjusted results due to the non-recurring nature of the Charitable Contribution. Amounts for income tax matters represent net noncash (benefits) expense primarily associated with the revaluation of certain deferred tax liabilities related to intangible assets and goodwill as a result of tax rate changes. The amount for 2020 included a$79 million net noncash expense related to the impact of legislation enacted in theUnited Kingdom increasing its corporate tax rate and state and local income tax changes. These amounts have been excluded from the as adjusted results as these items will not have a cash flow impact and to ensure comparability among periods presented.
Per share amounts reflect net income attributable to
(4) Nonvoting participating preferred stock is considered to be a common stock equivalent for purposes of determining basic and diluted earnings per share calculations. As ofDecember 31, 2020 , there were no shares of preferred stock outstanding. 38
--------------------------------------------------------------------------------
Assets Under Management
AUM for reporting purposes generally is based upon how investment advisory and administration fees are calculated for each portfolio. Net asset values, total assets, committed assets or other measures may be used to determine portfolio AUM.
AUM and Net Inflows (Outflows) by Client Type and Product Type
AUM Net inflows (outflows)
(in millions) 2020 2019 2020 2019
Retail $ 845,917 $ 703,297 $ 69,556 $ 15,810
iShares ETFs 2,669,007 2,240,065 184,885 183,492
Institutional:
Active 1,524,462 1,338,670 31,624 99,456
Index 2,948,683 2,599,882 (28,717 ) 36,902
Institutional subtotal 4,473,145 3,938,552 2,907 136,358
Long-term 7,988,069 6,881,914 257,348 335,660
Cash management 666,252 545,949 113,349 93,074
Advisory(1) 22,359 1,770 20,141 2
Total $ 8,676,680 $ 7,429,633 $ 390,838 $ 428,736 AUM and Net Inflows (Outflows) by Investment Style and Product Type
AUM Net inflows (outflows)
(in millions) 2020 2019 2020 2019
Active $ 2,250,887 $ 1,947,222 $ 87,737 $ 109,892
Index and iShares ETFs 5,737,182 4,934,692 169,611 225,768
Long-term 7,988,069 6,881,914 257,348 335,660
Cash management 666,252 545,949 113,349 93,074
Advisory(1) 22,359 1,770 20,141 2
Total $ 8,676,680 $ 7,429,633 $ 390,838 $ 428,736 AUM and Net Inflows (Outflows) by Product Type
AUM Net inflows (outflows)
(in millions) 2020 2019 2020 2019
Equity $ 4,419,806 $ 3,820,329 $ 48,995 $ 28,353
Fixed income 2,674,488 2,315,392 157,961 263,579
Multi-asset 658,733 568,121 13,213 18,889
Alternatives:
Illiquid alternatives 85,770 75,349 10,883 14,103
Liquid alternatives 73,218 59,048 6,545 3,957
Currency and commodities(2) 76,054 43,675 19,751 6,779
Alternatives subtotal 235,042 178,072 37,179 24,839
Long-term 7,988,069 6,881,914 257,348 335,660
Cash management 666,252 545,949 113,349 93,074
Advisory(1) 22,359 1,770 20,141 2
Total $ 8,676,680 $ 7,429,633 $ 390,838 $ 428,736 (1) Advisory AUM represents mandates linked to purchases and disposition of
assets and portfolios on behalf of official institutions and long-term
portfolio liquidation assignments. Approximately
AUM held in advisory accounts associated with the
York ("FRBNY") assignment as of
reporting as of
ETFs AUM or Fixed Income AUM above. These holdings are excluded from Advisory
AUM.
(2) Amounts include commodity iShares ETFs.
39
--------------------------------------------------------------------------------
The following table presents the component changes in BlackRock's AUM for 2020
and 2019.
(in millions) 2020 2019
Beginning AUM $ 7,429,633 $ 5,975,818
Net inflows (outflows):
Long-term 257,348 335,660
Cash management 113,349 93,074
Advisory(1) 20,141 2
Total net inflows (outflows) 390,838 428,736
Market change 746,269 994,076
FX impact(2) 109,940 31,003
Total change 1,247,047 1,453,815
Ending AUM $ 8,676,680 $ 7,429,633 (1) Advisory AUM represents mandates linked to purchases and disposition of
assets and portfolios on behalf of official institutions and long-term
portfolio liquidation assignments. Approximately
AUM held in advisory accounts associated with the FRBNY assignment as of
included within Fixed Income iShares ETFs AUM or Fixed Income AUM above.
These holdings are excluded from Advisory AUM.
(2) Foreign exchange reflects the impact of translating non-US dollar denominated
AUM into US dollars for reporting purposes.
BlackRock has historically grown AUM through organic growth and acquisitions. Management believes that the Company will be able to continue to grow AUM organically by focusing on strong investment performance, efficient delivery of beta for index products, client service, developing new products and optimizing distribution capabilities.
Component Changes in AUM for 2020
The following table presents the component changes in AUM by client type and
product type for 2020.
Net Full year
December 31, inflows Market FX December 31, average
(in millions) 2019 (outflows) change impact(1) 2020 AUM(2)
Retail:
Equity $ 252,413 $ 39,341 $ 42,545 $ 4,135 $ 338,434 $ 265,433
Fixed income 305,265 22,784 9,725 2,694 340,468 309,723
Multi-asset 120,439 (481 ) 12,262 404 132,624 117,195
Alternatives 25,180 7,912 929 370 34,391 28,839
Retail subtotal 703,297 69,556 65,461 7,603 845,917 721,190
iShares ETFs:
Equity 1,632,972 76,307 186,918 8,904 1,905,101 1,561,970
Fixed income 565,790 88,894 28,009 7,340 690,033 627,039
Multi-asset 5,210 646 388 24 6,268 5,287
Alternatives 36,093 19,038 12,331 143 67,605 53,845iShares ETFs subtotal 2,240,065 184,885 227,646
16,411 2,669,007 2,248,141 Institutional: Active: Equity 141,118 1,890 24,045 2,469 169,522 141,059 Fixed income 651,368 6,598 49,712 8,591 716,269 673,043 Multi-asset 434,233 13,639 52,365 11,005 511,242 443,913 Alternatives 111,951 9,497 3,861 2,120 127,429 116,557 Active subtotal 1,338,670 31,624 129,983 24,185 1,524,462 1,374,572 Index: Equity 1,793,826 (68,543 ) 254,475 26,991 2,006,749 1,723,674 Fixed income 792,969 39,685 67,623 27,441 927,718 837,469 Multi-asset 8,239 (591 ) 749 202 8,599 8,157 Alternatives 4,848 732 (50 ) 87 5,617 4,675 Index subtotal 2,599,882 (28,717 ) 322,797 54,721 2,948,683 2,573,975 Institutional subtotal 3,938,552 2,907 452,780 78,906 4,473,145 3,948,547 Long-term 6,881,914 257,348 745,887 102,920 7,988,069 6,917,878 Cash management 545,949 113,349 (63 ) 7,017 666,252 617,989 Advisory(3) 1,770 20,141 445 3 22,359 13,236 Total$ 7,429,633 $ 390,838 $ 746,269 $ 109,940 $ 8,676,680 $ 7,549,103
(1) Foreign exchange reflects the impact of translating non-US dollar denominated
AUM into US dollars for reporting purposes.
(2) Average AUM is calculated as the average of the month-end spot AUM amounts
for the trailing thirteen months.
(3) Advisory AUM represents mandates linked to purchases and disposition of
assets and portfolios on behalf of official institutions and long-term
portfolio liquidation assignments. Approximately
AUM held in advisory accounts associated with the FRBNY assignment as of
included within Fixed Income iShares ETFs AUM or Fixed Income AUM above.
These holdings are excluded from Advisory AUM.
40
--------------------------------------------------------------------------------
The following table presents component changes in AUM by investment style and
product type for 2020.
Net Full year
December 31, inflows Market FX December 31, average(in millions) 2019 (outflows) change impact(1) 2020 AUM(2) Active: Equity$ 316,145 $ 30,241 $ 58,922 $ 4,881 $ 410,189 $ 327,403 Fixed income 939,275 26,934 58,153 10,653 1,035,015 964,153 Multi-asset 554,672 13,154 64,629 11,409 643,864 561,107 Alternatives 137,130 17,408 4,791 2,490 161,819 145,395 Active subtotal 1,947,222 87,737 186,495 29,433 2,250,887 1,998,058 Index and iShares ETFs: iShares ETFs: Equity 1,632,972 76,307 186,918 8,904 1,905,101 1,561,970 Fixed income 565,790 88,894 28,009 7,340 690,033 627,039 Multi-asset 5,210 646 388 24 6,268 5,287 Alternatives 36,093 19,038 12,331 143 67,605 53,845 iShares ETFs subtotal 2,240,065 184,885 227,646 16,411 2,669,007 2,248,141 Non-ETF Index: Equity 1,871,212 (57,553 ) 262,143 28,714 2,104,516 1,802,763 Fixed income 810,327 42,133 68,907 28,073 949,440 856,082 Multi-asset 8,239 (587 ) 747 202 8,601 8,158 Alternatives 4,849 733 (51 ) 87 5,618 4,676 Non-ETF Index 2,694,627 (15,274 ) 331,746 57,076 3,068,175 2,671,679 subtotal Index & iShares ETFs subtotal 4,934,692 169,611 559,392 73,487 5,737,182 4,919,820 Long-term 6,881,914 257,348 745,887 102,920 7,988,069 6,917,878 Cash management 545,949 113,349 (63 ) 7,017 666,252 617,989 Advisory(3) 1,770 20,141 445 3 22,359 13,236 Total$ 7,429,633 $ 390,838 $ 746,269 $ 109,940 $ 8,676,680 $ 7,549,103 The following table presents component changes in AUM by product type for 2020. Net Full year December 31, inflows Market FX December 31, average (in millions) 2019 (outflows) change impact(1) 2020 AUM(2) Equity$ 3,820,329 $ 48,995 $ 507,983 $ 42,499 $ 4,419,806 $ 3,692,136 Fixed income 2,315,392 157,961 155,069 46,066 2,674,488 2,447,274 Multi-asset 568,121 13,213 65,764 11,635 658,733 574,552 Alternatives: Illiquid alternatives 75,349 10,883 (1,512 ) 1,050 85,770 78,166 Liquid alternatives 59,048 6,545 6,295 1,330 73,218 64,522 Currency and 76,054 commodities(4) 43,675 19,751 12,288 340 61,228 Alternatives subtotal 178,072 37,179 17,071 2,720 235,042 203,916 Long-term 6,881,914 257,348 745,887 102,920 7,988,069 6,917,878 Cash management 545,949 113,349 (63 ) 7,017 666,252 617,989 Advisory(3) 1,770 20,141 445 3 22,359 13,236 Total$ 7,429,633 $ 390,838 $ 746,269 $
109,940$ 8,676,680 $ 7,549,103
(1) Foreign exchange reflects the impact of translating non-US dollar denominated
AUM into US dollars for reporting purposes.
(2) Average AUM is calculated as the average of the month-end spot AUM amounts
for the trailing thirteen months.
(3) Advisory AUM represents mandates linked to purchases and disposition of
assets and portfolios on behalf of official institutions and long-term
portfolio liquidation assignments. Approximately
AUM held in advisory accounts associated with the FRBNY assignment as of
included within Fixed Income iShares ETFs AUM or Fixed Income AUM above.
These holdings are excluded from Advisory AUM.
(4) Amounts include commodity iShares ETFs.
AUM increased$1.25 trillion to$8.68 trillion atDecember 31, 2020 from$7.43 trillion atDecember 31, 2019 driven primarily by net market appreciation and positive net flows across all investment styles and product types.
Net market appreciation of
AUM increased$109.9 billion due to the impact of foreign exchange movements, primarily due to the weakening of the US dollar, largely against the Euro, the British pound and the Japanese yen.
For further discussion on AUM, see Part I, Item 1 - Business - Assets Under Management.
41
--------------------------------------------------------------------------------Component Changes in AUM for 2019
The following table presents component changes in AUM by client type and product
type for 2019.
Net Full year
December 31, inflows Market FX December 31, average(in millions) 2018 (outflows) change impact(1) 2019 AUM(2) Retail: Equity$ 205,714 $ (652 ) $ 45,820 $ 1,531 $ 252,413 $ 229,688 Fixed income 271,588 21,222 11,882 573 305,265 289,632 Multi-asset 113,417 (9,291 ) 16,138 175 120,439 117,366 Alternatives 20,131 4,531 506 12 25,180 22,384 Retail subtotal 610,850 15,810 74,346 2,291 703,297 659,070 iShares ETFs: Equity 1,274,262 64,705 292,840 1,165 1,632,972 1,453,395 Fixed income 427,596 112,345 25,878 (29 ) 565,790 503,266 Multi-asset 4,485 113 601 11 5,210 4,489 Alternatives 25,082 6,329 4,664 18 36,093 29,767
iShares ETFs subtotal 1,731,425 183,492 323,983
1,165 2,240,065 1,990,917 Institutional: Active: Equity 110,976 1,852 27,547 743 141,118 124,722 Fixed income 538,961 55,006 55,358 2,043 651,368 611,383 Multi-asset 336,237 28,785 68,410 801 434,233 385,495 Alternatives 93,805 13,813 3,852 481 111,951 103,369 Active subtotal 1,079,979 99,456 155,167 4,068 1,338,670 1,224,969 Index: Equity 1,444,873 (37,552 ) 380,101 6,404 1,793,826 1,640,715 Fixed income 646,272 75,006 55,969 15,722 792,969 733,371 Multi-asset 7,745 (718 ) 1,203 9 8,239 8,095 Alternatives 4,340 166 272 70 4,848 4,580 Index subtotal 2,103,230 36,902 437,545 22,205 2,599,882 2,386,761 Institutional subtotal 3,183,209 136,358 592,712 26,273 3,938,552 3,611,730 Long-term 5,525,484 335,660 991,041 29,729 6,881,914 6,261,717 Cash management 448,565 93,074 3,054 1,256 545,949 486,636 Advisory(3) 1,769 2 (19 ) 18 1,770 1,766 Total$ 5,975,818 $ 428,736 $ 994,076 $ 31,003 $ 7,429,633 $ 6,750,119
(1) Foreign exchange reflects the impact of translating non-US dollar denominated
AUM into US dollars for reporting purposes.
(2) Average AUM is calculated as the average of the month-end spot AUM amounts
for the trailing thirteen months.
(3) Advisory AUM represents long-term portfolio liquidation assignments.
42
--------------------------------------------------------------------------------
The following table presents component changes in AUM by investment style and
product type for 2019.
Net Full year
December 31, inflows Market FX December 31, average(in millions) 2018 (outflows) change impact(1) 2019 AUM(2) Active: Equity$ 258,205 $ (2,918 ) $ 59,701 $ 1,157 $ 316,145 $ 286,461 Fixed income 795,985 74,972 66,150 2,168 939,275 885,170 Multi-asset 449,654 19,494 84,549 975 554,672 502,860 Alternatives 113,936 18,344 4,357 493 137,130 125,753 Active subtotal 1,617,780 109,892 214,757 4,793 1,947,222 1,800,244 Index and iShares ETFs: iShares ETFs: Equity 1,274,262 64,705 292,840 1,165 1,632,972 1,453,395 Fixed income 427,596 112,345 25,878 (29 ) 565,790 503,266 Multi-asset 4,485 113 601 11 5,210 4,489 Alternatives 25,082 6,329 4,664 18 36,093 29,767 iShares ETFs 1,731,425 183,492 323,983 1,165 2,240,065 1,990,917 subtotal Non-ETF Index: Equity 1,503,358 (33,434 ) 393,767 7,521 1,871,212 1,708,664 Fixed income 660,836 76,262 57,059 16,170 810,327 749,216 Multi-asset 7,745 (718 ) 1,202 10 8,239 8,096 Alternatives 4,340 166 273 70 4,849 4,580 Non-ETF Index 2,176,279 42,276 452,301 23,771 2,694,627 2,470,556 subtotal Index & iShares ETFs subtotal 3,907,704 225,768 776,284 24,936 4,934,692 4,461,473 Long-term 5,525,484 335,660 991,041 29,729 6,881,914 6,261,717 Cash management 448,565 93,074 3,054 1,256 545,949 486,636 Advisory(3) 1,769 2 (19 ) 18 1,770 1,766 Total$ 5,975,818 $ 428,736 $ 994,076 $ 31,003 $ 7,429,633 $ 6,750,119 The following table presents component changes in AUM by product type for 2019. Net Full year December 31, inflows Market FX December 31, average (in millions) 2018 (outflows) change impact(1) 2019 AUM(2) Equity$ 3,035,825 $ 28,353 $ 746,308 $ 9,843 $ 3,820,329 $ 3,448,520 Fixed income 1,884,417 263,579 149,087 18,309 2,315,392 2,137,652 Multi-asset 461,884 18,889 86,352 996 568,121 515,445 Alternatives: Illiquid 59,827 14,103 1,101 318 75,349 68,030 alternatives Liquid alternatives 51,718 3,957 3,224 149 59,048 55,088 Currency and 31,813 6,779 4,969 114 43,675 36,982 commodities(4) Alternatives 143,358 24,839 9,294 581 178,072 160,100 subtotal Long-term 5,525,484 335,660 991,041 29,729 6,881,914 6,261,717 Cash management 448,565 93,074 3,054 1,256 545,949 486,636 Advisory(3) 1,769 2 (19 ) 18 1,770 1,766 Total$ 5,975,818 $ 428,736 $ 994,076 $
31,003$ 7,429,633 $ 6,750,119
(1) Foreign exchange reflects the impact of translating non-US dollar denominated
AUM into US dollars for reporting purposes.
(2) Average AUM is calculated as the average of the month-end spot AUM amounts
for the trailing thirteen months.
(3) Advisory AUM represents long-term portfolio liquidation assignments.
(4) Amounts include commodity iShares ETFs.
AUM increased$1.5 trillion to$7.43 trillion atDecember 31, 2019 from$5.98 trillion atDecember 31, 2018 driven primarily by net market appreciation and positive net flows across all investment styles and product types.
Net market appreciation of
AUM increased
43
--------------------------------------------------------------------------------Discussion of Financial Results
Introduction
The Company derives a substantial portion of its revenue from investment advisory and administration fees, which are recognized as the services are performed over time because the customer is receiving and consuming the benefits as they are provided by the Company. Fees are primarily based on agreed-upon percentages of AUM and recognized for services provided during the period, which are distinct from services provided in other periods. Such fees are affected by changes in AUM, including market appreciation or depreciation, foreign exchange translation and net inflows or outflows. Net inflows or outflows represent the sum of new client assets, additional fundings from existing clients (including dividend reinvestment), withdrawals of assets from, and termination of, client accounts and distributions to investors representing return of capital and return on investments to investors. Market appreciation or depreciation includes current income earned on, and changes in the fair value of, securities held in client accounts. Foreign exchange translation reflects the impact of translating non-US dollar denominated AUM into US dollars for reporting purposes. The Company also earns revenue by lending securities on behalf of clients, primarily to highly rated banks and broker-dealers. The securities loaned are secured by collateral in the form of cash or securities, with minimum collateral generally ranging from approximately 102% to 112% of the value of the loaned securities. Generally, the revenue earned is shared between the Company and the funds or accounts managed by the Company from which the securities are borrowed. Investment advisory agreements for certain separate accounts and investment funds provide for performance fees based upon relative and/or absolute investment performance, in addition to base fees based on AUM. Investment advisory performance fees generally are earned after a given period of time and when investment performance exceeds a contractual threshold. As such, the timing of recognition of performance fees may increase the volatility of the Company's revenue and earnings. The magnitude of performance fees can fluctuate quarterly due to the timing of carried interest recognition on alternative products; however, the third and fourth quarters have a greater number of nonalternative products with performance measurement periods that end on eitherSeptember 30 orDecember 31 . The Company offers investment management technology systems, risk management services, wealth management and digital distribution tools, all on a fee basis. Clients include banks, insurance companies, official institutions, pension funds, asset managers, retail distributors and other investors. Fees earned for technology services are primarily recorded as services are performed over time and are generally determined using the value of positions on the Aladdin platform, or on a fixed-rate basis. Revenue derived from the sale of software licenses is recognized upon the granting of access rights.
The Company earns distribution and service fees for distributing investment products and providing support services to investments portfolios. The fees are based on AUM and are recognized when the amount of fees is known.
The Company advises global financial institutions, regulators, and government entities across a range of risk, regulatory, capital markets and strategic services. Fees earned for advisory services, which are included in advisory and other revenue, are determined using fixed-rate fees and are recognized over time as the related services are completed. The Company earns fees for transition management services primarily comprised of commissions recognized in connection with buying and selling securities on behalf of its customers. Commissions related to transition management services, which are included in advisory and other revenue, are recorded on a trade-date basis as transactions occur.
The Company also earns revenue related to certain minority investments accounted for as equity method investments.
Operating expense reflects employee compensation and benefits, distribution and servicing costs, direct fund expense, general and administration expense and amortization of finite-lived intangible assets.
• Employee compensation and benefits expense includes salaries, commissions,
temporary help, deferred and incentive compensation, employer payroll taxes,
severance and related benefit costs.
• Distribution and servicing costs, which are primarily AUM driven, include
payments to third parties, primarily associated with distribution and
servicing of client investments in certain Company products.
• Direct fund expense primarily consists of third-party nonadvisory expenses
incurred by the Company related to certain funds for the use of index
trademarks, reference data for indices, custodial services, fund
administration, fund accounting, transfer agent services, shareholder
reporting services, legal expense, and audit and tax services as well as other
fund-related expenses directly attributable to the nonadvisory operations of
the fund. These expenses may vary over time with fluctuations in AUM, number
of shareholder accounts, or other attributes directly related to volume of
business.
• General and administration expense includes marketing and promotional,
occupancy and office-related costs, portfolio services (including clearing
expense related to transition management services), technology, professional
services, communications, contingent consideration fair value adjustments,
product launch costs, the impact of foreign currency remeasurement, and other
general and administration expense. Foreign currency remeasurement losses were
Approximately 75% of the Company's revenue is generated in US dollars. The Company's revenue and expense generated in foreign currencies (primarily the Euro and British pound) are impacted by foreign exchange rates. Any effect of foreign exchange rate change on revenue is partially offset by a change in expense driven by the Company's considerable non-dollar expense base related to its operations outsidethe United States . Nonoperating income (expense) includes the effect of changes in the valuations on investments and earnings on equity method investments as well as interest and dividend income and interest expense. The Company primarily holds seed and co-investments in sponsored investment products that invest in a variety of asset classes, including private equity, hedge funds and real assets. Investments generally are made for co-investment purposes, to establish a performance track record or for regulatory purposes, includingFederal Reserve Bank stock. The Company does not engage in proprietary trading activities that could conflict with the interests of its clients. In addition, nonoperating income (expense) includes the impact of changes in the valuations of consolidated sponsored investment funds. The portion of nonoperating income (expense) not attributable to the Company is allocated to NCI on the consolidated statements of income. 44 --------------------------------------------------------------------------------
Revenue
The following table presents detail of revenue for 2020 and 2019 and includes the product type mix of base fees and performance fees.
(in millions) 2020
2019
Investment advisory, administration fees and securities lending revenue: Equity: Active$ 1,737 $ 1,554 iShares ETFs 3,499 3,495 Non-ETF index 664 667 Equity subtotal 5,900 5,716 Fixed income: Active 1,957 1,918 iShares ETFs 1,119 963 Non-ETF index 463 405 Fixed income subtotal 3,539 3,286 Multi-asset 1,163 1,148 Alternatives: Illiquid alternatives 577 488 Liquid alternatives 502 413 Currency and commodities(1) 168 108 Alternatives subtotal 1,247 1,009 Long-term 11,849 11,159 Cash management 790 618
Total Investment advisory, administration fees and securities lending revenue
12,639 11,777
Investment advisory performance fees: Equity 91 36 Fixed income 35 10 Multi-asset 35 19 Alternatives: Illiquid alternatives 83 136 Liquid alternatives 860 249 Alternatives subtotal 943 385 Total performance fees 1,104 450 Technology services revenue 1,139 974 Distribution fees: Retrocessions 736 658 12b-1 fees (US mutual fund distribution fees) 337 358 Other 58 53 Total distribution fees 1,131 1,069 Advisory and other revenue: Advisory 68 99 Other 124 170 Total advisory and other revenue 192 269 Total revenue$ 16,205 $ 14,539
(1) Amounts include commodity iShares ETFs.
The table below lists base fees and mix of average AUM by product type:
Mix of Base Fees Mix of Average AUM(1)
2020 2019 2020 2019
Equity:
Active 14 % 13 % 4 % 4 %
iShares ETFs 28 % 30 % 21 % 22 %
Non-ETF index 5 % 6 % 24 % 25 %
Equity subtotal 47 % 49 % 49 % 51 %
Fixed income:
Active 15 % 16 % 13 % 13 %
iShares ETFs 9 % 8 % 8 % 7 %
Non-ETF index 4 % 3 % 11 % 11 %
Fixed income subtotal 28 % 27 % 32 % 31 %
Multi-asset 9 % 10 % 8 % 8 %
Alternatives:
Illiquid alternatives 5 % 4 % 1 % 1 %
Liquid alternatives 4 % 4 % 1 % 1 %
Currency and commodities(2) 1 % 1 % 1 % 1 %
Alternatives subtotal 10 % 9 % 3 % 3 %
Long-term 94 % 95 % 92 % 93 %
Cash management 6 % 5 % 8 % 7 %
Total excluding Advisory AUM 100 % 100 % 100 % 100 %
(1) Average AUM is calculated as the average of the month-end spot AUM amounts
for the trailing thirteen months.
(2) Amounts include commodity iShares ETFs.
45
--------------------------------------------------------------------------------
Revenue increased
Base fees of$12,639 million in 2020 increased$862 million from$11,777 million in 2019, primarily driven by organic growth, the positive impact of market beta and foreign exchange movements on average AUM and higher securities lending revenue, partially offset by the impact of fee reductions on certain products. Securities lending revenue of$652 million increased$35 million from$617 million in 2019, primarily reflecting higher average balances of securities on loan and higher cash reinvestment spreads, partially offset by lower asset spreads. Investment advisory performance fees of$1,104 million in 2020 increased$654 million from$450 million in 2019, primarily reflecting higher revenue from liquid alternative and long-only equity products. Approximately 60% of the full year increase in performance fees was attributable to a single hedge fund strategy that delivered strong performance during the year. Technology services revenue of$1,139 million for 2020 increased$165 million from$974 million in 2019, primarily reflecting higher revenue from Aladdin and the impact of the eFront acquisition, which closed in May of 2019. Advisory and other revenue of$192 million in 2020 decreased$77 million from$269 million in 2019, primarily reflecting the impact of the Charitable Contribution of BlackRock's remaining 20% stake inPennyMac in 2020 and lower advisory assignments. Expense
The following table presents expense for 2020 and 2019.
(in millions) 2020 2019
Expense:
Employee compensation and benefits$ 5,041 $ 4,470 Distribution and servicing costs: Retrocessions 736 658 12b-1 costs 328 354 Other 771 673 Total distribution and servicing costs 1,835 1,685 Direct fund expense 1,063 978 General and administration: Marketing and promotional 229 350 Occupancy and office related 319 307 Portfolio services 283 261 Technology 397 289 Professional services 170 161 Communications 54 39 Foreign exchange remeasurement 6 31
Contingent consideration fair value adjustments 23 53 Product launch costs
166 59
Charitable Contribution 589 -
Other general and administration 229 208
Total general and administration expense 2,465 1,758
Amortization of intangible assets 106 97
Total expense $ 10,510 $ 8,988
Expense increased $1,522 million , or 17%, from 2019, primarily driven by higher
general and administration expense, including the impact of the Charitable
Contribution and higher product launch costs, higher employee compensation and
benefits expense, and higher volume-related expense in 2020.
Employee compensation and benefits expense increased $571 million , or 13%, to
$5,041 million in 2020 from $4,470 million in 2019, primarily reflecting higher
base and incentive compensation, driven in part by higher performance fees and
operating income.
Direct fund expense increased
General and administration expense increased$707 million from 2019, primarily driven by$589 million of expense related to the Charitable Contribution, higher product launch costs, higher portfolio services and technology expense, including certain costs related to COVID-19, costs related to certain legal matters, includingAviron Capital, LLC ., and a$12 million impairment of a fixed asset. The increase was partially offset by lower marketing and promotional expense, lower contingent consideration fair value adjustments and lower foreign exchange remeasurement expense for 2020. 46 --------------------------------------------------------------------------------
Nonoperating Results
The summary of nonoperating income (expense), less net income (loss) attributable to NCI for 2020 and 2019 was as follows:
(in millions) 2020
2019
Nonoperating income (expense), GAAP basis(1)$ 829 $
236
Less: Net income (loss) attributable to NCI 354
50
Nonoperating income (expense), as adjusted, net of NCI(2)(3)
(in millions) 2020 2019 Net gain (loss) on investments(1)(2) Private equity$ 44 $ 47 Real assets 8 21 Other alternatives(3) 32 19 Other investments(4) 120 144 Subtotal 204 231
Gain related to the Charitable Contribution 122 - Other gains (losses)(5)
292 61
Total net gain (loss) on investments(1)(2) 618 292 Interest and dividend income
62 97
Interest expense (205 ) (203 )
Net interest expense (143 ) (106 )
Nonoperating income (expense)(1) $ 475 $ 186 (1) Net of net income (loss) attributable to NCI.
(2) Management believes nonoperating income (expense), less net income (loss)
attributable to NCI, is an effective measure for reviewing BlackRock's
nonoperating results, which ultimately impacts BlackRock's book value. See
Non-GAAP Financial Measures for further information on non-GAAP financial
measures.
(3) Amounts primarily include net gains (losses) related to direct hedge fund
strategies and hedge fund solutions.
(4) Amounts primarily include net gains (losses) related to unhedged equity and
fixed income investments.
(5) Amount for 2020 includes a nonoperating pre-tax gain of approximately
million in connection with a recapitalization of iCapital. Additional amounts
include noncash pre-tax gains (losses) related to the revaluation of certain
other corporate minority investments.
Income Tax Expense
GAAP As adjusted
(in millions) 2020 2019 2020 2019
Operating income(1) $ 5,695 $ 5,551 $ 6,284 $ 5,551
Total nonoperating income (expense)(1)(2) $ 475 $ 186 $ 353 $ 186
Income before income taxes(2) $ 6,170 $ 5,737 $ 6,637 $ 5,737
Income tax expense $ 1,238 $ 1,261 $ 1,400 $ 1,253
Effective tax rate 20.1 % 22.0 % 21.1 % 21.9 %
(1) As adjusted items are described in more detail in Non-GAAP Financial
Measures.
(2) Net of net income (loss) attributable to NCI.
The Company's tax rate is affected by tax rates in foreign jurisdictions and the
relative amount of income earned in those jurisdictions, which the Company
expects to be fairly consistent in the near term. The significant foreign
jurisdictions that have different statutory tax rates than the US federal
statutory rate of 21% include the
2020 Income tax expense (GAAP) reflected:
o a discrete tax benefit of
Charitable Contribution;
o a discrete tax benefit of $139 million , including benefits related tochanges in the Company's organizational entity structure and stock-based
compensation awards that vested in 2020; and
o a $79 million net noncash expense associated with the revaluation ofcertain deferred income tax assets and liabilities related to legislation
enacted in the
and local income tax changes.
The as adjusted effective tax rate of 21.1% for 2020 excluded the$241 million discrete tax benefit in connection with the Charitable contribution due to its non-recurring nature and the$79 million noncash deferred tax revaluation noncash expense mentioned above as it will not have a cash flow impact and to ensure comparability among periods presented.
2019 Income tax expense (GAAP) reflected:
o a discrete tax benefit of
compensation awards that vested in 2020.
47
--------------------------------------------------------------------------------
Balance Sheet Overview
The following table presents a reconciliation of the consolidated statement of financial condition presented on a GAAP basis to the consolidated statement of financial condition, excluding the impact of separate account assets and separate account collateral held under securities lending agreements (directly related to lending separate account securities) and separate account liabilities and separate account collateral liabilities under securities lending agreements and consolidated sponsored investment products. The Company presents the as adjusted balance sheet as additional information to enable investors to exclude certain assets that have equal and offsetting liabilities or noncontrolling interests that ultimately do not have an impact on stockholders' equity or cash flows. Management views the as adjusted balance sheet, which contains non-GAAP financial measures, as an economic presentation of the Company's total assets and liabilities; however, it does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
Separate Account Assets and Liabilities and Separate Account Collateral Held under Securities Lending Agreements
Separate account assets are maintained byBlackRock Life Limited , a wholly owned subsidiary of the Company that is a registered life insurance company in theUnited Kingdom , and represent segregated assets held for purposes of funding individual and group pension contracts. The Company records equal and offsetting separate account liabilities. The separate account assets are not available to creditors of the Company and the holders of the pension contracts have no recourse to the Company's assets. The net investment income attributable to separate account assets accrues directly to the contract owners and is not reported on the consolidated statements of income. While BlackRock has no economic interest in these assets or liabilities, BlackRock earns an investment advisory fee for the service of managing these assets on behalf of its clients. In addition, the Company records on its consolidated statements of financial condition the separate account collateral received underBlackRock Life Limited securities lending arrangements as its own asset in addition to an equal and offsetting separate account collateral liability for the obligation to return the collateral. The collateral is not available to creditors of the Company, and the borrowers under the securities lending arrangements have no recourse to the Company's assets.
Consolidated Sponsored Investment Products
The Company consolidates certain sponsored investment products accounted for as
variable interest entities ("VIEs") and voting rights entities ("VREs"),
(collectively, "consolidated sponsored investment products"). See Note 2,
Significant Accounting Policies, in the notes to the consolidated financial
statements contained in Part II, Item 8 of this filing for more information on
the Company's consolidation policy.
The Company cannot readily access cash and cash equivalents or other assets held
by consolidated sponsored investment products to use in its operating
activities. In addition, the Company cannot readily sell investments held by
consolidated sponsored investment products in order to obtain cash for use in
the Company's operations.
December 31, 2020
Separate Consolidated
Account Sponsored
GAAP Assets/ Investment As
(in millions) Basis Collateral(1) Products(2) Adjusted
Assets
Cash and cash equivalents $ 8,664 $ - $ 206 $ 8,458
Accounts receivable 3,535 - - 3,535
Investments 6,919 - 2,486 4,433
Separate account assets and
collateral held under securities
lending agreements 121,170 121,170 - -
Other assets(3) 3,880 - 81 3,799
Subtotal 144,168 121,170 2,773 20,225
Goodwill and intangible assets, net 32,814 - - 32,814
Total assets $ 176,982 $ 121,170 $ 2,773 $ 53,039
Liabilities
Accrued compensation and benefits $ 2,499 $ - $ - $ 2,499
Accounts payable and accrued
liabilities 1,028 - - 1,028
Borrowings 7,264 - - 7,264
Separate account liabilities and
collateral liabilities under
securities lending agreements 121,170 121,170 - -
Deferred income tax liabilities(4) 3,673 - - 3,673
Other liabilities 3,692 - 400 3,292
Total liabilities 139,326 121,170 400 17,756
Equity
Total BlackRock, Inc. stockholders'
equity 35,283 - - 35,283
Noncontrolling interests 2,373 - 2,373 -
Total equity 37,656 - 2,373 35,283
Total liabilities and equity $ 176,982 $ 121,170 $ 2,773 $ 53,039 (1) Amounts represent segregated client assets and related liabilities, in which
BlackRock has no economic interest. BlackRock earns an investment advisory
fee for the service of managing these assets on behalf of its clients.
(2) Amounts represent the portion of assets and liabilities of Consolidated
Sponsored Investment Products attributable to NCI.
(3) Amount includes property and equipment and other assets.
(4) Amount includes approximately
related to goodwill and intangibles. See Note 25, Income Taxes, in the notes
to the consolidated financial statements contained in Part II, Item 8 of this
filing for more information.
48
-------------------------------------------------------------------------------- The following discussion summarizes the significant changes in assets and liabilities on a GAAP basis. Please see the consolidated statements of financial condition as ofDecember 31, 2020 and 2019 contained in Part II, Item 8 of this filing. The discussion does not include changes related to assets and liabilities that are equal and offsetting and have no impact on BlackRock's stockholders' equity. Assets. Cash and cash equivalents atDecember 31, 2020 and 2019 included$206 million and$141 million , respectively, of cash held by consolidated sponsored investment products (see Liquidity and Capital Resources for details on the change in cash and cash equivalents during 2020). Accounts receivable atDecember 31, 2020 increased$356 million fromDecember 31, 2019 , primarily due to higher performance and base fees receivables. Investments, including the impact of consolidated sponsored investment products increased$1,430 million fromDecember 31, 2019 (for more information see Investments herein).Goodwill and intangible assets decreased$117 million fromDecember 31, 2019 , primarily due to amortization of intangible assets. Other assets (including operating lease right-of-use ("ROU") assets and property and equipment) decreased$4 million fromDecember 31, 2019 , primarily due to a net decrease in certain corporate minority investments, primarily related to the previously discussed Charitable Contribution of BlackRock's remaining 20% stake inPennyMac , partially offset by an increase in unit trust receivables (substantially offset by an increase in unit trust payables recorded within other liabilities). Liabilities. Accrued compensation and benefits atDecember 31, 2020 increased$442 million fromDecember 31, 2019 , primarily due to higher 2020 incentive compensation accruals. Other liabilities increased$222 million fromDecember 31, 2019 , primarily due to higher other liabilities of consolidated sponsored investment products and higher unit trust payables (substantially offset by an increase in unit trust receivables recorded within other assets), partially offset by lower contingent liabilities related to certain acquisitions. Net deferred income tax liabilities atDecember 31, 2020 decreased$61 million fromDecember 31, 2019 , primarily due to the effects of temporary differences associated with stock-based compensation, investment income and the income tax benefit related to the Charitable Contribution, partially offset by the effects of temporary differences associated with the revaluation of certain deferred income tax liabilities due to tax legislation enacted in theUnited Kingdom and state and local income tax changes.
Investments
The Company's investments were$6,919 million and$5,489 million atDecember 31, 2020 and 2019, respectively. Investments include consolidated investments held by sponsored investment products accounted for as VIEs and VREs. Management reviews BlackRock's investments on an "economic" basis, which eliminates the portion of investments that does not impact BlackRock's book value or net income attributable to BlackRock. BlackRock's management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. The Company presents investments, as adjusted, to enable investors to understand the portion of investments that is owned by the Company, net of NCI, as a gauge to measure the impact of changes in net nonoperating income (expense) on investments to net income (loss) attributable to BlackRock. The Company further presents net "economic" investment exposure, net of deferred compensation investments and hedged investments, to reflect another helpful measure for investors. The economic impact of investments held pursuant to deferred compensation arrangements is offset by a change in compensation expense. The impact of certain investments is substantially mitigated by swap hedges. Carried interest capital allocations are excluded as there is no impact to BlackRock's stockholders' equity until such amounts are realized as performance fees. Finally, the Company's regulatory investment inFederal Reserve Bank stock, which is not subject to market or interest rate risk, is excluded from the Company's net economic investment exposure. December 31, December 31, (in millions) 2020 2019 Investments, GAAP$ 6,919
(4,976 ) (3,784 )
Net interest in consolidated sponsored investment
products(1) 2,490 2,290
Investments, as adjusted 4,433 3,995
Federal Reserve Bank stock (94 ) (93 )
Deferred compensation investments (6 ) (23 )
Hedged investments (833 ) (644 )
Carried interest (627 ) (528 )
Total "economic" investment exposure(2) $ 2,873
(1) Amount included
of
Company's "economic" investment exposure.
(2) Amounts exclude investments in corporate minority investments included in
other assets on the consolidated statements of financial condition
The following table represents the carrying value of the Company's economic
investment exposure, by asset type, at
December 31, December 31,
(in millions) 2020 2019
Equity(1) $ 835 $ 609
Fixed income(2) 958 1,008
Multi-asset(3) 127 178
Alternatives:
Private equity 418 355
Real assets 251 322
Other alternatives(4) 284 235
Alternatives subtotal 953 912
Total "economic" investment exposure
(1) Equity includes unhedged seed investments in equity mutual funds/strategies
and equity securities.
(2) Fixed income includes unhedged seed investments in fixed income mutual
funds/strategies, bank loans and
regulatory purposes.
(3) Multi-asset includes unhedged seed investments in multi-asset mutual
funds/strategies.
(4) Other alternatives primarily include hedge funds/funds of hedge funds.
49
--------------------------------------------------------------------------------As adjusted investment activity for 2020 and 2019 was as follows:
(in millions) 2020
2019
Total Investments, as adjusted, beginning balance
3,381
Purchases/capital contributions 1,117 975 Sales/maturities (909 ) (617 ) Distributions(1) (237 ) (226 ) Market appreciation(depreciation)/earnings from equity method investments 309
333
Carried interest capital allocations/(distributions) 99
141
Other(2) 59
8
Total Investments, as adjusted, ending balance
3,995
(1) Amount includes distributions representing return of capital and return on
investments.
(2) Amount includes the impact of foreign exchange movements.
LIQUIDITY AND CAPITAL RESOURCES
BlackRock Cash Flows Excluding the Impact of Consolidated Sponsored Investment Products
The consolidated statements of cash flows include the cash flows of the consolidated sponsored investment products. The Company uses an adjusted cash flow statement, which excludes the impact ofConsolidated Sponsored Investment Products, as a supplemental non-GAAP measure to assess liquidity and capital requirements. The Company believes that its cash flows, excluding the impact of the consolidated sponsored investment products, provide investors with useful information on the cash flows of BlackRock relating to its ability to fund additional operating, investing and financing activities. BlackRock's management does not advocate that investors consider such non-GAAP measures in isolation from, or as a substitute for, its cash flows presented in accordance with GAAP. The following table presents a reconciliation of the consolidated statements of cash flows presented on a GAAP basis to the consolidated statements of cash flows, excluding the impact of the cash flows of consolidated sponsored investment products: Cash Flows Impact on Excluding Cash Flows Impact of of Consolidated Consolidated Sponsored Sponsored GAAP Investment Investment (in millions) Basis Products Products Cash, cash equivalents and restricted cash, December 31, 2018$ 6,505 $ 245 $ 6,260 Net cash provided by/(used in) operating activities 2,884 (1,563 ) 4,447 Net cash provided by/(used in) investing activities (2,014 ) (110 ) (1,904 ) Net cash provided by/(used in) financing activities (2,583 ) 1,569 (4,152 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash 54 - 54 Net increase/(decrease) in cash, cash equivalents and restricted cash (1,659 ) (104 ) (1,555 ) Cash, cash equivalents and restricted cash, December 31, 2019$ 4,846 $ 141 $ 4,705 Net cash provided by/(used in) operating activities 3,743 (1,966 ) 5,709 Net cash provided by/(used in) investing activities (254 ) (71 ) (183 ) Net cash provided by/(used in) financing activities 244 2,102 (1,858 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash 102 - 102 Net increase/(decrease) in cash, cash equivalents and restricted cash 3,835 65 3,770 Cash, cash equivalents and restricted cash, December 31, 2020$ 8,681 $ 206 $ 8,475 Sources of BlackRock's operating cash primarily include investment advisory, administration fees and securities lending revenue, performance fees, technology services revenue, advisory revenue and distribution fees. BlackRock uses its cash to pay for all operating expense, interest and principal on borrowings, income taxes, dividends on BlackRock's capital stock, repurchases of the Company's stock, acquisitions, capital expenditures and purchases of co-investments and seed investments.
For details of the Company's GAAP cash flows from operating, investing and financing activities, see the Consolidated Statements of Cash Flows contained in Part II, Item 8 of this filing.
Cash flows provided by/(used in) operating activities, excluding the impact of consolidated sponsored investment products, primarily include the receipt of investment advisory and administration fees, securities lending revenue and performance fees offset by the payment of operating expenses incurred in the normal course of business, including year-end incentive compensation accrued for in the prior year. Cash flows used in investing activities, excluding the impact of consolidated sponsored investment products, for 2020 were$183 million and reflected$194 million of purchases of property and equipment and$172 million of net investment purchases, partially offset by$183 million of distributions of capital from equity method investees. Cash flows used in financing activities, excluding the impact of consolidated sponsored investment products, for 2020 were$1.9 billion , primarily resulting from$1.8 billion of share repurchases, including$1.1 billion from PNC,$412 million in open market transactions and$297 million of employee tax withholdings related to employee stock transactions, and$2.3 billion of cash dividend payments, partially offset by$2.2 billion of proceeds from long-term borrowings. 50
-------------------------------------------------------------------------------- The Company manages its financial condition and funding to maintain appropriate liquidity for the business. Liquidity resources atDecember 31, 2020 and 2019 were as follows: December 31, December 31, (in millions) 2020 2019 Cash and cash equivalents(1)$ 8,664 $ 4,829 Cash and cash equivalents held by consolidated sponsored investment products(2) (206 ) (141 ) Subtotal 8,458 4,688 Credit facility - undrawn 4,000 4,000 Total liquidity resources(3)$ 12,458 $ 8,688
(1) The percentage of cash and cash equivalents held by the Company's US
subsidiaries was approximately 55% and 45% at
respectively. See Net Capital Requirements herein for more information on net
capital requirements in certain regulated subsidiaries.
(2) The Company cannot readily access such cash and cash equivalents to use in
its operating activities.
(3) Amounts do not reflect year-end incentive compensation accruals, which are
paid in the first quarter.
Total liquidity resources increased$3,770 million during 2020, primarily reflecting$2.2 billion of proceeds from long-term borrowings and cash flows from other operating activities, partially offset by cash dividend payments of$2.3 billion and share repurchases of$1.8 billion .
A significant portion of the Company's
The Company's liquidity and capital resources were not materially impacted by COVID-19 and related economic conditions during 2020. The Company will continue to monitor its liquidity and capital resources due to the current pandemic.
Share Repurchases. During 2020, the Company repurchased an aggregate of
approximately
Net Capital Requirements. The Company is required to maintain net capital in certain regulated subsidiaries within a number of jurisdictions, which is partially maintained by retaining cash and cash equivalent investments in those subsidiaries or jurisdictions. As a result, such subsidiaries of the Company may be restricted in their ability to transfer cash between different jurisdictions and to their parents. Additionally, transfers of cash between international jurisdictions may have adverse tax consequences that could discourage such transfers.BlackRock Institutional Trust Company, N.A . ("BTC") is chartered as a national bank that does not accept deposits or make commercial loans and whose powers are limited to trust and other fiduciary activities. BTC provides investment management and other fiduciary services, including investment advisory and securities lending agency services, to institutional clients. BTC is subject to regulatory capital and liquid asset requirements administered by theUS Office of the Comptroller of the Currency . AtDecember 31, 2020 and 2019, the Company was required to maintain approximately$2.2 billion and$1.9 billion , respectively, in net capital in certain regulated subsidiaries, including BTC, entities regulated by theFinancial Conduct Authority andPrudential Regulation Authority in theUnited Kingdom , and the Company's broker-dealers. The Company was in compliance with all applicable regulatory net capital requirements. Undistributed Earnings of Foreign Subsidiaries. As a result of The 2017 Tax Cuts and Jobs Act and the one-time mandatory deemed repatriation tax on untaxed accumulated foreign earnings, US income taxes were provided on the Company's undistributed foreign earnings. The financial statement basis in excess of tax basis of its foreign subsidiaries remains indefinitely reinvested in foreign operations. The Company will continue to evaluate its capital management plans.
Short-Term Borrowings
2020 Revolving Credit Facility. The Company's credit facility has an aggregate commitment amount of$4 billion and was amended inMarch 2020 to extend the maturity date toMarch 2025 (the "2020 credit facility"). The 2020 credit facility permits the Company to request up to an additional$1 billion of borrowing capacity, subject to lender credit approval, increasing the overall size of the 2020 credit facility to an aggregate principal amount not to exceed$5 billion . Interest on borrowings outstanding accrues at a rate based on the applicable London Interbank Offered Rate plus a spread. The 2020 credit facility requires the Company not to exceed a maximum leverage ratio (ratio of net debt to earnings before interest, taxes, depreciation and amortization, where net debt equals total debt less unrestricted cash) of 3 to 1, which was satisfied with a ratio of less than 1 to 1 atDecember 31, 2020 . The 2020 credit facility provides back-up liquidity to fund ongoing working capital for general corporate purposes and various investment opportunities. AtDecember 31, 2020 , the Company had no amount outstanding under the 2020 credit facility. Commercial Paper Program. The Company can issue unsecured commercial paper notes (the "CP Notes") on a private-placement basis up to a maximum aggregate amount outstanding at any time of$4 billion . The commercial paper program is currently supported by the 2020 credit facility. AtDecember 31, 2020 , BlackRock had no CP Notes outstanding. 51
--------------------------------------------------------------------------------
Long-Term Borrowings
The carrying value of long-term borrowings atDecember 31, 2020 included the following: (in millions) Maturity Amount Carrying Value Maturity 4.25% Notes $ 750 $ 750 May 2021 3.375% Notes 750 748 June 2022 3.50% Notes 1,000 997 March 2024 1.25% Notes(1) 856 853 May 2025 3.20% Notes 700 695 March 2027 3.25% Notes 1,000 989 April 2029 2.40% Notes 1,000 993 April 2030 1.90% Notes 1,250 1,239 January 2031 Total Long-term Borrowings $ 7,306 $ 7,264
(1) The carrying value of the 1.25% Notes is calculated using the EUR/USD foreign
exchange rate as of December 31, 2020 .
In January 2020 , the Company issued $1 billion in aggregate principal amount of
2.40% senior unsecured and unsubordinated notes maturing on April 30, 2030 (the
"2030 Notes"). The net proceeds of the 2030 Notes were used for general
corporate purposes. Interest of approximately $24 million per year is payable
semi-annually on April 30 and October 30 of each year, which commenced on April
30, 2020 . The 2030 Notes may be redeemed prior to January 30, 2030 in whole or
in part at any time, at the option of the Company, at a "make-whole" redemption
price or at 100% of the principal amount of the 2030 Notes thereafter. The
unamortized discount and debt issuance costs are being amortized over the
remaining term of the 2030 Notes.
In April 2020 , the Company issued $1.25 billion in aggregate principal amount of
1.90% senior unsecured and unsubordinated notes maturing on January 28, 2031
(the "2031 Notes"). The net proceeds of the 2031 Notes are being used for
general corporate purposes, which may include the future repayment of all or a
portion of the $750 million 4.25% Notes due May 2021 . Interest of approximately
$24 million per year is payable semi-annually on January 28 and July 28 of each
year, which commenced on July 28, 2020 . The 2031 Notes may be redeemed prior to
October 28, 2030 in whole or in part at any time, at the option of the Company,
at a "make-whole" redemption price or at 100% of the principal amount of the
2031 Notes thereafter. The unamortized discount and debt issuance costs are
being amortized over the remaining term of the 2031 Notes.
For more information on Company's borrowings, see Note 15, Borrowings, in the
notes to the consolidated financial statements contained in Part II, Item 8 of
this filing.
Contractual Obligations, Commitments and Contingencies
The following table sets forth contractual obligations, commitments and
contingencies by year of payment at
(in millions) 2021 2022 2023 2024 2025 Thereafter Total Contractual obligations and commitments: Long-term borrowings(1): Principal$ 750 $ 750 $ -$ 1,000 $ 856 $ 3,950 $ 7,306 Interest 190 161 148 131 113 386 1,129 Operating leases 169 163 149 135 119 1,605 2,340 Purchase obligations 198 140 64 38 5 - 445 Investment commitments 789 - - - - - 789 Total contractual obligations and commitments 2,096 1,214 361 1,304 1,093 5,941 12,009 Contingent obligations: Contingent payments related to business acquisitions(2) 26 - - - - - 26 Total contractual obligations, commitments and
contingent obligations(3)
$ 1,093 $ 5,941 $ 12,035
(1) The amount of principal and interest payments for the 1.25% Notes (issued in
Euros) represents the expected payment amounts using the EUR/USD foreign
exchange rate as of
(2) The amount of contingent payments reflected for any year represents the
expected payments using foreign currency exchange rates as of
2020. The fair value of the remaining aggregate contingent payments at
the consolidated statements of financial condition.
(3) At
unrecognized tax benefits. Due to the uncertainty of timing and amounts that
will ultimately be paid, this amount has been excluded from the table above.
Operating Leases. The Company leases its primary office locations under agreements that expire on varying dates through 2043. In connection with certain lease agreements, the Company is responsible for escalation payments. The contractual obligations table above includes only guaranteed minimum lease payments for such leases and does not project potential escalation or other lease-related payments.
InMay 2017 , the Company entered into an agreement with 50HYMC Owner LLC , for the lease of approximately 847,000 square feet of office space located at 50 Hudson Yards,New York, New York . The term of the lease includes 20 years of cash rental payments expected to begin inMay 2023 , with the option to renew for a specified term. The lease requires annual base rental payments of approximately$51 million per year during the first five years of the lease term, increasing every five years to$58 million ,$66 million and$74 million per year (or approximately$1.2 billion in base rent over a 20-year period). InNovember 2019 , the Company exercised its initial expansion option with respect to two additional floors aggregating approximately 122,000 square feet of office space. The additional space requires approximately$185 million in base rent over the 20-year period. For more information on the Company's operating leases, see Note 13, Leases, in the notes to the consolidated financial statements contained in Part II, Item 8 of this filing. Purchase Obligations. In the ordinary course of business, BlackRock enters into contracts or purchase obligations with third parties whereby the third parties provide services to or on behalf of BlackRock. Purchase obligations included in the contractual obligations table above 52 -------------------------------------------------------------------------------- represent executory contracts, which are either noncancelable or cancelable with a penalty. AtDecember 31, 2020 , the Company's obligations primarily reflected standard service contracts for portfolio services, market data, office-related services and third-party marketing and promotional services, and obligations for equipment. Purchase obligations are recorded on the consolidated financial statements when services are provided and, as such, obligations for services and equipment not received are not included in the consolidated statement of financial condition atDecember 31, 2020 . Investment Commitments. AtDecember 31, 2020 , the Company had$789 million of various capital commitments to fund sponsored investment products, including consolidated sponsored investment products. These products include private equity funds, real assets funds and opportunistic funds. This amount excludes additional commitments made by consolidated funds of funds to underlying third-party funds as third-party noncontrolling interest holders have the legal obligation to fund the respective commitments of such funds of funds. Generally, the timing of the funding of these commitments is unknown and the commitments are callable on demand at any time prior to the expiration of the commitment. These unfunded commitments are not recorded on the consolidated statements of financial condition. These commitments do not include potential future commitments approved by the Company that are not yet legally binding. The Company intends to make additional capital commitments from time to time to fund additional investment products for, and with, its clients. Contingent Payments Related to Business Acquisitions. In connection with certain acquisitions, BlackRock is required to make contingent payments, subject to achieving specified performance targets, which may include revenue related to acquired contracts or new capital commitments for certain products. The fair value of the remaining aggregate contingent payments atDecember 31, 2020 totaled$26 million and is included in other liabilities on the consolidated statements of financial condition.
The following items have not been included in the contractual obligations, commitments and contingencies table:
Carried Interest Clawback. As a general partner in certain investment products, including private equity partnerships and certain hedge funds, the Company may receive carried interest cash distributions from the partnerships in accordance with distribution provisions of the partnership agreements. The Company may, from time to time, be required to return all or a portion of such distributions to the limited partners in the event the limited partners do not achieve a return as specified in the various partnership agreements. Therefore, BlackRock records carried interest subject to such clawback provisions in investments, or cash and cash equivalents to the extent that it is distributed, and as a deferred carried interest liability on its consolidated statements of financial condition. Carried interest is recorded as performance fees on BlackRock's consolidated statements of income when fees are no longer probable of significant reversal. Indemnifications. In the ordinary course of business or in connection with certain acquisition agreements, BlackRock enters into contracts pursuant to which it may agree to indemnify third parties in certain circumstances. The terms of these indemnities vary from contract to contract and the amount of indemnification liability, if any, cannot be determined or the likelihood of any liability is considered remote and, therefore, has not been included in the table above or recorded in the consolidated statement of financial condition atDecember 31, 2020 . See further discussion in Note 16, Commitments and Contingencies, in the notes to the consolidated financial statements contained in Part II, Item 8 of this filing. On behalf of certain clients, the Company lends securities to highly rated banks and broker-dealers. In these securities lending transactions, the borrower is required to provide and maintain collateral at or above regulatory minimums. Securities on loan are marked to market daily to determine if the borrower is required to pledge additional collateral. In connection with securities lending transactions, BlackRock has agreed to indemnify certain securities lending clients against potential loss resulting from a borrower's failure to fulfill its obligations under the securities lending agreement should the value of the collateral pledged by the borrower at the time of default be insufficient to cover the borrower's obligation under the securities lending agreement. The amount of securities on loan as ofDecember 31, 2020 and subject to this type of indemnification was$270 billion . In the Company's capacity as lending agent, cash and securities totaling$289 billion was held as collateral for indemnified securities on loan atDecember 31, 2020 . The fair value of these indemnifications was not material atDecember 31, 2020 . While the collateral pledged by a borrower is intended to be sufficient to offset the borrower's obligations to return securities borrowed and any other amounts owing to the lender under the relevant securities lending agreement, in the event of a borrower default, the Company can give no assurance that the collateral pledged by the borrower will be sufficient to fulfill such obligations. If the amount of such pledged collateral is not sufficient to fulfill such obligations to a client for whom the Company has provided indemnification, BlackRock would be responsible for the amount of the shortfall. These indemnifications cover only the collateral shortfall described above, and do not in any way guarantee, assume or otherwise insure the investment performance or return of any cash collateral vehicle into which securities lending cash collateral is invested. Compensation and Benefit Obligations. The Company has various compensation and benefit obligations, including bonuses, commissions and incentive payments payable, defined contribution plan matching contribution obligations, and deferred compensation arrangements, that are excluded from the contractual obligations and commitments table above. Accrued compensation and benefits atDecember 31, 2020 totaled$2,500 million and included annual incentive compensation of$1,685 million , deferred compensation of$428 million and other compensation and benefits related obligations of$387 million . Substantially all of the incentive compensation liability was paid in the first quarter of 2021, while the deferred compensation obligations are payable over various periods, with the majority payable over periods of up to three years. Acquisition. OnFebruary 1, 2021 , the Company completed the acquisition of 100% of the equity interests ofAperio , a pioneer in customizing tax-optimized index equity separately managed accounts ("SMAs") for approximately$1.1 billion in cash, using existing cash resources. The acquisition ofAperio increased BlackRock's SMA assets and is expected to expand the breadth of the Company's capabilities via tax-managed strategies across factors, broad market indexing, and investor Environmental, Social, and Governance preferences across all asset classes. In connection with the acquisition, the Company recorded an initial estimate of purchase price allocation at the date of the transaction primarily related to goodwill of approximately$0.8 billion and$0.3 billion of finite-lived intangible assets (mainly customer relationships), which will be amortized over their estimated lives, which range from 10 to 12 years, with a weighted-average estimated life of approximately 10 years. The goodwill recognized in connection with the acquisition is primarily attributable to anticipated synergies from the transaction. The amount of goodwill expected to be deductible for tax purposes is approximately$0.5 billion . 53 --------------------------------------------------------------------------------
CRITICAL ACCOUNTING POLICIES
The preparation of consolidated financial statements in conformity with GAAP 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 revenue and expense during the reporting periods. Actual results could differ significantly from those estimates. Management considers the following critical accounting policies important to understanding the consolidated financial statements. For a summary of these and additional accounting policies see Note 2, Significant Accounting Policies, in the notes to the consolidated financial statements included in Part II, Item 8 of this filing.
Consolidation
In the normal course of business, the Company is the manager of various types of
sponsored investment vehicles. The Company performs an analysis for investment
products to determine if the product is a VIE or a VRE. Assessing whether an
entity is a VIE or a VRE involves judgment and analysis. Factors considered in
this assessment include the entity's legal organization, the entity's capital
structure and equity ownership, and any related party or de facto agent
implications of the Company's involvement with the entity. Investments that are
determined to be VREs are consolidated if the Company can exert control over the
financial and operating policies of the investee, which generally exists if
there is greater than 50% voting interest. Investments that are determined to be
VIEs are consolidated if the Company is the primary beneficiary ("PB") of the
entity. BlackRock is deemed to be the PB of a VIE if it has the power to direct
the activities that most significantly impact the entities' economic performance
and has the obligation to absorb losses or the right to receive benefits that
potentially could be significant to the VIE. The Company generally consolidates
VIEs in which it holds an economic interest of 10% or greater and deconsolidates
such VIEs once equity ownership falls below 10%. See Note 6, Consolidated
Sponsored Investment Products, in the notes to the consolidated financial
statements contained in Part II, Item 8 of this filing for more information.
Investments
Equity Method Investments. For equity investments where BlackRock does not control the investee, and where it is not the PB of a VIE, but can exert significant influence over the financial and operating policies of the investee, the Company follows the equity method of accounting. The evaluation of whether the Company exerts control or significant influence over the financial and operational policies of its investees requires significant judgment based on the facts and circumstances surrounding each individual investment. Factors considered in these evaluations may include the type of investment, the legal structure of the investee, the terms and structure of the investment agreement, including investor voting or other rights, the terms of BlackRock's advisory agreement or other agreements with the investee, any influence BlackRock may have on the governing board of the investee, the legal rights of other investors in the entity pursuant to the fund's operating documents and the relationship between BlackRock and other investors in the entity. BlackRock's equity method investees that are investment companies record their underlying investments at fair value. Therefore, under the equity method of accounting, BlackRock's share of the investee's underlying net income predominantly represents fair value adjustments in the investments held by the equity method investees. BlackRock's share of the investee's underlying net income or loss is based upon the most currently available information and is recorded as nonoperating income (expense) for investments in investment companies, or as advisory and other revenue for certain corporate minority investments, which are recorded in other assets, since such investees are considered to be an extension of BlackRock's core business. AtDecember 31, 2020 , the Company had$1,081 million and$399 million of equity method investments, included in investments and other assets, respectively, and atDecember 31, 2019 , the Company had$943 million and$531 million of equity method investments included in investments and other assets, respectively. Other nonequity method corporate minority investments. Other nonequity method corporate minority investments are recorded within other assets on the consolidated statements of financial condition. AtDecember 31, 2020 and 2019, these investments totaled$272 million and$282 million , respectively, and included investments in equity securities, which are generally measured at fair value or under the measurement alternative to fair value for nonmarketable securities. Changes in value of these securities are recorded in nonoperating income (expense) on the consolidated statements of income. See Note 2, Significant Accounting Policies, in the notes to the consolidated financial statements contained in Part II, Item 8 of this filing for more information. Impairments of Investments. Evaluation of impairments involves significant assumptions and management judgments, which could differ from actual results, and these differences could have a material impact on the consolidated statements of income. See Note 2, Significant Accounting Policies, in the notes to the consolidated financial statements contained in Part II, Item 8 of this filing for more information.
Fair Value Measurements
The Company's assessment of the significance of a particular input to the fair value measurement according to the fair value hierarchy (i.e., Level 1, 2 and 3 inputs, as defined) in its entirety requires judgment and considers factors specific to the financial instrument. See Note 2, Significant Accounting Policies, in the consolidated financial statements contained in Part II, Item 8 of this filing for more information on fair value measurements. Changes in Valuation. Changes in value on$6,919 million of investments will impact the Company's nonoperating income (expense),$404 million are held at cost or amortized cost and the remaining$627 million relates to carried interest, which will not impact nonoperating income (expense). AtDecember 31, 2020 , changes in fair value of$4,372 million of consolidated sponsored investment products will impact BlackRock's net income (loss) attributable to NCI on the consolidated statements of income. BlackRock's net exposure to changes in fair value of consolidated sponsored investment products was$1,886 million .
Leases
The Company determines if a contract is a lease or contains a lease at
inception. The identification of whether a contract contains a lease requires
judgment, including determining whether there are identified assets in the
contract that the Company has control over for a specified period of time in
exchange for consideration.
54
--------------------------------------------------------------------------------
Fixed lease payments are included in the measurement of ROU assets and lease
liabilities on the consolidated statement of financial condition. The Company
recognizes ROU assets and lease liabilities based on the present value of these
future lease payments over the lease term at the commencement date discounted
using the Company's incremental borrowing rate ("IBR"). Management judgment is
required in determining the Company's IBR, including assessing the Company's
credit rating using various financial metrics, such as revenue, operating margin
and revenue growth, and, as appropriate, performing market analysis of yields on
publicly traded bonds (secured or unsecured) of comparable companies. See Note
2, Significant Accounting Policies, in the notes to the consolidated financial
statements contained in Part II, Item 8 of this filing for more information on
leases.
The value of advisory contracts acquired in business acquisitions to manage AUM in proprietary open-end investment funds as well as collective trust funds without a specified termination date are classified as indefinite-lived intangible assets. The assignment of indefinite lives to such investment fund contracts is based upon the assumption that there is no foreseeable limit on the contract period to manage these funds due to the likelihood of continued renewal at little or no cost. In addition, trade names/trademarks are considered indefinite-lived intangibles if they are expected to generate cash flows indefinitely.Goodwill represents the cost of a business acquisition in excess of the fair value of the net assets acquired. Indefinite-lived intangible assets and goodwill are not amortized. Finite-lived management contracts, which relate to acquired separate accounts and funds, investor/customer relationships, and technology related assets that are expected to contribute to the future cash flows of the Company for a specified period of time are amortized over their remaining expected useful lives, which, atDecember 31, 2020 ranged from 1 to 10 years with a weighted-average remaining estimated useful life of seven years.Goodwill . The Company assesses its goodwill for impairment at least annually, considering such factors as the book value and the market capitalization of the Company. The impairment assessment performed as ofJuly 31, 2020 indicated no impairment charge was required. The Company continues to monitor its book value per share compared with closing prices of its common stock for potential indicators of impairment. AtDecember 31, 2020 , the Company's common stock closed at$721.54 , which exceeded its book value of approximately$231.31 per share.
Indefinite-lived and finite-lived intangibles. The Company performs assessments to determine if any intangible assets are impaired and whether the indefinite-life and finite-life classifications are still appropriate.
In evaluating whether it is more likely than not that the fair value of indefinite-lived intangibles is less than carrying value, BlackRock performed certain quantitative assessments and assessed various significant qualitative factors including AUM, revenue basis points, projected AUM growth rates, operating margins, tax rates and discount rates. In addition, the Company considered other factors including: (i) macroeconomic conditions such as a deterioration in general economic conditions, limitations on accessing capital, fluctuations in foreign exchange rates, or other developments in equity and credit markets; (ii) industry and market considerations such as a deterioration in the environment in which the Company operates, an increased competitive environment, a decline in market-dependent multiples or metrics, a change in the market for an entity's services, or regulatory, legal or political developments; and (iii) the Company-specific events, such as a change in management or key personnel, overall financial performance and litigation that could affect significant inputs used to determine the fair value of the indefinite-lived intangible asset. If an indefinite-lived intangible is determined to be more likely than not impaired, then the fair value of the asset is compared with its carrying value and any excess of the carrying value over the fair value would be recognized as an expense in the period in which the impairment occurs. For finite-lived intangible assets, if potential impairment circumstances are considered to exist, the Company will perform a recoverability test, using an undiscounted cash flow analysis. Actual results could differ from these cash flow estimates, which could materially impact the impairment conclusion. If the carrying value of the asset is determined not to be recoverable based on the undiscounted cash flow test, the difference between the book value of the asset and its current fair value would be recognized as an expense in the period in which the impairment occurs. In addition, management judgment is required to estimate the period over which finite-lived intangible assets will contribute to the Company's cash flows and the pattern in which these assets will be consumed. A change in the remaining useful life of any of these assets, or the reclassification of an indefinite-lived intangible asset to a finite-lived intangible asset, could have a significant impact on the Company's amortization expense, which was$106 million ,$97 million and$50 million for 2020, 2019 and 2018, respectively. In 2020, 2019 and 2018, the Company performed impairment tests, including evaluating various qualitative factors and performing certain quantitative assessments. The Company determined that no impairment charges were required and that the classification of indefinite-lived versus finite-lived intangibles was still appropriate and no changes were required to the expected lives of the finite-lived intangibles. The Company continuously monitors various factors, including AUM, for potential indicators of impairment.
Contingent Consideration Liabilities
In connection with certain acquisitions, BlackRock is required to make
contingent payments, subject to achieving specified performance targets. The
fair value of this contingent consideration is estimated at the time of
acquisition closing and is included in other liabilities on the consolidated
statements of financial condition. As the fair value of the expected payments
amount subsequently changes, the contingent consideration liability is adjusted,
resulting in contingent consideration fair value adjustments recorded within
general and administration expense of the consolidated statements of
income. Cash payments up to the acquisition date fair value amount of the
contingent consideration liability are reflected as financing activities with
excess (if any) cash payments classified in operating activities. Any cash
payments made soon after the acquisition date will be classified in investing
activities.
55
--------------------------------------------------------------------------------
Revenue Recognition
Revenue is recognized upon transfer of control of promised services to customers in an amount to which the Company expects to be entitled in exchange for those services. The Company enters into contracts that can include multiple services, which are accounted for separately if they are determined to be distinct. Management judgment is required to identify distinct services and involves assessing such factors as whether the promised services significantly modify or customize one another or are highly interdependent or interrelated. Management judgment may be also required when determining the following: when variable consideration is no longer probable of significant reversal (and hence can be included in revenue); whether certain revenue should be presented gross or net of certain related costs; when a promised service transfers to the customer; and the applicable method of measuring progress for services transferred to the customer over time. Many of BlackRock's promised services represent a series of distinct services (e.g., investment advisory services) in which the associated variable consideration (e.g., management fees) is allocated to specific days of service as opposed to over the entire contract term. Investment advisory and administration fees are recognized as the services are performed over time because the customer is receiving and consuming the benefits as they are provided by the Company. Fees are primarily based on agreed-upon percentages of AUM and recognized for services provided during the period, which are distinct from services provided in other periods. Such fees are affected by changes in AUM, including market appreciation or depreciation, foreign exchange translation and net inflows or outflows. AUM represents the broad range of financial assets the Company manages for clients on a discretionary basis pursuant to investment management and trust agreements that are expected to continue for at least 12 months. In general, reported AUM reflects the valuation methodology that corresponds to the basis used for determining revenue (for example, net asset values). The Company earns revenue by lending securities on behalf of clients, primarily to highly rated banks and broker-dealers. The securities loaned are secured by collateral, generally ranging from 102% to 112% of the value of the loaned securities. For 2020, 2019 and 2018, securities lending revenue earned by the Company totaled$652 million ,$617 million and$627 million , respectively, and is recorded in investment advisory, administration and securities lending revenue on the consolidated statements of income. Investment advisory, administration fees and securities lending revenue are reported together as the fees for these services often are agreed upon with clients as a bundled fee. The Company receives investment advisory performance fees, including incentive allocations (carried interest) from certain actively managed investment funds and certain separately managed accounts. These performance fees are dependent upon exceeding specified relative or absolute investment return thresholds, which may vary by product or account, and include monthly, quarterly, annual or longer measurement periods. Performance fees, including carried interest, are recognized when it is determined that they are no longer probable of significant reversal (such as upon the sale of a fund's investment or when the amount of AUM becomes known as of the end of a specified measurement period). Given the unique nature of each fee arrangement, contracts with customers are evaluated on an individual basis to determine the timing of revenue recognition. Significant judgement is involved in making such determination. Performance fees typically arise from investment management services that began in prior reporting periods. Consequently, a portion of the fees the Company recognizes may be partially related to the services performed in prior periods that meet the recognition criteria in the current period. At each reporting date, the Company considers various factors in estimating performance fees to be recognized, including carried interest. These factors include but are not limited to whether: (1) the fees are dependent on the market and thus are highly susceptible to factors outside the Company's influence; (2) the fees have a large number and a broad range of possible amounts; and (3) the funds or separately managed accounts have the ability to invest or reinvest their sales proceeds. The Company is allocated carried interest from certain alternative investment products upon exceeding performance thresholds. The Company may be required to reverse/return all, or part, of such carried interest allocations/distributions depending upon future performance of these products. Carried interest subject to such clawback provisions is recorded in investments or cash and cash equivalents to the extent that it is distributed, on its consolidated statements of financial condition. The Company records a liability for deferred carried interest to the extent it receives cash or capital allocations related to carried interest prior to meeting the revenue recognition criteria. AtDecember 31, 2020 and 2019, the Company had$584 million and$483 million , respectively, of deferred carried interest recorded in other liabilities on the consolidated statements of financial condition. A portion of the deferred carried interest may also be paid to certain employees. The ultimate timing of the recognition of performance fee revenue and related compensation expense, if any, for these products is unknown. See Note 17, Revenue, in the notes to the consolidated financial statements for detailed changes in the deferred carried interest liability balance for 2020 and 2019.
Fees earned for technology services are primarily recorded as services are performed and are generally determined using the value of positions on the Aladdin platform or on a fixed-rate basis. Revenue derived from the sale of software licenses is recognized upon the granting of access rights.
Distribution and service fees earned for distributing investment products and
providing support services to investment portfolios, are based on AUM, and are
recognized when the amount of fees is known.
Adjustments to revenue arising from initial estimates recorded historically have
been immaterial since the majority of BlackRock's investment advisory and
administration revenue is calculated based on AUM and since the Company does not
record performance fee revenue until: (1) performance thresholds have been
exceeded and (2) management determines the fees are no longer probable of
significant reversal.
56
--------------------------------------------------------------------------------Income Taxes
Deferred income tax assets and liabilities are recognized for future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases using currently enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. Significant management judgment is required in estimating the ranges of possible outcomes and determining the probability of favorable or unfavorable tax outcomes and potential interest and penalties related to such unfavorable outcomes. Actual future tax consequences relating to uncertain tax positions may be materially different than the Company's current estimates. AtDecember 31, 2020 , BlackRock had$940 million of gross unrecognized tax benefits, of which$565 million , if recognized, would affect the effective tax rate. Management is required to estimate the timing of the recognition of deferred tax assets and liabilities, make assumptions about the future deductibility of deferred income tax assets and assess deferred income tax liabilities based on enacted tax rates for the appropriate tax jurisdictions to determine the amount of such deferred income tax assets and liabilities. AtDecember 31, 2020 , the Company had deferred income tax assets of$304 million and deferred income tax liabilities of$3,673 million on the consolidated statement of financial condition. Changes in deferred tax assets and liabilities may occur in certain circumstances, including statutory income tax rate changes, statutory tax law changes, changes in the anticipated timing of recognition of deferred tax assets and liabilities or changes in the structure or tax status of the Company. The Company assesses whether a valuation allowance should be established against its deferred income tax assets based on consideration of all available evidence, both positive and negative, using a more likely than not standard. The assessment considers, among other matters, the nature, frequency and severity of recent losses, forecast of future profitability, the duration of statutory carry back and carry forward periods, the Company's experience with tax attributes expiring unused, and tax planning alternatives. The Company records income taxes based upon its estimated income tax liability or benefit. The Company's actual tax liability or benefit may differ from the estimated income tax liability or benefit. The Company had current income taxes receivables of approximately$175 million and current income taxes payables of$131 million atDecember 31, 2020 .
Accounting Developments
For accounting pronouncements that the Company adopted during the year endedDecember 31, 2020 , see Note 2, Significant Accounting Policies, in the notes to the consolidated financial statements contained in Part II, Item 8 of this filing. 57
--------------------------------------------------------------------------------
© Edgar Online, source
