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 June 30, 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 $1.4 trillion in assets under management at June 30, 2009. See "Executive Overview - Other Events" for additional information regarding our investment in BlackRock.

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 second quarter of 2009 refers to the period from April 1, 2009 through June 30, 2009, while the results for the first six months of 2009 refers to the period from January 1, 2009 through June 30, 2009. The second quarter of 2008 refers to the period from March 29, 2008 through June 27, 2008, and the first six months of 2008 refers to the period from December 29, 2007 through June 27, 2008. The intervening period between Merrill Lynch's previous fiscal year end (December 26, 2008) and the beginning of the first quarter of 2009 (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 a net (loss) / earnings from continuing operations for the three and six months ended June 30, 2009 of $(1.8) billion and $1.8 billion. These results compare with net losses from continuing operations of $(4.6) billion and $(6.6) billion for the three and six months ended June 27, 2008. Revenues, net of interest expense ("net revenues") for the three and six months ended June 30, 2009 were $2.2 billion and $12.1 billion, compared with negative $2.1 billion in the three months ended June 27, 2008 and $818 million in the six months ended June 27, 2008. The pre-tax (loss) / earnings from continuing operations was $(2.9) billion for the three months ended June 30, 2009 and $2.4 billion for the six month period. Pre-tax losses were $(8.1) billion and $(11.4) billion in the three and six months ended June 27, 2008. The results for both periods in 2008 included a restructuring charge of $445 million arising from staff reductions completed during the second quarter of 2008.

The results for the second quarter of 2009 reflected improved sales and trading results as compared with the prior year. Net revenues increased due primarily to higher revenues from fixed income trading activities, including mortgage and credit products, which generated positive trading revenues in the current year as compared with significant net write-downs recorded in the prior year period. These increases were partially offset by lower revenues from equities and rates and currency products. In addition, net revenues for the second quarter of 2009 were adversely affected by net losses of $3.6 billion due to the impact of the narrowing of Merrill Lynch's credit spreads on the carrying value of certain of Merrill Lynch's long-term debt liabilities. The results for the six month period ended June 30, 2009 also reflected higher revenues from fixed income trading as compared with the losses recorded in the prior year. The results for the first half of 2009 also included a $1.4 billion net loss due to the impact of the narrowing of Merrill Lynch's credit spreads on the carrying value of certain of Merrill Lynch's long-term debt liabilities. The results for both the second quarter and six month periods of 2009 reflected lower investment banking revenues and lower revenues from our global wealth management activities.

In the 2008 quarterly period, net revenues and earnings were adversely affected by net losses within our fixed income trading business, which included write-downs of $3.5 billion related to U.S. asset-backed collateralized debt obligations ("ABS CDOs") and $2.9 billion of credit valuation adjustments related to hedges with financial guarantors, about half of which related to U.S. super senior ABS CDOs. Other significant net losses included $1.7 billion in the investment securities portfolio of Merrill Lynch's U.S. banks, as well as $1.3 billion from certain residential mortgage exposures. The results for the six months ended June 27, 2008 included net losses related U.S. ABS CDOs of $5.0 billion; credit valuation adjustments related to hedges with financial guarantors of $5.9 billion; net losses related to the investment securities portfolio of Merrill Lynch's U.S. banks of $2.1 billion; and net losses related to certain residential mortgage exposures of $2.0 billion. The losses for the six month period were partially offset by a net gain of $2.2 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. During the six months ended June 30, 2009, these transfers included approximately $47 billion each of assets and liabilities transferred from Merrill Lynch to Bank of America, primarily U.S. matched book repurchase

positions and mortgage positions. Approximately $40 billion of assets and $18 billion of liabilities 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 June 12, 2009, BlackRock agreed to purchase Barclays Global Investors from Barclays, Plc. and upon the closing of this transaction, which is anticipated to occur in the fourth quarter of 2009, we will record an adjustment to our investment in BlackRock. This acquisition has the effect of diluting our ownership interest in BlackRock, which for accounting purposes will be treated as a sale of a portion of our ownership interest. As a result, our economic interest in BlackRock will be reduced from approximately 50 percent to approximately 35 percent.

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 does not intend to enter into a binding agreement with the U.S. government and negotiations are continuing.

Subsequent Events: Sale of U.S. Banks to Bank of America

During the second quarter of 2009, the separate boards of directors of Merrill Lynch Bank USA ("MLBUSA") and Merrill Lynch Bank & Trust Co., FSB ("MLBT-FSB") approved the sale of their respective entities to a subsidiary of Bank of America.

In both transactions, Merrill Lynch will sell the shares of the respective entity to Bank of America. The sale price will be equal to the net book value of the respective entity as of the date of transfer, and consideration will be in the form of floating rate demand notes payable from Bank of America to Merrill Lynch. The demand notes will be established at market rates at the time of each sale.

The MLBUSA sale was completed on July 1, 2009. At that time, MLBUSA was merged into Bank of America, N.A., a subsidiary of Bank of America. The sale of MLBT-FSB is expected to be completed on or about October 1, 2009. At June 30, 2009, the total assets of MLBUSA and MLBT-FSB were $68 billion and $35 billion, respectively.

Results Of Operations


(dollars in millions, except per share amounts)
                                                                                                                                    % Change between the           % Change between the
                                                        Successor Company                       Predecessor Company                  Three Months Ended              Six Months Ended
                                                 Three Months         Six Months          Three Months        Six Months             June 30, 2009 and              June 30, 2009 and
                                                     Ended              Ended                 Ended              Ended                the Three Months                the Six Months
                                                   June 30,            June 30,             June 27,           June 27,                Ended June 27,                 Ended June 27,
                                                     2009                2009                 2008               2008                       2008                           2008

Revenues
Principal transactions                           $    (1,515 )       $    4,263           $    (4,083 )       $  (6,501 )                        N/M %                          N/M %
Commissions                                            1,490              2,733                 1,811             3,700                          (18 )                          (26 )
Managed account and other fee-based revenues           1,018              2,121                 1,399             2,854                          (27 )                          (26 )
Investment banking                                       862              1,468                 1,158             2,075                          (26 )                          (29 )
Earnings from equity method investments                   54                 94                   111               542                          (51 )                          (83 )
Other (includes $294 million of debt
other-than-temporary impairment losses in
2009)                                                    783              1,043                (1,875 )          (3,324 )                        N/M                            N/M

Subtotal                                               2,692             11,722                (1,479 )            (654 )                        N/M                            N/M
Interest and dividend revenues                         2,440              6,819                 7,535            19,396                          (68 )                          (65 )
Less interest expense                                  2,969              6,424                 8,172            17,924                          (64 )                          (64 )

Net interest (expense) profit                           (529 )              395                  (637 )           1,472                          (17 )                          (73 )
Revenues, net of interest expense                      2,163             12,117                (2,116 )             818                          N/M                            N/M

Non-interest expenses:
Compensation and benefits                              3,294              6,436                 3,491             7,687                           (6 )                          (16 )
Communications and technology                            497                894                   566             1,121                          (12 )                          (20 )
Brokerage, clearing, and exchange fees                   240                492                   370               757                          (35 )                          (35 )
Occupancy and related depreciation                       298                553                   328               637                           (9 )                          (13 )
Professional fees                                        149                248                   263               505                          (43 )                          (51 )
Advertising and market development                        54                159                   166               342                          (67 )                          (54 )
Office supplies and postage                               37                 77                    55               112                          (33 )                          (31 )
Other                                                    483                902                   311               624                           55                             45
Restructuring Charge                                       -                  -                   445               445                          N/M                            N/M

Total non-interest expenses                            5,052              9,761                 5,995            12,230                          (16 )                          (20 )

Pre-tax (loss)/earnings from continuing
operations                                            (2,889 )            2,356                (8,111 )         (11,412 )                        N/M                            N/M
Income tax (benefit)/expense                          (1,069 )              516                (3,477 )          (4,809 )                        N/M                            N/M

Net (loss)/earnings from continuing
operations                                            (1,820 )            1,840                (4,634 )          (6,603 )                        N/M                            N/M

Discontinued operations:
Pre-tax (loss) from discontinued operations                -                  -                   (32 )             (57 )                        N/M                            N/M
Income tax (benefit)                                       -                  -                   (12 )             (44 )                        N/M                            N/M

Net (loss) from discontinued operations                    -                  -                   (20 )             (13 )                        N/M                            N/M

Net (loss)/earnings                                   (1,820 )            1,840                (4,654 )          (6,616 )                        N/M                            N/M
Preferred stock dividends                                 38                 53                   237               411                          N/M                            N/M

Net (loss)/earnings applicable to common
stockholders                                     $    (1,858 )       $    1,787           $    (4,891 )       $  (7,027 )                        N/M                            N/M

Basic (loss) per common share from
continuing operations                                    N/A                N/A           $     (4.95 )       $   (7.17 )                        N/M                            N/M
Basic (loss) per common share from
discontinued operations                                  N/A                N/A                 (0.02 )           (0.01 )                        N/M                            N/M

Basic (loss) per common share                            N/A                N/A           $     (4.97 )       $   (7.18 )                        N/M                            N/M

Diluted (loss) per common share from
continuing operations                                    N/A                N/A           $     (4.95 )       $   (7.17 )                        N/M                            N/M
Diluted (loss) per common share from
discontinued operations                                  N/A                N/A                 (0.02 )           (0.01 )                        N/M                            N/M

Diluted (loss) per common share                          N/A                N/A           $     (4.97 )       $   (7.18 )                        N/M                            N/M

Book value per share                                     N/M                N/M           $     21.43         $   21.43

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.

Quarterly Consolidated Results of Operations

Our net loss from continuing operations for the second quarter of 2009 was $1.8 billion compared with a net loss of $4.6 billion for the second quarter of 2008. Net revenues for the three months ended June 30, 2009 were $2.2 billion compared with negative $2.1 billion for the prior year period. The results in 2009 primarily reflected improved performance from our fixed income trading businesses. The quarter's results also included a $3.6 billion loss due to the impact of the narrowing 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 June 27, 2008 were primarily driven by our fixed income businesses and were materially impacted by the challenging market environment that existed during that period. Such conditions resulted in net losses on U.S. ABS CDOs, credit valuation adjustments related to hedges, and certain mortgage-related exposures.

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 negative $1.5 billion for the three months ended June 30, 2009 compared with negative $4.1 billion for the three months ended June 27, 2008. The negative principal transactions revenues in the second quarter of 2009 were primarily driven by a $3.6 billion loss due to the impact of the narrowing of Merrill Lynch's credit spreads on the carrying value of certain of our long-term debt liabilities. Equity trading revenues decreased as compared with the prior year, primarily reflecting lower revenues associated with certain structured equity financing activities within our global markets financing and services business. Revenues from rates and currency products declined due to the impact of credit valuation adjustments on certain derivative positions as well as a less favorable trading environment as compared with the prior year. Revenues from other fixed income trading activities increased, including mortgage and credit products, reflecting improved results in the current year as compared with the significant net write-downs recorded in the prior year period. In the second quarter of 2008, the negative principal transaction revenues were driven primarily by net losses in our fixed income trading businesses, which included our U.S. ABS CDO and residential mortgage-related businesses. 2008's results reflected the difficult market conditions that existed during that period, including the deterioration of the credit markets, lower levels of liquidity, increased volatility and a weaker U.S. housing market. Such conditions resulted in net losses that included $3.5 billion related to U.S. ABS CDOs, $2.9 billion of credit valuation adjustments related to hedges with financial guarantors, $1.7 billion related to the investment securities portfolio of our U.S. banks, and $1.3 billion related to certain residential mortgage exposures.

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 negative $529 million for the three months ended June 30, 2009 as compared with negative $637 million in the prior year period. Interest revenues declined as a result of lower asset levels and stated interest rates on those assets. Interest expense also decreased due to reduced funding levels and lower interest rates on such funding in our sales and trading businesses. The results in both periods were also affected by interest expenses associated with certain structured equity financing activities within our global markets financing and services business. The effect of the higher net interest expense associated with the structured equity financing activities is offset in Principal transactions revenues.

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 $1.5 billion for the three months

ended June 30, 2009, down 18% 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 . . .