A Strong Financial Performance In 2004, we delivered:

• Net revenues of $22 billion, up 11% from the $19.9 billion the firm generated in 2003.
• Pretax margin of 26.5%, a record level for Merrill Lynch.
• Net earnings of $4.4 billion, the highest the firm has ever reported, up 16% from
  $3.8 billion in 2003.
• Earnings per diluted share of $4.38, a 13% increase over $3.87 per share
  the prior year.

All three of our businesses — Global Markets & Investment Banking (GMI), Global Private Client (GPC) and Merrill Lynch Investment Managers (MLIM) — contributed to these results. Each achieved higher net revenues and pretax earnings in 2004 than in 2003. And our performance was as consistently impressive across the world as it was across our businesses, with each of our geographic regions increasing net revenues year-over-year.

Investing for Growth In many respects, our financial performance was less important than the investments we continue to make to strengthen our businesses and enhance our ability to produce growing, sustainable earnings over the long run.

We took a number of steps to round out our product and service capabilities. We made targeted acquisitions and successfully recruited new expertise and management depth in key businesses like equities, investment banking and the consumer finance activities of GPC. We also focused on employee development. Throughout the firm, we are formally identifying and advancing the leaders on whose shoulders rests the future of Merrill Lynch.

Operating in a Challenging Environment We managed well throughout a year characterized by varying market conditions. We started 2004 with a strong first quarter, in which all areas of the markets were performing well and each of our businesses benefited. Then the environment changed. Through much of the middle of the year we saw a noticeable slowdown in financial markets. Uncertainty over interest rates, the price of oil, the U.S. presidential election, geopolitical risk and equity valuations combined to reduce client activity levels. Institutional investors began sitting on the sidelines. At the same time, very low levels of volatility reduced trading opportunities even further. Then the last quarter showed renewed strength with a considerable uptick in activity and opportunity.

In 2004, we successfully navigated these different market environments without losing momentum in meeting our goals. It was also a year that validated the strategies we began implementing more than three years ago — investing to diversify revenues and better meet client needs, while maintaining strict operating discipline and keeping a keen eye on the bottom line.

Despite the ups and downs, we were able to generate a consistent level of earnings, while making progress on every front that we had targeted — investing for growth firmwide. We also embarked on an aggressive capital management program with the repurchase of $3 billion of equity capital during the year.