Key questions and answers from the fourth quarter earnings call conducted by Merrill Lynch & Co on January 17, 2008.

Glenn Schorr (UBS): What percentage of carry trades and illiquid assets might reduce the overall balance sheet?

John A. Thain: One piece is reducing the carry trades which we are going to do over time. The second piece will be to move more of the illiquid assets into third party funds. The first sale was about $10 billion and there is another $4 billion to go.

Glenn Schorr (UBS): Have you written down your illiquids to a point where you could transfer them into a third party fund at fair value?

John A. Thain: Yes, although most of the write-downs are in CDOs and sub-prime, so those unfortunately will not go into third-party funds. We are very comfortable that these are at levels at which we believe they are either saleable or actually represent good value.

Glenn Schorr (UBS): Comment on your presence in other areas like structured credit leverage and finance?

John A. Thain: On the structured credit side, that will be dramatically reduced. On the leveraged finance area, we are already in a very good spot but we will add where it makes sense exposure to the leverage finance area.

Roger Freeman (Lehman Brothers): Can you talk a little bit to the hedges that you have around the $30 billion of gross exposures still on in CDOs, ABS CDOs?

Nelson Chai: Where the book is marked right now reflects as at as best we could where we think those positions were. We triangulated around a bunch of different modeling assumptions and a lot of obviously external metrics to come up with what we thought was the right range, if you will.

Roger Freeman (Lehman Brothers): Were there any assets sold off during the quarter?

John A. Thain: There were a few but very small, although the ones that we did sell were right around where they were marked.

Roger Freeman (Lehman Brothers): What is the game plan for reducing exposures over time?

If the market becomes more liquid as we get into the first quarter we can sell more of them but focusing on the gross number without giving credit to the hedges is not the right way to look at it because we do have $23 billion of shorts, plus we also have a short in our trading book. And the net exposure is still dramatically reduced from where it was at the third quarter.

Roger Freeman (Lehman Brothers): At what level are you carrying any ACA hedges at this point?

John A. Thain: We are reserving against ACA dollar for dollar, so it I s 100% reserved.

Roger Freeman (Lehman Brothers): Is there a charge related to the acceleration of the stock vesting? And how much is that?

Nelson Chai: That would have been small, about $183 million. We had to take the accrual based on where we were going to pay people across the business franchises, with the exception of parts of our fixed income business, the businesses had record years and so we needed to compensate people for a lot of reasons, including retention accordingly.

Roger Freeman (Lehman Brothers): How much was the stock/cash mix this year compared to last year in bonuses?

John A. Thain: The mix on the bonus part was approximately 60-40.

Mike Mayo (Deutsche Bank): Any thoughts about further changes in the business mix?

John A. Thain: The only other specific asset that we have is our 20% stake in Bloomberg, which we carry at zero and we are not looking to sell that.