Merrill Lynch Q1 08

--earning -1.97 bil vs 2.03 bil Q1 07 --Net rev 2.9 bil, down 69% from prior-year period. Execluding writedown it is 7.9 bil --drivers: write down 1.5 bil of US ABS CDOS. Credit valuation adjustments of -3.0 bil related to hedge s w financial guarantors, most of which related to US super senior ABS CDOs. Leveraged loand offsetby net benefits of 2.1 bil due to widenning carry credit spreadds FICC --net exposure of US ABS CDOs as of Q1 08 is 6.7 bil, up from 5.1 bil at Q1 07. --credit valuation adjustments -3.0 bil, 2.2 goes to super senior ABS CDOs --residential mortgage a.net expsorue to US subprime 1.4 bil, due to hegding, assets sales and net wrodowns.. b.net expsure sto Alt-A residential 3.2 bil, purchases offset by 402 mil net write downs. c.net expsorue to prime residential mortgae 30.8 bil c.non-US mortgegae 8.8 bil --banks invesment portfolio: net expsoure 42.5 bil. net pre-tax wrife downs of 3.1 bil due to Alt-A MBS. --leveraged loans: 14 bil, down from 18 bil Q4 07. net write-down 825 mil --Commercial Real Estate: exposure 21 bil For total U.S. super senior ABS CDOs, long exposures (including associated gains and losses reported in income and other net changes in net exposures) were $26.3 billion and $30.4 billion at March 28, 2008 and December 28, 2007, respectively. Short exposures (including associated gains and losses reported in income and other net changes in net exposures) were $19.8 billion and $23.6 billion at March 28, 2008 and December 28, 2007, respectively. Short exposures primarily consist of purchases of credit default swap protection from various third parties, including monoline financial guarantors, insurers and other market participants. During the first quarter of 2008, credit valuation adjustments related to the firm’s hedges with financial guarantors were negative $3.0 billion, including negative $2.2 billion related to U.S. super senior ABS CDOs. The hedges with financial guarantors related to U.S. super senior ABS CDOs declined to $10.9 billion due to net gains on these hedges and the firm’s decision to consider $1.1 billion notional amount of certain hedges with a highly rated financial guarantor as ineffective, which resulted in a write-off of $45 million. The net gains, coupled with the deteriorating environment for financial guarantors, resulted in credit valuation adjustments of negative $2.2 billion during the 2008 first quarter. As a result, the carrying value of these hedges related to U.S. super senior ABS CDOs was $3.0 billion at quarter end. Please see attachment V for details related to these hedges. Credit Valuation Adjustment During the first quarter of 2008, credit valuation adjustments related to the firm’s hedges with financial guarantors were negative $3.0 billion, including negative $2.2 billion related to U.S. super senior ABS CDOs. The hedges with financial guarantors related to U.S. super senior ABS CDOs declined to $10.9 billion due to net gains on these hedges and the firm’s decision to consider $1.1 billion notional amount of certain hedges with a highly rated financial guarantor as ineffective, which resulted in a write-off of $45 million. The net gains, coupled with the deteriorating environment for financial guarantors, resulted in credit valuation adjustments of negative $2.2 billion during the 2008 first quarter. As a result, the carrying value of these hedges related to U.S. super senior ABS CDOs was $3.0 billion at quarter end. Please see attachment V for details related to these hedges. comments --US ABS CDO futher writedown 1-2 bil --Financial Garanteer 1-2 bil --Residential MBS futher writedown of 1 bil --Banks portfolio 500 mil --credit valuation adjustments 1-2 bil --total 5 bil in Q2 08