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Investor Relations
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Capital ProfileMerrill Lynch & Co., Inc. and Subsidiaries (Unaudited)Equity CapitalAt December 28, 2007, equity capital, as defined by Merrill Lynch, was $36.7 billion and comprised of $27.5 billion of common equity, $4.4 billion of preferred stock, and $4.7 billion of trust preferred securities. We define equity capital more broadly than stockholders' equity under U.S. generally accepted accounting principles, as we include other capital instruments with equity-like characteristics such as trust preferred securities. We view trust preferred securities as equity capital because they are either perpetual or have maturities of at least 50 years at issuance. These trust preferred securities represent junior subordinated notes, net of related investments. Junior subordinated notes (related to trust preferred securities) are reported on the Consolidated Balance Sheets as liabilities for accounting purposes. The related investments are reported as investment securities on the Consolidated Balance Sheets. Major components of the changes in our equity capital for 2007 and 2006 are as follows:
(1) Includes effect of accumulated other comprehensive loss and other items. Our equity capital of $36.7 billion at December 28, 2007 decreased $5.7 billion, or 13%, from December 29, 2006. Equity capital decreased in 2007 primarily as a result of net losses, common stock repurchases and dividends. The equity capital decrease was partially offset by the issuance of common stock, the net issuance of preferred stock and trust preferred securities and the net effect of employee stock transactions. On a pro forma basis for equity issuances completed subsequent to year-end and described below, we had $45.6 billion of pro forma equity capital which was comprised of $29.9 billion in common equity, $11.0 billion in preferred stock and $4.7 billion in trust preferred securities. Common StockOn December 24, 2007, we reached agreements with each of Temasek and Davis, on behalf of various investors, to sell an aggregate of 116.7 million shares of newly issued common stock at a price of $48.00 per share, for aggregate proceeds of approximately $5.6 billion. Temasek purchased 55 million shares in December 2007 and the remaining 36.7 million shares in January 2008. In addition, Temasek and its assignees exercised options to purchase an additional 12.5 million shares of our common stock at a purchase price of $48.00 per share in February 2008. Davis purchased 25 million shares in December 2007. See "Other Information (Unaudited) - Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities" for additional detail on these transactions. Upon closing the First Republic acquisition on September 21, 2007, we issued 11.6 million shares of common stock as a portion of the consideration. On January 18, 2007, the Board of Directors declared a 40% increase in the regular quarterly dividend to 35 cents per common share. During 2007, we repurchased 62.1 million common shares at an average repurchase price of $84.88 per share. On April 30, 2007 the Board of Directors authorized the repurchase of an additional $6 billion of our outstanding common shares. During 2007, we had completed the $5 billion repurchase program authorized in October 2006 and had $4.0 billion of authorized repurchase capacity remaining under the repurchase program authorized in April 2007. We did not repurchase any common stock during the fourth quarter of 2007 and do not anticipate additional repurchases of common shares. Preferred StockOn January 15, 2008, we reached agreements with several long-term investors to sell an aggregate of 66,000 shares of newly issued 9.00% Non-Voting Mandatory Convertible Non-Cumulative Preferred Stock, Series 1, par value $1.00 per share and liquidation preference $100,000 per share (the "Mandatory Convertible Preferred Stock"), at a price of $100,000 per share, for an aggregate purchase price of approximately $6.6 billion. We issued the Mandatory Convertible Preferred Stock on various dates in January and February 2008. See "Other Information (Unaudited) - Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities" for additional detail on these transactions. In conjunction with the acquisition of First Republic on September 21, 2007 we issued $65 million of 6.70% non-cumulative perpetual preferred stock and $50 million of 6.25% non-cumulative preferred stock in exchange for First Republic's preferred stock Series A and B, respectively. On March 20, 2007, Merrill Lynch issued $1.5 billion of floating rate, non-cumulative, perpetual preferred stock. Trust Preferred SecuritiesOn March 30, 2007, Merrill Lynch Preferred Capital Trust II redeemed all of the outstanding $300 million of 8.00% trust preferred securities. On May 2, 2007, Merrill Lynch Capital Trust II issued $950 million of 6.45% trust preferred securities and invested the proceeds in junior subordinated notes issued by ML & Co. On August 22, 2007, Merrill Lynch Capital Trust III issued $750 million of 7.375% trust preferred securities and invested the proceeds in junior subordinated notes issued by ML & Co.
The above is excerpted from the Merrill Lynch Form 10-K Balance Sheet Leverage
Assets-to-equity leverage ratios are commonly used to assess a company's capital adequacy. We believe that a leverage ratio adjusted to exclude certain assets considered to have low risk profiles and assets in customer accounts financed primarily by customer liabilities provides a more meaningful measure of balance sheet leverage in the securities industry than an unadjusted ratio. We calculate adjusted assets by reducing total assets by (1) securities financing transactions and securities received as collateral less trading liabilities net of contractual agreements and (2) segregated cash and securities and separate accounts assets.
(1) Represents junior subordinated notes (related to trust preferred securities), net of related investments. The related investments are reported as investment securities and were $429 million and $490 million at December 28, 2007 and December 29, 2006, respectively. The table above does not reflect the impact of the following transactions that occurred subsequent to our 2007 year end:
The above is excerpted from the Merrill Lynch Form 10-K Share RepurchasesThe table below sets forth the information with respect to purchases made by or on behalf of us or any "affiliated purchaser" of our common stock during the year ended December 28, 2007.
(1) Share repurchases under the program were made pursuant to open-market purchases, Rule 10b5-1 plans or privately negotiated transactions as market conditions warranted and at prices that we deemed appropriate.
The above is excerpted from the Merrill Lynch Form 10-K Long-term Capital
Our long-term capital sources include equity capital, long-term borrowings and certain deposits in bank subsidiaries that we consider to be long-term or stable in nature.
(1) Includes $3.8 billion of equity in connection with common stock issuances to Temasek and Davis.
At December 28, 2007, our long-term capital sources of $288.9 billion exceeded our estimated long-term capital requirements. In addition, on a pro forma basis for equity issuances completed subsequent to year-end and described on page 54, our pro forma long-term capital was $297.9 billion. See Liquidity Risk in the Risk Management Section for additional information.
The above is excerpted from the Merrill Lynch Form 10-K Liquidity Risk Management
We define liquidity risk as the potential inability to meet financial obligations, on- or off-balance sheet, as they come due.
Consistent with our objectives, we maintain excess liquidity at ML & Co. and selected subsidiaries in the form of cash and high quality unencumbered liquid assets, which represent our "Global Liquidity Sources" and serve as our primary source of liquidity risk protection. As of December 28, 2007 and December 29, 2006, the aggregate Global Liquidity Sources were $200 billion and $178 billion, respectively, consisting of the following:
The excess liquidity pool is maintained at, or readily available to, ML & Co. and can be deployed to meet cash outflow obligations under stressed liquidity conditions. The excess liquidity pool includes cash and cash equivalents, investments in short-term money market mutual funds, U.S. government and agency obligations and other liquid securities. In the first quarter of 2007, we changed our investment strategy and eliminated our exposure to long-term fixed rate assets. At December 28, 2007 and December 29, 2006, the total carrying value of the excess liquidity pool, net of related hedges, was $79 billion and $63 billion, respectively, which included liquidity sources at subsidiaries that we believe are available to ML & Co. without restrictions.
The above is excerpted from the Merrill Lynch Form 10-K |
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