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Financial Highlights 4 consecutive years of record earnings; 47% increase in annual diluted earnings per share. Our rapidly expanding franchise outside of the U.S. generated revenue growth of 42% in 2006, increasing non-U.S. revenues to 37% of total, the highest proportion in our history. We significantly improved our return on equity to 21.3% in 2006, up 5.3 percentage points from 2005, driven by strong earnings growth and a record $9 billion of stock repurchases. Since 2004, we have announced more than 30 acquisitions, alliances and other strategic investments to accelerate our growth across a broad range of businesses and geographies.

Revenues, earnings, earnings per share and return on equity all grew strongly as a result of our continued emphasis on broadening the asset classes and capabilities we offer clients, expanding our geographic footprint, diversifying our revenues, managing and deploying our capital more effectively and investing in top talent from within and outside the company. Our financial results underscore that progress:

Net earnings of $7.5 billion, up 47% from 2005 and 69% from 2004; Earnings per diluted share were $7.59; Net revenues increased 33% to $34.7 billion; Pre-tax profit margin rose to 30.1%; Return on common equity (ROE) increased to 21.3%; Book value per common share increased to $41.35; 2006 dividends on common stock increased 32% to $1.00 per share

Each of our geographic regions generated impressive growth and, following what we see as a long-term trend, we recorded the largest percentage of revenue from non-U.S. business in firm history. The growth was also broad-based in terms of business mix with strong year-over-year results reported in Global Markets & Investment Banking and Global Wealth Management, which includes our Global Private Client and Global Investment Management businesses.

Beyond Financial Performance

But to me, our success is about more than just financial performance. It is also about the company's strategic progress. We are better positioned than ever to meet the demands of the marketplace. We've accomplished this by continuing to work on two fronts: creating a set of capabilities that enable our clients to capture opportunities wherever and whenever they occur; and building a culture that allows us to fully capitalize on those capabilities.

Building Our Capabilities

Perhaps the most significant achievement for the company last year was our successful combination of Merrill Lynch Investment Managers (MLIM) with BlackRock, Inc. This merger created an asset management firm with global reach, $1 trillion in assets under management, a healthy balance between equity and fixed income and an attractive balance of individual and institutional clients. Importantly, our shareholders maintain a significant investment in the new BlackRock, a company almost twice the size of MLIM with a powerful growth trajectory.

We also took a number of steps to further round out our capabilities. We acquired First Franklin, one of the nation's leading originators of residential mortgage loans, adding scale to our mortgage platform and providing a robust source of origination for our securitization and trading operations. We acquired Petrie Parkman & Co., a leading investment bank for the North American oil and gas industry and a perfect complement to our rapidly growing commodities platform. We reorganized our institutional fixed income division to better manage risks, improve efficient use of the firm's balance sheet and enhance growth prospects, and we continued to expand our private equity activities with several major investments in leading companies. On the wealth management side, we became fully operational with our joint venture in Japan, and we acquired a company called Equity Methods, adding increased financial reporting and forecasting capabilities to our retirement group.

These advancements and others build on all that we've done over the last few years — the expense discipline, the repositioning of the business, the investments in people and technology, and more than 30 acquisitions, joint ventures and other transactions. We are continually evolving our platform to stay ahead of the marketplace and our clients' needs.

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