When Charlie Merrill pioneered the investment business that defined his life's work, he set forth principles that guided this firm and established the standards for investing throughout America and the world. For nearly a century, the dedication of Merrill Lynch to the principles of client service, integrity, excellence and teamwork built a company whose culture and leadership stood strongly and resolutely through years of prosperity and adversity. I am honored to be the CEO of this great global franchise. I am excited by the challenge to serve our clients and lead our company forward through these turbulent times.

In my first letter to you, our shareholders, I would like to address three topics, starting with our results in 2007 and my priorities during my early months. Then I will review the performance of each of our businesses. I will close by looking ahead at goals and opportunities for our clients and our company. While U.S. economic prospects are uncertain, we anticipate growth in our businesses in 2008, at home and across the world.

2007 RESULTS

Let me begin with 2007. While many of our businesses produced excellent, some even record-breaking results, we suffered the worst performance in the history of Merrill Lynch. We reported a net loss from continuing operations for the full year of $8.6 billion, or $10.73 per fully diluted share, following write-downs resulting from our exposures to the U.S. mortgage market in U.S. ABS CDOs and sub-prime residential mortgages and securities.

FOUR IMMEDIATE PRIORITIES

That must never happen again. Since my arrival, we have moved to restructure risk management and to reposition the firm for growth by meeting four priorities.

First, anticipating the possibility of a liquidity squeeze at year end, we reduced the size of our balance sheet and freed up additional liquidity and more than $2 billion of capital through the sale of non-core assets. We ended the year with the holding company's excess liquidity of nearly $80 billion.

Our second priority was to bolster our capital base. We raised $12.8 billion, which exceeded what we lost, and we could have raised substantially more. I am happy to report that the rating agencies affirmed our credit ratings, and we are well capitalized. We can now set our sights on growing our businesses and leveraging global opportunities. Let me also note that our new shareholders represent a diverse group of long-term, passive, strategic investors who can help us in key markets.