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New Capabilities and Expanded Reach

We have built a host of new capabilities to better meet client needs, extended our geographic reach and, at the same time, continued investing to enhance our traditional strengths.

Businesses that have been significantly built up include commercial real estate, commodities, foreign exchange, prime brokerage, principal investing and leveraged finance. Geographically, we expanded in some of the world's most dynamic economies. We announced an increase in our ownership position in India's leading investment bank, DSP Merrill Lynch, from 40 percent to 90 percent, giving us an unparalleled position in India's burgeoning capital marketplace. We participated in a consortium that took a 10 percent stake in the Bank of China, providing an excellent opportunity to participate in China's phenomenal growth. And in a resurgent Japan, we announced a partnership with Bank of Tokyo Mitsubishi UFJ (BTMU), a leading Japanese bank, to gain greater access to a wealth management market that boasts the world's second highest concentration of people with one million dollars or more of investable assets.

Attracting Top Talent

The primary focus of our ongoing growth strategy is organic investments, since we can build on our framework and foundation. Ultimately, it is important for us to be able to carve out a path based primarily on our own capabilities. To that end, we've invested significantly in technology and new products to enhance the competitiveness of all three businesses.

More importantly though, we have added remarkable talent to our franchise since mid-2003, with most of it occurring in the last 18 months. In GPC, we increased financial advisor (FA) productivity and added more than 1,800 FAs, during a period when most of our major competitors' financial advisor forces have grown at a much slower rate or gotten smaller. We have scale and strong operating leverage in GPC. By recruiting additional financial advisors, we can add new clients, give them access to our vast array of products, grow revenues and enhance profitability. In MLIM, we significantly expanded our non-proprietary sales distribution team in the Americas and added several new management and investment professionals. In GMI, excluding acquisitions, we added more than 1,600 people, including more than 160 Managing Directors and nearly 200 Directors. These totals are net figures — across the business and across the globe — upgrading our talent, bringing in new expertise and adding scale in the asset classes and geographies that we've targeted for growth. The ultimate impact of these hires in terms of revenues is yet to be fully realized.