continuing operations for the third quarter of 2008 of $5.1 billion, or $5.56 per diluted

share, compared with a net loss from continuing operations of $2.4 billion, or $2.99 per

diluted share, for the third quarter of 2007. Merrill Lynch’s net loss for the third quarter

of 2008 was $5.2 billion, or $5.58 per diluted share, compared with a net loss of $2.2

billion, or $2.82 per diluted share, for the year-ago quarter.

Third quarter 2008 net revenues were $16 million, driven by a number of significant

items, including:

hedges with monoline guarantor counterparties

ownership stake in Bloomberg, L.P.

September, including real estate-related asset write-downs and losses related to

certain government sponsored entities and major U.S. broker-dealers, as well as the

default of a U.S. broker-dealer

spreads on the carrying value of certain of our long-term debt liabilities, which was

similarly impacted by the severe market movements in September

1 ABS CDOs are defined as collateralized debt obligations comprised of asset-backed securities.

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across residential and commercial mortgage exposures

quarter of 2008, down 31% on a comparable basis from the prior-year period, reflective

of the challenging operating environment.

Third quarter 2008 net revenues decreased from $380 million in the prior-year period,

which included $8.5 billion in net write-downs, primarily related to U.S. ABS CDO and

residential mortgage-related exposures, and a $609 million net gain related to the changes

in carrying value of certain of our long-term debt liabilities.

The net loss for the third quarter of 2008 was also impacted by certain non-compensation

expense items3 including:

common stock offering

previously announced offer to repurchase auction rate securities (ARS) from its

private clients and the associated settlement with regulators

Merrill Lynch's net loss applicable to common shareholders for the third quarter and first

nine months of 2008 included $2.1 billion of additional preferred dividends associated

with the previously announced exchange of the mandatory convertible preferred stock.

See Capital and Liquidity Management for further information.

The net loss from continuing operations for the first nine months of 2008 was $11.7

billion, or $13.16 per diluted share, compared with net earnings from continuing

operations of $1.7 billion, or $1.60 per diluted share, in the prior-year period. The first

nine months of 2008 net loss and loss per diluted share were $11.8 billion and $13.20,

respectively, compared with net earnings of $2.1 billion, or $2.03 per diluted share, for

the prior-year period. The first nine months of 2008 net revenues were $834 million

compared with $19.4 billion in the prior-year period. The first nine months of 2008

comparable basis.

Including the impact of this quarter’s net loss, at the end of the third quarter of 2008,

Merrill Lynch’s total common equity increased to $29.8 billion, an increase of 41% or

$8.7 billion from the second quarter of 2008. Total stockholders’ equity was $38.4

billion at the end of the third quarter of 2008, an increase of 10% or $3.6 billion from the

second quarter of 2008. See Capital and Liquidity Management for a more detailed

description of this quarter’s activities.

2 See Attachment VIII for a reconciliation of non-GAAP measures.

3 These items were recorded in the Corporate segment.

3

transaction

27% from prior year-to-date

and 14% year-on-year

Lynch also ranked #2 in global announced M&A for the quarter4

environment; FA headcount increased by 240 from a year ago; Net new annuitized

assets are up $21 billion year-to-date

approximately 15% over the quarter

CDOs

planned sales, reductions of 56% in non-U.S. residential mortgages and 25% in

commercial real estate, excluding First Republic Bank and the U.S. Banks Investment

Securities Portfolio

billion sale of the Bloomberg stake

participation in the TARP Capital Purchase Program, Merrill Lynch agreed and

expects to issue $10 billion of non-voting preferred stock and related warrants to the

U.S. Treasury pursuant to the program.

"We continue to reduce exposures and de-leverage the balance sheet prior to the closing

of the Bank of America deal," said John A. Thain, chairman and CEO of Merrill Lynch.

"As the landscape for financial services firms continues to change and our transition

teams make good progress, we believe even more that the transaction will create an

unparalleled global company with pre-eminent scale, earnings power and breadth."

4 Source: Dealogic.

4

In addition to the restructuring charge of $445 million recorded in the second quarter, an

additional $39 million was recorded in the third quarter related to headcount reduction

initiatives, primarily in technology. The third quarter and year-to-date amounts recorded

in the business segments were as follows: $18 million and $329 million in Global

Markets and Investment Banking and $21 million and $155 million in Global Wealth

Management. The following discussion of business segment results excludes the impact

of these restructuring expenses. A reconciliation of these segment results appears on

Attachment III to this release.

GMI recorded net revenues of negative $3.2 billion and a pre-tax loss of $6.0 billion for

the third quarter of 2008 compared with net revenues of negative $3.2 billion and a pretax

loss of $4.6 billion in the prior-year period. The challenging market environment,

particularly in September, resulted in net losses in FICC and lower net revenues in

Investment Banking, offset by significantly higher net revenues in Equity Markets

resulting from the Bloomberg gain. GMI’s third quarter net revenues included a net

benefit of $2.8 billion (approximately $2.0 billion in FICC and $0.8 billion in Equity

Markets) due to the impact of the widening of Merrill Lynch’s credit spreads on the

carrying value of certain long-term debt liabilities.

• Net revenues from GMI’s three major business lines were as follows:

Rates and Currencies were more than offset by net losses related to the CDO sale and

termination and potential settlement of related monoline hedges, real estate-related

assets, and net losses from credit spreads widening across most asset classes to

significantly higher levels at the end of the quarter. FICC recorded significant losses

as a result of severe market dislocations in September, including credit spread

volatility and a default of a major U.S. broker-dealer. In addition, net revenues for

other FICC businesses declined from the third quarter of 2007, as the environment for

those businesses was materially worse than the year-ago quarter.

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S. ABS CDOs:

At the end of the third quarter, net exposures to U.S. super senior ABS CDOs

were $1.1 billion, down from $4.3 billion at the end of the second quarter. The

remaining net exposure is predominantly comprised of U.S. super senior ABS

CDOs based on mezzanine underlying collateral.

The aggregate U.S. super senior ABS CDO long exposures were $6.4 billion,

substantially reduced from $19.9 billion at the end of the second quarter. The

reduction predominantly resulted from the CDO sale, which decreased long

exposures by $11.1 billion. The long exposure was further reduced during the

quarter by $2.4 billion resulting from mark-to-market adjustments, amortization

and liquidations.

At quarter-end, the super senior ABS CDO long exposure was hedged with an

aggregate of $5.3 billion of short exposure, which was down $10.3 billion from

the end of the second quarter. Of this reduction, $8.4 billion was due to the

termination and potential settlement of related monoline hedges and $1.9 billion

was primarily due to mark-to-market gains, amortization and liquidations. The

remaining short position predominantly reflects contracts with highly-rated, nonmonoline

counterparties with strong collateral servicing agreements.

Please see Attachment VI to this release for details related to these exposures.

Financial Guarantors:

At the end of the third quarter of 2008, the carrying value of hedges with financial

guarantors related to U.S. super senior ABS CDOs was $1.4 billion, reduced from

$2.9 billion at the end of the second quarter. The decrease was due to the

termination and potential settlement of monoline hedges partially offset by

modest gains in the market value of the remaining hedges. Please see Attachment

VI to this release for details related to these hedges.

The carrying value of hedges with financial guarantors related to other asset

classes outside of U.S. super senior ABS CDOs increased from $3.6 billion at the

end of the second quarter to $4.5 billion at the end of the third quarter 2008,

resulting from gains in the market value of these hedges.

During the third quarter of 2008, credit valuation adjustments related to the firm’s

remaining hedges with financial guarantors, including those related to U.S. super

senior ABS CDOs, were not significant.

Residential Mortgages (excluding U.S. Banks Investment Securities Portfolio):

Net exposures related to U.S. prime residential mortgages increased 3% to

$34.6 billion during the quarter, as GWM’s First Republic Bank continued to

originate mortgages for its high net worth client base, partially offset by the

approximately $0.4 billion sale of the firm’s entire prime securities trading

portfolio.

Other residential mortgage-related exposures of approximately $10 billion at the

beginning of the third quarter declined by 50% during the period to $5.0 billion,

6

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by 64% to $3.6 billion inclusive of planned sales. These reductions included a

net loss of $2.2 billion during the quarter, which includes write-downs associated

with these planned sales. The components of these reductions along with net

losses are summarized below:

to increased short positions and net losses of $392 million

million due to sales of approximately $1.0 billion and net losses of $492

million

during the period to $4.6 billion, or by 56% to $3.3 billion inclusive of planned

sales. These reductions included a net loss of $1.3 billion during the quarter,

which includes write-downs associated with these planned sales.

Please see Attachment VII to this release for details related to these exposures.

U.S. Banks Investment Securities Portfolio:

Within the investment securities portfolio of Merrill Lynch’s U.S. banks, net pretax

losses of $852 million were recognized through the statement of earnings

during the third quarter of 2008. These net losses reflected the other-thantemporary

impairment in the value of certain securities, primarily U.S. Alt-A

residential mortgage-backed securities. At the end of the quarter, the cumulative

pre-tax OCI balance related to this portfolio increased by $882 million to negative

$5.5 billion, and was recorded in stockholders’ equity on an after-tax basis.

Please see Attachment VII to this release for details related to these exposures.

Leveraged Finance:

During the third quarter of 2008, the firm recorded write-downs of approximately

$550 million related to leveraged finance commitments. Legacy leveraged

finance commitments declined 18% to $6.1 billion, down from $7.5 billion at the

end of the second quarter. The $1.4 billion reduction of legacy commitments was

primarily due to loan sales and syndications. New commitments of approximately

$670 million were also made during the quarter resulting in total leveraged

finance commitments of $6.8 billion at quarter-end.

Commercial Real Estate:

Third quarter 2008 net exposures related to commercial real estate, excluding

First Republic Bank, totaled approximately $12.8 billion, down 14% from the

second quarter, due primarily to markdowns, foreign exchange revaluations, sales

and paydowns in U.S. and European whole loans/conduits. Inclusive of the $1.6

billion of planned sales, net exposure would be $11.2 billion, down 25% from the

second quarter. The reductions included a net loss of $854 million during the

quarter, which includes write-downs associated with these planned sales. Net

exposures related to First Republic Bank were $2.9 billion at the end of the third

7

-MOREquarter,

up 10% from the second quarter. Please see Attachment VII to this

release for details related to these exposures.

Bloomberg gain and a net gain related to changes in the carrying value of certain

long-term debt liabilities, were $6.0 billion compared with $1.6 billion in the prioryear

period. Global Equity-Linked Products revenues increased approximately 14%

from the prior-year period, driven by increased trading activity and heightened market

volatility. These increases were more than offset by declines from our Cash business,

which experienced adverse market conditions, as well as Global Markets Financing

and Services, which experienced declines in average balances, particularly in

September. Private equity net losses were $289 million for the third quarter of 2008

compared with net losses of $61 million for the prior year quarter. Excluding private

equity net losses, the Bloomberg gain and the net gain related to changes in the

carrying value of certain long-term debt liabilities, Equity Markets revenues were

down 19% from the prior-year period.

down 25% from $1.0 billion in the 2007 third quarter. Equity origination, debt

origination and advisory revenues all declined, reflecting significantly lower industrywide

underwriting and deal volumes compared with the year-ago period.

For the first nine months of 2008, GMI recorded a pre-tax loss of $18.3 billion, on net

revenues of negative $9.2 billion, due primarily to net losses in FICC that were partially

offset by revenues in Equity Markets and Investment Banking. In addition, GMI

recorded a net gain of approximately $5.0 billion (approximately $3.4 billion in FICC

and $1.5 billion in Equity Markets) due to the impact of the widening of Merrill Lynch’s

credit spreads on the carrying value of certain long-term debt liabilities.

GWM generated solid net revenues for the third quarter of 2008 despite significant

market declines, reflecting the stability of the client franchise and the significant

proportion of recurring net revenues in GWM.

third quarter of 2007. The decrease in net revenues was primarily due to declines in

transactional and origination revenues resulting from reduced client and issuer

activity amidst increasingly challenging market conditions. The revenue decline was

partially offset by a reduction in compensation and non-compensation expenses,

resulting in pre-tax earnings of $774 million. GWM’s pre-tax profit margin was

23.9%, compared with 26.9% in the prior-year period.

• Net revenues from GWM’s major business lines were as follows:

billion, down 8% from the prior-year period driven by lower transaction and

origination revenues resulting from reduced client and origination activity in a

challenging environment. Fee-based revenues also declined due to lower market

levels.

8

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million, an 11% decline from the third quarter of 2007, due to lower revenues

from investments in asset management and alternative investment management

companies.

FAs during the quarter and 240 from the third quarter of 2007, as GWM continued to

be successful in retaining and recruiting high-quality experienced FAs. FA retention,

particularly among first and second quintile FAs, continues to outperform the industry

average. Outside the Americas, Merrill Lynch’s continued focus and investment in

the GWM franchise increased international FA headcount 8% year over year.

third quarter. Total net new money was negative $3 billion, impacted largely by

client reaction to persistent volatility and negative market movements during the

quarter.

quarter.

GWM recorded pre-tax earnings of $2.2 billion for the first nine months of 2008, down

18% from the year-ago period. Net revenues were $10.2 billion, a decline of 2%. The

decrease in pre-tax earnings was driven by lower net revenues from GPC and GIM and

slightly higher expenses reflecting GWM’s commitment to continuing investment in its

key growth initiatives.

Compensation and benefits expenses were $3.5 billion for the third quarter of 2008, up

76% from $2.0 billion in the third quarter of 2007, primarily due to the reversal of

compensation expense accruals in the prior-year quarter. Compensation and benefits

expenses were $11.2 billion for the first nine months of 2008, down 3% from $11.6

billion in the first nine months of 2007 primarily due to a decline in compensation

expense accruals reflecting lower net revenues and reductions in headcount.

Total non-compensation expenses were $4.8 billion for the third quarter of 2008,

including the $2.5 billion Temasek payment and the $425 million ARS-related expense;

excluding the aforementioned items, total non-compensation expenses were $1.9 billion,

down 9% from the year-ago quarter. Details of the other significant changes in noncompensation

expenses from the third quarter of 2007 are as follows:

costs related to ongoing technology investments and system development initiatives,

including continued investment in GWM platforms and workstations.

primarily to lower travel and other related expenses.

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auction-rate securities as previously discussed. Excluding this item, other expenses

were $163 million, down 59% due primarily to the write-off of approximately $100

million of identifiable intangible assets related to First Franklin in the prior-year

quarter and lower minority interest expenses associated with private equity

investments.

In the third quarter of 2008 Merrill Lynch recorded a pre-tax restructuring charge of $39

million, primarily related to severance costs and the accelerated amortization of

previously granted stock awards associated with headcount reduction initiatives,

primarily in technology. The restructuring charge for the nine month period was $484

million.

Income taxes from continuing operations for the third quarter were a net credit of $3.1

billion, reflecting tax benefits associated with the firm’s pre-tax losses. The third quarter

effective tax rate was 37.9%, compared with 34.6% for the third quarter of 2007. The

increase in the effective tax rate reflected changes in the firm’s geographic mix of

earnings.

The firm’s excess liquidity pool ended the quarter at approximately $77 billion, well in

excess of total debt maturing over the next twelve months.

Merrill Lynch’s active management of equity capital during the 2008 third quarter

included a number of transactions, including the previously announced $9.8 billion

common stock offering and sale of a 20% stake in Bloomberg L.P. resulting in a pre-tax

gain of $4.3 billion.

As previously disclosed, concurrent with the $9.8 billion common stock offering, holders

of $4.9 billion of the $6.6 billion of the mandatory convertible preferred stock agreed to

exchange their preferred stock for approximately 177 million shares of common stock,

plus $65 million in cash. Holders of the remaining $1.7 billion of mandatory convertible

preferred stock agreed to exchange their preferred stock for new mandatory convertible

preferred stock. The price reset feature for all securities exchanged was eliminated. In

connection with the elimination of the price reset feature of the $6.6 billion of preferred

stock, Merrill Lynch recorded additional preferred dividends of $2.1 billion in the third

quarter of 2008.

In light of the pending transaction with Bank of America, Merrill Lynch is no longer

pursuing the proposed sale of Financial Data Services, Inc. (FDS). As a result, all of

Merrill Lynch’s equity capital and related figures do not include any impact of the firm’s

previously contemplated sale of a controlling interest in FDS.

At the end of the third quarter of 2008, estimated book value per share was $18.59, down

from $21.43 at the end of the second quarter. Adjusting for the company’s $1.7 billion

mandatory convertible preferred offering on an “if-converted” basis, Merrill Lynch’s

adjusted book value per share was $18.90 at the end of the third quarter of 2008.

10

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to the third quarter, and as part of Bank of America’s $25 billion

participation in the TARP Capital Purchase Program, Merrill Lynch agreed and expects

to issue $10 billion of non-voting preferred stock and related warrants to the U.S.

Treasury pursuant to the program.

Merrill Lynch’s full-time employees totaled 60,900 at the end of the third quarter of

2008, reduced by approximately 3,300 employees since the prior-year period, largely due

to headcount reduction initiatives in the U.S., within GMI and support areas.