The importance of an unconditional value system and strong corporate culture was starkly demonstrated by the issues our industry, and indeed the entire business community, faced this past year. At times, the integrity of Merrill Lynch was questioned — and in each instance we responded as forcefully as possible to reassert our leadership in the marketplace and protect our reputation.

Merrill Lynch was built on an inviolable set of Principles: Client Focus, Respect for the Individual, Teamwork, Responsible Citizenship and Integrity. These values form the basis of our culture. They are a covenant among our employees, clients and shareholders.

As a financial services company, we must lead by example. In the last year, Merrill Lynch helped set a new standard for the objectivity and independence of investment research. Long a leader in corporate governance, we, along with other members of a special New York Stock Exchange committee, helped to shape the corporate governance recommendations proposed by the Exchange. We also are in compliance with Sarbanes-Oxley and other regulations designed to strengthen corporate governance and to improve the accuracy and reliability of corporate disclosure.

Merrill Lynch remains one of the world's most powerful franchises with preeminent market position, scale and financial strength. These are tremendous advantages; we will be judged by how we make use of them.

To achieve excellence and integrity in all that we do, we are building a performance-based culture — one that defines how we think, how we behave and how we measure success. Intentions are good. Results are what matter.

Our Future Merrill Lynch remains one of the world's most powerful franchises — with preeminent market position, scale and financial strength. These are tremendous advantages; we will be judged by how we make use of them. Every day, people throughout Merrill Lynch turn the idea of excellence into reality — each person making the business stronger. So, too, each leader builds on the accomplishments of those who came before.

During the past six years, as Chairman & Chief Executive Officer, David Komansky skillfully led Merrill Lynch through volatile business cycles to an unprecedented market presence around the world. All of us are grateful for his leadership and many contributions.

We face an uncertain year from a position of strength: in our financial foundation, client relationships, diverse businesses and, most importantly, the extraordinary talent of our people. More than reacting to a changing world, we are committed to leading change — setting new standards for the industry, creating a more disciplined, agile and accountable culture, and generating sustained, meaningful value for clients, shareholders and employees, now and in the future.

E. Stanley O'Neal Chief Executive Officer March 4, 2003