##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
    Washington, D.C. 20549
  FORM 10-Q
 (Mark One)X

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    June 27, 2008ORTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from
    
    to   Commission file number 1-7182
  MERRILL LYNCH & CO., INC.
    Delaware

13-2740599(State or Other Jurisdiction of
    Incorporation or Organization)

(I.R.S. Employer Identification No.)4 World Financial Center,
    New York, New York

10080(Address of Principal Executive Offices)

(Zip Code)(212) 449-1000Registrants telephone number, including area code:    X
  Rule 12b-2
   Large
    Accelerated Filer  X
    Accelerated Filer
    Non-Accelerated Filer
    Smaller Reporting Company  Rule 12b-2
  X
  APPLICABLE
    ONLY TO CORPORATE ISSUERS:
    one-for-one




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##### 



MERRILL
    LYNCH & CO., INC. QUARTERLY REPORT ON
    FORM 10-Q
    FOR THE QUARTERLY PERIOD ENDED JUNE 27, 2008
    TABLE OF CONTENTS
  Part I. Financial InformationItem 1.  Financial Statements
    (unaudited)


4Condensed Consolidated Statements of
    (Loss)/Earnings


4Condensed Consolidated Balance Sheets


6Condensed Consolidated Statements of Cash
    Flows


8Condensed Consolidated Statements of
    Comprehensive (Loss)/Income


9Notes to Condensed Consolidated Financial
    Statements


10Note 1. Summary of Significant Accounting
    Policies


10Note 2. Segment and Geographic
    Information


26Note 3. Fair Value


28Note 4. Securities Financing Transactions


39Note 5. Investment Securities


40Note 6. Securitization Transactions and
    Transactions with Special Purpose Entities (SPEs)


42Note 7. Loans, Notes, and Mortgages and
    Related Commitments to Extend Credit


50Note 8. Goodwill and Intangibles


51Note 9. Borrowings and Deposits


52Note 10. Stockholders Equity and
    Earnings Per Share


55Note 11. Commitments, Contingencies and
    Guarantees


58Note 12. Employee Benefit Plans


63Note 13. Income Taxes


64Note 14. Regulatory Requirements


65Note 15. Discontinued Operations


67Note 16. Cash Flow Restatement


68Note 17. Restructuring Charge


68Note 18. Subsequent Events


69Report of Independent Registered Public
    Accounting Firm


71Item 2.  Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


72Forward-Looking Statements and
    Non-GAAP Financial Measures


72Introduction


72Executive Overview


73Consolidated Results of Operations


80Business Segments


90Geographic Information


97Consolidated Balance Sheets


99Off Balance Sheet Exposures


100Contractual Obligations and Commitments


103Capital and Funding


105Risk Management


117Critical Accounting Policies and Estimates


128Recent Accounting Developments


135Item 3.  Quantitative and
    Qualitative Disclosures About Market Risk


137Item 4.  Controls and
    Procedures


137Part II. Other Information


138Item 1.  Legal
    Proceedings


138Item 1A. Risk Factors


140Item 2.  Unregistered Sales of
    Equity Securities, Use of Proceeds and Issuer Purchases of
    Equity Securities


140Item 4.  Submission of Matters
    to a Vote of Security Holders


142Item 6.  Exhibits


142Signatures


143Index to Exhibits


144EX-12: Statement Re: Computation of RatiosEX-15: Letter of Awareness from Deloitte & Touche LLPEX-31.1: CertificationEX-31.2: CertificationEX-32.1: CertificationEX-32.2: CertificationEX-99.2: Pro Forma Stockholders' Equity   2




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##### Table of Contents



Available
    Information
  1-800-SEC-0330
  Form 10-K, Form 10-Q, Form 8-K
  ­
    ­
 3




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##### Table of Contents



PART I.
    FINANCIAL INFORMATION ITEM 1.
    Financial Statements  Merrill
    Lynch & Co., Inc. and SubsidiariesCondensed Consolidated Statements of
    (Loss)/Earnings (Unaudited)
  For the Three Months EndedJune 27,

June 29,(In millions, except per share amounts)

2008

2007RevenuesPrincipal transactions

$
(4,083
)

$
3,556Commissions


1,811



1,787Managed accounts and other fee-based revenues


1,399



1,349Investment banking


1,158



1,528Earnings from equity method investments


111



375Other


(1,875
)


387(1,479
)


8,982Interest and dividend revenues


7,535



14,447Less interest expense


8,172



13,970Net interest (loss)/profit


(637
)


477Revenues, net of interest expense


(2,116
)


9,459Non-interest expensesCompensation and benefits


3,491



4,731Communications and technology


566



482Brokerage, clearing, and exchange fees


370



346Occupancy and related depreciation


328



273Professional fees


263



245Advertising and market development


166



200Office supplies and postage


55



56Other


311



300Restructuring charge


445



-Total non-interest expenses


5,995



6,633Pre-tax (loss)/earnings from continuing operations


(8,111
)


2,826Income tax (benefit)/expense


(3,477
)


816Net (loss)/earnings from continuing operations


(4,634
)


2,010Discontinued operations:Pre-tax (loss)/earnings from discontinued operations


(32
)


197Income tax (benefit)/expense


(12
)


68Net (loss)/earnings from discontinued operations


(20
)


129Net (loss)/earnings

$
(4,654
)

$
2,139Preferred stock dividends

$
237


$
72Net (loss)/earnings applicable to common stockholders

$
(4,891
)

$
2,067Basic (loss)/earnings per common share from continuing operations

$
(4.95
)

$
2.32Basic (loss)/earnings per common share from discontinued
    operations


(0.02
)


0.16Basic (loss)/earnings per common share

$
(4.97
)

$
2.48Diluted (loss)/earnings per common share from continuing
    operations

$
(4.95
)

$
2.10Diluted (loss)/earnings per common share from discontinued
    operations


(0.02
)


0.14Diluted (loss)/earnings per common share

$
(4.97
)

$
2.24Dividend paid per common share

$
0.35


$
0.35Average shares used in computing earnings per common shareBasic


984.1



833.8Diluted


984.1



923.3    See Notes to Condensed
    Consolidated Financial Statements
 4




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##### Table of Contents



Merrill
    Lynch & Co., Inc. and Subsidiaries
    Condensed Consolidated Statements of (Loss)/Earnings
    (Unaudited)
  For the Six Months EndedJune 27,

June 29,(In millions, except per share amounts)

2008

2007RevenuesPrincipal transactions

$
(6,501
)

$
6,290Commissions


3,700



3,500Managed accounts and other fee-based revenues


2,854



2,633Investment banking


2,075



3,038Earnings from equity method investments


542



684Other


(3,324
)


1,228(654
)


17,373Interest and dividend revenues


19,396



27,168Less interest expense


17,924



25,479Net interest profit


1,472



1,689Revenues, net of interest expense


818



19,062Non-interest expensesCompensation and benefits


7,687



9,585Communications and technology


1,121



961Brokerage, clearing, and exchange fees


757



656Occupancy and related depreciation


637



538Professional fees


505



471Advertising and market development


342



355Office supplies and postage


112



115Other


624



654Restructuring charge


445



-Total non-interest expenses


12,230



13,335Pre-tax (loss)/earnings from continuing operations


(11,412
)


5,727Income tax (benefit)/expense


(4,809
)


1,687Net (loss)/earnings from continuing operations


(6,603
)


4,040Discontinued operations:Pre-tax (loss)/earnings from discontinued operations


(57
)


391Income tax (benefit)/expense


(44
)


134Net (loss)/earnings from discontinued operations


(13
)


257Net (loss)/earnings

$
(6,616
)

$
4,297Preferred stock dividends

$
411


$
124Net (loss)/earnings applicable to common stockholders

$
(7,027
)

$
4,173Basic (loss)/earnings per common share from continuing operations

$
(7.17
)

$
4.67Basic (loss)/earnings per common share from discontinued
    operations


(0.01
)


0.31Basic (loss)/earnings per common share

$
(7.18
)

$
4.98Diluted (loss)/earnings per common share from continuing
    operations

$
(7.17
)

$
4.22Diluted (loss)/earnings per common share from discontinued
    operations


(0.01
)


0.28Diluted (loss)/earnings per common share

$
(7.18
)

$
4.50Dividend paid per common share

$
0.35


$
0.35Average shares used in computing earnings per common shareBasic


978.5



837.6Diluted


978.5



926.8    See Notes to Condensed
    Consolidated Financial Statements
 5




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##### Table of Contents



Merrill
    Lynch & Co., Inc. and SubsidiariesCondensed Consolidated Balance Sheets
    (Unaudited)
  June 27,

Dec. 28,(dollars in millions, except per
    share amounts)

2008

2007ASSETSCash and cash equivalents

$
31,211


$
41,346Cash and securities segregated for regulatory purposes or
    deposited with clearing organizations


26,228



22,999Securities financing transactionsReceivables under resale agreements (includes $105,047 in 2008
    and $100,214 in 2007 measured at fair value in accordance
    with SFAS No. 159)


224,958



221,617Receivables under securities borrowed transactions (includes
    $1,201 in 2008 measured at fair value in accordance with SFAS
    No. 159)


129,426



133,140354,384



354,757Trading assets, at fair value (includes securities
    pledged as collateral that can be sold or repledged of $23,401
    in 2008 and $45,177 in 2007)Derivative contracts


86,492



72,689Equities and convertible debentures


42,870



60,681Corporate debt and preferred stock


37,769



37,849Mortgages, mortgage-backed, and asset-backed


29,273



28,013Non-U.S.
    governments and agencies


8,825



15,082U.S. Government and agencies


6,784



11,219Municipals, money markets and physical commodities


5,626



9,136217,639



234,669Investment securities (includes $4,556 in 2008 and $4,685
    in 2007 measured at fair value in accordance with
    SFAS No. 159) (includes securities pledged as
    collateral that can be sold or repledged of $4,111 in 2008
    and $16,124 in 2007)


71,286



82,532Securities received as collateral, at fair value


51,505



45,245Other receivablesCustomers (net of allowance for doubtful accounts of $91 in 2008
    and $24 in 2007)


70,798



70,719Brokers and dealers


17,300



22,643Interest and other


32,684



33,487120,782



126,849Loans, notes, and mortgages (net of allowances for loan
    losses of $602 in 2008 and $533 in 2007) (includes $1,204 in
    2008 and $1,149 in 2007 measured at fair value
    in accordance with SFAS No. 159)


79,170



94,992Equipment and facilities (net of accumulated depreciation
    and amortization of $5,779 in 2008 and $5,518 in 2007)


3,142



3,127Goodwill and other intangible assets


5,058



5,091Other assets


5,805



8,443Total Assets

$
966,210


$
1,020,050  6




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##### Table of Contents



Merrill
    Lynch & Co., Inc. and Subsidiaries
    Condensed Consolidated Balance Sheets (Unaudited)
  June 27,

Dec. 28,(dollars in millions, except per
    share amount)

2008

2007LIABILITIESSecurities financing transactionsPayables under repurchase agreements (includes $81,193 in 2008
    and $89,733 in 2007 measured at fair value in accordance with
    SFAS No. 159)

$
197,881


$
235,725Payables under securities loaned transactions


65,691



55,906263,572



291,631Short-term borrowings (includes $3,112 in 2008 measured
    at fair value in accordance with SFAS No. 159)


19,139



24,914Deposits


100,458



103,987Trading liabilities, at fair valueDerivative contracts


65,908



73,294Equities and convertible debentures


25,362



29,652Non-U.S.
    governments and agencies


6,460



9,407U.S. Government and agencies


4,541



6,135Corporate debt and preferred stock


3,254



4,549Municipals, money markets and other


451



551105,976



123,588Obligation to return securities received as collateral, at
    fair value


51,505



45,245Other payablesCustomers


65,633



63,582Brokers and dealers


15,743



24,499Interest and other


33,777



44,545115,153



132,626Long-term borrowings (includes $91,667 in 2008 and
    $76,334 in 2007 measured at fair value in accordance with
    SFAS No. 159)


270,436



260,973Junior subordinated notes (related to trust preferred
    securities)


5,193



5,154Total Liabilities


931,432



988,118COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITYPreferred Stockholders Equity (liquidation
    preference of $30,000 per share; issued: 2008 
    244,100 shares; 2007  155,000 shares;
    liquidation preference of $1,000 per share; issued: 2008 and
    2007  115,000 shares; liquidation preference of
    $100,000 per share; issued: 2008  66,000 shares)


13,666



4,383Common Stockholders EquityShares exchangeable into common stock


39



39Common stock (par value
    $1.331/3
    per share; authorized: 3,000,000,000 shares; issued:
    2008  1,414,588,700 shares; 2007 
    1,354,309,819 shares)


1,885



1,805Paid-in capital


31,200



27,163Accumulated other comprehensive loss (net of tax)


(3,685
)


(1,791
)Retained earnings


15,978



23,73745,417



50,953Less: Treasury stock, at cost (2008 
    431,518,432 shares; 2007 
    418,270,289 shares)


24,305



23,404Total Common Stockholders Equity


21,112



27,549Total Stockholders Equity


34,778



31,932Total Liabilities and Stockholders Equity

$
966,210


$
1,020,050    See Notes to Condensed
    Consolidated Financial Statements
 7




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##### Table of Contents



Merrill
    Lynch & Co., Inc. and SubsidiariesCondensed Consolidated Statements of Cash Flows
    (Unaudited)
  For the Six Months EndedJune 29,2007June 27,

As Restated(dollars in millions)

2008

See Note 16Cash flows from operating activities:Net (loss)/earnings

$
(6,616
)

$
4,297Adjustments to reconcile net (loss)/earnings to cash used for
    operating activitiesDepreciation and amortization


452



306Share-based compensation expense


1,357



885Deferred taxes


(3,353
)


196Earnings from equity method investments


(153
)


(540
)Other


3,787



752Changes in operating assets and liabilities:Trading assets


17,030



(21,091
)Cash and securities segregated for regulatory purposes or
    deposited with clearing organizations


(2,058
)


(4,835
)Receivables under resale agreements


(3,341
)


(82,896
)Receivables under securities borrowed transactions


3,714



(68,745
)Customer receivables


(78
)


(6,664
)Brokers and dealers receivables


5,345



(10,926
)Proceeds from loans, notes, and mortgages held for sale


15,010



45,073Other changes in loans, notes, and mortgages held for sale


(3,535
)


(49,358
)Trading liabilities


(16,324
)


21,590Payables under repurchase agreements


(37,844
)


84,192Payables under securities loaned transactions


9,785



28,387Customer payables


2,051



6,537Brokers and dealers payables


(8,756
)


16,481Trading investment securities


411



5,748Other, net


(2,375
)


(2,629
)Cash used for operating activities


(25,491
)


(33,240
)Cash flows from investing activities:Proceeds from (payments for):Maturities of available-for-sale securities


4,243



7,818Sales of available-for-sale securities


20,021



15,728Purchases of available-for-sale securities


(22,104
)


(28,997
)Proceeds from the sale of discontinued operations


12,576



-Equipment and facilities, net


(454
)


(50
)Loans, notes, and mortgages held for investment


(8,588
)


6,205Other investments


1,818



(4,232
)Acquisitions, net of cash


-



(1,267
)Cash provided by (used for) investing activities


7,512



(4,795
)Cash flows from financing activities:Proceeds from (payments for):Commercial paper and short-term borrowings


(6,439
)


1,954Issuance and resale of long-term borrowings


53,564



75,517Settlement and repurchases of long-term borrowings


(46,053
)


(29,985
)Deposits


(3,529
)


(1,323
)Derivative financing transactions


452



(28
)Issuance of common stock


2,535



700Issuance of preferred stock, net


9,283



1,479Common stock repurchases


-



(3,800
)Other common stock transactions


(870
)


267Excess tax benefits related to share-based compensation


37



649Dividends


(1,136
)


(749
)Cash provided by financing activities


7,844



44,681(Decrease)/increase in cash and cash equivalents


(10,135
)


6,646Cash and cash equivalents, beginning of period


41,346



32,109Cash and cash equivalents, end of period

$
31,211


$
38,755Supplemental Disclosure of Cash Flow Information:Cash paid for:Income taxes (net of refunds)

$
116


$
890Interest


18,235



24,860    See Notes to Condensed
    Consolidated Financial Statements
 8




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##### Table of Contents



Merrill
    Lynch & Co., Inc. and SubsidiariesCondensed Consolidated Statements of Comprehensive
    (Loss)/Income (Unaudited)
  For the Three Months Ended

For the Six Months EndedJune 27,

June 29,

June 27,

June 29,(dollars in millions)

2008

2007

2008

2007Net (loss)/earnings

$
(4,654
)

$
2,139


$
(6,616
)

$
4,297Other comprehensive income/(loss), net of tax:Foreign currency translation adjustment


(40
)


60



(48
)


24Net unrealized gain/(loss) on investment securities
    available-for-sale


462



(82
)


(1,814
)


(24
)Net deferred loss on cash flow hedges


(89
)


(23
)


(40
)


(27
)Defined benefit pension and postretirement plans


1



5



6



9Total other comprehensive income/(loss), net of tax


334



(40
)


(1,896
)


(18
)Comprehensive (loss)/income

$
(4,320
)

$
2,099


$
(8,512
)

$
4,279    See Notes to Condensed
    Consolidated Financial Statements
 9




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##### Table of Contents



Merrill
    Lynch & Co., Inc. and SubsidiariesNotes to Condensed Consolidated Financial
    Statements (Unaudited)June 27, 2008
  Note 1.  Summary
    of Significant Accounting Policies
  Form 10-K
  Basis of
    Presentation
           10




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##### Table of Contents



Discontinued
    Operations
      Consolidation
    Accounting Policies
      Accounting for Limited
    Partnership Investments The Equity
    Method of Accounting for Investments in Common Stock
  and/or
 11




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##### Table of Contents



and/or
  Accounting for Transfers and Servicing of Financial Assets
    and Extinguishment of Liabilities
  Securitization
    Activities
    
    The transferred assets have been legally isolated from the
    transferor even in bankruptcy or other receivership;
    The transferee has the right to pledge or exchange the assets it
    received, or if the entity is a QSPE the beneficial interest
    holders have the right to pledge or exchange their beneficial
    interests; and
    The transferor does not maintain effective control over the
    transferred assets (e.g. the ability to unilaterally cause the
    holder to return specific transferred assets).  Revenue
    Recognition
         12




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##### Table of Contents



and/or
    Use of
    Estimates
    
    Valuations of assets and liabilities requiring fair value
    estimates;
    Determination of other-than-temporary impairments for
    available-for-sale investment securities;
    The outcome of litigation;
    Assumptions and cash flow projections used in determining
    whether VIEs should be consolidated and the determination of the
    qualifying status of QSPEs;
    The realization of deferred taxes and the recognition and
    measurement of uncertain tax positions;
    The carrying amount of goodwill and other intangible assets;
    The amortization period of intangible assets with definite lives;
    Incentive-based compensation accruals and valuation of
    share-based payment compensation arrangements; and
    Other matters that affect the reported amounts and disclosure of
    contingencies in the financial statements.    Fair
    Value Measurement
  Accounting for
    Certain Investments in Debt and Equity Securities Accounting for Derivative Instruments
    and Hedging Activities Fair Value Option for Certain
    Financial Assets and Liabilities
 13




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##### Table of Contents



Fair Value Measurements No. 02-3, Issues Involved in Accounting for Derivative Contracts Held
    for Trading Purposes and Contracts Involved in Energy Trading
    and Risk Management Activities (EITF 02-3),
    and/or
  EITF 02-3. EITF 02-3, EITF 02-3 EITF 02-3. EITF 02-3 and/or
   14




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##### Table of Contents



Liquidity
    Counterparty
    Credit Risk
      Legal
    Reserves
    Income
    Taxes
  Accounting for Income Taxes
  Accounting for Uncertainty in Income Taxes
 15




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##### Table of Contents



Securities
    Financing Transactions
            Rule 15c3-3
  and/or
     16




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##### Table of Contents



Trading
    Assets and Liabilities
      Derivatives
    net-by-counterparty
     17




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##### Table of Contents



1.
    Merrill Lynch routinely issues debt in a variety of maturities
    and currencies to achieve the lowest cost financing possible. In
    addition, Merrill Lynchs regulated bank entities accept
    time deposits of varying rates and maturities. Merrill Lynch
    enters into derivative transactions to hedge these liabilities.
    Derivatives used most frequently include swap agreements that:  
    Convert fixed-rate interest payments into variable-rate interest
    payments;
    Change the underlying interest rate basis or reset
    frequency; and
    Change the settlement currency of a debt instrument.  2.
    Merrill Lynch enters into hedges on marketable investment
    securities to manage the interest rate risk, currency risk, and
    net duration of its investment portfolios.3.
    Merrill Lynch has fair value hedges of long-term fixed rate
    resale and repurchase agreements to manage the interest rate
    risk of these assets and liabilities. Subsequent to the adoption
    of SFAS No. 159, Merrill Lynch elects to account for
    these instruments on a fair value basis rather than apply hedge
    accounting.4.
    Merrill Lynch uses foreign-exchange forward contracts,
    foreign-exchange options, currency swaps, and
    foreign-currency-denominated debt to hedge its net investments
    in foreign operations. These derivatives and cash instruments
    are used to mitigate the impact of changes in exchange rates.5.
    Merrill Lynch enters into futures, swaps, options and forward
    contracts to manage the price risk of certain commodity
    inventory.      1.
    A hedge of the fair value of a recognized asset or liability
    (fair value hedge). Changes in the fair value of
    derivatives that are designated and qualify as fair value hedges
    of interest rate risk, along with the gain or loss on the hedged
    asset or liability that is attributable to the hedged risk, are
    recorded in current period earnings as interest revenue or
    expense. Changes in the fair value of derivatives that are
    designated and qualify as fair value hedges of commodity price
    risk, along with the gain or loss on the hedged asset or
    liability that is attributable to the hedged risk, are recorded
    in current period earnings in principal transactions.2.
    A hedge of the variability of cash flows to be received or paid
    related to a recognized asset or liability (cash
    flow hedge). Changes in the fair value of derivatives that
    are designated and qualify as effective cash flow hedges are
    recorded in accumulated other comprehensive loss until earnings
    are affected by the variability of cash flows of the hedged
    asset or liability (e.g., when periodic interest accruals on a
    variable-rate asset or liability are recorded in earnings).3.
    A hedge of a net investment in a foreign operation. Changes in
    the fair value of derivatives that are designated and qualify as
    hedges of a net investment in a foreign operation are recorded
    in the foreign currency translation adjustment account within
    accumulated other comprehensive loss. 18




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##### Table of Contents



Changes in the fair value of the hedge instruments that are
    associated with the difference between the spot translation rate
    and the forward translation rate are recorded in current period
    earnings in other revenues.        Netting
    of Derivative Contracts
  Offsetting Amounts Related to Certain
    Contracts
  Derivatives
    that Contain a Significant Financing Element
   19




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##### Table of Contents



Investment
    Securities
    Marketable
    Investments
          
    Identifying securities with indicators of possible impairment;
    Analyzing individual securities with fair value less than
    amortized cost for specific factors including: 
    An adverse change in cash flows
    The estimated length of time to recover from fair value to
    amortized cost
    The severity and duration of the fair value decline from
    amortized cost
    Evaluating the financial condition of the issuer; 
    Discussing evidential matter, including an evaluation of the
    factors that could cause individual securities to qualify as
    having other-than-temporary impairment;
    Determining whether management intends to hold the security
    through to recovery. To the extent that Merrill Lynch has the
    ability and intent to hold the securities, no impairment charge
    will be recognized; and
    Documenting the analysis and conclusions. 20




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##### Table of Contents



Non-Qualifying
    Investments
    and/or Investment Companies
    The Equity Method of Accounting for Investments
    in Common Stock
  SFAS 115-1 SFAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its
    Application to Certain Investments
  Loans,
    Notes, and Mortgages, Net
       21




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##### Table of Contents



New
    Accounting Pronouncements
  EITF 03-6-1, Determining Whether Instruments Granted in Share-Based
    Payment Transactions Are Participating Securities EITF 03-6-1) , Earnings per Share EITF 03-6-1, EITF 03-6-1
  14-1, Accounting for Convertible Debt Instruments That May Be
    Settled in Cash upon Conversion (Including Partial Cash
    Settlement) 14-1),
 22




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##### Table of Contents



Accounting for Convertible Debt and Debt Issued with Stock
    Purchase Warrants 14-1 14-1 14-1
  Disclosure about Derivative Instruments and Hedging
    Activities, an Amendment of FASB Statement No. 133
  FAS 140-3, Accounting for Transfers of Financial Assets and Repurchase
    Financing Transactions FAS 140-3, FAS 140-3 FAS 140-3
  Noncontrolling Interests in Consolidated Financial
    Statements-an amendment of ARB No. 51
 23




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##### Table of Contents




    More assets and liabilities to be measured at fair value as of
    the acquisition date,
    Liabilities related to contingent consideration to be remeasured
    at fair value in each subsequent reporting period with changes
    reflected in earnings and not goodwill, and
    All acquisition-related costs to be expensed as incurred by the
    acquirer.    07-1, Clarification of the Scope of the Audit and Accounting Guide
    Investment Companies and Accounting by Parent Companies and
    Equity Method Investors for Investments in Investment Companies (SOP 07-1). SOP 07-1 SOP 07-1, SOP 07-1 SOP 07-1.
  No. FIN 39-1, Amendment of FASB Interpretation No. 39 FIN 39-1). FIN 39-1 FIN 39-1 FIN 39-1 FIN 39-1
  instrument-by-instrument
 24




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##### Table of Contents



EITF 02-3 EITF 02-3 EITF 02-3.
  Employers Accounting for Defined Benefit Pension and
    Other Postretirement Plans, an amendment of FASB Statements
    No. 87, 88, 106 and 132R
    Accounting for Servicing of Financial Assets Accounting for Transfers and
    Servicing of Financial Assets and Extinguishments of
    Liabilities,
 25




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##### Table of Contents



Accounting for Certain Hybrid Financial Instruments an
    amendment of FASB Statements No. 133 and 140 instrument-by-instrument
 Note 2.  Segment and Geographic
    Information



Segment
    Information



Merrill Lynchs operations are organized into two business
    segments: Global Markets and Investment Banking
    (GMI) and Global Wealth Management
    (GWM). GMI provides full service global markets and
    origination products and services to corporate, institutional,
    and government clients around the world. GWM creates and
    distributes investment products and services for individuals,
    small- to mid-size businesses, and employee benefit plans.



Merrill Lynch also records revenues and expenses within a
    Corporate category. Corporate results primarily
    include the impact of junior subordinated notes (related to
    trust preferred securities), gains and losses related to
    ineffective interest rate hedges on certain qualifying debt, and
    the impact of certain hybrid financing instruments accounted for
    under SFAS No. 159. Net revenues and pre-tax losses
    recorded within Corporate for the second quarter of 2008 were
    negative $156 million as compared with negative net
    revenues and pre-tax losses of $79 million and
    $90 million, respectively, in the prior year period.



Net revenues and pre-tax losses recorded within Corporate for
    the six months ended June 27, 2008 were negative
    $131 million and $130 million, as compared with
    negative net revenues of $169 million and pre-tax losses of
    $180 million in the prior year period.



The following segment results represent the information that is
    relied upon by management in its decision-making processes.
    Management believes that the following information by business
    segment

26




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##### Table of Contents



(dollars in millions)GMI

GWM

Corporate

TotalThree Months Ended June 27, 2008Non-interest revenues

$
(3,822
)

$
2,749


$
(406
)

$
(1,479
)Net interest
    (loss)/profit(1)


(1,497
)


610



250



(637
)Revenues, net of interest expense


(5,319
)


3,359



(156
)


(2,116
)Non-interest
    expenses(2)


3,240



2,755



-



5,995Pre-tax (loss)/earnings from continuing
    operations(3)

$
(8,559
)

$
604


$
(156
)

$
(8,111
)Quarter-end total assets

$
869,312


$
96,472


$
426


$
966,210Three Months Ended June 29, 2007Non-interest revenues

$
6,066


$
2,977


$
(61
)

$
8,982Net interest
    (loss)/profit(1)


(82
)


577



(18
)


477Revenues, net of interest expense


5,984



3,554



(79
)


9,459Non-interest expenses


4,047



2,575



11



6,633Pre-tax earnings/(loss) from continuing
    operations(3)

$
1,937


$
979


$
(90
)

$
2,826Quarter-end total
    assets(4)

$
983,246


$
92,651


$
427


$
1,076,324Six Months Ended June 27, 2008Non-interest revenues

$
(5,515
)

$
5,709


$
(848
)

$
(654
)Net interest
    (loss)/profit(1)


(494
)


1,249



717



1,472Revenues, net of interest expense


(6,009
)


6,958



(131
)


818Non-interest
    expenses(2)


6,597



5,634



(1
)


12,230Pre-tax (loss)/earnings from continuing
    operations(3)

$
(12,606
)

$
1,324


$
(130
)

$
(11,412
)Six Months Ended June 29, 2007Non-interest revenues

$
11,722


$
5,715


$
(64
)

$
17,373Net interest
    (loss)/profit(1)


621



1,173



(105
)


1,689Revenues, net of interest expense


12,343



6,888



(169
)


19,062Non-interest expenses


8,199



5,125



11



13,335Pre-tax earnings/(loss) from continuing
    operations(3)

$
4,144


$
1,763


$
(180
)

$
5,727  (1)
    
    Management views interest and
    dividend income net of interest expense in evaluating
    results.(2)
    
    Includes restructuring charges
    recorded in the second quarter of 2008 of $311 million and
    $134 million for GMI and GWM, respectively. See
    Note 17 for further information.(3)
    
    See Note 15 to the
    Condensed Consolidated Financial Statements for further
    information on discontinued operations.(4)
    
    Amounts have been restated to
    reflect goodwill balances in the respective business segments.
    Such amounts ($3,350 million in GMI and $294 million
    in GWM) were previously included in Corporate.  Geographic
    Information
    
    United States;
    Europe, Middle East, and Africa;
    Pacific Rim;
    Latin America; and
    Canada. 27




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
    Revenues and expenses are generally recorded based on the
    location of the employee generating the revenue or incurring the
    expense without regard to legal entity;
    Pre-tax earnings or loss from continuing operations include the
    allocation of certain shared expenses among regions; and
    Intercompany transfers are based primarily on service agreements.    (dollars in millions)For the Three Months Ended

For the Six Months EndedJune 27, 2008

June 29, 2007

June 27, 2008

June 29, 2007Revenues, net of interest expenseEurope, Middle East, and Africa

$
1,420


$
2,120


$
2,405


$
4,223Pacific Rim


729



1,493



1,546



2,680Latin America


402



363



867



750Canada


79



120



135



292Total Non-U.S.


2,630



4,096



4,953



7,945United
    States(1)(2)


(4,746
)


5,363



(4,135
)


11,117Total revenues, net of interest expense

$
(2,116
)

$
9,459


$
818


$
19,062Pre-tax (loss)/earnings from continuing operationsEurope, Middle East, and Africa

$
197


$
703


$
(164
)

$
1,479Pacific Rim


150



766



330



1,286Latin America


201



162



369



358Canada


30



62



28



176Total Non-U.S.


578



1,693



563



3,299United
    States(1)(2)


(8,689
)


1,133



(11,975
)


2,428Total pre-tax (loss)/earnings from continuing
    operations(3)

$
(8,111
)

$
2,826


$
(11,412
)

$
5,727  (1)
    
    Corporate net revenues and
    adjustments are reflected in the U.S. region.(2)
    
    U.S. net revenues for the three
    and six months ended June 27, 2008 include net losses of
    $9.5 billion and $15.9 billion, respectively, related
    to U.S. ABS CDOs, credit valuation adjustments related to hedges
    with financial guarantors, losses in the investment portfolio of
    Merrill Lynchs U.S. banks and other residential mortgage
    exposures. Losses for the six months ended June 27, 2008
    were partially offset by gains of $2.2 billion that
    resulted from the widening of Merrill Lynchs credit
    spreads on the carrying value of certain of our long-term debt
    liabilities.(3)
    
    See Note 15 for further
    information on discontinued operations. Note 3.  Fair Value



Fair
    Value Measurements



Fair
    Value Hierarchy



In accordance with SFAS No. 157, Merrill Lynch has
    categorized its financial instruments, based on the priority of
    the inputs to the valuation technique, into a three-level fair
    value hierarchy. The fair value hierarchy gives the highest
    priority to quoted prices in active markets for identical assets
    or liabilities (Level 1) and the lowest priority to
    unobservable inputs (Level 3). If the inputs used to

28




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##### Table of Contents



Level 1.
    Financial assets and liabilities whose values are based on
    unadjusted quoted prices for identical assets or liabilities in
    an active market that Merrill Lynch has the ability to access
    (examples include active exchange-traded equity securities,
    exchange-traded derivatives, most U.S. Government and
    agency securities, and certain other sovereign government
    obligations).Level 2.
    Financial assets and liabilities whose values are based on
    quoted prices in markets that are not active or model inputs
    that are observable either directly or indirectly for
    substantially the full term of the asset or liability.
    Level 2 inputs include the following:  a)
    Quoted prices for similar assets or liabilities in active
    markets (for example, restricted stock);  b)
    Quoted prices for identical or similar assets or liabilities in
    non-active markets (examples include corporate and municipal
    bonds, which trade infrequently);  c)
    Pricing models whose inputs are observable for substantially the
    full term of the asset or liability (examples include most
    over-the-counter derivatives, including interest rate and
    currency swaps); and  d)
    Pricing models whose inputs are derived principally from or
    corroborated by observable market data through correlation or
    other means for substantially the full term of the asset or
    liability (examples include certain residential and commercial
    mortgage-related assets, including loans, securities and
    derivatives).  Level 3.
    Financial assets and liabilities whose values are based on
    prices or valuation techniques that require inputs that are both
    unobservable and significant to the overall fair value
    measurement. These inputs reflect managements own
    assumptions about the assumptions a market participant would use
    in pricing the asset or liability (examples include certain
    private equity investments, certain residential and commercial
    mortgage-related assets (including loans, securities and
    derivatives), and long-dated or complex derivatives (including
    certain equity and currency derivatives and long-dated options
    on gas and power)).     29




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##### Table of Contents



Recurring
    Fair Value
    (dollars in millions)Fair Value Measurements on a Recurring Basisas of June 27, 2008NettingLevel 1

Level 2

Level 3

Adj(1)

TotalAssets:Securities segregated for regulatory purposes or deposited with
    clearing organizations

$
1,727


$
6,788


$
-


$
-


$
8,515Receivables under resale
    agreements(2)


-



105,047



-



-



105,047Receivables under securities borrowed transactions


-



1,201



-



-



1,201Trading assets, excluding derivative contracts


43,107



67,850



20,190



-



131,147Derivative contracts


5,930



686,792



33,127



(639,357
)


86,492Investment securities


2,843



45,419



4,589



-



52,851Securities received as collateral


45,869



5,636



-







51,505Loans, notes, and mortgages


-



1,205



172



-



1,377Other
    assets(3)


30



1,035



-



(17
)


1,048Liabilities:Payables under repurchase
    agreements(2)


-



81,193



-



-



81,193Short-term borrowings


-



3,078



34



-



3,112Trading liabilities, excluding derivative contracts


35,404



4,664



-



-



40,068Derivative contracts


5,767



680,413



34,419



(654,691
)


65,908Obligation to return securities received as collateral


45,869



5,636



-



-



51,505Long-term
    borrowings(4)


-



81,575



12,749



-



94,324Other payables  interest and
    other(3)


-



487



-



(17
)


470  (1)
    
    Represents counterparty and
    cash collateral netting.(2)
    
    Resale and repurchase
    agreements are shown gross of counterparty netting.(3)
    
    Primarily represents certain
    derivatives used for non-trading purposes.(4)
    
    Includes bifurcated embedded
    derivatives carried at fair value.  30




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##### Table of Contents



and/or
    and/or
  and/or
  (dollars in millions)Fair Value Measurements on a Recurring Basisas of December 28, 2007NettingLevel 1

Level 2

Level 3

Adj(1)

TotalAssets:Securities segregated for regulatory purposes or deposited with
    clearing organizations

$
1,478


$
5,595


$
84


$
-


$
7,157Receivables under resale
    agreements(2)


-



100,214



-



-



100,214Trading assets, excluding derivative contracts


71,038



81,169



9,773



-



161,980Derivative contracts


4,916



522,014



26,038



(480,279
)


72,689Investment securities


2,240



53,403



5,491



-



61,134Securities received as collateral


42,451



2,794



-



-



45,245Loans, notes, and mortgages


-



1,145



63



-



1,208Other
    assets(3)


7



1,739



-



(24
)


1,722Liabilities:Payables under repurchase
    agreements(2)


-



89,733



-



-



89,733Trading liabilities, excluding derivative contracts


43,609



6,685



-



-



50,294Derivative contracts


5,562



526,780



35,107



(494,155
)


73,294Obligation to return securities received as collateral


42,451



2,794



-



-



45,245Long-term
    borrowings(4)


-



75,984



4,765



-



80,749Other payables  interest and
    other(3)


2



287



-



(13
)


276  (1)
    
    Represents counterparty and
    cash collateral netting.(2)
    
    Resale and repurchase
    agreements are shown gross of counterparty netting.(3)
    
    Primarily represents certain
    derivatives used for non-trading purposes.(4)
    
    Includes bifurcated embedded
    derivatives carried at fair value. 31




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Level 3
    Assets and Liabilities as of December 28,
    2007
    and/or
    and/or
      (dollars in millions)Level 3 Financial Assets and LiabilitiesThree Months Ended June 27, 2008Total Realized and UnrealizedGains or (Losses)

Total Realized and

Purchases,included in Income

Unrealized Gains

IssuancesBeginning

Principal

Other



or (Losses)

and

Transfers

EndingBalance

Transactions

Revenue

Interest

included in Income

Settlements

in (out)

BalanceAssets:Securities segregated for regulatory purposes or deposited with
    clearing organizations

$
80


$
-


$
-


$
-


$
-


$
(80
)

$
-


$
-Trading assets


18,225



(2,624
)


-



37



(2,587
)


2,134



2,418



20,190Investment securities


4,932



(343
)


70



-



(273
)


(53
)


(17
)


4,589Loans, notes, and mortgages


205



-



(3
)


(3
)


(6
)


(12
)


(15
)


172Liabilities:Short-term borrowings


-



-



-



-



-



34



-



34Derivative contracts, net


3,003



(1,122
)


-



-



(1,122
)


(4,125
)


1,292



1,292Long-term borrowings


8,118



(1,169
)


14



-



(1,155
)


400



3,076



12,749         32




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##### Table of Contents



(dollars in millions)Level 3 Financial Assets and LiabilitiesSix Months Ended June 27, 2008Total Realized and UnrealizedGains or (Losses)

Total Realized and

Purchases,included in Income

Unrealized Gains

IssuancesBeginning

Principal

Other



or (Losses)

and

Transfers

EndingBalance

Transactions

Revenue

Interest

included in Income

Settlements

in (out)

BalanceAssets:Securities segregated for regulatory purposes or deposited with
    clearing organizations

$
84


$
-


$
-


$
1


$
1


$
(79
)

$
(6
)

$
-Trading assets


9,773



(3,047
)


-



81



(2,966
)


10,399



2,984



20,190Investment securities


5,491



(748
)


13



-



(735
)


98



(265
)


4,589Loans, notes, and mortgages


63



-



(1
)


(3
)


(4
)


119



(6
)


172Liabilities:Short-term borrowings


-



-



-



-



-



34



-



34Derivative contracts, net


9,069



(1,057
)


-



5



(1,052
)


(12,119
)


3,290



1,292Long-term borrowings


4,765



(1,617
)


14



-



(1,603
)


1,465



4,916



12,749         (dollars in millions)Level 3 Financial Assets and LiabilitiesThree Months Ended June 29, 2007Total Realized and UnrealizedGains or (Losses)

Total Realized and

Purchases,included in Income

Unrealized Gains

IssuancesBeginning

Principal

Other



or (Losses)

and

Transfers

EndingBalance

Transactions

Revenue

Interest

included in Income

Settlements

in (out)

BalanceAssets:Trading assets

$
2,324


$
259


$
-


$
32


$
291


$
483


$
550


$
3,648Investment securities


5,922



(295
)


185



5



(105
)


568



(601
)


5,784Loans, notes, and mortgages


6



-



(5
)


-



(5
)


(1
)


4



4Liabilities:Derivative contracts, net


1,357



416



5



1



422



(249
)


(915
)


(229
)Long-term borrowings


-



-



-



-



-



-



282



282   33




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##### Table of Contents



(dollars in millions)Level 3 Financial Assets and LiabilitiesSix Months Ended June 29, 2007Total Realized and UnrealizedGains or (Losses)

Total Realized and

Purchases,included in Income

Unrealized Gains

IssuancesBeginning

Principal

Other



or (Losses)

and

Transfers

EndingBalance

Transactions

Revenue

Interest

included in Income

Settlements

in (out)

BalanceAssets:Trading assets

$
2,021


$
253


$
-


$
28


$
281


$
503


$
843


$
3,648Investment securities


5,117



(430
)


480



5



55



1,204



(592
)


5,784Loans, notes, and mortgages


7



-



(9
)


-



(9
)


(2
)


8



4Liabilities:Derivative contracts, net


2,030



571



5



6



582



(807
)


(870
)


(229
)Long-term borrowings


-



-



-



-



-



-



282



282      (dollars in millions)Unrealized Gains or (Losses) for Level 3 Assets and
    Liabilities Still Held at June 27, 2008Three Months Ended June 27, 2008

Six Months Ended June 27, 2008Principal

Other





Principal

OtherTransactions

Revenue

Interest

Total

Transactions

Revenue

Interest

TotalAssets:Securities segregated for regulatory purposes or deposited with
    clearing organizations

$
-


$
-


$
-


$
-


$
-


$
-


$
1


$
1Trading assets


(2,623
)


-



59



(2,564
)


(3,047
)


-



103



(2,944
)Investment securities


(318
)


66



-



(252
)


(723
)


9



-



(714
)Loans, notes, and mortgages


-



-



(3
)


(3
)


-



6



(3
)


3Liabilities:Derivative contracts, net


(1,209
)


-



-



(1,209
)


(1,115
)


-



5



(1,110
)Long-term borrowings


(1,126
)


14



-



(1,112
)


(1,575
)


14



-



(1,561
)       (dollars in millions)Unrealized Gains or (Losses) for Level 3 Assets and
    Liabilities Still Held at June 29, 2007Three Months Ended June 29, 2007

Six Months Ended June 29, 2007Principal

Other





Principal

OtherTransactions

Revenue

Interest

Total

Transactions

Revenue

Interest

TotalAssets:Trading assets

$
234


$
-


$
32


$
266


$
203


$
-


$
28


$
231Investment securities


(295
)


189



5



(101
)


(430
)


396



5



(29
)Loans, notes, and mortgages


-



1



-



1



-



3



-



3Liabilities:Derivative contracts, net


336



5



1



342



460



-



6



466   Non-recurring
    Fair Value
   34




---



##### Table of Contents



(dollars in millions)Gains / (Losses)

Gains / (Losses)Non-Recurring
    Basis as of June 27, 2008

Three Months Ended

Six Months EndedLevel 1

Level 2

Level 3

Total

June 27, 2008

June 27, 2008Assets:Loans, notes, and mortgages

$
-


$
15,080


$
6,117


$
21,197


$
(53
)

$
(1,275
)Liabilities:Other liabilities


-



651



-



651



45



(7
)     (dollars in millions)Non-Recurring Basisas of December 28, 2007Level 1

Level 2

Level 3

TotalAssets:Loans, notes, and mortgages

$
-


$
32,594


$
7,157


$
39,751Liabilities:Other liabilities


-



666



-



666       Fair
    Value Option
   35




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##### Table of Contents



(dollars in millions)Changes in Fair Value For the Three

Changes in Fair Value For the SixMonths Ended June 27,

Months Ended June 27,2008, for Items Measured at Fair Value

2008, for Items Measured at Fair ValuePursuant to Fair Value Option

Pursuant to Fair Value OptionGains/



Total

Gains/



Total(losses)

Gains/(losses)

Changes

(losses)

Gains/(losses)

ChangesPrincipal

Other

in Fair

Principal

Other

in FairTransactions

Revenues

Value

Transactions

Revenues

ValueAssets:Receivables under resale agreements

$
(178
)

$
-


$
(178
)

$
(209
)

$
-


$
(209
)Receivables under securities borrowed transactions


-



-



-



-



-



-Investment securities


247



(1
)


246



(83
)


(39
)


(122
)Loans, notes, and mortgages


11



-



11



3



12



15Liabilities:Payables under repurchase agreements


63



-



63



48



-



48Short-term borrowings


379



-



379



182



-



182Long-term borrowings


1,263



370



1,633



4,509



869



5,378   (dollars in millions)Changes in Fair Value For the Three

Changes in Fair Value For the SixMonths Ended June 29,

Months Ended June 29,2007, for Items Measured at Fair

2007, for Items Measured at FairValue Pursuant to Fair Value Option

Value Pursuant to Fair Value OptionGains/

Gains/

Total

Gains/

Gains/

Total(losses)

(losses)

Changes

(losses)

(losses)

ChangesPrincipal

Other

in Fair

Principal

Other

in FairTransactions

Revenues

Value

Transactions

Revenues

ValueAssets:Receivables under resale agreements

$
6


$
-


$
6


$
5


$
-


$
5Investment securities


210



8



218



210



21



231Loans, notes, and mortgages


-



20



20



2



40



42Liabilities:Payables under repurchase agreements


7



-



7



17



-



17Long-term borrowings


985



-



985



838



-



838     Resale
    and repurchase agreements:
    Securities
    borrowed transactions:
   36




---



##### Table of Contents



Investment
    securities:
    Loans,
    notes, and mortgages:
      Short-term
    and long-term borrowings:
        (dollars in millions)PrincipalFair Value

Amountat

Due UponJune 27, 2008

Maturity

DifferenceAssets:Receivables under resale agreements

$
105,047


$
104,970


$
77Receivables under securities borrowed transactions


1,201



1,201



-Loans, notes and
    mortgages(1)


1,204



1,395



(191
)Liabilities:Payables under repurchase agreements


81,193



81,233



(40
)Short-term borrowings


3,112



3,158



(46
)Long-term
    borrowings(2)


91,667



93,635



(1,968
)  (1)
    
    The majority of the difference
    relates to loans purchased at a substantial discount from the
    principal amount.(2)
    
    The majority of the difference
    relates to the impact of the widening of Merrill Lynchs
    credit spreads, the change in fair value of non-recourse debt,
    and zero coupon notes issued at a substantial discount from the
    principal amount.  37




---



##### Table of Contents



(dollars in millions)Fair Value

Principalat

AmountDecember 28,

Due Upon2007

Maturity

DifferenceAssets:Receivables under resale agreements

$
100,214


$
100,090


$
124Loans, notes and
    mortgages(1)


1,149



1,355



(206
)Liabilities:Long-term
    borrowings(2)


76,334



81,681



(5,347
)  (1)
    
    The majority of the difference
    relates to loans purchased at a substantial discount from the
    principal amount.(2)
    
    The majority of the difference
    relates to the impact of the widening of Merrill Lynchs
    credit spreads, the change in fair value of non-recourse debt,
    and zero coupon notes issued at a substantial discount from the
    principal amount.  Trading
    Risk Management
    Concentration
    of Risk to the Mortgage Markets
   
    Net exposures of $33.7 billion in U.S. Prime
    residential mortgage-related positions and $10.0 billion in
    other residential mortgage-related positions, excluding Merrill
    Lynchs U.S. banks investment securities portfolio;
    Net exposure of $4.5 billion in super senior U.S. ABS
    CDOs and related secondary trading exposures;
    Net exposure of $18.0 billion in Merrill Lynchs
    U.S. banks investment securities portfolio; and
    Net exposure of $14.9 billion in commercial real estate
    related positions, excluding First Republic, and
    $2.7 billion in First Republic commercial real estate
    related positions.    Concentration
    of Risk to Monoline Financial Guarantors
   38




---



##### Table of Contents



Note 4.  Securities Financing Transactions    non-U.S. governments Rule 15c3-3
     39




---



##### Table of Contents



(dollars in millions)June 27,

Dec. 28,2008

2007Trading asset categoryMortgages, mortgage-backed, and asset-backed securities

$
20,881


$
11,873U.S. Government and agencies


5,729



11,110Corporate debt and preferred stock


16,170



17,144Non-U.S.
    governments and agencies


1,606



2,461Equities and convertible debentures


7,906



9,327Municipals and money markets


733



450Total

$
53,025


$
52,365  Note 5.  Investment Securities    
    SFAS No. 115 investments held by ML &
    Co.  and certain of its non-broker-dealer entities,
    including Merrill Lynch banks. SFAS No. 115
    investments consist of: 
    Debt securities, including debt held for investment and
    liquidity and collateral management purposes that are classified
    as available-for-sale, debt securities held for trading
    purposes, and debt securities that Merrill Lynch intends to hold
    until maturity;
    Marketable equity securities, which are generally classified as
    available-for-sale. 
    Non-qualifying investments are those that do not fall within the
    scope of SFAS No. 115. Non-qualifying investments
    consist principally of: 
    Equity investments, including investments in partnerships and
    joint ventures. Included in equity investments are investments
    accounted for under the equity method of accounting, which
    consist of investments in (i) partnerships and certain
    limited liability corporations where Merrill Lynch has more than
    minor influence (i.e. generally defined as greater than a three
    percent interest) and (ii) corporate entities where Merrill
    Lynch has the ability to exercise significant influence over the
    investee (i.e. generally defined as ownership and voting
    interest of 20% to 50%). For information related to our
    investments accounted for under the equity method, please refer
    to Note 5 of the 2007 Annual Report. Also included in
    equity investments are private equity investments that Merrill
    Lynch holds for capital appreciation
    and/or
    current income and which are accounted for at fair value in
    accordance with the Investment Company Guide, as well as private
    equity investments accounted for at fair value under the fair
    value option election in SFAS No. 159. The carrying
    value of private equity investments reflects expected exit
    values based upon market prices or other valuation methodologies
    including discounted expected cash flows and market comparables
    of similar companies.
    Deferred compensation hedges, which are investments economically
    hedging deferred compensation liabilities and are accounted for
    at fair value. 40




---



##### Table of Contents



(dollars in millions)June 27,

Dec. 28,2008

2007Investment securitiesAvailable-for-sale(1)

$
43,819


$
50,922Trading


3,848



5,015Held-to-maturity


271



267Non-qualifying(2)Equity
    investments(3)


27,889



29,623Deferred compensation
    hedges(4)


1,639



1,710Investments in trust preferred securities and other investments


435



438Total

$
77,901


$
87,975  (1)
    
    At June 27, 2008 and
    December 28, 2007, includes $6.6 billion and
    $5.4 billion, respectively, of investment securities
    reported in cash and securities segregated for regulatory
    purposes or deposited with clearing organizations.(2)
    
    Non-qualifying for
    SFAS No. 115 purposes.(3)
    
    Includes Merrill Lynchs
    investment in BlackRock.(4)
    
    Represents investments that
    economically hedge deferred compensation liabilities.     
    Whether there has been an adverse change in the estimated cash
    flows of the security;
    The period of time over which it is estimated that the fair
    value will increase from the current level to at least the
    amortized cost level, or until principal is estimated to be
    received;
    The period of time a securitys fair value has been below
    amortized cost;
    The amount by which the securitys fair value is below
    amortized cost;
    The financial condition of the issuer; and
    Managements ability and intent to hold the security until
    fair value recovers or until the principal is received.   41




---



##### Table of Contents



(dollars in millions)Three Months Ended

Six Months EndedJune 27, 2008

June 27, 2008Security DescriptionPrime

$
223


$
227Alt A


1,373



1,544Sub-prime


80



94CDOs


28



221Total

$
1,704


$
2,086    Note 6.  Securitization Transactions and
    Transactions with Special Purpose Entities (SPEs)  Securitizations
  and/or and/or
   42




---



##### Table of Contents



(dollars in millions)Six Months EndedJune 27,

June 29,2008

2007Asset categoryResidential mortgage loans

$
10,386


$
81,172Municipal bonds


4,703



36,588Commercial loans and corporate bonds


1,483



8,869Other


413



1,474Total

$
16,985


$
128,103   and/or
       43




---



##### Table of Contents



(dollars in millions)Residential



Commercial LoansMortgage

Municipal

and CorporateLoans

Bonds

BondsRetained interest amount

$
1,417


$
1,108


$
977Weighted average credit losses (rate per annum)


0.7
%


0.0
%


1.0
%Range


0-7.8
%


0.0
%


0-5.0
%Impact on fair value of 10% adverse change

$
(7
)

$
-


$
(2
)Impact on fair value of 20% adverse change

$
(14
)

$
-


$
(4
)Weighted average discount rate


11.9
%


2.3
%


3.5
%Range


0-100
%


1.6-8.2
%


0-35.0
%Impact on fair value of 10% adverse change

$
(43
)

$
(51
)

$
(11
)Impact on fair value of 20% adverse change

$
(92
)

$
(99
)

$
(23
)Weighted average life (in years)


5.0



9.9



4.8Range


0-28.4



7.2-11.5



0-9.1Weighted average prepayment speed
    (CPR)(1)


18.5
%


29.0
%


25.0
%Range(1)


0-54
%


0-35.9
%


0-96
%Impact on fair value of 10% adverse change

$
(27
)

$
-


$
(3
)Impact on fair value of 20% adverse change

$
(50
)

$
-


$
(5
)   CPR=Constant Prepayment
    Rate
 (1)
    
    Relates to select
    securitization transactions where assets are
    prepayable.      Residential



Commercial LoansMortgage

Municipal

and CorporateLoans

Bonds

BondsCredit losses (rate per annum)


0.6
%


0.0
%


0.6
%Weighted average discount rate


5.8
%


4.6
%


2.6
%Weighted average life (in years)


4.9



7.8



5.6Prepayment speed assumption
    (CPR)(1)


26.6
%


9.0
%


15.5
%   CPR = Constant Prepayment
    Rate
 (1)
    
    Relates to select
    securitization transactions where assets are
    prepayable.   44




---



##### Table of Contents



and/or
  Mortgage
    Servicing Rights
          (dollars in millions)Carrying ValueMortgage servicing rights, December 28, 2007 (fair
    value was $476)

$
389Additions


1Amortization


(71
)Valuation allowance adjustments


(46
)Mortgage servicing rights, June 27, 2008(fair value
    was $333)

$
273  45




---



##### Table of Contents



(dollars in millions)For the Three

For the SixMonths Ended

Months EndedJune 27,

June 29,

June 27,

June 29,2008

2007

2008

2007Servicing fees

$
115


$
92


$
202


$
166Ancillary and late fees


14



16



32



30Total

$
129


$
108


$
234


$
196     (dollars in millions)Fair value of capitalized MSRs

$
333Weighted average prepayment speed (CPR)


22.3
%Impact on fair value of 10% adverse change

$
(20
)Impact on fair value of 20% adverse change

$
(42
)Weighted average discount rate


17.5
%Impact on fair value of 10% adverse change

$
(13
)Impact on fair value of 20% adverse change

$
(26
)     Variable
    Interest Entities
  ,
   46




---



##### Table of Contents



(dollars in millions)Significant VariablePrimary Beneficiary

Interest HolderNet

Recourse

TotalAsset

to Merrill

Asset

MaximumSize(4)

Lynch(5)

Size(6)

ExposureJune 27, 2008Loan and real estate VIEs

$
6,945


$
6,051


$
-


$
-Guaranteed and other
    funds(1)


1,667



162



324



171Credit-linked note and other
    VIEs(2)


138



265



-



-Tax planning
    VIEs(3)


1



3,473



152



5December 28, 2007Loan and real estate VIEs

$
15,420


$
-


$
307


$
232Guaranteed and other
    funds(1)


4,655



928



246



23Credit-linked note and other
    VIEs(2)


83



-



5,438



9,081Tax planning
    VIEs(3)


1



-



483



15  (1)
    
    The maximum exposure for
    guaranteed and other funds is the fair value of Merrill
    Lynchs investments, derivatives entered into with the VIEs
    if they are in an asset position, and liquidity and credit
    facilities with certain VIEs.(2)
    
    The maximum exposure for
    credit-linked note and other VIEs is the notional amount of
    total return swaps that Merrill Lynch has entered into with the
    VIEs. This assumes a total loss on the referenced assets
    underlying the total return swaps. The maximum exposure may be
    different than the total asset size due to the netting of
    certain derivatives in the VIE.(3)
    
    The maximum exposure for tax
    planning VIEs reflects indemnifications made by Merrill Lynch to
    investors in the VIEs.(4)
    
    This column reflects the size
    of the assets held in the VIE after accounting for intercompany
    eliminations and any balance sheet netting of assets and
    liabilities as permitted by FIN 39.(5)
    
    This column reflects the
    extent, if any, to which investors have recourse to Merrill
    Lynch beyond the assets held in the VIE. For certain loan and
    real estate and tax planning VIEs, recourse to Merrill Lynch
    represents the notional amount of derivatives that Merrill Lynch
    has on the assets in the VIEs.(6)
    
    This column reflects the total
    size of the assets held in the VIE.    Loan and
    Real Estate VIEs
  
    Merrill Lynch has investments in VIEs that hold loans or real
    estate. Merrill Lynch may be either the primary beneficiary
    which would result in consolidation of the VIE, or may be a
    significant variable interest holder. These VIEs include
    entities that are primarily designed to provide financing to
    clients, to invest in real estate or obtain exposure to mortgage
    related assets. These VIEs include securitization vehicles that
    Merrill Lynch is required to consolidate because QSPE status has
    not been met and Merrill Lynch is the primary beneficiary as it
    retains the residual interests. This was a result of Merrill
    Lynchs inability to sell mortgage related securities
    because of the illiquidity in the securitization markets.
    Merrill Lynchs inability to sell certain securities
    disqualified the VIEs as QSPEs thereby resulting in Merrill
    Lynchs consolidation of the VIEs. Depending upon the
    continued illiquidity in the securitization market, these
    transactions and future transactions that could fail QSPE status 47




---



##### Table of Contents



may require consolidation and related disclosures. Merrill Lynch
    also is the primary beneficiary for certain VIEs as a result of
    total return swaps over the assets (primarily mortgage related)
    in the VIE.    Guaranteed
    and Other Funds
  
    Merrill Lynch is the sponsor of funds that provide a guaranteed
    return to investors at the maturity of the VIE. This guarantee
    may include a guarantee of the return of an initial investment
    or of the initial investment plus an agreed upon return
    depending on the terms of the VIE. Investors in certain of these
    VIEs have recourse to Merrill Lynch to the extent that the value
    of the assets held by the VIEs at maturity is less than the
    guaranteed amount. In some instances, Merrill Lynch is the
    primary beneficiary and must consolidate the fund. Assets held
    in these VIEs are primarily classified in trading assets. In
    instances where Merrill Lynch is not the primary beneficiary,
    the guarantees related to these funds are further discussed in
    Note 11 to the Condensed Consolidated Financial Statements.
    Merrill Lynch has made certain investments in alternative
    investment fund structures that are VIEs. Merrill Lynch is the
    primary beneficiary of these funds as a result of its
    substantial investment in the vehicles. Merrill Lynch records
    the assets in these VIEs in investment securities in the
    Condensed Consolidated Balance Sheets.
    Merrill Lynch has established two asset-backed commercial paper
    conduits (Conduits), one of which remains active.
    Merrill Lynchs variable interests in the active Conduit
    are in the form of 1) a liquidity facility that protects
    commercial paper holders against short term changes in the fair
    value of the assets held by the Conduit in the event of a
    disruption in the commercial paper market, and 2) a credit
    facility to the Conduit that protects commercial paper investors
    against credit losses for up to a certain percentage of the
    portfolio of assets held by the Conduit. Merrill Lynch also
    provided a liquidity facility with a third Conduit that it did
    not establish and Merrill Lynch had purchased all the assets
    from this Conduit at December 28, 2007.   48




---



##### Table of Contents



Credit-Linked
    Note and Other VIEs
  
    Merrill Lynch has entered into transactions with VIEs where
    Merrill Lynch typically purchases credit protection from the VIE
    in the form of a derivative in order to synthetically expose
    investors to a specific credit risk. These are commonly known as
    credit-linked note VIEs. Merrill Lynch also takes synthetic
    exposure to the underlying investment grade collateral held in
    these VIEs, which primarily includes super senior
    U.S. sub-prime ABS CDOs, through total return swaps. As a
    result of a reconsideration event during the first quarter of
    2008, Merrill Lynchs exposure to these vehicles declined
    such that at June 27, 2008, Merrill Lynch no longer held a
    significant variable interest in these vehicles. The decrease in
    Total Asset Size and Maximum Exposure as compared to year end
    2007 is due to Merrill Lynch no longer holding a significant
    variable interest in these vehicles. Merrill Lynch recorded its
    transactions with these VIEs as trading
    assets/liabilities-derivative contracts in the Condensed
    Consolidated Financial Statements.
    In 2004, Merrill Lynch entered into a transaction with a VIE
    whereby Merrill Lynch arranged for additional protection for
    directors and employees to indemnify them against certain losses
    that they may incur as a result of claims against them. Merrill
    Lynch is the primary beneficiary and consolidates the VIE
    because its employees benefit from the indemnification
    arrangement. As of June 27, 2008 and December 28, 2007
    the assets of the VIE totaled approximately $16 million,
    representing a purchased credit default agreement, which is
    recorded in other assets on the Condensed Consolidated Balance
    Sheets. In the event of a Merrill Lynch insolvency, proceeds of
    $140 million will be received by the VIE to fund any
    claims. Neither Merrill Lynch nor its creditors have any
    recourse to the assets of the VIE.  Tax
    Planning VIEs
  
    Merrill Lynch has entered into transactions with VIEs that are
    used, in part, to provide tax planning strategies to investors
    and/or
    Merrill Lynch through an enhanced yield investment security.
    These structures typically provide financing to Merrill Lynch
    and/or the
    investor at enhanced rates. Merrill Lynch may be either the
    primary beneficiary of and consolidate the VIE, or may be a
    significant variable interest holder in the VIE. Recourse
    increased during the period as a result of new transactions
    where Merrill Lynch consolidated the VIEs and investors have
    recourse to Merrill Lynch through derivatives entered into
    either directly with Merrill Lynch or through the VIE. 49




---



##### Table of Contents



Note 7.  Loans, Notes, Mortgages and Related
    Commitments to Extend Credit    
    Consumer loans, which are substantially secured, including
    residential mortgages, home equity loans, and other loans to
    individuals for household, family, or other personal
    expenditures.
    Commercial loans including corporate and institutional loans
    (including corporate and financial sponsor, non-investment grade
    lending commitments), commercial mortgages, asset-based loans,
    small- and middle-market business loans, and other loans to
    businesses.    (dollars in millions)Loans

Commitments(1)June 27,

Dec. 28,

June 27,

Dec. 28,2008

2007

2008(2)(3)

2007(3)Consumer:Mortgages

$
31,122


$
26,939


$
10,064


$
7,023Other


1,816



5,392



1,347



3,298Commercial and small- and middle-market business:Investment grade


17,548



18,917



33,532



36,921Non-investment grade


29,286



44,277



14,286



30,99079,772



95,525



59,229



78,232Allowance for loan losses


(602
)


(533
)


-



-Reserve for lending-related commitments


-



-



(1,594
)


(1,408
)Total, net

$
79,170


$
94,992


$
57,635


$
76,824  (1)
    
    Commitments are outstanding as
    of the date the commitment letter is issued and are comprised of
    closed and contingent commitments. Closed commitments represent
    the unfunded portion of existing commitments available for draw
    down. Contingent commitments are contingent on the borrower
    fulfilling certain conditions or upon a particular event, such
    as an acquisition. A portion of these contingent commitments may
    be syndicated among other lenders or replaced with capital
    markets funding.(2)
    
    See Note 11 to the
    Condensed Consolidated Financial Statements for a maturity
    profile of these commitments.(3)
    
    In addition to the loan
    origination commitments included in the table above, at
    June 27, 2008, Merrill Lynch entered into agreements to
    purchase $302 million of loans that, upon settlement of the
    commitment, will be classified in loans held for investment and
    loans held for sale. Similar loan purchase commitments totaled
    $330 million at December 28, 2007. See Note 11 to
    the Condensed Consolidated Financial Statements for additional
    information. 50




---



##### Table of Contents



(dollars in millions)Six Months EndedJune 27,

June 29,2008

2007Allowance for loan losses, at beginning of period

$
533


$
478Provision for loan losses


170



11Charge-offs


(104
)


(43
)Recoveries


6



9Net charge-offs


(98
)


(34
)Other


(3
)


(20
)Allowance for loan losses, at end of period

$
602


$
435      Note 8.  Goodwill and Intangibles  Goodwill
  Goodwill and Other
    Intangible Assets
 51




---



##### Table of Contents



(dollars in millions)GMI

GWM

TotalGoodwill:December 28, 2007

$
2,970


$
1,620


$
4,590Translation adjustment and other


24



2



26June 27, 2008

$
2,994


$
1,622


$
4,616   Intangible
    Assets
  Accounting for the Impairment or
    Disposal of Long-Lived Assets
     Note 9.  Borrowings and Deposits      
    Certain debt issuances are issued at a discount to their
    redemption amount, which will accrete up to the redemption
    amount as they approach maturity;
    Certain debt issuances are accounted for at fair value and
    incorporate changes in Merrill Lynchs creditworthiness as
    well as other underlying risks (see Note 3);
    Certain structured notes whose coupon or repayment terms are
    linked to the performance of debt and equity securities,
    indices, currencies or commodities will take into consideration
    the fair value of those risks; and
    Certain debt issuances are adjusted for the impact of the
    application of fair value hedge accounting (see Note 1). 52




---



##### Table of Contents



(dollars in millions)June 27,

Dec. 28,2008

2007Senior debt issued by ML & Co.

$
159,573


$
148,190Senior debt issued by subsidiaries  guaranteed by
    ML & Co.


11,906



14,878Senior structured notes issued by ML & Co.


43,341



45,133Senior structured notes issued by subsidiaries 
    guaranteed by ML & Co.


42,931



31,401Subordinated debt issued by ML & Co.


12,944



10,887Junior subordinated notes (related to trust preferred securities)


5,193



5,154Other subsidiary financing  not guaranteed by
    ML & Co.


12,628



5,597Other subsidiary financing 
    non-recourse(1)


6,252



29,801Total

$
294,768


$
291,041  (1)
    
    Other subsidiary
    financing  non-recourse is primarily attributable to
    debt issued to third parties by consolidated entities that are
    VIEs. Additional information regarding VIEs is provided in
    Note 6 to the Condensed Consolidated Financial
    Statements.    (dollars in millions)June 27,

Dec. 28,2008

2007Short-term borrowingsCommercial paper

$
8,620


$
12,908Promissory notes


-



2,750Secured short-term borrowings


1,656



4,851Other unsecured short-term borrowings


8,863



4,405Total

$
19,139


$
24,914Long-term
    borrowings(1)Fixed-rate
    obligations(2)

$
117,161


$
102,020Variable-rate
    obligations(3)(4)


151,520



156,743Zero-coupon contingent convertible debt
    (LYONs®)


1,599



2,210Other Zero-coupon obligations


156



-Total

$
270,436


$
260,973DepositsU.S.

$
72,065


$
76,634Non U.S.


28,393



27,353Total

$
100,458


$
103,987  (1)
    
    Excludes junior subordinated
    notes (related to trust preferred securities).(2)
    
    Fixed-rate obligations are
    generally swapped to floating rates.(3)
    
    Variable interest rates are
    generally based on rates such as LIBOR, the U.S. Treasury Bill
    Rate, or the Federal Funds Rate.(4)
    
    Included are various
    equity-linked, credit-linked or other indexed
    instruments. 53




---



##### Table of Contents



(dollars in millions)Less than 1 year

$
79,159



29
%1 - 2 years


34,053



132+ - 3 years


20,772



83+ - 4 years


26,611



104+ - 5 years


21,808



8Greater than 5 years


88,033



32Total

$
270,436



100
%       ®
  ® ® ®
  
    An increase in the number of shares into which the
    LYONs®
    convert from 14.0915 shares to 16.5 shares,
    An extension of the call protection in the
    LYONs®,
    which would otherwise have terminated on March 13, 2008,
    thru March 13, 2014,
    The inclusion of two additional dates, September 13, 2010
    and March 13, 2014, on which investors can require Merrill
    Lynch to repurchase the
    LYONs®.  ® ® No. 06-6, ®
 54




---



##### Table of Contents



June 27,

Dec. 28,2008

2007Short-term borrowings


3.36
%


4.64
%Long-term borrowings


4.57



4.35Junior subordinated notes (related to trust preferred securities)


6.82



6.91      Note 10.  Stockholders Equity and
    Earnings Per Share  Preferred
    Stock Issuance
    Mandatory
    Convertible Preferred Stock Issuance
   55




---



##### Table of Contents



Common
    Stock Issuance
  1 3
       56




---



##### Table of Contents



Earnings
    Per Share
    (dollars in millions, except per share amounts)Three Months Ended

Six Months EndedJune 27,

June 29,

June 27,

June 29,2008

2007

2008

2007Net (loss)/earnings from continuing operations

$
(4,634
)

$
2,010


$
(6,603
)

$
4,040Net (loss)/earnings from discontinued operations


(20
)


129



(13
)


257Preferred stock dividends


(237
)


(72
)


(411
)


(124
)Net (loss)/earnings applicable to common
    shareholders  for basic and diluted
    EPS(1)

$
(4,891
)

$
2,067


$
(7,027
)

$
4,173(shares in thousands)Weighted-average basic shares
    outstanding(2)(8)


984,091



833,804



978,463



837,551Effect of dilutive instruments:Employee stock
    options(3)


-



39,712



-



40,829FACAAP
    shares(3)


-



20,736



-



20,483Restricted shares and
    units(3)


-



24,424



-



23,084Convertible
    LYONs®(4)


-



4,645



-



4,819ESPP
    shares(3)


-



9



-



12Dilutive potential common shares


-



89,526



-



89,227Diluted
    Shares(5)(6)(8)


984,091



923,330



978,463



926,778Basic EPS from continuing operations

$
(4.95
)

$
2.32


$
(7.17
)

$
4.67Basic EPS from discontinued operations


(0.02
)


0.16



(0.01
)


0.31Basic EPS

$
(4.97
)

$
2.48


$
(7.18
)

$
4.98Diluted EPS from continuing operations

$
(4.95
)

$
2.10


$
(7.17
)

$
4.22Diluted EPS from discontinued operations


(0.02
)


0.14



(0.01
)


0.28Diluted EPS

$
(4.97
)

$
2.24


$
(7.18
)

$
4.50Common shares outstanding at period
    end(7)(8)


985,376



862,559



985,376



862,559  (1)
    
    Due to the net loss for the
    three and six months ended June 27, 2008, inclusion of the
    incremental shares on the Mandatory Convertible Preferred Stock
    would be antidilutive and have not been included as part of the
    Diluted EPS calculation. See Mandatory Convertible Preferred
    Stock Issuance section above for additional
    information.(2)
    
    Includes shares exchangeable
    into common stock.(3)
    
    See Note 13 of the 2007
    Annual Report for a description of these instruments.(4)
    
    See Note 9 to the
    Condensed Consolidated Financial Statements and Note 9 of
    the 2007 Annual Report for additional information on
    LYONs®.(5)
    
    Excludes 243 thousand of
    instruments for the three and six month periods ended
    June 29, 2007 and 281 thousand for the six months ended
    June 29, 2007 that were considered antidilutive and thus
    were not included in the above calculations.(6)
    
    Due to the net loss for the
    three and six months ended June 27, 2008, the Diluted EPS
    calculation excludes 126 million of incremental shares
    related to the mandatory convertible preferred stock,
    122 million of employee stock options, 40 million of
    FACAAP shares, 45 million of restricted shares and units,
    and 311 thousand of ESPP shares, as they were
    antidilutive.(7)
    
    Increase in outstanding shares
    primarily related to Temasek and Davis issuances.(8)
    
    Subsequent to the end of the
    second quarter of 2008, Merrill Lynch issued common stock
    through a public offering. Refer to Note 18 for further
    details. 57




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##### Table of Contents



Note 11.  Commitments, Contingencies and
    Guarantees  Litigation
    and/or and/or
  Accounting for Contingencies
  Commitments
    (dollars in millions)Commitment expirationLess thanTotal

1 year

1 - 3 years

3+- 5 years

Over 5 yearsCommitments to extend credit

$
59,229


$
18,535


$
11,525


$
21,454


$
7,715Purchasing and other commitments


9,181



2,819



1,058



1,391



3,913Operating leases


4,096



674



1,270



1,003



1,149Commitments to enter into forward dated resale and securities
    borrowing agreements


64,790



64,614



176



-



-Commitments to enter into forward dated repurchase and
    securities lending agreements


76,529



76,365



164



-



-  58




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##### Table of Contents



Commitments
    to Extend Credit
        Purchasing
    and Other Commitments
         59




---



##### Table of Contents



Operating
    Leases
    Guarantees
  Guarantors Accounting and Disclosure Requirements for
    Guarantees, Including Indebtedness of Others
  (dollars in millions)MaximumPayout /

Less than





Over

CarryingNotional

1 year

1 - 3 years

3+- 5 years

5 years

ValueDerivative contracts

$
4,152,925


$
519,662


$
828,617


$
1,412,198


$
1,392,448


$
234,383Liquidity, credit and default facilities


19,219



16,813



869



1,537



-



165Residual value guarantees


846



68



362



96



320



11Standby letters of credit and other guarantees


46,169



1,758



1,200



927



42,284



621   Derivative
    Contracts
     60




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##### Table of Contents



Liquidity,
    Credit and Default Facilities
      (dollars in millions)Merrill Lynch Liquidity
    Facilities Can Be Drawn:

Municipal Bonds to WhichIn 7 Days with

In 7 Days with

After Up to



Merrill Lynch Has RecourseNet Liquidity

Gross Liquidity

364 Days(1)

Total

if Facilities Are DrawnMerrill Lynch provides standby liquidity facilities

$
6,750


$
1,970


$
3,022


$
11,742


$
13,314Merrill Lynch provides standby liquidity facilities and credit
    default protection


1,491



2,588



2,039



6,118



6,695Total

$
8,241


$
4,558


$
5,061


$
17,860


$
20,009  (1)
    
    Initial liquidity support
    within 7 days is provided by third parties for a maximum of
    364 days.   61




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Residual
    Value Guarantees
    Stand-by
    Letters of Credit and Other Guarantees
         62




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##### Table of Contents



Note 12.
    Employee Benefit Plans ­ ­    Defined
    Benefit Pension Plans
    (dollars in millions)Three Months EndedJune 27, 2008

June 29, 2007U.S.

Non-U.S.



U.S.

Non-U.S.Plans

Plans

Total

Plans

Plans

TotalService cost

$
-


$
7


$
7


$
-


$
7


$
7Interest cost


24



21



45



24



20



44Expected return on plan assets


(29
)


(21
)


(50
)


(29
)


(20
)


(49
)Amortization of net (gains)/losses, prior service costs and other


-



3



3



(1
)


8



7Total defined benefit pension cost

$
(5
)

$
10


$
5


$
(6
)

$
15


$
9   (dollars in millions)Six Months EndedJune 27, 2008

June 29, 2007U.S.

Non-U.S.



U.S.

Non-U.S.Plans

Plans

Total

Plans

Plans

TotalService cost

$
-


$
14


$
14


$
-


$
14


$
14Interest cost


48



43



91



48



40



88Expected return on plan assets


(59
)


(43
)


(102
)


(58
)


(39
)


(97
)Amortization of net (gains)/losses, prior service costs and other


-



6



6



(2
)


15



13Total defined benefit pension cost

$
(11
)

$
20


$
9


$
(12
)

$
30


$
18   non-U.S. defined
 63




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##### Table of Contents



Postretirement
    Benefits Other Than Pensions
    (dollars in millions)Three Months

Six MonthsEnded

EndedJune 27,

June 29,

June 27,

June 29,2008

2007

2008

2007Service cost

$
2


$
1


$
3


$
3Interest cost


4



4



7



8Amortization of net (gains)/losses, prior service costs and other


(9
)


(1
)


(10
)


(3
)Total other postretirement benefits cost

$
(3
)

$
4


$
-


$
8     
 Note 13.
    Income Taxes ­ ­  2004-2005. 2002-2006.
   64




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##### Table of Contents



Note 14.
    Regulatory Requirements     non-U.S. subsidiaries
  Securities
    Regulation
  Rule 15c3-1
         65




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##### Table of Contents



Banking
    Regulation
    (dollars in millions)MLBUSA

MLBT-FSBWellCapitalized

Actual

Actual

Actual

ActualMinimum

Ratio

Amount

Ratio

AmountTier 1 leverage


5%



9.35%


$
5,579



8.08%


$
2,343Tier 1 capital


6%



12.45%



5,579



10.58%



2,343Total capital


10%



14.81%



6,639



12.58%



2,793       
 Note 15.  Discontinued
    Operations
      66




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##### Table of Contents



(dollars in millions)For the SixFor the Three Months Ended

Months EndedJune 27,

June 29,

June 27,

June 29,2008

2007

2008

2007Total revenues, net of interest expense

$
-


$
269


$
28


$
520(Losses) / earnings before income taxes

$
(32
)

$
197


$
(57
)

$
391Income tax (benefit) /expense


(12
)


68



(44
)


134Net (loss) / earnings from discontinued operations

$
(20
)

$
129


$
(13
)

$
257     (dollars in millions)June 27,

Dec. 28,2008

2007Assets:Loans, notes and mortgages

$
215


$
12,995Other assets


38



332Total Assets

$
253


$
13,327Liabilities:Other payables, including interest


-



489Total Liabilities

$
-


$
489     Note 16.  Cash
    Flow Restatement





Subsequent to the issuance of the Companys Condensed
    Consolidated Financial Statements for the quarter ended
    June 29, 2007, the Company determined that its previously
    issued Condensed Consolidated Statements of Cash Flows for the
    six months ended June 29, 2007 contained an error resulting
    from the reclassification of certain cash flows from trading
    liabilities into derivative financing transactions. This error
    resulted in an overstatement of cash used for operating
    activities and a corresponding overstatement of cash provided by
    financing activities for the period described above.



This adjustment to the Condensed Consolidated Statements of Cash
    Flows does not affect the Companys Condensed Consolidated
    Statements of (Loss)/Earnings, Condensed Consolidated Balance

67




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##### Table of Contents



(dollars in millions)As Previously
    Presented

Adjustments

As RestatedFor the six months ended June 29,
    2007(1)Trading liabilities

$
8,744


$
12,846


$
21,590Cash used for operating activities


(46,086
)


12,846



(33,240
)Derivative financing transactions


12,818



(12,846
)


(28
)Cash provided by financing activities


57,527



(12,846
)


44,681  (1)
    
    There was no change in cash and
    cash equivalents for the period restated.  
 Note 17.
    Restructuring       
 Note 18.
    Subsequent Events   Bloomberg,
    L.P. and Financial Data Services
     68




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##### Table of Contents



CDO
    Sale
          Termination
    of Monoline Hedges
        Common
    Stock Offering and Early Conversion of Mandatory Convertible
    Preferred
   69




---



##### Table of Contents



70




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                   Fair Value Measurement, The Fair Value Option for Financial Assets and
    Financial Liabilities  Including an amendment of FASB
    Statement No. 115, Accounting for Uncertainty in Income
    Taxes, an Interpretation of FASB Statement No. 109,
      71




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##### Table of Contents



ITEM 2.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS Forward-Looking
    Statements and Non-GAAP Financial Measures  Form 10-K Form 10-K, Form 10-Q Form 8-K.
   Introduction   72




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##### Table of Contents



GMI


GWMClients


Corporations, financial institutions, institutional investors,
    and governments


Individuals, small- to mid-size businesses, and employee benefit
    plansProducts and businesses


Global Markets (comprised of Fixed Income, Currencies & Commodities (FICC) & Equity Markets)   Facilitates client transactions and makes markets in securities, derivatives, currencies, commodities and other financial instruments to satisfy client demands   Provides clients with financing, securities clearing, settlement,
and custody services   Engages in principal and private equity investing, including managing investment funds, and certain proprietary trading activities


Global Private Client (GPC)   Delivers products and services
    primarily through our Financial Advisors (FAs)
         Commission and fee-based
    investment accounts
         Banking, cash management,
    and credit services, including consumer and small business
    lending and
    Visa®
    cards
         Trust and generational
    planning
         Retirement services
         Insurance productsInvestment Banking


Global Investment Management (GIM)   Provides a wide range of securities
    origination services for issuer clients, including underwriting
    and placement of public and private equity, debt and related
    securities, as well as lending and other financing activities
    for clients globally
       Advises clients on strategic issues,
    valuation, mergers, acquisitions and restructurings


   Creates and manages hedge funds and
    other alternative investment products for GPC clients
       Includes net earnings from our ownership
    positions in other investment management companies, including
    our investment in BlackRockStrategic priorities


   Disciplined expansion globally
       Optimize amount of capital allocated to
    businesses
       Enhance risk management capabilities
       Strengthen linkages with our GWM
    business
       Continue to invest in technology to
    enhance productivity and efficiency
       Manage non-compensation expenses to be
    in line with business activity


   Continued growth in client assets
       Hire additional FAs
       Focus on client segmentation and
    increased annuitization of revenues through fee-based
    products
       Diversify revenues by adding products
    and services
       Continue to invest in technology to
    enhance productivity and efficiency
       Disciplined expansion globally
       Strengthen linkages with our GMI
    business
       Manage non-compensation expenses to be
    in line with business activity  
 Executive
    Overview
   Company
    Results
   73




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##### Table of Contents



Global
    Markets and Investment Banking (GMI)
    FICC
 74




---



##### Table of Contents



Equity Markets
  Investment Banking
  Global
    Wealth Management (GWM)
    GPC
  GIM
  Discontinued
    Operations
     75




---



##### Table of Contents



Restructuring
    Charge
    Subsequent
    Events
  Bloomberg,
    L.P. and Financial Data Services
      CDO
    Sale
     76




---



##### Table of Contents



Termination
    of Monoline Hedges
        Common
    Stock Offering and Early Conversion of Mandatory Convertible
    Preferred
       77




---



##### Table of Contents



Pro Forma
    Information
     Business
    Environment and
    Outlook(1)
               (1)
 78




---



##### Table of Contents



79




---



##### Table of Contents



Consolidated
    Results Of Operations (dollars in millions, except per share amounts)For the Three Months Ended

For the Six Months EndedJune 27,

June 29,

%

June 27,

June 29,

%2008

2007

Change

2008

2007

ChangeRevenuesPrincipal transactions

$
(4,083
)

$
3,556



N/M
%

$
(6,501
)

$
6,290



N/M
%Commissions


1,811



1,787



1



3,700



3,500



6Managed accounts and other fee-based revenues


1,399



1,349



4



2,854



2,633



8Investment banking


1,158



1,528



(24
)


2,075



3,038



(32
)Earnings from equity method investments


111



375



(70
)


542



684



(21
)Other


(1,875
)


387



N/M



(3,324
)


1,228



N/MSubtotal


(1,479
)


8,982



N/M



(654
)


17,373



N/MInterest and dividend revenues


7,535



14,447



(48
)


19,396



27,168



(29
)Less interest expense


8,172



13,970



(42
)


17,924



25,479



(30
)Net interest (loss)/profit


(637
)


477



N/M



1,472



1,689



(13
)Revenues, net of interest expense


(2,116
)


9,459



N/M



818



19,062



(96
)Non-interest expenses:Compensation and benefits


3,491



4,731



(26
)


7,687



9,585



(20
)Communications and technology


566



482



17



1,121



961



17Brokerage, clearing, and exchange fees


370



346



7



757



656



15Occupancy and related depreciation


328



273



20



637



538



18Professional fees


263



245



7



505



471



7Advertising and market development


166



200



(17
)


342



355



(4
)Office supplies and postage


55



56



(2
)


112



115



(3
)Other


311



300



4



624



654



(5
)Restructuring charge


445



-



N/M



445



-



N/MTotal non-interest expenses


5,995



6,633



(10
)


12,230



13,335



(8
)Pre-tax (loss)/earnings from continuing operations


(8,111
)


2,826



N/M



(11,412
)


5,727



N/MIncome tax (benefit)/expense


(3,477
)


816



N/M



(4,809
)


1,687



N/MNet (loss)/earnings from continuing operations


(4,634
)


2,010



N/M



(6,603
)


4,040



N/MDiscontinued operations:Pre-tax (loss)/earnings from discontinued operations


(32
)


197



N/M



(57
)


391



N/MIncome tax (benefit)/expense


(12
)


68



N/M



(44
)


134



N/MNet (loss)/earnings from discontinued operations


(20
)


129



N/M



(13
)


257



N/MNet (loss)/earnings

$
(4,654
)

$
2,139



N/M


$
(6,616
)

$
4,297



N/MPreferred stock dividends

$
237


$
72



229


$
411


$
124



231Net (loss)/earnings applicable to common stockholders

$
(4,891
)

$
2,067



N/M


$
(7,027
)

$
4,173



N/MBasic (loss)/earnings per common share from continuing operations

$
(4.95
)

$
2.32



N/M


$
(7.17
)

$
4.67



N/MBasic (loss)/earnings per common share from discontinued
    operations


(0.02
)


0.16



N/M



(0.01
)


0.31



N/MBasic (loss)/earnings per common share

$
(4.97
)

$
2.48



N/M


$
(7.18
)

$
4.98



N/MDiluted (loss)/earnings per common share from continuing
    operations

$
(4.95
)

$
2.10



N/M


$
(7.17
)

$
4.22



N/MDiluted (loss)/earnings per common share from discontinued
    operations


(0.02
)


0.14



N/M



(0.01
)


0.28



N/MDiluted (loss)/earnings per common share

$
(4.97
)

$
2.24



N/M


$
(7.18
)

$
4.50



N/MReturn on average common stockholders equity from
    continuing operations


N/M



21.0
%






N/M



21.4
%Return on average common stockholders equity


N/M



22.4
%






N/M



22.8
%Book value per share

$
21.43


$
43.55



(51
)

$
21.43


$
43.55



(51
)Note: Certain prior period amounts have been reclassified to
    conform to the current period presentation.  N/M = Not Meaningful
 80




---



##### Table of Contents



Quarterly
    Consolidated Results of Operations
           81




---



##### Table of Contents



and/or
       82




---



##### Table of Contents



Year-to-Date
    Consolidated Results of Operations
          U.S. ABS
    CDO and Other Mortgage-Related Activities
  Non-U.S. residential
  U.S.
    Residential Mortgage-Related Activities (excluding U.S. banks
    investment securities portfolio)
  U.S. Prime
 83




---



##### Table of Contents



U.S. Sub-prime
    U.S. Alt-A
      Non-U.S. Non-U.S. net
 84




---



##### Table of Contents



U.S. Banks Investment Securities Portfolio
  (dollars in millions)Net

Net



NetExposures as

Gains/(Losses)

Other Net

Exposures asof Mar. 28,

Reported in

Changes in Net

of Jun. 27,

Percent2008

Income

Exposures(1)

2008

Inc/(Dec)Residential Mortgage-Related (excluding U.S. banks investment
    securities portfolio):U.S. Prime

$
30,750


$
67


$
2,901


$
33,718



10
%Other Residential:U.S. Sub-prime

$
1,435


$
(544
)

$
121


$
1,012



(29
)%U.S. Alt-A


3,172



(549
)


(1,081
)


1,542



(51
)%Non-U.S.


8,769



(229
)


(1,092
)


7,448



(15
)%Total Other
    Residential(2)

$
13,376


$
(1,322
)

$
(2,052
)

$
10,002



(25
)%  (1)
    
    Represents U.S. Prime
    originations, purchases, sales, hedges, paydowns, changes in
    loan commitments and related funding.(2)
    
    Includes warehouse lending,
    whole loans, residuals and residential mortgage-backed
    securities.  U.S. ABS
    CDO Activities
        U.S.
    Super Senior ABS CDO Portfolio
     
    High-grade super senior positions, which are issued by ABS CDOs
    with underlying collateral having an average credit rating of
    Aa3/A1 at inception of the underwriting by Moodys Investor
    Services; 85




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##### Table of Contents




    Mezzanine super senior positions, which are issued by ABS CDOs
    with underlying collateral having an average credit rating of
    Baa2/Baa3 at inception of the underwriting by Moodys
    Investor Services; and
    CDO-squared super senior positions, which are issued by ABS CDOs
    with underlying collateral consisting of other ABS CDO
    securities which have collateral attributes typically similar to
    high-grade and mezzanine super senior positions.        Secondary
    Trading Exposures Related to the ABS CDO Business
      (dollars in millions)Net

Net



NetExposures as

Gains/(Losses)

Other Net

Exposures asof Mar. 28,

Reported in

Changes in Net

of Jun. 27,

Percent2008

Income(1)

Exposures(2)

2008

Inc/(Dec)U.S. ABS CDO net exposures and losses:U.S. super senior ABS CDO net exposures and losses:High-grade

$
4,121


$
(2,933
)

$
1,266


$
2,454Mezzanine


2,249



(515
)


(89
)


1,645CDO-squared


187



(11
)


(43
)


133Total super senior ABS CDO net exposures and losses


6,557



(3,459
)


1,134



4,232Secondary trading


114



(33
)


146



227Total(3)

$
6,671


$
(3,492
)

$
1,280


$
4,459



(33
)%   (1)
    
    Amounts exclude credit
    valuation adjustments of negative $1.4 billion for the 2008
    second quarter ($6.2 billion life-to-date) related to
    financial guarantor exposures on U.S. super senior ABS CDOs. See
    table below regarding financial guarantor exposures.(2)
    
    Primarily consists of hedge
    ineffectiveness, transactions executed, and amortization during
    the period. 86




---



##### Table of Contents



(3)
    
    Hedges are affected by a
    variety of factors that impact the degree of their
    effectiveness. These factors may include differences in
    attachment point, timing of cash flows, control rights,
    litigation, the creditworthiness of the counterparty, limited
    recourse to counterparties and other basis risks.    Monoline
    Financial Guarantors
  and/or
  and/or
       87




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##### Table of Contents



(dollars in millions)Financial Guarantors Exposure on U.S. Super Senior ABS CDOs
    as of June 27, 2008Notional of CDS,

Mark-to-MarketNet of Gains Prior

Gains Priorto Credit

to Credit

CreditNotional of

Valuation

Valuation

Valuation

Mark-to-MarketCDS(1)

Adjustments(2)

Adjustments(3)

Adjustments(4)

Value of CDSCredit default swaps (CDS) with
    financial guarantors:By counterparty credit
    quality:(5)AAA

$
-


$
-


$
-


$
-


$
-AA


(6,726
)


(4,667
)


2,059



(721
)


1,338A


(1,598
)


(334
)


1,264



(758
)


506BBB


(3,741
)


(1,170
)


2,571



(1,542
)


1,029Non-investment grade or unrated


(6,632
)


(3,428
)


3,204



(3,204
)


-Total

$
(18,697
)

$
(9,599
)

$
9,098


$
(6,225
)

$
2,873   (1)
    
    The gross notional amount of
    CDS purchased as protection for U.S. super senior ABS CDOs was
    $18.7 billion and $18.8 billion at June 27, 2008
    and March 28, 2008, respectively. This decline was due to
    amortization of the underlying reference entities on the CDS.
    Amounts do not include exposure with financial guarantors for
    other asset classes.(2)
    
    The notional of the total CDS,
    net of gains prior to credit valuation adjustments, was
    $9.6 billion and $10.9 billion at June 27, 2008
    and March 28, 2008, respectively.(3)
    
    Represents life-to-date
    mark-to-market gains prior to credit valuation adjustments.
    Balance was $9.1 billion and $7.8 billion as of
    June 27, 2008 and March 28, 2008,
    respectively.(4)
    
    Represents life-to-date credit
    valuation adjustments. Balance was $6.2 billion and
    $4.8 billion as of June 27, 2008 and March 28,
    2008, respectively.(5)
    
    Represents S&P credit
    rating bands as of June 27, 2008.  U.S.
    Banks Investment Securities Portfolio
   88




---



##### Table of Contents




    Whether there has been an adverse change in the estimated cash
    flows of the security;
    The period of time over which it is estimated the fair value
    will increase from the current level to at least the amortized
    cost level, or until principal is estimated to be received;
    The period of time a securitys fair value has been below
    amortized cost;
    The amount by which the fair value has declined below amortized
    cost;
    The financial condition of the issuer; and
    Managements ability and intent to hold the security until
    fair value recovers or until the principal is received.      (dollars in millions)Net

Net

Unrealized

Other

NetExposures

Gains/(Losses)

Gains/(Losses)

Net Changes

Exposuresas of Mar. 28,

Reported in

Included in OCI

in Net

as of Jun. 27,

Percent2008

Income(1)

(pre-tax)(2)

Exposures(3)

2008

Inc/(Dec)U.S. Banks Investment Securities Portfolio:Sub-prime residential mortgage-backed securities

$
3,327


$
(91
)

$
(212
)

$
(123
)

$
2,901Alt-A residential mortgage-backed securities


5,330



(1,378
)


601



(215
)


4,338Commercial mortgage-backed securities


5,088



13



270



5



5,376Prime residential mortgage-backed securities


3,580



(211
)


82



(337
)


3,114Non-residential asset-backed securities


988



(7
)


2



(152
)


831Non-residential CDOs


770



(1
)


(20
)


(4
)


745Agency residential mortgage-backed securities


532



2



-



(29
)


505Other


229



-



2



(5
)


226Total

$
19,844


$
(1,673
)

$
725


$
(860
)

$
18,036



(9
)%   (1)
    
    Includes gains and losses
    realized upon the sale of securities as well as losses on
    certain securities deemed to be other-than-temporarily
    impaired.(2)
    
    Represents the reclassification
    of approximately $1.7 billion (approximately
    $1.6 billion in MLBUSA and $0.1 billion in MLBT-FSB)
    in pre-tax losses out of other comprehensive (loss)/income
    (OCI), partially offset by an additional
    $979 million in pre-tax losses recorded in OCI.(3)
    
    Primarily represents principal
    paydowns and sales.  Commercial
    Real Estate
   89




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##### Table of Contents



(dollars in millions)Net



NetNet Exposures

Gains/(Losses)

Other Net

Exposuresas of Mar. 28,

Reported

Changes in Net

as of Jun. 27,

Percent2008

in Income

Exposures(1)

2008

Inc/(Dec)Commercial Real Estate:Whole Loans/Conduits

$
9,750


$
30


$
(1,908
)

$
7,872Securities and Derivatives


960



(61
)


(324
)


575Real Estate
    Investments(2)


7,288



(6
)


(828
)


6,454Total Commercial Real Estate, excluding First Republic
    Bank

$
17,998


$
(37
)

$
(3,060
)

$
14,901



(17)
%First Republic Bank

$
2,586


$
22


$
62


$
2,670



3
%   (1)
    
    Primarily represents sales,
    repayments and the cancellation of unfunded
    commitments.(2)
    
    We make equity and debt
    investments in entities whose underlying assets are real estate.
    We consolidate those entities in which we are the primary
    beneficiary in accordance with
    FIN No. 46-R,
    Consolidation of Variable Interest Entities (revised December
    2003)  an interpretation of ARB No. 51. We do
    not consider ourselves to have economic exposure to the total
    underlying assets in those entities. The amounts presented are
    our net investment and, therefore, exclude the amounts that have
    been consolidated but for which we do not consider ourselves to
    have economic exposure.  
 Business
    Segments
       agreed-upon
 90




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##### Table of Contents



Global Markets and Investment Banking
  GMI
    Results of Operations
  (dollars in millions)For the Three Months Ended

For the Six Months EndedJun. 27,

Jun. 29,

%

Jun. 27,

Jun. 29,

%2008

2007

Change

2008

2007

ChangeGlobal MarketsFICC

$
(8,068
)

$
2,421



N/M


$
(11,446
)

$
5,046



N/MEquity Markets


1,727



2,148



(20
)


3,610



4,534



(20
)Total Global Markets revenues, net of interest expense


(6,341
)


4,569



N/M



(7,836
)


9,580



N/MInvestment BankingOrigination:Debt


367



471



(22
)


598



1,057



(43
)Equity


338



547



(38
)


537



910



(41
)Strategic Advisory Services


317



397



(20
)


692



796



(13
)Total Investment Banking revenues, net of interest expense


1,022



1,415



(28
)


1,827



2,763



(34
)Total GMI revenues, net of interest expense


(5,319
)


5,984



N/M



(6,009
)


12,343



N/MNon-interest expenses, before restructuring charge


2,929



4,047



(28
)


6,286



8,199



(23
)Restructuring charge


311



-



N/M



311



-



N/MPre-tax (loss)/earnings from continuing operations

$
(8,559
)

$
1,937



N/M


$
(12,606
)

$
4,144



N/MPre-tax (loss)/earnings from continuing operations, before
    restructuring charge

$
(8,248
)

$
1,937



N/M


$
(12,295
)

$
4,144



N/MPre-tax profit margin


N/M



32.4
%






N/M



33.6
%Pre-tax profit margin, before restructuring charge


N/M



32.4
%






N/M



33.6
%  N/M = Not Meaningful
     91




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##### Table of Contents



Fixed
    Income, Currencies and Commodities (FICC)
    Non-U.S. residential
    Equity
    Markets
     92




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##### Table of Contents



Investment
    Banking
      Origination
        Strategic
    Advisory Services
     93




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##### Table of Contents



Global Wealth Management
  GWM Results of Operations
  (dollars in millions)For the Three Months Ended

For the Six Months EndedJun. 27,

Jun. 29,

%

Jun. 27,

Jun. 29,

%2008

2007

Change

2008

2007

ChangeGPCFee-based revenues

$
1,591


$
1,544



3


$
3,216


$
3,017



7Transactional and origination revenues


897



1,015



(12
)


1,823



1,926



(5
)Net interest profit and related
    hedges(1)


604



577



5



1,242



1,169



6Other revenues


74



113



(35
)


185



210



(12
)Total GPC revenues, net of interest expense


3,166



3,249



(3
)


6,466



6,322



2GIMTotal GIM revenues, net of interest expense


193



305



(37
)


492



566



(13
)Total GWM revenues, net of interest expense


3,359



3,554



(5
)


6,958



6,888



1Non-interest expenses, before restructuring charge


2,621



2,575



2



5,500



5,125



7Restructuring charge


134



-



N/M



134



-



N/MPre-tax earnings from continuing operations

$
604


$
979



(38
)

$
1,324


$
1,763



(25
)Pre-tax earnings from continuing operations, before
    restructuring charge

$
738


$
979



(25
)

$
1,458


$
1,763



(17
)Pre-tax profit margin


18.0
%


27.5
%






19.0
%


25.6
%Pre-tax profit margin, before restructuring charge


22.0
%


27.5
%






21.0
%


25.6
%Total Financial Advisors


16,690



16,200







16,690



16,200   N/M = Not Meaningful
 (1)
    
    Includes the interest component
    of non-qualifying derivatives, which are included in other
    revenues on the Condensed Consolidated Statements of
    (Loss)/Earnings.     94




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##### Table of Contents



Global
    Private Client
        Fee-Based
    Revenues
  ®
      (dollars in billions)As of

As ofJun. 27,

Dec. 28,2008

2007Assets in client accountsU.S.

$
1,447


$
1,586Non  U.S.


158



165Total

$
1,605


$
1,751Assets in annuitized-revenue products

$
630


$
655    95




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##### Table of Contents



Transactional
    and Origination Revenues
      Net
    Interest Profit and Related Hedges
      Other
    Revenues
    Global
    Investment Management
     96




---



##### Table of Contents



Geographic
    Information
    (dollars in millions)For the Three Months Ended

For the Six Months EndedJune 27,

June 29,

%

June 27,

June 29,

%2008

2007

Change

2008

2007

ChangeRevenues, net of interest expenseEurope, Middle East, and Africa

$
1,420


$
2,120



(33
)%

$
2,405


$
4,223



(43
)%Pacific Rim


729



1,493



(51
)


1,546



2,680



(42
)Latin America


402



363



11



867



750



16Canada


79



120



(34
)


135



292



(54
)Total Non-U.S


2,630



4,096



(36
)


4,953



7,945



(38
)United
    States(1)(2)


(4,746
)


5,363



N/M



(4,135
)


11,117



N/MTotal

$
(2,116
)

$
9,459



N/M


$
818


$
19,062



N/M  (1)
    
    Corporate net revenues and
    adjustments are reflected in the U.S. region. (2)
    
    U.S. net revenues for the three
    and six months ended June 27, 2008 include net losses of
    $9.5 billion and $15.9 billion, respectively, related
    to U.S. ABS CDOs, credit valuation adjustments related to hedges
    with financial guarantors, losses in the investment portfolio of
    Merrill Lynchs U.S. banks and other residential mortgage
    exposures. Losses for the six months ended June 27, 2008
    were partially offset by gains of $2.2 billion that
    resulted from the widening of Merrill Lynchs credit
    spreads on the carrying value of certain of our long-term debt
    liabilities.  Non-U.S. net non-U.S. net non-U.S. net
     97




---



##### Table of Contents



non-U.S. net non-U.S. regions
     98




---



##### Table of Contents



Consolidated
    Balance Sheets
    (dollars in millions)2008June 27,

Six Month

Dec. 28,

20072008

Average(1)

2007

Average(1)AssetsTrading-RelatedSecurities financing assets

$
405,889


$
422,554


$
400,002


$
490,729Trading assets


217,639



250,988



234,669



254,421Other trading-related receivables


92,097



114,755



95,753



93,556715,625



788,297



730,424



838,706Non-Trading-RelatedCash


57,439



77,397



64,345



54,068Investment securities


71,286



79,918



82,532



85,982Loans, notes, and mortgages, net


79,170



81,829



94,992



81,704Other non-trading assets


42,690



45,796



47,757



52,150250,585



284,940



289,626



273,904Total assets

$
966,210


$
1,073,237


$
1,020,050


$
1,112,610Liabilities Trading-RelatedSecurities financing liabilities

$
315,077


$
380,547


$
336,876


$
459,827Trading liabilities


105,976



151,358



123,588



146,073Other trading-related payables


84,535



112,019



91,550



107,198505,588



643,924



552,014



713,098Non-Trading-RelatedShort-term borrowings


19,139



18,091



24,914



20,231Deposits


100,458



103,447



103,987



88,319Long-term borrowings


270,436



243,651



260,973



211,118Junior subordinated notes (related to trust preferred securities)


5,193



5,174



5,154



4,263Other non-trading liabilities


30,618



22,371



41,076



36,180425,844



392,734



436,104



360,111Total liabilities


931,432



1,036,658



988,118



1,073,209Total stockholders equity


34,778



36,579



31,932



39,401Total liabilities and stockholders equity

$
966,210


$
1,073,237


$
1,020,050


$
1,112,610  (1)
    
    Averages represent our daily
    balance sheet estimates, which may not fully reflect netting and
    other adjustments included in period-end balances. Balances for
    certain assets and liabilities are not revised on a daily
    basis.   99




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##### Table of Contents



Off-Balance
    Sheet Exposures    (dollars in millions)ExpirationLess than

1 - 3

3+ -
    5

Over 5Total

1 Year

Years

Years

YearsLiquidity, credit and default facilities

$
19,219


$
16,813


$
869


$
1,537


$
-Residual value guarantees


846



68



362



96



320Standby letters of credit and other guarantees


46,169



1,758



1,200



927



42,284   Liquidity,
    Credit and Default Facilities
    Residual
    Value Guarantees
    Standby
    Letters of Credit
    Other
    Guarantees
   100




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##### Table of Contents



Derivatives
  Guarantors
    Accounting and Disclosure Requirements for Guarantees, Including
    Indebtedness of Others
       101




---



##### Table of Contents



Involvement
    with SPEs
    
    Municipal bond securitization SPEs: SPEs that issue
    medium-term paper, purchase municipal bonds as collateral and
    purchase a guarantee to enhance the creditworthiness of the
    collateral.
    Asset-backed securities SPEs: SPEs that issue different
    classes of debt, from super senior to subordinated, and equity
    and purchase assets as collateral, including residential
    mortgages, commercial mortgages, auto leases and credit card
    receivables.
    ABS CDOs: SPEs that issue different classes of debt, from
    super senior to subordinated, and equity and purchase
    asset-backed securities collateralized by residential mortgages,
    commercial mortgages, auto leases and credit card receivables.
    Synthetic CDOs: SPEs that issue different classes of
    debt, from super senior to subordinated, and equity, purchase
    high-grade assets as collateral and enter into a portfolio of
    credit default swaps to synthetically create the credit risk of
    the issued debt.
    Credit-linked note SPEs: SPEs that issue notes
    linked to the credit risk of a company, purchase high-grade
    assets as collateral and enter into credit default swaps to
    synthetically create the credit risk to pay the return on the
    notes.
    Tax planning SPEs: SPEs are sometimes used to legally
    isolate transactions for the purpose of obtaining a particular
    tax treatment for our clients as well as ourselves. The assets
    and capital structure of these entities vary for each structure.
    Trust preferred security SPEs: These SPEs hold junior
    subordinated debt issued by ML & Co., or our
    subsidiaries, and issue preferred stock on substantially the
    same terms as the junior subordinated debt to third party
    investors. We also provide a parent guarantee, on a junior
    subordinated basis, of the distributions and other payments on
    the preferred stock to the extent that the SPEs have funds
    legally available. The debt we issue into the SPE is classified
    as long-term borrowings on our Condensed Consolidated Balance
    Sheets. The ML & Co. parent guarantees of its own
    subsidiaries are not required to be recorded in the Condensed
    Consolidated Financial Statements.
    Conduits: Generally, entities that issue commercial paper
    and subordinated capital, purchase assets, and enter into total
    return swaps or repurchase agreements with higher rated
    counterparties, particularly banks. The Conduits generally have
    a liquidity
    and/or
    credit facility to further enhance the credit quality of the
    commercial paper issuance. A single seller conduit will execute
    total return swaps, repurchase agreements, and liquidity and
    credit facilities with one financial institution. A multi-seller
    conduit will execute total return swaps, repurchase agreements,
    and liquidity and credit facilities with numerous financial
    institutions. Refer to 102




---



##### Table of Contents



Notes 6 and 11 to the Condensed Consolidated Financial
    Statements for additional information on Conduits.    
    Holder of Issued Debt and Equity: Merrill Lynch invests
    in debt of third party securitization vehicles that are SPEs and
    also invests in SPEs that we establish. In Merrill Lynch formed
    SPEs, we may be the holder of debt and equity of an SPE. These
    holdings will be classified as trading assets, loans, notes and
    mortgages or investment securities. Such holdings may change
    over time at our discretion and rarely are there contractual
    obligations requiring us to purchase additional debt or equity
    interests. Significant obligations are disclosed in the
    off-balance sheet arrangements table above.
    Warehousing of Loans and Securities: Warehouse loans and
    securities represent amounts maintained on our balance sheet
    that are intended to be sold into a trust for the purposes of
    securitization. We may retain these loans and securities on our
    balance sheet for the benefit of a CDO managed by a third party.
    Warehoused loans are carried as held for sale and warehoused
    securities are carried as trading assets.
    Securitizations: In the normal course of business, we
    securitize: commercial and residential mortgage loans and home
    equity loans; municipal, government, and corporate bonds; and
    other types of financial assets. Securitizations involve the
    selling of assets to SPEs, which in turn issue debt and equity
    securities (tranches) with those assets as
    collateral. We may retain interests in the securitized financial
    assets through holding tranches of the securitization. See
    Note 6 to the Condensed Consolidated Financial Statements.
    Structured Investment Vehicles (SIVs): SIVs
    are leveraged investment programs that purchase securities and
    issue asset-backed commercial paper and medium-term notes. These
    SPEs are characterized by low equity levels with partial
    liquidity support facilities and the assets are actively managed
    by the SIV investment manager. We have not been the sponsor or
    equity investor of any SIV, though we have acted as a commercial
    paper or medium-term note placement agent for various SIVs.   Contractual
    Obligations and Commitments  Contractual
    Obligations
    103




---



##### Table of Contents



(dollars in millions)ExpirationLess than

1 - 3

3+ -
    5

Over 5Total

1 Year

Years

Years

YearsLong-term borrowings

$
270,436


$
79,159


$
54,825


$
48,419


$
88,033Contractual interest
    payments(1)


63,750



7,724



12,312



9,371



34,343Purchasing and other commitments


9,181



2,819



1,058



1,391



3,913Junior subordinated notes (related to trust preferred securities)


5,193



-



-



-



5,193Operating lease commitments


4,096



674



1,270



1,003



1,149   (1)
    
    Relates to estimates of future
    interest payments associated with long-term borrowings based
    upon applicable interest rates as of June 27, 2008.
    Includes stated coupons, if any, on structured notes.  non-U.S. dollar-denominated
        Commitments
    (dollars in millions)ExpirationLess than

1 - 3

3+ -
    5

Over 5Total

1 Year

Years

Years

YearsCommitments to extend
    credit(1)

$
59,229


$
18,535


$
11,525


$
21,454


$
7,715Commitments to enter into forward dated resale and securities
    borrowing agreements


64,790



64,614



176



-



-Commitments to enter into forward dated repurchase and
    securities lending agreements


76,529



76,365



164



-



-   (1)
    
    See Note 7 and
    Note 11 to the Condensed Consolidated Financial
    Statements. 104




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##### Table of Contents



Capital
    and Funding ­ ­    
    Maintain sufficient long-term capital to support the execution
    of our business strategies and to achieve our financial
    performance objectives;
    Ensure liquidity across market cycles and through periods of
    financial stress; and
    Comply with regulatory capital requirements.  Long-Term
    Capital
      (dollars in millions)June 27,

Dec. 28,2008

2007Common equity

$
21,112


$
27,549Preferred stock


13,666



4,383Trust preferred
    securities(1)


4,764



4,725Equity capital


39,542



36,657Subordinated long-term debt obligations


12,944



10,887Senior long-term debt
    obligations(2)


171,830



156,370Deposits(3)


82,019



85,035Total long-term capital

$
306,335


$
288,949   (1)
    
    Represents junior subordinated
    notes (related to trust preferred securities), net of related
    investments. The related investments are reported as investment
    securities and were $429 million at June 27, 2008 and
    December 28, 2007. (2)
    
    Excludes junior subordinated
    notes (related to trust preferred securities), the current
    portion of long-term borrowings and the long-term portion of
    other subsidiary financing that is non-recourse to or not
    guaranteed by ML & Co. Borrowings that mature in more
    than one year, but contain provisions whereby the holder has the
    option to redeem the obligations within one year, are reflected
    as the current portion of long-term borrowings and are not
    included in long-term capital.(3)
    
    Includes $68,378 million
    and $13,641 million of deposits in U.S. and
    non-U.S.
    banking subsidiaries, respectively, at June 27, 2008, and
    $70,246 million and $14,789 million of deposits in
    U.S. and
    non-U.S.
    banking subsidiaries, respectively, at December 28, 2007
    that we consider to be long-term based on our liquidity
    models.    Equity
    Capital
   105




---



##### Table of Contents



Common
    Stock
      Preferred
    Stock
   106




---



##### Table of Contents



(dollars in millions)Balance at December 28, 2007

$
36,657Net loss


(6,616
)Issuance of common stock in connection with Temasek


2,362Issuance of preferred stock, net of repurchases and re-issuances


9,283Common and preferred stock dividends


(1,136
)Other comprehensive loss


(1,896
)Net effect of employee stock transactions and other


888Balance at June 27, 2008

$
39,542   Balance
    Sheet Leverage
     107




---



##### Table of Contents



(dollars in millions)June 27, 2008

Dec. 28, 2007Total assets

$
966,210


$
1,020,050Less:Receivables under resale agreements


224,958



221,617Receivables under securities borrowed transactions


129,426



133,140Securities received as collateral


51,505



45,245Add:Trading liabilities, at fair value, excluding derivative
    contracts


40,068



50,294Sub-total


600,389



670,342Less:Segregated cash and securities balances


26,228



22,999Adjusted assets


574,161



647,343Less:Goodwill and other intangible assets


5,058



5,091Tangible adjusted assets

$
569,103


$
642,252Stockholders equity

$
34,778


$
31,932Add:Trust preferred
    securities(1)


4,764



4,725Equity capital

$
39,542


$
36,657Tangible equity
    capital(2)

$
34,484


$
31,566Leverage
    ratio(3)


24.4
x


27.8
xAdjusted leverage
    ratio(4)


14.5
x


17.7
xTangible adjusted leverage
    ratio(5)


16.5
x


20.3
x  (1)
    
    Represents junior subordinated
    notes (related to trust preferred securities), net of related
    investments. The related investments are reported as investment
    securities and were $429 million at June 27, 2008 and
    December 28, 2007. (2)
    
    Equity capital less goodwill
    and other intangible assets.(3)
    
    Total assets divided by equity
    capital.(4)
    
    Adjusted assets divided by
    equity capital.(5)
    
    Tangible adjusted assets
    divided by tangible equity capital.    Consolidated
    Regulatory Capital Requirements
   108




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##### Table of Contents



(dollars in millions)Tier 1 Composition:Common stockholders equity

$
21,112Less:Goodwill and other intangible assets


(5,058
)Disallowed deferred tax assets


(8,393
)Gains on fair valuation of own debt (net of tax)


(2,485
)Add:Losses on available-for-sale debt securities (net of tax)


3,323Qualifying cumulative and non-cumulative preferred stock


13,666Qualifying restricted core capital
    elements(1)


5,195Other
    additions/(deductions)(2)


47Tier 1 Capital


27,407Tier 2 Composition:Qualifying subordinated debt


12,944Qualifying senior debt


760Excess of eligible credit reserves over total expected credit
    losses


1,400Allowable gains on equity investments


1,541Total Allowable Capital

$
44,052Risk Weighted AssetsCredit risk

$
222,683Market risk


99,641Operational risk


36,563Total

$
358,887Tier 1 Capital Ratio (Tier 1 Capital / Risk
    Weighted Assets)


7.64
%Total Capital Ratio (Total Allowable Capital / Risk Weighted
    Assets)


12.27
%  (1)
    
    Consists mainly of junior
    subordinated notes (related to trust preferred securities) and
    certain minority interests(2)
    
    Includes gains and losses on
    cash flow hedges and minimum pension liability adjustments
    associated with defined benefit plans    Composition
    of Tier 1 and Total Allowable Capital
  Tier 1
    Capital
    109




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##### Table of Contents



Total
    Allowable Capital
   Capital
    Requirement by Risk Type
    Credit
    Risk
   Market
    Risk
 The Application of
    Basel II Trading Activities and the Treatment of Double
    Default Effects (July 2005), International Convergence of Capital
    Measurement and Capital Standards: A Revised Framework.
  Operational
    Risk
  110




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##### Table of Contents



Funding
      (dollars in millions)June 27,

Dec. 28,2008

2007Commercial paper

$
8,620


$
12,908Promissory notes


-



2,750Other unsecured short-term
    borrowings(1)(2)


4,720



1,229Current portion of long-term
    borrowings(3)


69,029



63,307Total unsecured short-term borrowings

$
82,369


$
80,194Senior long-term
    borrowings(4)

$
171,830


$
156,370Subordinated long-term borrowings


12,944



10,887Total unsecured long-term borrowings

$
184,774


$
167,257Deposits

$
100,458


$
103,987   (1)
    
    Excludes $1.7 billion and
    $4.9 billion of secured short-term borrowings at
    June 27, 2008 and December 28, 2007, respectively;
    these short-term borrowings are represented under a master note
    lending program.(2)
    
    Excludes $4.1 billion and
    $3.2 billion of other unsecured
    short-term
    borrowings that is
    non-recourse
    or not guaranteed by ML & Co. at June 27, 2008
    and December 28, 2007, respectively.(3)
    
    Excludes $10.1 billion and
    $1.7 billion of the current portion of other subsidiary
    financing that is non-recourse or not guaranteed by
    ML & Co. at June 27, 2008 and December 28,
    2007, respectively.(4)
    
    Excludes junior subordinated
    notes (related to trust preferred securities), current portion
    of long-term borrowings, secured long-term borrowings, and the
    long-term portion of other subsidiary financing that is
    non-recourse or not guaranteed by ML & Co.    
    Diversify funding sources;
    Maintain sufficient long-term borrowings;
    Concentrate unsecured funding at ML & Co. (parent
    company);
    Use deposits as a source of funding; and
    Adhere to prudent governance principles. 111




---



##### Table of Contents



Diversification
    of Funding Sources
  non-U.S. medium-term non-U.S. private non-U.S. commercial
    (USD equivalent in millions)June 27,



Dec. 28,2008



2007USD

$
149,551



51
%

$
165,285



57
%EUR


87,933



30



74,207



26JPY


14,033



5



16,879



6GBP


15,319



5



9,303



3AUD


5,577



2



5,455



2CAD


5,175



2



5,953



2CHF


5,444



2



2,283



1INR


1,215



1



1,964



1Other(1)


5,328



2



4,558



2Total(2)

$
289,575



100
%

$
285,887



100
%   (1)
    
    Includes various other foreign
    currencies, none of which individually exceed 1% of total
    issuances. (2)
    
    Excludes junior subordinated
    notes (related to trust preferred securities).  and/or
    Maintenance
    of Sufficient Long-Term Borrowings
   112




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##### Table of Contents



(dollars in billions)Consolidated unsecured long-term debt maturities within twelve
    months

$
79.2Less: non-recourse debt and debt not guaranteed by
    ML & Co.


10.1Less: warrant maturities and other customer funded
    positions(1)


9.6ML & Co. maximum long-term debt maturities within
    twelve months


59.5Less: ML & Co. debt that may potentially mature within
    twelve months, final maturity beyond twelve
    months(2)


8.1ML & Co. contractual long-term debt maturities within
    twelve months

$
51.4   (1)
    
    Warrants are fully funded
    customer facilitation trades.(2)
    
    Consists of structured notes
    that are callable based on certain market triggers. See
    Note 9 to the Condensed Consolidated Financial Statements
    for further information on our structured notes. 113




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##### Table of Contents



(dollars in billions)Balance December 28, 2007

$
261.0Issuance and resale


53.6Settlement and repurchase


(46.1
)Other(1)


1.9Balance June 27,
    2008(2)

$
270.4  (1)
    
    Primarily relates to fair value
    changes and foreign exchange movements.(2)
    
    See Note 9 to the
    Condensed Consolidated Financial Statements for the long-term
    borrowings maturity schedule.    ® Committed Credit Facilities
  non-U.S. dollar
  Concentration
    of Unsecured Funding at ML & Co.
    Deposit
    Funding
   114




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##### Table of Contents



Liquidity Risk Risk
    Management
  Prudent
    Governance
    Credit
    Ratings
      P-1 a-1.
   115




---



##### Table of Contents



Senior



PreferredDebt

Subordinated

Stock

Commercial

RatingRating Agency

Ratings

Debt Ratings

Ratings

Paper Ratings

OutlookDominion Bond Rating Service Ltd.

A(high)

A

A(low)

R-1(middle)

NegativeFitch Ratings

A+

A

A

F1

Negative WatchMoodys Investors Service, Inc.

A2

A3

Baa1

P-1

StableRating & Investment Information, Inc. (Japan)

A+

A

Not Rated

a-1

NegativeStandard & Poors Ratings Services

A

A-

BBB+

A-1

Negative   and/or
  Cash
    Flows
     116




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##### Table of Contents



Risk
    Management  Risk
    Management Philosophy
        Market
    Risk
  and/or
     117




---



##### Table of Contents




    VaR measures do not convey the magnitude of extreme events;
    Historical data that forms the basis of VaR may fail to predict
    current and future market volatility; and
    VaR does not reflect the effects of market illiquidity (i.e.,
    the inability to sell or hedge a position over a relatively long
    period).       118




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##### Table of Contents



Trading
    Value at Risk
  (dollars in millions)Daily

Daily

DailyJun. 27

Mar. 28

Dec. 28

High

Low

Average

Average

Average2008

2008

2007

2Q08

2Q08

2Q08

1Q08

2007Trading
    Value-at-Risk(1)Interest rate and credit spread

$
37


$
65


$
52


$
74


$
37


$
59


$
63


$
52Equity


20



20



26



24



18



20



20



28Commodity


28



18



15



30



13



21



22



18Currency


2



10



5



14



2



7



7



5Subtotal(2)


87



113



98











107



112



103Diversification benefit


(38
)


(54
)


(33
)










(50
)


(47
)


(38
)Overall

$
49


$
59


$
65


$
69


$
47


$
57


$
65


$
65  (1)
    
    Based on a 95% confidence level
    and a
    one-day
    holding period.(2)
    
    Subtotals are not provided for
    highs and lows as they are not meaningful.      one-day
  Non-Trading
    Market Risk
  Counterparty Credit
    Risk
   119




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##### Table of Contents



® pre-tax
    Counterparty
    Credit Risk
       120




---



##### Table of Contents



Commercial
    Lending
  and/or
    (dollars in millions)ClosedBy Credit
    Quality(1)

Loans

CommitmentsAA or above

$
4,155


$
8,091A


3,470



13,779BBB


9,923



10,594BB


17,108



6,548B or below


9,449



4,875Unrated


2,729



1,997Total

$
46,834


$
45,884  (1)
    
    Based on credit rating agency
    equivalent of internal credit ratings.  ClosedBy Industry

Loans

CommitmentsFinancial Institutions


28
%


25
%Industrial/Manufacturing


20



21Real Estate


22



4Energy/Utilities


3



13Consumer Goods and Services


4



10Lodging/Entertainment


4



6Technology


1



5All Other


18



16Total


100
%


100
%   121




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##### Table of Contents



ClosedBy Country

Loans

CommitmentsUnited States


54
%


66
%United Kingdom


7



12Germany


6



5Japan


5



0France


4



1All Other


24



16Total


100
%


100
%     Residential
    Mortgage Lending
    Derivatives
        122




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##### Table of Contents



(dollars in millions)Years to Maturity

MaturityCredit
    Rating(1)

0 to 3

3+ to 5

5+ to 7

Over 7

Netting(2)

TotalAA or above

$
8,161


$
4,178


$
3,576


$
11,840


$
(5,974
)

$
21,781A


7,537



2,384



1,492



10,197



(4,440
)


17,170BBB


6,253



1,048



1,093



3,490



(1,582
)


10,302BB


3,330



931



1,329



3,234



(1,355
)


7,469B or below


2,335



1,128



457



5,344



(139
)


9,125Unrated


1,360



300



67



223



(249
)


1,701Total

$
28,976


$
9,969


$
8,014


$
34,328


$
(13,739
)

$
67,548  (1)
    
    Represents credit rating agency
    equivalent of internal credit ratings. (2)
    
    Represents netting of payable
    balances with receivable balances for the same counterparty
    across maturity band categories. Receivable and payable balances
    with the same counterparty in the same maturity category,
    however, are net within the maturity category.    Liquidity
    Risk
        
    Maintain excess liquidity in the form of unencumbered liquid
    assets and committed credit facilities;
    Match asset and liability profiles appropriately;
    Perform scenario analysis and stress testing; and 123




---



##### Table of Contents




    Maintain a well formulated and documented contingency funding
    plan, including access to lenders of last resort.  Excess
    Liquidity and Unencumbered Assets
      (dollars in billions)June 27,

December 28,2008

2007Excess liquidity pool

$
92


$
79Unencumbered assets at bank subsidiaries


52



57Unencumbered assets at non-bank subsidiaries


61



64Global Liquidity Sources

$
205


$
200        124




---



##### Table of Contents



Off-Balance
    Sheet Financing
    Committed
    Credit Facilities
       125




---



##### Table of Contents



Asset-Liability
    Management
      
    The portion of assets that cannot be self-funded in the secured
    financing markets, considering stressed market conditions,
    including illiquid and less liquid assets;
    Subsidiaries regulatory capital;
    Collateral on derivative contracts that may be required in the
    event of changes in our credit ratings or movements in the
    underlying instruments;
    Portions of commitments to extend credit based on our estimate
    of the probability of draws on these commitments; and
    Other contingencies based on our estimates.        Scenario
    Analysis and Stress Testing
   126




---



##### Table of Contents



and/or
  Contingency
    Funding Plan
    non-U.S. subsidiaries
  Federal
    Reserve Liquidity Facilities
         127




---



##### Table of Contents



Other
    Risks
     Critical
    Accounting Policies and Estimates
  Use of
    Estimates
    
    Valuations of assets and liabilities requiring fair value
    estimates;
    Determination of other-than-temporary impairments for
    available-for-sale investment securities;
    The outcome of litigation;
    Assumptions and cash flow projections used in determining
    whether VIEs should be consolidated and the determination of the
    qualifying status of QSPEs;
    The realization of deferred taxes and the recognition and
    measurement of uncertain tax positions;
    The carrying amount of goodwill and other intangible assets;
    The amortization period of intangible assets with definite lives;
    Incentive-based compensation accruals and valuation of
    share-based payment compensation arrangements; and
    Other matters that affect the reported amounts and disclosure of
    contingencies in the financial statements.  Use of Estimates
    Valuation
    of Financial Instruments
  Accounting for Certain Investments in Debt and Equity
    Securities Accounting for
    Derivative Instruments and Hedging Activities Fair Value Option for Certain
    Financial Assets and Liabilities
 128




---



##### Table of Contents




    Trading inventory and investment securities;
    Private equity and principal investments;
    Certain receivables under resale agreements and payables under
    repurchase agreements;
    Loans and allowance for loan losses and liabilities recorded for
    unrealized losses on unfunded commitments; and
    Certain long-term borrowings, primarily structured debt.    Fair Value Measurements
    and/or
  EITF 02-3, Issues Involved in Accounting for Derivative Contracts Held
    for Trading Purposes and Contracts Involved in Energy Trading
    and Risk Management Activities (EITF 02-3). EITF 02-3, EITF 02-3 EITF 02-3.
 129




---



##### Table of Contents



EITF 02-3 and/or
  Valuation
    Controls
    Valuation
    Adjustments
    Liquidity
    Counterparty
    Credit Risk
      SFAS 157
    Hierarchy
   130




---



##### Table of Contents



Level 1
    Level 2
    a)
    Quoted prices for similar assets or liabilities in active
    markets (for example, restricted stock);b)
    Quoted prices for identical or similar assets or liabilities in
    non-active markets (examples include corporate and municipal
    bonds, which trade infrequently);c)
    Pricing models whose inputs are observable for substantially the
    full term of the asset or liability (examples include most
    over-the-counter derivatives including interest rate and
    currency swaps); andd)
    Pricing models whose inputs are derived principally from or
    corroborated by observable market data through correlation or
    other means for substantially the full term of the asset or
    liability (examples include certain residential and commercial
    mortgage related assets, including loans, securities and
    derivatives).  Level 3
    and/or
    131




---



##### Table of Contents



(dollars in millions)June 27,

March 28,

December 28,2008

2008

2007Level 3
    assets(1)

$
64,195


$
82,367


$
48,606Level 3 assets as a percentage of total assets


7
%


8
%


5
%Level 3 liabilities

$
47,202


$
57,571


$
39,872Level 3 liabilities as a percentage of total liabilities


5
%


6
%


4
%   (1)
    
    Includes assets measured at
    fair value on a recurring and non-recurring basis    
    U.S. super senior ABS CDO positions within trading assets
    of $10.1 billion and derivative assets of $9.9 billion;
    U.K. residential real estate loans measured at fair value on a
    non-recurring basis of $5.2 billion;
    credit derivatives of $13.6 billion that incorporate
    unobservable correlation;
    corporate bonds and loans within trading assets of
    $8.5 billion (including $1.6 billion of auction rate
    securities);
    private equity and principal investment positions of
    $4.3 billion within investment securities; and
    equity, currency, interest rate and commodity derivative
    contracts of $9.2 billion that are long-dated
    and/or have
    unobservable correlation.    
    derivative liabilities on U.S. super senior ABS CDO
    positions of $15.4 billion;
    credit derivatives of $10.8 billion that incorporate
    unobservable correlation;
    equity and currency derivative contracts of $6.6 billion
    that are long-dated
    and/or have
    unobservable correlation;
    structured notes classified as long term borrowings of
    $10.7 billion with embedded equity and commodity
    derivatives that are long-dated
    and/or have
    unobservable correlation; and
    non-recourse debt arrangements classified as long term
    borrowings of $1.7 billion related to certain non-recourse
    long-term borrowings issued by consolidated SPEs.  long-dated
 132




---



##### Table of Contents



Mortgage
    related positions
    U.S. ABS CDOs
    Residential mortgages
    Corporate
    debt and loans
    Private
    equity and principal investments
    Derivatives
    and structured notes with significant unobservable
    correlation
   133




---



##### Table of Contents



Derivatives
    and structured notes with significant unobservable
    volatility
  and/or
    Litigation
  and/or Accounting for
    Contingencies
  Variable
    Interest Entities and Qualified Special Purpose
    Entities
  and/or
 134




---



##### Table of Contents



Income
    Taxes
    2004-2005. 2002-2006.
  Accounting for Uncertainty in Income Taxes, an interpretation
    of FASB Statement No. 109
    RECENT ACCOUNTING
    DEVELOPMENTS    
    FSP
    EITF 03-6-1,
    Determining Whether Instruments Granted in Share-Based
    Payment Transactions Are Participating Securities;
    FSP APB
    14-1,
    Accounting for Convertible Debt Instruments That May Be
    Settled in Cash upon Conversion (Including Partial Cash
    Settlement);
    SFAS No. 161, Disclosure about Derivative
    Instruments and Hedging Activities, an Amendment of FASB
    Statement No. 133; 135




---



##### Table of Contents




    SFAS No. 160, Noncontrolling Interests in
    Consolidated Financial Statements-an amendment of ARB
    No. 51;
    FSP
    FAS 140-3,
    Accounting for Transfers of Financial Assets and Repurchase
    Financing Transactions;
    SFAS No. 141R, Business Combinations;
    Statement of Position
    07-1,
    Clarification of the Scope of the Audit and Accounting Guide
    Investment Companies and Accounting by Parent Companies and
    Equity Method Investors for Investments in Investment
    Companies;
    FSP
    No. FIN 39-1,
    Amendment of FASB Interpretation No. 39;
    SFAS No. 159, Fair Value Option for Certain
    Financial Assets and Liabilities;
    SFAS No. 157, Fair Value Measurements;
    SFAS No. 158, Employers Accounting for
    Defined Benefit Pension and Other Postretirement Plans, an
    amendment of FASB Statements No. 87, 88, 106 and 132R;
    Interpretation No. 48, Accounting for Uncertainty in
    Income Taxes, an Interpretation of FASB Statement
    No. 109;
    SFAS No. 156, Accounting for Servicing of Financial
    Assets; and
    SFAS No. 155, Accounting for Certain Hybrid
    Financial Instruments an amendment of FASB Statements
    No. 133 and 140.  Transfers
    of Financial Assets and QSPEs
    ASF
    Framework
  deeds-in-lieu
 136




---



##### Table of Contents



Accounting
    for Transfers and Servicing of Financial Assets and
    Extinguishments of Liabilities (a replacement of FASB Statement
    No. 125)
      Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk    Item 4.
    Controls
    and Procedures  Rule 13a-15(e)
  Rule 13a-15(f)
 137




---



##### Table of Contents



PART II 
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings  Form 10-K Form 10-Q
  Enron
    Litigation
  Newby v. Enron Corp., et al.: Stoneridge
    Investment v. Scientific Atlanta
  Subprime-Related
    Litigation
  In re Merrill Lynch & Co., Inc. Securities,
    Derivative, and ERISA Litigation
  Securities Class Actions.
  ERISA Class Actions.
  Shareholder Derivative Actions.
 138




---



##### Table of Contents



XL Litigation.
  Auction-Rate
    Litigation
  Burton v. Merrill Lynch & Co., Inc., et al.;
    Stanton v. Merrill Lynch & Co., Inc., et al.
  In re Public Offering Fee Antitrust Litigation and In re
    Issuer Plaintiff Initial Public Offering Fee Antitrust
    Litigation
  In the Matter of Merrill Lynch, Pierce, Fenner &
    Smith, Incorporated:
  GIC Litigation
  Hinds
    County, Mississippi v. Wachovia Bank, N.A. et al.
  Other
   139




---



##### Table of Contents



and/or
    Item 1A.
    Risk
    Factors  Form 10-K Form 10-K and/or
  Item 2.
    Unregistered
    Sales of Equity Securities, Use of Proceeds and Issuer Purchases
    of Equity Securities    (dollars in millions, except per share amounts)Total Number

Approximateof Shares

Dollar Value ofPurchased as

Shares that MayTotal Number

Average

Part of Publicly

Yet be Purchasedof Shares

Price Paid

Announced

Under thePeriod

Purchased

per Share

Program(1)

ProgramMonth #1 (Mar. 29, 2008  May 2, 2008)Capital Management Program


-



-



-


$
3,971Employee
    Transactions(2)


987,373


$
46.54



N/A



N/AMonth #2 (May 3, 2008  May 30, 2008)Capital Management Program


-



-



-


$
3,971Employee
    Transactions(2)


634,350


$
47.43



N/A



N/A 140




---



##### Table of Contents



(dollars in millions, except per share amounts)Total Number

Approximateof Shares

Dollar Value ofPurchased as

Shares that MayTotal Number

Average

Part of Publicly

Yet be Purchasedof Shares

Price Paid

Announced

Under thePeriod

Purchased

per Share

Program(1)

ProgramMonth #3 (May 31, 2008  June 27, 2008)Capital Management Program


-



-



-


$
3,971Employee
    Transactions(2)


1,158,803


$
37.82



N/A



N/ASecond Quarter 2008 (Mar. 29, 2008  June 27,
    2008)Capital Management Program


-



-



-


$
3,971Employee
    Transactions(2)


2,780,526


$
43.11



N/A



N/A  (1)
    
    No repurchases were made for
    the quarter ended June 27, 2008.(2)
    
    Included in the total number of
    shares purchased are: (1) shares purchased during the
    period by participants in the Merrill Lynch 401(k) Savings and
    Investment Plan (401(k)) and the Merrill Lynch
    Retirement Accumulation Plan (RAP), (2) shares
    delivered or attested to in satisfaction of the exercise price
    by holders of ML & Co. employee stock options (granted
    under employee stock compensation plans) and (3) Restricted
    Shares withheld (under the terms of grants under employee stock
    compensation plans) to offset tax withholding obligations that
    occur upon vesting and release of Restricted Shares.
    ML & Co.s employee stock compensation plans
    provide that the value of the shares delivered, attested, or
    withheld, shall be the average of the high and low price of
    ML & Co.s common stock (Fair Market Value) on
    the date the relevant transaction occurs. See Notes 12 and
    13 to the 2007 Annual Report for additional information on these
    plans.         141




---



##### Table of Contents



Form S-3
  Item 4.
    Submission
    of Matters to a Vote of Security Holders  Form 10-Q
  Item 6.
    Exhibits   142




---



##### Table of Contents



SIGNATURES    MERRILL LYNCH & CO., INC.
   By:
    /s/  Nelson
    Chai       By:
    /s/  Christopher
    Hayward        143




---



##### Table of Contents



INDEX TO
    EXHIBITS  ExhibitNumber

Exhibit3.1

Restated Certificate of Incorporation of Merrill Lynch,
    effective as of May 3, 2001 (Exhibit 3.1 is
    incorporated by reference to Merrill Lynchs Current Report
    on
    Form 8-K
    dated November 14, 2005).3.2 & 4.1

Certificate of Designations of Merrill Lynch establishing the
    rights, preferences, privileges, qualifications, restrictions
    and limitations relating to Merrill Lynchs Floating Rate
    Non-Cumulative Preferred Stock, Series 1 (Exhibits 3.2
    and 4.1 are incorporated by reference to Registrants
    Current Report on
    Form 8-K
    dated November 14, 2005).3.3 & 4.2

Certificate of Designations of Merrill Lynch establishing the
    rights, preferences, privileges, qualifications, restrictions
    and limitations relating to Merrill Lynchs Floating Rate
    Non-Cumulative Preferred Stock, Series 2 (Exhibits 3.3
    and 4.2 are incorporated by reference to Registrants
    Current Report on
    Form 8-K
    dated November 14, 2005).3.4 & 4.3

Certificate of Designations of Merrill Lynch establishing the
    rights, preferences, privileges, qualifications, restrictions
    and limitations relating to Merrill Lynchs 6.375%
    Non-Cumulative Preferred Stock, Series 3 (Exhibits 3.4
    and 4.3 are incorporated by reference to Registrants
    Current Report on
    Form 8-K
    dated November 14, 2005).3.5 & 4.4

Certificate of Designations of Merrill Lynch establishing the
    rights, preferences, privileges, qualifications, restrictions
    and limitations relating to Merrill Lynchs Floating Rate
    Non-Cumulative Preferred Stock, Series 4 (Exhibits 3.5
    and 4.4 are incorporated by reference to Registrants
    Current Report on
    Form 8-K
    dated November 14, 2005).3.6 & 4.5

Certificate of Designations of Merrill Lynch establishing the
    rights, preferences, privileges, qualifications, restrictions
    and limitations relating to Merrill Lynchs Floating Rate
    Non-Cumulative Preferred Stock, Series 5 (Exhibits 3.6
    and 4.5 are incorporated by reference to Registrants
    Current Report on
    Form 8-K
    dated March 20, 2007).3.7 & 4.6

Certificate of Designations of Merrill Lynch establishing the
    rights, preferences, privileges, qualifications, restrictions
    and limitations relating to Merrill Lynchs 6.70%
    Non-Cumulative Perpetual Preferred Stock, Series 6
    (Exhibits 3.7 and 4.6 are incorporated by reference to
    Registrants Current Report on
    Form 8-K
    dated September 24, 2007).3.8 & 4.7

Certificate of Designations of Merrill Lynch establishing the
    rights, preferences, privileges, qualifications, restrictions
    and limitations relating to Merrill Lynchs 6.25%
    Non-Cumulative Perpetual Preferred Stock, Series 7
    (Exhibits 3.8 and 4.7 are incorporated by reference to
    Registrants Current Report on
    Form 8-K
    dated September 24, 2007).3.9 & 4.8

Certificate of Designations of Merrill Lynch establishing the
    rights, preferences, privileges, qualifications, restrictions
    and limitations relating to Merrill Lynchs 9.00%
    Non-Voting Mandatory Convertible Non-Cumulative Preferred Stock,
    Series 1, par value$1.00 per share and liquidation
    preference $100,000 per share (Exhibits 3.9 and 4.8 are
    incorporated by reference to Registrants Current Report on
    Form 8-K
    dated January 16. 2008).3.10 & 4.9

Certificate of Designations of Merrill Lynch establishing the
    rights, preferences, privileges, qualifications, restrictions
    and limitations relating to Merrill Lynchs 8.625%
    Non-Cumulative Preferred Stock, Series 8
    (Exhibits 3.10 and 4.9 are incorporated by reference to
    Registrants Current Report on
    Form 8-K
    dated April 29, 2008).3.11 & 4.10

Certificate of Designations of Merrill Lynch establishing the
    rights, preferences, privileges, qualifications, restrictions
    and limitations relating to Merrill Lynchs 9.00%
    Non-Voting Mandatory Convertible Non-Cumulative Preferred Stock,
    Series 2, par value $1.00 per share and liquidation
    preference $100,000 per share (Exhibits 3.11 and 4.10 are
    incorporated by reference to Registrants Current Report on
    Form 8-K
    dated August 1, 2008). 144




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##### Table of Contents



ExhibitNumber

Exhibit3.12 & 4.11

Certificate of Designations of Merrill Lynch establishing the
    rights, preferences, privileges, qualifications, restrictions
    and limitations relating to Merrill Lynchs 9.00%
    Non-Voting Mandatory Convertible Non-Cumulative Preferred Stock,
    Series 3, par value $1.00 per share and liquidation
    preference $100,000 per share (Exhibits 3.12 and 4.11 are
    incorporated by reference to Registrants Current Report on
    Form 8-K
    dated August 1, 2008).4

Instruments defining the rights of security holders, including
    indentures:ML & Co. hereby undertakes to furnish to the
    Securities and Exchange Commission, upon request, copies of the
    instruments that have not been filed which define the rights of
    holders of long-term debt securities of ML & Co. that
    authorize an amount of securities constituting 10% or less of
    the total assets of ML & Co. and its subsidiaries on a
    consolidated basis. Such instruments have not been filed
    pursuant to Item 601(b)(4)(iii)(A) of
    Regulation S-K.10.1

Form of Agreement dated February 27,2008 with Thomas J.
    Sanzone (filed as Exhibit 10.1 to ML & Co.s
    Report on
    Form 8-K
    dated March 7, 2008).10.2

Amended and Restated Stockholder Agreement, dated as of
    July 16, 2008, by and between Merrill Lynch &
    Co., Inc. and BlackRock, Inc. (filed as Exhibit 7.02 to
    ML & Co.s Amendment No. 1 to
    Schedule 13D dated July 22, 2008).10.3

ML & Co.s 2009 Deferred Compensation Plan (filed
    as Exhibit 10 to ML & Co.s Registration
    Statement on
    Form S-8
    dated May 29, 2008).12*

Statement re: computation of ratios.15*

Letter of awareness from Deloitte & Touche LLP, dated
    August 4, 2008, concerning unaudited interim financial
    information.31.1*

Rule 13a-14(a)
    Certification.31.2*

Rule 13a-14(a)
    Certification.32.1*

Certification Pursuant to 18 U.S.C. Section 1350, as
    Adopted Pursuant to Section 906 of the Sarbanes 
    Oxley Act of 2002.32.2*

Certification Pursuant to 18 U.S.C. Section 1350, as
    Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.99.1

Reconciliation of Non-GAAP Measures (Filed as
    Exhibit 99.2 to ML & Co.s Report on
    Form 8-K
    dated July 17, 2008).99.2*

Pro Forma Stockholders Equity.     *
    
    Filed Herewith 145