- A $180 million in Alt-A, and other loans, where credit spreads widened and real estate deteriorated. $175 million in first and second year loans spent for securitization, while subordination changes by rating agencies and executed trades at $450 million of European non-conforming loans on credit spread widening and executed trades.

- Compensation to net revenue ratio is 59%.
- Revenues decreased 6% from 2006.
- Effective income tax rate continuing operations was 24.5%. The decrease reflects the impact of lower earnings and lower tax rate applicable to non U.S. earnings partially offset by lower estimate domestic tax credits.

- Institutional Security revenues were $16.1 billion, down 24% from last year.
- PBT decreased 89% to $817 million, and return on equity was 4%.
- Fixed income sales and trading revenues was $650 million, down 93% from record results in 2006.

- Equity sales and trading revenues were up 38% to $8.7 billion.
- Advisory revenues increased 45% to $2.5 billion, 21% higher than the previous record set in 2000.
- Equity underwriting was up 48%, to $1.6 billion, and debt underwriting increased 1% to $1.4 billion. Investment banking pipelines continue to be healthy.
- Principal transactions, investment revenues were $496 million up $279 million increase versus the third quarter and full year revenues increased 35% in 2006.

- Wealth Management revenues of $6.6 billion, were up 20% and expenses of $5.5 billion increased 9%.
- PBT totaled $1.2 billion, up a 127% from 2006, and PBT margin improved 17%. The return on equity for fiscal 2007 was 41%.

- Asset Management revenues were $5.5 billion up 59% from 2006. PBT was $1.5 billion, PBT margin was 27% and return on equity was 26%.
- Total net inflows of the year were $35 billion, when compared favorably to the $9.3 billion in net outflows in 2006.
- The company launched 74 new products, 37 in alternatives, 25 in equity, and 12 in fixed income.

- This year 43% of regional revenues have come from the Americas, 36% from Europe, Middle East and Africa, and 21% from Asia. Year-over-year international revenues have increased 44%.
- Regional results in the second half of 2007 are skewed in favor of non-U.S. results and the majority of trading losses is sustained in U.S. business. If the company was to exclude these losses, 55% of revenues will be from the Americas, 29% from Europe, Middle East and Africa, and 16% from Asia. The company continues to believe that the pace of international growth will exceed that of the U.S.

Fiscal 2008 Outlook

- The company would anticipate that next tax rates will be close to 2006 tax rate of approximately 33%.
- Based on total loans and commitments, the company will continue to drive in the first quarter, if capital markets remain receptive. On non-investment grade corporate lending commitments of $20 billion, this includes $12.2 billion of commitments related to leveraged acquisition finance pipeline, which is down from $31.3 billion.

Key questions from the fourth quarter earnings call conducted by Morgan Stanley on December 19, 2007.

Guy Moszkowski (Merrill Lynch): What is the timeframe and what will drive the recognition of the 100 million shares coming into the share count for EPS purposes in the fully diluted count?

Colm Kelleher: They come in August 2010; so short-term we will have a small charge upfront. Then on conversion, depending on the strike price, we will have 9.9% of the company represented by shares.

Guy Moszkowski (Merrill Lynch): As they come into or closer to the money, is there some gradual increment to the diluted shares as opposed to what happens to the book value calculation?

Colm Kelleher: There will be impact, as we come closer to the money much itself from the threshold price.

Guy Moszkowski (Merrill Lynch): How do you think at this point about your Tier 1 to assets ratio with the $5 billion included?

Colm Kelleher: We were well capitalized despite the write-downs ahead of the equity infusion. We feel even more strongly confident about that post that.

Guy Moszkowski (Merrill Lynch): What do you now viewed that ratio is?

Colm Kelleher: All I can say at this stage because we are not in a position yet to disclose until we met all our minimum regulatory requirements on Tier 1. We feel, we are adequately capitalized, and on regulatory capital, we think we have a significant access.

Guy Moszkowski (Merrill Lynch): On the remaining $5.5 billion of sub-prime related assets in the bank, did you just change the status to trading assets within the bank or did the bank sell the position to the broker dealer?

John Mack: We re-designated so we have not sold the broker dealer. The reason we have done this is to be transparent rather than taking temporary or permanent impairments through OCI and than taking a charge any permanent impairment. These assets are of a high quality, prices have been volatile in November and in some cases they went down to, for instance 93 and then rebound to 95, 96. We felt that it was much clearer to re-designate these as mark-to markets securities.