Forward-Looking Statements and Non-GAAP Financial Measures

We have included certain statements in this report which may be considered forward-looking, including those about management expectations and intentions, the impact of off-balance sheet exposures, significant contractual obligations and anticipated results of litigation and regulatory investigations and proceedings. These forward-looking statements represent only Merrill Lynch & Co., Inc.'s ("ML & Co." and, together with its subsidiaries, "Merrill Lynch", the "Company", the "Corporation", "we", "our" or "us") beliefs regarding future performance, which is inherently uncertain. There are a variety of factors, many of which are beyond our control, which affect our operations, performance, business strategy and results and could cause our actual results and experience to differ materially from the expectations and objectives expressed in any forward-looking statements. These factors include, but are not limited to, actions and initiatives taken by both current and potential competitors and counterparties, general economic conditions, market conditions, the effects of current, pending and future legislation, regulation and regulatory actions, the actions of rating agencies and the other risks and uncertainties detailed in this report. See "Risk Factors" in Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 26, 2008 (the "2008 Annual Report"). Accordingly, you should not place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. We do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the dates they are made. The reader should, however, consult further disclosures we may make in future filings of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

From time to time, we may also disclose financial information on a non-GAAP basis where management uses this information and believes this information will be valuable to investors in gauging the quality of our financial performance, identifying trends in our results and providing more meaningful period-to-period comparisons.

Introduction

Merrill Lynch was formed in 1914 and became a publicly traded company on June 23, 1971. In 1973, we created the holding company, ML & Co., a Delaware corporation that, through its subsidiaries, is one of the world's leading capital markets, advisory and wealth management companies. We are a leading global trader and underwriter of securities and derivatives across a broad range of asset classes, and we serve as a strategic advisor to corporations, governments, institutions and individuals worldwide. In addition, as of March 31, 2009, we owned approximately half of the economic interest of BlackRock, Inc. ("BlackRock"), one of the world's largest publicly traded investment management companies with approximately $1.3 trillion in assets under management at March 31, 2009.

Bank of America Acquisition

On January 1, 2009, Merrill Lynch was acquired by Bank of America Corporation ("Bank of America") through the merger of a wholly owned subsidiary of Bank of America with and into ML & Co. with ML & Co. continuing as the surviving corporation and a wholly owned subsidiary of Bank of America. Upon completion of the acquisition, each outstanding share of ML & Co. common stock was converted into 0.8595 shares of Bank of America common stock. As of the completion of the acquisition, ML & Co. Series 1 through Series 8 preferred stock were converted into Bank of America preferred stock with substantially identical terms to the corresponding series of Merrill Lynch preferred stock (except for additional voting rights provided to the Bank of America securities). The Merrill Lynch 9.00% Non-Voting Mandatory Convertible Non-Cumulative Preferred Stock, Series 2, and

9.00% Non-Voting Mandatory Convertible Non-Cumulative Preferred Stock, Series 3 that was outstanding immediately prior to the completion of the acquisition remained issued and outstanding subsequent to the acquisition, but are now convertible into Bank of America common stock.

Bank of America's cost of acquiring Merrill Lynch has been pushed down to form a new accounting basis for Merrill Lynch. Accordingly, the Condensed Consolidated Financial Statements appearing in Part I, Item 1 of this Form 10-Q are presented for Merrill Lynch for periods occurring prior to the acquisition by Bank of America (the "Predecessor Company") and subsequent to the January 1, 2009 acquisition (the "Successor Company"). The Predecessor Company and Successor Company periods have been separated by a vertical line on the face of the Condensed Consolidated Financial Statements to highlight the fact that the financial information for such periods has been prepared under two different cost bases of accounting.

Effective January 1, 2009, Merrill Lynch adopted calendar quarter-end and year-end reporting periods to coincide with those of Bank of America. As a result, the following discussion of the results of operations for the first quarter of 2009 refers to the period from January 1, 2009 through March 31, 2009, while the first quarter of 2008 refers to the period from December 29, 2007 through March 28, 2008. The intervening period between Merrill Lynch's previous fiscal year end (December 26, 2008) and the beginning of the current quarter (January 1, 2009) is presented separately on the Condensed Consolidated Statements of Earnings / (Loss).

In connection with our acquisition by Bank of America, we evaluated the provisions of Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS No. 131"), in the first quarter of 2009. Pursuant to SFAS No. 131, operating segments represent components of an enterprise for which separate financial information is available that is regularly evaluated by the chief operating decision maker in determining how to allocate resources and in assessing performance. Based upon how the chief operating decision maker of Merrill Lynch reviews our results, it was determined that Merrill Lynch does not contain any identifiable operating segments under SFAS No. 131. As a result, the financial information of Merrill Lynch is presented as a single segment.

As a result of the acquisition of Merrill Lynch by Bank of America, certain information is not required in this Form 10-Q as permitted by general Instruction H of Form 10-Q. We have also abbreviated Management's Discussion and Analysis of Financial Condition and Results of Operations as permitted by general Instruction H.

Executive Overview

Company Results

We reported net income from continuing operations for the three months ended March 31, 2009 of $3.7 billion, compared with a net loss from continuing operations of $2.0 billion for the three months ended March 28, 2008. Revenues, net of interest expense ("net revenues") for the three months ended March 31, 2009 were $10.0 billion, compared with $2.9 billion in the prior-year period, while the pre-tax gain from continuing operations was $5.2 billion for the three months ended March 31, 2009 compared with a pre-tax loss of $3.3 billion for the three months ended March 28, 2008.

Net revenues and net earnings during the first three months of 2009 reflected improved sales and trading results, including solid revenues from rates and currencies, which benefited from increased volatility during the quarter, and commodities, which were up primarily as a result of trading in the power and natural gas markets. Revenues from mortgage products also increased due to lower net write-downs on mortgage exposures as compared with the prior year period. The quarter's results also included a $2.2 billion gain due to the impact of the widening of Merrill Lynch's credit spreads on the carrying value of certain of Merrill Lynch's long-term debt liabilities. These increases were partially offset by lower investment banking revenues and lower revenues from our global wealth management activities.

In the prior-year period, net revenues and earnings were adversely affected by net losses within our fixed income trading business, which included write-downs of $1.5 billion related to U.S. asset-backed collateralized debt obligations ("ABS CDOs") and $3.0 billion of credit valuation adjustments related to hedges with financial guarantors, most of which related to U.S. super senior ABS CDOs. The write-downs were partially offset by a net gain of $2.1 billion due to the impact of the widening of Merrill Lynch's credit spreads on the carrying value of certain of Merrill Lynch's long-term debt liabilities.

Transactions with Bank of America

Subsequent to the Bank of America acquisition, certain assets and liabilities were transferred at fair value between Merrill Lynch and Bank of America. These transfers were made in connection with efforts to manage risk in a more effective and efficient manner at the consolidated Bank of America level. The assets and liabilities transferred related to sales and trading activities and included positions associated with the rates and currency, equity and mortgage products trading businesses. These transfers included approximately $47 billion of both assets and liabilities transferred from Merrill Lynch to Bank of America, primarily U.S. matched book repurchase positions and mortgage positions. In addition, approximately $2 billion of commercial mortgage-backed securities were transferred to Bank of America. Approximately $16 billion of assets were transferred from Bank of America to Merrill Lynch, primarily equity related positions. In the future, Merrill Lynch and Bank of America may continue to transfer certain assets and liabilities to (and from) each other.

Other Events

On January 16, 2009, due to larger than expected fourth quarter losses at Merrill Lynch, the U.S. government and Bank of America entered into an agreement in principle in which the U.S. government would provide protection against the possibility of unusually large losses on a pool of Bank of America's financial instruments. As of the time of filing this document, Bank of America has not entered into a binding agreement with the U.S. government.

Results Of Operations


(dollars in millions, except per share amounts)
                                                Successor Company                    Predecessor Company
                                                                             For the Period
                                                  Three Months                December 27,          Three Months
                                                      Ended                       2008                  Ended
                                                    March 31,               to December 31,           March 28,
                                                      2009                        2008                  2008             % Change(1)

Revenues
Principal transactions                          $         5,778              $       (280 )         $    (2,418 )              N/M %
Commissions                                               1,243                        22                 1,889                (34 )
Managed account and other fee-based
revenues                                                  1,103                        22                 1,455                (24 )
Investment banking                                          606                        12                   917                (34 )
Earnings from equity method investments                      40                         -                   431                (91 )
Other                                                       260                        19                (1,449 )              N/M

Subtotal                                                  9,030                      (205 )                 825                N/M
Interest and dividend revenues                            4,379                        34                11,861                (63 )
Less interest expense                                     3,455                         -                 9,752                (65 )

Net interest profit                                         924                        34                 2,109                (56 )

Revenues, net of interest expense                         9,954                      (171 )               2,934                N/M

Non-interest expenses:
Compensation and benefits                                 3,142                        64                 4,196                (25 )
Communications and technology                               397                         -                   555                (28 )
Brokerage, clearing, and exchange fees                      252                        10                   387                (35 )
Occupancy and related depreciation                          255                         -                   309                (17 )
Professional fees                                            99                         -                   242                (59 )
Advertising and market development                          105                         -                   176                (40 )
Office supplies and postage                                  40                         -                    57                (30 )
Other                                                       419                         -                   313                 34

Total non-interest expenses                               4,709                        74                 6,235                (24 )

Pre-tax earnings/(loss) from continuing
operations                                                5,245                      (245 )              (3,301 )              N/M
Income tax expense/(benefit)                              1,585                       (92 )              (1,332 )              N/M

Net earnings/(loss) from continuing
operations                                                3,660                      (153 )              (1,969 )              N/M

Discontinued operations:
Pre-tax (loss) from discontinued
operations                                                    -                         -                   (25 )              N/M
Income tax (benefit)                                          -                         -                   (32 )              N/M

Net earnings from discontinued operations                     -                         -                     7                N/M

Net earnings/(loss)                                       3,660                      (153 )              (1,962 )              N/M

Preferred stock dividends                                    15                         -                   174                N/M

Net earnings/(loss) applicable to common
stockholders                                    $         3,645              $       (153 )         $    (2,136 )              N/M

Basic (loss) per common share from
continuing operations                                       N/A              $      (0.10 )         $     (2.20 )              N/M
Basic earnings per common share from
discontinued operations                                     N/A                         -                  0.01                N/M

Basic (loss) per common share                               N/A              $      (0.10 )         $     (2.19 )              N/M

Diluted (loss) per common share from
continuing operations                                       N/A              $      (0.10 )         $     (2.20 )              N/M
Diluted earnings per common share from
discontinued operations                                     N/A                         -                  0.01                N/M

Diluted (loss) per common share                             N/A              $      (0.10 )         $     (2.19 )              N/M

Note: Certain prior period amounts have been reclassified to conform to the current period presentation.
N/M = Not meaningful.
N/A = Earnings per share information is not applicable to the Successor Company period since Merrill Lynch is now a wholly-owned subsidiary of Bank of America.
(1) Percentages refer to the changes between the three months ended March 31, 2009 and the three months ended March 28, 2008.

Consolidated Results of Operations

Our net income from continuing operations for the three months ended March 31, 2009 was $3.7 billion compared with a net loss from continuing operations of $2.0 billion for the three months ended March 28, 2008. Net revenues for the three months ended March 31, 2009 were $10.0 billion compared with $2.9 billion for the prior year period. The results in 2009 primarily reflected improved performance from our rates and currencies, commodities and credit products businesses. The quarter's results also included a $2.2 billion gain due to the impact of the widening of Merrill Lynch's credit spreads on the carrying value of certain of our long-term debt liabilities. The net losses for the quarter ended March 28, 2008 were primarily driven by our credit and structured finance and investment businesses. These businesses were impacted by the deterioration of the credit markets that occurred during that period, resulting in net losses on our U.S. ABS CDO, sub-prime, Alt-A, and Non-U.S. residential mortgage positions and leveraged finance commitments.

Principal transactions revenues include both realized and unrealized gains and losses on trading assets and trading liabilities and investment securities classified as trading investments. Principal transactions revenues were $5.8 billion for the three months ended March 31, 2009 compared with negative $2.4 billion for the three months ended March 28, 2008. The results for 2009 reflected strong revenues from our rates and currencies business due to increased volatility in the interest rate markets, leading to wider spreads; the flight to safety to U.S. Treasuries and Agencies; and good customer flow. Commodities revenues also increased, reflecting higher revenues from trading in the power and natural gas markets. Revenues from mortgage products increased due to lower net write-downs on mortgage exposures as compared with the prior year period. Equity trading revenues also increased, reflecting improved results from equity derivatives and convertible bond trading. The quarter's results also included net gains due to the impact of the widening of Merrill Lynch's credit spreads on the carrying value of certain of our long-term debt liabilities. The negative principal transaction revenues in the first quarter of 2008 were driven primarily by net losses in our credit and structured finance and investment businesses, which includes our U.S. ABS CDO and residential mortgage-related businesses. The difficult credit environment that existed during the first quarter of 2008, evidenced by widening credit spreads, forced liquidations, high volatility, lack of market liquidity for many credit products, and the U.S. housing market downturn, all contributed to the decline in revenues from these businesses. These losses were partially offset by net gains from the widening of Merrill Lynch's credit spreads on the carrying value of certain of our long-term debt liabilities.

Net interest profit is a function of (i) the level and mix of total assets and liabilities, including trading assets owned, deposits, financing and lending transactions, and trading strategies associated with our businesses, and
(ii) the prevailing level, term structure and volatility of interest rates. Net interest profit is an integral component of trading activity. In assessing the profitability of our client facilitation and trading activities, we view principal transactions and net interest profit in the aggregate as net trading revenues. Changes in the composition of trading inventories and hedge positions can cause the mix of principal transactions and net interest profit to fluctuate from period to period. Net interest profit was $924 million for the three months ended March 31, 2009 as compared with $2.1 billion in the prior year period. The decline was primarily due to decreased interest revenues generated as a result of lower asset levels and stated interest rates on those assets, partially offset by lower interest expense associated with reduced funding levels and lower interest rates on such funding in our sales and trading businesses.

Commissions revenues primarily arise from agency transactions in listed and OTC equity securities and commodities, insurance products and options. Commissions revenues also include distribution fees for promoting and distributing mutual funds. Commissions revenues were $1.2 billion for the three months ended March 31, 2009, down 34% from the prior year period, driven primarily by lower revenues from our global cash equity trading business resulting from lower transaction volumes. Commission revenues

from our global wealth management activities also declined as compared with the prior year as challenging market conditions resulted in reduced transaction volume for certain products.

Managed accounts and other fee-based revenues primarily consist of asset-priced portfolio service fees earned from the administration of separately managed and other investment accounts for retail investors, annual account fees, and certain other account-related fees. Managed accounts and other fee-based revenues were $1.1 billion for the three months ended March 31, 2009, a decrease of 24% from the prior year period. The decline was primarily associated with lower fee-based revenues from our global wealth management activities, reflecting lower fee-based asset levels as a result of difficult market conditions, including a decline in equity valuations.

Investment banking revenues include (i) origination revenues representing fees earned from the underwriting of debt, equity and equity-linked securities, as well as loan syndication and commitment fees and (ii) strategic advisory services revenues including merger and acquisition and other investment banking advisory fees. Investment banking revenues were $606 million for the three months ended March 31, 2009, down 34% from the prior year period. As a result of Bank of America's acquisition of Merrill Lynch, beginning in 2009, certain debt origination activities that were formerly conducted by Merrill Lynch are now being conducted within the Bank of America platform, while certain equity origination activities that were formerly conducted by Bank of America are now being conducted within the Merrill Lynch platform.

Earnings from equity method investments include our pro rata share of income and losses associated with investments accounted for under the equity method of accounting. Earnings from equity method investments were $40 million for the three months ended March 31, 2009, down from $431 million for the three months ended March 28, 2008. The decrease primarily reflected lower revenues from certain investments, including alternative investment management companies. The prior year quarter included revenues associated with our investment in Bloomberg, L.P., which was sold in July 2008. Refer to Note 5 of the 2008 Annual Report for further information on equity method investments.

Other revenues include gains and losses on investment securities, including certain available-for-sale securities, gains and losses on private equity investments, and gains and losses on loans and other miscellaneous items. Other revenues were $260 million for the three months ended March 31, 2009, compared with negative $1.4 billion in the prior year period. Other revenues in 2009 were primarily associated with an increase in the value of certain loans that are accounted for under the fair value option in accordance with SFAS No. 159, Fair Value Option for Certain Financial Assets and Liabilities. The negative revenues for 2008 primarily reflected write-downs of approximately $900 million on leveraged finance commitments and other-than-temporary impairment charges on available for sale securities of approximately $400 million.

Compensation and benefits expenses were $3.1 billion for the three months ended March 31, 2009 and $4.2 billion in the prior year period. The year over year decrease primarily reflects lower compensation costs as a result of reduced headcount levels. In addition, amortization expense associated with prior year stock-based compensation awards decreased as a result of the revaluation of these awards due to purchase accounting adjustments that were recorded in connection with the acquisition of Merrill Lynch by Bank of America.

Non-compensation expenses were $1.6 billion for the quarter ended March 31, 2009, down 23% from 2008. Brokerage, clearing and exchange fees were $252 million, down 35%, primarily associated with decreased transaction volumes. Professional fees were $99 million, down 59% primarily due to lower legal fees. Other expenses were $419 million, an increase of 34% from the prior year, primarily reflecting the amortization of intangible assets that were recorded in connection with the acquisition of Merrill Lynch by Bank of America.

Income taxes from continuing operations for the first quarter of 2009 were $1.6 billion. The effective tax rate for the first quarter of 2009 was 30.2% compared with 40.4% for the prior-year period. The decrease in the effective tax rate reflected changes in Merrill Lynch's geographic mix of earnings.

The majority of the income of certain foreign subsidiaries is not currently subject to U.S. income tax as a result of deferral provisions applicable to active financing income. These provisions are scheduled to expire for taxable years beginning on or after January 1, 2010. Absent an extension of these provisions, active financing income earned by foreign subsidiaries after expiration will be subject to a tax provision that considers the incremental U.S. tax. Merrill Lynch does not expect the impact, which will depend upon the amount and geographic mix of future earnings, to drive Merrill Lynch's effective tax rate higher than the U.S. statutory tax rates for 2010.

U.S. ABS CDO and Other Mortgage-Related Activities

Capital markets showed signs of improvement in the first quarter of 2009. Market dislocations that occurred throughout 2008 continued to impact our results in the first quarter of 2009, but to a lesser extent in comparison with the losses we incurred on CDOs and other mortgage related products in the first quarter of 2008.

Residential Mortgage-Related Activities (excluding the Investment Securities Portfolio)

U.S. Prime: We had net exposures of $33 billion at March 31, 2009, which consisted primarily of prime mortgage whole loans, including approximately $30 billion of prime loans originated with clients of our global wealth management business.

In addition to our U.S. prime related net exposures, we also had net exposures related to other residential mortgage-related activities. Significant activities consisted of the following:

U.S. Sub-prime: We had net exposures of $(504) million at March 31, 2009, compared with $195 million at December 26, 2008. As of March 31, 2009, our U.S. Sub-prime exposures consisted mainly of secondary trading exposures related . . .