The company continues to effectively balance increasing ROE while growing book value per share.

Book value per share was $41.95, up 13% from a year ago, and up 60 cents from year end, despite the impact of share repurchases and annual stock-based compensation grant. The company increased ROE, which was up more than 4 points from the year-ago period to 23.3%. This is a direct result of efforts to grow revenues, drive higher margins and actively manage both balance sheet and equity capital.

Key questions from the first quarter earnings call conducted by Merrill Lynch & Co., Inc. on April 19, 2007.

Glenn Schorr (UBS): You issued about 1.6 billion, is that all in preferred this quarter?

Jeffrey N. Edwards: That is right, which will increase our dividends as you model going forward by about $20 million a quarter.

Glenn Schorr (UBS): You had over 11% of total equity. Is there any limitation on that in terms of capital ratios and your thinking around that?

Jeffrey N. Edwards: As we approach our capital management, one important component is how we look at different pieces of our capital base. To that end, both preferred stock and other hybrids are critical components of that. At this point, we feel that we have got an appropriate balance and will continue to look at that on a quarter-by-quarter basis going forward. We are not constrained from a ratio perspective at this point. We do think it reflects good capital management and is part of our improving ROE story.

Glenn Schorr (UBS): Long-term debt was up $24 billion. What went on there?

Jeffrey N. Edwards: You should expect to see our balance sheet get bigger at quarter end, consistent with the pattern you have seen over the last several quarters as we have grown our business. That is a part of the growth in our business. Part of that growth of balance sheet, needs to occur in a way that is consistent with sound capital management and liquidity. Part of that increase in long-term debt reflects that. It has been an important part of our strategy to not just grow our balance sheet but increase the strength of our liquidity as well, and that has happened over the course of the last several quarters and happened again this quarter. That long-term debt issuance is partly reflective of that. We issued some subordinated debt during the quarter which is part of tower strategy to comply with CSE guidelines for total capital. All of that comes into play during the course of the quarter. Markets were conducive, favorable during the quarter. We funded a good amount and I would expect over the course of the next few quarters you would see that grow at a slower pace.

Glenn Schorr (UBS): How the ownership position in Bloomberg falls under FAS 157, 15, is there a piece that is optional?

Jeffrey N. Edwards: If you look at the adoption of 157/159/48 which also occurred during the quarter, no significant impact at all in shareholders’ equity as a starting point. In terms of the income statement for the quarter, under the new guidelines we will no longer be deferring our 02/03 revenue so that is now going into the income statement directly. There was a part of our liquidity portfolio that previously had been under available for sale. We elected to put under fair value and there was a moderate amount of income associated with that, but less than 1% of revenues. Bloomberg we did not elect to put under fair value. We continue to equity method account for that.

Mike Mayo (Deutsche Bank): You said 10 percentage points higher growth outside the U.S., is that correct?

Jeffrey N. Edwards: That is correct. That is true for both the sequential growth and for the year-on-year growth.

Mike Mayo (Deutsche Bank): Does that imply 30% growth outside the U.S.?

Jeffrey N. Edwards: I will not get into the arithmetic of exactly how that works in different periods, but if you assume at least 10% more rapid growth both sequentially and year on year, you get a sense for the greater momentum that that business is producing.

Mike Mayo (Deutsche Bank): Can you give some color by region?

Jeffrey N. Edwards: We set records in all our global regions, not to understate the importance of the U.S., we also had record revenues there. It is just that the growth was more rapid in the international markets. But I think you can tell from that that the growth has been strong, really across the board there. That is how I would characterize it. There was a strong growth in both Europe, Pac Rim and even in the Canada and Latin America sub regions of the Americas.

Mike Mayo (Deutsche Bank): Retail brokerage revenues were up in the quarter but not as strong as a few others. Was there any slowdown in March, and is that continuing?

Jeffrey N. Edwards: On a year-on-year basis the growth continues to be solid. It was up 11% in revenues from the first quarter of last year. Fund flows were strong. We continue to get operating leverage in the global wealth management business broadly. Business continues to show steady growth as it continues to steadily execute. What happened in March was not unusual in that business from the first quarter. You tended to see more active transactional volumes in the early part of the quarter than you do in the late part of the quarter. That typically follows into the second quarter as tax season comes up, but nothing unusual.

William Tanona (Goldman Sachs): The environment became trickier this first quarter and there were concerns with subprime, which you seem to have squashed regarding your exposure there. Have you changed your appetite in this environment?

Jeffrey N. Edwards: Risk management is a crucial aspect of our business. We have done a good job in negotiating these markets as a result of that. We are looking at new ways to do business where there are opportunities for us to either share risk or pre-sell some of the risk and still do good business. We are approaching it in a prudent way given the environment. In these markets, in these asset classes, it is important to recognize that there are going to be periods of dislocation. This particular quarter, there was one in the U.S. subprime business and it is important to react to that. As part of a broader portfolio of businesses, you are able to deal with those types of markets. As you can see, the fixed income business just powered right through that.