##### 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
    September 26, 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 (Do not check if a smaller
    reporting company)
  Rule 12b-2
  X
  APPLICABLE
    ONLY TO CORPORATE ISSUERS:




---



##### 



MERRILL
    LYNCH & CO., INC. QUARTERLY REPORT ON
    FORM 10-Q
    FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 26, 2008
    TABLE OF CONTENTS
   Part I. Financial Information


4Item 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


27Note 3. Fair Value


30Note 4. Securities Financing Transactions


40Note 5. Investment Securities


41Note 6. Securitization Transactions and
    Transactions with Special Purpose Entities (SPEs)


43Note 7. Loans, Notes, and Mortgages and
    Related Commitments to Extend Credit


50Note 8. Goodwill and Intangibles


52Note 9. Borrowings and Deposits


53Note 10. Stockholders Equity and
    Earnings Per Share


56Note 11. Commitments, Contingencies and
    Guarantees


60Note 12. Employee Benefit Plans


65Note 13. Income Taxes


66Note 14. Regulatory Requirements


67Note 15. Discontinued Operations


68Note 16. Cash Flow Restatement


70Note 17. Restructuring Charge


70Note 18. Subsequent Events


71Report of Independent Registered Public
    Accounting Firm


73Item 2.  Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


74Forward-Looking Statements and
    Non-GAAP Financial Measures


74Introduction


74Executive Overview


76Consolidated Results of Operations


84Business Segments


94Geographic Information


101Consolidated Balance Sheets


103Off Balance Sheet Exposures


104Contractual Obligations and Commitments


108Capital and Funding


109Risk Management


121Critical Accounting Policies and Estimates


133Recent Accounting Developments


141Item 3.  Quantitative and
    Qualitative Disclosures About Market Risk


143Item 4.  Controls and
    Procedures


144Part II. Other Information


145Item 1.  Legal
    Proceedings


145Item 1A. Risk Factors


147Item 2.  Unregistered Sales of
    Equity Securities, Use of Proceeds and Issuer Purchases of
    Equity Securities


149Item 6.  Exhibits


150Signatures


151Index to Exhibits


152EX-10.2: LETTER AGREEMENTEX-10.3: FORM OF CONSENTEX-12: STATEMENT RE: COMPUTATION OF RATIOSEX-15: LETTER OF AWARENESS FORM DELOITTE & TOUCHE LLPEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION    2




---



##### Table of Contents



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




---



##### 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 EndedSept. 26,

Sept. 28,(In millions, except per share amounts)

2008

2007RevenuesPrincipal transactions

$
(6,573
)

$
(5,761
)Commissions


1,745



1,860Managed accounts and other fee-based revenues


1,395



1,392Investment banking


845



1,277Earnings from equity method investments


4,401



412Other


(2,986
)


(1,114
)Subtotal


(1,173
)


(1,934
)Interest and dividend revenues


9,019



15,636Less interest expense


7,830



13,322Net interest profit


1,189



2,314Revenues, net of interest expense


16



380Non-interest expensesCompensation and benefits


3,483



1,979Communications and technology


546



499Brokerage, clearing, and exchange fees


348



364Occupancy and related depreciation


314



295Professional fees


242



245Advertising and market development


159



181Office supplies and postage


48



54Other


588



401Payment related to price reset on common stock offering


2,500



-Restructuring charge


39



-Total non-interest expenses


8,267



4,018Pre-tax loss from continuing operations


(8,251
)


(3,638
)Income tax benefit


(3,131
)


(1,258
)Net loss from continuing operations


(5,120
)


(2,380
)Discontinued operations:Pre-tax (loss)/earnings from discontinued operations


(53
)


211Income tax (benefit)/expense


(21
)


72Net (loss)/earnings from discontinued operations


(32
)


139Net loss

$
(5,152
)

$
(2,241
)Preferred stock dividends


2,319



73Net loss applicable to common stockholders

$
(7,471
)

$
(2,314
)Basic loss per common share from continuing operations

$
(5.56
)

$
(2.99
)Basic (loss)/earnings per common share from discontinued
    operations


(0.02
)


0.17Basic loss per common share

$
(5.58
)

$
(2.82
)Diluted loss per common share from continuing operations

$
(5.56
)

$
(2.99
)Diluted (loss)/earnings per common share from discontinued
    operations


(0.02
)


0.17Diluted loss per common share

$
(5.58
)

$
(2.82
)Dividend paid per common share

$
0.35


$
0.35Average shares used in computing earnings per common shareBasic


1,339.0



821.6Diluted


1,339.0



821.6    See Notes to Condensed
    Consolidated Financial Statements
 4




---



##### Table of Contents



Merrill
    Lynch & Co., Inc. and Subsidiaries
    Condensed Consolidated Statements of (Loss)/Earnings
    (Unaudited)
  For the Nine Months EndedSept. 26,

Sept. 28,(In millions, except per share amounts)

2008

2007RevenuesPrincipal transactions

$
(13,074
)

$
529Commissions


5,445



5,360Managed accounts and other fee-based revenues


4,249



4,025Investment banking


2,920



4,315Earnings from equity method investments


4,943



1,096Other


(6,310
)


114Subtotal


(1,827
)


15,439Interest and dividend revenues


28,415



42,804Less interest expense


25,754



38,801Net interest profit


2,661



4,003Revenues, net of interest expense


834



19,442Non-interest expensesCompensation and benefits


11,170



11,564Communications and technology


1,667



1,460Brokerage, clearing, and exchange fees


1,105



1,020Occupancy and related depreciation


951



833Professional fees


747



716Advertising and market development


501



536Office supplies and postage


160



169Other


1,212



1,055Payment related to price reset on common stock offering


2,500



-Restructuring charge


484



-Total non-interest expenses


20,497



17,353Pre-tax (loss)/earnings from continuing operations


(19,663
)


2,089Income tax (benefit)/expense


(7,940
)


429Net (loss)/earnings from continuing operations


(11,723
)


1,660Discontinued operations:Pre-tax (loss)/earnings from discontinued operations


(110
)


602Income tax (benefit)/expense


(65
)


206Net (loss)/earnings from discontinued operations


(45
)


396Net (loss)/earnings

$
(11,768
)

$
2,056Preferred stock dividends


2,730



197Net (loss)/earnings applicable to common stockholders

$
(14,498
)

$
1,859Basic (loss)/earnings per common share from continuing operations

$
(13.16
)

$
1.75Basic (loss)/earnings per common share from discontinued
    operations


(0.04
)


0.48Basic (loss)/earnings per common share

$
(13.20
)

$
2.23Diluted (loss)/earnings per common share from continuing
    operations

$
(13.16
)

$
1.60Diluted (loss)/earnings per common share from discontinued
    operations


(0.04
)


0.43Diluted (loss)/earnings per common share

$
(13.20
)

$
2.03Dividend paid per common share

$
1.05


$
1.05Average shares used in computing earnings per common shareBasic


1,098.6



832.2Diluted


1,098.6



916.3    See Notes to Condensed
    Consolidated Financial Statements
 5




---



##### Table of Contents



Merrill
    Lynch & Co., Inc. and SubsidiariesCondensed Consolidated Balance Sheets
    (Unaudited)
  Sept. 26,

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

2008

2007ASSETSCash and cash equivalents

$
36,406


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


22,801



22,999Securities financing transactionsReceivables under resale agreements (includes $104,315 in 2008
    and $100,214 in 2007 measured at fair value in accordance with
    SFAS No. 159)


164,466



221,617Receivables under securities borrowed transactions (includes
    $271 in 2008 measured at fair value in accordance with SFAS
    No. 159)


99,596



133,140264,062



354,757Trading assets, at fair value (includes securities
    pledged as collateral that can be sold or repledged of $27,074
    in 2008 and $45,177 in 2007)Derivative contracts


74,106



72,689Equities and convertible debentures


34,311



60,681Corporate debt and preferred stock


38,998



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


19,130



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


8,998



15,082U.S. Government and agencies


6,903



11,219Municipals, money markets and physical commodities


6,912



9,136189,358



234,669Investment securities (includes $4,045 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 $7,152 in 2008 and
    $16,124 in 2007)


72,182



82,532Securities received as collateral, at fair value


47,654



45,245Other receivablesCustomers (net of allowance for doubtful accounts of $97 in 2008
    and $24 in 2007)


84,077



70,719Brokers and dealers


33,552



22,643Interest and other


35,894



33,487153,523



126,849Loans, notes, and mortgages (net of allowances for loan
    losses of $852 in 2008 and $533 in 2007) (includes $1,237 in
    2008 and $1,149 in 2007 measured at fair value in accordance
    with SFAS No. 159)


75,737



94,992Equipment and facilities (net of accumulated depreciation
    and amortization of $5,882 in 2008 and $5,518 in 2007)


3,082



3,127Goodwill and other intangible assets


4,989



5,091Other assets


5,986



8,443Total Assets

$
875,780


$
1,020,050  6




---



##### Table of Contents



Merrill
    Lynch & Co., Inc. and Subsidiaries
    Condensed Consolidated Balance Sheets (Unaudited)
  Sept. 26,

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

2008

2007LIABILITIESSecurities financing transactionsPayables under repurchase agreements (includes $72,962 in 2008
    and $89,733 in 2007 measured at fair value in accordance with
    SFAS No. 159)

$
172,023


$
235,725Payables under securities loaned transactions


45,220



55,906217,243



291,631Short-term borrowings (includes $3,079 in 2008 measured
    at fair value in accordance with SFAS No. 159)


25,693



24,914Deposits


90,001



103,987Trading liabilities, at fair valueDerivative contracts


55,613



73,294Equities and convertible debentures


19,302



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


5,595



9,407U.S. Government and agencies


3,828



6,135Corporate debt and preferred stock


1,577



4,549Municipals, money markets and other


830



55186,745



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


47,654



45,245Other payablesCustomers


69,387



63,582Brokers and dealers


27,897



24,499Interest and other


40,277



44,545137,561



132,626Long-term borrowings (includes $71,886 in 2008 and
    $76,334 in 2007 measured at fair value in accordance with
    SFAS No. 159)


227,326



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


5,202



5,154Total Liabilities


837,425



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  17,000 shares)


8,605



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  2,030,675,842 shares; 2007 
    1,354,309,819 shares)


2,707



1,805Paid-in capital


47,754



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


(4,334
)


(1,791
)Retained earnings


7,960



23,73754,126



50,953Less: Treasury stock, at cost (2008 
    432,167,085 shares; 2007 
    418,270,289 shares)


24,376



23,404Total Common Stockholders Equity


29,750



27,549Total Stockholders Equity


38,355



31,932Total Liabilities and Stockholders Equity

$
875,780


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




---



##### Table of Contents



Merrill
    Lynch & Co., Inc. and Subsidiaries
    Condensed Consolidated Statements of Cash Flows
    (Unaudited) For the Nine Months EndedSept. 28,2007Sept. 26,

As Restated(dollars in millions)

2008

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

$
(11,768
)

$
2,056Adjustments to reconcile net (loss)/earnings to cash provided by
    (used for) operating activitiesDepreciation and amortization


671



633Share-based compensation expense


1,787



1,220Payment related to price reset on common stock offering


2,500



-Deferred taxes


(5,571
)


(1,380
)Gain on sale of Bloomberg L.P.


(4,296
)


-Earnings from equity method investments


(146
)


(814
)Other


6,140



1,920Changes in operating assets and liabilities:Trading assets


45,311



(54,449
)Cash and securities segregated for regulatory purposes or
    deposited with clearing organizations


658



(6,500
)Receivables under resale agreements


57,151



(41,479
)Receivables under securities borrowed transactions


33,544



(53,869
)Customer receivables


(13,359
)


(11,977
)Brokers and dealers receivables


(10,905
)


(7,574
)Proceeds from loans, notes, and mortgages held for sale


18,550



57,797Other changes in loans, notes, and mortgages held for sale


(1,264
)


(71,534
)Trading liabilities


(37,082
)


27,949Payables under repurchase agreements


(63,702
)


75,961Payables under securities loaned transactions


(10,686
)


3,469Customer payables


5,805



13,495Brokers and dealers payables


3,398



744Trading investment securities


942



3,339Other, net


(14,708
)


3,961Cash provided by (used for) operating activities


2,970



(57,032
)Cash flows from investing activities:Proceeds from (payments for):Maturities of available-for-sale securities


5,978



10,511Sales of available-for-sale securities


27,218



25,830Purchases of available-for-sale securities


(29,121
)


(43,633
)Proceeds from the sale of discontinued operations


12,576



-Equipment and facilities, net


(593
)


(364
)Loans, notes, and mortgages held for investment


(11,240
)


4,830Other investments


1,909



(6,711
)Acquisitions, net of cash


-



(1,826
)Cash provided by (used for) investing activities


6,727



(11,363
)Cash flows from financing activities:Proceeds from (payments for):Commercial paper and short-term borrowings


779



8,480Issuance and resale of long-term borrowings


64,851



137,235Settlement and repurchases of long-term borrowings


(83,353
)


(60,620
)Deposits


(13,986
)


874Derivative financing transactions


554



(4
)Issuance of common stock


9,885



760Issuance of preferred stock, net


9,281



1,494Common stock repurchases


-



(5,272
)Other common stock transactions


(822
)


670Excess tax benefits related to share-based compensation


39



643Dividends


(1,865
)


(1,124
)Cash (used for) provided by financing activities


(14,637
)


83,136(Decrease) increase in cash and cash equivalents


(4,940
)


14,741Cash and cash equivalents, beginning of period


41,346



32,109Cash and cash equivalents, end of period

$
36,406


$
46,850Supplemental Disclosure of Cash Flow Information:Income taxes paid

$
422


$
1,391Interest paid


26,529



38,078   Non-cash investing and financing activities:
        See Notes to Condensed
    Consolidated Financial Statements
 8




---



##### Table of Contents



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

For the Nine Months EndedSept. 26,

Sept. 28,

Sept. 26,

Sept. 28,(dollars in millions)

2008

2007

2008

2007Net (loss)/earnings

$
(5,152
)

$
(2,241
)

$
(11,768
)

$
2,056Other comprehensive income/(loss), net of tax:Foreign currency translation adjustment


(141
)


(9
)


(189
)


15Net unrealized loss on investment securities available-for-sale


(544
)


(741
)


(2,358
)


(765
)Net deferred gain/(loss) on cash flow hedges


37



46



(3
)


19Defined benefit pension and postretirement plans


(1
)


4



5



13Total other comprehensive loss, net of tax


(649
)


(700
)


(2,545
)


(718
)Comprehensive (loss)/income

$
(5,801
)

$
(2,941
)

$
(14,313
)

$
1,338    See Notes to Condensed
    Consolidated Financial Statements
 9




---



##### Table of Contents



Merrill
    Lynch & Co., Inc. and SubsidiariesNotes to Condensed Consolidated Financial
    Statements (Unaudited)
    September 26, 2008
  
 Note 1.  Summary of Significant
    Accounting Policies
  Form 10-K
      Basis of
    Presentation
       10




---



##### Table of Contents



Discontinued
    Operations
      Consolidation
    Accounting Policies
       11




---



##### Table of Contents



Consolidation of All
    Majority-Owned Subsidiaries, Accounting for Limited
    Partnership Investments The Equity
    Method of Accounting for Investments in Common Stock
  and/or Consolidation of Variable Interest
    Entities 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




---



##### 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 13




---



##### Table of Contents




    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
  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,
 14




---



##### Table of Contents



EITF 02-3 EITF 02-3 and/or
    Liquidity
    Counterparty
    Credit Risk
      Legal
    Reserves
   15




---



##### Table of Contents



Income
    Taxes
  Accounting for Income Taxes
  Accounting for Uncertainty in Income Taxes
    Securities
    Financing Transactions
           16




---



##### Table of Contents



Rule 15c3-3
  and/or
      Trading
    Assets and Liabilities
      Derivatives
   17




---



##### Table of Contents



net-by-counterparty
        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.   18




---



##### Table of Contents



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.         19




---



##### Table of Contents



Netting
    of Derivative Contracts
  Offsetting Amounts Related to Certain
    Contracts
  Derivatives
    that Contain a Significant Financing Element
    Investment
    Securities
    Marketable
    Investments
       20




---



##### Table of Contents




    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. Absent other indicators of possible
    impairment, 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.  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




---



##### Table of Contents



22




---



##### Table of Contents



New
    Accounting Pronouncements
  FAS 133-1 FIN 45-4, Disclosures about Credit Derivatives and Certain Guarantees:
    An Amendment of FASB Statement No. 133 and FASB
    Interpretation No. 45; and Clarification of the Effective
    Date of FASB Statement No. 161 FAS 133-1 FIN 45-4), FAS 133-1 FIN 45-4 FAS 133-1 FIN 45-4 Guarantors Accounting and Disclosure Requirements for
    Guarantees, Including Indirect Guarantees of Indebtedness of
    Others FAS 133-1 FIN 45-4
  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), 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
 23




---



##### Table of Contents



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
  Business Combinations
  
    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- SOP 07-1 SOP 07-1, SOP 07-1 SOP 07-1.
 24




---



##### Table of Contents



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
  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
 25




---



##### Table of Contents



Accounting for Servicing of Financial Assets Accounting for Transfers and
    Servicing of Financial Assets and Extinguishments of
    Liabilities,
  Accounting for Certain Hybrid Financial Instruments an
    amendment of FASB Statements No. 133 and 140 instrument-by-instrument
 26




---



##### Table of Contents



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 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. In addition, Corporate results for the
    three and nine month periods ended September 26, 2008
    included expenses of $2.5 billion related to the payment to
    affiliates and transferees of Temasek Holdings (Private) Limited
    (Temasek) (refer to Note 10 for further
    information) and $425 million (which includes a fine of
    $125 million) associated with the auction rate securities
    (ARS) repurchase program and the associated
    settlement with regulators (refer to Note 11 for further
    information). Net revenues and pre-tax losses recorded within
    Corporate for the third quarter of 2008 were negative
    $56 million and $3.0 billion, respectively as compared
    with net revenues and pre-tax earnings of $20 million and
    $21 million, respectively, in the prior year period.



Net revenues and pre-tax losses recorded within Corporate for
    the nine months ended September 26, 2008 were negative
    $187 million and $3.1 billion, as compared with
    negative net revenues of $149 million and pre-tax losses of
    $159 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 provides a reasonable representation of each
    segments contribution to Merrill Lynchs consolidated
    net revenues and pre-tax earnings or loss from continuing
    operations.



27




---



##### Table of Contents



(dollars in millions)GMI

GWM

Corporate

TotalThree months Ended Sept. 26, 2008Non-interest revenues

$
(3,382
)

$
2,666


$
(457
)

$
(1,173
)Net interest
    profit(1)


219



569



401



1,189Revenues, net of interest expense


(3,163
)


3,235



(56
)


16Non-interest
    expenses(2)


2,851



2,482



2,934



8,267Pre-tax (loss)/earnings from continuing
    operations(3)

$
(6,014
)

$
753


$
(2,990
)

$
(8,251
)Quarter-end total assets

$
777,994


$
97,360


$
426


$
875,780Three months Ended Sept. 28, 2007Non-interest revenues

$
(4,311
)

$
2,965


$
(588
)

$
(1,934
)Net interest
    profit(1)


1,133



573



608



2,314Revenues, net of interest expense


(3,178
)


3,538



20



380Non-interest expenses


1,434



2,585



(1
)


4,018Pre-tax earnings/(loss) from continuing
    operations(3)

$
(4,612
)

$
953


$
21


$
(3,638
)Quarter-end total
    assets(4)

$
990,518


$
106,243


$
427


$
1,097,188Nine months Ended Sept. 26, 2008Non-interest revenues

$
(8,897
)

$
8,375


$
(1,305
)

$
(1,827
)Net interest
    (loss)/profit(1)


(275
)


1,818



1,118



2,661Revenues, net of interest expense


(9,172
)


10,193



(187
)


834Non-interest
    expenses(2)


9,448



8,116



2,933



20,497Pre-tax (loss)/earnings from continuing
    operations(3)

$
(18,620
)

$
2,077


$
(3,120
)

$
(19,663
)Nine months Ended Sept. 28, 2007Non-interest revenues

$
7,411


$
8,680


$
(652
)

$
15,439Net interest
    profit(1)


1,754



1,746



503



4,003Revenues, net of interest expense


9,165



10,426



(149
)


19,442Non-interest expenses


9,633



7,710



10



17,353Pre-tax (loss)/earnings from continuing
    operations(3)

$
(468
)

$
2,716


$
(159
)

$
2,089  (1)
    
    Management views interest and
    dividend income net of interest expense in evaluating
    results. (2)
    
    Includes restructuring charges
    recorded in the three and nine month periods ended September 26,
    2008 of $18 million and $329 million for GMI,
    respectively, and $21 million and $155 million for
    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 ($4,516 million in GMI and $375 million
    in GWM) were previously included in Corporate.  Geographic
    Information
    
    United States;
    Europe, Middle East, and Africa;
    Pacific Rim;
    Latin America; and
    Canada. 28




---



##### Table of Contents




    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 Nine Months EndedSept. 26, 2008

Sept. 28, 2007

Sept. 26, 2008

Sept. 28, 2007Revenues, net of interest expenseEurope, Middle East, and Africa

$
(1,339
)

$
1,233


$
1,061


$
5,454Pacific Rim


311



1,481



1,858



4,160Latin America


325



378



1,191



1,128Canada


22



77



155



369Total Non-U.S


(681
)


3,169



4,265



11,111United
    States(1)(2)(3)


697



(2,789
)


(3,431
)


8,331Total revenues, net of interest expense

$
16


$
380


$
834


$
19,442Pre-tax earnings from continuing operationsEurope, Middle East, and Africa

$
(2,410
)

$
144


$
(2,583
)

$
1,631Pacific Rim


(275
)


783



46



2,073Latin America


104



189



473



553Canada


(12
)


37



16



213Total Non-U.S


(2,593
)


1,153



(2,048
)


4,470United
    States(1)(2)(3)


(5,658
)


(4,791
)


(17,615
)


(2,381
)Total pre-tax (loss) earnings from continuing
    operations(4)

$
(8,251
)

$
(3,638
)

$
(19,663
)

$
2,089  (1)
    
    Corporate net revenues and
    adjustments are reflected in the U.S. region. (2)
    
    U.S. net revenues for the three
    and nine months ended September 26, 2008 include net losses
    of $10.2 billion and $26.1 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, losses from other
    residential mortgage exposures, and losses from commercial real
    estate exposures. Losses for the three and nine months ended
    September 26, 2008 were partially offset by gains of $2.8
    and $5.0 billion, respectively, that resulted from the
    widening of Merrill Lynchs credit spreads on the carrying
    value of certain of our long-term liabilities, and a
    $4.3 billion net gain related to the sale of Merrill
    Lynchs ownership stake in Bloomberg L.P. (see
    Note 5).(3)
    
    U.S. net revenues for the three
    and nine months ended September 28, 2007 include net losses
    of $7.9 billion related to sub-prime residential
    mortgage-related securities and U.S. ABS CDOs.(4)
    
    See Note 15 for further
    information on discontinued operations. 29




---



##### Table of Contents



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
    measure the financial instruments fall within different levels
    of the hierarchy, the categorization is based on the lowest
    level input that is significant to the fair value measurement of
    the instrument.



Financial assets and liabilities recorded on the Condensed
    Consolidated Balance Sheets are categorized based on the inputs
    to the valuation techniques as follows: 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)).   30




---



##### Table of Contents



Recurring
    Fair Value
    (dollars in millions)Fair Value Measurements on a Recurring Basisas of Sept. 26, 2008NettingLevel 1

Level 2

Level 3

Adj(1)

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

$
2,216


$
6,001


$
-


$
-


$
8,217Receivables under resale agreements


-



104,315



-



-



104,315Receivables under securities borrowed transactions


-



271



-



-



271Trading assets, excluding derivative contracts


42,472



54,957



17,823



-



115,252Derivative contracts


6,249



637,168



32,535



(601,846
)


74,106Investment securities


3,166



41,396



4,202



-



48,764Securities received as collateral


42,572



5,082



-



-



47,654Loans, notes and mortgages


-



682



721



-



1,403Other
    assets(2)


22



1,910



-



-



1,932Liabilities:Payables under repurchase agreements

$
-


$
72,962


$
-


$
-


$
72,962Short-term borrowings


-



3,064



15



-



3,079Trading liabilities, excluding derivative contracts


27,673



3,431



28



-



31,132Derivative contracts


5,507



642,533



28,835



(621,262
)


55,613Obligation to return securities received as collateral


42,572



5,082



-



-



47,654Long-term
    borrowings(3)


-



60,855



11,535



-



72,390Other payables  interest and
    other(2)


-



570



-



(82
)


488  (1)
    
    Represents counterparty and
    cash collateral netting. (2)
    
    Primarily represents certain
    derivatives used for non-trading purposes.(3)
    
    Includes bifurcated embedded
    derivatives carried at fair value.    and/or
 31




---



##### Table of Contents



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


-



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(2)


7



1,739



-



(24
)


1,722Liabilities:Payables under repurchase agreements


-



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(3)


-



75,984



4,765



-



80,749Other payables  interest and
    other(2)


2



287



-



(13
)


276  (1)
    
    Represents counterparty and
    cash collateral netting. (2)
    
    Primarily represents certain
    derivatives used for non-trading purposes.(3)
    
    Includes bifurcated embedded
    derivatives carried at fair value.  Level 3 Assets and Liabilities as of
    December 28, 2007
    and/or
   32




---



##### Table of Contents



and/or
      (dollars in millions)Level 3 Financial Assets and LiabilitiesThree Months Ended Sept. 26, 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

$
-


$
-


$
-


$
-


$
-


$
-


$
-



-Trading assets


20,190



303



-



5



308



(3,374
)


699



17,823Derivative contracts, net


(1,292
)


(8,792
)


-



-



(8,792
)


13,348



436



3,700Investment securities


4,589



(147
)


(304
)


-



(451
)


61



3



4,202Loans, notes and mortgages


172



(6
)


(18
)


1



(23
)


557



15



721Liabilities:Trading liabilities

$
-


$
1


$
-


$
-


$
1


$
-


$
29



28Short-term borrowings


34



-



-



-



-



(19
)


-



15Long-term borrowings


12,749



3,788



271



-



4,059



(30
)


2,875



11,535      33




---



##### Table of Contents



(dollars in millions)Level 3 Financial Assets and LiabilitiesNine Months Ended Sept. 26, 2008Total Realized and Unrealized Gains

Total Realized and

Purchases,or (Losses) 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



(2,744
)


-



86



(2,658
)


7,025



3,683



17,823Derivative contracts, net


(9,069
)


(9,849
)


-



5



(9,844
)


25,467



(2,854
)


3,700Investment securities


5,491



(895
)


(291
)


-



(1,186
)


159



(262
)


4,202Loans, notes and mortgages


63



(6
)


(19
)


(2
)


(27
)


676



9



721Liabilities:Trading liabilities

$
-


$
1


$
-


$
-


$
1


$
-


$
29


$
28Short-term borrowings


-



-



-



-



-



15



-



15Long-term borrowings


4,765



2,171



285



-



2,456



1,435



7,791



11,535         (dollars in millions)Level 3 Financial Assets and LiabilitiesThree Months Ended Sept. 28, 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

$
3,648


$
(1,938
)

$
-


$
6


$
(1,932
)

$
1,608


$
6,409


$
9,733Derivative contracts, net


229



(4,032
)


(2
)


11



(4,023
)


139



81



(3,574
)Investment securities


5,784



(974
)


4



-



(970
)


938



(99
)


5,653Loans, notes and mortgages


4



-



(4
)


-



(4
)


(2
)


9



7Liabilities:Long-term borrowings

$
282


$
280


$
-


$
-


$
280


$
81


$
529


$
612   34




---



##### Table of Contents



(dollars in millions)Level 3 Financial Assets and LiabilitiesNine Months Ended Sept. 28, 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


$
(1,685
)

$
-


$
34


$
(1,651
)

$
2,111


$
7,252


$
9,733Derivative contracts, net


(2,030
)


(3,461
)


3



17



(3,441
)


946



951



(3,574
)Investment securities


5,117



(1,404
)


484



5



(915
)


2,142



(691
)


5,653Loans, notes and mortgages


7



-



(13
)


-



(13
)


(4
)


17



7Liabilities:Long-term borrowings

$
-


$
280


$
-


$
-


$
280


$
81


$
811


$
612      (dollars in millions)Unrealized Gains or (Losses) for Level 3 Assets and
    Liabilities Still Held at Sept. 26, 2008Three Months Ended Sept. 26, 2008

Nine Months Ended Sept. 26, 2008Principal

Other





Principal

OtherTransactions

Revenue

Interest

Total

Transactions

Revenue

Interest

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

$
-


$
-


$
-


$
-


$
-


$
-


$
1


$
1Trading assets


293



-



(29
)


264



(2,753
)


-



74



(2,679
)Derivative contracts, net


(3,979
)


-



-



(3,979
)


2,611



-



5



2,616Investment securities


(102
)


(304
)


-



(406
)


(822
)


(295
)


-



(1,117
)Loans, notes, and mortgages


(6
)


(15
)


1



(20
)


(6
)


(9
)


(2
)


(17
)Liabilities:Long-term borrowings

$
3,811


$
271


$
-


$
4,082


$
2,236


$
285


$
-


$
2,521       (dollars in millions)Unrealized Gains or (Losses) for Level 3 Assets and
    Liabilities Still Held at Sept. 28, 2007Three Months Ended Sept. 28, 2007

Nine Months Ended Sept. 28, 2007Principal

Other





Principal

OtherTransactions

Revenue

Interest

Total

Transactions

Revenue

Interest

TotalAssets:Trading assets

$
(1,956
)

$
-


$
6


$
(1,950
)

$
(1,719
)

$
-


$
34


$
(1,685
)Derivative contracts, net


(4,088
)


(2
)


11



(4,079
)


(3,589
)


(2
)


17



(3,574
)Investment securities


(974
)


(6
)


-



(980
)


(1,404
)


393



7



(1,004
)Loans, notes, and mortgages


-



1



-



1



-



4



-



4Liabilities:Long-term borrowings

$
280


$
-


$
-


$
280


$
280


$
-


$
-


$
280  35




---



##### Table of Contents



Non-recurring
    Fair Value
    (dollars in millions)Gains / (Losses)

Gains / (Losses)Non-Recurring Basis as of Sept.
    26, 2008

Three Months Ended

Nine Months EndedLevel 1

Level 2

Level 3

Total

Sept. 26, 2008

Sept. 26, 2008Assets:Loans, notes, and mortgages

$
-


$
11,297


$
5,750


$
17,047


$
(2,577
)

$
(3,645
)Liabilities:Other liabilities

$
-


$
705


$
14


$
719


$
(77
)

$
(59
)     (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   and/or
    Fair
    Value Option
   36




---



##### Table of Contents



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

Changes in Fair Value For the NineMonths Ended Sept. 26,

Months Ended Sept. 26,2008, for Items Measured at Fair Value

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

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

$
139


$
-


$
139


$
(70
)

$
-


$
(70
)Investment securities


(588
)


(212
)


(800
)


(671
)


(251
)


(922
)Loans, notes and mortgages


(40
)


-



(40
)


(37
)


12



(25
)Liabilities:Payables under repurchase agreements

$
(100
)

$
-


$
(100
)

$
(52
)

$
-


$
(52
)Short-term borrowings


(367
)


-



(367
)


(185
)


-



(185
)Long-term
    borrowings(1)


8,632



846



9,478



12,578



1,715



14,293  (1)
    
    Other revenues primarily
    represent fair value changes on non-recourse long-term
    borrowings issued by consolidated SPEs.  (dollars in millions)Changes in Fair Value For the Three

Changes in Fair Value For the NineMonths Ended Sept. 28,

Months Ended Sept. 28,2007, 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

$
62


$
-


$
62


$
67


$
-


$
67Investment securities


(68
)


(1
)


(69
)


142



20



162Loans, notes and mortgages


(3
)


20



17



(1
)


60



59Liabilities:Payables under repurchase agreements

$
(10
)

$
-


$
(10
)

$
7


$
-


$
7Long-term borrowings


576



-



576



1,417



-



1,417     Resale
    and repurchase agreements:
   37




---



##### Table of Contents



Securities
    borrowed transactions:
    Investment
    securities:
    Loans,
    notes, and mortgages:
      Short-term and long-term borrowings:
       38




---



##### Table of Contents



(dollars in millions)Fair Value

Principalat

AmountSeptember 26,

Due Upon2008

Maturity

DifferenceAssets:Receivables under resale agreements

$
104,315


$
104,102


$
213Receivables under securities borrowed transactions


271



271



-Loans, notes and mortgages


1,237



1,321



(84
)Liabilities:Payables under repurchase agreements

$
72,962


$
72,902


$
60Short-term borrowings


3,079



3,071



8Long-term
    borrowings(1)


71,886



76,183



(4,297
)  (1)
    
    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.  (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 $34.6 billion in U.S. Prime
    residential mortgage-related positions and $5.0 billion in
    other residential mortgage-related positions, excluding Merrill
    Lynchs U.S. banks investment securities portfolio;
    Net exposure of $15.7 billion in Merrill Lynchs
    U.S. banks investment securities portfolio;
    Net exposure of $12.8 billion in commercial real estate
    related positions, excluding First Republic, and
    $2.9 billion in First Republic commercial real estate
    related positions; and
    Net exposure of $1.1 billion in U.S. super senior ABS
    CDO exposures.   39




---



##### Table of Contents



Concentration
    of Risk to Monoline Financial Guarantors
     Note 4.  Securities Financing Transactions    non-U.S. governments Rule 15c3-3
   40




---



##### Table of Contents



(dollars in millions)Sept. 26,

Dec. 28,2008

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

$
16,746


$
11,873U.S. Government and agencies


6,027



11,110Corporate debt and preferred stock


12,918



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


1,656



2,461Equities and convertible debentures


16,179



9,327Municipals and money markets


2,622



450Total

$
56,148


$
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 41




---



##### Table of Contents



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.    (dollars in millions)Sept. 26,

Dec. 28,2008

2007Investment securitiesAvailable-for-sale(1)

$
40,206


$
50,922Trading


3,407



5,015Held-to-maturity


4,581



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


27,892



29,623Deferred compensation
    hedges(4)


1,565



1,710Investments in trust preferred securities and other investments


435



438Total

$
78,086


$
87,975  (1)
    
    At September 26, 2008 and
    December 28, 2007, includes $5.9 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 and interest 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 and interest is
    received. 42




---



##### Table of Contents



(dollars in millions)Three Months Ended

Nine Months EndedSept. 26,

Sept. 26,2008

2008Security DescriptionPrime

$
58


$
255Alt A


628



2,202Sub-prime


110



204CDOs


51



272Total

$
847


$
2,933     Bloomberg,
    L.P.
   Note 6.  Securitization Transactions and
    Transactions with Special Purpose Entities (SPEs)  Securitizations
  and/or
 43




---



##### Table of Contents



and/or
      (dollars in millions)Nine Months EndedSept. 26,

Sept. 28,2008

2007Asset categoryResidential mortgage loans

$
13,258


$
92,558Municipal bonds


5,867



46,358Commercial loans and corporate bonds


2,834



13,502Other


196



4,430Total

$
22,155


$
156,848   and/or
    commercial-related
   44




---



##### Table of Contents



(dollars in millions)Commercial-RelatedResidential



Assets andMortgage-Related

Municipal

CorporateAssets

Bonds

BondsRetained interest amount

$
1,048


$
558


$
1,401Weighted average credit losses (rate per
    annum)(1)


0.7
%


0.0
%


2.0
%Impact on fair value of 10% adverse change

$
(1
)

$
-


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

$
(3
)

$
-


$
(7
)Weighted average discount rate


7.9
%


7.1
%


6.6
%Impact on fair value of 10% adverse change

$
(31
)

$
(15
)

$
(15
)Impact on fair value of 20% adverse change

$
(61
)

$
(27
)

$
(29
)Weighted average life (in years)


7.1



8.9



5.7Weighted average prepayment speed
    (CPR)(2)


14.9
%


0.0
%


24.4
%Impact on fair value of 10% adverse change

$
(9
)

$
-


$
(4
)Impact on fair value of 20% adverse change

$
(18
)

$
-


$
(8
)   CPR=Constant Prepayment
    Rate
 (1)
    
    Credit losses are computed only
    on positions for which expected credit loss is either a key
    assumption in the determination of fair value or is not
    reflected in the discount rate.(2)
    
    Relates to select
    securitization transactions where assets are
    prepayable.      Commercial-RelatedResidential



Assets andMortgage-Related

Municipal

CorporateAssets

Bonds

BondsCredit losses (rate per
    annum)(1)


0.2
%


0.0
%


1.5
%Weighted average discount rate


6.4
%


5.2
%


4.4
%Weighted average life (in years)


6.8



10.9



6.3Prepayment speed assumption
    (CPR)(2)


15.7
%


0.0
%


16.6
%   CPR = Constant Prepayment
    Rate
 (1)
    
    Credit losses are computed only
    on positions for which expected credit loss is either a key
    assumption in the determination of fair value or is not
    reflected in the discount rate.(2)
    
    Relates to select
    securitization transactions where assets are
    prepayable. 45




---



##### Table of Contents



and/or
  Mortgage
    Servicing Rights
       46




---



##### Table of Contents



(dollars in millions)Carrying ValueMortgage servicing rights, December 28, 2007(fair
    value is $476)

$
389Additions


5Amortization


(100
)Valuation allowance adjustments


(63
)Mortgage servicing rights, Sept. 26, 2008(fair value is
    $267)

$
231     (dollars in millions)For the Three

For the NineMonths Ended

Months EndedSept. 26,

Sept. 28,

Sept. 26,

Sept. 28,2008

2007

2008

2007Servicing fees

$
82


$
96


$
284


$
262Ancillary and late fees


12



17



44



47Total

$
94


$
113


$
328


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

$
267Weighted average prepayment speed (CPR)


24.4
%Impact on fair value of 10% adverse change

$
(15
)Impact on fair value of 20% adverse change

$
(32
)Weighted average discount rate


17.2
%Impact on fair value of 10% adverse change

$
(9
)Impact on fair value of 20% adverse change

$
(17
)     Variable
    Interest Entities
  ,
 47




---



##### Table of Contents



(dollars in millions)Significant VariablePrimary Beneficiary

Interest HolderNet

Recourse

TotalAsset

to Merrill

Asset

MaximumSize(4)

Lynch(5)

Size(6)

ExposureSeptember 26, 2008Loan and real estate VIEs

$
7,201


$
2,689


$
-


$
-Guaranteed and other
    funds(1)


1,516



344



122



64Credit-linked note and other
    VIEs(2)


191



246



-



-Tax planning
    VIEs(3)


1



45



151



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 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 48




---



##### Table of Contents



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
    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. The decrease in net
    assets was a result of redemptions of investments in certain
    funds.
    Merrill Lynch had established two asset-backed commercial paper
    conduits (Conduits), one of which remained active
    until July 2008. Merrill Lynch had variable interests in these
    Conduits in the form of 1) a liquidity facility that
    protected 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 protected 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 49




---



##### Table of Contents



not establish and Merrill Lynch had purchased all the assets
    from this Conduit at December 28, 2007.      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 Merrill Lynch no longer holds 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 September 26, 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.  
 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. 50




---



##### Table of Contents




    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)Sept. 26,

Dec. 28,

Sept. 26,

Dec. 28,2008

2007

2008(2)(3)

2007(3)Consumer:Mortgages

$
30,027


$
26,939


$
9,154


$
7,023Other


2,573



5,392



2,484



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


14,684



18,917



33,842



36,921Non-investment grade


29,305



44,277



10,818



30,99076,589



95,525



56,298



78,232Allowance for loan losses


(852
)


(533
)


-



-Reserve for lending-related commitments


-



-



(1,668
)


(1,408
)Total, net

$
75,737


$
94,992


$
54,630


$
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
    September 26, 2008, Merrill Lynch entered into agreements
    to purchase $395 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.    (dollars in millions)Nine Months EndedSept. 26,

Sept. 28,2008

2007Allowance for loan losses, at beginning of period

$
533


$
478Provision for loan losses


538



96Charge-offs


(233
)


(53
)Recoveries


9



25Net charge-offs


(224
)


(28
)Other


5



42Allowance for loan losses, at end of period

$
852


$
588    51




---



##### Table of Contents



Note 8.  Goodwill and
    Intangibles
   Goodwill
  Goodwill and Other
    Intangible Assets
    (dollars in millions)GMI

GWM

TotalGoodwill:December 28, 2007

$
2,970


$
1,620


$
4,590Translation adjustment and other


(21
)


(1
)


(22
)September 26, 2008

$
2,949


$
1,619


$
4,568   Intangible
    Assets
  Accounting for the Impairment or
    Disposal of Long-Lived Assets
 52




---



##### Table of Contents



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).    (dollars in millions)Sept. 26,

Dec. 28,2008

2007Senior debt issued by ML & Co.

$
137,077


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


9,862



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


38,130



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


30,883



31,401Subordinated debt issued by ML & Co.


12,725



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


5,202



5,154Other subsidiary financing 
    non-recourse(1)

    and/or not guaranteed by ML & Co.


24,342



35,398Total

$
258,221


$
291,041  53




---



##### Table of Contents



(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)Sept. 26,

Dec. 28,2008

2007Short-term borrowingsCommercial paper

$
4,423


$
12,908Promissory notes


-



2,750Secured short-term
    borrowings(1)


13,809



4,851Other unsecured short-term borrowings


7,461



4,405Total

$
25,693


$
24,914Long-term
    borrowings(2)Fixed-rate
    obligations(3)

$
106,440


$
102,020Variable-rate
    obligations(4)(5)


119,254



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

    )


1,599



2,210Other Zero-coupon obligations


33



-Total

$
227,326


$
260,973DepositsU.S.

$
70,022


$
76,634Non U.S.


19,979



27,353Total

$
90,001


$
103,987  (1)
    
    Consisted primarily of
    borrowings from Federal Home Loan Banks for both periods, and as
    of September 26, 2008, also included borrowings under a
    secured bank credit facility.(2)
    
    Excludes junior subordinated
    notes (related to trust preferred securities).(3)
    
    Fixed-rate obligations are
    generally swapped to floating rates.(4)
    
    Variable interest rates are
    generally based on rates such as LIBOR, the U.S. Treasury Bill
    Rate, or the Federal Funds Rate.(5)
    
    Included are various
    equity-linked, credit-linked or other indexed
    instruments.    (dollars in millions)Less than 1 year

$
62,647



28
%1 - 2 years


32,218



142+ - 3 years


14,877



73+ - 4 years


26,679



124+ - 5 years


16,420



7Greater than 5 years


74,485



32Total

$
227,326



100
%      54




---



##### Table of Contents



®
  ® ® ®
  
    An increase in the number of shares into which the
    LYONs®

    convert from 14.0915 shares to 16.5 shares; in August
    2008, the conversion rate was adjusted to 16.6771 shares
    due to the payment of quarterly cash dividends in excess of
    $0.16 per share,
    An extension of the call protection in the
    LYONs®

    , which would otherwise have terminated on March 13, 2008,
    through 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, ®
    Sept. 26,

Dec. 28,2008

2007Short-term borrowings


3.07
%


4.64
%Long-term borrowings


4.91



4.35Junior subordinated notes (related to trust preferred securities)


6.82



6.91    55




---



##### Table of Contents



Committed
    Credit Facilities
           Note 10.  Stockholders Equity and
    Earnings Per Share  Preferred
    Stock Issuance
   56




---



##### Table of Contents



Mandatory
    Convertible Preferred Stock Issuance
            Current stock price

Current stock priceis greater than or

is less than orInitial minimum

Initial threshold

equal to initial threshold

equal to initial minimumSeries

conversion price

appreciation price

appreciation price

conversion priceSeries 2

$
33.00


$
38.61



2,590 shares



3,030 sharesSeries 3

$
22.50


$
26.33



3,798 shares



4,444 shares    57




---



##### Table of Contents



Common
    Stock Issuance
  1 3
       58




---



##### Table of Contents



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

Nine Months EndedSept. 26,

Sept. 28,

Sept. 26,

Sept. 28,2008

2007

2008

2007Net (loss)/earnings from continuing operations

$
(5,120
)

$
(2,380
)

$
(11,723
)

$
1,660Net (loss)/earnings from discontinued operations


(32
)


139



(45
)


396Preferred stock dividends


(2,319
)


(73
)


(2,730
)


(197
)Net (loss)/earnings applicable to common
    stockholders  for basic and diluted
    EPS(1)

$
(7,471
)

$
(2,314
)

$
(14,498
)

$
1,859(shares in thousands)Weighted-average basic shares
    outstanding(2)


1,338,963



821,565



1,098,630



832,222Effect of dilutive instruments:Employee stock
    options(3)


-



-



-



36,764FACAAP
    shares(3)


-



-



-



20,552Restricted shares and
    units(3)


-



-



-



23,524Convertible
    LYONs®(4)


-



-



-



3,213ESPP
    shares(3)


-



-



-



11Dilutive potential common shares


-



-



-



84,064Diluted
    Shares(5)(6)(7)


1,338,963



821,565



1,098,630



916,286Basic EPS from continuing operations

$
(5.56
)

$
(2.99
)

$
(13.16
)

$
1.75Basic EPS from discontinued operations


(0.02
)


0.17



(0.04
)


0.48Basic EPS

$
(5.58
)

$
(2.82
)

$
(13.20
)

$
2.23Diluted EPS from continuing operations

$
(5.56
)

$
(2.99
)

$
(13.16
)

$
1.60Diluted EPS from discontinued operations


(0.02
)


0.17



(0.04
)


0.43Diluted EPS

$
(5.58
)

$
(2.82
)

$
(13.20
)

$
2.03Common shares outstanding at period end


1,600,100



855,375



1,600,100



855,375  (1)
    
    Due to the net loss for the
    three and nine months ended September 26, 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)
    
    Due to the net loss for the
    three months ended September 28, 2007, the Diluted EPS
    calculation excludes 112 million of employee stock options,
    37 million of FACAAP shares, 43 million of restricted
    shares and units, and 183 thousand of ESPP shares, as they were
    antidilutive.(6)
    
    Excludes 10 million of
    instruments for the nine month period ended September 28,
    2007, that were considered antidilutive and thus were not
    included in the above calculations.(7)
    
    Due to the net loss for the
    three and nine months ended September 26, 2008, the Diluted
    EPS calculation excludes 304 million of non-employee stock
    options,59 million of
    incremental shares related to the mandatory convertible
    preferred stock, 124 million of employee stock options,
    40 million of FACAAP shares, 42 million of restricted
    shares and units, and 457 thousand of ESPP shares, as they were
    antidilutive. 59




---



##### 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

$
56,298


$
18,056


$
13,397


$
18,639


$
6,206Purchasing and other commitments


8,768



3,692



1,224



1,250



2,602Operating leases


3,831



653



1,213



955



1,010Commitments to enter into forward dated resale and securities
    borrowing agreements


60,095



59,609



486



-



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


48,014



47,941



73



-



-  60




---



##### Table of Contents



Commitments
    to Extend Credit
        Purchasing
    and Other Commitments
         61




---



##### 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

$
3,777,375


$
486,039


$
991,776


$
1,368,410


$
931,150


$
235,974Standby liquidity facilities


13,328



9,813



-



3,494



21



348Residual value guarantees


844



104



323



303



114



10Standby letters of credit and other guarantees


43,290



1,510



1,620



810



39,350



626Auction rate security guarantees


9,970



9,970



-



-



-



300   Derivative
    Contracts
     62




---



##### Table of Contents



Standby
    Liquidity 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

$
5,016


$
2,181


$
5,717


$
12,914


$
13,327  (1)
    
    Initial liquidity support
    within 7 days is provided by third parties for a maximum of
    364 days.     63




---



##### Table of Contents



Residual
    Value Guarantees
    Stand-by
    Letters of Credit and Other Guarantees
          Auction
    Rate Security Guarantees
   64




---



##### Table of Contents



Note 12.  Employee Benefit Plans ­ ­    Defined
    Benefit Pension Plans
    (dollars in millions)Three Months EndedSeptember 26, 2008

September 28, 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
)


(21
)


(50
)Amortization of net (gains)/losses, prior service costs and other


-



3



3



(1
)


7



6Total defined benefit pension cost

$
(5
)

$
10


$
5


$
(6
)

$
13


$
7   (dollars in millions)Nine Months EndedSeptember 26, 2008

September 28, 2007U.S.

Non-U.S.



U.S.

Non-U.S.Plans

Plans

Total

Plans

Plans

TotalService cost

$
-


$
21


$
21


$
-


$
21


$
21Interest cost


72



64



136



72



60



132Expected return on plan assets


(88
)


(64
)


(152
)


(87
)


(60
)


(147
)Amortization of net (gains)/losses, prior service costs and other


-



9



9



(3
)


22



19Total defined benefit pension cost

$
(16
)

$
30


$
14


$
(18
)

$
43


$
25    65




---



##### Table of Contents



non-U.S. defined
  Postretirement
    Benefits Other Than Pensions
    (dollars in millions)Three Months Ended

Nine Months EndedSeptember 26,

September 28,

September 26,

September 28,2008

2007

2008

2007Service cost

$
1


$
2


$
4


$
5Interest cost


4



4



11



12Amortization of net (gains)/losses, prior service costs and other


(3
)


(2
)


(13
)


(5
)Total other postretirement benefits cost

$
2


$
4


$
2


$
12     
 Note 13.
    Income Taxes ­ ­     66




---



##### Table of Contents



Note 14.
    Regulatory Requirements ­ ­    non-U.S. subsidiaries
  Securities
    Regulation
  Rule 15c3-1
       67




---



##### Table of Contents



Banking
    Regulation
     (dollars in millions)MLBUSA

MLBT-FSBWellCapitalized

Actual

Actual

Actual

ActualMinimum

Ratio

Amount

Ratio

AmountTier 1 leverage


5%



10.26%


$
5,940



7.95%


$
2,683Tier 1 capital


6%



12.36%



5,940



10.93%



2,683Total capital


10%



14.65%



7,043



11.41%



2,801      Note 15.  Discontinued Operations ­ ­   68




---



##### Table of Contents



(dollars in millions)For the Three

For the NineMonths Ended

Months EndedSept. 26,

Sept. 28,

Sept. 26,

Sept. 28,2008

2007

2008

2007Total revenues, net of interest expense

$
-


$
261


$
28


$
781(Losses) / earnings before income taxes


(53
)


211



(110
)


602Income tax (benefit) /expense


(21
)


72



(65
)


206Net (loss) / earnings from discontinued operations

$
(32
)

$
139


$
(45
)

$
396     (dollars in millions)Sept. 26,

Dec. 28,2008

2007Assets:Loans, notes and mortgages

$
176


$
12,995Other assets


13



332Total Assets

$
189


$
13,327Liabilities:Other payables, including interest


-



489Total Liabilities

$
-


$
489    69




---



##### Table of Contents



Note 16.  Cash Flow Restatement





Subsequent to the issuance of the Companys Condensed
    Consolidated Financial Statements for the quarter ended
    September 28, 2007, the Company determined that its
    previously issued Condensed Consolidated Statements of Cash
    Flows for the nine months ended September 28, 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
    Sheets, and Condensed Consolidated Statements of Comprehensive
    (Loss)/Income, or cash and cash equivalents. These adjustments
    also do not affect the Companys compliance with any
    financial covenants under its borrowing facilities.



A summary presentation of this cash flow restatement for the
    nine months ended September 28, 2007 is presented below. (dollars in millions)As Previously
    Presented

Adjustments

As RestatedFor the nine months ended Sept. 28,
    2007(1)Trading liabilities

$
5,096


$
22,853


$
27,949Cash used for operating activities


(79,885
)


22,853



(57,032
)Derivative financing transactions


22,849



(22,853
)


(4
)Cash provided by financing activities


105,989



(22,853
)


83,136  (1)
    
    There was no change in cash and
    cash equivalents for the period restated. 
 Note 17.
    Restructuring      70




---



##### Table of Contents



Note 18.
    Subsequent Events   Emergency
    Economic Stabilization Act of 2008
  10-year
     71




---



##### Table of Contents



72




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                        Fair Value Measurements, 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.
      73




---



##### 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     74




---



##### Table of Contents



75




---



##### 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
   76




---



##### Table of Contents




    Net write-downs of $5.7 billion resulting from the
    previously announced sale of U.S. asset-backed
    collateralized debt obligations (ABS CDOs) and the
    termination and potential settlement of related hedges with
    monoline guarantor counterparties;
    Net gain of $4.3 billion from the previously announced sale
    of our 20% ownership stake in Bloomberg, L.P.;
    Net write-downs of $3.8 billion, principally from severe
    market dislocations in September, including real estate-related
    asset write-downs and losses related to certain government
    sponsored entities and major U.S. broker-dealers, as well
    as the default of a major U.S. broker-dealer;
    Net gains of $2.8 billion due to the impact of the widening
    of Merrill Lynchs credit spreads on the carrying value of
    certain of our long-term debt liabilities, which was similarly
    impacted by the severe market movements in September;
    Net losses of $2.6 billion resulting primarily from
    completed and planned asset sales across residential and
    commercial mortgage exposures;
    A $2.5 billion non-tax deductible payment to affiliates and
    transferees of Temasek Holdings (Private) Limited
    (Temasek) related to our July common stock offering;
    and
    A $425 million expense, including a $125 million fine,
    arising from Merrill Lynchs previously announced offer to
    repurchase auction rate securities (ARS) from our
    private clients and the associated settlement with regulators.     77




---



##### Table of Contents



Global
    Markets and Investment Banking (GMI)
    FICC
  Equity Markets
  Investment Banking
  Global
    Wealth Management (GWM)
    GPC
 78




---



##### Table of Contents



GIM
  Discontinued
    Operations
        Restructuring
    Charge
    Common
    Stock Offering and Early Conversion of Mandatory Convertible
    Preferred
       79




---



##### Table of Contents



CDO Sale
    and Termination of Monoline Hedges
    Bloomberg, L.P
    Auction
    Rate Securities
  12-month 15-month
  Subsequent
    Events
  Emergency
    Economic Stabilization Act of 2008
  10-year
 80




---



##### Table of Contents



81




---



##### Table of Contents



Business
    Environment and
    Outlook(1)
            (1)  Debt and equity underwriting and merger and
    acquisition volumes were obtained from Dealogic.
 82




---



##### Table of Contents



83




---



##### Table of Contents



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

For the Nine Months EndedSept. 26,

Sept. 28,

%

Sept. 26,

Sept. 28,

%2008

2007

Change

2008

2007

ChangeRevenuesPrincipal transactions

$
(6,573
)

$
(5,761
)


N/M
%

$
(13,074
)

$
529



N/M
%Commissions


1,745



1,860



(6
)


5,445



5,360



2Managed account and other fee-based revenues


1,395



1,392



0



4,249



4,025



6Investment banking


845



1,277



(34
)


2,920



4,315



(32
)Earnings from equity method investments


4,401



412



N/M



4,943



1,096



N/MOther


(2,986
)


(1,114
)


N/M



(6,310
)


114



N/MSubtotal


(1,173
)


(1,934
)


N/M



(1,827
)


15,439



N/MInterest and dividend revenues


9,019



15,636



(42
)


28,415



42,804



(34
)Less interest expense


7,830



13,322



(41
)


25,754



38,801



(34
)Net interest profit


1,189



2,314



(49
)


2,661



4,003



(34
)Revenues, net of interest expense


16



380



(96
)


834



19,442



(96
)Non-interest expenses:Compensation and benefits


3,483



1,979



76



11,170



11,564



(3
)Communications and technology


546



499



9



1,667



1,460



14Brokerage, clearing, and exchange fees


348



364



(4
)


1,105



1,020



8Occupancy and related depreciation


314



295



6



951



833



14Professional fees


242



245



(1
)


747



716



4Advertising and market development


159



181



(12
)


501



536



(7
)Office supplies and postage


48



54



(11
)


160



169



(5
)Other


588



401



47



1,212



1,055



15Payment related to price reset on common stock offering


2,500



-



N/M



2,500



-



N/MRestructuring charge


39



-



N/M



484



-



N/MTotal non-interest expenses


8,267



4,018



106



20,497



17,353



18Pre-tax (loss)/earnings from continuing operations


(8,251
)


(3,638
)


N/M



(19,663
)


2,089



N/MIncome tax (benefit)/expense


(3,131
)


(1,258
)


N/M



(7,940
)


429



N/MNet (loss)/earnings from continuing operations


(5,120
)


(2,380
)


N/M



(11,723
)


1,660



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


(53
)


211



N/M



(110
)


602



N/MIncome tax (benefit)/expense


(21
)


72



N/M



(65
)


206



N/MNet (loss)/earnings from discontinued operations


(32
)


139



N/M



(45
)


396



N/MNet (loss)/earnings

$
(5,152
)

$
(2,241
)


N/M


$
(11,768
)

$
2,056



N/MPreferred stock dividends

$
2,319


$
73



N/M


$
2,730


$
197



N/MNet (loss)/earnings applicable to common stockholders

$
(7,471
)

$
(2,314
)


N/M


$
(14,498
)

$
1,859



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

$
(5.56
)

$
(2.99
)


N/M


$
(13.16
)

$
1.75



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


(0.02
)


0.17



N/M



(0.04
)


0.48



N/MBasic (loss)/earnings per common share

$
(5.58
)

$
(2.82
)


N/M


$
(13.20
)

$
2.23



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

$
(5.56
)

$
(2.99
)


N/M


$
(13.16
)

$
1.60



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


(0.02
)


0.17



N/M



(0.04
)


0.43



N/MDiluted (loss)/earnings per common share

$
(5.58
)

$
(2.82
)


N/M


$
(13.20
)

$
2.03



N/MBook value per share

$
18.59


$
39.60



(53
)

$
18.59


$
39.60



(53
)Note:  Certain prior period amounts have
    been reclassified to conform to the current period presentation.  N/M = Not Meaningful
 84




---



##### Table of Contents



Quarterly
    Consolidated Results of Operations
           85




---



##### Table of Contents



and/or
     86




---



##### Table of Contents



Year-to-Date
    Consolidated Results of Operations
       87




---



##### Table of Contents



U.S. ABS
    CDO and Other Mortgage-Related Activities
  Non-U.S. residential
  Residential
    Mortgage-Related Activities (excluding U.S. banks investment
    securities portfolio)
  U.S. Prime
    U.S. Sub-prime
    U.S. Alt-A
 88




---



##### Table of Contents



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

Net



Net

3Q08 vs.Exposures as

Gains/(Losses)

Other Net

Exposures as

2Q08of Jun. 27,

Reported in

Changes in Net

of Sep. 26,

Percent2008

Income

Exposures(1)

2008

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

$
33,718


$
(123
)

$
1,042


$
34,637



3
%Other Residential:U.S. Sub-prime

$
1,012


$
(392
)

$
(325
)

$
295



(71
)%U.S. Alt-A


1,542



(492
)


(1,025
)


25



(98
)%Non-U.S


7,448



(1,282
)


(1,522
)


4,644



(38
)%Total Other
    Residential(2)

$
10,002


$
(2,166
)

$
(2,872
)

$
4,964



(50
)%  (1)
    
    Represents U.S. Prime
    originations, sales, foreign exchange revaluations, hedges,
    paydowns, changes in loan commitments and related
    funding.(2)
    
    Includes warehouse lending,
    whole loans and residential mortgage-backed
    securities. 89




---



##### Table of Contents



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; and
    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.       90




---



##### Table of Contents



(dollars in billions)U.S. Super Senior ABS CDO
    Exposure

Long

Short

NetJune 27, 2008

$
19.9


$
(15.6
)

$
4.3Sale of CDOs:Sale Price of CDOs


(6.7
)


-



(6.7
)Loss on CDOs


(4.4
)


-



(4.4
)Total Reduction in Exposure from Sale


(11.1
)


-



(11.1
)Termination of XL
    Hedges(1)


-



1.2



1.2Settlement of Monoline Hedges on Long Position
    Sold(2)


-



7.2



7.2Total Increase in Exposure


-



8.4



8.4Total Exposure (As Reported in our Press Release Dated
    7/28/08)

$
8.8


$
(7.2
)

$
1.63Q Exposure Changes:Gains/(Losses)

$
(1.9
)

$
1.6


$
(0.3
)Liquidations/Amortization


(0.5
)


0.3



(0.2
)September 26, 2008

$
6.4


$
(5.3
)

$
1.1  (1)
    
    We terminated all of our
    CDO-related hedges with XL, which at June 27, 2008 had a
    carrying value of $1,029 million in exchange for an upfront
    payment of $500 million. This termination resulted in a net
    loss of approximately $529 million.(2)
    
    This includes both settled and
    potentially settled monoline hedges.      Monoline
    Financial Guarantors
  and/or
 91




---



##### Table of Contents



and/or
        (dollars in millions)Mark-to-Market Prior

Life-to-Dateto Credit

CreditCredit Default Swaps with
    Financial

Notional of

Net

Valuation

Valuation

CarryingGuarantors on U.S. Super Senior ABS CDOs

CDS

Exposure

Adjustments

Adjustments

ValueJune 27, 2008

$
(18.7
)

$
(9.6
)

$
9.1


$
(6.2
)

$
2.9Termination of XL
    Hedges(1)


3.7



1.2



(2.5
)


1.5



(1.0
)Settlement of Monoline Hedges on Long Position
    Sold(2)


12.1



7.2



(4.9
)


4.1



(0.8
)Total (As Reported in Press Release Dated 7/28/08)

$
(2.9
)

$
(1.2
)

$
1.7


$
(0.6
)

$
1.13Q Activity


0.0



0.3



0.3



(0.0
)


0.3September 26, 2008

$
(2.9
)

$
(0.9
)

$
2.0


$
(0.6
)

$
1.4  (1)
    
    We terminated all of our
    CDO-related hedges with XL, which had an aggregate carrying
    value at June 27, 2008 of $1,029 million, in exchange
    for an upfront payment of $500 million. This termination
    resulted in a net loss of approximately
    $529 million.(2)
    
    This includes both settled and
    potentially settled monoline hedges.  U.S.
    Banks Investment Securities Portfolio
   92




---



##### 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 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.      (dollars in millions)Net

Net

Unrealized

Other

NetExposures

Gains/(Losses)

Gains/(Losses)

Net Changes

Exposuresas of Jun. 27,

Reported in

Included in OCI

in Net

as of Sep. 26,

Percent2008

Income(2)

(pre-tax)

Exposures(3)

2008

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

$
2,901


$
(116
)

$
24


$
(107
)

$
2,702



(7
)%Alt-A residential mortgage-backed securities


4,338



(622
)


(135
)


(83
)


3,498



(19
)%Commercial mortgage-backed securities


5,376



6



(370
)


28



5,040



(6
)%Prime residential mortgage-backed securities


3,114



(82
)


(152
)


(371
)


2,509



(19
)%Non-residential asset-backed securities


831



(8
)


(40
)


(60
)


723



(13
)%Non-residential CDOs


745



(30
)


(181
)


(48
)


486



(35
)%Agency residential asset-backed securities


505



-



-



(13
)


492



(3
)%Other


226



-



(28
)


9



207



(8
)%Total(1)

$
18,036


$
(852
)

$
(882
)

$
(645
)

$
15,657



(13
)%   (1)
    
    The September 26,
    2008 net exposures include investment securities of
    approximately $140 million recorded in a
    non-U.S.
    Bank legal entity.(2)
    
    Primarily represents losses on
    certain securities deemed to be other-than-temporarily
    impaired.(3)
    
    Primarily represents principal
    paydowns and sales. 93




---



##### Table of Contents



Commercial
    Real Estate
      (dollars in millions)Net



Net

3Q08 vs.Net Exposures

Gains/(Losses)

Other Net

Exposures

2Q08as of Jun. 27,

Reported in

Changes in Net

as of Sep. 26,

Percent2008

Income

Exposures(1)

2008

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

$
7,872


$
(838
)

$
(906
)

$
6,128



(22)
%Securities and Derivatives


575



(10
)


(10
)


555



(3)
%Real Estate
    Investments(2)


6,454



(6
)


(312
)


6,136



(5)
%Total Commercial Real Estate, excluding First Republic
    Bank

$
14,901


$
(854
)

$
(1,228
)

$
12,819



(14)
%First Republic Bank

$
2,670


$
22


$
241


$
2,933



10
%   (1)
    
    Primarily represents sales,
    paydowns and foreign exchange revaluations.(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 46(R), Consolidation of
    Variable Interest Entities (revised December 2003) 
    an interpretation of ARB No. 51. We do not have economic
    exposure to the total underlying assets in those entities. The
    amounts presented are our net investments and therefore exclude
    the amounts that have been consolidated but for which we do not
    have economic exposure.  
 Business
    Segments
      94




---



##### Table of Contents



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

For the Nine Months EndedSept. 26,

Sept. 28,

%

Sept. 26,

Sept. 28,

%2008

2007

Change

2008

2007

ChangeGlobal MarketsFICC

$
(9,943
)

$
(5,764
)


N/M


$
(21,389
)

$
(718
)


N/MEquity Markets


6,030



1,581



281



9,640



6,115



58Total Global Markets revenues, net of interest expense


(3,913
)


(4,183
)


N/M



(11,749
)


5,397



N/MInvestment BankingOrigination:Debt


182



276



(34
)


780



1,333



(41
)Equity


214



344



(38
)


751



1,254



(40
)Strategic Advisory Services


354



385



(8
)


1,046



1,181



(11
)Total Investment Banking revenues, net of interest expense


750



1,005



(25
)


2,577



3,768



(32
)Total GMI revenues, net of interest expense


(3,163
)


(3,178
)


N/M



(9,172
)


9,165



N/MNon-interest expenses, before restructuring charge


2,833



1,434



98



9,119



9,633



(5
)Restructuring charge


18



-



N/M



329



-



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

$
(6,014
)

$
(4,612
)


N/M


$
(18,620
)

$
(468
)


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

$
(5,996
)

$
(4,612
)


N/M


$
(18,291
)

$
(468
)


N/M  N/M = Not Meaningful
     95




---



##### Table of Contents



Fixed
    Income, Currencies and Commodities (FICC)
    Non-U.S. residential
    Equity
    Markets
     96




---



##### Table of Contents



Investment
    Banking
      Origination
        Strategic
    Advisory Services
     97




---



##### Table of Contents



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

For the Nine Months EndedSept. 26,

Sept. 28,

%

Sept. 26,

Sept. 28,

%2008

2007

Change

2008

2007

ChangeGPCFee-based revenues

$
1,568


$
1,605



(2
)

$
4,784


$
4,622



4Transactional and origination revenues


729



989



(26
)


2,552



2,915



(12
)Net interest profit and related
    hedges(1)


587



584



1



1,829



1,753



4Other revenues


110



90



22



295



300



(2
)Total GPC revenues, net of interest expense


2,994



3,268



(8
)


9,460



9,590



(1
)GIMTotal GIM revenues, net of interest expense


241



270



(11
)


733



836



(12
)Total GWM revenues, net of interest expense


3,235



3,538



(9
)


10,193



10,426



(2
)Non-interest expenses, before restructuring charge


2,461



2,585



(5
)


7,961



7,710



3Restructuring charge


21



-



N/M



155



-



N/MPre-tax earnings from continuing operations

$
753


$
953



(21
)

$
2,077


$
2,716



(24
)Pre-tax earnings from continuing operations, before
    restructuring charge

$
774


$
953



(19
)

$
2,232


$
2,716



(18
)Pre-tax profit margin


23.3
%


26.9
%






20.4
%


26.1
%Pre-tax profit margin, before restructuring charge


23.9
%


26.9
%






21.9
%


26.1
%Total Financial Advisors


16,850



16,610







16,850



16,610   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.     98




---



##### Table of Contents



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

As ofSept. 26,

Dec. 28,2008

2007Assets in client accountsU.S

$
1,333


$
1,586Non  U.S


142



165Total

$
1,475


$
1,751Assets in annuitized-revenue products

$
580


$
655    99




---



##### Table of Contents



Transactional
    and Origination Revenues
      Net
    Interest Profit and Related Hedges
      Other
    Revenues
    Global
    Investment Management
     100




---



##### Table of Contents



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

For the Nine Months EndedSept. 26,

Sept. 28,

%

Sept. 26,

Sept. 28,

%2008

2007

Change

2008

2007

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

$
(1,339
)

$
1,233



N/M
%

$
1,061


$
5,454



(81
)%Pacific Rim


311



1,481



(79
)


1,858



4,160



(55
)Latin America


325



378



(14
)


1,191



1,128



6Canada


22



77



(71
)


155



369



(58
)Total Non-U.S


(681
)


3,169



N/M



4,265



11,111



(62
)United
    States(1)(2)(3)


697



(2,789
)


N/M



(3,431
)


8,331



N/MTotal

$
16


$
380



N/M


$
834


$
19,442



N/M  (1)
    
    Corporate net revenues and
    adjustments are reflected in the U.S. region.(2)
    
    U.S. net revenues for the three
    and nine months ended September 26, 2008 include net losses
    of $10.2 billion and $26.1 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, losses from other
    residential mortgage exposures, and losses from commercial real
    estate exposures. Losses for the three and nine months ended
    September 26, 2008 were partially offset by gains of $2.8
    and $5.0 billion, respectively, that resulted from the
    widening of Merrill Lynchs credit spreads on the carrying
    value of certain of our long-term debt liabilities, and a
    $4.3 billion net gain related to the sale of our ownership
    stake in Bloomberg L.P. (3)
    
    U.S. net revenues for the three
    and nine months ended September 28, 2007 include net losses
    of $7.9 billion related to U.S. sub-prime residential
    mortgage-related securities and U.S. ABS CDOs.  Non-U.S. net non-U.S. net
     101




---



##### Table of Contents



non-U.S. net non-U.S. regions
     102




---



##### Table of Contents



Consolidated
    Balance Sheets
    (dollars in millions)2008Sept. 26,

Nine Month

Dec. 28,

20072008

Average(1)

2007

Average(1)AssetsTrading-RelatedSecurities financing assets

$
311,716


$
419,516


$
400,002


$
490,729Trading assets


189,358



243,851



234,669



254,421Other trading-related receivables


119,136



110,242



95,753



93,556620,210



773,609



730,424



838,706Non-Trading-RelatedCash and cash equivalents


59,207



74,650



64,345



54,068Investment securities


72,182



76,701



82,532



85,982Loans, notes, and mortgages, net


75,737



80,024



94,992



81,704Other non-trading assets


48,444



44,890



47,757



52,150255,570



276,265



289,626



273,904Total assets

$
875,780


$
1,049,874


$
1,020,050


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

$
264,897


$
378,386


$
336,876


$
459,827Trading liabilities


86,745



144,009



123,588



146,073Other trading-related payables


99,978



106,092



91,550



107,198451,620



628,487



552,014



713,098Non-Trading-RelatedShort-term borrowings


25,693



16,753



24,914



20,231Deposits


90,001



101,088



103,987



88,319Long-term borrowings


227,326



243,611



260,973



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


5,202



5,179



5,154



4,263Other non-trading liabilities


37,583



17,593



41,076



36,180385,805



384,224



436,104



360,111Total liabilities


837,425



1,012,711



988,118



1,073,209Total stockholders equity


38,355



37,163



31,932



39,401Total liabilities and stockholders equity

$
875,780


$
1,049,874


$
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.   103




---



##### Table of Contents



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

1 - 3

3+ -

    5

Over 5Total

1 Year

Years

Years

YearsStandby liquidity facilities

$
13,328


$
9,813


$
-


$
3,494


$
21Residual value guarantees


844



104



323



303



114Standby letters of credit and other guarantees


43,290



1,510



1,620



810



39,350Auction rate security guarantees


9,970



9,970



-



-



-   Standby
    Liquidity Facilities
    Residual
    Value Guarantees
    Standby
    Letters of Credit
    Other
    Guarantees
   104




---



##### Table of Contents



Auction
    Rate Security Guarantees
    Derivatives
  Guarantors
    Accounting and Disclosure Requirements for Guarantees, Including
    Indebtedness of Others
 105




---



##### 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. 106




---



##### Table of Contents




    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 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 that require 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;
    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. 107




---



##### Table of Contents



Contractual
    Obligations and Commitments  Contractual
    Obligations
    (dollars in millions)ExpirationLess than

1 - 3

3+ -

    5

Over 5Total

1 Year

Years

Years

YearsLong-term borrowings

$
227,326


$
62,647


$
47,095


$
43,099


$
74,485Contractual interest
    payments(1)


59,138



7,053



11,300



8,605



32,180Purchasing and other commitments


8,768



3,692



1,224



1,250



2,602Junior subordinated notes (related to trust preferred securities)


5,202



-



-



-



5,202Operating lease commitments


3,831



653



1,213



955



1,010   (1)
    
    Relates to estimates of future
    interest payments associated with long-term borrowings based
    upon applicable interest rates as of September 26, 2008.
    Includes stated coupons, if any, on structured notes.  non-U.S. dollar-denominated
   108




---



##### Table of Contents



Commitments
    (dollars in millions)ExpirationLess than

1 - 3

3+ -

    5

Over 5Total

1 Year

Years

Years

YearsCommitments to extend
    credit(1)

$
56,298


$
18,056


$
13,397


$
18,639


$
6,206Commitments to enter into forward dated resale and securities
    borrowing agreements


60,095



59,609



486



-



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


48,014



47,941



73



-



-  (1)
    
    See Note 7 and
    Note 11 to the Condensed Consolidated Financial
    Statements.    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
   109




---



##### Table of Contents



(dollars in millions)Sept. 26,

Dec. 28,2008

2007Common equity

$
29,750


$
27,549Preferred stock


8,605



4,383Trust preferred
    securities(1)


4,773



4,725Equity capital


43,128



36,657Subordinated long-term debt obligations


12,725



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


146,518



156,370Deposits(3)


76,680



85,035Total long-term capital

$
279,051


$
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 September 26, 2008
    and December 28, 2007, respectively.(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 $65,654 million
    and $11,026 million of deposits in U.S. and
    non-U.S.
    banking subsidiaries, respectively, at September 26, 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
     110




---



##### Table of Contents



Preferred
    Stock Issuance
          Common
    Stock
     111




---



##### Table of Contents



(dollars in millions)Balance at December 28, 2007

$
36,657Net loss


(11,768
)Issuance of common stock


14,489Issuance of preferred stock, net of repurchases and re-issuances


9,122Common and preferred stock dividends


(4,003
)Other comprehensive loss


(2,545
)Net effect of employee stock transactions and other


1,176Balance at September 26, 2008

$
43,128   Balance
    Sheet Leverage
     112




---



##### Table of Contents



(dollars in millions)Sept. 26, 2008

Dec. 28, 2007Total assets

$
875,780


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


164,466



221,617Receivables under securities borrowed transactions


99,596



133,140Securities received as collateral


47,654



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


31,132



50,294Sub-total


595,196



670,342Less:Segregated cash and securities balances


22,801



22,999Adjusted assets


572,395



647,343Less:Goodwill and other intangible assets


4,989



5,091Tangible adjusted assets

$
567,406


$
642,252Stockholders equity

$
38,355


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


4,773



4,725Equity capital

$
43,128


$
36,657Tangible equity
    capital(2)

$
38,139


$
31,566Leverage
    ratio(3)


20.3
x


27.8
xAdjusted leverage
    ratio(4)


13.3
x


17.7
xTangible adjusted leverage
    ratio(5)


14.9
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 September 26, 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
   113




---



##### Table of Contents



(dollars in millions)Tier 1 Composition:


Sept. 26,
    2008



Jun. 27,
    2008Common stockholders equity

$
29,750


$
21,112Qualifying cumulative and non-cumulative preferred stock


8,605



13,666Trust preferred securities


4,725



4,725Minority interests


418



470Less: Goodwill and other intangibles


(4,989
)


(5,058
)Less: Disallowed deferred tax assets


(11,609
)


(8,393
)Less: Gains on fair valuation of own debt


(4,190
)


(2,485
)Add: Losses on available for sale debt securities


3,867



3,323(Gain)/loss on cash flow hedges


21



112(Gain)/loss from accounting change on defined benefit plans


(65
)


(65
)Tier 1 Capital


26,533



27,407Tier 2 Composition:Qualifying subordinated debt


12,725



12,944Qualifying senior debt


541



760Excess of eligible credit reserves over total expected credit
    losses


1,268



1,400Allowable gains on equity investments


2,233



1,541Total Allowable Capital

$
43,300


$
44,052Risk Weighted AssetsCredit risk

$
204,831


$
222,683Market risk


71,923



99,641Operational risk


27,264



36,563Total

$
304,018


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


8.73
%


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


14.24
%


12.27
%   Composition
    of Tier 1 and Total Allowable Capital
  Tier 1
    Capital
     Total
    Allowable Capital
  114




---



##### Table of Contents



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
   Funding
   115




---



##### Table of Contents



(dollars in millions)Sept. 26,

Dec. 28,2008

2007Commercial paper

$
4,423


$
12,908Promissory notes


-



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


6,671



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


55,426



63,307Total unsecured short-term borrowings

$
66,520


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

$
146,518


$
156,370Subordinated long-term borrowings


12,725



10,887Total unsecured long-term borrowings

$
159,243


$
167,257Deposits

$
90,001


$
103,987   (1)
    
    Excludes $13.8 billion and
    $4.9 billion of secured short-term borrowings at
    September 26, 2008 and December 28, 2007,
    respectively; these consisted primarily of borrowings from
    Federal Home Loan Banks for both periods, and as of
    September 26, 2008, also included borrowings under a
    secured bank credit facility.(2)
    
    Excludes $0.8 billion and
    $3.2 billion of other unsecured short-term borrowings that
    is non-recourse or not guaranteed by ML & Co. at
    September 26, 2008 and December 28, 2007,
    respectively.(3)
    
    Excludes $7.2 billion and
    $1.7 billion of the current portion of other subsidiary
    financing that is non-recourse or not guaranteed by
    ML & Co. at September 26, 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.  Diversification
    of Funding Sources
  non-U.S. medium-term non-U.S. private non-U.S. commercial
 116




---



##### Table of Contents



(USD equivalent in millions)Sept. 26,

Percentage of

Dec. 28,

Percentage of2008

Total

2007

TotalUSD


134,804



52
%

$
165,285



57
%EUR


75,052



30



74,207



26JPY


12,602



5



16,879



6GBP


14,095



6



9,303



3AUD


4,857



2



5,455



2CAD


4,472



2



5,953



2CHF


1,501



1



2,283



1INR


838



0



1,964



1Other(1)


4,798



2



4,558



2Total(2)

$
253,019



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
     117




---



##### Table of Contents



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

$
62.6Less: non-recourse debt and debt not guaranteed by
    ML & Co.


7.2Less: warrant
    maturities(1)


4.5ML & Co. maximum long-term debt maturities within
    twelve months


50.9Less: ML & Co. debt that may potentially mature within
    twelve months, final maturity beyond twelve
    months(2)


8.3ML & Co. contractual long-term debt maturities within
    twelve months

$
42.6   (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. 118




---



##### Table of Contents



(dollars in billions)Balance December 28, 2007

$
261.0Issuance and resale


64.9Settlement and repurchase


(83.4
)Other(1)


(15.2
)Balance September 26,
    2008(2)

$
227.3  (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
   119




---



##### Table of Contents



Liquidity Risk Risk
    Management
  Prudent
    Governance
    Credit
    Ratings
        Senior

Subordinated

Preferred

CommercialDebt

Debt

Stock

Paper

RatingRating Agency

Ratings

Ratings

Ratings

Ratings

OutlookDominion Bond Rating Service Ltd.

A(high)

A

A(low)

R-1 (middle)

Developing
    ImplicationsFitch Ratings

A+

A

A

F1

Rating Watch
    EvolvingMoodys Investors Service, Inc.

A2

A3

Baa1

P-1

Review for UpgradeRating & Investment Information, Inc. (Japan)

A+

A

Not Rated

a-1

Rating Monitor with
    a view to UpgradingStandard & Poors Ratings Services

A

A-

BBB+

A-1

Developing
    Implications    120




---



##### Table of Contents



and/or
  Cash
    Flows
       Risk
    Management  Risk
    Management Philosophy
     121




---



##### Table of Contents



Market
    Risk
  and/or
          
    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). 122




---



##### Table of Contents



Trading
    Value at Risk
  (dollars in millions)Daily

Daily

DailySept. 26

Jun. 27

Dec. 28

High

Low

Average

Average

Average2008

2008

2007

3Q08

3Q08

3Q08

2Q08

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

$
43


$
37


$
52


$
47


$
28


$
35


$
59


$
52Equity


12



20



26



23



12



16



20



28Commodity


13



28



15



30



12



18



21



18Currency


4



2



5



8



-



3



7



5Subtotal(2)


72



87



98











72



107



103Diversification benefit


(28
)


(38
)


(33
)










(33
)


(50
)


(38
)Overall

$
44


$
49


$
65


$
52


$
30


$
39


$
57


$
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.   123




---



##### Table of Contents



one-day
  Non-Trading
    Market Risk
  Counterparty Credit
    Risk
    ®
    Counterparty
    Credit Risk
   124




---



##### Table of Contents



Commercial
    Lending
  and/or
   125




---



##### Table of Contents



(dollars in millions)ClosedBy Credit
    Quality(1)

Loans

CommitmentsAA or above

$
3,376


$
7,743A


3,316



13,725BBB


7,992



11,072BB


17,950



5,900B or below


8,761



3,371Unrated


2,594



464Total

$
43,989


$
42,275  (1)
    
    Based on credit rating agency
    equivalent of internal credit ratings.  ClosedBy Industry

Loans

CommitmentsFinancial Institutions


34
%


21
%Industrial/Manufacturing


17



27Real Estate


20



4Energy/Utilities


4



12Consumer Goods and Services


4



10Lodging/Entertainment


4



5Technology


1



6All Other


16



15Total


100
%


100
%   ClosedBy Country

Loans

CommitmentsUnited States


58
%


69
%United Kingdom


6



12Germany


5



6Japan


4



0France


3



1All Other


24



12Total


100
%


100
%     Residential
    Mortgage Lending
   126




---



##### Table of Contents



Derivatives
        (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

$
6,110


$
4,745


$
2,821


$
11,279


$
(6,902
)

$
18,053A


6,910



2,242



1,566



10,326



(3,052
)


17,992BBB


4,036



872



802



3,485



(1,426
)


7,769BB


2,463



1,355



1,224



1,837



(1,230
)


5,649B or below


2,147



871



304



2,326



(91
)


5,557Unrated


1,441



194



22



632



(171
)


2,118Total

$
23,107


$
10,279


$
6,739


$
29,885


$
(12,872
)

$
57,138  (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
   127




---



##### Table of Contents




    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
    Maintain a well formulated and documented contingency funding
    plan, including access to lenders of last resort.    Excess
    Liquidity and Unencumbered Assets
   128




---



##### Table of Contents



(dollars in billions)Sept. 26,

December 28,2008

2007Excess liquidity pool

$
77


$
79Unencumbered assets at bank subsidiaries


41



57Unencumbered assets at non-bank subsidiaries


49



64Global Liquidity Sources

$
167


$
200   non-U.S. broker-dealer
       129




---



##### Table of Contents



Off-Balance
    Sheet Financing
    Committed
    Credit Facilities
           130




---



##### 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.       131




---



##### Table of Contents



Scenario
    Analysis and Stress Testing
      and/or
  Contingency
    Funding Plan
    non-U.S. subsidiaries
  U.S.
    Government Liquidity Facilities
     132




---



##### Table of Contents



non-U.S. broker-dealer
      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.   133




---



##### Table of Contents



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
    
    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
     134




---



##### Table of Contents



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. EITF 02-3 and/or
  Valuation
    Controls
      
    For listed instruments, pricing data from the relevant exchange
    or trade reporting service will typically be used.
    For plain vanilla OTC derivative positions, data about the
    market levels for relevant pricing parameters (e.g., volatility,
    correlation) are obtained from brokers active in the relevant
    markets. 135




---



##### Table of Contents




    For more complex OTC derivative positions and cash instruments,
    pricing data is sourced from broad-based consensus pricing
    services to which many peer-group firms contribute their pricing
    data, indicative (non-transactional) quotes supplied by brokers,
    and prices from independent data vendors that are based upon the
    relevant vendors proprietary models and expert opinion.
    When relying on non-transactional data, multiple sources of
    information are compared, if available.    Valuation
    Adjustments
    Liquidity
    Counterparty
    Credit Risk
      SFAS 157
    Hierarchy
   136




---



##### Table of Contents



Level 1
    Level 2
     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
    and/or
    (dollars in millions)September 26,

June 27,

December 28,2008

2008

2007Level 3
    assets(1)

$
61,031


$
64,195


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


7
%


7
%


5
%Level 3
    liabilities(1)

$
40,427


$
47,202


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


5
%


5
%


4
%   (1)
    
    Includes assets measured at
    fair value on both a recurring and non-recurring
    basis. 137




---



##### Table of Contents




    U.S. ABS CDOs of $4.0 billion and derivative assets of
    $7.5 billion;
    United Kingdom (U.K.) residential and commercial
    real estate loans measured at fair value on a non-recurring
    basis of $4.3 billion;
    credit derivatives of $17.6 billion that incorporate
    unobservable correlation;
    corporate bonds and loans within trading assets of
    $11.8 billion (including $1.0 billion of auction rate
    securities);
    private equity and principal investment positions of
    $4.2 billion within investment securities; and
    equity, currency, interest rate and commodity derivative
    contracts of $7.4 billion that are long-dated
    and/or have
    unobservable correlation.    
    derivative liabilities on U.S. ABS CDOs of
    $8.5 billion;
    credit derivatives of $13.1 billion that incorporate
    unobservable correlation;
    equity and currency derivative contracts of $7.2 billion
    that are long-dated
    and/or have
    unobservable correlation;
    structured notes classified as long term borrowings of
    $8.8 billion with embedded equity and commodity derivatives
    that are long-dated
    and/or have
    unobservable correlation; and
    long term borrowings of $1.1 billion related to certain
    long-term borrowings issued by consolidated SPEs.        Mortgage
    related positions
    U.S. ABS CDOs
   138




---



##### Table of Contents



Residential mortgages
    Corporate
    debt and loans
    Private
    equity and principal investments
    Derivatives
    and structured notes with significant unobservable
    correlation
    Derivatives
    and structured notes with significant unobservable
    volatility
  and/or
   139




---



##### Table of Contents



Litigation
  and/or Accounting for
    Contingencies
  Variable
    Interest Entities and Qualified Special Purpose
    Entities
  and/or
  Income
    Taxes
     140




---



##### Table of Contents



Accounting for Uncertainty in Income Taxes, an interpretation
    of FASB Statement No. 109
    
 Recent
    Accounting Developments
     
    FSP
    FAS 133-1
    and
    FIN 45-4,
    Disclosures about Credit Derivatives and Certain Guarantees:
    An Amendment of FASB Statement 133 and FASB Interpretation
    No. 45; and Clarification of the Effective Date of FASB
    Statement No. 161;
    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;
    SFAS No. 160, Noncontrolling Interests in
    Consolidated Financial Statements-an amendment of ARB
    No. 51; 141




---



##### Table of Contents




    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 Consolidation
    Fair
    Value in Inactive Markets
  No. 157-3, Determining the Fair Value of a Financial Asset When the
    Market for That Asset Is Not Active FAS 157-3). FAS 157-3 FAS 157-3 FAS 157-3
 142




---



##### Table of Contents



ASF
    Framework
  deeds-in-lieu
    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   143




---



##### Table of Contents



Item 4.
    Controls
    and Procedures  Rule 13a-15(e)
  Rule 13a-15(f)
 144




---



##### Table of Contents



PART II 
    OTHER INFORMATION  Item 1. Legal
    Proceedings
  Form 10-K Form 10-Q
  Merger-Related Litigation:
  In re Merrill Lynch & Co., Inc. Securities,
    Derivative, and ERISA Litigation (S.D.N.Y.):
  Louisiana Sheriffs Pension & Relief
    Fund v. Conway, et al.:
  Auction
    Rate Regulatory Matters and
    Litigation :
  Settlement of Regulatory Matters:
  Mayor and City Council of Baltimore Maryland v.
    Citigroup, Inc., et al. and Russell Mayfield, et al. v.
    Citigroup, Inc., et al.:
 145




---



##### Table of Contents



Diane Blas v. ONeal, et al., and Louisiana
    Municipal Police Employees Retirement System v. Thain, et
    al.:
  Carroll v. American International, Group, Inc., et al.: Series A-5 Bernstein v. American International Group, Inc.,
    et al.
  Lehman Brothers, Inc., Securities Litigation:
  Fannie Mae Securities Litigation:
  McReynolds. v. Merrill Lynch: African-American African-American
  Sales Practice Litigation.
 146




---



##### Table of Contents



and/or
  Opes Prime/Lift Capital:
  Mediafiction Litigation:
  Other
  and/or
    Item 1A.
    Risk
    Factors  Form 10-K Form 10-K
 147




---



##### Table of Contents



and/or
    Merrill
    Lynchs business may be adversely affected if, as a result
    of general market conditions, the actions of market
    participants, credit rating agencies or otherwise, Merrill Lynch
    is unable to access short term and secured funding at
    commercially reasonable costs.
      Merrill
    Lynchs business may be adversely affected by recent and
    prospective proposals that may result in increased regulatory
    oversight.
    Merrill
    Lynchs business may be adversely affected as a result of
    the competitive environment for financial professionals and
    clients.
   148




---



##### Table of Contents



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 (Jun. 28, 2008  Aug. 1, 2008)Capital Management Program


-


$
-



-


$
3,971Employee
    Transactions(2)


2,865,812


$
27.57



N/A



N/AMonth #2 (Aug. 2, 2008  Aug. 29, 2008)Capital Management Program


-


$
-



-


$
3,971Employee
    Transactions(2)


1,095,492


$
26.65



N/A



N/AMonth #3 (Aug. 30, 2008  
    Sept. 26, 2008)Capital Management Program


-


$
-



-


$
3,971Employee
    Transactions(2)


2,236,504


$
22.06



N/A



N/AThird Quarter 2008 (Jun. 28, 2008  Sept. 26,
    2008)Capital Management Program


-


$
-



-


$
3,971Employee
    Transactions(2)


6,197,808


$
25.42



N/A



N/A  (1)
    
    No repurchases were made for
    the quarter ended September 26, 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.     149




---



##### Table of Contents



Form S-3
    Item 6.
    Exhibits   150




---



##### Table of Contents



SIGNATURES  Pursuant to the requirements of
    the Securities Exchange Act of 1934, the registrant has duly
    caused this report to be signed on its behalf by the undersigned
    thereunto duly authorized.
  MERRILL
    LYNCH & CO.,
    INC. (Registrant)
  By:
    /s/  Nelson
    Chai  Nelson
    Chai
 Executive
    Vice President and
 Chief
    Financial Officer
  By:
    /s/  Gary
    Carlin  Gary
    Carlin
 Vice
    President, Controller and
    Chief     Accounting Officer
  Date: November 4, 2008
 151




---



##### Table of Contents



INDEX TO
    EXHIBITS  ExhibitNumber

Exhibit2.1

Agreement and Plan of Merger, dated as of September 15,
    2008, by and between Merrill Lynch & Co., Inc. and
    Bank of America Corporation (incorporated by reference to
    Exhibit 2.1 to Merrill Lynchs Current Report on
    Form 8-K
    dated September 19, 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 Waiver of Rights under Benefit Plans and Compensation
    Arrangements (included as Annex B to Exhibit 10.2).10.2*

Letter Agreement, dated October 26, 2008, between the
    United States Department of the Treasury and Merrill
    Lynch & Co., Inc.10.3*

Form of Consent to entry by Merrill Lynch into agreement with
    United States Department of the Treasury.12*

Statement re: computation of ratios.15*

Letter of awareness from Deloitte & Touche LLP, dated
    November 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 October 16, 2008).99.2

Stock Option Agreement, dated September 15, 2008, between
    Merrill Lynch & Co., Inc. and Bank of America
    Corporation (incorporated by reference to Exhibit 99.1 to
    Merrill Lynchs Current Report on Form
    8-K dated
    September 19, 2008).     *
    
    Filed Herewith 152