Key questions and answers from the first quarter fiscal 2008 earnings call conducted by Merrill Lynch & Co Inc. on April 17, 2008.

Glenn Schorr (UBS): Concerning the securities in the bank portfolio, a lot of the marks go to the OCI line. What differentiates a mark and the marking to market in the securities portfolio that would go to the P&L versus anything else?

Nelson Chai: In our investment portfolio, we've invested in some ABS, some prime, but mostly Alt-As. We've done our analysis of the positions, and we believe we have the ability and intent to hold until maturity, which we intend to do. There obviously are differences between the individual pieces. We continue to monitor each of the positions if there are any price fluctuations. This is meant to determine whether or not we would maintain them in OCI or whether or not they move over. In the quarter, we had about $400 million that we took into OTTI.

Glenn Schorr (UBS): Can you comment on what the gross and net adjusted leverage ratios were?

Nelson Chai: The adjusted leverage ratio got reduced from about 17.7 times at year end to 16.2 times.

Glenn Schorr (UBS): There's pressure that leverage ratios need to move lower, as imperfect a measure as it is. What is your comment?

Nelson Chai: We'll continue to focus on reducing our illiquid positions. We've taken our risk weighted assets down 7% in the quarter. It's a big focus of ours, and it also is one of the drivers and we continue to do a very good job on our risk weighted assets. The line for well capitalized is 10% and we are doing very well relative to that.

Glenn Schorr (UBS): There was a large refinancing need in the last quarter, meaning debt coming due over the balance of 2008. Can you give update on how much has been done, your plans for the rest of the year on the debt side and how much of the higher funding costs are direct impact versus an offset on the asset side?

Nelson Chai: The excess liquidity pool was $82 billion at quarter end and it's greater than our funding obligations. In the 10K we talked about $44 billion of debt maturities coming due in 2008. We obviously continue to roll commercial paper and repurchase agreements, but we obviously will continue to be active in the markets and look for opportunities. We talked about capitalization and debt. We have funded some of the stuff by reducing the balance sheet and we continue to do that. In the first quarter, given where the credit markets were, the returns are much better to do that, and obviously we focus very much on continuing to do both. We’ll continue to look at reducing the balance sheet, which obviously reduces the need for the funding, but importantly, we will be looking at the markets in the back quarters of the year.

Michael Mayo (Deutsche Bank): Concerning the decline in the brokerage margin, you mentioned that on a core basis, it would have been closer to 22% to 23%. Are you looking to improve that or you need better markets for that to improve?

Nelson Chai: There's a seasonal thing in terms of payroll taxes and where some of that stuff comes in. We also mentioned that we took an $80 million reserve against a client receivable as well. We're always looking to improve our margin.

Michael Mayo (Deutsche Bank): BlackRock's worth $13 billion and yet it's on the balance sheet for $8 billion. What's the unique synergy that you need to maintain that investment, and why not monetize that unrealized gain of $5 billion?

John A. Thain: There's a great relationship between our two companies and the ability for them to create products that we then distribute through our system is working very well. We wouldn't want to disturb that relationship, and frankly, the earnings that are being generated from BlackRock are very positive for us.

Prashant Bhatia (Citigroup): You indicated that you don't need to raise capital; what would drive you to change that and can we infer that because you don't need to raise capital, you are expecting to be profitable in the quarters ahead?

John A. Thain: At the end of last year, we raised $12.8 billion in new capital and for 2007, we lost $8.6 billion. We therefore basically raised $4.2 billion of excess capital. That excess capital was intended to reassure the market that we didn't have to come back into the equity markets and it'd give us the capital base to go forward into 2008. That continues to be the case. Concerning profitability going forward, we obviously don't give guidance so we're not going to project anything. But your comment is a very reasonable expectation.

Prashant Bhatia (Citigroup): On the auction rate securities, can you update us on how much of these securities are owned by Merrill Lynch clients and how you think this issue gets resolved over time?

John A. Thain: Our clients own about $18.5 billion of them. Of that $18.5 billion, about $12 billion are closed-end funds, which are the most problematic. We have been working with those closed-end funds to refinance the securities, which is the ultimate answer here. Nuveen and BlackRock have announced the intention to do that. That is the answer to this problem. Ultimately these things are very well protected from a credit point of view, and so I don't think there's any question that the investors will ultimately get their money back at par. They however have to be refinanced and that's what we're working to do.

Susan Katzke (Credit Suisse): Can you comment on the Private Equity business and review again what the negative mark was this quarter and what your intentions are for your larger, single-name holdings?

Nelson Chai: In the first quarter last year, we had revenue of about $450 million in the Private Equity business and it had to do with mark to market on positions. We have publicly traded companies in that portfolio and because of the market and a few of the larger positions traded down during the quarter, we took the net revenues down $200 million. That is a fairly significant swing if you think on a year-over-year basis. In terms of what our position is, we will evaluate what we think the relative value of each of the positions periodically, which we do, and if we think that it makes sense to exit the positions because the prices are right, we will. Fundamentally we still like the properties we have in our book.

Susan Katzke (Credit Suisse): You said your Private Equity marks were down $200 million year-over-year. Were they still net positive?

Nelson Chai: No. The revenue the year ago would have been a positive $450 million.