Merrill Lynch issued the following press statement:

actions to significantly reduce the company’s risk exposures and further strengthen its

capital position. These actions include:

in an exposure reduction of $11.1 billion from June 27, 2008

Assurance Inc. (“XL”) and settlement negotiations with other monoline

counterparties

billion through a public offering launched today (excluding a fifteen percent, or

approximately $1.3 billion, option granted to the underwriter to purchase

additional shares of common stock to cover over-allotments)

the public offering, a portion of which is subject to receipt of regulatory approvals

common stock or new preferred securities, which eliminates the reset features in

the original securities

offering by executive management

“The sale of the substantial majority of our CDO positions represents a significant

milestone in our risk reduction efforts,” said John A. Thain, Chairman and CEO of

Merrill Lynch. “Our consistent focus has been to opportunistically reduce risk, and in

order to take advantage of this sizeable sale on an accelerated basis, we have decided to

further enhance our capital position by issuing common stock. The actions we

announced both today and on July 17 will materially enhance the company’s capital

position and financial flexibility going forward.”

As a result of the transactions announced today, the company expects to record a pre-tax

write-down in the third quarter of 2008 of approximately $5.7 billion. This write-down is

comprised of a $4.4 billion loss associated with the sale of CDOs, a $0.5 billion net loss

on the termination of hedges with XL Capital Assurance and an approximately $0.8

billion maximum loss related to the potential settlement of other CDO hedges with

certain monoline counterparties. In the third quarter, Merrill Lynch also expects to

record an expense of $2.5 billion related to its reset payment to Temasek and $2.4 billion

of additional dividends as a result of the exchange of certain existing mandatory

convertible preferred stock for common stock as described under “Common Stock

Offerings and Early Conversion of Mandatory Convertible Preferred.”

Pro forma for the transactions announced today, the sale of our interest in Bloomberg

L.P. and the expected FDS transaction, Merrill Lynch’s Tier 1 capital ratio, total capital

ratio and adjusted “if-converted” book value per share as of June 27, 2008 would have

been 10.5%, 16.6% and $22.21. These figures do not include the impact of any exercise

of the approximately $1.3 billion over-allotment option. Please see Attachment II for

further details.

CDO Sale:

On July 28, 2008, Merrill Lynch agreed to sell $30.6 billion gross notional amount of

U.S. super senior ABS CDOs to an affiliate of Lone Star Funds for a purchase price of

$6.7 billion. At the end of the second quarter of 2008, these CDOs were carried at $11.1

billion, and in connection with this sale Merrill Lynch will record a write-down of $4.4

billion pre-tax in the third quarter of 2008.

On a pro forma basis, this sale will reduce Merrill Lynch’s aggregate U.S. super senior

ABS CDO long exposures from $19.9 billion at June 27, 2008, to $8.8 billion, the

majority of which comprises older vintage collateral – 2005 and earlier. The pro forma

$8.8 billion super senior long exposure is hedged with an aggregate of $7.2 billion of

short exposure, of which $6.0 billion are with highly-rated non-monoline counterparties,

of which virtually all have strong collateral servicing agreements, and $1.1 billion are

with MBIA. The remaining net exposure will be $1.6 billion. The sale will reduce

Merrill Lynch’s risk-weighted assets by approximately $29 billion.

Merrill Lynch will provide financing to the purchaser for approximately 75% of the

purchase price. The recourse on this loan will be limited to the assets of the purchaser.

The purchaser will not own any assets other than those sold pursuant to this transaction.

The transaction is expected to close within 60 days.

In addition to the CDO sale referenced above, Merrill Lynch also agreed to terminate all

of its CDO-related hedges with XL and is in the process of negotiating settlements on

certain contracts with other monoline counterparties. These short positions were the

hedges on long CDO positions that are part of the announced sale.

Merrill Lynch executed an agreement to terminate all of its CDO-related hedges with XL.

The transaction is expected to close in early August 2008. When the transaction closes,

all of Merrill Lynch’s CDO-related hedges with XL will be terminated in exchange for an

upfront cash payment to Merrill Lynch of $500 million. These hedges had a carrying

value of approximately $1.0 billion at June 27, 2008. As a result of this transaction,

Merrill Lynch will record a pre-tax loss of $528 million during the third quarter of 2008.

Merrill Lynch is also in the process of negotiating settlements on certain contracts

relating to CDO hedges with MBIA and other lower-rated monolines. If Merrill Lynch

were to receive no payments in connection with the settlement of these hedges, the

maximum loss Merrill Lynch expects to record would be their current carrying value,

$0.8 billion.

The hedges described above had a net notional value of $8.4 billion. To reflect the XL

termination and the other potential settlements with other monolines, Merrill Lynch will

reduce its U.S. super senior ABS CDO short exposures, or hedges, from $15.6 billion at

June 27, 2008, to $7.2 billion on a pro forma basis (see Attachment I for further details).

Common Stock Offering and Early Conversion of Mandatory Convertible Preferred:

Merrill Lynch plans to raise $8.5 billion through the public offering of common stock

announced today (excluding a fifteen percent, or approximately $1.3 billion option

granted to the underwriter to purchase additional shares of common stock to cover overallotments).

Temasek Holdings, Merrill Lynch’s largest shareholder, has committed to

purchase $3.4 billion of common stock in the offering, a portion of which is subject to

regulatory approvals that are expected to be obtained after the closing of the offering. In

addition, Merrill Lynch’s executive management team intends to purchase approximately

750 thousand shares of common stock in the offering.

In satisfaction of Merrill Lynch’s obligations under the reset provisions contained in the

investment agreement with Temasek Holdings, Merrill Lynch has agreed to pay Temasek

$2.5 billion, 100% of which will be invested in the offering at the public offering price

without any future reset protection.

In addition, $5.4 billion of the $6.6 billion of outstanding mandatory convertible

preferred holders have agreed to exchange their outstanding preferred stock for

approximately 195 million shares of common stock, plus accrued dividends payable in

cash or stock at the option of the holder. A holder of $1.2 billion of outstanding

mandatory convertible preferred has agreed to exchange their securities for new

mandatory convertible preferred securities with a reference price of $33.00. The reset

feature for all securities exchanged has been eliminated.

significantly enhance the firm’s equity capital position. The offering is being conducted

as a public offering registered under the Securities Act of 1933, and will be subject to

customary closing conditions. Merrill Lynch, Pierce, Fenner & Smith Incorporated is

serving as sole book-running manager and underwriter of the offering.