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 September 30, 2009, we owned approximately 48 percent 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 September 30, 2009. See "Executive Overview - Other Events" for additional information regarding our investment in BlackRock.

Bank of America Acquisition and Basis of Presentation

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 third quarter of 2009 refers to the period from July 1, 2009 through September 30, 2009, and the first nine months of 2009 refers to the period from January 1, 2009 through September 30, 2009. The third quarter of 2008 refers to the period from June 28, 2008 through September 26, 2008, and the first nine months of 2008 refers to the period from December 29, 2007 through September 26, 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 Accounting Standards Codification ("ASC") 280, Segment Reporting ("Segment Reporting"), in the first quarter of 2009. Pursuant to Segment Reporting, 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. As a result, the financial information of Merrill Lynch is presented as a single segment.

During the third quarter of 2009, Merrill Lynch adjusted previously reported prior period 2009 amounts related to the valuation of certain long-term borrowings, primarily structured notes. The impact of these adjustments reduced principal transactions revenues by $252 million and $178 million and net earnings by $176 million and $160 million for the first and second quarters of 2009, respectively. The results for the three and nine months ended September 30, 2009 are appropriately stated. Historical quarterly results presented in future filings will include the impact of these revisions.

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 earnings from continuing operations for the three and nine months ended September 30, 2009 of $690 million and $2.2 billion. These results compare with net losses from continuing operations of $(5.1) billion and $(11.7) billion for the three and nine months ended September 26, 2008. Revenues, net of interest expense ("net revenues") for the three and nine months ended September 30, 2009 were $5.1 billion and $16.8 billion, compared with $16 million and $834 million in the three and nine months ended September 26, 2008. Pre-tax earnings from continuing operations were $509 million and $2.4 billion for the three and nine months ended September 30, 2009, respectively. Pre-tax losses from continuing operations were $(8.3) billion and $(19.7) billion in the three and nine months ended September 26, 2008.

The results for the third 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 equity and commodity net revenues. In addition, net revenues for the third quarter of 2009 were adversely affected by net losses of $2.1 billion 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 results for the nine month period ended September 30, 2009 also reflected higher revenues from fixed income trading as compared with the net losses recorded in the prior year. The results for the first nine months of 2009 also included a $3.5 billion net 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 results for both the three and nine month periods ended September 30, 2009 reflected lower investment banking revenues and lower revenues from our global wealth management activities.

In the third quarter of 2008, net revenues and net earnings were materially affected by a number of significant items, which included: net write-downs of $5.7 billion resulting from the sale of U.S. asset-backed collateralized debt obligations ("ABS CDOs") and the termination and settlement of related hedges; a net gain of $4.3 billion from the sale of our 20% ownership stake in Bloomberg, L.P.; net write-downs of $3.8 billion associated with real estate-related assets and losses related to certain government-sponsored entities and major U.S. broker dealers, as well as the default of a major U.S. broker-dealer; net gains of $2.8 billion 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; net losses of $2.6 billion across residential and commercial mortgage exposures; a $2.5 billion non-deductible payment to affiliates and transferees of Temasek Holdings (Private) Limited ("Temasek") related to our July 2008 offering of common stock; and a $425 million expense, including a $125 million fine, arising from Merrill Lynch's offer to repurchase auction rate securities ("ARS") from our private clients and the associated settlement with regulators.

The results for the nine months ended September 26, 2008 included net losses related to U.S. ABS CDOs of $9.8 billion; credit valuation adjustments related to hedges with financial guarantors of $7.2 billion; net losses related to certain residential mortgage exposures of $4.3 billion; net losses related to the investment securities portfolio of Merrill Lynch's U.S. banks of $2.9 billion; net losses of $2.1 billion related to U.S. broker-dealers and certain government-sponsored entities; and leveraged finance commitment write-downs of $1.8 billion. In addition, the results for the nine months ended September 26, 2008 included a restructuring charge of $484 million arising from staff reductions completed during the period. These results were partially offset by a net gain of $4.3 billion from the sale of our ownership stake in Bloomberg, L.P. as well as a net benefit of $5.0 billion related to the widening of Merrill Lynch's credit spreads on the carrying value of certain of our long-term debt liabilities.

Our net loss applicable to common shareholders for the three and nine months ended September 26, 2008 included $2.1 billion of additional preferred dividends associated with the exchange of Merrill Lynch's mandatory convertible preferred stock, which occurred in July 2008.

Transactions with Bank of America

Asset and Liability Transfers

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 nine months ended September 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 $42 billion of assets and $19 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.

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 sold the shares of the respective entity to Bank of America. The sale price of each entity was equal to its net book value as of the date of transfer. Consideration for the sale of MLBUSA was in the form of an $8.9 billion floating rate demand note payable from Bank of America to Merrill Lynch, while MLBT-FSB was sold for cash of approximately $4.4 billion. The demand note received by Merrill Lynch in connection with the MLBUSA sale had a stated interest rate that was a market rate at the time of 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 was completed on November 2, 2009. At that time, MLBT-FSB was also merged into Bank of America, N.A. At September 30, 2009, the total assets of MLBT-FSB were $37.7 billion. In October, 2009, Bank of America announced that it had reached a definitive agreement to sell First Republic Bank, a division of MLBT-FSB, to a group of third party investors. The sale is expected to close in the second quarter of 2010, subject to receipt of all regulatory approvals.

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 48 percent to approximately 34 percent.

On September 21, 2009, Bank of America reached an agreement to terminate its term sheet with the U.S. government under which the U.S. government agreed in principle to provide protection against the possibility of unusually large losses on a pool of Bank of America's financial instruments that were acquired from Merrill Lynch. In connection with the termination of the term sheet, Bank of America paid a total of $425 million in the third quarter to the U.S. government to be allocated among the U.S. Treasury, the Federal Reserve and the Federal Deposit Insurance Corporation.

Results Of Operations


(dollars in millions, except per share amounts)
                                                                                                                                        % Change between the           % Change between the
                                                          Successor Company                        Predecessor Company                   Three Months Ended             Nine Months Ended
                                                  Three Months         Nine Months          Three Months         Nine Months             Sept. 30, 2009 and             Sept. 30, 2009 and
                                                      Ended               Ended                 Ended               Ended                 the Three Months               the Nine Months
                                                    Sept. 30,           Sept. 30,             Sept. 26,           Sept. 26,               Ended Sept. 26,                Ended Sept. 26,
                                                      2009                2009                  2008                2008                        2008                           2008

Revenues
Principal transactions                            $       214         $     4,047           $    (6,573 )       $   (13,074 )                        N/M %                          N/M %
Commissions                                             1,316               4,049                 1,745               5,445                          (25 )                          (26 )
Managed account and other fee-based revenues              997               3,118                 1,395               4,249                          (29 )                          (27 )
Investment banking                                        732               2,200                   845               2,920                          (13 )                          (25 )
Earnings from equity method investments                   213                 306                 4,401               4,943                          (95 )                          (94 )
Other(1)                                                1,352               2,395                (2,986 )            (6,310 )                        N/M                            N/M

Subtotal                                                4,824              16,115                (1,173 )            (1,827 )                        N/M                            N/M
Interest and dividend revenues                          2,685               9,505                 9,019              28,415                          (70 )                          (67 )
Less interest expense                                   2,407               8,831                 7,830              25,754                          (69 )                          (66 )

Net interest profit                                       278                 674                 1,189               2,661                          (77 )                          (75 )

Revenues, net of interest expense                       5,102              16,789                    16                 834                          N/M                            N/M


Non-interest expenses:
Compensation and benefits                               2,768               9,203                 3,483              11,170                          (21 )                          (18 )
Communications and technology                             501               1,395                   546               1,667                           (8 )                          (16 )
Brokerage, clearing, and exchange fees                    240                 732                   348               1,105                          (31 )                          (34 )
Occupancy and related depreciation                        314                 867                   314                 951                            -                             (9 )
Professional fees                                         148                 396                   242                 747                          (39 )                          (47 )
Advertising and market development                         89                 248                   159                 501                          (44 )                          (50 )
Office supplies and postage                                38                 115                    48                 160                          (21 )                          (28 )
Other                                                     495               1,398                   588               1,212                          (16 )                           15
Payment related to price reset on common
stock offering                                              -                   -                 2,500               2,500                          N/M                            N/M
Restructuring charge                                        -                   -                    39                 484                          N/M                            N/M

Total non-interest expenses                             4,593              14,354                 8,267              20,497                          (44 )                          (30 )

Pre-tax earnings/(loss) from continuing
operations                                                509               2,435                (8,251 )           (19,663 )                        N/M                            N/M
Income tax (benefit)/expense                             (181 )               241                (3,131 )            (7,940 )                        N/M                            N/M

Net earnings/(loss) from continuing
operations                                                690               2,194                (5,120 )           (11,723 )                        N/M                            N/M

Discontinued operations:
Pre-tax loss from discontinued operations                   -                   -                   (53 )              (110 )                        N/M                            N/M
Income tax benefit                                          -                   -                   (21 )               (65 )                        N/M                            N/M

Net loss from discontinued operations                       -                   -                   (32 )               (45 )                        N/M                            N/M

Net earnings/(loss)                                       690               2,194                (5,152 )           (11,768 )                        N/M                            N/M
Preferred stock dividends                                  38                  91                 2,319               2,730                          N/M                            N/M

Net earnings/(loss) applicable to common
stockholders                                      $       652         $     2,103           $    (7,471 )       $   (14,498 )                        N/M                            N/M

Basic loss per common share from continuing
operations                                                N/A                 N/A           $     (5.56 )       $    (13.16 )                        N/M                            N/M
Basic loss per common share from discontinued
operations                                                N/A                 N/A                 (0.02 )             (0.04 )                        N/M                            N/M

Basic loss per common share                               N/A                 N/A           $     (5.58 )       $    (13.20 )                        N/M                            N/M

Diluted loss per common share from continuing
operations                                                N/A                 N/A           $     (5.56 )       $    (13.16 )                        N/M                            N/M
Diluted loss per common share from
discontinued operations                                   N/A                 N/A                 (0.02 )             (0.04 )                        N/M                            N/M

Diluted loss per common share                             N/A                 N/A           $     (5.58 )       $    (13.20 )                        N/M                            N/M

Book value per share                                      N/M                 N/M           $     18.59         $     18.59                          N/M                            N/M

(1) Successor Company amounts include other income and other-than-temporary impairment losses on available-for-sale debt securities. The other-than-temporary impairment losses were $305 million and $599 million for the three and nine months ended September 30, 2009, respectively.

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 periods since Merrill Lynch is now a wholly-owned subsidiary of Bank of America.

Quarterly Consolidated Results of Operations

Our net earnings from continuing operations for the third quarter of 2009 was $690 million compared with a net loss of $5.1 billion for the third quarter of 2008. Net revenues for the three months ended September 30, 2009 were $5.1 billion compared with $16 million 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 $2.1 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 September 26, 2008 were primarily driven by our fixed income businesses and were materially impacted by the challenging market environment that existed during that period. Losses incurred during the third quarter of 2008 included write-downs from the sale of U.S. ABS CDOs and the termination of related hedges, losses across residential and commercial mortgage-related exposures, real estate asset write-downs and losses related to certain government sponsored entities and major U.S. broker-dealers, including the default of a major U.S broker-dealer.

Principal transactions revenues include both realized and unrealized gains and losses on trading assets and trading liabilities and investment securities classified as trading. Principal transactions revenues were $214 million for the three months ended September 30, 2009 compared with negative $6.6 billion for the three months ended September 26, 2008. Principal transactions revenues in the third quarter of 2009 were adversely affected by a $2.1 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 increased as compared with the prior year, primarily reflecting higher revenues from cash and derivative products. Credit products revenues increased, reflecting strong liquidity and client activity, augmented by strong new issuance volume, as well as more favorable market conditions as compared with the prior year. Revenues from certain other fixed income trading activities also increased, including mortgage products, reflecting improved results in the current year as compared with the significant net write-downs recorded in the prior year period. These increases were partially offset by lower revenues from commodities and rates and currencies as compared with the prior year. In the . . .