CORPORATE AND INSTITUTIONAL CLIENT GROUP

Unparalleled Global Franchises

Few businesses are changing more profoundly than investment banking and capital markets. Globalization, higher client expectations and new technologies have transformed our competitive landscape. Preeminence today means having an unmatched ability to enhance local client relationships by delivering global advisory and product capabilities in any market environment.

REINFORCING LEADERSHIP POSITIONS
Our Corporate and Institutional Client Group (CICG) comprises one of the world's foremost capital markets and investment banking franchises. Our ability to provide expert advice, to customize innovative financing solutions to our clients' most complex needs, and to distribute debt and equity securities more broadly and rapidly than anyone else are the foundation of our leadership positions in securities origination, trading and advisory services.

CICG had an outstanding year in 2000. Despite difficult market conditions during the second half of the year, we achieved significant increases in revenues and net earnings, with particularly strong performance from our equities business. We retained our No. 1 ranking in equity and debt origination globally, and launched key strategic initiatives to position our business for future growth.

BUILDING WORLD-CLASS CAPABILITIES
Among the year's highlights, we built a world-class technology, media and telecommunications (TMT) investment banking capability, achieving a No. 2 industry ranking in equity and equity-linked underwriting. Merrill Lynch's technology research team won top honors in Institutional Investor's annual "All-Star Research Team" poll.

Landmark investment banking mandates included transactions for some of the world's largest telecommunications companies, such as AT&T Wireless, British Telecommunications, NTT and China Mobile. China Mobile represented the year's largest emerging markets offering. We advised and provided financing for longstanding U.S. client Solectron on its acquisition of Singapore's Natsteel Electronics, and we sole-managed the largest convertible bond in history - a $3.45 billion issue for Tyco International - utilizing LYONs ^® , an innovative financing structure pioneered by Merrill Lynch.

We were also joint lead manager of Latin America's largest equity placement ever, for Petrobras. For RWE, an international multi-utility group based in Germany, we served as sole advisor on the acquisition of Britain's Thames Water and executed the related risk management and financing transactions.

TRADING FROM A POSITION OF STRENGTH In the capital markets, we dramatically expanded our Nasdaq equity trading capacity with the purchase of market-maker Herzog Heine Geduld. We now make markets in 8,000 Nasdaq and over-the-counter stocks, with much of that business coming from broker-dealers and other wholesale clients. We also created a parallel equity wholesaling business in Europe, MLX MarketEdgeSM , which provides broker-dealer clients fast and reliable trading in 15,000 European, U.S. and U.K. equities. Our Debt Markets team maintained its position as No.1 global underwriter, while building an integrated risk management business to help insulate clients from credit, currency, inflation and environmental risks.

Perhaps most important, our Direct Markets group is in the vanguard of the technology revolution in capital markets, creating the next generation of direct and online institutional capabilities. Our browser-based MLXSM portal provides a single electronic window through which investors can access any product, anywhere in the trading cycle, anywhere in the world. Our leadership of joint ventures - including BondBook, The MuniCenterTM and TheMarkets.com - and our partnerships with leading technology providers are accelerating the pace of positive change within our firm and the industry. In total, Merrill Lynch institutional clients made a record $1.9 trillion in trades over the firm's e-commerce platforms in 2000. Tomorrow's institutional investors will require a superior class of global investment bank, with a complete set of integrated solutions. Looking forward, we have the right human and technological resources to deliver the value-added advice and service that - in market after market, across more than 30 countries - set Merrill Lynch apart.

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