UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, ~~2010~~2011

Commission file number: 1-7182

~~Commission~~MERRILL ~~file~~LYNCH ~~number:~~& ~~1-7182~~ CO., INC. (Exact name of Registrant as specified in its charter)

MERRILL LYNCH & CO., INC.



Delaware		13-2740599
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Bank of America Corporate Center 100 N. Tryon Street Charlotte, North Carolina		28255
(Address of principal executive offices)		(Zip Code)

(704) 386-5681
Registrant’s telephone number, including area code:

(Exact name of Registrant as specified in its charter)



Securities registered pursuant to Section 12(b) of the Act: Title of Each Class		Name of Each Exchange on Which Registered
Trust Preferred Securities of Merrill Lynch Capital Trust I (and the guarantee of the Registrant with respect thereto); Trust Preferred Securities of Merrill Lynch Capital Trust II (and the guarantee of the Registrant with respect thereto); Trust Preferred Securities of Merrill Lynch Capital Trust III (and the guarantee of the Registrant with respect thereto)		New York Stock Exchange

Delaware		13-2740599
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
Bank of America Corporate Center 100 N. Tryon Street Charlotte, North Carolina		28255
(Address of principal executive offices)		(Zip Code)
(704) 386-5681
Registrant’s telephone number, including area code:

See the full list of securities listed on the NYSE Arca on the pages directly following this cover.

Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class		Name of Each Exchange on Which Registered
Trust Preferred Securities of Merrill Lynch Capital Trust I (and the guarantee of the registrant with respect thereto); Trust Preferred Securities of Merrill Lynch Capital Trust II (and the guarantee of the registrant with respect thereto); Trust Preferred Securities of Merrill Lynch Capital Trust III (and the guarantee of the registrant with respect thereto)		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

~~See~~Indicate ~~the~~by ~~full~~check ~~list~~mark ofif ~~securities listed on~~ the ~~NYSE~~Registrant ~~Arca~~is ~~and~~a ~~The NASDAQ~~well-known ~~Stock~~seasoned ~~Market~~issuer, onas ~~the~~defined ~~pages~~in ~~directly~~Rule 405 ~~following~~of ~~this~~the ~~cover~~Securities Act.

~~Securities registered pursuant to Section 12(g) of the Act: None~~ _ YES X NO

Indicate by check mark if the Registrant is anot ~~well-known seasoned~~required ~~issuer,~~to asfile ~~defined~~reports inpursuant ~~Rule~~to Section ~~405~~13 or Section 15(d) of the ~~Securities~~ Exchange Act.

YES X ~~YES~~ NO

Indicate by check mark ifwhether the Registrant is(1) has ~~not~~filed all reports required to ~~file reports~~be ~~pursuant~~filed toby Section 13 or ~~Section~~ 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

~~YES~~ X YES NO

Indicate by check mark whether the ~~Registrant~~registrant ~~(1)~~ has ~~filed all~~submitted ~~reports~~electronically and posted on its corporate Web site, if any, every Interactive Data File required to be ~~filed~~submitted byand ~~Section 13~~posted orpursuant ~~15(d)~~to Rule 405 of ~~the~~ ~~Securities~~Regulation S-T ~~Exchange~~(§ 232.405 ~~Act~~ of ~~1934~~this chapter) during the preceding 12 months (or for such shorter period that the ~~Registrant~~ registrant was required to ~~file~~submit ~~such reports),~~ and ~~(2) has~~post ~~been subject to~~ such ~~filing requirements for the past 90 days~~files).

X YES NO

Indicate by check mark ~~whether~~if ~~the~~disclosure ~~registrant~~of ~~has~~delinquent ~~submitted electronically~~filers ~~and~~pursuant ~~posted~~to onItem 405 ~~its~~of ~~corporate~~Regulation S-K ~~Web~~is ~~site,~~not ifcontained ~~any~~herein, ~~every~~ ~~Interactive~~and ~~Data~~will ~~File~~not ~~required to~~ be ~~submitted~~contained, ~~and posted pursuant~~ to ~~Rule 405~~the ~~of Regulation S-T (§ 232.405~~best of ~~this~~the ~~chapter)~~Registrant’s ~~during~~knowledge, ~~the~~in ~~preceding 12 months~~definitive (proxy or ~~for~~information ~~such~~statements ~~shorter~~incorporated ~~period~~by ~~that~~reference ~~the~~in ~~registrant was~~Part III ~~required~~of tothis ~~submit~~Form 10-K ~~and~~or ~~post~~any ~~such~~amendment ~~files)~~to this Form 10-K. X

~~YES NO~~ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

~~Indicate~~Large byaccelerated ~~check~~filer ~~mark~~Accelerated iffiler ~~disclosure~~Non-accelerated offiler ~~delinquent~~X ~~filers pursuant~~Smaller toreporting ~~Item 405~~company ~~of Regulation S-K is~~(Do not ~~contained~~check ~~herein,~~if ~~and~~a ~~will~~smaller ~~not~~reporting be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X company)

Indicate by check mark whether the ~~registrant~~Registrant is a ~~large accelerated~~shell ~~filer, an accelerated filer, a non-accelerated filer, or a smaller reporting~~ company. ~~See~~(as ~~the~~defined ~~definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”~~ in Rule 12b-2 of the Exchange Act~~. (Check one~~): .

~~Large accelerated filer Accelerated filer Non-accelerated filer~~ YES X ~~Smaller reporting company~~ NO

~~(Do~~As ~~not~~of ~~check~~the ifclose aof ~~smaller reporting~~business ~~company~~on June 30, 2011, there was no voting common equity of the Registrant ("Common Stock") held by non-affiliates. The Registrant has no non-voting Common Stock.

~~Indicate~~As byof ~~check~~the ~~mark~~close ~~whether~~of ~~the~~business ~~Registrant~~on isFebruary 23, a2012, ~~shell~~there ~~company (as~~were ~~defined in Rule~~1,000 ~~12b-2~~ shares of ~~the~~Common ~~Exchange~~Stock ~~Act)~~outstanding, all of which were held by Bank of America Corporation.

~~YES X NO~~ The Registrant is a wholly-owned subsidiary of Bank of America Corporation and meets the conditions set forth in General Instructions I(1)(a) and (b) of Form 10-K and is therefore filing this Form with a reduced disclosure format as permitted by Instruction I (2).

AsTable of ~~the close of business on June 30, 2010, there was no voting common equity held by non-affiliates. The company has no non-voting common stock.~~ Contents

AsSecurities ofregistered ~~the~~pursuant ~~close~~to ~~of business on February~~Section ~~25,~~12(b) ~~2011, there were 1,000 shares~~ of ~~Common~~the ~~Stock~~Act ~~outstanding,~~and ~~all~~listed ofon ~~which were~~the ~~held~~NYSE® byArca® ~~Bank~~are ofas ~~America Corporation.~~ follows:

~~The~~Strategic ~~registrant~~Return ~~is a wholly owned subsidiary of Bank of America Corporation and meets the conditions set forth in General Instructions~~Notes® ~~I(1)(a) and (b) of Form 10-K and is therefore filing this Form with a reduced disclosure format as permitted by Instruction I (2).~~

~~Table~~Strategic ofReturn ~~Contents~~Notes Linked to the Select Ten Index due March 8, 2012

~~Securities registered~~Strategic ~~pursuant~~Return toNotes ~~Section 12(b)~~Linked ofto the ~~Act~~Select ~~and~~Ten ~~listed on~~Index ~~the NYSE® Arca® are~~due asMay 10, ~~follows:~~ 2012

Strategic Return Notes® Linked to the Select 10 Index due July 5, 2012

Strategic Return Notes Linked to the ~~Industrial~~Merrill 15Lynch ~~Index~~Factor Model® due ~~February~~ November 27, 2012

Strategic Return Notes Linked to the ~~Select~~Merrill ~~Ten~~Lynch ~~Index~~Factor Model® due ~~March~~ December 86, 2012

~~Strategic~~NYSE ~~Return~~and ~~Notes~~Arca ~~Linked~~are toregistered ~~the~~service ~~Select~~marks ~~Ten~~of ~~Index~~NYSE ~~due May 10~~Group, ~~2012~~ Inc. All other service marks are the property of Bank of America Corporation.

~~Strategic Return Notes Linked to the Select 10 Index due July 5, 2012~~ i

~~Strategic~~Table ~~Return~~of ~~Notes Linked to the Value 30 Index due July 6, 2011~~ Contents

~~Strategic~~ANNUAL ~~Return~~REPORT ~~Notes~~ON ~~Linked to the Value 30 Index due August~~FORM ~~8, 2011~~ 10-K

~~Strategic~~FOR ~~Return~~THE ~~Notes~~YEAR ~~Linked~~ENDED toDECEMBER ~~the Baby Boomer Consumption Index due September 6~~31, 2011

~~Strategic~~TABLE ~~Return~~OF ~~Notes Linked to the Merrill Lynch Factor Model® due November 7, 2012~~ CONTENTS

Strategic Return Notes Linked to the Select Ten Index due November 8, 2011



Part I
Item 1. Business	3
Item 1A. Risk Factors	5
Item 1B. Unresolved Staff Comments	21
Item 2. Properties	22
Item 3. Legal Proceedings	22
Item 4. Mine Safety Disclosures	22
Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	23
Item 6. Selected Financial Data	23
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Introduction	25
Executive Overview	27
Results of Operations	32
Off-Balance Sheet Exposures	35
Funding and Liquidity	43
Item 7A. Quantitative and Qualitative Disclosures about Market Risk	47
Item 8. Financial Statements and Supplementary Data	53
Report of Independent Registered Public Accounting Firm	53
Consolidated Financial Statements
Consolidated Statements of (Loss) Earnings	54
Consolidated Statements of Comprehensive (Loss) Income	55
Consolidated Balance Sheets	56
Consolidated Statements of Changes in Stockholder's Equity	58
Consolidated Statements of Cash Flows	59
Notes to Consolidated Financial Statements	60
Note 1. Summary of Significant Accounting Policies	60
Note 2. Transactions with Bank of America	72
Note 3. Segment and Geographic Information	74
Note 4. Fair Value Disclosures	75
Note 5. Fair Value of Financial Instruments	97
Note 6. Derivatives	98
Note 7. Securities Financing Transactions	110
Note 8. Investment Securities	111
Note 9. Securitizations and Other Variable Interest Entities (“VIEs”)	115
Note 10. Loans, Notes and Mortgages	121
Note 11. Goodwill and Intangible Assets	125
Note 12. Borrowings and Deposits	126
Note 13. Stockholder's Equity and Earnings Per Share	130
Note 14. Commitments, Contingencies and Guarantees	131
Note 15. Employee Benefit Plans	148
Note 16. Employee Incentive Plans	156
Note 17. Income Taxes	160
Note 18. Regulatory Requirements	163
Note 19. Quarterly Information (Unaudited)	163
Note 20. Parent Company Information	164
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	167
Item 9A. Controls and Procedures	167
Item 9B. Other Information	168
Part III
Item 10. Directors, Executive Officers and Corporate Governance	168
Item 11. Executive Compensation	168
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	168

~~Strategic Return Notes Linked to the Merrill Lynch Factor Model® due December 6, 2012~~ 1

~~Securities registered~~Table ~~pursuant to Section 12(b)~~ of ~~the Act and listed on The NASDAQ® Stock Market are as follows:~~ Contents

MITTS®



Item 13. Certain Relationships and Related Transactions, and Director Independence	168
Item 14. Principal Accountant Fees and Services	168
Part IV
Item 15. Exhibits and Financial Statement Schedules	170
Signatures	171
EX-12
EX-23.1
EX-24.1
EX-24.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101

~~Nikkei®225 MITTS® Securities due March 8, 2011~~ 2

~~S&P~~Table ~~500 ®MITTS® Securities~~of ~~due August 31, 2011~~ Contents

~~97%~~PART ~~Protected Notes~~ I

~~97% Protected~~Item ~~Notes~~1. ~~Linked to the performance of the Dow Jones Industrial Average SM due March 28, 2011~~ Business

~~97%~~Merrill Lynch ~~Protected~~& ~~Notes~~Co., ~~Linked~~Inc. (“ML & Co.” and together with its subsidiaries, “Merrill Lynch”, or the “Company”) is a holding company that, through its subsidiaries, is one of the world's leading capital markets, advisory and wealth management companies. The Company was founded in 1914 and became a publicly traded company on June 23, 1971. In 1973, the holding company ML & Co., a Delaware corporation, was created. Through our subsidiaries, we are a leading global trader and underwriter of securities and derivatives across a broad range of asset classes, and we serve as a strategic advisor to ~~Global~~corporations, ~~Equity~~governments, ~~Basket~~institutions ~~due February~~and individuals worldwide. When used in this report, “we”, “us” and “our” may refer to ML 14& Co. individually, ~~2012~~ ML & Co. and its subsidiaries, or certain of ML & Co.'s subsidiaries or affiliates.

~~Strategic~~We ~~Return~~are ~~Notes~~ a wholly-owned subsidiary of Bank of America Corporation (“Bank of America”) and meet the requirements to omit certain information from this Form 10-K as permitted by General Instruction I (2) of Form 10-K. We have also provided a brief description of our business activities in Item 1 as permitted by General Instruction I (2).

~~Strategic~~Pursuant ~~Return~~to ~~Notes~~Accounting ~~Linked~~Standards Codification (“ASC”) 280, Segment Reporting (“Segment Reporting”), operating segments represent components of an enterprise for which separate financial information is available that is regularly evaluated by the chief operating decision maker in determining how to allocate resources and in assessing performance. The business activities of Merrill Lynch are included within certain of the ~~Industrial~~operating 15segments ~~Index~~of ~~due April 25~~Bank of America. Detailed financial information related to the operations of Merrill Lynch, ~~2011~~ however, is not provided to Merrill Lynch's chief operating decision maker. As a result, Merrill Lynch does not contain any identifiable operating segments under Segment Reporting, and therefore the financial information of Merrill Lynch is presented as a single segment.

~~S&P~~The ~~500~~following is a ~~registered~~brief ~~service~~discussion ~~mark~~ of ~~Standard &~~ ~~Poor’s~~the ~~Financial~~nature Services LLC; DOW JONES INDUSTRIAL AVERAGE is a service mark of Dow Jones Trademark Holdings LLC. Nikkei is a registered service mark of Kabushiki Kaisha Nihon Keizai Shimbun Sha Corporation. NASDAQ is a registered service mark of Nasdaq Stock Market, Inc. NYSE and ~~Arca~~ ~~are~~scope ~~registered service marks~~ of ~~NYSE~~our ~~Group,~~activities ~~Inc.~~in ~~All other service marks are the property of Bank of America Corporation~~2011.

i Capital Markets and Advisory Activities. We conduct sales and trading activities and act as a market maker in securities, derivatives, currencies, and other financial instruments to satisfy client demands. In addition, we distribute fixed income, currency, commodity and equity products, and derivatives. We also provide clients with financing, securities clearing, settlement, and custody services, and engage in select principal investing activities.

~~Table~~We also assist clients in raising capital through underwritings and private placements of ~~Contents~~equity, debt and related securities, and loan syndications and offer advisory services to clients on strategic issues, valuation, mergers, acquisitions and restructurings.

~~ANNUAL REPORT~~In ~~ON FORM~~November 102010, Banc of America Securities LLC (“BAS”), a wholly-~~K FOR~~owned ~~THE~~broker-dealer ~~YEAR~~subsidiary ~~ENDED~~of ~~DECEMBER~~Bank 31of America, ~~2010 TABLE~~merged OFinto ~~CONTENTS~~ Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), a wholly-owned broker-dealer subsidiary of ML & Co., with MLPF&S as the surviving corporation. See Note 1 to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for further information.

Part I
Item 1. Business			3
Item 1A. Risk Factors			7
Item 1B. Unresolved Staff Comments			22
Item 2. Properties			22
Item 3. Legal Proceedings			23
Item 4. Removed and Reserved			23
Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			24
Item 6. Selected Financial Data			24
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Introduction			26
Executive Overview			28
Results of Operations			32
Off-Balance Sheet Exposures			35
Funding and Liquidity			40
Item 7A. Quantitative and Qualitative Disclosures about Market Risk			44
Item 8. Financial Statements and Supplementary Data			48
Report of Independent Registered Public Accounting Firm			48
Consolidated Financial Statements
Consolidated Statements of Earnings/(Loss)			50
Consolidated Balance Sheets			51
Consolidated Statements of Changes in Stockholders’ Equity			53
Consolidated Statements of Comprehensive Income/(Loss)			55
Consolidated Statements of Cash Flows			56
Notes to Consolidated Financial Statements			57
Note 1. Summary of Significant Accounting Policies			57
Note 2. Transactions with Bank of America			73
Note 3. Segment and Geographic Information			75
Note 4. Fair Value Disclosures			76
Note 5. Fair Value of Financial Instruments			97
Note 6. Derivatives			98
Note 7. Securities Financing Transactions			109
Note 8. Investment Securities			111
Note 9. Securitizations and Other Variable Interest Entities (“VIEs”)			115
Note 10. Loans, Notes and Mortgages			123
Note 11. Goodwill and Intangible Assets			127
Note 12. Borrowings and Deposits			129
Note 13. Stockholders’ Equity and Earnings Per Share			133
Note 14. Commitments, Contingencies and Guarantees			135
Note 15. Employee Benefit Plans			153
Note 16. Employee Incentive Plans			162
Note 17. Income Taxes			167
Note 18. Regulatory Requirements			171
Note 19. Discontinued Operations			172
Note 20. Restructuring Charge			173
Note 21. Quarterly Information (Unaudited)			173
Note 22. Parent Company Information			174
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			177
Item 9A. Controls and Procedures			177
Item 9B. Other Information			179

Wealth and Investment Management Activities. We provide brokerage, investment advisory and financial planning services, offering a broad range of both proprietary and third-party wealth management products and services globally to individuals, small- to mid-size businesses, and employee benefit plans. We also create and manage wealth management products, including alternative investment products for clients.

1 At December 31, 2010, we owned an approximately 7% economic interest in BlackRock, Inc. (“BlackRock”), a publicly traded investment management company. In June 2011, we sold our entire economic interest in BlackRock, and therefore as of December 31, 2011 we no longer held an economic interest in BlackRock. See Note 8 to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for further information.

~~Table~~Research. We also provide a variety of ~~Contents~~research services on a global basis. These services are at the core of the value proposition we offer to institutional and individual investor clients and are an integral component of our product offerings.

Part III
Item 10. Directors, Executive Officers and Corporate Governance			179
Item 11. Executive Compensation			179
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			179
Item 13. Certain Relationships and Related Transactions, and Director Independence			179
Item 14. Principal Accountant Fees and Services			179
Part IV
Item 15. Exhibits and Financial Statement Schedules			181
Signatures			182
EX-12
EX-23.1
EX-23.2
EX-23.3
EX-24.1
EX-24.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2

For additional information about our business, see Note 1 to the Consolidated Financial Statements.

2 3

Table of Contents

~~PART I~~ Regulation

~~Item~~Certain 1aspects of our business, and the business of our competitors and the financial services industry in general, are subject to extensive regulation by United States (“U.S.”) ~~Business~~federal and state regulatory agencies and securities exchanges and by various non-U.S. government agencies or regulatory bodies, securities exchanges, self-regulatory organizations and central banks.

~~Merrill~~United ~~Lynch &~~States ~~Co.,~~Regulatory ~~Inc.~~Oversight ~~(“ML & Co.”~~ and together with its subsidiaries, “Merrill Lynch”, the “Company”, the “Corporation”, “we”, “our” or “us”) was formed in 1914 and became a publicly traded company on June 23, 1971. When used in this report, “we”, “us” and “our” may refer to ML & Co. individually, ML & Co. and its subsidiaries, or certain of ML & Co.’s subsidiaries or affiliates. In 1973, the holding company ML & Co., a Delaware corporation, was created. Through its subsidiaries, ML & Co. is one of the world’s leading capital markets, advisory and wealth management companies. We are a leading global trader and underwriter of securities and derivatives across a broad range of asset classes, and we serve as a strategic advisor to corporations, governments, institutions and individuals worldwide. Supervision

OnHolding ~~January 1,~~Company 2009, we became a wholly-owned subsidiary of Bank of America Corporation (“Bank of America”). As a result of our acquisition by Bank of America, certain information is not required in this Form 10-K as permitted by General Instruction I(2) of Form 10-K. We have also provided a brief description of our business activities in Item 1 as permitted by General Instruction I(2). Supervision

~~Pursuant~~As toa ~~Accounting~~wholly-owned ~~Standards~~subsidiary ~~Codification~~of ~~(“ASC”) 280,~~Bank ~~Segment~~of ~~Reporting (“Segment Reporting”)~~America, ~~operating~~ ~~segments~~a ~~represent~~bank ~~components~~holding ofcompany ~~an enterprise for which separate financial information is available~~ that is ~~regularly~~ ~~evaluated~~also bya ~~the~~financial ~~chief~~holding ~~operating~~company, ~~decision~~we ~~maker~~are ~~in determining~~subject ~~how~~ to ~~allocate~~the ~~resources~~oversight of, and ininspection ~~assessing performance. Based upon how our chief operating decision maker reviews our results~~by, itthe ~~was~~Board ~~determined~~of ~~that~~Governors ~~Merrill~~of ~~Lynch~~the ~~does not~~Federal ~~contain~~Reserve ~~any~~System ~~identifiable operating segments. As a result,~~ (the ~~financial~~“Federal ~~information of Merrill Lynch is presented as a single segment~~Reserve”).

~~The~~Broker-Dealer ~~following is a brief discussion of the nature and scope of our activities in 2010.~~ Regulation

~~Capital~~MLPF&S, ~~Markets~~Merrill ~~and~~Lynch ~~Advisory~~Professional ~~Activities~~Clearing Corp. ~~We conduct~~ ~~sales~~(“ML ~~and~~Pro”) ~~trading activities~~ and wecertain ~~act~~other assubsidiaries aof ~~market maker~~ML & inCo. ~~securities,~~are ~~derivatives,~~registered ~~currencies,~~as ~~and~~broker-dealers ~~other financial~~with ~~instruments~~the toSecurities ~~satisfy~~Exchange ~~client~~Commission ~~demands.~~(“SEC”) ~~In addition~~and, ~~we distribute~~as ~~fixed income~~such, ~~currency~~are ~~and~~subject ~~certain~~to ~~commodity~~regulation ~~products and~~by ~~derivatives~~the ~~and~~SEC ~~equity~~ and ~~equity~~by self-~~related~~regulatory ~~products.~~organizations, ~~We provide~~such ~~clients~~as ~~with~~the ~~financing,~~Financial ~~securities~~Industry ~~clearing,~~Regulatory ~~settlement, and~~Authority. ~~custody~~Certain ~~services~~of our subsidiaries and ~~engage~~affiliates, inincluding ~~principal~~MLPF&S, ~~investing~~are inregistered ~~a variety~~as ofinvestment ~~asset~~advisors ~~classes~~with the SEC.

WeOur ~~also~~subsidiaries ~~assist~~that ~~clients~~are inbroker-dealers ~~raising~~registered ~~capital~~with ~~through~~the ~~underwritings and~~SEC ~~private~~are ~~placements~~subject to Rule 15c3-1 under the Securities Exchange Act of ~~equity,~~1934 ~~debt~~(“Exchange Act”) which is designed to measure the general financial condition and ~~related~~liquidity ~~securities~~of a broker-dealer. Under this rule, ~~and~~ ~~loan~~these ~~syndications~~entities ~~and~~are ~~offer~~required ~~advisory~~to ~~services~~maintain the minimum net capital deemed necessary to ~~clients~~meet ~~on strategic~~broker-dealers’ ~~issues,~~continuing ~~valuation~~commitments to customers and others. Under certain circumstances, ~~mergers~~this rule limits the ability of such broker-dealers to allow withdrawal of such capital by ML & Co. or other Merrill Lynch subsidiaries. Additional information regarding certain net capital requirements is in Note 18 to the Consolidated Financial Statements in Part II, ~~acquisitions~~Item 8 ~~and restructurings~~of this Form 10-K.

On November 1, 2010, Banc of America Securities LLC (“BAS”), a wholly-owned broker-dealer subsidiary of Bank of America, merged into Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), a wholly-owned broker-dealer subsidiary of ML & Co., with MLPF&S as the surviving corporation. As a result of this merger, MLPF&S remained a direct wholly-owned broker-dealer subsidiary of ML & Co. and an indirect wholly-owned broker-dealer subsidiary of Bank of America. Also on November 1, 2010, Banc of America Securities Holdings Corporation (“BASH”), the parent of BAS, merged into ML & Co., with ML & Co. as the surviving corporation. See Note 1 to the Consolidated Financial ~~Statements~~ inReform ~~Part II, Item 8 of this Form 10-K for further information.~~ Act

~~Wealth~~ On ~~and~~July ~~Investment~~21, ~~Management Activities. We~~2010, ~~provide~~the ~~brokerage,~~Dodd-Frank ~~investment advisory~~Wall Street Reform and ~~financial~~Consumer ~~planning~~Protection ~~services,~~Act ~~offering~~(the “Financial Reform Act”) was signed into law. As a ~~broad~~result ~~range~~ of ~~both~~the ~~proprietary~~Financial Reform Act, several significant regulatory developments occurred in 2011, and ~~third-party~~additional ~~wealth~~regulatory ~~management~~developments ~~products~~ may occur in 2012 and ~~services~~beyond. The ~~globally~~Financial toReform ~~individuals~~Act has had, ~~small-~~and will continue to ~~mid-size businesses~~have, a significant and ~~employee~~negative ~~benefit~~impact ~~plans~~on our earnings through revenue reductions, higher costs and new restrictions. For Wea ~~also~~description ~~create~~of significant developments, see “Management's Discussion and ~~manage~~ ~~wealth~~Analysis ~~management~~of ~~products~~Financial Condition and Results of Operations - Executive Overview - Other Events - Financial Reform Act” in Part II, ~~including~~Item 7 ~~alternative~~ of this Form 10-K.

3 Non-U.S. Regulatory Oversight and Supervision

~~Table~~Our business is also subject to extensive regulation by various non-U.S. regulators including governments, securities exchanges, central banks and regulatory bodies. Certain of ~~Contents~~our subsidiaries are regulated as broker-dealers under the laws of the jurisdictions in which they operate. Subsidiaries engaged in banking and trust activities outside the U.S. are regulated by various government entities in the particular jurisdiction where they are chartered, incorporated and/or conduct their business activities. In some cases, the legislative and regulatory developments outside the U.S. applicable to these subsidiaries may have an impact on our business and results of operations. Our financial services operations in the United Kingdom (“U.K.”) are subject to regulation by and supervision of the Financial Services Authority (the “FSA”). In July of 2010, the U.K. proposed abolishing the FSA and replacing it with the Financial Policy Committee within the Bank of England (the “FPC”) and two new regulators, the Prudential Regulatory Authority (the “PRA”) and the Consumer Protection and Markets Authority (the “CPMA”). Our U.K. regulated entities will be subject to the supervision of the FPC and the PRA for prudential matters and the CPMA for conduct of business matters. The new financial regulatory structure is intended to be in place by the end of 2012. We continue to monitor the development and potential impact of this regulatory restructuring.

~~investment products for clients, and maintain ownership positions in other investment management companies.~~ 4

OnTable ~~November 15, 2010, we sold approximately 51.2 million shares~~ of common stock of BlackRock, Inc. (“BlackRock”), a publicly traded investment management company, for net proceeds of approximately $8.2 billion. Immediately prior to this sale, we owned approximately 34% of the economic interest of BlackRock. As a result of this sale, our economic interest of BlackRock as of December 31, 2010 was approximately 7%. Contents

~~Research. We~~Item ~~also provide a variety of research services on a global basis~~1A. ~~These~~Risk ~~services are at the core of the value proposition we offer to institutional and individual investor clients and are an integral component of our product offerings.~~ Factors

~~For~~In ~~additional~~the ~~information~~course ~~about~~of conducting our business operations, ~~see~~we ~~Note 1~~ are exposed to a variety of risks, some of which are inherent in the ~~Consolidated~~financial services industry and others of which are more specific to our own businesses. The following discussion addresses the most significant factors that could affect our businesses, operations, and financial condition. Additional factors that could affect our financial condition and operations are discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Forward-Looking Statements. ” However, other factors could also adversely affect our businesses, operations, and financial condition. Therefore, the risk factors below should not be considered a complete list of potential risks that we may face.

~~Regulation~~ General Economic and Market Conditions Risk

~~Certain~~Our ~~aspects~~businesses and results of ~~our~~operations ~~business~~have been, and ~~the~~may ~~business~~continue ofto ~~our competitors~~be, materially and adversely affected by the U.S. and international financial ~~services~~markets ~~industry~~and ineconomic ~~general,~~conditions ~~are subject~~generally. Our tobusinesses ~~stringent~~and ~~regulation~~results of operations are materially affected by ~~United~~the ~~States (“~~financial markets and general economic conditions in the U.S.”) ~~federal~~and abroad, including factors such as the level and ~~state~~volatility ~~regulatory~~of ~~agencies~~short-term and ~~securities~~ ~~exchanges~~long-term interest rates, inflation, home prices, unemployment and byunder-employment ~~various~~ levels, bankruptcies, household income, consumer spending, fluctuations in both debt and equity capital markets, liquidity of the global financial markets, the availability and cost of capital and credit, investor sentiment and confidence in the financial markets, European sovereign debt risks and the strength of the U.S. economy and the non-U.S. ~~government agencies~~economies orin ~~regulatory~~which ~~bodies,~~we operate. The deterioration of any of these conditions can adversely affect our business and securities ~~exchanges~~portfolios, ~~self~~ our level of charge-~~regulatory~~offs ~~organizations~~and provision for credit losses, the carrying value of our deferred tax assets, our capital levels and ~~central~~liquidity ~~banks~~and our results of operations.

~~United States~~Although ~~Regulatory~~the ~~Oversight~~U.S. economy continued its modest recovery in 2011, elevated unemployment, under-employment and ~~Supervision~~ household debt, along with continued stress in the consumer real estate market and certain commercial real estate markets, pose challenges for domestic economic performance and the financial services industry. The sustained high unemployment rate and the lengthy duration of unemployment have directly impaired consumer finances and pose risks to the financial services industry. The U.S. housing market remains weak and elevated levels of distressed and delinquent mortgages pose further risks to the housing market. In addition, the public perception of certain financial services firms and practices appeared to decline during 2011. The current environment of heightened scrutiny of financial institutions has resulted in increased public awareness of and sensitivity to financial services industry fees and practices. Each of these factors may adversely affect our fees and costs.

~~Holding Company~~Liquidity ~~Supervision~~ Risk

AsLiquidity arisk ~~wholly-owned~~is ~~subsidiary~~the ofpotential ~~Bank~~inability ofto ~~America,~~meet aour ~~bank~~contractual ~~holding company~~and ~~that~~contingent ~~is also a~~ financial ~~holding company~~obligations, weon- ~~are~~or ~~subject to~~off-balance ~~the oversight of~~sheet, ~~and~~as ~~inspection~~they ~~by,~~become ~~the Board of Governors of the Federal Reserve System (the “Federal Reserve Board” or “FRB”)~~due.

~~Broker~~Adverse changes to Bank of America’s or our credit ratings from the major credit rating agencies could have a material adverse effect on our liquidity, cash flows, competitive position, financial condition and results of operations by significantly limiting our access to funding or the capital markets, increasing our borrowing costs, or triggering additional collateral or funding requirements. Our borrowing costs and ability to raise funds are directly impacted by our credit ratings. In addition, credit ratings may be important to customers or counterparties when we compete in certain markets and when we seek to engage in certain transactions, including over-~~Dealer Regulation~~ the-counter (“OTC”) derivatives.

~~MLPF&S,~~Credit ~~Merrill~~ratings ~~Lynch~~and ~~Professional~~outlooks ~~Clearing~~are ~~Corp.~~opinions ~~(“ML Pro”)~~on ~~and~~our ~~certain~~creditworthiness ~~other~~and ~~subsidiaries~~that of ~~ML &~~our ~~Co. are~~obligations ~~registered~~or assecurities, ~~broker~~including long-~~dealers~~term ~~with~~debt, ~~the~~short-term ~~Securities~~borrowings ~~Exchange Commission (“SEC”)~~ and, asother ~~such~~securities, ~~are~~including ~~subject~~asset ~~to regulation~~securitizations. byFollowing the ~~SEC~~acquisition ~~and~~of Merrill Lynch by ~~self-regulatory~~Bank ~~organizations~~of America, ~~such as~~the major credit rating agencies have indicated that the ~~Financial~~primary ~~Industry~~drivers ~~Regulatory~~of ~~Authority (“FINRA”)~~Merrill Lynch's credit ratings are Bank of America's credit ratings. ~~Certain~~Bank of ~~our~~America's ~~subsidiaries~~credit ~~and~~ratings ~~affiliates~~are subject to ongoing review by the rating agencies, which consider a number of factors, including ~~MLPF&S~~Bank of America's financial strength, ~~are~~performance, ~~registered~~prospects and operations as ~~investment~~well ~~advisors with~~as ~~the~~factors ~~SEC~~not under Bank of America's control.

Our subsidiaries that are broker-dealers registered with the SEC are subject to Rule 15c3-1 under the Securities Exchange Act of 1934 (“Exchange Act”) which is designed to measure the general financial condition and liquidity of a broker-dealer. Under this rule, these entities are required to maintain the minimum net capital deemed necessary to meet broker-dealers’ continuing commitments to customers and others. Under certain circumstances, this rule limits the ability of such broker-dealers to allow withdrawal of such capital by ML & Co. or other Merrill Lynch subsidiaries. Additional information regarding certain net capital requirements is in Note 18 to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K. 5

4 Table of Contents

~~Table~~On December 15, 2011, Fitch Ratings ("Fitch") downgraded Bank of ~~Contents~~America's and ML & Co.'s long-term and short-term debt ratings as a result of Fitch's decision to lower its “support floor” for systemically important U.S. financial institutions. On November 29, 2011, Standard & Poor's Ratings Services ("S&P") downgraded Bank of America's and ML & Co.'s long-term and short-term debt ratings as a result of S&P's implementation of revised methodologies for determining Banking Industry Country Risk Assessments and bank ratings. On September 21, 2011, Moody's Investors Service, Inc. ("Moody's") downgraded Bank of America's and ML & Co.'s long-term and short-term debt ratings as a result of Moody's lowering the amount of uplift for potential U.S. government support it incorporates into ratings. On February 15, 2012, Moody's placed Bank of America's long-term debt ratings on review for possible downgrade as part of their review of financial institutions with global capital markets operations. Any adjustment to Bank of America's (and consequently, our) ratings will be determined based on Moody's review; however, the agency offered guidance that downgrades to Bank of America's ratings, if any, would likely be limited to one notch.

~~Non-U~~Currently, Bank of America's and ML & Co.'s long-term/short-term senior debt ratings and outlooks expressed by the rating agencies are as follows: Baa1/P-2 (negative) by Moody's; A-/A-2 (negative) by S&P; and A/F1 (stable) by Fitch. ~~Regulatory~~ ~~Oversight~~The rating agencies could make further adjustments to Bank of America's (and ~~Supervision~~ consequently, our) credit ratings at any time. There can be no assurance that additional downgrades will not occur.

~~Our~~A ~~business~~further isreduction ~~also~~in ~~subject~~certain ~~to extensive regulation by various non-U.S. regulators including governments, securities exchanges, central banks and regulatory bodies. Certain~~ of our ~~subsidiaries~~credit ~~are~~ratings ~~regulated~~may ~~as broker-dealers~~have ~~under~~a ~~the~~material ~~laws~~adverse ofeffect ~~the~~on ~~jurisdictions~~our in which they operate. Subsidiaries engaged in banking and trust activities outside the U.S. are regulated by various government entities in the particular jurisdiction where they are charteredliquidity, ~~incorporated and/or conduct~~access ~~their~~to ~~business~~credit ~~activities. In some cases~~markets, the ~~legislative~~ ~~and~~related ~~regulatory~~cost ~~developments~~of ~~outside~~funds, ~~the U.S. applicable to these subsidiaries may have an impact on~~ our ~~business~~businesses and ~~results~~on ofcertain ~~operations.~~trading ~~Our~~revenues, ~~financial~~particularly ~~services operations~~ in ~~the~~those ~~United~~businesses ~~Kingdom~~where ~~(“U.K.”)~~counterparty ~~are~~creditworthiness ~~subject to~~is ~~regulation by and supervision of the Financial Services Authority (the “FSA”)~~critical. InIf ~~July of 2010, the U.K. proposed abolishing the FSA and replacing it with the Financial Policy Committee within the~~ Bank of ~~England~~America’s ~~(the “FPC”)~~or ~~and~~Merrill ~~two~~Lynch’s ~~new regulators, the Prudential Regulatory Authority~~ (~~the~~including ~~“PRA”)~~our ~~and~~bank's ~~the~~or ~~Consumer Protection~~broker ~~and~~dealer ~~Markets Authority (the “CPMA”~~subsidiaries'). ~~Our U.K.~~short-term ~~regulated~~credit ~~entities~~ratings ~~will~~were bedowngraded ~~subject~~by toone ~~the~~or ~~supervision~~more ~~of the~~levels, ~~FPC within~~ the ~~Bank~~potential ofloss ~~England for prudential matters and the CPMA for conduct~~ of ~~business~~access ~~matters.~~to ~~The~~short-term ~~new~~funding ~~financial regulatory~~sources ~~structure~~such isas ~~intended~~repurchase toagreement befinancing inand ~~place by~~ the ~~end~~effect ~~of 2012.~~on Weour ~~continue~~incremental tocost ~~monitor~~of ~~the~~funds ~~development~~ and ~~potential impact~~earnings ofcould ~~this~~be ~~regulatory restructuring~~material.

~~Changes~~ In addition, under the terms of certain OTC derivative contracts and other trading agreements, in ~~Legislation~~the event of a further downgrade of the credit ratings of ML & Co. or certain subsidiaries, counterparties to those agreements may require ML & Co. or certain subsidiaries to provide additional collateral, terminate these contracts or agreements, or provide other remedies. At December 31, 2011, if the rating agencies had downgraded their long-term senior debt ratings for ML & Co. or certain subsidiaries by one incremental notch, the amount of additional collateral contractually required by derivative contracts and ~~Regulations~~ other trading agreements would have been approximately $0.4 billion. If the rating agencies had downgraded their long-term senior debt ratings for ML & Co. or certain subsidiaries by a second incremental notch, approximately $0.3 billion in additional collateral would have been required.

~~Proposals~~Also, toif ~~change~~ the ~~laws~~rating ~~and~~agencies ~~regulations~~had ~~governing~~downgraded ~~the banking~~their ~~and~~long-term ~~financial~~senior ~~services~~debt ~~industries~~ratings ~~are~~for ~~frequently introduced~~ML in& ~~Congress,~~Co. ~~in the state legislatures and before the various bank regulatory~~ or ~~financial~~certain ~~regulatory~~subsidiaries ~~agencies as well as~~ by ~~lawmakers~~one ~~and~~incremental ~~regulators~~notch, ~~in jurisdictions outside~~ the ~~U.S. where~~ wederivative ~~operate.~~liability ~~Congress~~that ~~and~~would ~~the~~be ~~Federal~~subject ~~government have continued~~ to ~~evaluate~~unilateral ~~and~~termination ~~develop~~by ~~legislation,~~counterparties ~~programs~~as ~~and initiatives~~of ~~designed~~December to31, ~~among~~2011 ~~other~~was ~~things,~~$0.5 ~~stabilize the financial and housing markets~~billion, ~~stimulate~~against ~~the~~which ~~economy,~~$0.3 ~~including the~~billion ~~Federal~~of ~~government’s~~collateral ~~foreclosure~~had ~~prevention~~been ~~program, and prevent future financial crises by further regulating the financial services industry~~posted. AsIf ~~a result of~~ the ~~financial~~rating ~~crisis and~~agencies ~~ongoing~~had ~~challenging~~downgraded ~~economic~~their ~~environment,~~long-term wedebt ~~anticipate additional~~ratings ~~legislative~~for ~~and~~ML ~~regulatory~~& ~~proposals~~Co. ~~and~~or ~~initiatives as~~certain ~~well~~subsidiaries asby ~~continued~~a ~~legislative~~second ~~and~~incremental ~~regulatory~~notch, ~~scrutiny~~the ofderivative ~~the financial~~liability ~~services~~that ~~industry.~~would ~~However,~~be atsubject ~~this~~to ~~time~~unilateral wetermination ~~cannot determine~~by the ~~final~~counterparties ~~form~~as of ~~any~~December ~~proposed~~31, ~~programs~~2011 orwas ~~initiatives or~~an ~~related~~incremental ~~legislation~~$3.5 billion, ~~the~~against ~~likelihood~~which ~~and~~$3.4 ~~timing~~billion of ~~any~~collateral ~~other future~~had ~~proposals~~been ~~or legislation, and the impact they might have on us~~posted.

OnWhile ~~July 21,~~certain ~~2010~~potential impacts are contractual and quantifiable, the ~~Dodd-Frank~~full ~~Wall~~consequences ~~Street~~of ~~Reform~~a credit ratings downgrade to a financial institution are inherently uncertain, as they depend upon numerous dynamic, complex and ~~Consumer~~ ~~Protection~~inter-related ~~Act~~factors ~~(the~~and ~~“Financial~~assumptions, ~~Reform~~including ~~Act”) was~~whether ~~signed~~any ~~into~~downgrade ~~law.~~of ~~The~~a ~~Financial~~firm's ~~Reform~~long-term ~~Act~~credit ~~provides~~ratings ~~for sweeping~~precipitates ~~financial~~downgrades ~~regulatory~~to ~~reform~~its short-term credit ratings, and ~~will~~assumptions ~~alter~~about the ~~way~~potential ~~in which~~behaviors weof ~~conduct~~various ~~certain~~customers, ~~businesses~~investors and counterparties.

~~The~~For ~~Financial~~a ~~Reform~~further ~~Act~~discussion ~~contains~~of aour ~~broad~~liquidity ~~range~~matters, ofsee ~~significant provisions~~“Management’s ~~that~~Discussion ~~could~~and ~~affect~~Analysis ~~our~~of ~~businesses,~~Financial ~~including,~~Condition ~~without limitation,~~and ~~the~~Results ~~following:~~ of Operations — Funding and Liquidity.”

•Our ~~limiting~~liquidity, ~~banking~~cash ~~organizations~~flows, ~~from~~financial ~~engaging~~condition inand ~~proprietary~~results ~~trading~~of operations, and ~~other~~competitive ~~investment~~position ~~activity~~may ~~regarding~~be ~~hedge~~significantly ~~funds~~adversely ~~and~~affected ~~private~~by ~~equity~~the ~~funds;~~inability •of ~~increasing~~us ~~regulation~~or Bank of America to access the ~~derivative~~capital markets; •or ~~providing~~if ~~for~~there ~~heightened~~is ~~capital,~~an ~~liquidity,~~increase ~~and~~in ~~prudential~~our ~~regulation~~borrowing ~~and~~costs. Liquidity ~~supervision~~is ~~over~~essential ~~systemically~~to ~~important~~our ~~financial~~business. ~~institutions;~~We •fund ~~providing~~our ~~for~~assets ~~new~~primarily ~~resolution~~with ~~authority~~a tomix ~~establish~~of secured and unsecured liabilities through a ~~process~~globally tocoordinated ~~unwind~~funding ~~large~~strategy ~~systemically~~with ~~important~~Bank ~~financial~~of ~~institutions~~America. ~~and~~We ~~requiring~~have ~~the~~established ~~development~~intercompany lending and ~~implementation~~borrowing ofarrangements ~~recovery~~to ~~and~~facilitate ~~resolution~~centralized ~~plans;~~liquidity management. As a

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•result, ~~creating~~our aliquidity ~~new~~risk ~~regulatory~~is ~~body~~derived in large part from Bank of America’s liquidity risk. Bank of America’s and our liquidity could be significantly adversely affected by an inability to ~~set~~access ~~requirements~~the ~~around~~capital markets; illiquidity or volatility in the ~~terms~~capital ~~and~~markets; ~~conditions~~unforeseen outflows of ~~consumer~~cash, ~~financial~~including ~~products~~customer deposits, funding for commitments and ~~expanding~~contingencies; the ~~role~~ability ofto ~~state~~sell ~~regulators~~assets inon ~~enforcing~~favorable ~~consumer~~terms; ~~protection~~increased liquidity requirements ~~over~~on ~~banks~~our banking or nonbanking subsidiaries imposed by their home countries; or negative perceptions about Bank of America’s and •our ~~requiring~~short- ~~securitizers~~or tolong-term ~~retain~~business aprospects, ~~portion~~including downgrades of ~~the~~credit ~~risk~~ratings. Several of these factors may arise due to circumstances that ~~would~~neither ~~otherwise~~we nor Bank of America may be ~~transferred~~able to ~~investors~~control, such as a general market disruption, negative views about the financial services industry generally, changes in ~~certain~~the ~~securitization~~regulatory ~~transactions~~environment, actions by credit rating agencies or an operational problem that affects third parties, us or Bank of America.

~~The~~Our ~~Financial~~and ~~Reform~~Bank ~~Act~~of ~~may~~America’s ~~have~~cost aof ~~significant~~obtaining funding is directly related to prevailing market interest rates and ~~negative impact~~to oncredit ~~our~~spreads. ~~earnings~~Credit ~~through~~spreads ~~reduced~~are ~~revenues~~the amount in excess of the interest rate of U.S. Treasury securities, ~~higher~~or ~~costs and~~other ~~new~~benchmark ~~restrictions~~securities, of the same maturity that we or Bank of America need to pay to funding providers. Increases in interest rates and bysuch ~~reducing~~credit ~~available~~spreads ~~capital~~can significantly increase the cost of funding for us and Bank of America. ~~The Financial~~Changes ~~Reform~~in ~~Act~~credit spreads are market-driven and may ~~also~~be ~~have~~influenced anby ~~adverse~~market ~~impact~~perceptions onof the ~~value~~ creditworthiness of ~~certain~~us ~~assets~~and Bank of America. Changes to interest rates and ~~liabilities~~credit ~~held~~spreads onoccur ~~our~~continuously ~~balance sheet~~and may be unpredictable and highly volatile.

WeFor ~~anticipate~~additional ~~that~~information ~~the~~about ~~final~~our ~~regulations associated with the Financial Reform Act will include limitations on certain activities~~liquidity, including ~~limitations~~credit onratings ~~the use of certain financial institutions’ own capital for proprietary trading~~ and ~~sponsorship~~outlooks, orsee ~~investment in hedge funds and private equity funds (the~~ “~~Volcker~~Management’s ~~Rule”).~~Discussion ~~Regulations implementing the Volcker Rule are required to be in place by October 21, 2011,~~ and ~~the~~Analysis ~~Volcker~~of ~~Rule~~Financial ~~becomes~~Condition effective twelve months after such rules are final or on July 21, 2012, whichever is earlier. The Volcker Rule then gives certain financial institutions two years from the effective date (with opportunities for additional extensions) to bring activities and ~~investments~~ ~~into~~Results ~~conformance. In anticipation~~ of ~~the~~Operations — ~~adoption~~Funding ~~of the final regulations, we have begun winding down our proprietary trading line of business. The ultimate impact of the Volcker Rule or the winding down of this business,~~ and ~~the time it will take to comply or complete, continues to remain uncertain~~Liquidity. ~~The final regulations issued may impose additional operational and compliance costs on us.~~ ”

~~The~~Our ~~Financial~~dependence ~~Reform~~upon ~~Act~~funds ~~includes~~from ~~measures~~our tosubsidiaries ~~broaden~~and ~~the~~our ~~scope of~~parent ~~derivative~~could ~~instruments~~adversely ~~subject~~impact toour ~~regulation~~liquidity. ML & Co. byis ~~requiring clearing~~a holding company that is a separate and ~~exchange~~distinct ~~trading~~legal ofentity ~~certain~~from ~~derivatives~~its parent, ~~imposing new~~Bank ~~capital~~of America, and ~~margin~~our ~~requirements~~broker-dealers ~~for~~and ~~certain~~other ~~market participants~~subsidiaries. ~~and~~We ~~imposing~~evaluate ~~position~~and ~~limits~~manage liquidity on ~~certain over-the-counter derivatives~~a legal entity basis. ~~The~~Legal ~~Financial~~entity ~~Reform~~liquidity ~~Act~~is ~~grants~~an important consideration as there are legal and other limitations on our ability to utilize liquidity from one legal entity to satisfy the U liquidity requirements of another, including ML & Co.S. For instance, ML ~~Commodity~~& Co. ~~Futures~~depends ~~Trading~~on ~~Commission~~dividends, ~~(the “CFTC”)~~distributions and ~~the~~borrowings ~~SEC~~or ~~substantial~~other ~~new~~payments ~~authority~~from its subsidiaries and ~~requires~~ ~~numerous~~may ~~rulemakings~~depend byin ~~these~~large ~~agencies~~part on financing from Bank of America to fund payments on our obligations, including debt obligations. ~~Generally~~Bank of America may, in some instances, be unable to provide us with the ~~CFTC~~ ~~and~~funding ~~SEC~~we ~~have~~need ~~until~~to ~~July~~fund payments on our obligations. Many of our subsidiaries, including our broker-dealer subsidiaries, are subject to laws that restrict dividend payments to ML 16& Co. In addition, ~~2011~~our broker-dealer subsidiaries are subject to ~~promulgate~~restrictions ~~the rulemakings~~on ~~necessary~~their ability to ~~implement~~lend ~~these~~or ~~regulations~~transact with affiliates and to minimum regulatory capital and liquidity requirements, as well as restrictions on their ability to use funds deposited with them in brokerage accounts to fund their businesses. ~~The ultimate~~Additional ~~impact~~restrictions ofon ~~these~~related ~~derivatives~~party ~~regulations~~transactions, increased capital and liquidity requirements and additional limitations on the ~~time it~~use ~~will~~of ~~take~~funds toon ~~comply~~deposit in brokerage accounts, ~~continues~~as well as lower earnings, can reduce the amount of funds available to ~~remain~~meet ~~uncertain~~the obligations of ML & Co. and ~~The~~even ~~final regulations~~require ~~will~~ML & ~~impose~~Co. to provide additional ~~operational~~funding ~~and~~to ~~compliance costs~~such subsidiaries. Regulatory action of that kind could impede access to funds we need to make payments on usour ~~and~~obligations. ~~may~~In ~~require~~addition, usour right to ~~restructure~~participate ~~certain~~in ~~businesses~~ a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors. For additional information about regulatory capital requirements and ~~negatively~~limitations ~~impact~~on our ~~revenues~~subsidiaries' ~~and~~ability ~~results~~to pay dividends, see Note 18 to the Consolidated Financial Statements in Part II, Item 8 of ~~operations~~this Form 10-K.

~~The~~Mortgage major credit ratings agencies have indicated that the primary drivers of our credit ratings are Bank of America’s credit ratings. Although the ratings agencies have indicated that Bank of America’s credit ratings currently reflect their expectation that, if necessary, Bank of America would receive significant support from the U.S. Government, all three major ratings agencies have indicated they will reevaluate, and ~~could~~Housing reduce the uplift they include in Bank of America’s ratings for government support for reasons arising from financial services regulatory reform proposals or legislation. In the event of certain credit ratings downgrades, our access to credit markets, liquidity and our related funding costs would be materially adversely affected. For additional information about our credit ratings, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Funding and Liquidity” in Part II, Item 7 of this Form 10Market-K. Related Risk

~~Most~~We ~~provisions~~have ofbeen, ~~the~~and ~~Financial~~expect ~~Reform~~to ~~Act~~continue ~~require~~to ~~various federal~~be, ~~banking~~required ~~and securities regulators~~ to ~~issue~~repurchase ~~regulations to~~mortgage ~~clarify~~loans and/or ~~implement~~reimburse ~~its~~whole ~~provisions~~loan orbuyers, toFannie ~~conduct~~Mae ~~studies~~("FNMA") ~~on significant~~and ~~issues.~~Freddie ~~These~~Mac ~~proposed~~(collectively, ~~regulations~~the "GSEs") and ~~studies~~monolines ~~are generally~~for ~~subject~~losses due to aclaims ~~public~~related ~~notice~~to representations and ~~comment~~warranties ~~period.~~made ~~The timing~~in ofconnection ~~issuance~~with sales of ~~final~~residential ~~regulations~~mortgage-backed securities and other loans, ~~their~~and ~~effective~~have ~~dates~~ received similar claims, and ~~their~~may ~~potential~~receive ~~impacts~~additional toclaims, ~~our~~from ~~business~~private-label ~~will~~securitization beinvestors ~~determined over~~and ~~the~~private-label ~~coming~~securitization ~~months~~trustees, monolines and ~~years~~others. AsWe ahave ~~result~~recorded provisions for certain of these exposures. However, the ultimate ~~impact~~ resolution of ~~the~~these ~~Financial~~exposures ~~Reform~~could ~~Act’s~~have ~~final~~a ~~rules~~material adverse effect on our ~~businesses~~ cash flows, financial condition and results of operations. In ~~will~~connection ~~depend~~with onresidential ~~regulatory interpretation~~loans ~~and~~sold ~~rulemaking,~~to investors other than the GSEs as well as to the ~~success~~GSEs, ofMerrill ~~any~~Lynch and certain of ~~our~~ ~~actions~~its tosubsidiaries ~~mitigate~~made ~~the~~various ~~negative~~representations ~~earnings~~and ~~impact~~warranties. Breaches of ~~certain provisions.~~ these representations and warranties may result in a requirement that we repurchase mortgage loans, or indemnify or provide other remedies to counterparties

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(collectively, "repurchases"). Merrill Lynch, including First Franklin Financial Corporation ("First Franklin"), sold loans originated from 2004 to 2008 (primarily subprime and alt-A) with an original principal balance of $132 billion through private-label securitizations or whole loan sales that were subject to representations and warranties liabilities. Most of the loans sold in the form of whole loans were subsequently pooled into private-label securitizations sponsored by the third-party buyer of the whole loans. For the outstanding balance of these loans as of December 31, 2011 and December 31, 2010, see Management's Discussion and Analysis of Financial Condition and Results of Operations - Off-Balance Sheet Exposures - Representations and Warranties - Experience with Non-GSE Investors” in Part II, Item 7 1Aof this Form 10-K. In ~~Risk~~addition, ~~Factors~~Merrill Lynch and First Franklin securitized first-lien residential mortgage loans, generally in the form of mortgage-backed securities ("MBS") guaranteed by the GSEs.

InThe ~~the~~amount ~~course~~ of ~~conducting~~ our ~~business~~total ~~operations,~~outstanding werepurchase ~~are exposed~~claims tofrom aall ~~variety~~sources oftotaled ~~risks,~~approximately ~~some~~$1.3 ofbillion ~~which~~at ~~are~~December ~~inherent~~31, in2011. ~~the financial~~The ~~services~~total ~~industry~~amount ~~and others~~ of ~~which are more specific to~~ our ~~own~~recorded ~~businesses.~~liability ~~The~~related ~~following~~to ~~discussion addresses~~representations ~~some~~and ofwarranties ~~the~~repurchase ~~key~~exposure ~~risks~~was ~~that~~$2.8 ~~could~~billion ~~affect~~at ~~our businesses,~~December ~~operations~~31, ~~and financial condition~~2011. For ~~Other~~information ~~factors that~~concerning ~~could~~the ~~affect~~provisions ~~our~~recorded ~~financial condition and operations are discussed~~ in ~~“Management’s~~2011 ~~Discussion~~ and ~~Analysis~~2010 ~~of Financial~~for ~~Condition~~our ~~and~~repurchase ~~Results~~exposure ofon ~~Operations — Forward~~private-~~Looking~~label ~~Statements.” However~~securitizations, ~~other~~see ~~factors~~Note 14 ~~besides those~~to ~~discussed~~the ~~below~~Consolidated orFinancial ~~elsewhere~~Statements in ~~this report could also adversely affect our businesses~~Part II, ~~operations,~~Item 8 ~~and financial condition. Therefore, the risk factors below should not be considered a complete list~~ of ~~potential~~this ~~risks that we may face~~Form 10-K.

Our ~~businesses~~estimated liability and ~~results~~range of ~~operations~~possible ~~have~~loss ~~been~~with respect to non-GSE exposures is necessarily dependent on, and ~~may continue~~limited ~~to be~~by, ~~materially~~our historical claims and ~~adversely~~settlement ~~affected~~experience byand the ~~U.S. and~~experience ~~international~~of ~~financial~~our ~~markets~~affiliates with non-GSE counterparties and ~~economic~~may ~~conditions generally~~materially change in the future based on factors beyond our control. ~~Our~~ Future ~~businesses~~provisions and/or ~~results~~estimated ranges of ~~operations~~ ~~are~~possible ~~materially~~loss ~~affected~~for bynon-GSE ~~the~~representations ~~financial~~and ~~markets~~warranties ~~and general~~may ~~economic~~be ~~conditions~~significantly inimpacted ~~the~~if ~~U.S.~~actual ~~and~~experiences ~~abroad~~are different from our assumptions in our predictive models, including ~~factors~~, ~~such~~without aslimitation, those regarding the ~~level~~ultimate ~~and~~resolution ~~volatility~~of the Bank of ~~short-term~~New ~~and long-term~~York ~~interest~~Mellon settlement, estimated repurchase rates, ~~inflation~~economic conditions, home prices, ~~unemployment~~ consumer and ~~under-employment~~counterparty ~~levels~~behavior, ~~bankruptcies,~~and ~~household~~a ~~income, consumer~~variety ~~spending~~of judgmental factors. In addition, ~~fluctuations~~we inhave ~~both~~not ~~debt~~recorded ~~and~~any ~~equity~~representations ~~capital markets,~~and ~~liquidity~~warranties ofliability ~~the~~for ~~global~~certain ~~financial~~potential ~~markets,~~monoline ~~the availability~~exposures and ~~cost~~certain potential whole loan exposures. We currently estimate that the range of ~~capital~~possible ~~and~~loss ~~credit,~~related ~~investor~~to ~~sentiment~~ non-GSE representations and ~~confidence~~warranties inexposure ~~the~~as ~~financial~~of ~~markets~~December 31, ~~and~~2011 ~~the~~could ~~strength~~be ofup ~~the U~~to $0.S5 billion over existing accruals. ~~economy~~ This ~~and~~estimated ~~the~~ range of possible loss for non-~~U.S. economies in~~GSE ~~which~~representations weand ~~operate.~~warranties ~~The~~does ~~deterioration~~not ofrepresent ~~any~~a ofprobable ~~these conditions~~loss, ~~can~~and ~~adversely~~is ~~affect~~based ~~our~~on ~~business~~currently ~~and~~available ~~securities portfolios~~information, ~~our~~significant ~~level~~judgment, and a number of ~~charge-offs~~assumptions ~~and~~that ~~provision~~are ~~for~~subject ~~credit losses~~to change, ~~our~~including ~~capital~~the ~~levels~~assumption ~~and~~that ~~liquidity~~the ~~and~~conditions ~~our~~of ~~results~~the ~~of operations~~BNY Mellon Settlement are satisfied.

~~U.S. financial~~Adverse ~~markets~~developments ~~have~~with ~~improved~~respect ~~from~~to ~~the~~one ~~severe financial~~or ~~crisis~~more ~~that~~of ~~dominated~~ the ~~domestic~~assumptions ~~economy~~underlying in the ~~second~~ ~~half~~liability offor ~~2008~~non-GSE representations and ~~early~~warranties ~~2009,~~and ~~but~~the ~~mortgage~~corresponding ~~markets~~estimated ~~remain fragile.~~range ~~The~~of ~~financial~~possible ~~crisis~~loss ~~that~~could ~~gripped~~result ~~the European Union beginning~~ in ~~spring~~significant ~~2010~~increases ~~directly~~to ~~affected~~future ~~U.S. financial market~~provisions ~~behavior~~ and ~~the~~our ~~financial~~estimated ~~services~~range ~~industry. Any intensification~~ of ~~Europe’s~~possible ~~financial~~loss. If ~~crisis~~future orrepresentations ~~the inability~~and towarranties ~~address~~losses ~~the~~occur ~~sources~~in excess of ~~future~~our ~~financial~~recorded ~~turmoil~~liability ~~in Europe~~and ~~may~~estimated ~~adversely~~range ~~affect~~of ~~the~~possible ~~U.S. and~~loss ~~international financial~~for ~~markets~~non-GSE exposures and ~~the~~in ~~financial~~excess ~~services~~of ~~industry.~~our ~~Such adverse~~recorded ~~effect~~liability ~~may~~for ~~involve~~GSE ~~declines in liquidity~~exposures, ~~loss~~including ~~of investor~~as ~~confidence~~a inresult of the ~~financial~~factors ~~services~~set ~~industry~~forth below, ~~disruptions~~ insuch ~~credit~~losses ~~markets,~~could ~~declines~~have ina ~~the~~material ~~values~~adverse ofeffect ~~many asset~~on ~~classes,~~our ~~reductions~~cash inflows, ~~home~~financial ~~prices~~condition and ~~increased unemployment~~results of operations.

~~Although~~The ~~the~~liability ~~U.S. economy~~for ~~has~~obligations ~~continued~~under torepresentations ~~recover throughout~~and ~~2010~~warranties ~~and~~with ~~growth~~respect ofto ~~real~~GSE ~~Gross~~and ~~Domestic~~non-GSE ~~Product strengthened~~exposures inand the ~~second~~corresponding ~~half~~estimate of ~~2010,~~ the ~~elevated~~range ~~levels~~ of ~~unemployment~~ possible loss for non-GSE representations and ~~household~~warranties ~~debt,~~exposures ~~along~~do ~~with~~not ~~continued~~include ~~stress~~any losses related to litigation matters disclosed in ~~the~~ ~~consumer~~Note 14 ~~and~~to ~~commercial~~the ~~real~~Consolidated ~~estate~~Financial ~~markets~~Statements, ~~pose~~nor ~~challenges for~~do ~~domestic~~they ~~economic~~include ~~performance~~any ~~and~~potential ~~the~~securities ~~financial~~law ~~services industry.~~or ~~Consumer~~fraud ~~spending,~~claims ~~exports~~or ~~and~~potential ~~business~~indemnity ~~investment~~or ~~in equipment~~other ~~and~~claims ~~software~~against ~~rose~~us. ~~during~~Merrill ~~2010,~~Lynch ~~and~~is ~~showed~~not ~~accelerated momentum~~able into ~~the~~reasonably ~~second~~estimate ~~half~~the amount of ~~2010,~~any ~~but~~possible ~~labor~~loss ~~markets~~with ~~and housing~~respect ~~markets~~to ~~remain~~any ~~weak~~such ~~and~~securities ~~pose~~law ~~risks.~~(except ~~The~~to ~~sustained~~the ~~high unemployment~~extent ~~rate~~reflected ~~and~~in the ~~lengthy~~aggregate ~~duration~~range of ~~unemployment~~possible ~~have directly~~loss ~~impaired~~for ~~consumer~~litigation ~~finances~~ and ~~pose~~regulatory ~~risks~~matters disclosed in Note 14 to the ~~financial~~ ~~services~~Consolidated ~~sector.~~Financial ~~These~~Statements), ~~factors~~fraud ~~may~~or ~~adversely~~other ~~affect credit~~claims ~~quality~~against ~~and~~us; ~~the~~however, ~~general~~such loss could have a material adverse effect on our cash flows, financial ~~services~~condition ~~sector~~and results of operations.

~~These~~For ~~conditions,~~additional asinformation ~~well~~about asour ~~any~~representations ~~further~~and ~~challenges~~warranties ~~stemming from~~exposure, ~~the~~see ~~continuing~~“Management’s ~~global~~Discussion ~~economic recovery~~ and ~~recent financial~~Analysis ~~reform~~of ~~initiatives, such as the~~ Financial ~~Reform~~Condition ~~Act, could~~and ~~have~~Results aof ~~material~~Operations — ~~adverse~~Off-Balance ~~effect~~Sheet onExposures — ~~our~~Representations ~~businesses~~ and ~~results~~ ofWarranties” ~~operations~~and inNote 14 to the ~~future~~Consolidated Financial Statements.

~~Liquidity Risk~~ If final court approval is not obtained with respect to the BNY Mellon Settlement or if Bank of America and certain of its non-Merrill Lynch subsidiaries determine to withdraw from the settlement, Merrill Lynch's future representations and warranties losses could substantially exceed our existing accruals and the estimated range of possible loss over existing accruals, and consequently could have a material adverse effect on Merrill Lynch's cash flows, financial condition and results of operations. On June 28, 2011, Bank of America and certain of its non-

~~Liquidity risk is the potential inability to meet our contractual and contingent financial obligations, on- or off-balance sheet, as they become due.~~ 8

7 Table of Contents

~~Table~~Merrill Lynch subsidiaries entered into a settlement agreement with The Bank of ~~Contents~~New York Mellon (“BNY Mellon”), as trustee, to resolve, among other claims, all outstanding and potential claims related to alleged representations and warranties breaches (including repurchase claims) with respect to the 525 legacy first-lien and five second-lien non-GSE residential mortgage-backed securitization trusts containing loans principally originated between 2004 and 2008 and for which BNY Mellon acts as trustee or indenture trustee (the “BNY Mellon Settlement”). The BNY Mellon Settlement is subject to final court approval and certain other conditions. It is not currently possible to predict the timing or ultimate outcome of the court approval process, which can include appeals and could take a substantial period of time. There can be no assurance that final court approval of the settlement will be obtained, that all conditions will be satisfied (including the receipt of private letter rulings from the Internal Revenue Service (the “IRS”) and other tax rulings and opinions) or that, if certain conditions to the BNY Mellon Settlement permitting withdrawal are met, Bank of America and certain of its non-Merrill Lynch subsidiaries will not determine to withdraw from the BNY Mellon Settlement agreement.

~~Adverse~~If ~~changes~~final tocourt ~~Bank~~approval ofis ~~America’s~~not orobtained ~~our~~with ~~credit ratings~~respect ~~from~~to the ~~major~~BNY ~~credit~~Mellon ~~ratings~~Settlement ~~agencies~~or ~~could~~if ~~have~~Bank ~~a material~~of ~~adverse~~America ~~effect~~and oncertain ~~our~~of ~~liquidity,~~its ~~cash~~non-Merrill ~~flows, competitive~~Lynch ~~position,~~subsidiaries ~~financial~~determine ~~condition~~to ~~and~~withdraw ~~results~~from ~~of operations~~the byBNY ~~significantly~~Mellon ~~limiting~~Settlement ~~our~~agreement ~~access~~in toaccordance ~~the~~with ~~funding or~~its ~~capital markets~~terms, ~~increasing~~Merrill ~~our~~Lynch's ~~borrowing~~future ~~costs,~~representations ~~or triggering~~and ~~additional~~warranties ~~collateral~~losses orwith ~~funding~~respect ~~requirements~~to ~~under certain~~non-GSEs ~~bilateral~~could ~~provisions~~substantially ofexceed our ~~trading~~non-GSE ~~and~~reserve, ~~collateralized financing~~together ~~contracts. Credit~~with ~~ratings and outlooks are opinions on~~ our ~~creditworthiness~~estimated ~~and~~range ~~that~~ of ~~our~~possible ~~obligations or~~loss ~~securities,~~related ~~including~~to ~~long~~non-~~term~~GSE ~~debt,~~representations ~~short-term borrowings~~ and ~~other~~warranties ~~securities.~~exposure ~~Our~~of ~~credit~~up ~~ratings~~to ~~affect~~$0.5 ~~the~~billion ~~cost~~over ~~and availability~~existing ofaccruals ~~our~~at ~~funding.~~December ~~In addition~~31, ~~credit~~2011. ~~ratings~~Developments ~~may~~with ~~be important~~respect to ~~customers~~one or ~~counterparties~~more ~~when~~of wethe ~~compete~~assumptions ~~in certain~~underlying ~~markets~~the ~~and~~estimated ~~when~~range weof ~~seek~~possible toloss ~~engage~~for innon-GSE ~~certain transactions,~~representations ~~including~~and ~~over-the-counter~~warranties (~~“OTC”) derivatives.~~including ~~Thus,~~the ittiming isand ~~our~~ultimate ~~objective~~outcome toof ~~maintain~~the ~~high-quality credit~~court ~~ratings.~~approval ~~The~~process ~~major~~relating ~~credit~~to ~~ratings agencies have indicated that~~ the ~~primary~~BNY ~~drivers~~Mellon ofSettlement) ~~Merrill~~could ~~Lynch’s~~result ~~credit~~in ~~ratings are~~significant ~~Bank~~increases ofin ~~America’s~~our ~~credit~~non-GSE ~~ratings.~~reserve ~~Ratings agencies regularly evaluate Bank of America~~ and/or ~~us.~~to ~~Their~~this ~~ratings~~estimated range of ~~our long-term~~possible ~~and~~loss, ~~short-term debt~~ and ~~other~~such ~~securities~~increases ~~may~~could ~~change from~~have ~~time~~a tomaterial ~~time~~adverse ~~and~~effect ~~are based~~ on aour ~~number~~cash ~~of factors~~flows, ~~including~~ ~~Bank~~financial ofcondition ~~America’s~~ and ~~our~~results ~~financial~~of ~~strength and~~ operations. For asadditional ~~well~~information asregarding ~~factors~~the ~~not~~BNY ~~under~~Mellon ~~our control~~Settlement, ~~such~~see ~~as rating-agency-specific~~“Management's ~~criteria~~Discussion orand ~~frameworks~~Analysis ~~for~~of ~~our~~Financial ~~industry or~~Condition ~~certain~~and ~~security~~Results ~~types,~~of ~~which~~Operations - ~~are~~Off-Balance ~~subject~~Sheet toExposures - ~~revision~~Representations ~~from time to time,~~ and ~~conditions affecting the financial services industry generally~~Warranties”.

~~There~~Further ~~can~~weakness bein nothe ~~assurance~~U.S. ~~that~~housing wemarket, ~~will~~including ~~maintain~~home ~~our~~prices, ~~current ratings.~~may Aadversely ~~reduction~~affect ~~in certain of~~ our ~~credit~~asset ~~ratings~~classes ~~would likely~~and have a ~~material~~significant adverse effect on our ~~liquidity,~~financial ~~access to~~condition ~~credit~~and ~~markets,~~results ~~the~~of ~~related~~operations. Economic ~~cost~~weakness ofin ~~funds,~~2011 ~~our~~was ~~businesses~~accompanied ~~and on~~by ~~certain~~continued ~~trading~~stress ~~revenues,~~in ~~particularly~~the inU.S. housing ~~those~~market, ~~businesses where~~including ~~counterparty~~declines ~~creditworthiness~~in ishome ~~critical~~prices. InThese ~~connection with~~declines ~~certain~~in ~~OTC~~the ~~derivatives~~housing ~~contracts and other trading agreements~~market, ~~counterparties~~with ~~may~~falling ~~require~~home usprices toand ~~provide~~elevated ~~additional collateral or to terminate these contracts~~foreclosures, ~~agreements~~have ~~and collateral~~negatively ~~financing~~impacted ~~arrangements in~~ the ~~event of a~~ credit ~~ratings~~ ~~downgrade~~performance of ~~Bank~~certain of ~~America (and consequently ML & Co.). Termination of these contracts and agreements could cause us to sustain losses and impair~~ our ~~liquidity because we would be required to make significant cash payments or pledge securities as collateral~~portfolios. IfContinued ~~Bank~~high ofunemployment ~~America’s~~rates orin ~~Merrill Lynch’s~~the ~~commercial paper or short-term credit ratings (which currently~~ U.S. have ~~the~~challenged ~~following ratings: P-1 by Moody’s, A-1 by~~ U.S&P. consumers and ~~F1+~~further bycompounded ~~Fitch)~~these ~~were~~stresses ~~downgraded~~in ~~by one or more levels,~~ the ~~potential~~U.S. housing ~~loss~~market ofas ~~short-term~~employment ~~funding~~conditions ~~sources~~may ~~such~~be ~~as repurchase~~compelling ~~agreement~~some ~~financing~~consumers ~~and~~to ~~the~~delay ~~effect~~new onhome ~~our~~purchases ~~incremental cost~~or ofmiss ~~funds~~payments ~~would~~on beexisting ~~material~~mortgages.

~~During~~Conditions ~~2009~~in ~~and~~the ~~2010,~~U.S. ~~the~~housing ~~ratings~~market ~~agencies~~have ~~took~~also ~~numerous actions,~~resulted ~~many~~in ofsignificant ~~which~~write-downs ~~were~~of ~~negative,~~asset tovalues ~~adjust~~in ~~Bank~~several ~~of America’s~~asset ~~and~~classes, ~~our~~notably ~~credit~~mortgage-backed ~~ratings~~securities and ~~the~~exposure ~~outlooks~~to ~~on those ratings~~monolines. ~~The~~These ~~ratings~~conditions ~~agencies~~may ~~have~~negatively ~~indicated~~affect ~~that,~~the asvalue ~~a systemically~~of ~~important~~real ~~financial institution~~estate, ~~Bank~~which ~~of America’s~~could ~~credit~~negatively ~~ratings~~affect ~~currently~~our ~~reflect~~exposure ~~their expectation~~to ~~that,~~representations ifand ~~necessary,~~warranties. ~~Bank~~While ofthere ~~America~~were ~~would~~continued ~~receive significant~~indications ~~support~~throughout ~~from~~the past year that the U.S. ~~Government.~~economy ~~All~~is ~~three ratings agencies have indicated~~stabilizing, ~~however, that they will reevaluate and could reduce~~ the ~~uplift~~performance ~~they include in Bank~~ of ~~America’s~~ ~~ratings~~our ~~for~~overall ~~government~~portfolios ~~support for reasons arising from financial services regulatory reform proposals. Any expectation that government support~~ may benot ~~diminished~~significantly ~~or withheld~~improve in the near future. ~~would~~A ~~likely~~protracted ~~have~~continuation aor ~~negative~~worsening ~~impact on Bank~~ of ~~America’s~~these ~~(and~~difficult ~~consequently~~U.S. ~~our)~~housing ~~credit~~market ~~ratings. The~~conditions ~~timing~~may ofexacerbate the ~~agencies’~~adverse ~~assessments~~effects ofoutlined ~~potential government~~above ~~support,~~and ashave ~~well~~a assignificant ~~the~~adverse ~~impact~~effect on our ~~credit~~financial ~~ratings, is~~condition ~~currently~~and ~~uncertain~~results of operations.

~~For~~Credit ~~a further discussion of our liquidity matters, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Funding and Liquidity.”~~ Risk

~~Our~~Credit ~~liquidity,~~risk ~~cash~~is ~~flows, financial condition and results of operations, and competitive position could be significantly adversely affected by~~ the ~~inability~~risk of ~~ML &~~loss ~~Co.~~arising ~~or Bank~~from ofa ~~America~~borrower, toobligor ~~access capital markets~~ or ifcounterparty ~~there~~default iswhen ~~an increase in our borrowing costs. Liquidity is essential to our business. We fund our assets primarily with~~ a ~~mix~~ of secured and unsecured liabilities through a globally coordinated funding strategy with Bank of America. We have established intercompany lending and borrowing arrangements to facilitate centralized liquidity management. As a resultborrower, ~~our liquidity~~obligor ~~risk~~or iscounterparty ~~derived~~does innot ~~large~~meet ~~part~~its ~~from Bank of America’s liquidity risk~~obligations. ~~Bank of America’s and our liquidity could be~~

8 Increased credit risk, due to economic or market disruptions, insufficient credit loss reserves or concentration of credit risk, may necessitate increased provisions for credit losses and could have an adverse effect on our financial condition and results of operations. When we buy debt securities, loan money, commit to loan money or enter into a letter of credit or other contract with a counterparty, we incur credit risk, or the risk of losses if our borrowers do not repay their loans or our counterparties fail to perform according to the terms of their agreements. A number of our products expose us to credit risk, including loans, lending commitments, derivatives, trading account assets and assets held-for-sale. The credit quality of our portfolios has a significant impact on our earnings.

~~Table of Contents~~9

~~significantly~~Table ~~adversely affected by an inability to access the capital markets; illiquidity or volatility in the capital markets; unforeseen outflows~~ of cash, including customer deposits, funding for commitments and contingencies; inability to sell assets on favorable terms; or negative perceptions about Bank of America’s and our short- or long-term business prospects, including changes in credit ratings. Several of these factors may arise due to circumstances that neither we nor Bank of America may be able to control, such as a general market disruption, negative views about the financial services industry generally, changes in the regulatory environment, actions by credit ratings agencies or an operational problem that affects third parties, us or Bank of America. For example, during the recent financial crisis, our ability to raise funding was at times adversely affected in the U.S. and international markets. Contents

~~Our~~Global and ~~Bank~~U.S. ofeconomic ~~America’s~~conditions ~~cost~~continue ~~of obtaining funding is directly related~~ to ~~prevailing~~weigh ~~market~~on ~~interest~~our ~~rates and to~~ credit ~~spreads~~portfolios. ~~Credit~~Economic ~~spreads~~or ~~are~~market ~~the~~disruptions ~~amount~~are inlikely ~~excess~~to ofincrease ~~the interest~~our ~~rate~~credit ofexposure ~~U.S. Treasury~~to ~~securities~~customers, obligors or other ~~benchmark~~ ~~securities,~~counterparties ofdue ~~the same maturity that we or Bank of America need~~ to ~~pay to funding providers. Increases in interest rates and such credit spreads can significantly increase~~ the ~~cost~~ ofincreased ~~funding~~risk ~~for~~that usthey ~~and Bank of America. Changes in credit spreads are market-driven, and~~ may bedefault ~~influenced~~on bytheir ~~market perceptions~~obligations ofto ~~the creditworthiness of~~ us ~~and Bank of America~~. ~~Changes to interest rates and credit spreads occur continuously and may be unpredictable and highly volatile.~~

~~For~~We ~~additional~~estimate ~~information~~and ~~about~~establish an allowance for credit losses for losses inherent in our ~~liquidity,~~lending activities (including unfunded lending commitments), excluding those measured at fair value, through a charge to earnings. The amount of allowance is determined based on our evaluation of the potential credit ~~ratings~~ losses included within our loan portfolio. The process for determining the amount of the allowance requires difficult, subjective and ~~outlooks~~complex judgments. Our ability to assess future economic conditions or the creditworthiness of our customers, ~~see~~obligors ~~“Management’s~~or ~~Discussion~~other counterparties is imperfect. We may suffer unexpected losses if the models and ~~Analysis~~ ofassumptions ~~Financial~~we ~~Condition~~use to establish reserves and ~~Results~~make judgments in extending credit to our borrowers and other counterparties become less predictive of ~~Operations —~~ ~~Funding~~future events. In such an event, we might need to increase the size of our allowance, which could adversely affect our financial condition and ~~Liquidity~~results of operations.”

~~Our~~In ~~dependence~~the ~~upon~~ordinary ~~funds~~course ~~from~~of our ~~subsidiaries~~business, ~~and~~we ~~our parent~~also ~~could~~may ~~adversely~~be ~~impact~~subject ~~our liquidity. ML & Co.~~to is a ~~holding company~~concentration ~~that~~of iscredit arisk ~~separate~~in ~~and~~a ~~distinct~~particular ~~legal~~industry, ~~entity from its parent~~country, ~~Bank of America~~counterparty, ~~and~~borrower ~~our~~or ~~broker-dealer and other subsidiaries~~issuer. WeA ~~evaluate~~deterioration ~~and~~in ~~manage~~the ~~liquidity~~financial oncondition aor ~~legal~~prospects ~~entity basis.~~of ~~Legal~~a ~~entity~~particular ~~liquidity~~industry isor ana ~~important~~failure ~~consideration~~or ~~as there~~downgrade ~~are legal and other limitations on our ability to utilize liquidity from one legal entity to satisfy the liquidity requirements~~ of ~~another~~, ~~including~~or ~~ML & Co.~~default ~~For instance~~by, ~~ML & Co.~~any ~~depends~~particular onentity ~~dividends, distributions and borrowings~~ or ~~other~~group ~~payments~~of ~~from~~entities ~~its subsidiaries~~could ~~and~~have ~~may~~a ~~depend~~material inadverse ~~large~~effect ~~part~~ on ~~financing from Bank of America to fund payments on~~ our ~~obligations~~businesses, ~~including~~and ~~debt obligations.~~the ~~Bank~~processes ofby ~~America~~which ~~may,~~we inset ~~some~~limits ~~instances,~~and bemonitor ~~unable to provide us with~~ the ~~funding~~level ~~we need to fund payments on our obligations. Many~~ of our ~~subsidiaries,~~credit ~~including~~exposure ~~our broker-dealer~~to ~~subsidiaries~~individual entities, ~~are~~industries ~~subject~~and tocountries ~~laws~~may ~~that~~not ~~restrict dividend~~function ~~payments~~as towe ~~ML &~~have Coanticipated. InWhile ~~addition,~~ our ~~broker-dealer~~ ~~subsidiaries~~activities ~~are~~expose ~~subject~~us to ~~restrictions~~many ondifferent ~~their ability~~industries ~~to lend or transact with affiliates~~ and ~~to minimum regulatory capital requirements~~counterparties, aswe ~~well~~routinely asexecute ~~restrictions~~a ~~on their~~high ~~ability~~volume toof ~~use~~transactions ~~funds deposited~~ with ~~them~~counterparties in ~~brokerage accounts~~the tofinancial ~~fund~~services ~~their~~industry, ~~businesses.~~including ~~Additional restrictions on related~~broker-~~party transactions~~dealers, ~~increased~~commercial ~~capital requirements and additional limitations on the use of funds on deposit in brokerage accounts~~banks, asinvestment ~~well as lower earnings, can reduce the amount of~~ funds ~~available to meet the obligations of ML & Co.~~ and ~~even require ML & Co~~insurers. ~~to provide~~This ~~additional~~has ~~funding~~resulted ~~to such subsidiaries. Regulatory restrictions could impede access to funds we need to make payments on our obligations. In addition, our right to participate~~ in asignificant ~~distribution~~credit ofconcentration ~~assets~~with ~~upon~~respect ~~a subsidiary’s liquidation or reorganization is subject~~ to ~~the~~this ~~prior claims of the subsidiary’s creditors~~industry.

~~Mortgage~~ In the ordinary course of business, we also enter into transactions with sovereign nations, U.S. states and ~~Housing~~U.S. municipalities. ~~Market-Related~~Unfavorable ~~Risk~~ economic or political conditions, disruptions to capital markets, currency fluctuations, social instability and changes in government policies could impact the operating budgets or credit ratings of sovereign nations, U.S. states and U.S. municipalities and expose us to credit risk.

WeFor have been, and expect to continue to be, required to repurchase loans and/or reimburse whole loan buyers, the government-sponsored enterprises (“GSEs”) and monoline bond insurance companies (“monolines”) for losses due to claims related to representations and warranties made in connection with sales of residential mortgage-backed securities and other loans, and have received similar claims, and may receive additional ~~claims,~~information ~~from~~about ~~private-label securitization investors. The resolution of these claims could have a material adverse effect on~~ our ~~cash~~credit ~~flows,~~risk ~~financial condition~~ and ~~results~~credit ~~of operations. In~~risk ~~prior~~management ~~years,~~policies ~~Merrill Lynch~~ and ~~certain~~ ~~of its subsidiaries~~procedures, ~~including~~see ~~First Franklin Financial Corporation (~~“~~First~~Quantitative ~~Franklin”),~~and ~~sold~~Qualitative ~~pools~~Disclosures ~~of first-lien~~about ~~mortgage~~Market ~~loans~~Risk — ~~and~~Credit ~~home~~Risk ~~equity loans as private-label~~ Management.”

9 We could suffer losses as a result of the actions of, or deterioration in, the commercial soundness of our counterparties and other financial services institutions. We could suffer losses and our ability to engage in routine trading and funding transactions could be adversely affected by the actions and commercial soundness of other market participants. We have exposure to many different industries and counterparties, and we routinely execute transactions with counterparties in the financial services industry, including broker-dealers, commercial banks, investment banks, mutual and hedge funds and other institutional clients. Financial services institutions and other counterparties are inter-related because of trading, funding, clearing or other relationships. As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, have led to market-wide liquidity problems and could lead to significant future liquidity problems, including losses or defaults by us or by other institutions. Many of these transactions expose us to credit risk in the event of default of a counterparty or client. In addition, our credit risk may be impacted when the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount of the loan or derivatives exposure due us. Any such losses could materially adversely affect our financial condition and results of operations.

~~Table~~Our derivatives businesses may expose us to unexpected risks and potential losses. We are party to a large number of ~~Contents~~derivatives transactions, including credit derivatives. Our derivatives businesses may expose us to unexpected market, credit and operational risks that could cause us to suffer unexpected losses and have an adverse effect on our financial condition and results of operations. Severe declines in asset values, unanticipated credit events or unforeseen circumstances that may cause previously uncorrelated factors to become correlated (and vice versa) may create losses resulting from risks not appropriately taken into account in the development, structuring or pricing of a derivative instrument. The terms of certain of our OTC derivative contracts and other trading agreements provide that upon the occurrence of certain specified events, such as a change in our credit ratings, we may be required to provide additional collateral or to provide other remedies, or our counterparties may have the right to terminate or otherwise diminish our rights under these contracts or agreements.

securitizations or in the form of whole loans. In certain cases, all or a portion of the private label securitizations were insured by monolines. In addition, Merrill Lynch and First Franklin securitized first-lien residential mortgage loans generally in the form of mortgage-backed securities guaranteed by the GSEs. In connection with these transactions, Merrill Lynch and certain of its subsidiaries made various representations and warranties. These representations and warranties, as governed by the agreements, related to, among other things, the ownership of the loan, the validity of the lien securing the loan, the absence of delinquent taxes or liens against the property securing the loan, the process used to select the loan for inclusion in a transaction, the loan’s compliance with any applicable loan criteria, including underwriting standards, and the loan’s compliance with applicable federal, state and local laws. Breaches of these representations and warranties may result in the requirement that we repurchase mortgage loans or otherwise make whole or provide other remedy to counterparties (collectively, repurchase claims). 10

WeTable ~~expect repurchase and similar requests going forward and the volume~~ of repurchase requests from monolines, whole loan buyers and investors in private-label securitizations could increase in the future. It is reasonably possible that future losses may occur and our estimate is that the upper range of possible loss related to non-GSE sales could be $1 billion to $2 billion over existing accruals. This estimate does not represent a probable loss, is based on currently available information, significant judgment, and a number of assumptions that are subject to change. Future provisions and possible loss or range of possible loss may be impacted if actual results are different from our assumptions regarding economic conditions, home prices and other matters and may vary by counterparty. We expect that the resolution of the repurchase claims process with the non-GSE counterparties will likely be a protracted process, and we will vigorously contest any request for repurchase if we conclude that a valid basis for a repurchase claim does not exist. Contents

~~The~~Many ~~resolution~~derivative ofinstruments ~~claims~~are ~~related~~individually tonegotiated ~~alleged~~and ~~breaches~~non-standardized, ofwhich ~~these representations~~can ~~and~~make ~~warranties~~exiting, ~~and~~transferring ~~repurchase~~or ~~claims~~settling ~~could~~some ~~have a~~positions ~~material~~difficult. ~~adverse~~Many ~~effect~~derivatives onrequire ~~our~~that ~~financial~~we ~~condition,~~deliver ~~cash~~to ~~flows and~~the ~~results~~counterparty ofthe ~~operations~~underlying security, ~~and~~loan ~~could~~or ~~exceed~~other ~~existing~~obligation ~~estimates and~~in ~~accruals~~order to receive payment. In ~~addition,~~a ~~any~~number ~~accruals~~of orcases, ~~estimates~~ we ~~have made~~do ~~are~~not ~~based~~hold, onand ~~assumptions~~may ~~which~~not ~~are~~be ~~subject~~able to ~~change~~obtain, the underlying security, loan or other obligation.

~~For~~Following ~~additional~~the ~~information~~downgrade ~~about~~of ~~our~~the ~~representations~~credit ratings of ML & Co. and ~~warranties~~ ~~exposure~~certain subsidiaries, ~~see~~we ~~“Management’s~~have ~~Discussion~~engaged in discussions with certain derivative and ~~Analysis~~ ofother ~~Financial~~counterparties ~~Condition~~regarding their rights under these agreements. In response to counterparties' inquiries and ~~Results~~requests, ~~of Operations —~~we ~~Off-Balance~~have ~~Sheet~~discussed ~~Exposures — Representations~~and in some cases substituted derivative contracts and ~~Warranties”~~other trading agreements, including naming our affiliate, Bank of America, N.A. ("BANA") as the new counterparty. Our ability to substitute or make changes to these agreements to meet counterparties' requests may be subject to certain limitations, including counterparty willingness, regulatory limitations on naming BANA as the new counterparty, and ~~Note 14~~the type or amount of collateral required. It is possible that such limitations on our ability to substitute or make changes to these agreements, including naming BANA as the ~~Consolidated~~ ~~Financial~~new ~~Statements~~counterparty, could adversely affect our results of operations.

~~Continued,~~Derivatives orcontracts ~~increasing,~~and ~~declines~~other intransactions ~~the~~entered ~~domestic~~into ~~and international~~with ~~housing~~third ~~markets,~~parties ~~including~~are ~~home~~not ~~prices,~~always ~~may adversely~~confirmed ~~affect~~by ~~our~~the ~~asset~~counterparties ~~classes~~or ~~and~~settled ~~have~~on a ~~significant adverse~~timely ~~effect~~basis. onWhile ~~our~~a ~~financial~~transaction ~~condition~~remains ~~and~~unconfirmed ~~results~~or ~~of operations. Economic~~during ~~deterioration~~any ~~throughout 2009~~delay ~~and~~in ~~weakness~~settlement, inwe ~~the~~are ~~economic~~subject ~~recovery~~to inheightened ~~2010~~credit ~~were accompanied~~and byoperational ~~continued~~risk ~~stress~~and in the ~~U.S. and international~~event ~~housing~~of ~~markets,~~default ~~including~~may ~~declines~~find init ~~home prices.~~more ~~These~~difficult ~~declines~~to inenforce the ~~housing~~contract. ~~market~~In addition, ~~with~~as ~~falling~~new ~~home prices~~ and ~~increasing~~more ~~foreclosures,~~complex derivatives products have ~~negatively~~been ~~impacted~~created, ~~the credit~~covering ~~performance~~a ofwider ~~certain~~array of ~~our~~underlying ~~portfolios.~~credit ~~Continued~~and ~~high unemployment~~other ~~rates~~instruments, indisputes about the ~~U.S. have~~terms ~~added~~of ~~another element to~~ the ~~financial~~underlying ~~challenges~~contracts ~~facing~~may ~~U.S. consumers~~arise, ~~and further~~which ~~compounded~~could ~~these~~impair ~~stresses~~our inability ~~the~~to ~~U.S. housing market~~effectively asmanage ~~employment~~our ~~conditions~~risk ~~may~~exposures befrom ~~compelling~~these ~~some~~products ~~consumers to~~and ~~delay~~subject ~~new~~us ~~home~~to ~~purchases~~increased ~~or miss payments on existing mortgages~~costs.

~~Conditions~~For inadditional ~~the~~information ~~housing~~on ~~market~~our ~~have~~derivatives ~~also resulted in significant write-downs of asset values in several asset classes, notably mortgage-backed securities and~~ exposure ~~to monolines. These conditions may negatively affect the value of real estate~~, ~~which~~see ~~could~~Note 6 ~~negatively affect our exposure~~ to ~~representations~~ ~~and warranties. While there were continued indications throughout~~ the ~~past~~Consolidated ~~year~~Financial ~~that the U~~Statements.S. economy is stabilizing, the performance of our overall portfolios may not significantly improve in the near future. A protracted continuation or worsening of these difficult housing market conditions would likely exacerbate the adverse effects outlined above and have a significant adverse effect on our financial condition and results of operations.

10 Market Risk

~~Table~~Market risk is the risk that values of ~~Contents~~assets and liabilities or revenues will be adversely affected by changes in market conditions such as market volatility. Market risk is inherent in the financial instruments associated with our operations and activities, including loans, deposits, securities, short-term borrowings, long-term debt, trading account assets and liabilities, and derivatives.

~~Credit Risk~~ Our businesses and results of operations have been, and may continue to be, significantly adversely affected by changes in the levels of market volatility and by other financial or capital market conditions. Our businesses and results of operations may be adversely affected by market risk factors such as changes in interest and currency exchange rates, equity and futures prices, the implied volatility of interest rates, credit spreads and other economic and business factors. These market risks may adversely affect, among other things, (i) the value of our on- and off-balance sheet securities, trading assets, and other financial instruments, (ii) the cost of debt capital and our access to credit markets, (iii) the value of assets under management, which could reduce our fee income relating to those assets, (iv) customer allocation of capital among investment alternatives, (v) the volume of client activity in our trading operations, (vi) investment banking fees, and (vii) the general profitability and risk level of the transactions in which we engage. Any of these developments could have a significant adverse impact on our financial condition and results of operations.

~~Credit~~We ~~risk~~use isvarious ~~the~~models and strategies to assess and control our market risk exposures but those are subject to inherent limitations. Our models, which rely on historical trends and assumptions, may not be sufficiently predictive of ~~loss~~future ~~arising~~results ~~from~~due ato ~~borrower~~limited historical patterns, ~~obligor~~ extreme or ~~counterparty~~unanticipated ~~default~~market ~~when~~movements aand ~~borrower~~illiquidity, ~~obligor~~especially during severe market downturns or ~~counterparty~~ ~~does~~stress ~~not~~events. ~~meet~~The ~~its~~models ~~obligations~~that we use to assess and control our market risk exposures also reflect assumptions about the degree of correlation or lack thereof among prices of various asset classes or other market indicators.

~~Increased~~In ~~credit~~times ~~risk,~~of ~~due~~market tostress ~~economic~~ or ~~market~~other ~~disruptions~~unforeseen circumstances, ~~insufficient~~ ~~credit~~such ~~loss~~as ~~reserves~~the ormarket ~~concentration~~conditions ofexperienced ~~credit risk,~~in ~~may~~2008 ~~necessitate~~and ~~increased~~2009, ~~provisions~~previously ~~for~~uncorrelated ~~credit~~indicators ~~losses~~may ~~and could~~become ~~have~~correlated, anor ~~adverse~~previously ~~effect~~correlated onindicators ~~our~~may ~~financial~~move ~~condition~~in ~~and results~~different ~~of operations~~directions. ~~When~~ weThese ~~buy~~types ~~debt securities,~~of ~~loan~~market ~~money,~~movements ~~commit~~have toat ~~loan~~times ~~money~~limited orthe ~~enter~~effectiveness ~~into a letter~~ of ~~credit~~our orhedging ~~other~~strategies ~~contract~~and ~~with~~have acaused ~~counterparty,~~us weto incur ~~credit~~ ~~risk,~~significant ~~or the risk of~~ losses, ifand ~~our~~they ~~borrowers~~may ordo ~~our counterparties~~so ~~fail~~in tothe ~~perform~~future. ~~according~~These tochanges ~~the~~in ~~terms~~correlation ofcan ~~their agreements.~~be Aexacerbated ~~number~~where ofother ~~our~~market ~~products~~participants ~~expose~~are ususing ~~to credit~~ risk~~, including~~ ~~loans,~~or ~~derivatives,~~ trading ~~account~~models ~~assets~~with ~~and~~assumptions ~~assets held-for-sale and~~or ~~unfunded~~algorithms ~~lending commitments~~ that ~~include~~are ~~loan~~similar ~~commitments, letters~~to ofours. ~~credit~~In these and ~~financial~~other ~~guarantees.~~cases, ~~The~~it ~~credit~~may ~~quality of~~be ~~our~~difficult ~~portfolios~~to ~~has~~reduce aour ~~significant~~risk ~~impact~~positions ondue ~~our~~to ~~earnings.~~ the

Although credit quality generally continued to show improvement throughout 2010, global and national economic conditions continue to weigh on our credit portfolios. Economic or market disruptions are likely to increase our credit exposure to customers, obligors or other counterparties due to the increased risk that they may default on their obligations to us. 11

WeTable estimate and establish an allowance for credit risks and credit losses inherent in our lending activities (including unfunded lending commitments), excluding those measured at fair value, through a charge to earnings. The amount of allowance is determined based on our evaluation of the potential credit losses included within our loan portfolio. The process for determining the amount of the allowance requires subjective and complex judgments. Our ability to assess future economic conditions or the creditworthiness of our customers, obligors or other counterparties is imperfect. We may underestimate the credit losses in our portfolios and suffer unexpected losses if the models and approaches we use to establish reserves and make judgments in extending credit to our borrowers and other counterparties become less predictive of future behaviors, valuations, assumptions or estimates. In such an event we may need to increase the size of our allowance in 2011, which would adversely affect our financial condition and results of operations. Contents

Inactivity ~~the~~of ~~ordinary~~other ~~course~~market ofparticipants ~~our~~or ~~business,~~widespread wemarket ~~also~~dislocations, ~~may~~including becircumstances ~~subject to~~where aasset ~~concentration~~values ofare ~~credit~~declining ~~risk~~significantly toor ano ~~particular~~market ~~industry, country,~~exists ~~counterparty,~~for ~~borrower~~certain ~~or issuer~~assets. ATo ~~deterioration in~~ the ~~financial~~extent ~~condition~~that orwe ~~prospects~~own ofsecurities athat ~~particular~~do ~~industry~~not ~~or a~~have ~~failure~~an orestablished ~~downgrade~~liquid ~~of,~~trading ormarket ~~default by, any particular entity~~ or ~~group~~are ofotherwise ~~entities~~subject ~~could~~to ~~have~~restrictions aon ~~material~~sale ~~adverse~~or ~~impact on our businesses~~hedging, ~~and the processes by which~~ we ~~set limits and monitor the level of our credit exposure to individual entities, industries and countries~~ may not ~~function~~be asable weto ~~have anticipated.~~reduce ~~While~~ our ~~activities~~positions ~~expose us to many different industries~~ and ~~counterparties,~~therefore wereduce ~~routinely~~our ~~execute~~risk aassociated ~~high volume of transactions~~ with ~~counterparties~~such inpositions. In ~~the financial services industry~~addition, ~~including~~challenging ~~brokers~~market ~~and~~conditions ~~dealers,~~may ~~commercial banks,~~also ~~investment~~adversely ~~funds~~affect ~~and~~our ~~insurers.~~investment ~~This~~banking ~~has resulted in significant credit concentration with respect to this industry~~fees.

InFor ~~the~~additional ~~ordinary~~information ~~course~~about ofmarket ~~business,~~risk weand ~~also~~our ~~enter~~market ~~into transactions~~risk ~~with~~management ~~sovereign~~policies ~~nations, U.S. states~~ and ~~U.S. municipalities.~~ ~~Unfavorable economic or political conditions~~procedures, ~~disruptions~~see to“Quantitative ~~capital~~and ~~markets,~~Qualitative ~~currency fluctuations,~~Disclosures ~~social~~about ~~instability~~Market ~~and~~Risk” ~~changes~~ in ~~government policies could impact the operating budgets or credit ratings of sovereign nations~~Part II, ~~U.S.~~Item ~~states~~7A ~~and U.S. municipalities and expose us to credit risk. The economic downturn has adversely affected certain~~ of ~~our portfolios and further exposed us to~~ this ~~concentration of risk~~Form 10-K.

~~For~~Further ~~additional~~downgrades ~~information~~in ~~about~~the ~~our~~U.S. government's sovereign credit ~~risk~~rating, ~~and~~or in the credit ~~risk management~~ratings ~~policies~~of ~~and~~instruments ~~procedures~~issued, ~~see~~insured ~~“Quantitative~~or guaranteed by related institutions, agencies or instrumentalities, could result in risks to Merrill Lynch and ~~Qualitative~~ ~~Disclosures~~its ~~about~~credit ~~Market~~ratings ~~Risk —~~and ~~Credit Risk~~general ~~Management~~economic conditions that we are not able to predict.”

11 On August 2, 2011, Moody's affirmed the U.S. government's existing sovereign rating, but revised the rating outlook to negative. On August 5, 2011, S&P downgraded the U.S. government's long-term sovereign credit rating to AA+ from AAA and stated that the outlook on the long-term rating is negative. On the same day, S&P affirmed its A-1+ short-term rating on the U.S. and removed it from CreditWatch negative. On November 28, 2011, Fitch affirmed its AAA long-term rating on the U.S., but changed the outlook from stable to negative. On the same day, Fitch affirmed its F1+ short-term rating on the U.S. All three rating agencies have indicated that they will continue to assess fiscal projections and consolidation measures, as well as the medium-term economic outlook for the U.S.

~~Table~~There continues to be the perceived risk of ~~Contents~~a sovereign credit ratings downgrade of the U.S. government, including the ratings of U.S. Treasury securities. It is foreseeable that the ratings and perceived creditworthiness of instruments issued, insured or guaranteed by institutions, agencies or instrumentalities directly linked to the U.S. government could also be correspondingly affected by any such downgrade. Instruments of this nature are key assets on the balance sheets of financial institutions, including Merrill Lynch, and are widely used as collateral by financial institutions to meet their day-to-day cash flows in the short-term debt market. A downgrade of the sovereign credit ratings of the U.S. government and perceived creditworthiness of U.S. government-related obligations could impact our ability to obtain funding that is collateralized by affected instruments, as well as affecting the pricing of that funding when it is available. A downgrade may also adversely affect the market value of such instruments.

We ~~could~~cannot ~~suffer~~predict ~~losses~~if, aswhen aor ~~result~~how ofany changes to the ~~actions~~credit ofratings or ~~deterioration~~ inperceived ~~the~~creditworthiness ~~commercial soundness~~ of ~~our~~these ~~counterparties and~~organizations ~~other~~will ~~financial~~affect ~~services~~economic ~~institutions~~conditions. ~~Our ability~~ toSuch ~~engage~~ratings inactions ~~routine trading and funding transactions~~ could beresult ~~adversely~~in ~~affected~~a bysignificant ~~the~~adverse ~~actions~~impact ~~and commercial soundness of other market participants. We have exposure~~ to many different industries and counterparties, and we routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, mutual and hedge funds and other institutional clientsus. ~~Financial~~The ~~services~~credit ~~institutions~~rating ~~and~~agencies’ ~~other counterparties~~ratings ~~are~~for ~~inter-related~~Bank ~~because~~ of ~~trading,~~America ~~funding, clearing~~(and ~~or other relationships. As a result~~consequently, ~~defaults~~Merrill ~~by,~~Lynch) ~~or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, have led to market-wide liquidity problems and~~ could ~~lead~~be ~~to significant~~directly ~~future liquidity problems, including losses~~ or ~~defaults~~ byindirectly usimpacted or by ~~other~~a ~~institutions.~~downgrade ~~Many~~ of ~~these transactions expose us to credit risk in~~ the ~~event of default of a counterparty or client~~U.S. Ingovernment’s ~~addition,~~sovereign ~~our~~rating ~~credit~~because ~~risk may be impacted when~~ the ~~collateral~~credit ~~held~~ratings byof uslarge ~~cannot~~systemically beimportant ~~realized~~financial orinstitutions ~~is liquidated~~currently atincorporate ~~prices~~a ~~not~~degree ~~sufficient to recover the full amount~~ of ~~the~~uplift ~~loan or derivatives exposure~~ due ~~us.~~to ~~Any~~assumptions ~~such~~concerning ~~losses could~~government ~~materially and adversely affect our financial condition and results of operations~~support.

~~Our~~A ~~derivatives~~downgrade ~~businesses~~of ~~may~~the ~~expose~~sovereign uscredit toratings ~~unexpected~~of ~~risks and~~the ~~potential losses~~U. WeS. ~~are~~government ~~party~~or tothe acredit ~~large number~~ratings of ~~derivatives~~related ~~transactions~~institutions, ~~including~~agencies ~~credit derivatives.~~or ~~Our~~instrumentalities ~~derivatives~~would ~~businesses~~significantly ~~may~~exacerbate ~~expose~~the usother risks to ~~unexpected~~ ~~market~~which Merrill Lynch is subject and any related adverse effects on our business, ~~credit~~financial condition and ~~operational~~results ~~risks~~of operations, ~~that~~including ~~could~~those ~~cause us~~described tounder ~~suffer~~"Risk ~~unexpected~~Factors - Credit Risk - We could suffer losses ~~and~~as ~~have~~a anresult ~~adverse~~of ~~effect~~the onactions of or deterioration in the commercial soundness of our counterparties and other financial ~~condition~~services institutions," "Risk Factors - Market Risk - Our business and results of operations. ~~Severe~~have ~~declines in~~been, ~~asset~~and ~~values~~may continue to be, ~~unanticipated~~significantly ~~credit~~adversely ~~events~~affected orby ~~unforeseen circumstances~~changes ~~that~~in ~~may~~the ~~cause~~levels ~~previously~~of ~~uncorrelated~~market ~~factors~~volatility ~~to become~~and ~~correlated~~by (other financial or capital market conditions" and ~~vice~~"Risk ~~versa)~~Factors ~~may~~- ~~create~~Liquidity ~~losses~~Risk ~~resulting from~~- ~~risks~~Our ~~not~~liquidity, ~~appropriately~~cash ~~taken~~flows, ~~into~~financial ~~account~~condition inand ~~the development~~results of operations, ~~structuring~~and competitive position may be significantly adversely affected by the inability of us or ~~pricing~~Bank of aAmerica ~~derivative~~to ~~instrument~~access capital markets, or if there is an increase in our borrowing costs. "

~~Many~~Uncertainty ~~derivative~~about ~~instruments~~the ~~are~~financial ~~individually~~stability ~~negotiated~~of ~~and non-standardized,~~several ~~which~~countries ~~can~~in ~~make~~the ~~exiting~~European Union ("EU"), ~~transferring~~the ~~or settling~~increasing ~~some~~risk ~~positions~~that ~~difficult.~~those ~~Many~~countries ~~derivatives~~may ~~require~~default ~~that we~~on ~~deliver~~their tosovereign ~~the~~debt ~~counterparty~~and ~~the~~related ~~underlying~~stresses ~~security,~~on ~~loan~~financial ~~or other~~markets, ~~obligation~~the inEuro ~~order~~and tothe ~~receive~~EU ~~payment.~~could Inhave a ~~number~~significant ~~of cases,~~adverse weeffect doon ~~not~~our ~~hold~~business, ~~and~~financial ~~may~~condition ~~not~~and beresults ~~able~~of tooperations. In ~~obtain~~2011, the ~~underlying~~ ~~security~~financial crisis in Europe continued, ~~loan~~triggered orby ~~other~~high ~~obligation.~~sovereign ~~This~~budget ~~could~~deficits ~~cause us~~and torising ~~forfeit~~direct ~~the~~and ~~payments~~contingent ~~due~~sovereign todebt usin ~~under~~Greece, ~~these~~Ireland, ~~contracts~~Italy, ~~or result~~Portugal inand ~~settlement~~Spain, ~~delays~~which ~~with~~created ~~the~~concerns ~~attendant~~about ~~credit~~the ~~and operational~~ability ~~risk,~~of asthese ~~well~~EU ascountries ~~increased~~to ~~costs~~continue to usservice their sovereign debt obligations. These conditions impacted financial markets and

Derivatives contracts and other transactions entered into with third parties are not always confirmed by the counterparties or settled on a timely basis. While a transaction remains unconfirmed or during any delay in settlement, we are subject to heightened credit and operational risk and in the event of default may find it more difficult to enforce the contract. In addition, as new and more complex derivatives products have been created, covering a wider array of underlying credit and other instruments, disputes about the terms of the underlying contracts may arise, which could impair our ability to effectively manage our risk exposures from these products and subject us to increased costs. 12

~~For~~Table ~~a further discussion~~ of ~~our derivatives exposure, see Note 6 to the Consolidated Financial Statements.~~ Contents

resulted in credit ratings downgrades for, and high and volatile bond yields on, the sovereign debt of many EU countries. Certain European countries continue to experience varying degrees of financial stress, and yields on government-issued bonds in Greece, Ireland, Italy, Portugal and Spain have risen and remain volatile. Despite assistance packages to certain of these countries, the creation of a joint EU-IMF European Financial Stability Facility and additional expanded financial assistance to Greece, uncertainty over the outcome of the EU governments' financial support programs and worries about sovereign finances and the stability of the Euro and the EU persist. Market ~~Risk~~ concerns over the direct and indirect exposure of certain European banks and insurers to these EU countries resulted in a widening of credit spreads and increased costs of funding for these financial institutions. While we have reduced our exposure to European financial institutions, the insolvency of one or more major European financial institutions could adversely impact financial markets and, consequently, our results of operations.

~~Market risk~~Risks isand ongoing concerns about the ~~risk~~debt crisis in Europe could have a detrimental impact on the global economic recovery, sovereign and non-sovereign debt in these countries and the financial condition of European financial institutions, and international financial institutions with exposure to the region, including us. Market and economic disruptions have affected, and may continue to affect, consumer confidence levels and spending, personal bankruptcy rates, levels of incurrence and default on consumer debt and residential mortgages, and housing prices, among other factors. There can be no assurance that ~~values~~the market disruptions in Europe, including the increased cost of ~~assets~~funding for certain governments and ~~liabilities~~financial institutions, will not spread, nor can there be any assurance that future assistance packages will be available or ~~revenues~~, even if provided, will be ~~adversely~~sufficient to stabilize the affected bycountries ~~changes~~and markets in ~~market conditions~~Europe ~~such~~or aselsewhere. To ~~market~~the ~~volatility.~~extent ~~Market~~uncertainty ~~risk~~regarding isthe ~~inherent~~European in economic recovery continues to negatively impact consumer confidence and consumer credit factors, or should the ~~financial~~EU ~~instruments~~enter ~~associated~~a ~~with~~deep recession, both the U.S. economy and our business and results of operations could be significantly and ~~activities,~~ ~~including~~adversely ~~loans~~affected. Global economic uncertainty, ~~deposits~~regulatory initiatives and reform have impacted, ~~securities~~and will likely continue to impact, ~~short~~non-~~term borrowings,~~U.S. ~~long~~credit and trading portfolios. We are seeking to address this risk but there can be no assurance our efforts in this respect will be sufficient or successful. Our total sovereign and non-~~term~~sovereign ~~debt~~exposure to Greece, ~~trading~~Italy, ~~account~~Ireland, ~~assets~~Portugal, and ~~liabilities~~ Spain was $2.7 billion at December 31, 2011. Our total net sovereign and ~~derivatives~~non-sovereign exposure to these countries was $1. 1 billion at December 31, 2011, after taking into account net credit default protection. At December 31, 2011, the fair value of net credit default protection purchased was $1.6 billion. Losses could still result because our credit protection contracts pay out only under certain scenarios.

~~Our~~For ~~businesses~~additional ~~and~~information ~~results~~regarding ofour ~~operations~~direct ~~have~~sovereign ~~been,~~ and ~~may continue~~non-sovereign toexposures bein Europe, ~~significantly~~see ~~adversely~~“Management's ~~affected~~Discussion byand ~~changes~~Analysis ~~in the~~of ~~levels~~Financial Condition and Results of ~~market~~Operations - ~~volatility~~Executive ~~and~~Overview by- ~~other~~Other ~~financial~~Events ~~or capital~~- ~~market~~European ~~conditions. Our~~Union ~~businesses~~Sovereign Credit Risks" and ~~results~~ of“Quantitative ~~operations~~and ~~may~~Qualitative beDisclosures ~~adversely~~about ~~affected~~Market byRisk-Credit ~~market~~Risk ~~risk factors~~ Management” in Part II, Item 7A of this Form 10-K.

12 Declines in the value of certain of our assets could have an adverse effect on our results of operations. We have a large portfolio of financial instruments, including, among others, certain corporate loans and loan commitments, loans held-for-sale, repurchase agreements, long-term deposits, trading assets and liabilities, derivatives assets and liabilities, available-for-sale securities and certain other assets and liabilities that we measure at fair value. We determine the fair values of these instruments based on the fair value hierarchy under applicable accounting guidance. The fair values of these financial instruments include adjustments for market liquidity, credit quality and other transaction-specific factors, where appropriate.

~~Table~~Gains or losses on these instruments can have a direct and significant impact on our results of ~~Contents~~operations, unless we have effectively hedged our exposures. Fair values may be impacted by declining values of the underlying assets or the prices at which observable market transactions occur and the continued availability of these transactions. The financial strength of counterparties, such as monolines, with whom we have economically hedged some of our exposure to these assets, also will affect the fair value of these assets. Sudden declines and significant volatility in the prices of assets may substantially curtail or eliminate the trading activity for these assets, which may make it very difficult to sell, hedge or value such assets. The inability to sell or effectively hedge assets reduces our ability to limit losses in such positions and the difficulty in valuing assets may increase our risk-weighted assets, which requires us to maintain additional capital and increases our funding costs.

~~such~~Asset asvalues ~~changes~~also indirectly ~~interest~~impact ~~and~~revenues ~~currency~~in exchange rates, equity and futures prices, the implied volatility of interest rates, credit spreads and other economic and business factors. These market risks may adversely affect, for example, (i) the value of our ~~on-~~asset ~~and off-balance sheet securities, trading assets, and other financial instruments, (ii) the cost of debt capital and our access to credit markets, (iii) the value of assets under~~ management, which could reduce our fee income relating to those assets, (iv) customer allocation of capital among investment alternatives, (v) the volume of client activity in our trading operations, and (vi) the general profitability and risk level of the transactions in which we engagebusinesses. ~~Any~~We ofreceive ~~these~~asset-based ~~developments could have a significant adverse impact on our financial condition and results of operations.~~

We use various models and strategies to assess and control our market risk exposures but those are subject to inherent limitations. For example, our models, which rely on historical trends and assumptions, may not be sufficiently predictive of future results due to limited historical patterns, extreme or unanticipated market movements and illiquidity, especially during severe downturns or stress events. The models that we use to assess and control our market risk exposures also reflect assumptions about the degree of correlation or lack thereof among prices of various asset classes or other market indicators. In times of market stress or other unforeseen circumstances, such as the market conditions experienced in 2008 and 2009, previously uncorrelated indicators may become correlated, or previously correlated indicators may move in different directions. These types of market movements have at times limited the effectiveness of our hedging strategies and have caused us to incur significant losses, and they may do so in the future. These changes in correlation can be exacerbated where other market participants are using risk or trading models with assumptions or algorithms that are similar to ours. In these and other cases, it may be difficult to reduce our risk positions due to the activity of other market participants or widespread market dislocations, including circumstances where asset values are declining significantly or no market exists for certain assets. To the extent that we make investments directly in securities that do not have an established liquid trading market or are otherwise subject to restrictions on sale or hedging, we may not be able to reduce our positions and therefore reduce our risk associated with such positions. 13

~~For~~Table ~~additional information about market risk and our market risk management policies and procedures, see “Quantitative and Qualitative Disclosures about Market Risk” in Part II, Item 7A~~ of ~~this Form 10-K.~~ Contents

~~Declines~~management infees based on the value of ~~certain of~~ our ~~assets~~clients’ ~~could~~portfolios ~~have~~or ~~an adverse~~investments ~~effect~~in onfunds ~~our~~managed ~~results~~by ofus ~~operations. We have a large portfolio of financial instruments that we measure at fair value~~and, ~~including~~in ~~among~~some ~~others certain corporate loans and loan commitments~~cases, ~~loans held-for-sale, repurchase~~we ~~agreements and long-term deposits. We~~ also ~~have trading~~receive ~~assets~~incentive ~~and~~fees ~~liabilities,~~based ~~derivatives~~on ~~assets~~increases ~~and liabilities, available-for-sale securities~~in ~~and~~the ~~certain~~value ~~other~~of ~~assets~~such ~~that are valued at fair value~~investments. WeDeclines ~~determine~~in ~~the~~asset ~~fair~~ values ofcan ~~these~~reduce ~~instruments based on~~ the ~~fair~~ value ~~hierarchy~~of ~~under~~our ~~applicable~~clients’ ~~accounting guidance.~~portfolios ~~The~~or ~~fair~~fund ~~values~~assets, ofwhich ~~these~~in ~~financial~~turn ~~instruments~~can ~~include adjustments~~result ~~for~~in ~~market~~lower ~~liquidity,~~fees ~~credit~~earned ~~quality~~for ~~and~~managing ~~other transaction-specific~~such ~~factors, where appropriate~~assets.

~~Gains~~For oradditional ~~losses~~information onabout these instruments can have a direct and significant impact on our results of operations, unless we have effectively “hedged” our exposures. Fair values may be impacted by declining values of the underlying assets or the prices at which observable market transactions occur and the continued availability of these transactions. The financial strength of counterparties, such as monolines, with whom we have economically hedged some of our exposure to these assets, also will affect the fair value ofmeasurements, ~~these~~see ~~assets.~~Note ~~Sudden~~4 ~~declines~~ and ~~significant~~ ~~volatility~~Note 5 ~~in the prices of assets may substantially curtail or eliminate the trading activity for these assets, which may make it very difficult~~ to ~~sell, hedge or value such assets. The inability to sell or effectively hedge assets reduces our ability to limit losses in such positions and~~ the ~~difficulty~~ inConsolidated ~~valuing~~Financial ~~assets may increase our risk-weighted assets, which requires us to maintain additional capital and increases our funding costs~~Statements.

13 Regulatory and Legal Risk

~~Table~~Government measures to regulate the financial services industry, including the Financial Reform Act, either individually, in combination or in the aggregate, have increased and will continue to increase our compliance costs and could require us to change certain of ~~Contents~~our business practices, impose significant additional costs on us, limit the products that we offer, limit our ability to pursue business opportunities in an efficient manner, require us to increase our capital, impact the value of assets that we hold, significantly reduce our revenues or otherwise materially and adversely affect our businesses, financial condition and results of operations. As a financial institution, we are heavily regulated at the state, federal and international levels. As a result of the 2008-2009 financial crisis and related global economic downturn, we have faced and expect to continue to face increased public and legislative scrutiny as well as stricter and more comprehensive regulation of our businesses. These regulatory and legislative measures, either individually, in combination or in the aggregate, could require us to further change certain of our business practices, impose significant additional costs on us, limit the products that we offer, limit our ability to pursue business opportunities in an efficient manner, require us to increase our capital, impact the value of assets that we hold, significantly reduce our revenues or otherwise materially and adversely affect our businesses, financial condition and results of operations.

~~Asset~~On ~~values~~October ~~also~~11, ~~directly~~2011, ~~impact~~the ~~revenues~~Federal inReserve, ~~our~~the ~~asset management~~Office ~~businesses.~~of Wethe ~~receive~~Comptroller ~~asset-based~~of ~~management~~the ~~fees based~~Currency on(the “OCC”), the ~~value~~Federal Deposit Insurance Corporation (the “FDIC”) and the SEC, four of ~~our~~the ~~clients’~~five ~~portfolios~~regulatory agencies charged with promulgating regulations implementing limitations on proprietary trading as well as the sponsorship of or ~~investments~~ investment in hedge funds ~~managed~~and private equity funds (the “Volcker Rule”) established by usthe ~~and~~Financial Reform Act, inreleased ~~some~~for ~~cases~~comment proposed implementing regulations. On January 11, we2012, ~~also receive~~the ~~incentive~~Commodities ~~fees~~Futures ~~based~~Trading onCommission ~~increases~~(the in“CFTC”), the ~~value~~fifth ofagency, ~~such investments.~~released ~~Declines~~for incomment ~~asset~~its ~~values~~proposed ~~can~~regulations ~~reduce~~under the ~~value~~Volcker Rule. The proposed regulations include clarifications to the definition of ~~our~~ ~~clients’~~proprietary ~~portfolios~~trading orand ~~fund~~distinctions ~~assets,~~between ~~which~~permitted inand ~~turn~~prohibited ~~can result~~activities. The incomment ~~lower~~period ~~fees~~for ~~earned~~the first regulations proposed ended on February 13, 2012 and the comment period for ~~managing~~the ~~such~~CFTC ~~assets~~regulations will end in March 2012.

~~For~~The ~~additional~~statutory ~~information~~provisions ~~about~~of ~~fair~~the ~~value~~Volcker ~~measurements~~Rule will become effective on July 21, ~~see Note~~2012, whether or not the final regulations are adopted, and it gives certain financial institutions two years from the effective date, with opportunities for additional extensions, to bring activities and investments into compliance. Although Merrill Lynch exited its stand-alone proprietary trading business as of June 530, 2011 in anticipation of the Volcker Rule and to further our initiative to optimize our balance sheet, the ~~Consolidated~~ultimate ~~Financial~~impact ~~Statements~~of the Volcker Rule on us remains uncertain. However, based on the content of the proposed regulations, it is possible that the implementation of the Volcker Rule could limit or restrict our remaining trading activities. Implementation of the Volcker Rule could also limit or restrict our ability to sponsor and hold ownership interests in hedge funds, private equity funds and other subsidiary operations. Additionally, implementation of the Volcker Rule could increase our operational and compliance costs, reduce our trading revenues and adversely affect our results of operations. The date by which final regulations will be issued is uncertain.

~~Our commodities activities~~Additionally, ~~particularly~~the ~~our~~Financial ~~physical commodities~~Reform ~~business,~~Act ~~subject~~includes usmeasures to ~~performance,~~broaden ~~environmental and~~the ~~other~~scope ~~risks~~of ~~that~~derivative ~~may~~instruments ~~result~~subject into ~~significant~~regulation ~~cost~~by requiring clearing and ~~liabilities. As~~ ~~part~~exchange trading of ~~our~~certain ~~commodities~~derivatives; ~~business, we~~imposing ~~enter~~new ~~into~~capital, ~~exchange-traded contracts~~margin, ~~financially settled OTC derivatives~~reporting, ~~contracts~~registration ~~for~~and ~~physical~~business ~~delivery~~conduct ~~and~~requirements ~~contracts providing~~ for ~~the~~certain ~~transportation,~~market ~~transmission~~ participants; and~~/or storage~~ ~~rights~~imposing onposition orlimits inon ~~vessels,~~certain ~~barges,~~OTC ~~pipelines, transmission lines or storage facilities~~derivatives. ~~Commodity,~~The ~~related~~Financial ~~storage, transportation~~Reform orAct ~~other~~grants ~~contracts expose us to~~ the ~~risk~~CFTC ~~that~~and the ~~price~~ ofSEC ~~the~~substantial ~~underlying~~new ~~commodity~~authority orand ~~the~~requires ~~cost~~numerous ofrulemakings ~~storing~~by ~~or transporting~~these ~~commodities~~agencies. ~~may~~The ~~rise~~Financial orReform ~~fall.~~Act Inrequired ~~addition, contracts~~regulators ~~relating~~ to ~~physical~~promulgate ~~ownership and/or delivery~~the ~~can~~rulemakings ~~expose~~necessary us to ~~numerous~~implement ~~other~~these ~~risks,~~regulations ~~including performance~~by ~~and~~July ~~environmental~~16, ~~risks~~2011. However, ~~For~~the ~~example,~~rulemaking ~~our counterparties~~process ~~may~~was not becompleted ~~able~~as ~~to pass changes in the price~~ of ~~commodities~~ tothat ~~their~~date, ~~customers~~ and ~~therefore~~is ~~may~~ not beexpected ~~able~~ to ~~meet~~ ~~their~~conclude ~~performance~~until ~~obligations.~~well ~~Our~~into ~~actions~~2012. Further, ~~to mitigate~~ the ~~aforementioned~~ ~~risks~~regulators ~~may~~granted ~~not~~temporary ~~prove~~relief ~~adequate~~from tocertain ~~address~~requirements ~~every contingency.~~that Inwould ~~addition,~~have ~~insurance~~taken ~~covering~~effect ~~some~~on ofJuly ~~these risks may not be available~~16, ~~and~~2011 ~~the~~absent ~~proceeds, if~~ any, ~~from~~rulemaking. The ~~insurance recovery~~SEC ~~may~~temporary ~~not~~relief beis ~~adequate~~effective tountil ~~cover~~final ~~liabilities~~rules ~~with~~relevant ~~respect~~ to ~~particular~~each ~~incidents.~~requirement Asbecome ~~a result, our financial condition and results of operations may be adversely affected by such events.~~

~~Regulatory and Legal Risk~~ 14

~~Government~~Table ~~measures to regulate the financial services industry, including the Financial Reform Act, either individually, in combination or in the aggregate, could require us to change certain~~ of our business practices, impose significant additional costs on us, limit the products that we offer, limit our ability to pursue business opportunities in an efficient manner, require us to increase our capital, impact the value of assets that we hold, significantly reduce our revenues or otherwise materially and adversely affect our businesses, financial condition or results of operations. As a financial institution, we are heavily regulated at the state, federal and international levels. As a result of the financial crisis and related global economic downturn that began in 2007, we have faced and expect to continue to face increased public and legislative scrutiny as well as stricter and more comprehensive regulation of our financial services practices. These regulatory and legislative measures, either individually, in combination or in the aggregate, could require us to change certain of our business practices, impose significant additional costs on us, limit the products that we offer, limit our ability to pursue business opportunities in an efficient manner, require us to increase our capital, impact the value of assets that we hold, significantly reduce our revenues or otherwise materially and adversely affect our businesses, financial condition or results of operations. Contents

Ineffective. The ~~July~~CFTC ~~2010,~~temporary ~~the~~relief ~~Financial~~is ~~Reform~~effective ~~Act~~until ~~was~~the ~~signed~~earlier ~~into~~of ~~law.~~July ~~The Financial Reform Act~~16, ~~among~~2012 ~~other~~or ~~reforms,~~the ~~(i) limits banking~~date ~~organizations~~on ~~from~~which ~~engaging~~final inrules ~~proprietary~~relevant ~~trading~~to ~~and other~~each ~~investment~~requirement ~~activity~~become ~~regarding~~effective. ~~hedge~~The ~~funds~~ultimate ~~and~~impact ~~private equity~~of ~~funds;~~these ~~(ii) increases~~derivatives ~~regulation~~regulations, ofand the ~~OTC derivative~~time ~~markets;~~it ~~(iii) provides~~will ~~for~~take ~~heightened~~to ~~capital~~comply, ~~liquidity,~~ ~~and~~continue ~~prudential~~to ~~regulation~~remain ~~and~~uncertain. ~~supervision~~The ~~over systemically~~final ~~important~~regulations ~~financial~~will ~~institutions; (iv) provides~~impose ~~for~~additional ~~resolution~~operational ~~authority~~and tocompliance ~~establish~~costs ~~a process~~on tous ~~unwind large systemically important financial companies;~~ and ~~(v) requires~~may ~~securitizers~~require us to ~~retain~~restructure ~~a portion~~certain ofbusinesses, ~~the~~thereby ~~risk~~negatively ~~that~~impacting ~~would~~our ~~otherwise~~revenues beand ~~transferred~~results ~~into certain~~of ~~securitization transactions~~operations.

~~Many~~Similarly, ofin ~~these~~the ~~provisions~~U.K., ~~have~~the ~~begun~~FSA tohas beissued orproposed ~~will~~rules berequiring ~~phased~~the ~~in over~~submission ~~the~~of ~~next~~significant ~~several~~information ~~months~~about orcertain ~~years~~U.K. ~~and~~incorporated ~~will~~subsidiaries be(including ~~subject~~information ~~both to~~on ~~further~~intra-group ~~rulemaking~~dependencies and legal entity separation) to allow the ~~discretion~~FSA ofto ~~applicable regulatory~~develop ~~bodies~~resolution plans. As ~~The~~a ~~ultimate~~result ~~impact~~ of the ~~final~~FSA ~~rules~~review, onwe ~~our businesses~~could be required to take certain actions over the next several years, which could impose operational costs and ~~results~~potentially ofcould ~~operations~~result ~~will~~in ~~depend~~the onrestructuring ~~regulatory~~ of certain businesses and subsidiaries.

14 Many of the provisions under the Financial Reform Act have begun to be phased in or will be phased in over the next several months or years and will be subject both to further rulemaking and the discretion of applicable regulatory bodies. The Financial Reform Act will continue to have a significant and negative impact on our earnings through revenue reductions, higher costs and new restrictions. The ultimate impact of the Financial Reform Act on our businesses and results of operations will depend on regulatory interpretation and rulemaking, as well as the success of any of our actions to mitigate the negative earnings impact of certain provisions.

~~Table~~Changes in the structure of ~~Contents~~the GSEs and the relationship among the GSEs, the government and the private markets, or the conversion of the current conservatorship of the GSEs into receivership, could adversely impact certain of our operations. Each GSE is currently in a conservatorship, with its primary regulator, the Federal Housing Finance Agency (the "FHFA"), acting as conservator. During these conservatorships the FHFA may

~~interpretation~~increasingly converge certain risk management and ~~rulemaking~~other standards and practices of each enterprise, aswhich ~~well~~could asresult in a more uniform market for delivering agency conforming mortgage loans. We cannot predict if, when or how the ~~success~~conservatorships ofwill end, or any associated changes to the GSEs' business structure that could result. We also cannot predict whether the conservatorships will end in receivership. There are several proposed approaches to reform the GSEs which, if enacted, could change the structure of ~~our~~ ~~actions~~the GSEs and the relationship among the GSEs, the government and the private markets, including the trading markets for agency conforming mortgage loans and markets for mortgage-related securities in which we participate. We cannot predict the prospects for the enactment, timing or content of legislative or rulemaking proposals regarding the future status of the GSEs. Accordingly, there continues to ~~mitigate~~be uncertainty regarding the ~~negative~~future ~~earnings~~of the GSEs, including whether they will continue to exist in their current form. GSE reform, if enacted, could adversely impact certain of ~~certain provisions~~our operations.

We ~~anticipate~~face ~~that~~substantial ~~the~~potential ~~final~~legal ~~regulations~~liability ~~associated~~and ~~with~~significant ~~the Financial~~regulatory ~~Reform~~action, ~~Act~~which ~~will~~could ~~include~~have ~~limitations~~material adverse effects on ~~certain activities,~~our ~~including~~cash ~~limitations~~flows, onfinancial ~~the~~condition ~~use~~and results of ~~certain financial~~operations ~~institutions’~~or ~~own~~cause ~~capital~~significant ~~for~~reputational ~~proprietary~~harm ~~trading and~~to ~~sponsorship~~us. We orface ~~investment~~significant legal risks in ~~hedge~~our ~~funds~~businesses, and ~~private equity funds (~~the ~~Volcker~~volume ~~Rule).~~of ~~Regulations~~claims ~~implementing~~and ~~the~~amount ~~Volcker Rule~~of ~~are~~damages ~~required~~and topenalties beclaimed in ~~place~~litigation byand ~~October 21,~~regulatory ~~2011,~~proceedings ~~and the~~against ~~Volcker~~us ~~Rule~~and ~~becomes~~other ~~effective~~financial ~~twelve~~institutions ~~months~~remain ~~after~~high ~~such rules~~and are ~~final~~increasing. orIncreased onlitigation ~~July 21~~costs, ~~2012,~~substantial ~~whichever~~legal isliability ~~earlier. The~~or ~~Volcker~~significant ~~Rule~~regulatory ~~then~~action ~~gives~~against ~~certain~~us could have material adverse effects on our financial ~~institutions~~condition ~~two years~~and ~~from~~results ~~the~~of ~~effective~~operations ~~date~~or ~~(with~~cause ~~opportunities~~significant ~~for~~reputational ~~additional extensions)~~harm to ~~bring~~us, ~~activities~~which ~~and~~in ~~investments~~turn ~~into conformance~~could adversely impact our business prospects. In ~~anticipation~~addition, ofwe ~~the~~continue ~~adoption~~to offace ~~the~~increased ~~final regulations,~~litigation werisk and regulatory scrutiny. We have ~~begun~~continued ~~winding~~to ~~down~~experience ~~our~~increased ~~proprietary~~litigation ~~trading line~~and ofother ~~business~~disputes with counterparties regarding relative rights and responsibilities. ~~The~~Consumers, ~~ultimate~~clients ~~impact~~and ofother ~~the~~counterparties ~~Volcker~~have ~~Rule~~grown ormore ~~the winding~~litigious. Our ~~down~~experience ofwith ~~this~~certain ~~business~~regulatory authorities suggests a migration towards an increasing supervisory focus on enforcement, including in connection with alleged violations of law and ~~the~~customer ~~time~~harm. The itcurrent ~~will~~environment ~~take~~of ~~to comply~~additional orregulation, ~~complete~~increased regulatory compliance burdens, ~~continues~~and enhanced regulatory enforcement, combined with ongoing uncertainty related to ~~remain~~the ~~uncertain.~~continuing ~~The~~evolution ~~final regulations~~of ~~issued~~the ~~may~~regulatory ~~impose~~environment, ~~additional~~has resulted in significant operational and compliance costs onand usmay limit our ability to continue providing certain products and services.

~~The~~These ~~Financial~~litigation ~~Reform~~and ~~Act~~regulatory ~~includes~~matters ~~measures~~and toany ~~broaden~~related ~~the~~settlements ~~scope of~~could ~~derivative~~have ~~instruments~~a ~~subject~~material toadverse ~~regulation~~effect byon ~~requiring clearing~~our ~~and~~cash ~~exchange trading of certain derivatives~~flows, ~~imposing new~~financial ~~capital~~condition and ~~margin~~results ~~requirements~~of ~~for~~operations. ~~certain~~They ~~market participants~~could ~~and~~also ~~imposing~~negatively ~~position~~impact ~~limits~~our ~~on certain OTC derivatives~~reputation. ~~The~~For ~~Financial~~information ~~Reform~~concerning ~~Act~~certain ~~grants~~litigation-related ~~the~~expenses ~~CFTC~~recognized ~~and~~for ~~the SEC~~2011 ~~substantial new authority~~ and ~~requires numerous rulemakings by these agencies. Generally~~2010, the ~~CFTC~~estimated ~~and~~aggregate ~~SEC~~range ~~have~~of ~~until July 16,~~possible ~~2011~~losses toin ~~promulgate~~excess ~~the rulemakings necessary to implement these regulations. The ultimate impact~~ of ~~these derivatives regulations, and~~ the ~~time~~accrued itliability ~~will~~(if ~~take~~any) torelated ~~comply, continues~~ to ~~remain~~litigation ~~uncertain.~~matters ~~The~~(where ~~final~~an ~~regulations~~estimate ~~will~~is ~~impose additional~~possible) ~~operational~~at ~~and~~December ~~compliance~~31, ~~costs~~2011, onas uswell ~~and~~as ~~may require~~a usfurther todiscussion ~~restructure~~of ~~certain~~litigation ~~businesses~~risks, ~~and~~see ~~negatively impact~~Note 14 ~~our~~to ~~revenues~~the ~~and~~Consolidated ~~results of operations.~~

Although we cannot predict the full effect of the Financial Reform Act on our operations, it, as well as the future rules implementing its reforms, could result in a significant loss of revenue, impose additional costs on us, require us to increase our capital or otherwise materially adversely affect our businesses, financial condition or results of operations. 15

InTable ~~addition, Congress and the Administration have signaled growing interest in reforming the U.S. corporate income tax. While the timing~~ of consideration of such legislative reform is unclear, possible approaches include lowering the 35% corporate tax rate, modifying the taxation of income earned outside of the U.S. and limiting or eliminating various other deductions, tax credits and/or other tax preferences. It is not possible at this time to quantify either the one-time impact from remeasuring deferred tax assets and liabilities that might result upon enactment of tax reform or the ongoing impact reform might have on income tax expense, but it is possible either of these impacts could adversely affect our financial condition and results of operations. Contents

~~Other~~Financial ~~countries~~Statements ~~have also proposed and,~~ in ~~some~~Part ~~cases~~II, ~~adopted certain~~Item ~~regulatory~~8 changes targeted at financial institutions or that otherwise affect us. For example, the European Union has adopted increased capital requirements and the U.K. has (i) increased liquidity requirements for local financial institutions, including regulated U.K. subsidiaries of ~~non-U.K. bank~~this ~~holding~~Form ~~companies and other financial institutions as well as branches of non~~10-U.K. banks located in the U.K; (ii) adopted a Bank Tax Levy which will apply to the aggregate balance sheet of branches and subsidiaries of non-U.K. banks and banking groups operating in the U.K.; (iii) proposed the creation and production of recovery and resolution plans (commonly referred to as living wills) by U.K. regulated entities; and (iv) announced the expectation of corporate income tax rate reductions of one percent to be enacted during each of 2011, 2012 and 2013 that would favorably impact income tax expense on future earnings but which would result in adjustments to the carrying value of deferred tax assets and related one-time charges to income tax expense of nearly $400 million for each one percent reduction (however, it is possible that the full three percent rate reductions could be enacted in 2011, which would result in a 2011 charge of approximately $1.1 billion). We are also monitoring other international legislative proposals that could

15 Changes in governmental fiscal and monetary policy could adversely affect our financial condition and results of operations. Our businesses and earnings are affected by domestic and international fiscal and monetary policy. The Federal Reserve regulates the supply of money and credit in the U.S. and its policies determine in large part our cost of funds for lending, investing and capital raising activities and the return we earn on those loans and investments, both of which affect our net interest revenue. The actions of the Federal Reserve also can materially affect the value of financial instruments and other assets, such as debt securities, and its policies also can affect our borrowers, potentially increasing the risk that they may fail to repay their loans. Our businesses and earnings are also affected by the fiscal or other policies that are adopted by the U.S. government, various U.S. regulatory authorities and non-U.S. governments and regulatory authorities. Changes in domestic and international fiscal and monetary policies are beyond our control and difficult to predict, but could have an adverse impact on our capital requirements and the costs of running our businesses, in turn adversely impacting our financial condition and results of operations.

~~Table~~Changes in U.S. and non-U.S. tax and other laws and regulations could adversely affect our financial condition and results of ~~Contents~~operations. The U.S. Congress and the Administration have signaled growing interest in reforming the U.S. corporate income tax. While the timing of such reform is unclear, possible approaches include lowering the 35% corporate tax rate, modifying the taxation of income earned outside of the U.S. and limiting or eliminating various other deductions, tax credits and/or other tax preferences. It is not possible at this time to quantify either the one-time impact from remeasuring deferred tax assets and liabilities that might result upon enactment of tax reform or the ongoing impact reform might have on income tax expense, but either of these impacts could adversely affect our financial condition and results of operations.

~~materially~~In ~~impact us~~addition, ~~such~~the asincome ~~changes~~from certain non-U.S. subsidiaries has not been subject to U.S. income tax ~~laws. Currently,~~as a result of long-standing deferral provisions applicable to income that is derived in the ~~U.K.,~~active ~~net~~conduct ~~operating~~of ~~loss~~a ~~(“NOL”) carryforwards~~banking ~~have~~and anfinancing ~~indefinite~~business ~~life.~~(active ~~Were~~finance ~~the~~income). The U.KS. ~~taxing authorities~~ toCongress ~~introduce~~has ~~limitations~~extended on the ~~future~~application ~~utilization~~ of ~~NOLs~~these ~~and~~deferral weprovisions ~~were~~several ~~unable~~times, tomost ~~document~~recently ~~our~~in ~~continued~~2010. ~~ability~~These provisions now are set to ~~fully~~ ~~utilize~~expire ~~our~~for ~~NOLs~~taxable years beginning on or after January 1, we2012. ~~would~~Absent bean ~~required~~extension toof ~~establish~~these ~~a valuation~~provisions, ~~allowance~~active financing income earned by acertain ~~charge~~non-U.S. subsidiaries will generally be subject to ~~income~~a tax ~~expense~~provision that considers incremental U.S. ~~Depending upon~~income ~~the~~tax. ~~nature~~The impact of the ~~limitations,~~expiration ~~such~~of athese ~~change~~provisions ~~could~~would ~~be material~~depend inupon the ~~period~~amount, composition and geographic mix of ~~enactment~~our future earnings.

WeOther ~~face~~countries ~~substantial~~have ~~potential~~also ~~legal~~proposed ~~liability~~ and ~~significant regulatory action~~, ~~which~~in ~~could~~some ~~have~~cases, ~~material~~adopted ~~adverse~~certain ~~effects~~regulatory ~~on our~~changes ~~cash~~targeted ~~flows,~~at financial ~~condition~~institutions ~~and results of operations~~ or ~~cause~~ ~~significant~~that ~~reputational~~otherwise ~~harm~~affect to us. ~~We face~~ ~~significant~~The ~~legal~~EU ~~risks~~has inadopted ~~our~~increased ~~businesses,~~capital requirements and the ~~volume of~~U.K. ~~claims~~has ~~and~~(i) ~~amount~~increased ofliquidity ~~damages~~requirements ~~and~~for ~~penalties~~local ~~claimed in litigation and regulatory proceedings against us and other~~ financial institutions, ~~remain~~including ~~high~~regulated ~~and are increasing~~U.K. ~~Increased litigation~~subsidiaries ~~costs,~~of ~~substantial~~non-U.K. ~~legal~~bank ~~liability~~holding orcompanies ~~significant regulatory~~and ~~action~~other ~~against~~financial usinstitutions ~~could~~as ~~have~~well ~~material~~as ~~adverse~~branches ~~effects on our financial condition and results~~ of ~~operations~~non-U.K. orbanks ~~cause significant~~located ~~reputational harm to us, which~~ in ~~turn~~the ~~could adversely impact our business prospects~~U.K; In(ii) ~~addition,~~adopted ~~we continue~~a toBank ~~face~~Tax ~~increased~~Levy ~~litigation~~which ~~risk~~will ~~and~~apply ~~regulatory scrutiny~~to asthe aaggregate ~~result~~balance ofsheet ~~our acquisition by Bank~~ of ~~America.~~branches ~~As a result of ongoing challenging economic conditions~~ and ~~the increased~~subsidiaries ~~level~~ of ~~defaults~~non-U.K. ~~over~~banks ~~recent years, we have continued to experience increased litigation~~ and ~~other~~banking ~~disputes~~groups ~~with counterparties~~operating ~~regarding~~in ~~relative~~the ~~rights and responsibilities~~U. ~~These~~K.; ~~litigation~~ and ~~regulatory~~(iii) ~~matters~~proposed ~~and~~the ~~any~~creation ~~related settlements could have a material adverse effect on our cash flows, financial condition~~ and ~~results~~production of ~~operations.~~recovery ~~They~~and ~~could also~~resolution ~~negatively~~plans ~~impact~~by ~~our reputation~~U.K.-regulated ~~For a further discussion of litigation risks, see Note 14 to the Consolidated Financial Statements~~entities.

~~Changes~~On inJuly ~~governmental~~19, ~~fiscal~~2011, ~~and~~the ~~monetary~~U.K. ~~policy~~2011 ~~could adversely~~Finance ~~affect~~Bill ~~our~~was ~~financial~~enacted, ~~condition~~which ~~and~~reduced ~~results~~the ~~of operations. Our~~corporate ~~businesses~~income ~~and~~tax ~~earnings~~rate ~~are affected~~ by ~~domestic~~one ~~and~~percent ~~international~~to ~~fiscal~~26% beginning on April 1, 2011, and ~~monetary policy.~~then ~~For~~to ~~example~~25% effective April 1, ~~the~~2012. ~~Federal~~These ~~Reserve~~rate ~~Board~~reductions ~~regulates~~will ~~the supply~~favorably ofaffect ~~money~~income ~~and~~tax ~~credit~~expense inon ~~the~~future U.SK. ~~and~~earnings ~~its~~but ~~policies determine~~also inrequired ~~large~~us ~~part~~to remeasure our ~~cost~~U.K. ofnet ~~funds~~deferred ~~for~~tax ~~lending,~~assets ~~investing and~~using ~~capital~~the ~~raising~~lower ~~activities~~tax ~~and~~rates. The ~~the~~income ~~return~~tax webenefit ~~earn~~for onthe ~~those loans~~year ~~and~~ended ~~investments~~December 31, ~~both~~2011 ofincluded ~~which~~a ~~affect~~$774 ~~our~~million ~~net~~charge ~~interest revenue.~~for ~~The~~the ~~actions~~remeasurement. ofIf ~~the~~U.K. ~~Federal~~corporate ~~Reserve~~income ~~Board~~tax ~~also~~rates ~~can materially~~were ~~affect~~to ~~the~~be ~~value~~reduced ofto ~~financial~~23% ~~instruments~~by ~~we hold~~2014, ~~such~~ as ~~debt~~suggested ~~securities,~~in U.K. Treasury announcements and ~~its~~assuming ~~policies~~no ~~also~~change ~~can~~in ~~affect~~the ~~our borrowers~~deferred tax asset balance, ~~potentially~~a ~~increasing~~charge to income tax expense of approximately $400 million for each one percent reduction in the ~~risk~~rate ~~that~~would ~~they~~result ~~may~~in ~~fail~~each ~~to repay~~period ~~their~~of ~~loans.~~enactment ~~Our~~(for ~~businesses~~a ~~and~~total ~~earnings~~of ~~are~~approximately ~~also~~$800 ~~affected by~~million). We ~~the~~are ~~fiscal~~also ormonitoring other ~~policies~~international legislative proposals that ~~are~~could ~~adopted~~materially byimpact ~~various~~us, Usuch as changes to corporate income tax laws.~~S. regulatory~~ ~~authorities~~Currently, ~~non-~~ in the U.SK. ~~governments and~~, ~~international~~net ~~agencies~~operating loss carryforwards (“NOLs”) have an indefinite life. ~~Changes~~Were inthe ~~domestic~~U.K. ~~and international~~taxing ~~fiscal~~authorities to introduce limitations on the future utilization of NOLs and ~~monetary~~we ~~policies~~were ~~are~~unable ~~beyond~~to document our ~~control~~ ~~and~~continued ~~difficult~~ability to ~~predict~~fully utilize our NOLs, ~~but~~we ~~could~~would ~~have~~be anrequired ~~adverse impact~~to onestablish ~~our~~a ~~capital~~valuation ~~requirements~~allowance ~~and~~by a charge to income tax expense. Depending upon the ~~costs~~nature of ~~running~~the ~~our businesses~~limitations, insuch ~~turn~~a ~~adversely~~charge ~~impacting~~could ~~our~~be ~~financial~~material ~~condition and~~to our results of operations in the period of enactment.

~~Risk of the Competitive Environment in Which We Operate~~ 16

WeTable face significant and increasing competition in the financial services industry. We operate in a highly competitive environment. Over time, there has been substantial consolidation among companies in the financial services industry, and this trend accelerated in recent years as the credit crisis led to numerous mergers and asset acquisitions among industry participants and in certain cases reorganization, restructuring, or even bankruptcy. This trend has also hastened the globalization of the securities and financial services markets. We will continue to experience intensified competition as further consolidation in the financial services industry in connection with current market conditions may produce larger, better-capitalized and more geographically diverse companies that are capable of offering a wider array of financial products and services at more competitive prices. To the extent we expand into new business areas and new geographic regions, we may face competitors with more experience and more established relationships with clients, regulators and industry participants in the relevant market, which could adversely affect our ability to compete. In addition, technological advances and the growth of e-commerce have made it possible for non-depository institutions to offer Contents

16 Risk of the Competitive Environment in Which We Operate

~~Table~~We face significant and increasing competition in the financial services industry. We operate in a highly competitive environment. Over time, there has been substantial consolidation among companies in the financial services industry, and this trend accelerated in recent years. This trend has also hastened the globalization of ~~Contents~~the securities and financial services markets. We will continue to experience intensified competition as consolidation and globalization of the financial services industry may produce larger, better-capitalized and more geographically diverse companies that are capable of offering a wider array of financial products and services at more competitive prices. To the extent we expand into new business areas and new geographic regions, we may face competitors with more experience and more established relationships with clients, regulators and industry participants in the relevant market, which could adversely affect our ability to compete. In addition, technological advances and the growth of e-commerce have made it possible for non-depository institutions to offer products and services that traditionally were banking products, and for financial institutions to compete with technology companies in providing electronic and internet-based financial solutions. Increased competition may negatively affect our results of operations by creating pressure to lower prices on our products and services and reducing market share.

~~products~~Damage ~~and~~to ~~services~~our ~~that~~reputation ~~traditionally~~could ~~were~~significantly ~~banking~~harm ~~products~~our businesses, including our competitive position and ~~for~~business ~~financial~~prospects. Our ~~institutions~~ability to ~~compete~~attract ~~with~~and ~~technology companies~~retain incustomers, ~~providing~~clients, ~~electronic~~investors and ~~internet-based~~employees ~~financial solutions.~~is ~~Increased~~impacted ~~competition~~by ~~may~~our ~~negatively~~reputation. ~~affect~~Public ~~our results~~perception of ~~operations~~us byand ~~creating~~others ~~pressure~~in the financial services industry appeared to ~~lower~~decline ~~prices~~in ~~on our~~2011. ~~products~~We continue to face increased public and ~~services~~regulatory scrutiny resulting from the financial crisis and ~~reducing~~economic ~~market~~downturn, ~~share~~as well as our acquisition by Bank of America and the suitability or reasonableness of recommending particular trading or investment strategies.

~~Damage~~Significant ~~to our reputation could significantly~~ harm ~~our businesses, including our competitive position and business prospects. Our ability~~ to ~~attract and retain customers, clients and employees could be adversely affected to the extent~~ our reputation ~~is damaged. Significant harm to our reputation~~ can also arise from ~~many~~other sources, including indirectly as a result of actions by Bank of America or damage to its reputation, employee misconduct, litigation or regulatory outcomes, failing to deliver minimum or required standards of service and quality, compliance failures, unethical behavior, unintended disclosure of confidential information, and the activities of our clients, customers and counterparties., including vendors. Actions by the financial services industry generally or by certain members or individuals in the industry also can significantly adversely affect our reputation.

~~Our~~We ~~actual~~are orsubject ~~perceived failure~~ to ~~address~~complex ~~various issues also could give rise to reputational risk that could cause significant harm to us~~ and ~~our~~evolving ~~business~~laws ~~prospects, including failure to properly address operational risks. These issues include legal~~ and ~~regulatory~~regulations ~~requirements,~~regarding privacy, ~~properly maintaining~~data ~~customer~~protections and ~~employee~~other personal information, record keeping, protecting against money-laundering, sales and trading practices, ethical issues, and the proper identification of the legal, reputational, credit, liquidity and market risks inherent in our productsmatters.

WePrinciples ~~could~~concerning ~~suffer~~the ~~significant~~appropriate ~~reputational~~scope ~~harm~~of ifconsumer weand ~~fail~~commercial ~~to properly~~privacy ~~identify~~vary considerably in different jurisdictions, and ~~manage~~regulatory ~~potential~~and ~~conflicts~~public ofexpectations ~~interest. Management~~regarding ofthe ~~potential~~definition ~~conflicts~~and scope of ~~interests~~consumer ~~has~~and ~~become increasingly~~commercial ~~complex~~privacy asmay weremain ~~expand~~fluid ~~our~~into ~~business~~the ~~activities through~~future. ~~more~~It ~~numerous~~is ~~transactions,~~possible ~~obligations~~that ~~and~~these ~~interests with~~laws may be interpreted and ~~among~~applied ~~our~~by ~~clients.~~various ~~The~~jurisdictions ~~failure~~in toa ~~adequately~~manner ~~address, or~~that ~~the~~is ~~perceived~~inconsistent ~~failure~~with toour ~~adequately~~current ~~address~~or future practices, ~~conflicts~~or ~~of interest~~that ~~could~~is ~~affect~~inconsistent ~~the~~with ~~willingness~~one ofanother. ~~clients~~We toface ~~deal~~regulatory, ~~with us~~reputational and operational risks if personal, confidential or ~~give~~proprietary ~~rise~~information toof ~~litigation~~customers or ~~enforcement~~clients ~~actions,~~in ~~which could~~our ~~adversely~~possession ~~affect~~is ~~our~~mishandled ~~businesses~~or misused.

We ~~continue~~could tosuffer ~~face~~significant ~~increased~~reputational ~~public~~harm ~~and~~if ~~regulatory~~we ~~scrutiny resulting~~fail ~~from~~to ~~the~~properly ~~financial~~identify ~~crisis,~~and ~~including~~manage ~~our~~potential ~~acquisition by~~conflicts ~~Bank~~ of ~~America~~interest. ~~and~~Management ~~the suitability~~ of ~~certain~~potential ~~trading~~conflicts ~~and investment~~of ~~businesses.~~interest ~~Failure~~has tobecome ~~appropriately~~increasingly ~~address~~complex ~~any~~as ~~of these~~we ~~issues~~expand ~~could~~our ~~also~~business ~~give~~activities ~~rise~~through tomore ~~additional~~numerous ~~regulatory restrictions~~transactions, ~~legal~~obligations ~~risks~~ and ~~reputational~~interests ~~harm,~~with ~~which~~and ~~could,~~ among ~~other~~our ~~consequences~~clients. The failure to adequately address, ~~increase~~or the ~~size~~perceived ~~and~~failure ~~number~~to adequately address, conflicts of ~~litigation~~ ~~claims~~interest ~~and~~could ~~damages~~affect ~~asserted~~the orwillingness ~~subject~~of usclients to ~~enforcement~~ ~~actions~~deal with us, ~~fines~~or ~~and~~give ~~penalties~~rise ~~and~~to ~~cause~~litigation usor toenforcement ~~incur related~~actions, ~~costs~~which ~~and~~could ~~expenses~~adversely affect our businesses.

Our ~~ability~~actual or perceived failure to ~~attract~~address these and ~~retain~~other ~~qualified~~issues ~~employees~~gives ~~is critical~~rise to ~~the~~reputational ~~success~~risk ofthat ~~our~~could ~~businesses~~cause ~~and~~significant ~~failure~~harm to dous ~~so could~~and ~~adversely affect~~ our business prospects, including ~~our competitive~~failure ~~position~~to ~~and~~properly ~~results~~address ~~of operations~~operational risks. ~~Our~~ Failure ~~performance~~to isappropriately ~~heavily~~address ~~dependent on~~any ~~the~~of ~~talents~~these ~~and~~issues ~~efforts~~could ofalso ~~highly~~give ~~skilled~~rise ~~individuals. Competition~~to ~~for~~additional ~~qualified~~regulatory ~~personnel~~restrictions, ~~within~~legal ~~the~~risks ~~financial services industry~~ and ~~from~~reputational ~~businesses~~harm, ~~outside~~which ~~the financial services industry has been~~could, ~~and~~among isother ~~expected to continue to be~~consequences, ~~intense~~ ~~even~~increase ~~during~~the ~~difficult~~size ~~economic times. Our competitors include non-U.S.-based institutions~~ and ~~institutions~~number ~~otherwise~~of ~~not~~litigation ~~subject~~claims ~~to compensation~~ and ~~hiring~~damages ~~regulations~~asserted ~~imposed~~or ~~on U.S. institutions~~subject ~~and~~us ~~financial~~to ~~institutions~~enforcement ~~in particular. The difficulty we face in competing for key personnel is exacerbated in emerging markets~~actions, ~~where~~fines weand ~~are~~penalties ~~often~~and ~~competing for~~cause ~~qualified~~us ~~employees~~to ~~with~~incur ~~entities~~related ~~that~~costs ~~may~~and ~~have a significantly greater presence or more extensive experience in the region~~expenses.

InOur ~~order~~ability to attract and retain qualified ~~personnel,~~employees weis ~~must provide~~critical ~~market-level~~to ~~compensation.~~the Assuccess ~~a subsidiary~~ of ~~Bank~~our ~~of America,~~businesses weand ~~may~~failure ~~be subject~~ to ~~limitations~~do onso ~~compensation practices~~could ~~(which~~adversely ~~may~~affect orour ~~may~~business ~~not~~prospects, ~~affect~~including our ~~competitors)~~competitive ~~by regulators~~position inand ~~the~~results Uof operations.S. Our orperformance ~~around~~is ~~the~~heavily ~~world.~~dependent ~~Any future limitations~~ on ~~executive~~the ~~compensation~~talents ~~imposed by legislators~~ and ~~regulators~~ ~~could~~efforts ~~adversely~~of ~~affect~~highly ~~our~~skilled ~~ability~~individuals. toCompetition ~~attract~~for ~~and maintain~~ qualified ~~employees.~~personnel ~~Furthermore,~~within athe ~~substantial~~financial ~~portion of~~services ~~our~~industry ~~annual~~and ~~bonus~~from ~~compensation~~businesses ~~paid~~outside tothe ~~our~~financial ~~senior~~services ~~employees~~ industry has ~~in recent years taken the form of long-term~~

Table of Contents

~~equity~~been, ~~awards~~and is expected to continue to be, intense. ~~The~~Our ~~value~~competitors ofinclude ~~long~~non-~~term~~U.S.-based ~~equity~~institutions ~~awards~~and institutions otherwise not subject to ~~senior employees~~compensation ~~generally~~and ~~has~~hiring ~~been~~regulations ~~negatively~~imposed ~~affected~~on byU.S. institutions ~~the significant~~and ~~decline~~financial institutions in ~~the~~particular. ~~market~~The ~~price~~difficulty ofwe ~~Bank~~face ofin ~~America Corporation~~competing ~~common~~for ~~stock.~~key Ifpersonnel is exacerbated in emerging markets, where we are ~~unable~~often tocompeting ~~continue~~for ~~to attract~~qualified ~~and~~employees ~~retain~~with ~~qualified~~entities ~~individuals,~~that ~~our~~may ~~business prospects,~~have ~~including~~a ~~our~~significantly ~~competitive~~greater ~~position~~presence ~~and~~or ~~results~~more ~~of operations,~~extensive ~~could~~experience bein ~~adversely~~the ~~affected~~region.

IfIn weorder ~~materially~~to ~~fail~~attract toand retain ~~the~~qualified ~~advisors~~personnel, ~~that~~we must provide market-level compensation. As a subsidiary of Bank of America, we ~~employ~~may be subject to limitations on compensation practices (which may or may not affect our competitors) by regulators in the U.S. or around the world. Any future limitations on executive compensation imposed by legislation or regulation could adversely affect our ~~wealth~~ability to attract and ~~investment~~maintain ~~management~~qualified ~~business~~employees. Furthermore, ~~particularly those~~a ~~with~~substantial ~~significant~~portion ~~client~~of ~~relationships,~~our ~~such~~annual ~~failure~~bonus ~~could result~~compensation paid to our senior employees has in arecent ~~significant~~years ~~loss~~taken the form of ~~clients~~long-term orequity ~~the~~awards. ~~withdrawal~~The value of long-term equity awards to senior employees generally has been negatively affected by the significant ~~client~~decline ~~assets.~~in ~~Any~~the ~~such~~market ~~loss~~price orof ~~withdrawal~~Bank ~~could adversely~~of ~~impact~~America's ~~our~~common ~~wealth~~stock. If we are unable to continue to attract and ~~investment~~retain ~~management~~qualified individuals, our business ~~activities~~ ~~and~~prospects, including our competitive position and results of operations, ~~financial~~could ~~condition and~~be ~~cash~~adversely ~~flows~~affected.

~~Our~~In ~~inability~~addition, toif ~~adapt~~we ~~our~~fail ~~products and services~~ to ~~evolving industry~~retain ~~standards~~the ~~and~~wealth ~~consumer~~advisors ~~preferences~~that ~~could~~we ~~harm~~employ ~~our businesses. Our success depends,~~ in ~~part, on~~ our ~~ability~~ towealth ~~adapt our products~~ and ~~services~~investment tomanagement evolving industry standards. There is increasing pressure by competitors to provide products and services at lower prices. This can reduce our revenues from our fee-based products and services. In additionbusiness, ~~the~~particularly ~~widespread~~those ~~adoption~~with ofsignificant ~~new~~client ~~technologies~~relationships, ~~including internet~~such ~~services,~~failure could ~~require~~result usin toa ~~incur~~significant ~~substantial expenditures~~loss toof ~~modify~~clients or ~~adapt~~the ~~our~~withdrawal ~~existing~~of ~~products~~significant ~~and services~~client assets. WeAny ~~might~~such ~~not~~loss beor ~~successful~~withdrawal incould ~~developing~~adversely ~~or introducing~~impact ~~new~~our ~~products~~wealth and ~~services,~~investment ~~responding~~management orbusiness ~~adapting~~activities ~~to changes in consumer spending~~ and ~~saving~~our ~~habits~~financial condition, ~~achieving~~results ~~market acceptance~~ of ~~our~~operations ~~products~~ and ~~services,~~cash ~~or sufficiently developing and maintaining loyal customers~~flows.

~~Risks Related~~We may not be able to ~~Risk~~achieve ~~Management~~ expected cost savings from cost-saving initiatives, including from Project New BAC, or in accordance with currently anticipated time frames. We are currently engaged in numerous efforts to achieve certain cost savings, including, among other things, Project New BAC.

~~Our~~Project ~~risk~~New ~~management~~BAC ~~framework~~is ~~may~~a ~~not~~two-phase, beenterprise-wide ~~effective~~initiative ~~in mitigating~~to ~~risk~~simplify and ~~reducing~~streamline ~~the~~workflows ~~potential for significant losses. Our risk management framework is designed to minimize risk~~ and ~~loss to us. We seek to identify~~processes, ~~measure, monitor,~~align ~~report~~businesses and ~~control~~costs ~~our~~more ~~exposure~~closely towith ~~the~~Bank ~~types~~ of ~~risk~~America's ~~to which~~overall ~~we are subject, including~~ strategic, ~~credit,~~plan ~~market, liquidity,~~and ~~compliance,~~operating ~~fiduciary~~principles, ~~operational~~ and ~~reputational risks,~~increase ~~among others~~revenues. ~~While~~Phase we1 ~~employ~~focused aon ~~broad~~Bank ~~and diversified set~~ of ~~risk~~America's ~~monitoring~~consumer businesses and ~~mitigation~~related ~~techniques~~support, ~~those~~technology ~~techniques are~~and ~~inherently~~operations ~~limited~~functions. ~~because~~Phase ~~they~~2 ~~cannot~~focuses ~~anticipate~~on ~~the existence~~businesses orand ~~future~~related ~~development of currently unanticipated or unknown risks. For example~~support, ~~recent~~technology ~~economic conditions, heightened legislative~~ and ~~regulatory~~operations ~~scrutiny~~functions ofnot ~~the~~subject ~~financial services~~to ~~industry,~~evaluation ~~among other developments, have resulted~~ in ~~the~~ ~~creation~~Phase of1. All aaspects ~~variety~~ of ~~previously~~Project ~~unanticipated~~New orBAC ~~unknown risks,~~are ~~highlighting~~expected ~~the~~to ~~intrinsic~~be ~~limitations~~implemented ofby ~~our risk monitoring and mitigation techniques. As such, we may incur future losses due to~~ the ~~development~~end of ~~such previously unanticipated or unknown risks~~2014.

AWe ~~failure~~may inbe orunable ~~breach~~to offully ~~our~~realize ~~operational or security systems or infrastructure, or those of third parties, could disrupt our businesses, result in~~ the ~~disclosure~~cost ofsavings ~~confidential information or damage our reputation. Any such failure also could have a significant adverse effect on our reputation, cash flows, financial condition~~ and ~~results~~other ~~of operations. Our~~anticipated ~~business~~benefits is highly dependent on our ability to process and monitor, on a continuous basis, a large number of transactions, many of which are highly complex, across numerous and diverse markets in many currencies. The potential for operational risk exposure exists throughout our organization, including losses resulting from ~~unauthorized trades by any employees. Integral to~~ our ~~performance~~cost issaving ~~the continued efficacy of our internal processes~~initiatives, ~~systems, relationships with third parties and the vast array of employees and key executives~~ or in ~~our day-to-day and~~accordance ongoing operations. Our financial, accounting, data processing or other operating systems and facilities may fail to operate properly or become disabled as a result of events that are wholly or partially beyond our control and adversely affect our ability to process these transactions or provide these services. We must continuously update these systems to support our operations and growth. This updating entails significant costs and creates risks associated with ~~implementing~~currently ~~new~~anticipated ~~systems and integrating them with existing ones~~timeframes.

18 Our inability to adapt our products and services to evolving industry standards and consumer preferences could harm our businesses. Our success depends, in part, on our ability to adapt our products and services to evolving industry standards. There is increasing pressure by competitors to provide products and services at lower prices. This can reduce our revenues from our fee-based products and services. In addition, the widespread adoption of new technologies, including internet services, could require us to incur substantial expenditures to modify or adapt our existing products and services. We might not be successful in developing or introducing new products and services, responding or adapting to changes in consumer spending and saving habits, achieving market acceptance of our products and services, or sufficiently developing and maintaining loyal customers.

~~Table~~Risks ofRelated ~~Contents~~to Risk Management

InOur ~~addition,~~risk wemanagement ~~also~~framework ~~face~~may not be effective in mitigating risk and reducing the potential for significant losses. Our risk ofmanagement ~~operational~~framework ~~failure, termination~~is ordesigned ~~capacity~~to ~~constraints~~minimize ofrisk ~~any~~and ofloss ~~the~~to ~~clearing agents~~us. We seek to identify, ~~exchanges~~measure, ~~clearing~~monitor, ~~houses~~report orand ~~other~~control ~~financial intermediaries~~our weexposure ~~use~~to the types of risk to ~~facilitate~~which ~~our~~we ~~securities~~are ~~transactions. In~~subject, ~~recent~~including ~~years~~strategic, ~~there~~credit, ~~has~~market, ~~been~~liquidity, ~~significant~~compliance, ~~consolidation~~operational ~~among clearing~~and ~~agents~~reputational risks, ~~exchanges~~among others. While we employ a broad and ~~clearing~~diversified ~~houses~~set of risk monitoring and mitigation techniques, ~~which~~those ~~has increased~~techniques ~~our~~are ~~exposure~~inherently tolimited ~~operational~~because ~~failure,~~they ~~termination~~cannot anticipate the existence or ~~capacity~~ ~~constraints~~future development of ~~the~~currently ~~particular~~unanticipated ~~financial~~or ~~intermediaries that~~unknown werisks. ~~use~~Recent economic conditions, heightened legislative and ~~could~~regulatory ~~affect~~scrutiny ~~our~~of ~~ability~~the tofinancial ~~find~~services ~~adequate~~industry and ~~cost-effective~~ ~~alternatives~~increases in the ~~event~~overall complexity of ~~any~~our ~~such~~operations, ~~failure~~among other developments, ~~termination~~ orhave ~~constraint.~~resulted ~~Industry~~in ~~consolidation,~~a ~~whether~~heightened ~~among market~~level ~~participants~~of orrisk ~~financial~~for ~~intermediaries~~us. Accordingly, ~~increases~~we ~~the risk~~could suffer losses as a result of ~~operational~~our failure asto ~~disparate~~properly ~~complex~~anticipate ~~systems~~and ~~need~~manage ~~to be~~these ~~integrated~~risks, ~~often~~including all correlations and downstream secondary or follow-on aneffects ~~accelerated~~that ~~basis~~occur.

Furthermore, the interconnectivity of multiple financial institutions with central agents, exchanges and clearing houses, and the increased centrality of these entities under proposed and potential regulation, increases the risk that an operational failure at one institution or entity may cause an industry-wide operational failure that could adversely impact our own business operations. Any such failure, termination or constraint could adversely affect our ability to effect transactions, service our clients, manage our exposure to risk or expand our businesses and could have a significant adverse impact on our liquidity, financial condition and results of operations. 18

~~Our~~Table ~~operations rely on the secure processing, storage and transmission~~ of confidential and other information in our computer systems and networks. Although we take protective measures and endeavor to modify them as circumstances warrant, the security of our computer systems, software and networks may be vulnerable to breaches, unauthorized access, misuse, computer viruses or other malicious code and other events that could have a security impact. Additionally, breaches of security may occur through intentional or unintentional acts by those having authorized or unauthorized access to our or our clients’ or counterparties’ confidential or other information. If one or more of such events occur, this potentially could jeopardize our or our clients’ or counterparties’ confidential and other information processed and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions or malfunctions in our, our clients’, our counterparties’ or third parties’ operations, which could result in significant losses or reputational damage to us. We may be required to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures arising from operational and security risks, and we may be subject to litigation and financial losses that are either not insured against or not fully covered through any insurance maintained by us. Contents

WeA ~~routinely~~failure ~~transmit~~in ~~and~~or ~~receive~~breach ~~personal,~~of ~~confidential~~our ~~and proprietary~~operational ~~information~~or bysecurity ~~email~~systems ~~and~~or ~~other~~infrastructure, ~~electronic~~or ~~means.~~those ~~We have~~of ~~discussed~~third ~~and~~parties ~~worked~~ with ~~clients,~~which ~~vendors,~~we ~~service providers~~do business, ~~counterparties~~including ~~and~~as ~~other~~a ~~third~~result ~~parties~~of tocyber ~~develop secure transmission capabilities~~attacks, ~~but~~could wedisrupt doour ~~not have~~businesses, ~~and~~result ~~may~~in ~~be unable~~the todisclosure ~~put~~or inmisuse ~~place,~~of ~~secure~~confidential ~~capabilities~~or ~~with~~proprietary ~~all~~information, ofdamage our ~~clients,~~ ~~vendors~~reputation, ~~service~~increase ~~providers,~~our ~~counterparties~~costs and ~~other third~~cause ~~parties,~~losses. ~~and~~Any wesuch ~~may~~failure ~~not~~also becould ~~able~~have toa ~~ensure~~material ~~that~~adverse ~~these~~effect ~~third parties~~on ~~have~~our ~~appropriate~~business, ~~controls~~financial incondition ~~place~~and toresults ~~protect the confidentiality~~ of ~~the information~~operations. Our ~~Any~~business ~~interception,~~is ~~misuse~~highly ~~or mishandling~~dependent ofon ~~personal,~~our ~~confidential~~ability orto ~~proprietary~~process, ~~information being~~record ~~sent~~and tomonitor, oron ~~received from~~ a ~~client,~~continuous ~~vendor~~basis, ~~service provider,~~a ~~counterparty~~large ornumber ~~other~~of ~~third~~transactions, ~~party~~many ~~could~~of ~~result~~which ~~in legal~~are ~~liability~~highly complex, ~~regulatory~~across ~~action~~numerous and ~~reputational~~diverse ~~harm~~markets ~~for~~in ~~us and~~many ~~could~~currencies. ~~have~~The apotential ~~significant~~for ~~adverse~~operational ~~effect~~risk onexposure exists throughout our ~~competitive position~~organization, ~~financial~~including ~~condition~~losses ~~and~~resulting ~~results~~from ofunauthorized ~~operations~~trades by any employees.

Integral to our performance is the continued efficacy of our internal processes, systems, relationships with third parties and the vast array of employees and key executives in our day-to-day and ongoing operations. With regard to the physical infrastructure and systems that ~~supports~~support our operations, we have taken measures to implement backup systems and other safeguards, but our ability to conduct business may be adversely affected by any significant and widespread disruption to ~~that~~our infrastructure~~. Such~~ ~~disruptions~~or ~~could~~systems. ~~involve~~Our ~~electrical~~financial, ~~communications~~accounting, ~~internet~~ data processing, ~~transportation~~backup or other ~~services~~operating ~~used~~systems byand usfacilities ormay ~~third parties~~fail ~~with~~to ~~whom~~operate weproperly ~~conduct~~or ~~business.~~become ~~These~~disabled ~~disruptions~~or ~~may occur~~damaged as a result of a number of factors including events that ~~affect~~are ~~only~~wholly or partially beyond our ~~facilities~~control ~~or those~~and ofadversely affect our ~~clients~~ability orto ~~other~~process ~~business~~these ~~partners~~transactions ~~but~~or ~~they~~provide these services. There could ~~also~~ be ~~the~~sudden ~~result~~increases ofin ~~events~~customer ~~with~~transaction avolume; ~~broader~~electrical ~~impact~~or ~~globally~~telecommunications outages; natural disasters such as earthquakes, ~~regionally~~ tornadoes and hurricanes; disease pandemics; events arising from local or inlarger ~~the~~scale ~~cities~~political ~~where~~or ~~those~~social ~~facilities~~matters, ~~are~~including ~~located~~terrorist acts; and cyber attacks. ~~The~~ We continuously update these systems to support our operations and growth. This updating entails significant costs and creates risks associated with implementing new systems and integrating them with existing ones.

19 Information security risks for large financial institutions such as Bank of America and Merrill Lynch have significantly increased in recent years in part because of the proliferation of new technologies, the use of the Internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists and other external parties, including foreign state actors. Our operations rely on the secure processing, transmission and storage of confidential, proprietary and other information in our computer systems and networks. We rely on our digital technologies, computer and email systems, software, and networks to conduct our operations. In addition, to access our products and services, our customers may use personal smartphones, tablet PCs, and other mobile devices that are beyond our control systems. Our technologies, systems, networks, and our customers' devices have been subject to, and are likely to continue to be the target of, cyber attacks, computer viruses, malicious code, phishing attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of our or our customers' confidential, proprietary and other information, or otherwise disrupt our or our customers' or other third parties' business operations. Because of our prominence, we believe that such attacks may continue.

~~Table~~Although to date we have not experienced any material losses relating to cyber attacks or other information security breaches, there can be no assurance that we will not suffer such losses in the future. Our risk and exposure to these matters remains heightened because of, ~~Contents~~among other things, the evolving nature of these threats, the prominent size and scale of Bank of America and Merrill Lynch and their roles in the financial services industry, their expanded geographic footprint and international presence, the outsourcing of some of their business operations, the continued uncertain global economic environment, and system and customer account conversions. As a result, cybersecurity and the continued development and enhancement of our controls, processes and practices designed to protect our systems, computers, software, data and networks from attack, damage or unauthorized access remain a priority for us. As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.

~~such~~In ~~disruptions~~addition, ~~including~~we ~~any~~also ~~loss~~face the risk of operational failure, termination or capacity constraints of any of the third parties with which we do business or that facilitate our business activities, ~~could~~including ~~have~~clearing ~~a significant~~agents, ~~adverse~~exchanges, ~~effect~~clearing onhouses or other financial intermediaries we use to facilitate our ~~results~~securities transactions. In recent years, there has been significant consolidation among clearing agents, exchanges and clearing houses and increased interconnectivity of ~~operations~~multiple or financial ~~condition~~institutions with central agents, exchanges and clearing houses. This consolidation and interconnectivity increases the risk of operational failure, on both individual and industry-wide

Any of these operational and security risks could lead to significant and negative consequences, including reputational harm as well as loss of customers and business opportunities, which in turn could have a significant adverse effect on our businesses, cash flows, financial condition or results of operations. 19

~~Risk Related~~Table toof ~~Business Combination Transactions~~ Contents

~~Any~~bases, ~~failure~~as todisparate ~~successfully~~complex ~~integrate~~systems ~~with~~need ~~Bank~~to ofbe ~~America could~~integrated, ~~adversely~~often ~~affect~~on ~~our~~an ~~business. We~~accelerated ~~were acquired by Bank of America in 2009~~basis. ~~The~~Any ~~success~~such ~~of this acquisition faces numerous challenges~~failure, ~~including~~termination ~~the~~or ~~ability~~constraint to realize the anticipated benefits and cost savings of combining the businesses of Merrill Lynch and Bank of America. It is possible that the continued integration process of our acquisition could ~~result in disruption of our ongoing businesses or inconsistencies in standards, controls, procedures and policies that~~ adversely affect our ability to ~~maintain sufficiently~~effect ~~strong~~transactions, ~~relationships~~service ~~with~~our clients, ~~customers, depositors~~manage ~~and~~our ~~employees~~exposure or to ~~achieve~~risk ~~the~~or ~~anticipated~~expand ~~benefits of~~our ~~the~~businesses ~~acquisition. Integration efforts may also divert management attention~~ and ~~resources. These integration matters~~ could have ana significant adverse ~~effect~~impact on usour ~~for~~liquidity, anfinancial ~~undetermined~~condition ~~period. We will be subject to similar risks~~ and ~~difficulties~~results ~~in connection with any future acquisitions or decisions to downsize, sell or close units or otherwise change the business mix~~ of ~~Merrill Lynch~~operations.

~~Risk~~Disruptions or failures in the physical infrastructure or operating systems that support our business and customers, or cyber attacks or security breaches of ~~Being~~ anthe ~~International~~networks, ~~Business~~ systems or devices that our customers use to access our products and services could result in the loss of customers and business opportunities, legal liability, regulatory fines, penalties or intervention, reputational damage, reimbursement or other compensatory costs, and additional compliance costs, any of which could materially adversely affect our business, financial condition and results of operations.

WeRisk are subject to numerous political, economic, market, reputational, operational, legal, regulatory and other risks in the non-U.S. jurisdictions in which we operate which could adversely impact our businesses. We do business throughout the world, including in developing regions of ~~the~~Being world commonly known as emerging markets. Our businesses and revenues derived from non-U.S. jurisdictions are subject to risk of loss from currency fluctuations, social or judicial instability, changes in governmental policies or policies of central banks, expropriation, nationalization and/or confiscation of assets, price controls, capital controls, exchange controls, other restrictive actions, unfavorable political and diplomatic developments and changes in legislation. These risks are especially acute in emerging markets. As in the U.S., many non-U.S. jurisdictions in which we do business have been negatively impacted by recessionary conditions. While a number of these jurisdictions are showing signs of recovery, others continue to experience increasing levels of stress. In addition, the risk of default on sovereign debt in some non-U.S. jurisdictions is increasing and could expose us to substantial losses. Any such unfavorable conditions or developments could have an ~~adverse~~ ~~impact~~International ~~on our businesses and results of operations.~~ Business

~~Our~~We are subject to numerous political, economic, market, reputational, operational, legal, regulatory and other risks in the non-U.S. jurisdictions in which we operate which could adversely impact our businesses, ~~are~~financial ~~also~~condition ~~subject~~and toresults ~~extensive~~of ~~regulation by~~operations. We ~~various~~do business throughout the world, including in developing regions of the world commonly known as emerging markets. Our businesses and revenues derived from non-U.S. jurisdictions ~~regulators,~~are ~~including~~subject ~~governments~~to risk of loss from currency fluctuations, ~~securities~~ ~~exchanges~~social or judicial instability, changes in governmental policies or policies of central banks, expropriation, nationalization and/or confiscation of assets, price controls, capital controls, exchange controls, other ~~regulatory~~restrictive ~~bodies~~actions, unfavorable political and diplomatic developments and changes in ~~the~~legislation. ~~jurisdictions~~These risks are especially acute in ~~which~~emerging ~~those~~markets. ~~businesses~~Many ~~operate~~non-U.S. jurisdictions Inin ~~many countries,~~which ~~the~~we ~~laws~~do ~~and~~business ~~regulations~~have ~~applicable~~been tonegatively ~~the~~impacted ~~financial services~~by ~~and~~recessionary ~~securities~~conditions. ~~industries~~While ~~are~~a ~~uncertain~~number ~~and~~of ~~evolving, and~~these itjurisdictions ~~may~~are beshowing ~~difficult~~signs ~~for~~of usrecovery, others continue to ~~determine~~experience ~~the~~increasing ~~exact requirements~~levels of ~~local~~stress. ~~laws~~In inaddition, ~~every~~the ~~market~~increasing orpotential ~~manage~~risk ~~our relationships~~of ~~with~~default ~~multiple~~on ~~regulators~~sovereign debt in ~~various~~some ~~jurisdictions~~non-U. ~~Our~~S. jurisdictions ~~inability~~could expose us to ~~remain~~substantial losses. Risks in ~~compliance~~one ~~with~~country ~~local~~can ~~laws~~affect our operations in ~~a particular~~another ~~market~~country ~~and~~or ~~manage~~countries, including our ~~relationships~~operations ~~with~~in ~~regulators could~~the ~~have~~U.S. As a ~~significant~~result, ~~and~~any ~~adverse~~such ~~effect~~unfavorable ~~not~~conditions ~~only~~or ondevelopments ~~our businesses~~could inhave ~~that~~an ~~market~~adverse ~~but~~impact ~~also~~ on our ~~reputation~~businesses, ~~generally~~financial condition and results of operations.

WeOur ~~also~~non-U.S. ~~invest~~businesses orare ~~trade~~also insubject ~~the~~to ~~securities~~extensive ofregulation ~~corporations~~by ~~and governments~~various ~~located in~~ non-U.S. ~~jurisdictions~~ regulators, including ~~emerging~~governments, ~~markets.~~securities ~~Revenues~~exchanges, ~~from~~central banks and other regulatory bodies, in the ~~trading~~jurisdictions ~~of non-U~~in which those businesses operate.S. In many countries, the laws and regulations applicable to the financial services and securities industries are uncertain and evolving, and it may be ~~subject~~difficult tofor ~~negative~~us ~~fluctuations~~to asdetermine athe ~~result~~exact requirements of ~~the~~local ~~above factors~~laws in every market or manage our relationships with multiple regulators in various jurisdictions. ~~Furthermore,~~Our ~~the~~inability ~~impact~~to of remain in compliance with local laws in a particular market and manage our relationships with regulators could have a significant and adverse effect not only on our businesses in that market but also on our reputation generally.

20 We also invest or trade in the securities of corporations and governments located in non-U.S. jurisdictions, including emerging markets. Revenues from the trading of non-U.S. securities may be subject to negative fluctuations as a result of the above factors. Furthermore, the impact of these fluctuations could be magnified because non-U.S. trading markets, particularly in emerging market countries, are generally smaller, less liquid and more volatile than U.S. trading markets.

~~Table~~We are subject to geopolitical risks, including acts or threats of ~~Contents~~terrorism, and actions taken by the U.S. or other governments in response thereto and/or military conflicts that could adversely affect business and economic conditions abroad as well as in the U.S.

~~these~~Risk ~~fluctuations~~from ~~could~~Accounting ~~be magnified because non-U.S. trading markets, particularly in emerging market countries, are generally smaller, less liquid and more volatile than U.S. trading markets.~~ Changes

WeChanges in accounting standards or inaccurate estimates or assumptions in the application of accounting policies could adversely affect our financial condition and results of operations. Our accounting policies and methods are ~~subject~~fundamental to ~~geopolitical~~how ~~risks,~~we ~~including~~record ~~acts~~and orreport ~~threats~~ our financial condition and results of ~~terrorism,~~operations. Some of these policies require use of estimates and ~~actions~~assumptions ~~taken~~that bymay affect the ~~U.S.~~ reported value of our assets or ~~other governments~~liabilities inand ~~response~~ results of operations and~~/or military~~ ~~conflicts~~are critical because they require management to make difficult, subjective and complex judgments about matters that ~~could~~are ~~adversely~~inherently ~~affect~~uncertain. ~~business~~If ~~and economic~~those ~~conditions~~assumptions, ~~abroad~~estimates asor ~~well~~judgments aswere inincorrectly ~~the~~made, Uwe could be required to correct and restate prior-period financial statements.S.

~~Risk from Accounting Changes~~ 20

~~Changes~~Table ~~in accounting standards or inaccurate estimates or assumptions in the application~~ of accounting policies could adversely affect our financial condition and results of operations. Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. Some of these policies require use of estimates and assumptions that may affect the reported value of our assets or liabilities and results of operations and are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain. If those assumptions, estimates or judgments were incorrectly made, we could be required to correct and restate prior period financial statements. Contents

Accounting standard-setters and those who interpret the accounting standards (such as the Financial Accounting Standards Board, the SEC and our independent registered public accounting firm) may also amend or even reverse their previous interpretations or positions on how various standards should be applied. These changes can be ~~hard~~difficult to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, resulting in Merrill Lynch needing to revise and republish prior -period financial statements. For a further ~~discussion~~information ofon some of our critical accounting policies and standards and recent accounting changes, see Note 1 to the Consolidated Financial Statements.

Risk of Being a Wholly-Owned Subsidiary

We are a direct wholly-owned subsidiary of Bank of America and therefore are subject to strategic decisions of Bank of America ~~Corporation~~ and affected by Bank of America’s performance. We are fundamentally affected by our relationship with Bank of America. As a direct wholly-owned subsidiary of Bank of America, we are subject to a wide range of possible strategic decisions that Bank of America may make from time to time. Those strategic decisions could include the level and types of financing and other support made available to us by Bank of America. In addition, circumstances and events affecting Bank of America can significantly affect us. For example, the primary drivers of our credit ratings are Bank of America’s credit ratings, and when rating agencies take actions regarding Bank of America’s credit ratings and outlooks, they generally take the same actions with respect to our ratings and outlooks. Also, we have several borrowing arrangements and a globally coordinated funding strategy with Bank of America. Significant changes in Bank of America’s strategy or its relationship with us could have a material adverse effect on our business. Material adverse changes in the performance of Bank of America or its other subsidiaries could have a material adverse effect on our results of operations, financial condition and liquidity. We are indirectly exposed, therefore, to many of the risks to which Bank of America is directly exposed. Bank of America has not assumed or guaranteed the long-term debt that was issued or guaranteed by ML & Co. or its subsidiaries prior to the acquisition of Merrill Lynch by Bank of America.

As a wholly-owned subsidiary of Bank of America, a bank holding company that is also a financial holding company, we are subject to the oversight of, and inspection by, the ~~Board of Governors of the~~ Federal Reserve ~~Board~~. If Bank of America does not comply with regulatory requirements applicable to banking institutions with respect to regulatory capital, capital ratios and liquidity and required increases in the foregoing, our liquidity would be adversely affected. In order to comply with such requirements, Bank of America may be required to liquidate company assets, among other actions. Our activities are limited to those that are permissible for Bank of America under applicable laws and regulations. As a financial holding company, Bank of America (directly or through its subsidiaries) may engage in activities that are “financial in nature.” Bank of America’s status as a financial holding company requires, among other conditions, that each of its subsidiary insured depository institutions be well-capitalized and well-managed. Failure to satisfy these conditions may result in the Federal Reserve limiting the activities of Bank of America, which thereby could restrict our current business activities, require divestiture of certain of our assets and operations or limit potential future strategic plans.

21 Item 1B. Unresolved Staff Comments

~~Table~~Not ~~of Contents~~applicable.

in the foregoing, our liquidity would be adversely affected. In order to comply with such requirements, Bank of America may be required to liquidate company assets, among other actions. Our activities are limited to those that are permissible for Bank of America under applicable laws and regulations. As a financial holding company, Bank of America (directly or through its subsidiaries) may engage in activities that are “financial in nature.” Bank of America’s status as a financial holding company requires, among other conditions, that each of its subsidiary insured depository institutions be well-capitalized and well-managed. Failure to satisfy these conditions may result in the Federal Reserve Board limiting the activities of Bank of America, which thereby could restrict our current business activities, require divestiture of certain of our assets and operations or limit potential future strategic plans. 21

~~Item~~Table ~~1B.~~of ~~Unresolved Staff Comments~~Contents

~~There~~Item are no unresolved written comments that were received from the SEC staff 180 days or more before the end of our 2010 fiscal year relating to our periodic or current reports filed under the Securities Exchange Act of 19342. Properties

~~Item~~As 2.of ~~Properties~~December 31, 2011, our principal offices and other materially important properties consisted of the following:

We have offices in various locations throughout the world. Other than those described below as being owned, substantially all of our offices are located in leased premises. We believe that the facilities we own or lease are adequate for the purposes for which they are currently used and that they are well maintained. Set forth below is the location and the approximate square footage of our principal facilities. Information regarding our property lease commitments is set forth in “Operating Leases” in Note 14 to the Consolidated Financial Statements.



Facility Name	Location	General Character of the Physical Property	Property Status	Property Sq. Ft. ⁽¹⁾
4 World Financial Center	New York, NY	34 Story Building	Leased	1,806,365
2 World Financial Center	New York, NY	44 Story Building	Leased	504,896
Hopewell Campus	Hopewell, NJ	8 Building Campus with 4 Ancillary Buildings	Owned	1,787,811
Jacksonville Campus	Jacksonville, FL	4 Building Campus	Owned	577,402
Merrill Lynch Financial Center	London, UK	4 Building Campus	Leased	568,307
Nihonbashi 1-Chome Building	Tokyo, Japan	24 Story Building	Leased	263,723

~~Principal Facilities~~(1) inFor leased properties, Property Sq. Ft. represents the ~~United~~square ~~States~~ footage occupied by Merrill Lynch.

~~Following~~Our ~~our acquisition by Bank of America, we changed our~~ principal executive offices ~~from~~are 4located ~~World~~at ~~Financial Center, New York, New York, to the~~ Bank of America Corporate Center in Charlotte, North Carolina, which is owned by one of Bank of America’'s subsidiaries. In addition, ~~some~~we ofhave ~~our~~ employees ~~are~~ located at Bank of America Tower at One Bryant Park in New York, New York. We lease portions of 4 World Financial Center (1,800,000 square feet) and 2 World Financial Center (2,500,000 square feet); both leases expire in 2013. One of our subsidiaries is a partner in the partnership that holds the ground lessee’s interest in 4 World Financial Center. As of December 31, 2010, we occupied the entire 4 World Financial Center (other than retail areas) and approximately 27% of 2 World Financial Center.

We ~~own~~believe aour ~~760,000 square~~owned ~~foot~~and ~~building~~leased atproperties ~~222~~are ~~Broadway,~~adequate ~~New York~~for ~~and~~our ~~occupy~~business ~~92%~~needs ofand ~~this~~are ~~building~~well maintained. We ~~also~~continue ~~own 1,251,000 square~~to ~~feet~~evaluate our owned and leased real estate and may determine from time to time that certain of ~~office~~our ~~space~~premises and facilities, ~~273~~or ownership structures,~~000 square feet~~ are ofno ~~ancillary~~longer ~~buildings~~necessary infor ~~Hopewell,~~our ~~New~~operations. ~~Jersey~~In ~~and~~connection ~~the underlying~~therewith, ~~land~~we ~~upon~~are ~~which~~evaluating the ~~Hopewell~~sale ~~facilities~~or ~~are~~sale ~~located. We~~/ ~~also~~leaseback ~~own~~of acertain ~~600,000 square~~properties ~~foot~~and ~~campus~~we may incur costs in ~~Jacksonville, Florida,~~connection with ~~four~~any ~~office~~such ~~buildings~~transactions.

~~Principal Facilities~~Item ~~Outside~~3. ~~the~~Legal ~~United States~~ Proceedings

InRefer ~~London,~~to we"Litigation ~~lease~~ and ~~occupy~~Regulatory ~~100%~~Matters" ofin ~~our 576,626~~Note ~~square foot~~14 ~~London~~to ~~headquarters~~the ~~facility~~Consolidated ~~known as Bank of America Merrill Lynch~~ Financial ~~Centre;~~Statements ~~this lease expires~~ in ~~2022. In addition~~Part II, ~~we lease approximately 305,086~~Item ~~square feet in other London locations with various terms~~8, ~~the longest of~~ which ~~lasts~~ ~~until~~is ~~2020.~~incorporated Weherein ~~occupy~~by ~~134,375 square feet of this space and have sublet the remainder~~reference. In Tokyo, we have leased 292,349 square feet until January 2014 for our Japan headquarters. Other leased facilities in the Pacific Rim are located in Hong Kong, Singapore, Seoul, South Korea, Mumbai and Chennai, India, and Sydney and Melbourne, Australia.

22 Item 4. Mine Safety Disclosures

~~Table of Contents~~None.

~~Item 3. Legal Proceedings~~22

~~Refer~~Table ~~to Note 14 to the Consolidated Financial Statements in Part II, Item 8 for a discussion~~ of ~~litigation and regulatory matters.~~ Contents

~~Item 4. Removed and Reserved.~~PART II

23 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

~~Table~~ML & Co. made no purchases of ~~Contents~~its common stock during the year ended December 31, 2011. There were 1,000 shares of ML & Co. common stock outstanding as of December 31, 2011, all of which were held by Bank of America Corporation.

~~PART II~~ Dividends Per Common Share

~~Item~~As 5of the date of this report, Bank of America is the sole holder of the outstanding common stock of ML & Co. ~~Market~~There is no trading market for ~~Registrant~~ML & Co. common stock. No cash dividends were declared or paid for the years ended December 31, 2011 and 2010. With the exception of regulatory restrictions on subsidiaries’ abilities to pay dividends, there were no restrictions on ML & Co.’s ~~Common~~present ~~Equity~~ability to pay dividends on common stock, ~~Related~~other ~~Stockholder~~than ~~Matters~~ML & Co.’s obligation to make payments on its junior subordinated debt related to trust preferred securities, and ~~Issuer~~the ~~Purchases~~governing provisions of ~~Equity~~Delaware ~~Securities~~General Corporation Law.

~~ML &~~Securities ~~Co.~~Authorized ~~made~~for noIssuance ~~purchases~~under ofEquity ~~its~~Compensation common stock during the year ended December 31, 2010. There were 1,000 shares of ML & Co. common stock outstanding as of December 31, 2010, all of which were held by Bank of America Corporation. Plans

~~Dividends Per~~There ~~Common~~are ~~Share~~ no equity securities of ML & Co. that are authorized for issuance under any equity compensation plans. Refer to Note 15 and Note 16 of the Consolidated Financial Statements for further information on employee benefit and equity compensation plans.

AsItem ~~of the date of this report, Bank of America is the sole holder of the outstanding common stock of ML & Co~~6. ~~There~~ isSelected noFinancial trading market for ML & Co. common stock. No cash dividends were declared or paid for the year ended December 31, 2010. In the year ended December 31, 2009, ML & Co. paid a cash dividend of $700 million to Bank of America. With the exception of regulatory restrictions on subsidiaries’ abilities to pay dividends, there were no restrictions on ML & Co.’s present ability to pay dividends on common stock, other than ML & Co.’s obligation to make payments on its junior subordinated debt related to trust preferred securities, and the governing provisions of Delaware General Corporation Law. Data

~~Securities Authorized~~Not ~~for~~required ~~Issuance~~pursuant ~~under~~to ~~Equity~~General ~~Compensation Plans~~ Instruction I (2).

There are no equity securities of ML & Co. that are authorized for issuance under any equity compensation plans. Refer to Note 15 and Note 16 of the Consolidated Financial Statements for further information on employee benefit and equity compensation plans. 23

~~Item~~Table 6.of ~~Selected Financial Data.~~Contents

~~Not~~Item ~~required~~7. ~~pursuant~~Management’s toDiscussion ~~General~~and ~~Instruction I(2).~~ Analysis of Financial Condition and Results of Operations

24 Forward-Looking Statements

~~Table~~This report on Form 10-K, the documents that it incorporates by reference and the documents into which it may be incorporated by reference may contain, and from time to time Merrill Lynch & Co., Inc. (“ML & Co. and, together with its subsidiaries, “Merrill Lynch,” the “Company,” "we,” “our” or “us”) and its management may make certain statements that constitute forward-looking statements within the meaning of ~~Contents~~the Private Securities Litigation Reform Act of 1995. When used in this report, “we,” “us” and “our” may refer to ML & Co. individually, ML & Co. and its subsidiaries, or certain of ML & Co.'s subsidiaries or affiliates. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “expects,” “anticipates,” “believes,” “estimates,” “targets,” “intends,” “plans,” “goal” and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.” The forward-looking statements made represent the current expectations, plans or forecasts of Merrill Lynch regarding its future results and revenues and future business and economic conditions more generally, including statements concerning: the potential impacts of the European Union ("EU") sovereign debt crisis; the impact of the United Kingdom (the "U.K.") 2011 Finance Bill and review by the U.K. Financial Services Authority; the charge to income for each one percent reduction in the U.K. corporate income tax rate; the planned schedule and details for implementation and completion of, and the expected impact from, Phase 1 and Phase 2 of Project New BAC, including expected reductions in employment levels; the belief that the representations and warranties provision recorded in the year ended December 31, 2011 has provided for a substantial portion of Merrill Lynch's non-government sponsored enterprises ("GSEs") repurchase claims; the estimated range of possible loss for non-GSE representations and warranties exposure as of December 31, 2011 of up to $0.5 billion over existing accruals; Merrill Lynch's intention to vigorously contest any requests for repurchase for which it concludes that a valid basis does not exist; the net recovery projections for credit default swaps with monoline financial guarantors; the impact on economic conditions and Merrill Lynch arising from further changes to the credit rating or perceived creditworthiness of instruments issued, insured or guaranteed by the U.S. government, or of institutions, agencies or instrumentalities directly linked to the U.S. government; the realizability of deferred tax assets prior to expiration of any carryforward periods; credit trends and conditions, including credit losses, credit reserves, charge-offs, delinquency trends and nonperforming asset levels; investment banking fees; sales and trading revenues; liquidity; the revenue impact resulting from, and any mitigation actions taken in response to, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Financial Reform Act”), including, but not limited to, the Volcker Rule; that it is our objective to maintain high-quality credit ratings; the estimated range of possible loss from and the impact on Merrill Lynch of various legal proceedings discussed in Note 14 to the Consolidated Financial Statements; our estimates of contributions to be made to pension plans; our interest rate risk management strategies and models; our trading risk management processes; and other matters relating to Merrill Lynch. The foregoing is not an exclusive list of all forward-looking statements we make. These statements are not guarantees of future results or performance and involve certain risks, uncertainties and assumptions that are difficult to predict and often are beyond our control. Actual outcomes and results may differ materially from those expressed in, or implied by, any of these forward-looking statements.

You should not place undue reliance on any forward-looking statement and should consider the following uncertainties and risks, as well as the risks and uncertainties more fully discussed elsewhere in this report, under Item 1A. 7“Risk Factors” of this report, and in any of ML & Co.'s ~~Management’~~subsequent Securities and Exchange Commission (“SEC”) filings: Merrill Lynch's ~~Discussion~~ability to resolve its representations and ~~Analysis~~warranties obligations, and any related servicing, securities, fraud, indemnity or other claims with monolines, and private-label investors and other investors, including those monolines and investors from whom Merrill Lynch has not yet received claims or with whom it has not yet reached any resolutions; the identification and effectiveness of any initiatives to mitigate the negative impact of the Financial ~~Condition~~Reform Act; and ~~Results~~decisions to downsize, sell or close units or otherwise change the business mix of ~~Operations~~Merrill Lynch.

Forward-~~Looking Statements~~ looking statements speak only as of the date they are made, and Merrill Lynch undertakes no obligation to

This report on Form 10-K, the documents that it incorporates by reference and the documents into which it may be incorporated by reference may contain, and from time to time Merrill Lynch & Co., Inc. (“ML & Co. and, together with its subsidiaries, “Merrill Lynch,” the “Company,” the “Corporation,” “we,” “our” or “us”) and its management may make certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this report, “we,” “us” and “our” may refer to ML & Co. individually, ML & Co. and its subsidiaries, or certain of ML & Co.’s subsidiaries or affiliates. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “expects,” “anticipates,” “believes,” “estimates,” “targets,” “intends,” “plans,” “goal” and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.” The forward-looking statements made represent the current expectations, plans or forecasts of Merrill Lynch regarding its future results and revenues and future business and economic conditions more generally, including statements concerning: representations and warranties liabilities and range of possible loss estimates, expenses and repurchase claims and resolution of those claims; the potential assertion and impact of additional representation and warranties claims; the charge to income tax expense resulting from a reduction in the United Kingdom (“U.K.”) corporate income tax rate; credit trends and conditions, including credit losses, credit reserves, charge-offs, delinquency trends and nonperforming asset levels; liquidity; the revenue impact resulting from, and any mitigation actions taken in response to, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Financial Reform Act”), including the impact of the Volcker Rule and derivatives regulations; the impact of various legal proceedings discussed in Note 14 to the Consolidated Financial Statements; and other matters relating to Merrill Lynch. The foregoing is not an exclusive list of all forward-looking statements we make. These statements are not guarantees of future results or performance and involve certain risks, uncertainties and assumptions that are difficult to predict and often are beyond control. Actual outcomes and results may differ materially from those expressed in, or implied by, our forward-looking statements. 24

~~You~~Table should not place undue reliance on any forward-looking statement and should consider the following uncertainties and risks, as well as the risks and uncertainties more fully discussed elsewhere in this report, including Item 1A. “Risk Factors”, and in any of ML & Co.’s subsequent Securities and Exchange Commission (“SEC”) filings: our ability to resolve any representations and warranties obligations with private-label securitization investors, whole-loan investors, monolines and the government-sponsored enterprises (“GSEs”); the adequacy of the liability and/or range of possible loss estimates for representations and warranties exposures to private-label securitization and other investors, monolines and the GSEs; negative economic conditions generally, including continued weakness in the U.S. housing market, high unemployment in the U.S., economic challenges in many non-U.S. countries in which we operate and sovereign debt challenges; the level and volatility of the capital markets, interest rates, currency values and other market indices; changes in consumer, investor and counterparty confidence in, and the related impact on, financial markets and institutions, including Merrill Lynch as well as its business partners; Merrill Lynch’s credit ratings; estimates of the fair value of certain of our assets and liabilities; legislative and regulatory actions in the U.S. (including the impact of the Financial Reform Act and related regulations and interpretations) and internationally; the identification and effectiveness of any initiatives to mitigate the negative impact of the Financial Reform Act; the impact of litigation and regulatory investigations, including costs, expenses, settlements and judgments as well as any collateral effects on our ability to conduct our business and access the capital markets; various monetary and fiscal policies and regulations of the U.S. and non-U.S. governments; changes in accounting standards, rules and interpretations (including new consolidation guidance), inaccurate estimates or assumptions in the application of accounting policies, including in determining reserves, applicable guidance regarding goodwill accounting and the impact on Merrill Lynch’s financial statements; increased globalization of the financial services Contents

25 update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made.

~~Table~~The Notes to the Consolidated Financial Statements referred to in Management’s Discussion and Analysis of ~~Contents~~Financial Condition and Results of Operations ("MD&A") are incorporated by reference into MD&A. Certain prior-period amounts have been reclassified in order to conform with the current year's presentation.

industry and competition with other U.S. and international financial institutions; the adequacy of Merrill Lynch’s risk management framework; Merrill Lynch’s ability to attract new employees and retain and motivate existing employees; technology changes instituted by Merrill Lynch, its counterparties or competitors; Merrill Lynch’s ability to integrate with Bank of America; Merrill Lynch’s reputation, including the effects of continuing intense public and regulatory scrutiny of Merrill Lynch and the financial services sector; the effects of any unauthorized disclosures of our or our customers’ private or confidential information and any negative publicity directed toward Merrill Lynch; and decisions to downsize, sell or close units or otherwise change the business mix of Merrill Lynch. Introduction

~~Forward-looking~~Merrill ~~statements~~Lynch ~~speak~~was ~~only~~founded asin of1914 and became a publicly traded company on June 23, 1971. In 1973, the ~~date~~holding ~~they~~company ML & Co. was created. Through our subsidiaries, we are ~~made~~ one of the world's leading capital markets, advisory and wewealth ~~undertake~~management nocompanies. ~~obligation~~We toare ~~update~~a ~~any forward-looking~~leading ~~statement~~global totrader ~~reflect~~and ~~the~~underwriter ~~impact~~of securities and derivatives across a broad range of ~~circumstances or~~asset ~~events~~classes, ~~that~~and ~~arise~~we ~~after~~serve ~~the~~as ~~date~~a ~~the~~strategic ~~forward-looking statement~~advisor ~~was~~to ~~made~~corporations, governments, institutions and individuals worldwide.

~~Introduction~~ Bank of America Acquisition and Basis of Presentation

On January 1, 2009, Merrill Lynch was ~~formed~~acquired inby ~~1914~~Bank ~~and~~of ~~became~~America Corporation (“Bank of America”) through the merger of a ~~publicly~~wholly-owned ~~traded company~~subsidiary onof ~~June 23,~~Bank ~~1971.~~of InAmerica ~~1973,~~with ~~the~~and ~~holding~~into ~~company~~ ML & Co., awith ~~Delaware~~ML & Co. continuing as the surviving corporation, ~~was~~and ~~created.~~a ~~Through its~~wholly-owned ~~subsidiaries,~~subsidiary ~~ML & Co~~of Bank of America. isUpon ~~one~~completion of the ~~world’s~~ ~~leading~~acquisition, ~~capital~~each ~~markets,~~outstanding ~~advisory~~share ~~and~~of ~~wealth management~~ML & ~~companies~~Co. Wecommon ~~are~~stock awas ~~leading~~converted ~~global~~into ~~trader~~0.8595 shares ~~and underwriter~~of Bank of ~~securities~~America ~~and~~common ~~derivatives~~stock. ~~across~~As aof ~~broad~~the ~~range~~ completion of ~~asset~~the ~~classes~~acquisition, ~~and~~ML & weCo. ~~serve~~Series 1 asthrough aSeries 8 ~~strategic~~preferred ~~advisor~~stock ~~to corporations,~~were ~~governments,~~converted ~~institutions~~into ~~and~~Bank ~~individuals worldwide.~~of InAmerica ~~addition,~~preferred ~~during~~stock ~~the~~with ~~majority~~substantially ofidentical ~~2010~~terms weto ~~owned~~the ~~an approximately~~corresponding ~~34%~~series ~~economic~~of ~~interest~~Merrill inLynch ~~BlackRock,~~preferred ~~Inc.~~ stock (~~“BlackRock”),~~except ~~one~~for ofadditional voting rights provided to the ~~world’s~~Bank ~~largest publicly~~of ~~traded~~America ~~investment~~securities). ~~management~~The ~~companies~~Merrill ~~with approximately~~Lynch $39.600% ~~trillion~~Mandatory inConvertible ~~assets~~Non-Cumulative ~~under~~Preferred ~~management~~Stock, ~~at December~~Series 312, ~~2010~~and 9.00% InMandatory ~~November~~Convertible ~~2010~~Non-Cumulative Preferred Stock, weSeries 3 ~~sold~~that aremained ~~portion~~issued ~~of our~~and ~~investment~~outstanding insubsequent ~~BlackRock,~~to ~~and~~the ascompletion of ~~December 31,~~the ~~2010, we~~acquisition ~~owned~~were anautomatically ~~approximately~~converted 7%into ~~economic~~Bank ~~interest~~of inAmerica ~~BlackRock.~~common ~~For further~~stock ~~information~~ on ~~our~~October 15, ~~investment~~2010 in ~~BlackRock,~~accordance ~~see “Executive~~with ~~Overview —~~the ~~Other~~terms ~~Events~~of these securities.”

As discussed below, on November 1, 2010, Banc of America Securities Holdings Corporation (“BASH”), a wholly-owned subsidiary of Bank of America, ~~Acquisition~~merged into ML & Co., with ML & Co. as the surviving corporation (the “BASH Merger”). In accordance with Accounting Standards Codification (“ASC”) 805-10, Business Combinations, Merrill Lynch's Consolidated Financial Statements appearing in Part II, Item 8 of this Form 10-K include the historical results of BASH and ~~Basis~~subsidiaries as if the BASH Merger had occurred as of ~~Presentation~~ January 1, 2009, the date at which both entities were first under the common control of Bank of America. Merrill Lynch has recorded the assets and liabilities acquired in connection with the BASH Merger at their historical carrying values.

OnMerger ~~January 1,~~With 2009, Merrill Lynch was acquired by Bank of America Corporation (“Bank of America”) through the merger of a wholly-owned subsidiary of Bank of America with and into ML & Co., with ML & Co. continuing as the surviving corporation and a wholly-owned subsidiary of Bank of America. Upon completion of the acquisition, each outstanding share of ML & Co. common stock was converted into 0.8595 shares of Bank of America common stock. As of the completion of the acquisition, ML & Co. Series 1 through Series 8 preferred stock were converted into Bank of America preferred stock with substantially identical terms to the corresponding series of Merrill Lynch preferred stock (except for additional voting rights provided to the Bank of America preferred stock). The Merrill Lynch 9.00% Mandatory Convertible Non-Cumulative Preferred Stock, Series 2, and 9.00% Mandatory Convertible Non-Cumulative Preferred Stock, Series 3, that were outstanding immediately prior to the completion of the acquisition remained issued and outstanding subsequent to the acquisition. On October 15, 2010, all of the mandatory convertible non-cumulative preferred stock was automatically converted into Bank of America common stock in accordance with the terms of the securities. See also “Executive Overview — Other Events - Preferred Stock Conversion.” BASH

~~Bank~~As ofa ~~America’s~~result ~~cost~~ of ~~acquiring~~the ~~Merrill~~BASH ~~Lynch~~Merger, ~~was pushed~~Banc ~~down~~of toAmerica ~~form~~Securities aLLC ~~new~~(“BAS”), ~~accounting~~a ~~basis~~wholly-owned ~~for~~broker-dealer ~~Merrill~~subsidiary ~~Lynch. Accordingly~~of BASH, ~~the~~became ~~Consolidated~~a ~~Financial~~wholly-owned ~~Statements~~broker-dealer ~~appearing~~subsidiary ~~in Part II, Item 8~~ of ~~this Form~~ML ~~10-K are~~& ~~presented~~Co. ~~for~~Subsequently, ~~Merrill~~on ~~Lynch~~November 1, ~~for~~2010, ~~periods~~BAS ~~occurring~~was ~~prior~~merged ~~to the~~into ~~acquisition~~Merrill byLynch, ~~Bank~~Pierce, ofFenner & ~~America~~Smith ~~(the~~Incorporated (“~~Predecessor Company~~MLPF&S”), ~~and~~a ~~subsequent~~wholly-owned tobroker-dealer ~~the~~subsidiary ~~January~~of ML 1& Co., ~~2009 acquisition~~with ~~(the~~MLPF&S ~~“Successor~~as ~~Company”).~~the ~~The~~surviving ~~Predecessor Company~~corporation ~~and~~in ~~Successor~~the ~~Company~~merger ~~periods~~(the ~~have~~“MLPF&S ~~been~~Merger”). ~~separated~~As by a ~~vertical~~ ~~line~~result ~~on the face~~ of the ~~Consolidated~~MLPF&S ~~Financial Statements~~Merger, toMLPF&S ~~highlight~~remained ~~the~~a ~~fact~~direct ~~that~~wholly-owned ~~the~~broker-dealer ~~financial~~subsidiary ~~information for~~of ~~such~~ML & ~~periods~~Co. ~~has~~and ~~been~~an ~~prepared~~indirect ~~under~~wholly-owned ~~two~~broker-dealer ~~different~~subsidiary ~~cost bases~~of Bank of ~~accounting~~America.

In addition, as discussed below, on November 1, 2010, Banc of America Securities Holdings Corporation (“BASH”), a wholly-owned subsidiary of Bank of America, merged into ML & Co., with ML & Co. as the surviving corporation (the “BASH Merger”). In accordance with Accounting Standards Codification (“ASC”) 805-10, Business ~~Combinations, Merrill Lynch’s Consolidated~~ Segments

26 Pursuant to ASC 280, Segment Reporting, operating segments represent components of an enterprise for which separate financial information is available that is regularly evaluated by the chief operating decision maker in determining how to allocate resources and in assessing performance. The business activities of Merrill Lynch are included within certain of the operating segments of Bank of America. Detailed financial information related to the operations of Merrill Lynch, however, is not provided to Merrill Lynch's chief operating decision maker. As a result, Merrill Lynch does not contain any identifiable operating segments under Segment Reporting, and therefore the

~~Table of Contents~~25

~~Financial~~Table ~~Statements appearing in Part II, Item 8~~ of ~~this Form 10-K include~~ the historical results of BASH and subsidiaries as if the BASH Merger had occurred as of January 1, 2009, the date at which both entities were first under common control of Bank of America. Merrill Lynch has recorded the assets and liabilities acquired in connection with the BASH Merger at their historical carrying values. Contents

~~Merger with~~financial ~~BASH~~ information of Merrill Lynch is presented as a single segment.

~~On November~~Form 1, 2010, ML & Co. entered into an Agreement and Plan of Merger (the “Merger Agreement”) with BASH and the BASH Merger was completed. In addition, as a result of the BASH Merger, Banc of America Securities LLC (“BAS”), a wholly10-~~owned~~K broker-dealer subsidiary of BASH, became a wholly-owned broker-dealer subsidiary of ML & Co. Pursuant to the Merger Agreement, all of the issued and outstanding capital stock of ML & Co. remained outstanding and all of the issued and outstanding capital stock of BASH was cancelled, with no consideration paid with respect thereto. Subsequently, BAS was merged into Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), a wholly-owned broker-dealer subsidiary of ML & Co., with MLPF&S as the surviving corporation in this merger (the “MLPF&S Merger”). As a result of the MLPF&S Merger, all of the issued and outstanding capital stock of MLPF&S remained outstanding and all of the issued and outstanding membership interests of BAS were cancelled with no consideration paid with respect thereto. In addition, as a result of the MLPF&S Merger, MLPF&S remained a direct wholly-owned broker-dealer subsidiary of ML & Co. and an indirect wholly-owned broker-dealer subsidiary of Bank of America. Presentation

~~Business Segments~~ As a result of the acquisition of Merrill Lynch by Bank of America, certain information is not required in this Form 10-K as permitted by General Instruction I (2) of Form 10-K. We have also abbreviated MD&A as permitted by General Instruction I (2).

Pursuant to ASC 280, Segment Reporting, operating segments represent components of an enterprise for which separate financial information is available that is regularly evaluated by the chief operating decision maker in determining how to allocate resources and in assessing performance. Based upon how the chief operating decision maker of Merrill Lynch reviews our results, it was determined that Merrill Lynch does not contain any identifiable operating segments. As a result, the financial information of Merrill Lynch is presented as a single segment. 26

~~Form 10-K Presentation~~ Table of Contents

AsEXECUTIVE a result of the acquisition of Merrill Lynch by Bank of America, certain information is not required in this Form 10-K as permitted by General Instruction I(2) of Form 10-K. We have also abbreviated Management’s Discussion and Analysis of Financial Condition and Results of Operations as permitted by General Instruction I(2). OVERVIEW

We reported a net loss of $1.7 billion for the year ended December 31, 2011 as compared with net earnings of $3.8 billion in the year ended December 31, 2010. Revenues, net of interest expense (“net revenues”) for 2011 were $24.3 billion compared with $27 .8 billion in 2010. Our pre-tax loss was $4.7 billion in 2011 compared with pre-tax earnings of $3.9 billion in 2010.

~~Table~~Our results for the year ended December 31, 2011 primarily reflected lower principal transactions revenues associated with our trading activities, lower other revenues, and higher non-interest expenses, including higher intercompany service fees from Bank of ~~Contents~~America and higher compensation and benefits expense.

~~Executive Overview~~ Our results for the year ended December 31, 2011 were also adversely affected by a $2.7 billion representations and warranties provision. On June 28, 2011, Bank of America and certain of its non-Merrill Lynch subsidiaries entered into a settlement agreement (that is subject to final court approval and certain other conditions) to resolve, among other claims, all outstanding and potential claims related to alleged representations and warranties breaches (including repurchase claims) with respect to a number of non-GSE residential mortgage-backed securitization trusts. As a result of the experience gained by Bank of America and certain of its non-Merrill Lynch affiliates from this settlement agreement, Merrill Lynch determined that it had sufficient experience to record the $2.7 billion liability for representations and warranties related to its repurchase exposure on private-label securitizations during the quarter ended June 30, 2011. See “Off-Balance Sheet Exposures - Representations and Warranties” for further information.

~~Company Results~~ The declines in net earnings and net revenues for the year ended December 31, 2011 were partially offset by higher managed account and other fee-based revenues. There was also an increase in revenues associated with the valuation of certain of our long-term debt liabilities as compared with the prior year. During the year ended December 31, 2011, we recorded net gains of $2.0 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, primarily structured notes, while in the year ended December 31, 2010, we recorded net losses of $0.1 billion due to the narrowing of our credit spreads.

WeOur ~~reported~~ net ~~earnings~~loss applicable to our common shareholder was $1.7 billion for the year ended December 31, ~~2010~~ 2011 compared with net earnings of $3.8 6 billion ~~compared~~in ~~with~~the $7prior year.3 On October ~~billion~~15, 2010, all of ML & Co.'s outstanding Series 2 and Series 3 Mandatory Convertible Non-Cumulative Preferred Stock automatically converted into Bank of America common stock in accordance with the ~~year~~ ~~ended~~terms ~~December 31,~~of ~~2009~~those securities. ~~Revenues~~Immediately upon conversion, ~~net~~dividends on such shares of ~~interest expense~~preferred ~~(“net~~stock ~~revenues”)~~ceased ~~for~~to ~~2010~~accrue, the rights of holders of such preferred stock ceased, and the persons entitled to receive the shares of Bank of America common stock were ~~$27.9 billion~~ ~~compared~~treated ~~with~~for ~~net~~all ~~revenues~~purposes as having become the record and beneficial owners of ~~$29.5 billion~~ inshares ~~2009~~of Bank of America common stock. As ~~Pre-tax~~a ~~earnings~~result of the conversion, there were $3 no preferred stock dividends recorded during the year ended December 31, 2011.9 Preferred stock dividends of $134 ~~billion~~million were recorded in ~~2010~~the asyear ~~compared~~ended ~~with~~December $831, 2010.0 See Note ~~billion~~13 to the Consolidated Financial Statements for ~~2009~~ further information.

~~The~~Transactions ~~decrease in net revenues for the year ended December 31, 2010 included the impact of lower revenues from trading activities as compared~~ with ~~the prior year. The results for the year ended December 31, 2010 also reflected the absence of revenues from Merrill Lynch~~ Bank ~~USA (“MLBUSA”) and Merrill Lynch Bank & Trust Co., FSB (“MLBT-FSB”), which were sold to Bank~~ of America during the third and fourth quarters of 2009, respectively. In addition, net revenues in 2009 included a pre-tax gain of $1.1 billion associated with our investment in BlackRock (see “Other Events — BlackRock Investment”). These declines in net revenues were partially offset by a $5.1 billion reduction in net losses associated with the valuation of certain of our long-term debt liabilities. During the year ended December 31, 2010, we recorded net losses of $0.1 billion due to the impact of the narrowing of Merrill Lynch’s credit spreads on the carrying value of certain of our long-term debt liabilities, primarily structured notes, as compared with net losses from such long-term debt liabilities of $5.2 billion recorded in the year ended December 31, 2009. Higher compensation and benefits and other non-interest expenses also contributed to the decline in net earnings in the year ended December 31, 2010.

~~Our~~We have entered into various transactions with Bank of America, including transactions in connection with certain sales and trading and financing activities as well as the allocation of certain shared services. Total net ~~earnings~~revenues ~~applicable~~and non-interest expenses related to ~~our~~transactions ~~common~~with ~~shareholder~~Bank of America for the year ended December 31, ~~2010~~2011 were $1.3 billion and $2.6 5 billion, ~~as compared~~respectively. ~~with~~Such net revenues and non-interest expenses for the year ended December 31, 2010 were $7906 million and $807 million, respectively.~~2 billion~~ inNet revenues and non-interest expenses for the year ended December 31, ~~2009~~2011 reflect increased intercompany service fee revenues and expenses from Bank of America resulting from the integration of Bank of America's and Merrill Lynch's methodologies for allocating revenues and expenses associated with shared services to their subsidiaries. The net revenues related to transactions with Bank of America for the year ended December 31, 2010 included a gain of $280 million from the sale of approximately $11 billion of available-for-sale securities to Bank of America. These transfers were made to enable Bank of America or

~~Transactions with Bank of America~~ 27

~~Asset~~Table ~~and Liability~~of ~~Transfers~~ Contents

~~Subsequent~~its tonon-Merrill ~~the~~Lynch ~~Bank~~subsidiaries ofto ~~America~~more ~~acquisition,~~efficiently ~~certain~~manage ~~assets and~~the ~~liabilities~~existing ~~were~~portfolio ~~transferred~~of atsimilar ~~fair~~available-for-sale ~~value~~securities. ~~between~~In ~~Merrill Lynch~~addition, ~~and~~as ~~Bank~~discussed ofbelow, ~~America.~~net ~~These~~revenues ~~transfers~~for ~~were made in connection with~~ the ~~integration~~year ofended ~~certain~~December ~~trading~~31, ~~activities with~~2010 ~~Bank~~included ~~of America and efforts to manage risk in~~ a ~~more effective~~gain ~~and~~of ~~efficient~~approximately ~~manner~~$600 million atfrom the ~~consolidated~~sale ~~Bank~~ of ~~America~~ ~~level~~Bloomberg Inc. Innotes ~~the~~to ~~future, Merrill Lynch and~~ Bank of America ~~may~~. ~~continue~~See Note 2 to ~~transfer~~the ~~certain~~Consolidated ~~assets~~Financial ~~and~~Statements ~~liabilities~~for tofurther ~~(and from) each other~~information.

~~Sale~~Merger ~~of U.S.~~with ~~Banks to Bank of America~~ BASH

~~During~~See ~~2009, Merrill Lynch sold MLBUSA and MLBT~~“Introduction -~~FSB~~ toMerger ~~a subsidiary~~With ofBASH” Bank of America. In both transactions, Merrill Lynch sold the shares of the respective entity to Bank of America. The sale price of each entity was equal to its net book value as of the date of transfer. Consideration for ~~the~~further ~~sale~~information ~~of MLBUSA~~on ~~was~~this ~~in the form of an $8~~transaction.9 billion floating rate demand note payable from Bank of America to Merrill Lynch, while MLBT-FSB was sold for cash of approximately $4.4 billion. The demand note received by Merrill Lynch in connection with the MLBUSA sale had a stated market interest rate at the time of sale.

~~The~~Sale ~~MLBUSA sale was completed on July 1, 2009, and the sale~~ of ~~MLBT-FSB~~Bloomberg ~~was completed on November 2, 2009~~Inc. ~~After each sale was completed, MLBUSA and MLBT-FSB were merged into Bank of America, N.A., a subsidiary of Bank of America.~~ Notes

28 In July 2008, Merrill Lynch sold its 20% ownership stake in Bloomberg, L.P. to Bloomberg Inc. A portion of the consideration we received was notes issued by Bloomberg Inc., the general partner and owner of substantially all of Bloomberg, L.P. The notes represent senior unsecured obligations of Bloomberg Inc. In December 2010, Merrill Lynch sold the Bloomberg Inc. notes to a subsidiary of Bank of America at fair value. As a result of the sale, we recorded a gain of approximately $600 million, which is included within Other revenues in the Consolidated Statement of (Loss) Earnings for the year ended December 31, 2010.

~~Table~~Other ~~of Contents~~Events

~~Acquisition of~~Credit ~~Banc of America Investment Services, Inc. (“BAI”) from Bank of America~~ Ratings

InOn ~~October~~December ~~2009~~15, 2011, Fitch Ratings ("Fitch") downgraded Bank of America's ~~contributed~~and ~~the~~ML ~~shares~~& Co.'s long-term and short-term debt ratings as a result of ~~BAI~~Fitch's decision to lower its "support floor" for systemically important U.S. financial institutions. On November 29, ~~one~~ 2011, Standard & Poor's Ratings Services ("S&P") downgraded Bank of ~~its~~America's ~~wholly~~and ML & Co.'s long-~~owned~~term ~~broker~~and short-~~dealer~~term ~~subsidiaries~~debt ratings as a result of S&P's implementation of revised methodologies for determining Banking Industry Country Risk Assessments and bank ratings. On September 21, to 2011, Moody's Investors Service, Inc. ("Moody's") downgraded Bank of America's and ML & Co.'s ~~Subsequent~~long-term toand short-term debt ratings as a result of Moody's lowering the ~~transfer,~~amount ~~BAI~~of ~~was~~uplift ~~merged into~~for ~~MLPF&~~potential U.S. Ingovernment ~~accordance~~support ~~with ASC 805-10~~it incorporates into ratings. On February 15, ~~Business~~ ~~Combinations~~2012, ~~Merrill~~Moody's ~~Lynch’~~placed Bank of America's ~~Consolidated Financial~~long-term ~~Statements~~debt ~~include~~ratings ~~the~~on ~~results~~review offor ~~BAI~~possible downgrade as ifpart ~~the contribution~~of ~~from~~their review of financial institutions with global capital markets operations. Any adjustment to Bank of America's ~~had~~(and ~~occurred on January 1~~consequently, ~~2009,~~our) ~~the~~ratings ~~date~~will atbe ~~which~~determined ~~both~~based ~~entities~~on ~~were~~Moody's ~~first under~~review; ~~common~~however, ~~control~~the ofagency offered guidance that downgrades to Bank of America.'s ~~Refer~~ratings, toif ~~Note 2~~any, ~~to the~~would ~~Consolidated~~likely ~~Financial~~be ~~Statements~~limited ~~for~~to ~~further~~one ~~information~~notch.

~~Merger with~~Currently, ~~BASH~~ Bank of America's and ML & Co.'s long-term/short-term senior debt ratings and outlooks expressed by the rating agencies are as follows: Baa1/P-2 (negative) by Moody's; A-/A-2 (negative) by S&P; and A/F1 (stable) by Fitch. The rating agencies could make further adjustments to Bank of America's (and consequently, our) credit ratings at any time and there can be no assurance that additional downgrades will not occur.

~~See~~Under ~~“Introduction —~~the ~~Merger~~terms ~~with~~of ~~BASH”~~certain ~~for further~~OTC ~~information~~derivative oncontracts ~~this~~and ~~transaction~~other trading agreements, in the event of a downgrade of our credit ratings or certain subsidiaries' credit ratings, counterparties to those agreements may require us or certain subsidiaries to provide additional collateral, terminate these contracts or agreements, or provide other remedies.

For information regarding the risks associated with adverse changes in our credit ratings, see “Executive Overview - Other Events - Transactions with Affiliates”, “Funding and Liquidity - Credit Ratings”, Note 6 to the Consolidated Financial Statements, and Item 1A. "Risk Factors" of this Annual Report on Form 10-K.

~~Merrill~~Retirement ~~Lynch has entered into various other transactions with Bank~~ of ~~America,~~Certain ~~primarily~~Debt in connection with certain sales and trading and financing activities. Total net revenues and non-interest expenses related to transactions with Bank of America for the year ended December 31, 2010 were $906 million and $679 million, respectively, and were $1.5 billion and $689 million, respectively, for the year ended December 31, 2009. Net revenues for the year ended December 31, 2010 included a realized gain of approximately $280 million from the sale of approximately $11 billion of available-for-sale securities to Bank of America. In addition, as discussed below, 2010’s net revenues included a gain of approximately $600 million from the sale of Bloomberg Inc. notes to Bank of America. See Note 2 to the Consolidated Financial Statements for further information. Instruments

~~Sale~~As credit spreads for many financial institutions, including Merrill Lynch, have widened during the past year due to uncertainty and volatility in the global financial markets, the fair value of ~~Bloomberg~~ ~~Inc~~debt previously issued by financial institutions has decreased. ~~Notes~~ This uncertainty in the market, evidenced by, among other things, volatility in credit spreads, makes it

In July 2008, Merrill Lynch sold its 20% ownership stake in Bloomberg, L.P. to Bloomberg Inc. A portion of the consideration we received was notes issued by Bloomberg Inc., the general partner and owner of substantially all of Bloomberg, L.P. The notes represent senior unsecured obligations of Bloomberg Inc. In December 2010, Merrill Lynch sold the Bloomberg Inc. notes to a subsidiary of Bank of America at fair value. As a result of the sale, we recorded a gain of approximately $600 million, which is included within Other revenues in the Consolidated Statement of Earnings/(Loss) for the year ended December 31, 2010. 28

~~Other Events~~ Table of Contents

~~BlackRock Investment~~ economically advantageous to consider purchasing and retiring certain of our outstanding debt instruments. In 2012, we completed a tender offer to purchase and retire certain subordinated notes for approximately $1.2 billion in cash and will consider additional purchases in the future depending upon prevailing market conditions, liquidity and other factors. If the purchase of any debt instruments are at an amount less than the carrying value, such purchases would be accretive to earnings.

OnEuropean ~~December 1,~~Union ~~2009,~~Sovereign ~~BlackRock~~Credit completed its purchase of Barclays Global Investors from Barclays, Plc. This acquisition had the effect of diluting our ownership interest in BlackRock, which for accounting purposes was treated as a sale of a portion of our ownership interest. As a result, upon the closing of this transaction, we recorded an adjustment to our investment in BlackRock, which resulted in a pre-tax gain of $1.1 billion. This gain is included within Earnings from equity method investments in the Consolidated Statement of Earnings/(Loss) for the year ended December 31, 2009. In addition, as a result of this transaction, our economic interest in BlackRock was reduced from approximately 50% to approximately 34%. Risks

OnCertain ~~November 15~~European countries, ~~2010~~including Greece, ~~Merrill~~Ireland, ~~Lynch~~Italy, ~~completed~~Portugal ~~the~~and ~~sale~~Spain, continue to experience varying degrees of 51 financial stress.~~2 million~~ ~~shares~~Uncertainty in the progress of ~~BlackRock~~debt restructuring negotiations and the lack of a clear resolution to the crisis has led to continued volatility in European as well as global financial markets, and if the situation worsens, may further adversely affect these markets. ~~The~~In ~~net~~December ~~proceeds~~2011, the European Central Bank (the "ECB") announced initiatives to ~~Merrill~~ ~~Lynch~~address ~~from~~European bank liquidity and funding concerns by providing low-cost, three-year loans to banks, and expanding collateral eligibility. While reducing systemic risk, there remains considerable uncertainty as to future developments regarding the ~~sale~~European debt crisis. In early 2012, S&P, Fitch and Moody's downgraded the credit ratings of several European countries, and S&P downgraded the credit rating of the European Financial Stability Facility (the “EFSF”), adding to concerns about investor appetite for continued support in stabilizing the affected countries. Our total sovereign and non-sovereign exposure to Greece, Italy, Ireland, Portugal and Spain was $2.7 billion at December 31, 2011. Our total net sovereign and non-sovereign exposure to these ~~shares~~countries was $1.1 billion at December 31, 2011, after ~~underwriting discounts~~taking into account net credit default protection. At December 31, 2011, the fair value of net credit default protection purchased was $1.6 billion. Losses could still result because our credit protection contracts pay out only under certain scenarios. For further discussion of our direct sovereign and ~~before~~ non-sovereign exposures in Europe, see Item 7A.“Quantitative and Qualitative Disclosures About Market Risk - Credit Risk Management” and for more information about the risks associated with our non-sovereign exposures in Europe, see Item 1A. "Risk Factors".

29 Project New BAC

~~Table~~Project New BAC is a two-phase, enterprise-wide initiative to simplify and streamline workflows and processes, align businesses and expenses more closely with Bank of ~~Contents~~America's overall strategic plan and operating principles, and increase revenues. Phase 1 evaluations, which were completed in September 2011, focused on Bank of America's consumer businesses and related support, technology and operations functions. Phase 2 evaluations began in October 2011 and are focused on businesses and related support, technology and operations functions not subject to evaluation in Phase 1. Phase 2 evaluations are expected to continue through April 2012.

~~offering~~Implementation ~~expenses~~of ~~payable~~Phase by1 ~~Merrill~~recommendations ~~Lynch,~~began ~~were~~in ~~approximately $8~~late 2011.~~2 billion.~~ AsReductions ain ~~result~~the ofareas ~~the~~subject ~~sale,~~to ~~Merrill~~evaluation ~~Lynch~~for ~~does not~~Phase ~~own~~2 ~~any~~have ~~shares~~not ofyet ~~BlackRock~~been ~~common~~fully ~~stock~~identified, and ~~continues~~accordingly, ~~to own~~potential ~~shares~~cost ofsavings ~~BlackRock~~are ~~Series B~~currently ~~Preferred~~uncertain; ~~Stock~~however, ~~resulting in~~they aare ~~reduction~~expected ofto ~~our~~be ~~economic~~lower ~~interest~~than inPhase ~~BlackRock from approximately 34% to approximately 7%~~1. All ~~Merrill~~aspects ~~Lynch recorded a pre-tax gain~~ of ~~approximately~~New ~~$90 million~~BAC ~~from~~are ~~this transaction,~~expected ~~which~~to isbe ~~included~~implemented ~~within~~by ~~Earnings from equity method investments in~~ the ~~Consolidated~~end ~~Statement~~ of ~~Earnings/(Loss)~~ ~~for the year ended December 31, 2010~~2014. ~~See Note 8 to the Consolidated Financial Statements for further information.~~

~~U.K.~~When ~~Bank Levy~~reductions in employment levels associated with the implementation of New BAC are probable of occurring and ~~Corporate~~the ~~Tax~~amounts ~~Rate~~can ~~Reduction~~ be reasonably estimated, the associated severance costs will be recognized. There were no material expenses related to New BAC recorded in the year ended December 31, 2011.

OnFor ~~June 22,~~further ~~2010,~~information ~~the~~about ~~government of~~ the ~~U.K.~~risks ~~announced~~associated ~~that it~~with ~~intended~~New ~~to introduce an annual bank levy. Beginning in 2011~~BAC, ~~the~~ ~~bank~~see ~~levy~~Item ~~will be payable on the consolidated liabilities, subject to certain exclusions and offsets, of U~~1A.K. ~~group companies~~"Risk ~~and U~~Factors".K. branches of foreign banking groups as of each year end balance sheet date. As currently proposed, the bank levy rate for 2011 and future years will be 0.075 percent per annum for certain short-term liabilities with a rate of 0.0375 percent per annum for longer maturity liabilities and certain deposits. The legislation is expected to be enacted in the third quarter of 2011. We currently estimate that the cost of the U.K. bank levy will be approximately $100 million annually beginning in 2011.

~~On July 27, 2010, the~~ U.K. ~~government~~Corporate ~~enacted~~Income aTax ~~law~~Rate change reducing the corporate income tax rate by one percent effective for the 2011 U.K. tax fiscal year beginning on April 1, 2011. See “Results of Operations” for further information. Change

~~Preferred Stock~~On ~~Conversion~~ July 19, 2011, the U.K. 2011 Finance Bill was enacted, which reduced the corporate income tax rate. As a result of the reduction, we recorded a charge of $774 million due to the remeasurement of our U.K. net deferred tax assets. For additional information, see “Results of Operations - Year Ended December 31, 2011 Compared With Year Ended December 31, 2010.”

On October 15, 2010, all of ML & Co.’s outstanding Series 2 and Series 3 Mandatory Convertible Non-Cumulative Preferred Stock automatically converted into Bank of America common stock in accordance with the terms of those securities. Immediately upon conversion, dividends on such shares of preferred stock ceased to accrue, the rights of holders of such preferred stock ceased, and the persons entitled to receive the shares of Bank of America common stock were treated for all purposes as having become the record and beneficial owners of shares of Bank of America common stock. See Note 13 to the Consolidated Financial Statements for further information. 29

~~Financial Reform~~Table ~~Act~~ of Contents

~~On July 21, 2010, the Financial Reform Act was signed into law~~U.K. ~~The~~Bank ~~Financial Reform Act enacts sweeping financial regulatory reform and will alter the way in which we conduct certain businesses, increase our costs and reduce our revenues.~~ Levy

~~Background~~ The U.K. government bank levy legislation was enacted on July 19, 2011. The rate on banks operating in the U.K. has been set at 7.5 basis points (“bps”) for short-term liabilities and 3.75 bps for long-term liabilities for 2011 and will increase to 8.8 bps for short-term liabilities and 4.4 bps for long-term liabilities beginning in 2012. The cost of the bank levy was approximately $53 million for 2011, which is non-deductible for U.K. tax purposes.

~~Provisions in the~~ Financial Reform Act limit banking organizations from engaging in proprietary trading and certain investment activity regarding hedge funds and private equity funds. The Financial Reform Act increases regulation of the derivative markets. The Financial Reform Act also provides for resolution authority to establish a process to unwind large systemically important financial companies; creates a new regulatory body to set requirements regarding the terms and conditions of consumer financial products and expands the role of state regulators in enforcing consumer protection requirements over banks; includes new minimum leverage and risk-based capital requirements for large financial institutions; and requires securitizers to retain a portion of the risk that would otherwise be

30 The Financial Reform Act, which was signed into law on July 21, 2010, enacts sweeping financial regulatory reform and has altered and will continue to alter the way in which we conduct certain businesses, increase our costs and reduce our revenues. Many aspects of the Financial Reform Act remain subject to final rulemaking and will take effect over several years, making it difficult to anticipate the precise impact on Merrill Lynch, our customers or the financial services industry.

~~Table~~Limitations ofon ~~Contents~~Proprietary Trading

~~transferred~~On toOctober 11, ~~investors~~2011, inthe ~~certain~~Board ~~securitization~~of ~~transactions. Many~~Governors of ~~these~~the ~~provisions~~Federal ~~have~~Reserve ~~begun~~System to(the be"Federal ~~phased-in~~Reserve"), orthe ~~will~~Office ~~be phased-in~~of ~~over~~ the ~~next~~Comptroller ~~several~~of ~~months~~the orCurrency ~~years~~(the ~~and~~“OCC”), ~~will~~the ~~be subject~~Federal ~~both~~Deposit toInsurance ~~further~~Corporation ~~rulemaking~~(the “FDIC”) and the ~~discretion~~SEC, representing four of ~~applicable~~ the five regulatory ~~bodies.~~agencies ~~The~~charged with promulgating regulations implementing limitations on proprietary trading as well as the sponsorship of or investment in hedge funds and private equity funds (the “Volcker Rule”) established by the Financial Reform Act, ~~may~~released ~~have a~~for ~~significant~~comment ~~and~~proposed ~~negative~~implementing ~~impact~~regulations. onOn ~~our~~January ~~earnings~~11, ~~through reduced revenues~~2012, ~~higher~~the ~~costs~~Commodity ~~and~~Futures ~~new~~Trading ~~restrictions~~Commission (the “CFTC”), ~~and~~the ~~by reducing~~fifth ~~available~~agency, ~~capital.~~released for comment its proposed regulations under the Volcker Rule. The ~~ultimate~~proposed ~~impact~~regulations ofinclude clarifications to the ~~Financial Reform~~definition ~~Act~~of onproprietary ~~our~~trading ~~businesses~~and distinctions between permitted and ~~results~~prohibited ofactivities. The ~~operations~~comment ~~will depend~~period for the first regulations proposed ended on ~~regulatory~~February ~~interpretation~~13, 2012 and ~~rulemaking~~the comment period for the CFTC regulations will end in March 2012. However, asin ~~well~~light as of the ~~success~~complexity of ~~any~~the proposed regulations and the large volume of ~~our~~comments ~~actions~~received (the proposal requested comments on over 1,300 questions on 400 different topics), it is not possible to ~~mitigate~~predict the ~~negative earnings~~content ~~impact~~ of ~~certain~~the ~~provisions~~final regulations or when they will be issued.

~~Limitations~~ The statutory provisions of the Volcker Rule will become effective on ~~Certain~~July 21, ~~Activities~~ 2012, whether or not the final regulations are adopted, and it gives certain financial institutions two years from the effective date, with opportunities for additional extensions, to bring activities and investments into compliance. Although we exited our stand-alone proprietary trading business as of June 30, 2011 in anticipation of the Volcker Rule and further to our initiative to optimize our balance sheet, the ultimate impact of the Volcker Rule on us remains uncertain. However, based upon the content of the proposed regulations, it is possible that the implementation of the Volcker Rule could limit or restrict our remaining trading activities. Implementation of the Volcker Rule could also limit or restrict our ability to sponsor and hold ownership interests in hedge funds, private equity funds and other subsidiary operations, increase our operational and compliance costs, reduce our trading revenues and adversely affect our results of operations. For additional information about our trading business, see “Results of Operations - Year Ended December 31, 2011 Compared With Year Ended December 31, 2010.”

We anticipate that the final regulations associated with the Financial Reform Act will include limitations on certain activities, including limitations on the use of certain financial institutions’ own capital for proprietary trading and sponsorship or investment in hedge funds and private equity funds (the “Volcker Rule”). Regulations implementing the Volcker Rule are required to be in place by October 21, 2011, and the Volcker Rule becomes effective twelve months after such rules are final or on July 21, 2012, whichever is earlier. The Volcker Rule then gives certain financial institutions two years from the effective date (with opportunities for additional extensions) to bring activities and investments into conformance. In anticipation of the adoption of the final regulations, we have begun winding down our proprietary trading line of business. The ultimate impact of the Volcker Rule or the winding down of this business, and the time it will take to comply or complete, continues to remain uncertain. The final regulations issued may impose additional operational and compliance costs on us. Derivatives

~~Derivatives~~ The Financial Reform Act includes measures to broaden the scope of derivative instruments subject to regulation by requiring clearing and exchange trading of certain derivatives; imposing new capital, margin, reporting, registration and business conduct requirements for certain market participants; and imposing position limits on certain OTC derivatives. The Financial Reform Act required regulators to promulgate the rulemakings necessary to implement these regulations by July 16, 2011. However, the rulemaking process was not completed as of this date, and is not expected to conclude until well into 2012. Further, the regulators granted temporary relief from certain requirements that would have taken effect on July 16, 2011 absent any rulemaking. The SEC temporary relief is effective until final rules relevant to each requirement become effective. The CFTC temporary relief is effective until the earlier of July 16, 2012 or the date on which final rules relevant to each requirement become effective. The ultimate impact of these derivatives regulations, and the time it will take to comply, continues to remain uncertain. The final

The Financial Reform Act includes measures to broaden the scope of derivative instruments subject to regulation by requiring clearing and exchange trading of certain derivatives, imposing new capital and margin requirements for certain market participants and imposing position limits on certain over-the-counter derivatives. The Financial Reform Act grants the U.S. Commodity Futures Trading Commission (the “CFTC”) and the SEC substantial new authority and requires numerous rulemakings by these agencies. Generally, the CFTC and SEC have until July 16, 2011 to promulgate the rulemakings necessary to implement these regulations. The ultimate impact of these derivatives regulations, and the time it will take to comply, continues to remain uncertain. The final regulations will impose additional operational and compliance costs on us and may require us to restructure certain businesses and negatively impact our revenues and results of operations. 30

31 Table of Contents

~~Table~~regulations will impose additional operational and compliance costs on us and may require us to restructure certain businesses, thereby negatively impacting our revenues and results of ~~Contents~~operations.

~~Results Of~~The ~~Operations~~ Financial Reform Act will continue to have a significant and negative impact on our earnings through revenue reductions, higher costs and new restrictions, as well as reductions to available capital. The ultimate impact of the Financial Reform Act on our businesses and results of operations will depend on regulatory interpretation and rulemaking, as well as the success of any of our actions to mitigate the negative earnings impact of certain provisions.

(dollars in millions, except per share amounts)
						% Change between the
						Year Ended
	For the Year Ended			For the Year Ended		December 31, 2010 and the Year
	December 31, 2010			December 31, 2009		Ended December 31, 2009
Revenues
Principal transactions	$	7,074		$	5,121		38	%
Commissions		5,760			6,008		(4	)
Managed account and other fee-based revenues		4,516			4,317		5
Investment banking		5,313			5,558		(4	)
Earnings from equity method investments		898			1,679		(47	)
Other revenues(1)		4,628			3,401		36
Subtotal		28,189			26,084		8
Interest and dividend revenues		9,303			15,476		(40	)
Less interest expense		9,621			12,041		(20	)
Net interest (expense)/income		(318	)		3,435		N/M
Revenues, net of interest expense		27,871			29,519		(6	)
Non-interest expenses:
Compensation and benefits		15,069			13,333		13
Communications and technology		1,993			2,015		(1	)
Occupancy and related depreciation		1,395			1,316		6
Brokerage, clearing, and exchange fees		1,022			1,087		(6	)
Advertising and market development		444			396		12
Professional fees		986			769		28
Office supplies and postage		157			173		(9	)
Other		2,882			2,441		18
Total non-interest expenses		23,948			21,530		11
Pre-tax earnings		3,923			7,989		(51	)
Income tax expense		147			649		(77	)
Net earnings	$	3,776		$	7,340		(49	)
Preferred stock dividends		134			153		(12	)
Net earnings applicable to common stockholder	$	3,642		$	7,187		(49	)

Transactions with Affiliates

~~(1)~~The ~~Amounts~~terms ~~include~~of ~~other~~certain ~~income~~of our OTC derivative contracts and other~~-than-temporary~~ ~~impairment~~trading ~~losses~~agreements onprovide ~~available-for-sale~~that ~~debt~~upon ~~securities~~the occurrence of certain specified events, such as a change in our credit ratings, we may be required to provide additional collateral or to provide other remedies, or our counterparties may have the right to terminate or otherwise diminish our rights under these contracts or agreements. ~~The~~Following the recent downgrade of our and other non-~~than-temporary~~bank ~~impairment~~affiliates' ~~losses~~credit ~~were~~ratings, ~~$172~~we ~~million~~have engaged in discussions with certain derivative and ~~$656~~other ~~million~~counterparties ~~for~~regarding their rights under these agreements. In response to counterparties' inquiries and requests, we have discussed and in some cases substituted derivative contracts and other trading agreements, including naming our affiliate, Bank of America, N.A. ("BANA") as the ~~years~~new ~~ended~~counterparty. ~~December~~Our 31ability to substitute or make changes to these agreements to meet counterparties' requests may be subject to certain limitations, ~~2010~~including counterparty willingness, regulatory limitations on naming BANA as the new counterparty, and ~~2009~~the type or amount of collateral required. It is possible that such limitations on our ability to substitute or make changes to these agreements, ~~respectively~~including naming BANA as the new counterparty, could adversely affect our results of operations.

~~N/M~~Other ~~= Not meaningful.~~ Matters

~~Consolidated Results~~Bank of ~~Operations~~ America and Merrill Lynch have established guidelines and policies for managing capital across their respective subsidiaries. The guidance for our subsidiaries with regulatory capital requirements, including branch operations of banking subsidiaries, requires each entity to maintain satisfactory capital levels. In the U.K., the Financial Services Authority (the “FSA”) has issued proposed rules requiring the submission of significant information about certain U.K. incorporated subsidiaries (including information on intra-group dependencies and legal entity separation) to allow the FSA to develop resolution plans. As a result of the FSA review, we could be required to take certain actions over the next several years, which could impose operational costs and potentially could result in the restructuring of certain businesses and subsidiaries.

~~Our net earnings for the year ended December~~ 31, 2010 were $3.8 billion compared with $7.3 billion for the year ended December 31, 2009. Net revenues for the year ended December 31, 2010 were $27.9 billion compared with $29.5 billion for the year ended December 31, 2009.

~~Year Ended~~Table ~~December 31,~~of ~~2010 Compared With Year Ended December 31, 2009~~ Contents

Principal transactions revenues include both realized and unrealized gains and losses on trading assets and trading liabilities and investment securities classified as trading. Principal transactions revenues were $7.1 billion for the year ended December 31, 2010 compared with $5.1 billion for the year ended December 31, 2009. The increase in principal transactions revenues primarily reflected a $5.1 billion reduction in net losses associated with the valuation of certain of our long-term debt liabilities. During the year ended December 31, 2010, we recorded net losses of $0.1 billion due to the impact of the



RESULTS OF OPERATIONS
(dollars in millions, except per share amounts)
	For the Year Ended December 31, 2011			For the Year Ended December 31, 2010			% Change between the Year Ended December 31, 2011 and the Year Ended December 31, 2010
Revenues
Principal transactions	$	5,928		$	7,074		(16	)%
Commissions	5,698			5,760			(1	)
Managed account and other fee-based revenues	5,203			4,516			15
Investment banking	5,179			5,313			(3	)
Earnings from equity method investments	347			898			(61	)
Intercompany service fee revenue from BAC	925			279			N/M
Other revenues⁽¹⁾	1,796			4,324			(58	)
Subtotal	25,076			28,164			(11	)
Interest and dividend revenues	8,003			9,303			(14	)
Less interest expense	8,785			9,621			(9	)
Net interest expense	(782		)	(318		)	N/M
Revenues, net of interest expense	24,294			27,846			(13	)
Non-interest expenses:
Compensation and benefits	15,773			15,069			5
Communications and technology	1,771			1,993			(11	)
Occupancy and related depreciation	1,367			1,395			(2	)
Brokerage, clearing, and exchange fees	1,121			1,022			10
Advertising and market development	500			444			13
Professional fees	1,029			986			4
Office supplies and postage	126			157			(20	)
Provision for representations and warranties	2,731			(120		)	N/M
Intercompany service fee expense from BAC	2,320			538			N/M
Other	2,250			2,439			(8	)
Total non-interest expenses	28,988			23,923			21
Pre-tax (loss) earnings	(4,694		)	3,923			N/M
Income tax (benefit) expense	(2,946		)	147			N/M
Net (loss) earnings	$	(1,748	)	$	3,776		N/M
Preferred stock dividends	—			134			N/M
Net (loss) earnings applicable to common stockholder	$	(1,748	)	$	3,642		N/M

32 (1) Amounts include other income and other-than-temporary impairment losses on available-for-sale debt securities. The other-than-temporary impairment losses were $59 million and $172 million for the years ended December 31, 2011 and December 31, 2010, respectively.

~~Table~~N/M of= ~~Contents~~Not meaningful.

~~narrowing~~Consolidated ofResults ~~Merrill Lynch’s credit spreads on the carrying value~~ of certain of our long-term debt liabilities, primarily structured notes, as compared with net losses from such long-term debt liabilities of $5.2 billion recorded in the year ended December 31, 2009. This increase in principal transactions revenues was partially offset by a decline in trading revenues as compared with the prior year across most of our businesses. During 2010, market conditions were affected by continued uncertainty about global economic conditions, including concerns regarding the ongoing U.S. economic recovery and the level of U.S. unemployment, the European sovereign debt crisis, and increasing fears of inflation in certain emerging markets. The potential implications of regulatory developments, including the Financial Reform Act, also increased market uncertainty. Such conditions contributed to greater risk aversion, which negatively impacted the level of transaction activity during the year. Principal transactions revenues from our credit products business declined in the year ended December 31, 2010, reflecting less favorable market conditions as compared with the prior year. In the year ended December 31, 2009, revenues from credit products benefited from a significant tightening of credit spreads that occurred during that period. The decline in revenues from rates and currency products also reflected less favorable market conditions, as well as reduced client transaction volumes. Commodities revenues declined primarily due to lower revenues from natural gas and power products. The decline in equity trading revenues reflected lower revenues from both derivative and cash equity products, partially offset by higher revenues from our equity financing and services business. These declines in trading revenues were partially offset by higher revenues from our mortgage product business, as the prior year included net write-downs on certain mortgage exposures, including credit valuation adjustments related to financial guarantors. Operations

~~Net~~Our interest (expense) / income is a function of (i) the level and mix of total assets and liabilities, including trading assets owned, deposits, financing and lending transactions, and trading strategies associated with our businesses, and (ii) the prevailing level, term structure and volatility of interest rates. Net interest (expense) / income is an integral component of trading activity. In assessing the profitability of our client facilitation and trading activities, we view principal transactions and net ~~interest~~ ~~(expense)~~loss / income in the aggregate as net trading revenues. Changes in the composition of trading inventories and hedge positions can cause the mix of principal transactions and net interest (expense) / income to fluctuate from period to period. Net interest expense was $318 million for the year ended December 31, ~~2010~~2011 aswas $1.7 billion compared with net ~~interest revenue~~earnings of $3.4 8 billion for the year ended December 31, ~~2009~~2010. Net ~~The decline in net interest~~ revenues ~~in 2010~~for ~~included~~2011 ~~the impact from the absence of net interest revenues from MLBUSA and MLBT-FSB, which~~ were ~~sold~~$24.3 tobillion ~~Bank~~compared ~~of America~~with ~~during~~$27.8 billion ~~the~~in ~~third and fourth quarters of 2009, respectively~~2010.

~~Commissions~~Year ~~revenues~~Ended primarily arise from agency transactions in listed and over-the-counter (“OTC”) equity securities and commodities and options. Commissions revenues also include distribution fees for promoting and distributing mutual funds. Commissions revenues were $5.8 billion for the year ended December 31, ~~2010,~~ ~~down~~2011 4%Compared ~~from~~With ~~the~~Year ~~$6.0 billion~~Ended ~~of revenues recorded in the prior year. The decline included lower revenues from our global equities business. In addition, commissions for the year ended~~ December 31, ~~2009 included revenues associated with the issuance of equity securities by Bank of America.~~ 2010

~~Managed~~Principal ~~account~~transactions ~~and~~revenues ~~other~~include ~~fee-based~~both ~~revenues~~realized ~~primarily~~and ~~consist of~~unrealized ~~asset-priced~~gains ~~portfolio~~and ~~service~~losses ~~fees~~on ~~earned~~trading ~~from~~assets ~~the administration~~and oftrading ~~separately~~liabilities ~~managed~~ and ~~other~~ investment ~~accounts~~ ~~for~~securities ~~retail~~classified ~~investors,~~as ~~annual account fees, and certain other account-related fees~~trading. ~~Managed~~Principal ~~account~~transactions ~~and other fee-based~~ revenues were $4.5.9 billion for the year ended December 31, ~~2010,~~2011 ancompared ~~increase~~with ~~of 5% from the~~ $47.31 billion offor ~~revenues~~the ~~recorded~~year inended ~~the~~December ~~prior~~31, ~~year~~2010. The ~~increase~~ ~~was~~decrease primarily ~~driven~~reflected bylower ~~higher~~trading ~~fee-based~~ revenues ~~from our~~across ~~global~~most ~~wealth~~of ~~management~~our ~~activities,~~businesses ~~reflecting~~as acompared ~~higher level~~with ofthe ~~fee-based~~prior ~~assets~~year, ~~from~~primarily ~~which~~in ~~such~~our ~~revenues~~mortgage, ~~are~~credit ~~generated as~~and ~~compared~~rates ~~with~~and ~~the~~currencies ~~prior~~businesses, ~~year.~~as ~~The~~well ~~increase~~as a decline in ~~fee-based assets~~proprietary ~~was~~trading ~~primarily~~revenues due to ~~increased~~the ~~client~~exit ~~flows~~of ~~and~~our ~~market appreciation~~stand-alone proprietary trading business. ~~This~~Market ~~increase~~conditions ~~was~~were ~~partially~~generally ~~offset~~difficult bythroughout ~~the~~2011 ~~absence~~ as a result of ~~servicing~~concerns over global and ~~other~~U.S ~~fees~~economic ~~associated~~conditions, ~~with~~regulatory ~~MLBUSA~~uncertainty and ~~MLBT-FSB, which~~the ~~were~~implications ~~sold~~of the European sovereign debt crisis. Such conditions contributed to ~~Bank~~heightened ofmarket ~~America~~volatility ~~during~~and ~~2009.~~ increased

33 32

Table of Contents

~~Investment~~risk ~~banking~~aversion ~~revenues~~among ~~include~~investors. Revenues ~~(i) origination revenues~~from ~~representing~~mortgage ~~fees~~products ~~earned~~declined ~~from~~as ~~the~~a ~~underwriting~~result of ~~debt, equity~~losses ~~and~~due ~~equity-linked~~to ~~securities~~the difficult market conditions that existed during the year ended December 31, 2011, as well as ~~loan~~from ~~syndication and~~credit ~~commitment~~valuation ~~fees~~adjustments related to financial guarantors. Revenues from credit products decreased and ~~(ii) advisory~~reflected ~~services~~the ~~revenues~~ more difficult trading environment in 2011, including ~~merger~~widening credit spreads, significant levels of volatility in the credit markets and ~~acquisition~~decreased liquidity and ~~other~~client ~~investment~~activity ~~banking advisory~~as ~~fees~~a result of the European sovereign debt crisis. ~~Investment~~Revenues ~~banking~~from ~~revenues~~rates and currency products declined and were ~~$5.3 billion~~ ~~for~~also impacted by the ~~year~~difficult ~~ended~~market ~~December~~conditions ~~31,~~that ~~2010~~existed during the year, ~~a decrease~~including ofthe 4%European ~~from~~sovereign debt crisis and continued concerns about the ~~$5.6 billion~~economic ~~recorded~~recovery in the ~~prior year~~U.S. ~~Underwriting~~and globally. In addition, as discussed below, principal transaction revenues ~~decreased~~from 3%proprietary totrading declined by $40.3 8 billion due to the exit of our stand-alone proprietary trading business as of June 30, 2011. ~~Equity~~ ~~underwriting~~These declines in principal transactions revenues were ~~$1.5 billion~~partially offset by an increase in revenue associated with the valuation of certain of our liabilities. In the year ended December 31, ~~2010~~2011, aswe ~~compared~~recorded ~~with~~net gains of $12.90 billion in due to the ~~prior~~impact ~~year,~~of athe ~~decrease~~widening of ~~23%~~Merrill ~~due~~Lynch's tocredit aspreads ~~lower~~on ~~level~~the carrying value of ~~transaction~~ ~~activity.~~certain ~~Fixed~~of ~~income~~our ~~underwriting~~long-term ~~revenues~~debt ~~were~~ liabilities, primarily structured notes, as compared with net losses of $20.81 billion from such long-term debt liabilities recorded in the year ended December 31, 2010 ~~as compared~~due ~~with~~to the narrowing of our credit spreads. In addition, we recorded revenues of $20.5 billion in the ~~prior~~ year ended December 31, an2011 ~~increase of~~due ~~13%~~to ~~driven~~valuation byadjustments ~~higher~~associated ~~revenues~~with ~~within~~the ~~leveraged~~consideration ~~finance. Revenues~~of ~~from~~our ~~advisory~~own ~~services~~creditworthiness ~~declined~~in ~~10%~~the ~~to $1.0 billion,~~fair ~~reflecting~~value ~~lower~~of ~~revenues~~certain ~~from~~derivative ~~merger~~liabilities, ~~and acquisition~~an ~~activity~~increase asof ~~compared~~$0.4 ~~with~~billion from the prior year as our credit spreads widened during 2011.

~~Earnings~~Included ~~from~~in ~~equity~~principal ~~method~~transactions ~~investments~~revenues ~~include~~are ~~our~~net ~~pro~~revenues ~~rata share~~associated ofwith ~~income~~activities ~~and~~we ~~losses~~have ~~associated~~identified ~~with~~as ~~investments~~“proprietary ~~accounted for~~trading,” ~~under~~which ~~the~~was ~~equity~~conducted ~~method~~separately offrom ~~accounting~~our customer trading activities. ~~Earnings~~Our ~~from~~stand-alone ~~equity method~~proprietary ~~investments~~trading ~~were~~operations ~~$898 million~~engaged ~~for~~in ~~the~~trading ~~year~~activities ~~ended December 31~~in a variety of products, ~~2010~~including ~~compared~~stocks, ~~with~~bonds, $1currencies and commodities.~~7 billion~~ ~~for~~In ~~the year~~response ~~ended~~to ~~December 31,~~developments ~~2009.~~relating ~~The~~to ~~results~~the ~~for~~Volcker ~~2009~~Rule, ~~included a~~we ~~$1.1 billion~~have ~~pre~~exited our stand-~~tax~~ ~~gain~~alone ~~associated~~proprietary ~~with~~trading ~~our~~business ~~investment in~~as ~~BlackRock~~of June 30, ~~which~~2011. ~~resulted~~The revenues from ~~BlackRock’s~~these ~~acquisition of~~operations ~~Barclays~~for ~~Global~~the ~~Investors.~~year ~~Excluding~~ended ~~this~~December ~~gain~~31, ~~earnings~~2011 ~~from equity~~were ~~method~~$442 ~~investments~~million, ~~increased~~of ~~approximately~~ which $~~300~~ 418 million inwere ~~2010.~~included ~~This~~within ~~increase~~principal ~~primarily~~transactions ~~reflected higher~~revenues. The revenues from ~~our~~these ~~investment~~operations infor ~~BlackRock,~~the ~~including~~year ~~a pre-tax~~ended ~~gain~~December of31, ~~approximately~~2010 were $~~90 million~~1.4 ~~associated~~billion, ~~with the~~of ~~November~~which ~~2010~~$1.2 ~~sale~~billion ofwere aincluded ~~portion~~within ofprincipal ~~the~~transactions ~~investment~~revenues. ~~Higher revenues~~The ~~from~~remainder ~~certain~~of ~~other~~the ~~investments,~~revenues ~~including~~for ~~partnerships and~~these ~~alternative~~operations ~~investment~~were ~~management~~primarily ~~companies,~~recorded ~~also contributed~~within tonet ~~the~~interest ~~increase~~revenues. ~~Refer~~See toalso ~~Note~~“Executive Overview 8- toOther ~~the Consolidated~~Events - Financial ~~Statements~~Reform ~~for~~Act - ~~further~~Limitations ~~information~~ on ~~equity~~ ~~method~~Proprietary ~~investments~~Trading. ”

~~Other~~Net ~~revenues~~interest ~~include~~income ~~gains~~(expense) is a function of (i) the level and ~~losses~~mix onof ~~investment securities~~total assets and liabilities, including ~~certain available-for-sale securities~~trading assets, ~~gains~~deposits, financing and ~~losses~~lending ontransactions, ~~private~~and ~~equity~~trading ~~investments~~strategies associated with our businesses, and ~~gains~~ ~~and~~(ii) the ~~losses~~prevailing onlevel, ~~loans~~term structure and ~~other~~volatility ~~miscellaneous~~of ~~items~~interest rates. ~~Other revenues~~Net ~~were~~interest $4income (expense) is an integral component of trading activity.~~6 billion~~ ~~for~~In assessing the ~~year~~profitability ~~ended December 31~~of our client facilitation and trading activities, ~~2010~~we ~~compared~~view ~~with~~principal ~~$3.4 billion~~transactions and net interest income (expense) in the ~~prior~~ ~~year.~~aggregate ~~The~~as ~~increase~~net intrading ~~2010~~revenues. ~~included~~Changes ain ~~gain~~the composition of ~~approximately~~ ~~$600 million~~trading ~~associated~~inventories ~~with~~and hedge positions can cause the ~~sale~~mix of ~~Bloomberg~~ ~~Inc.~~principal ~~notes~~transactions toand ~~Bank~~net ofinterest ~~America.~~income ~~The~~(expense) ~~increase~~to influctuate ~~other revenues~~from inperiod ~~2010~~to ~~was~~period. ~~also~~Net ~~associated~~interest ~~with~~expense ~~higher~~was ~~revenues~~$782 million ~~from available-~~for~~-sale securities,~~ ~~including~~the ~~lower~~year ~~other-than-temporary~~ended ~~impairment losses~~December 31, ~~and~~2011 ~~higher~~as compared with net ~~revenues~~interest ~~from~~expense ~~certain~~of ~~private~~$318 million ~~equity investments~~in the year ended December 31, 2010. ~~These~~The ~~increases~~increase ~~were~~in ~~partially~~net ~~offset~~interest byexpense ~~the absence~~was ofprimarily due to lower net interest revenues generated from ~~MLBUSA~~our ~~and~~trading ~~MLBT-FSB~~activities, ~~which~~partially ~~were~~offset ~~sold~~by ~~to Bank~~lower offinancing ~~America during 2009~~costs.

~~Compensation~~Commissions ~~and~~revenues ~~benefits~~primarily ~~expenses~~arise ~~were~~from ~~$15.1 billion~~agency ~~for the~~transactions ~~year~~in ~~ended~~listed ~~December 31, 2010~~ and ~~$13.3 billion~~OTC ~~in the~~equity ~~prior~~securities ~~year~~and ~~period.~~commodities ~~The increase primarily reflected higher compensation~~ and ~~benefits~~options. ~~costs,~~Commissions ~~which~~revenues ~~included~~also ~~the~~include ~~impact~~distribution ~~of increased~~fees ~~headcount~~for ~~levels~~promoting ~~from investments in infrastructure~~ and ~~personnel~~distributing ~~associated~~mutual ~~with~~funds. ~~further~~Commissions ~~development~~revenues ofwere ~~the business,~~$5.7 billion asfor ~~well as~~ the ~~recognition of expense on proportionally larger prior~~ year ~~incentive~~ended ~~deferrals.~~December ~~Higher expenses~~31, ~~associated~~2011, ~~with stock-based compensation awards to retirement-eligible employees and~~ a ~~one-time~~decrease ~~employer~~of ~~payroll tax~~1% infrom the ~~U.K.~~prior ~~discussed below also contributed to the increase~~year. ~~These~~The ~~increases~~decline ~~were~~reflected ~~partially~~marginally ~~offset by~~ lower ~~incentive-based~~ ~~compensation~~revenues ~~expense,~~from ~~lower~~both ~~severance~~our ~~costs,~~global ~~and the~~markets ~~absence of compensation costs associated with MLBUSA~~ and ~~MLBT-FSB,~~ ~~which~~global ~~were~~wealth ~~sold~~management ~~to Bank of America during 2009~~businesses.

OnManaged ~~April 8,~~account ~~2010,~~and ~~the~~other ~~U.K.~~fee-based ~~enacted~~revenues ~~into~~primarily ~~law~~consist aof ~~one~~asset-~~time employer~~priced ~~payroll~~portfolio ~~tax~~service fees earned from the administration of ~~50%~~separately onmanaged ~~bonuses~~and ~~awarded~~other toinvestment ~~employees~~accounts ~~of applicable~~for ~~banking~~retail ~~entities~~investors, ~~between~~annual ~~December 9~~account fees, ~~2009~~and certain other account-related fees. Managed account and ~~April~~ other fee-based revenues were $5.2 billion for the year ended December 31, ~~2010~~2011, an increase of 15% from the prior year period. The ~~impact~~increase was driven by higher fee-based revenues from our global wealth management activities, reflecting higher levels of ~~this~~fee-based ~~tax~~assets ~~was~~from ~~approximately $330 million~~which such revenues are generated as well as increased revenues from fees on new accounts and ~~was~~asset ~~included~~management fees. The increase in ~~our~~fee-based ~~compensation~~assets ~~and benefits~~was ~~expense~~due ~~for~~to ~~the~~both ~~year~~strong ~~ended~~client ~~December 31,~~flows ~~2010~~into long-term products and market appreciation.

Non-compensation expenses were $8.9 billion for the year ended December 31, 2010 and $8.2 billion in the year ended December 31, 2009. Advertising and market development costs were $444 million, 33

34 Table of Contents

~~Table~~Investment banking revenues include (i) origination revenues representing fees earned from the underwriting of ~~Contents~~debt, equity and equity-linked securities, as well as loan syndication and commitment fees and (ii) advisory services revenues including merger and acquisition and other investment banking advisory fees. Total investment banking revenues were $5.2 billion for the year ended December 31, 2011, a decrease of 3% from the prior year. Underwriting revenues decreased 8% to $4.0 billion, largely driven by lower fees from debt capital markets, particularly in leveraged finance. Revenues from equity issuances also declined due to difficult market conditions.

anRevenues ~~increase~~from ofadvisory ~~12%~~services ~~primarily~~increased ~~due~~22% to ~~higher~~$1.2 ~~travel and entertainment expenses~~billion. Investment ~~Professional~~banking ~~fees~~revenues ~~were $986 million,~~from antransactions ~~increase~~involving Bank of ~~28%~~America ~~primarily due to higher employee recruitment, legal and other professional fees. Other expenses~~ were $~~2.9 billion,~~322 anmillion ~~increase~~in ~~of 18% from~~ the ~~prior~~ year. ~~The~~ended ~~increase~~December ~~reflected higher litigation-related expenses~~31, ~~higher~~2011 ~~intercompany service fees from Bank of America,~~ and ~~losses of approximately~~ $~~190~~ 212 million ~~associated~~in ~~with a real estate private equity fund that we deconsolidated during~~ the ~~fourth~~year ~~quarter~~ended ofDecember 31, 2010.

~~Included~~In ~~within~~2012, ~~Merrill~~our ~~Lynch’s~~sales ~~non-interest~~and ~~expenses~~trading ~~are intercompany~~revenue ~~service~~and ~~fees~~investment ~~from~~banking ~~Bank~~fees ofmay ~~America.~~continue ~~Beginning~~to ~~in 2011,~~be ~~Bank~~adversely ofaffected ~~America~~by ~~and~~lower ~~Merrill~~client ~~Lynch~~activity ~~integrated~~and ~~their methodologies~~challenging ~~for~~market ~~allocating~~conditions ~~expenses~~as ~~associated with shared services to their subsidiaries. As~~ a result of, ~~this~~among ~~integration~~other things, ~~Merrill~~ ~~Lynch~~the isEuropean ~~likely~~sovereign todebt ~~incur~~crisis, auncertainty ~~higher~~regarding ~~level~~the outcome of ~~intercompany service~~the ~~fees~~evolving ~~from~~domestic ~~Bank~~regulatory oflandscape, ~~America~~our incredit ~~future~~ratings ~~periods~~and market volatility.

~~Income~~Earnings ~~tax~~from ~~expense~~equity ~~was~~method ~~$147 million~~investments ~~for~~include ~~the~~our ~~year~~pro ~~ended December 31,~~rata ~~2010~~share ~~compared with an expense~~ of ~~$649 million~~ ~~for~~income ~~2009, resulting in effective tax rates of 3.8%~~ and ~~8.1%,~~losses ~~respectively.~~associated ~~The decrease in the effective tax rate as compared~~ with ~~2009~~investments ~~was~~accounted ~~primarily~~for ~~attributable~~under tothe ~~a proportionately~~equity ~~higher~~method ~~impact~~ of ~~net~~accounting. ~~tax~~Earnings ~~benefits~~from ~~due~~equity tomethod ~~the lower~~investments ~~level~~were of$347 million ~~pre-tax~~for ~~income~~the asyear ~~well~~ended asDecember a31, ~~release~~2011 ofcompared awith ~~larger portion~~$898 ofmillion ~~a valuation allowance provided~~ for ~~a U.S. federal~~the ~~capital~~year ~~loss~~ended ~~carryforward~~December ~~tax~~31, ~~benefit~~2010. The decrease ~~was~~reflected ~~partially~~lower ~~offset~~revenues byfrom acertain ~~charge~~equity ~~for~~method ~~the~~investments, ~~U.K.~~primarily ~~statutory tax~~BlackRock, ~~rate~~Inc. ~~reduction~~(“BlackRock”). In ~~referred~~November to2010, ~~below~~we ~~and~~sold by a ~~lower~~substantial ~~level~~portion of ~~tax benefit~~our ~~items~~investment ~~during~~in ~~2010~~BlackRock, ~~such~~which asreduced ~~the~~our ~~absence~~economic ofinterest ~~the~~in ~~2009 benefit~~BlackRock offrom ~~loss~~approximately on34% ~~certain~~to ~~foreign~~approximately ~~subsidiary~~7%. As ~~stock and~~ a ~~smaller~~ ~~portion~~result of ~~income~~this ~~earned~~transaction, inwe ~~foreign~~no ~~subsidiaries.~~longer ~~During 2010,~~accounted ~~the~~for ~~Bank~~our ofinvestment ~~America~~in ~~group,~~BlackRock ofunder ~~which~~the ~~Merrill~~equity ~~Lynch~~method. Earnings isfrom ~~a member,~~equity ~~recognized~~method ~~capital~~investments ~~gains~~in ~~from~~2010 ~~the~~included ~~sale~~a gain of ~~certain investment~~$90 ~~assets~~million ~~against~~associated ~~which~~with athis ~~portion~~sale. Refer ofto ~~Merrill Lynch’s U.S.~~Note ~~capital~~8 ~~loss~~to ~~carryforward~~the ~~was~~Consolidated ~~utilized, resulting~~Financial inStatements afor ~~$1.7 billion~~further ~~valuation~~information ~~allowance~~on ~~release~~equity ~~for Merrill~~method ~~Lynch~~investments.

OnIntercompany ~~July 27,~~service ~~2010,~~fee ~~the~~revenues ~~U.K.~~from ~~government~~Bank ~~enacted~~of aAmerica ~~law~~include ~~change reducing~~revenues ~~the~~associated ~~corporate~~with ~~income tax rate by one percent effective for~~ the ~~2011~~provision ~~U.K.~~of ~~tax~~certain ~~financial~~shared ~~year~~business ~~beginning~~activities onwith ~~April 1, 2011.~~Bank ~~While~~of ~~this rate reduction favorably affects income tax expense on future U~~America.K. Intercompany ~~earnings,~~service itfee ~~also~~revenues ~~required~~from usBank ~~to remeasure~~of ~~our~~America ~~U.K.~~were ~~net~~$925 ~~deferred~~million ~~tax~~in ~~assets using~~ the ~~lower tax rate, which resulted in a charge to income tax expense of $386 million during 2010. A future rate reduction of one percent per~~ year isended ~~generally~~December ~~expected~~31, ~~to be enacted in each of~~ 2011, ~~2012~~compared ~~and~~with ~~2013,~~$279 ~~which~~million ~~would result~~ in ~~a similar charge to income tax expense of nearly $400 million during each of~~ the ~~three~~prior ~~years~~year. The ~~U.K.~~increase ~~Treasury~~was ~~has~~driven ~~asked~~by ~~for~~higher ~~taxpayer~~fees ~~views on~~earned ~~whether~~from ~~they~~Bank ~~should,~~of asAmerica anin ~~alternative,~~connection ~~enact~~with ~~the~~certain ~~full remaining~~shared ~~three~~brokerage ~~percent~~and ~~reduction~~trading ~~entirely during 2011, which would accelerate the estimated charges into 2011 for a total of approximately $1~~activities.~~1 billion.~~

~~For~~Other ~~further~~revenues ~~information~~include gains and losses on ~~income~~investment ~~taxes~~securities, ~~see~~including ~~Note~~certain available-for-sale securities, gains and losses on private equity investments, and gains and losses on loans and other miscellaneous items. Other revenues were $1.8 billion in the year ended December 31, 2011 as compared with $4.3 billion in the year ended December 31, 2010. The decrease included lower gains from certain private equity and other investments, as well as lower gains associated with the sale of certain available-for-sale securities. In addition, the results for 2010 included a gain of approximately $600 17million associated with the sale of Bloomberg Inc. notes to Bank of America. These decreases were partially offset by a pre-tax gain of $377 million resulting from the ~~Consolidated~~ ~~Financial~~June ~~Statements~~2011 sale of our remaining investment in BlackRock.

~~Off~~Compensation and benefits expenses were $15.8 billion in the year ended December 31, 2011, an increase of 5% from the prior year period. The increase included higher amortization expense associated with stock-~~Balance Sheet~~based ~~Exposures~~ compensation awards, including awards granted to retirement-eligible employees, as compared with the prior year. Salary and other compensation costs also increased, which was related to investments in infrastructure. These increases were partially offset by lower incentive-based compensation expense as compared with the prior year, reflecting a decline in net revenues (adjusted for net revenues associated with the impact of changes in our credit spreads on the valuation of certain of our long-term debt and derivative liabilities). The increase was also partially offset by a charge for an incremental U.K. employer payroll tax that was recorded in 2010. In April 2010, the U.K. enacted into law a one-time employer payroll tax on bonuses awarded to employees of applicable banking entities between December 9, 2009 and April 5, 2010. The impact of this tax was approximately $330 million and was included in our compensation and benefits expense for the year ended December 31, 2010.

~~As a part of our normal operations, we enter into various off~~Non-~~balance~~compensation ~~sheet~~expenses ~~arrangements~~were ~~that may require future payments~~$13. ~~The~~2 billion ~~table~~in ~~and~~the ~~discussion~~year ~~below~~ended ~~outline our significant off-balance sheet arrangements, as well as their future expirations, as of~~ December 31, ~~2010.~~2011 ~~Refer~~compared towith ~~Note~~$8.9 ~~14 to~~billion ~~the~~in ~~Consolidated Financial Statements for further information.~~

(dollars in millions)
	Expiration
	Maximum		Less than		1 - 3		3 - 5		Over 5		Carrying
	Payout		1 Year		Years		Years		Years		Value
Standby liquidity facilities	$	1,309	$	687	$	601	$	-	$	21	$	-
Residual value guarantees		415		95		320		-		-		1
Standby letters of credit and other guarantees		1,119		378		301		16		424		-

35 Table of Contents

~~Table~~the prior year period. Non-compensation expenses in 2011 included a $2.7 billion provision for representations and warranties. See “Off-Balance Sheet Exposures - Representations and Warranties” for further information. Communications and technology expenses were $1.8 billion, a decrease of ~~Contents~~11% primarily due to lower costs for technology equipment and systems consulting. Brokerage, clearing and exchange fees were $1.1 billion, an increase of 10%, due primarily to higher brokerage and other fees associated with the global markets business. Advertising and market development expenses were $500 million, an increase of 13%, due primarily to higher travel and entertainment and marketing and promotional costs. Intercompany service fee expenses from Bank of America were $2.3 billion in the year ended December 31, 2011 compared with $0.5 billion in the prior year. Beginning in 2011, Bank of America and Merrill Lynch integrated their methodologies for allocating expenses associated with shared services to their subsidiaries. As a result of this integration, during 2011 Merrill Lynch incurred a higher level of intercompany service fees from Bank of America as compared with the prior year. Other expenses were $2.3 billion, a decrease of 8% from the prior year. The decrease included lower expense associated with non-controlling interests of certain principal investments as well as a prior year loss of $190 million associated with a real estate private equity fund that we deconsolidated during the fourth quarter of 2010, partially offset by higher litigation-related expenses.

~~Standby Liquidity~~The ~~Facilities~~ income tax benefit for the year ended December 31, 2011 was $2.9 billion compared with an income tax expense of $147 million for the year ended December 31, 2010, resulting in effective tax rates of 62.8% and 3.8%, respectively. The 2011 effective tax rate was higher than for 2010 as the impact of net tax benefit items described below increased the income tax benefit recorded on the 2011 pre-tax loss whereas for 2010 net tax benefits decreased tax expense recorded on pre-tax income.

~~Standby~~The ~~liquidity~~income ~~facilities~~tax ~~are~~rate ~~primarily~~for ~~comprised~~2011 ~~of liquidity~~was ~~facilities~~driven ~~provided~~by toa ~~certain unconsolidated municipal bond securitization variable interest entities (“VIEs”)~~$1.0 Inbillion ~~these~~release ~~arrangements,~~of ~~Merrill~~the ~~Lynch~~remaining ~~is required~~valuation toallowance ~~fund~~provided ~~these~~for ~~standby~~capital ~~liquidity~~loss ~~facilities~~carryforward iftax ~~certain contingent~~benefits ~~events~~and ~~take place (e.g.,~~ a ~~failed~~benefit ~~remarketing)~~of ~~and~~$593 ~~in certain~~million ~~cases~~for ifplanned ~~the~~realization ~~fair value~~ of ~~the~~previously ~~assets~~unrecognized ~~held~~deferred bytax ~~the~~assets ~~VIE declines~~related ~~below~~to the ~~stated~~tax ~~amount~~basis ofin ~~the~~certain ~~liquidity obligation~~subsidiaries. ~~The~~ These ~~potential~~benefits ~~exposure~~were ~~under~~partially ~~the~~offset ~~facilities is mitigated~~ by ~~economic~~ ~~hedges and/or~~the ~~other contractual~~$774 ~~arrangements~~million ~~entered~~charge ~~into~~due byto ~~Merrill~~the ~~Lynch~~U.K. ~~Based upon~~corporate ~~historical~~income ~~activity,~~tax itrate isreduction ~~considered~~discussed ~~remote~~below ~~that~~and ~~future payments~~by ~~would~~a ~~need~~$258 tomillion becharge ~~made~~to ~~under~~establish ~~these~~a ~~guarantees.~~valuation ~~Refer~~allowance ~~to Note 9~~for toa ~~the~~portion ~~Consolidated~~of ~~Financial~~certain ~~Statements~~non-U.S. ~~for~~deferred ~~further information~~tax assets.

~~Auction Rate~~The ~~Security~~2010 ~~(“ARS”)~~income ~~Guarantees~~ tax rate was driven by a $1.7 billion release of a valuation allowance provided for capital loss carryforward tax benefits and recurring tax preference items, partially offset by a $386 million charge for a one percent reduction to the U.K. tax rate enacted during 2010.

~~Under~~On July 19, 2011, the ~~terms~~U.K. of2011 ~~Merrill~~Finance ~~Lynch’s~~Bill ~~announced~~was ~~purchase program~~enacted, aswhich ~~augmented~~reduced the U.K. corporate income tax rate by ~~the~~one ~~global~~percent ~~agreement~~to ~~reached~~26% ~~with~~beginning ~~the New~~on ~~York~~April ~~Attorney~~1, ~~General~~2011, ~~the~~and ~~SEC~~then to 25% effective April 1, ~~the~~2012. These ~~Massachusetts~~rate ~~Securities Division~~reductions ~~and~~will ~~other~~favorably ~~state~~affect ~~securities~~income ~~regulators,~~tax ~~Merrill~~expense ~~Lynch agreed~~on future U.K. earnings but also required us to ~~purchase~~remeasure ~~ARS~~our atU.K. ~~par~~net ~~from~~deferred ~~its~~tax ~~retail~~assets ~~clients,~~using ~~including individual~~the lower tax rates. As noted above, ~~not-~~ the income tax expense for~~-profit, and~~ ~~small~~2011 ~~business~~included ~~clients,~~a ~~beginning~~$774 inmillion ~~2008~~charge for the remeasurement. If ~~The~~U.K. ~~final~~corporate ~~date~~income ~~of the~~tax ~~ARS~~rates ~~purchase~~were ~~program~~to ~~was~~be ~~January 15~~reduced to 23% by 2014, ~~2010~~as suggested in U.K ~~At December 31,~~Treasury ~~2009~~announcements and assuming no change in the deferred tax asset balance, a ~~liability~~charge to income tax expense of approximately $24 400 million ~~was recorded~~for ~~related~~each toone ~~these~~percent ~~guarantees.~~reduction Noin ~~liability~~the ~~was~~rate ~~recorded as~~would result in each period of ~~December 31,~~enactment ~~2010~~(for a total of approximately $800 million).

~~Residual Value~~OFF-BALANCE ~~Guarantees~~ SHEET EXPOSURES

AtAs ~~December 31,~~a ~~2010~~part of our normal operations, ~~residual~~we ~~value~~enter ~~guarantees~~into ~~of $415 million~~various ~~consist~~off-balance ofsheet ~~amounts~~arrangements ~~associated~~that ~~with~~may ~~certain power~~require ~~plant~~future ~~facilities~~payments. ~~Payments~~The ~~under~~table ~~these~~and ~~guarantees~~discussion ~~would only~~below beoutline ~~required~~our ifsignificant ~~the~~off-balance ~~fair~~sheet ~~value~~arrangements, ofas ~~such~~well ~~assets~~as ~~declined below~~ their ~~guaranteed~~future ~~value.~~expirations, Asas of December 31, ~~2010,~~2011. ~~no payments~~Refer ~~have~~to ~~been~~Note 14 ~~made~~to ~~under these guarantees and~~ the ~~carrying value~~Consolidated ofFinancial ~~the~~Statements ~~associated~~for ~~liabilities~~further ~~was not material, as Merrill Lynch believes that the estimated fair value of such assets was in excess of their guaranteed value~~information.

~~Standby Letters of Credit~~ 35

AtTable ~~December 31, 2010, we provided guarantees to certain counterparties in the form~~ of ~~standby letters of credit in the amount of $0.7 billion.~~ Contents

Representations and Warranties



(dollars in millions)
	Expiration
	Maximum Payout		Less than 1 Year		1 - 3 Years		3 - 5 Years		Over 5 Years
Standby liquidity facilities	$	761	$	186	$	555	$	3	$	17
Residual value guarantees	320		—		320		—		—
Standby letters of credit and other guarantees	429		280		99		31		19

InStandby ~~prior~~Liquidity years, Merrill Lynch and certain of its subsidiaries, including First Franklin Financial Corporation (“First Franklin”), sold pools of first-lien residential mortgage loans and home equity loans as private-label securitizations or in the form of whole loans. Many of the loans sold in the form of whole loans were subsequently pooled with other mortgages into private-label securitizations issued or sponsored by the third-party buyer of the whole loans. In addition, Merrill Lynch and First Franklin securitized first-lien residential mortgage loans generally in the form of mortgage-backed securities guaranteed by the GSEs. In connection with these transactions, Merrill Lynch and certain of its subsidiaries made various representations and warranties (these representations and warranties are not included in the table above). These representations and warranties, as governed by the agreements, related to, among other things, the ownership of the loan, the validity of the lien securing the loan, the absence of delinquent taxes or liens against the property securing the loan, the process used to select the loan for inclusion in a transaction, the loan’s compliance with any applicable loan criteria, including underwriting standards, and the loan’s compliance with applicable federal, state and local Facilities

36 We provide standby liquidity facilities primarily to certain unconsolidated municipal bond securitization variable interest entities (“VIEs”). In these arrangements, we are required to fund these standby liquidity facilities if certain contingent events take place (e.g., a failed remarketing) and in certain cases if the fair value of the assets held by the VIE declines below the stated amount of the liquidity obligation. The potential exposure under the facilities is mitigated by economic hedges and/or other contractual arrangements entered into by Merrill Lynch. Refer to Note 9 to the Consolidated Financial Statements for further information.

~~Table~~Residual ofValue ~~Contents~~Guarantees

~~laws.~~At ~~Breaches~~December 31, of2011, ~~these~~residual ~~representations~~value ~~and~~guarantees ~~warranties~~of ~~may result~~$320 million inconsist ~~the~~of ~~requirement~~amounts ~~that~~associated wewith ~~repurchase~~certain ~~mortgage~~power ~~loans~~plant ~~or otherwise make whole or provide other remedy to a whole loan buyer or securitization trust (collectively, repurchase claims)~~facilities. ~~Where~~ ~~the~~Payments ~~loans~~under ~~are~~these ~~originated~~guarantees ~~and~~would ~~sold~~only ~~by third parties, Merrill Lynch’s losses may~~ be ~~reduced~~required byif ~~any recourse to~~ the ~~original~~fair ~~sellers~~value of ~~the~~such ~~loans~~assets ~~for~~declined ~~representations~~below ~~and warranties~~their ~~previously~~guaranteed ~~provided~~value. byAs ~~the~~of ~~original~~December 31, ~~seller.~~2011, ~~Subject to~~no ~~the~~payments ~~requirements~~have ~~and~~been ~~limitations~~made ofunder ~~the applicable agreements,~~ these ~~representations~~guarantees and ~~warranties~~the ~~can~~carrying bevalue ~~enforced by~~of the ~~securitization~~associated ~~trustee~~liabilities orwas ~~whole~~not ~~loan~~material, ~~buyer~~ as ~~governed~~Merrill ~~by the~~Lynch ~~agreements~~believes ~~or,~~that inthe ~~certain~~estimated ~~securitizations~~fair ~~where~~value ~~monolines have insured all or some~~ of ~~the~~such ~~related~~assets ~~bonds~~was ~~issued,~~in byexcess ~~the insurer at any time over the life~~ of ~~the~~their ~~loan~~guaranteed value.

~~The~~Standby ~~fair~~Letters ~~value~~ of probable losses to be absorbed under the representations and warranties obligations and the guarantees is recorded as an accrued liability when the loans are sold. The liability for probable losses is updated by accruing a representations and warranties provision in the Consolidated Statement of Earnings/(Loss). This is done throughout the life of the loan as necessary when additional relevant information becomes available. The methodology used to estimate the liability for representations and warranties is a function of the representations and warranties given and considers a variety of factors, which include, depending on the counterparty, actual defaults, estimated future defaults, historical loss experience, estimated home prices, estimated probability that a repurchase request will be received, number of payments made by the borrower prior to default and estimated probability that a loan will be required to be repurchased. Changes to any one of these factors could significantly impact the estimate of our liability. Given that these factors vary by counterparty, Merrill Lynch analyzes its representations and warranties obligations based on the specific party with whom the sale was made. Merrill Lynch performs a loan by loan review of all properly presented repurchase claims and has and will continue to contest such demands that Merrill Lynch does not believe are valid. In addition, Merrill Lynch may reach a bulk settlement with a counterparty (in lieu of the loan-by-loan review process), on terms determined to be advantageous to Merrill Lynch. Credit

~~The~~At ~~liability for representations and warranties recorded at~~ December 31, ~~2010 and December 31~~2011, ~~2009~~we ~~was $213 million~~provided ~~and~~guarantees ~~$378 million,~~to ~~respectively.~~certain ~~The~~counterparties ~~table below~~in ~~presents~~the aform ~~roll forward~~ of ~~the~~standby ~~liability~~letters ~~for representations~~of ~~and~~credit ~~warranties~~in ~~and~~the ~~corporate~~amount ~~guarantees:~~ of $0.4 billion.

(dollars in millions)
Beginning balance as of December 31, 2009	$	378
Charge-offs		(45	)
Provision		(120	)
Ending balance as of December 31, 2010	$	213

Representations and Warranties

~~The~~In ~~liability~~prior ~~for~~years, ~~representations~~Merrill Lynch and ~~warranties~~certain ~~has~~of ~~been established~~its ~~when~~subsidiaries, ~~those~~including ~~obligations~~First ~~are~~Franklin ~~both~~Financial ~~probable~~Corporation (“First Franklin”), sold pools of first-lien residential mortgage loans and ~~reasonably~~ ~~estimable.~~home ~~Although~~equity ~~experience~~loans ~~with~~as ~~non~~private-~~GSE~~label ~~claims remains~~securitizations (in a limited number of these securitizations, ~~Merrill Lynch~~monolines ~~expects~~insured ~~additional~~all ~~activity in~~or ~~this~~some ~~area~~of ~~going~~the ~~forward~~securities), ~~and~~or in the ~~volume~~form of ~~repurchase~~whole ~~claims from~~loans. ~~monolines,~~Most of the loans sold in the form of whole ~~loan~~loans ~~buyers~~were ~~and~~subsequently ~~investors~~pooled ininto private-label securitizations ~~could~~sponsored ~~increase~~by inthe third-party buyer of the ~~future~~whole loans. ~~The representations~~In addition, Merrill Lynch and ~~warranties~~First ~~provision~~Franklin ~~may~~securitized ~~vary~~first-lien ~~significantly each~~residential ~~period~~mortgage asloans generally in the ~~methodology~~form ~~used~~of tomortgage-backed ~~estimate~~securities guaranteed by the ~~expense continues~~GSEs. toIn beconnection ~~refined~~with ~~based~~these ontransactions, ~~the~~Merrill ~~level~~Lynch made various representations and ~~type~~warranties. Breaches of ~~repurchase~~ ~~claims~~these ~~presented,~~representations ~~defects~~and ~~identified,~~warranties ~~the~~may ~~latest experience~~result ~~gained~~in onthe requirement to repurchase ~~claims~~mortgage ~~and~~loans or to otherwise make whole or provide other ~~relevant~~remedies ~~facts and~~to ~~circumstances~~the GSEs, ~~which~~whole-loan ~~could~~buyers, ~~have~~securitization atrusts ~~material~~or ~~adverse~~monoline ~~impact~~insurers (collectively, “repurchases”). In such cases, Merrill Lynch would be exposed to any credit loss on ~~our~~ ~~earnings~~the repurchased mortgage loans after accounting for any ~~particular~~mortgage ~~period~~insurance or mortgage guaranty payments that it may receive.

ItSubject isto ~~reasonably~~the ~~possible~~requirements ~~that~~and ~~future~~limitations ~~losses~~of ~~may~~the ~~occur~~applicable sales and ~~Merrill~~ ~~Lynch’s~~securitization ~~estimate~~agreements, isthese ~~that~~representations ~~the~~and ~~upper~~warranties ~~range~~can ~~of possible~~be ~~loss~~enforced ~~related~~by tothe ~~non~~GSEs, the whole-~~GSE~~loan ~~sales~~buyer, ~~could~~the besecuritization ~~$1 billion to~~trustee, ~~$2 billion~~or ~~over~~others ~~existing~~as ~~accruals.~~governed ~~This~~by ~~estimate~~the ~~does not~~applicable ~~represent~~agreement or, in a ~~probable~~limited ~~loss,~~number isof ~~based~~first-lien onand ~~currently~~home ~~available information~~equity securitizations where monoline insurers have insured all or some of the securities issued, ~~significant~~by ~~judgment~~the monoline insurer. In the case of loans sold to parties other than the GSEs, ~~and~~the contractual liability to repurchase typically arises only if there is a ~~number~~breach of ~~assumptions~~ the representations and warranties that ~~are~~materially ~~subject~~and toadversely ~~change.~~affects ~~Future~~the ~~provisions~~interest ~~and~~of ~~possible~~the ~~loss~~ investor or ~~range~~investors in the loan or of ~~possible~~the ~~loss~~monoline ~~may~~insurer be(as ~~impacted~~applicable). ifContracts ~~actual~~with ~~results~~the ~~are different~~GSEs ~~from~~do ~~our~~ not contain equivalent language.

37 36

Table of Contents

~~assumptions~~For ~~regarding~~additional ~~economic~~information ~~conditions,~~about ~~home~~accounting ~~prices~~for representations and ~~other matters~~warranties and ~~may~~our ~~vary~~representations byand ~~counterparty.~~warranties ~~We expect that the resolution of the repurchase~~ claims ~~process~~and ~~with the non-GSE counterparties will likely be a protracted process~~exposures, ~~and~~see weNote 14 ~~will vigorously~~to ~~contest~~the ~~any~~Consolidated ~~request~~Financial ~~for repurchase if we conclude that a valid basis for a repurchase claim does not exist~~Statements.

~~As presented in the table below,~~ Merrill Lynch, ~~including~~has ~~First Franklin,~~vigorously ~~sold~~contested ~~loans~~any ~~originated~~request ~~from~~for ~~2004~~repurchase towhen ~~2008~~it ~~(primarily subprime~~has ~~and alt-A)~~concluded ~~with~~ that a ~~total~~valid ~~original~~basis ~~principal~~for ~~balance~~repurchase indoes ~~the~~not ~~amount~~exist ~~of approximately~~and ~~$133 billion~~will ~~through~~continue ~~securitizations~~to ordo ~~whole loan~~so ~~sales~~in ~~that~~the ~~were~~future. ~~subject~~Merrill toLynch ~~representations~~may ~~and~~reach ~~warranties liabilities,~~settlements ofin ~~which~~the ~~approximately~~future ~~$62 billion~~if ~~has~~opportunities ~~been paid,~~arise ~~$29 billion~~on ~~has~~terms ~~defaulted~~it ~~and~~believes ~~$42 billion remains~~to ~~outstanding~~be asadvantageous ofto ~~December 31,~~Merrill ~~2010~~Lynch.

AsBank it relates to private investors, including those who have invested in private-label securitizations, a contractual liability to repurchase mortgage loans generally arises only if counterparties prove that there is a breach of ~~the representations~~America ~~and~~BNY ~~warranties~~Mellon that materially and adversely affects the interest of the investor or all investors in a securitization trust, or that there is a breach of other standards established by the terms of the related sale agreement. We believe that the longer a loan performs, the less likely an underwriting representations and warranties breach would have had a material impact on the loan’s performance or that a breach even exists. Because the majority of the borrowers in this population would have made a significant number of payments if they are not yet 180 days or more delinquent, we believe that the principal balance at the greatest risk of repurchase requests in this population are those that have defaulted and those that are currently 180 days or more past due (severely delinquent). Additionally, the obligation to repurchase mortgage loans also requires that counterparties have the contractual right to demand repurchase of the loans. We believe private label securitization investors must generally aggregate 25% of the voting interests in each of the tranches of a particular securitization to instruct the securitization trustee to investigate potential repurchase claims. While a securitization trustee may elect to investigate or demand repurchase of loans on its own, individual investors typically have limited rights under the contracts to present repurchase claims directly. Settlement

~~The~~On ~~following~~June 28, ~~table~~2011, ~~presents~~Bank ~~the~~of ~~population~~America and certain of ~~loans~~its ~~sold~~non-Merrill ~~as whole~~Lynch ~~loans~~subsidiaries orentered ininto ~~securitizations~~a ~~originated~~settlement ~~from~~agreement ~~2004~~(subject to ~~2008~~final court approval and certain other conditions) with The Bank of New York Mellon (“BNY Mellon”), by ~~entity~~as trustee, ~~together~~to resolve, among other claims, all outstanding and potential claims related to alleged representations and warranties breaches (including repurchase claims) with respect to the ~~principal~~525 atlegacy ~~risk~~first-lien ~~summarized~~and byfive second-lien non-GSE residential mortgage-backed securitization trusts containing loans principally originated between 2004 and 2008 and for which BNY Mellon acts as trustee or indenture trustee (the ~~number~~ “BNY Mellon Settlement”). As a result of ~~payments~~the experience gained by Bank of America and certain of its non-Merrill Lynch affiliates in the ~~borrower~~BNY ~~made~~Mellon ~~prior~~Settlement, Merrill Lynch determined that it had sufficient experience to ~~default~~record ~~or becoming~~a ~~severely~~$2.7 ~~delinquent~~billion liability for representations and warranties related to its repurchase exposure on private-label securitizations in the year ended December 31, 2011.

(dollars in billions)
	Principal Balance										Principal at Risk
			Outstanding		Outstanding						Borrower						Borrower
	Original		Principal		Principal		Defaulted				Made Less		Borrower		Borrower		Made More
	Principal		Balance		Balance		Principal		Principal		than 13		Made 13 to		Made 25 to		Than 36
Entity	Balance		December 31, 2010		Over 180 Days		Balance		at Risk		Payments		24 Payments		36 Payments		Payments
Merrill Lynch (excluding First Franklin)	$	50	$	19	$	7	$	10	$	17	$	3	$	4	$	3	$	7
First Franklin		83		23		7		19		26		4		6		4		12
Total	$	133	$	42	$	14	$	29	$	43	$	7	$	10	$	7	$	19

There can be no assurance that final court approval of the BNY Mellon Settlement will be obtained, that all conditions to the BNY Mellon Settlement will be satisfied or, if certain conditions to the BNY Mellon Settlement permitting withdrawal are met, that Bank of America and certain of its non-Merrill Lynch subsidiaries will not determine to withdraw from the settlement. If final court approval is not obtained or if Bank of America and such subsidiaries determine to withdraw from the BNY Mellon Settlement in accordance with its terms, although Merrill Lynch is not a party to the proceedings, our future representations and warranties losses could be substantially different than existing accruals and the estimated range of possible losses over existing accruals described above. Under an order entered by the court in connection with the BNY Mellon Settlement, potentially interested persons had the opportunity to give notice of an intent to object to the settlement (including on the basis that more information was needed) until August 30, 2011. Approximately 44 groups or entities appeared prior to the deadline; two of those groups or entities have subsequently withdrawn from the proceeding and one motion to intervene was denied. Certain of these groups or entities filed notices of intent to object, made motions to intervene or both filed notices of intent to object and made motions to intervene.

AsAn ~~presented~~investor inopposed to the ~~table~~settlement ~~below,~~removed ~~during~~ the ~~twelve~~proceeding ~~months~~to ~~ended December 31~~federal court. On October 19, ~~2010~~2011, ~~$68 million~~the offederal ~~repurchase~~court ~~claims were~~denied ~~resolved~~BNY ~~through~~Mellon's ~~repurchase~~motion orto ~~indemnification~~remand ~~payments~~the proceeding to ~~the~~ ~~investor~~state orcourt. BNY ~~securitization~~Mellon, ~~trust~~as ~~for~~well ~~losses~~as the investors that ~~they incurred,~~have ~~compared~~intervened ~~with~~in ~~$72 million~~support ~~for~~of the ~~year~~BNY ~~ended December 31~~Mellon Settlement, ~~2009.~~petitioned ~~During~~to ~~2010~~appeal ~~and~~the ~~2009,~~denial ~~Merrill~~of ~~Lynch~~this ~~paid $59 million~~motion. ~~and~~On ~~$52 million~~November 4, ~~respectively~~2011, tothe ~~resolve these~~district ~~claims,~~court ~~resulting~~entered ina written order setting a ~~loss~~discovery onschedule, ~~the~~and ~~related~~discovery ~~loans~~is atongoing. On December 27, 2011, the ~~time~~ U.S. Court of ~~repurchase~~Appeals orfor ~~reimbursement~~the ofSecond ~~$50 million~~Circuit inaccepted ~~2010~~ the appeal, and ~~$43 million~~stated in ~~2009.~~an ~~The~~amended ~~amount~~scheduling oforder ~~loss~~that, ~~for~~pursuant ~~loan repurchases~~to isstatute, ~~reduced~~it bywould ~~the~~rule ~~fair~~on ~~value~~the ofappeal ~~the~~by ~~underlying~~February ~~loan collateral~~27, 2012.

38 It is not currently possible to predict how many of the parties who have appeared in the court proceeding will ultimately object to the BNY Mellon Settlement, whether the objections will prevent receipt of final court approval or the ultimate outcome of the court approval process, which can include appeals and could take a substantial period of time. In particular, conduct of discovery and the resolution of the objections to the settlement and any appeals could take a substantial period of time and these factors could materially delay the timing of final court approval. Accordingly, it is not possible to predict when the court approval process will be completed.

~~Table~~Outstanding ~~of Contents~~Claims

~~Loan Repurchase~~The table below presents outstanding repurchase claims by counterparty at December 31, 2011 and ~~Indemnification~~December 31, ~~Payments~~ 2010.

(dollars in millions)
	Year Ended						Year Ended
	December 31, 2010						December 31, 2009
	Unpaid						Unpaid
	Principal						Principal
	Balance		Cash Paid		Loss		Balance		Cash Paid		Loss
First Lien
Repurchases	$	11	$	14	$	5	$	12	$	12	$	3
Indemnification Payments		46		33		33		60		40		40
Total First Lien		57		47		38		72		52		43
Home Equity
Indemnification Payments		11		12		12		-		-		-
Total Home equity		11		12		12		-		-		-
Total First Lien and Home Equity	$	68	$	59	$	50	$	72	$	52	$	43

AtTable ~~December 31, 2010, the unpaid principal balance~~ of loans related to outstanding claims was approximately $624 million, including $538 million in repurchase claims that have been reviewed where it is believed a valid defect has not been identified that would constitute an actionable breach of representations and warranties and $87 million in repurchase requests that are in the process of review. The table below presents outstanding claims by counterparty as of December 31, 2010 and December 31, 2009: Contents

Outstanding Claims by Counterparty



Outstanding Claims by Counterparty
(dollars in millions)
	December 31,
	2011		2010
GSEs	$	65	$	59
Monoline	136		48
Others⁽¹⁾	1,101		517
Total	$	1,302	$	624

(dollars in millions)
	2010		2009
GSEs	$	59	$	35
Monoline		48		41
Others(1)		517		651
Total	$	624	$	727


(1)	The majority of these repurchase claims are from whole-loan buyers of subprime loans or trustees of private-label securitization trusts through which First Franklin sold subprime loans.

(Of the $1).3 ~~The~~billion ~~majority~~of outstanding claims as of ~~these~~December ~~repurchase~~31, ~~claims~~2011, ~~are~~we ~~from~~believe ~~whole~~that ~~loan~~for ~~buyers~~$620 onmillion, ~~subprime~~a ~~loans~~valid defect has not been identified which would constitute an actionable breach of representations and warranties. The remaining $682 million of claims are in the process of review.

~~Derivatives~~ In 2011, we received $665 million of new repurchase claims from whole-loan and private-label securitization investors, predominately from private-label securitization trustees received in the fourth quarter of 2011. These claims from private-label securitization trustees are still in the process of being evaluated, although we believe it is likely that some of the claims will meet the required standards. When a claim has been denied and there has not been communication with the counterparty for six months, Merrill Lynch views these claims as inactive; however, they remain in the unresolved claims balance until resolution.

WeAs ~~record~~presented ~~all~~in ~~derivative~~the ~~transactions~~table atbelow, ~~fair~~Merrill ~~value~~Lynch onpaid ~~our Consolidated~~$58 ~~Balance~~million ~~Sheets.~~during Weboth dothe ~~not~~year ~~monitor~~ended ~~our~~December ~~exposure~~31, 2011 and December 31, 2010 to ~~derivatives~~ ~~based~~resolve $62 million and $68 million, respectively, of repurchase claims through repurchase or indemnification payments to investors, resulting in a loss on the ~~notional~~related ~~amount~~loans ~~because~~at ~~that~~the ~~amount~~time ~~is not~~of arepurchase ~~relevant~~or ~~indicator~~indemnification payment of ~~our~~$48 million ~~exposure~~in toboth ~~these~~periods. Cash ~~contracts,~~paid ~~as it~~for isloan ~~generally~~repurchases ~~not~~includes ~~indicative~~the unpaid principal balance of the loan plus past due interest. The amount ~~that~~of weloss ~~would~~for ~~owe on~~loan repurchases is reduced by the ~~contract~~fair value of the underlying loan collateral. ~~Instead,~~The arepurchase ~~risk~~of ~~framework~~loans isand ~~used~~indemnification payments related to ~~define risk~~repurchase ~~tolerances~~claims generally resulted from material breaches of representations and ~~establish~~warranties ~~limits~~related to ~~help~~the toloans' ~~ensure~~material ~~that certain~~compliance ~~risk-related~~with ~~losses~~the ~~occur~~applicable ~~within~~underwriting ~~acceptable~~standards, ~~predefined limits.~~including ~~Since~~borrower ~~derivatives~~misrepresentation, ~~are~~credit ~~recorded~~exceptions onwithout ~~the~~sufficient ~~Consolidated Balance~~compensating ~~Sheets~~factors atand ~~fair~~non-compliance ~~value~~with ~~and~~underwriting procedures, although the ~~disclosure~~actual ofrepresentations ~~the~~and ~~notional amounts~~warranties ismade ~~not~~in a ~~relevant~~sales ~~indicator~~transaction ofand ~~risk,~~the ~~notional~~resulting ~~amounts are~~repurchase ~~not~~and ~~provided~~indemnification ~~for~~activity ~~the~~can ~~off-balance~~vary ~~sheet~~by ~~exposure~~transaction ~~on derivatives~~or investor. ~~Derivatives~~A ~~that~~direct ~~meet~~relationship between the ~~accounting~~type ~~definition~~of defect that causes the breach of a ~~guarantee~~representations and ~~credit~~warranties ~~derivatives~~and ~~are~~the ~~included~~severity inof ~~Note 6 to~~ the ~~Consolidated~~realized ~~Financial~~loss ~~Statements~~has not been observed.

Involvement with VIEs



dollars in millions
	Year Ended December 31,
	2011		2010
Claims resolved ⁽¹⁾	$	62	$	68

Repurchases	12		13
Indemnification payments	46		45
Total	$	58	$	58

We(1) ~~transact~~Represents ~~with~~unpaid ~~VIEs~~principal ~~in a variety of capacities, including those that we help establish as well as those initially established by third parties~~balance. We utilize VIEs in the ordinary course of business to support our own and our customers’ financing and investing needs. Merrill Lynch securitizes loans and debt securities using VIEs as a source of funding and a means of transferring the economic risk of the loans or debt securities to third parties. We also administer, structure or invest in or enter into derivatives with other VIEs, including multi-seller conduits, municipal bond trusts, collateralized debt obligations

39 Liability for Representations and Warranties

~~Table~~The liability for representations and warranties is included in Interest and other payables on the Consolidated Balance Sheets, and the related provision is included in Non-interest expenses on the Consolidated Statements of ~~Contents~~(Loss) Earnings. The methodology used to estimate the liability for representations and warranties is a function of

(“CDOs”) and other entities, as described in more detail below. Our involvement with VIEs can vary and we are required to continuously reassess prior consolidation and disclosure conclusions. Refer to Note 1 to the Consolidated Financial Statements for a discussion of our consolidation accounting policy. Types of VIEs with which we have historically transacted include: 38

•Table ~~Municipal bond securitization VIEs: VIEs that issue medium-term paper, purchase municipal bonds as collateral and purchase a guarantee to enhance the creditworthiness~~ of the collateral. • Asset-backed securities VIEs: VIEs 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. • CDOs: VIEs that issue different classes of debt, from super senior to subordinated, and equity and purchase securities, including asset-backed securities collateralized by residential mortgages, commercial mortgages, auto leases and credit card receivables as well as corporate bonds. • Synthetic CDOs: VIEs 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 VIEs: VIEs 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. • Trust preferred security VIEs: These VIEs 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 VIEs have funds legally available. The debt we issue into the VIE is classified as long-term borrowings on our Consolidated Balance Sheets. The ML & Co. parent guarantees of its own subsidiaries are not required to be recorded in the Consolidated Financial Statements.Contents

~~Contractual Obligations~~ the representations and warranties given and considers a variety of factors, which include, depending on the counterparty, actual defaults, estimated future defaults, historical loss experience, estimated home prices, other economic conditions, estimated probability that a repurchase claim will be received, consideration of whether presentation thresholds will be met, number of payments made by the borrower prior to default and estimated probability that a loan will be required to be repurchased as well as other relevant facts and circumstances, such as bulk settlements and identity of the counterparty or type of counterparty, with whom a sale was made. The estimate of the liability for representations and warranties is based on currently available information, significant judgment and a number of factors, including those set forth above, that are subject to change. Changes to any one of these factors could significantly impact the estimate of the liability and could have a material adverse impact on our results of operations for any particular period.

WeAt ~~have~~December ~~contractual~~31, ~~obligations~~2011 toand ~~make~~December 31, ~~future~~2010, ~~payments~~the ofliability ~~debt, lease~~for representations and ~~other~~warranties ~~agreements~~was $2.8 billion ~~Additionally~~and $213 million, inrespectively. ~~the~~As ~~normal~~noted ~~course of business~~above, wein ~~enter~~the ~~into~~year ~~contractual~~ended ~~arrangements~~December ~~whereby~~31, 2011, we ~~commit~~ torecorded ~~future~~a ~~purchases~~provision offor ~~products~~representations orand ~~services~~warranties ~~from unaffiliated parties. Other obligations include our contractual funding obligations~~ related to our ~~employee~~repurchase ~~benefit~~exposure ~~plans.~~on ~~See Notes 12,~~private-label 14securitizations ~~and~~of ~~15 to the Consolidated Financial Statements~~$2. 7 billion.

~~Funding~~Estimated ~~and Liquidity~~ Range of Possible Loss for Non-GSEs

We ~~fund~~believe ~~our~~it ~~assets~~is ~~primarily~~probable ~~with~~that aadditional ~~mix~~claimants ofin ~~secured~~certain ~~and~~types ~~unsecured liabilities~~of ~~through~~securitizations amay ~~globally~~come ~~coordinated~~forward ~~funding strategy~~ with ~~Bank~~ ofcredible ~~America.~~claims Wethat ~~fund~~meet athe ~~portion~~requirements of ~~our~~the ~~trading~~terms ~~assets~~of ~~with secured liabilities, including repurchase agreements, securities loaned and other short-term secured borrowings, which are less sensitive to our credit ratings due to~~ the ~~underlying collateral~~securitizations. ~~Prior~~As toa ~~Merrill~~result ~~Lynch’s~~of ~~acquisition~~the byBNY ~~Bank~~Mellon ~~of America,~~Settlement ~~ML &~~in ~~Co. was~~ the ~~primary~~second ~~issuer~~quarter of ~~Merrill Lynch’s~~2011, ~~unsecured~~we ~~debt~~determined ~~instruments.~~that ~~Debt~~we ~~instruments~~had ~~were also~~sufficient ~~issued~~experience byto ~~certain~~record ~~subsidiaries.~~a ~~Bank~~liability ofrelated ~~America~~to ~~has~~our ~~not assumed~~exposure oron ~~guaranteed~~certain ~~the long~~private-~~term~~label ~~debt~~securitizations. ~~that~~We ~~was~~believe ~~issued~~that ~~or guaranteed~~with bythe ~~ML &~~additional Co$2.7 billion ornon-GSE ~~its~~representations ~~subsidiaries~~and ~~prior~~warranties ~~to the~~provision ~~acquisition~~recorded ofin ~~Merrill~~the ~~Lynch~~year byended ~~Bank~~December ~~of America. We may~~31, ~~from~~ ~~time to time~~2011, ~~purchase~~we ~~outstanding~~have ~~ML &~~provided ~~Co.~~for ~~debt securities~~a insubstantial ~~various~~portion ~~transactions,~~of ~~depending~~our ~~upon~~non-GSE ~~prevailing market~~representations ~~conditions, liquidity~~ and ~~other~~warranties ~~factors~~exposures.

~~Beginning~~However, ~~late~~it is reasonably possible that future representations and warranties losses may occur in excess of the ~~third~~amounts ~~quarter~~recorded offor ~~2009,~~these inexposures. ~~connection~~In ~~with~~ addition, the ~~update~~BNY orMellon ~~renewal~~Settlement ofdid not provide sufficient experience related to certain ~~Merrill Lynch international~~private-label ~~securities~~securitizations ~~offering~~sponsored ~~programs,~~by ~~Bank~~third-party ofwhole-loan ~~America agreed~~investors. As toit ~~guarantee~~relates ~~debt~~to ~~securities,~~certain ~~warrants and/or certificates~~private-label ~~issued~~securitizations sponsored by third-party whole-loan investors and certain ~~subsidiaries~~whole ofloan ~~ML & Co.~~sales, onit is not possible to determine whether a ~~going~~loss ~~forward~~has ~~basis.~~occurred ~~All~~or ~~existing~~is ~~ML &~~probable ~~Co. guarantees~~and, oftherefore, ~~securities~~no ~~issued~~representations byand ~~those~~warranties ~~same~~liability ~~Merrill~~has ~~Lynch subsidiaries~~ been recorded in connection with these transactions.

40 We currently estimate that the range of possible loss for non-GSE representations and warranties exposure as of December 31, 2011 could be up to $0.5 billion over existing accruals. This estimated range of possible loss for non-GSE representations and warranties does not represent a probable loss, and is based on currently available information, significant judgment, and a number of assumptions, including those set forth below, that are subject to change.

~~Table~~The methodology used to estimate the non-GSE representations and warranties liability and the corresponding range of ~~Contents~~possible loss considers a variety of factors including Merrill Lynch's experience related to actual defaults, projected future defaults, historical loss experience, estimated home prices, other economic conditions and the experience of Merrill Lynch's affiliates. Among the factors that impact the non-GSE representations and warranties liability and the corresponding estimated range of possible loss are: (1) contractual material adverse effect requirements, (2) the representations and warranties provided, and (3) the requirement to meet certain presentation thresholds. The first factor is based on our belief that a non-GSE contractual liability to repurchase a loan generally arises only if the counterparties prove there is a breach of representations and warranties that materially and adversely affects the interest of the investor or all investors, or the monoline insurer (as applicable), in a securitization trust and, accordingly, we believe that the repurchase claimants must prove that the alleged representations and warranties breach was the cause of the loss. The second factor is related to the fact that non-GSE securitizations include different types of representations and warranties than those provided to the GSEs. We believe the non-GSE securitizations' representations and warranties are less rigorous and actionable than the explicit provisions of comparable agreements with the GSEs without regard to any variations that may have arisen as a result of dealings with the GSEs. The third factor is related to the fact that certain presentation thresholds need to be met in order for any repurchase claim to be asserted on the initiative of investors under the non-GSE agreements. A securitization trustee may investigate or demand repurchase on its own action, and most agreements contain a

under various international securities offering programs will remain in full force and effect as long as those securities are outstanding, and Bank of America has not assumed any of those prior ML & Co. guarantees or otherwise guaranteed such securities. There were approximately $4.9 billion of securities guaranteed by Bank of America at December 31, 2010. 39

InTable ~~addition, Bank~~ of America has guaranteed the performance of Merrill Lynch on certain derivative transactions. The aggregate amount of such derivative liabilities was approximately $2.1 billion at December 31, 2010. Contents

~~Following~~threshold, ~~the~~for ~~merger~~example 25% of ~~BAS~~the ~~into~~voting ~~MLPF&S~~rights per trust, ~~Bank~~that allows investors to declare a servicing event of ~~America agreed~~default under certain circumstances or to ~~guarantee~~request ~~the~~certain ~~short-term~~action, ~~senior~~such ~~unsecured~~as ~~obligations issued~~requesting byloan ~~MLPF&S~~files, ~~under~~that ~~its~~the ~~short-term~~trustee ~~master~~may ~~note~~choose ~~program on~~to aaccept ~~going~~and ~~forward~~follow, ~~basis~~exempt from liability, provided the trustee is acting in good faith. ~~This~~If ~~issuance~~there ~~program~~is ~~was~~an ~~previously maintained~~uncured byservicing ~~BAS~~event of default, and the trustee fails to ~~provide~~bring ~~short-term~~suit ~~funding~~during ~~for~~a ~~its broker~~60-~~dealer~~day ~~operations.~~period, ~~At December 31~~then, ~~2010~~under most agreements, $8 investors may file suit.~~8 billion~~ ofIn ~~borrowings~~addition ~~under~~to this, most agreements also allow investors to direct the ~~program~~securitization ~~were outstanding~~trustee ~~and~~to ~~guaranteed~~investigate byloan ~~Bank~~files or demand the repurchase of ~~America~~loans, if security holders hold a specified percentage, for example, 25%, of the voting rights of each tranche of the outstanding securities.

~~Following~~Although ~~the~~we ~~completion~~continue ofto ~~Bank~~believe ofthat ~~America’s~~presentation ~~acquisition of~~thresholds ~~Merrill~~are ~~Lynch, ML & Co. became~~ a ~~subsidiary~~factor ~~of Bank of America and established intercompany lending and borrowing arrangements to facilitate centralized liquidity management. Included~~ in ~~these~~the ~~intercompany~~determination ~~agreements is a $75 billion one-year revolving unsecured line~~ of ~~credit~~probable ~~that~~loss, ~~allows ML &~~given ~~Co. to borrow funds from Bank of America at a spread to~~ the ~~London~~BNY ~~Interbank~~Mellon ~~Offered Rate (“LIBOR”) that is reset periodically and is consistent with other intercompany agreements. This credit line was renewed effective January 1~~Settlement, ~~2011 with a maturity date of January 1, 2012. The credit line will automatically be extended by one year to~~ the ~~succeeding~~estimated ~~January 1st unless~~range ~~Bank~~ of ~~America provides~~possible ~~written~~loss ~~notice~~assumes ~~not~~that ~~to extend at least 45 days prior to~~ the ~~maturity~~presentation ~~date.~~threshold ~~The~~can ~~agreement~~be ~~does~~met ~~not~~for ~~contain~~all ~~any financial~~of ~~or other covenants. There were no outstanding borrowings against~~ the ~~line~~non-GSE ofsecuritization ~~credit at December 31, 2010~~transactions.

In addition, toin the ~~$75 billion~~case ~~unsecured line~~ of ~~credit~~private-label securitizations, ~~a $25 billion 364~~the methodology used to estimate the non-~~day revolving~~GSE ~~unsecured~~representations ~~line~~and warranties liability and the corresponding range of ~~credit~~possible loss considers the experience resulting from the BNY Mellon Settlement and assumes that ~~allows~~the ~~ML & Co.~~conditions to ~~borrow~~the ~~funds~~BNY Mellon Settlement will be satisfied. Since the non-GSE transactions that were included in the BNY Mellon Settlement differ from ~~Bank~~those ofthat ~~America~~were ~~was~~not ~~established~~included ~~on February 15,~~in ~~2011.~~the ~~This~~BNY ~~facility~~Mellon ~~will~~Settlement, ~~provide~~Merrill ~~further support~~Lynch ~~for~~adjusted ~~operating~~the ~~requirements.~~experience ~~Interest~~implied onin the ~~line~~settlement ~~of credit~~in isorder ~~based~~to ondetermine ~~prevailing~~the ~~short~~estimated non-~~term~~GSE ~~market~~representations ~~rates~~and warranties liability and corresponding range of possible loss. The ~~agreement~~ ~~does~~judgmental ~~not~~adjustments ~~contain~~made ~~any~~include ~~financial~~consideration orof ~~other~~the ~~covenants.~~differences ~~The line~~in the mix of ~~credit~~products ~~matures~~in onthe ~~February 14~~securitizations, ~~2012~~loan originator, likelihood of claims differences, the differences in the number of payments that the borrower has made prior to default, and the sponsor of the securitization.

InFuture ~~connection~~provisions ~~with~~and/or ~~the~~ranges ~~merger~~ of ~~BAS~~possible ~~into~~loss ~~MLPF&S,~~for ~~we established~~non-GSE ~~two~~representations ~~unsecured~~and ~~lending~~warranties ~~facilities~~may ~~that~~be ~~allow MLPF&S~~significantly toimpacted ~~borrow~~if ~~funds~~actual ~~from~~experience ~~Bank~~is ofdifferent ~~America~~from our assumptions in ~~order~~our ~~to directly~~predictive ~~provide~~models, ~~funding~~including, ~~for~~without ~~our~~limitation, ~~broker-dealer~~those ~~activities.~~regarding ~~The first~~the ~~lending~~ultimate ~~facility~~resolution of the BNY Mellon Settlement, ~~which~~estimated ~~was~~repurchase ~~established~~rates, ~~on November 1~~economic conditions, ~~2010~~home prices, isconsumer and counterparty behavior, and a ~~$4 billion~~variety of judgmental factors. Adverse developments with respect to one~~-year~~ ~~revolving unsecured~~or ~~line~~more of ~~credit~~the ~~that~~assumptions ~~allows~~underlying ~~MLPF&S~~the liability for representations and warranties and the corresponding estimated range of possible loss could result in significant increases to ~~borrow~~future ~~funds from~~provisions ~~Bank~~and/or this range of ~~America~~possible loss estimate. ~~Interest~~For onexample, if courts were to disagree with our interpretation that the ~~line~~underlying agreements require a claimant to prove that the representations and warranties breach was the cause of ~~credit~~the isloss, ~~based~~it ~~on prevailing~~could ~~short-term~~significantly ~~market~~impact ~~rates~~this estimated range of possible loss. ~~The~~Additionally, ~~credit~~if ~~line~~recent ~~will automatically~~court berulings ~~extended~~related byto monoline litigation, including one ~~year~~related to ~~the~~an ~~succeeding November 1st unless~~affiliate ~~Bank~~of ours, that have allowed sampling of ~~America~~loan ~~provides~~files ~~written notice~~instead ~~not~~of requiring a loan-by-loan review to ~~extend~~determine atif ~~least~~a ~~45 days~~representations ~~prior~~and towarranties breach has occurred are followed generally by the ~~maturity date.~~courts, Atprivate-label ~~December 31~~securitization investors may view litigation as a more attractive alternative as compared to a loan-by-loan review. Finally, ~~2010~~although Merrill Lynch believes that the representations and warranties typically given in non-GSE transactions are less rigorous and actionable than those given in GSE transactions, ~~$1.9 billion~~Merrill ~~was outstanding~~Lynch ondoes not have significant loan-level experience in non-GSE transactions to measure the ~~line~~impact of ~~credit~~these differences on the probability that a loan will be required to be repurchased.

The ~~second~~liability ~~lending~~for ~~facility,~~obligations ~~which~~under ~~was~~representations ~~established~~and onwarranties ~~February 22,~~with ~~2011,~~respect isto aGSE ~~$15 billion 364~~and non-~~day revolving~~GSE ~~unsecured~~exposures ~~line~~and the corresponding estimated range of ~~credit~~possible ~~that~~loss ~~allows~~for ~~MLPF&S~~non-GSE representations and warranties exposures do not include any losses related to ~~borrow~~ ~~funds~~litigation ~~from~~matters ~~Bank~~disclosed ofin ~~America~~Note 14 to the Consolidated Financial Statements, nor do they include any potential securities law or fraud claims or potential indemnity or other claims against us. ~~Interest~~Merrill onLynch is not able to reasonably estimate the ~~line~~amount of ~~credit~~ isany ~~based~~possible onloss ~~prevailing~~with ~~short-term~~respect ~~market~~to ~~rates.~~any ~~The~~such ~~line~~ securities law (except to the extent reflected in the aggregate range of ~~credit~~possible ~~matures~~loss onfor ~~February~~litigation 21and regulatory matters disclosed in Note 14 to the Consolidated Financial Statements), ~~2012~~fraud or other claims against us; however, such loss could be material.

~~Also~~Experience ~~in connection~~ with ~~the~~Non-GSE merger of BAS into MLPF&S, an approximately $1.5 billion subordinated loan agreement with Bank of America was assumed by MLPF&S, which bears interest based on a spread to LIBOR, and has a scheduled maturity date of December 31, 2012. The loan agreement contains a provision that automatically extends the loan’s maturity by one year unless Bank of America provides 13 months written notice not to extend prior to the scheduled maturity date. In addition, MLPF&S has assumed a $7 billion revolving subordinated line of credit with Bank of America. The subordinated line of credit bears interest based on a spread to LIBOR, and has a scheduled maturity date of October 1, 2012. The revolving subordinated line of credit contains a provision that Investors

41 As presented in the table below, Merrill Lynch, including First Franklin, sold loans originated from 2004 to 2008 (primarily subprime and alt-A) with an original principal balance of $132 billion to investors other than the GSEs (although the GSEs are investors in certain private-label securitizations), of which approximately $62 billion in principal has been paid off and $46 billion has defaulted or is severely delinquent (i.e., 180 days or more past due)

~~Table of Contents~~40

~~automatically~~Table ~~extends the maturity by one year unless Bank~~ of ~~America~~ provides 13 months’ written notice not to extend prior to the scheduled maturity date. At December 31, 2010, $1.1 billion was outstanding on the subordinated line of credit. MLPF&S assumed these subordinated borrowings to support regulatory capital requirements. Contents

~~Refer~~at toDecember ~~Note 12~~31, ~~to the Consolidated Financial Statements for additional information regarding our intercompany lending and borrowing arrangements~~2011.

~~Credit Ratings~~ As it relates to private-label securitizations, a contractual liability to repurchase mortgage loans generally arises only if counterparties prove there is a breach of the representations and warranties that materially and adversely affects the interest of the investor or all investors in a securitization trust or of the monoline insurer (as applicable). Merrill Lynch believes that the longer a loan performs, the less likely it is that an alleged representations and warranties breach had a material impact on the loan's performance or that a breach even exists. Because the majority of the borrowers in this population would have made a significant number of payments if they are not yet 180 days or more past due, we believe that the principal balance at the greatest risk for repurchase claims in this population of private-label securitization investors is a combination of loans that have already defaulted and those that are currently severely delinquent. Additionally, the obligation to repurchase loans also requires that counterparties have the contractual right to demand repurchase of the loans (presentation thresholds). Private-label securitization investors generally do not have the contractual right to demand repurchase of loans directly or the right to access loan files.

~~Our~~While ~~credit~~we ~~ratings~~believe ~~affect~~ the ~~cost~~agreements for private-label securitizations generally contain less rigorous representations and ~~availability~~warranties ofand ~~our funding.~~place Inhigher ~~addition,~~burdens ~~credit~~on ~~ratings~~investors ~~may~~seeking berepurchases ~~important~~than ~~to customers~~the orexplicit ~~counterparties~~provisions ~~when~~of wethe ~~compete~~comparable inagreements ~~certain~~with ~~markets and~~the ~~when~~GSEs wewithout ~~seek~~regard to ~~engage~~any invariations ~~certain~~that ~~transactions,~~may ~~including OTC~~have ~~derivatives.~~arisen ~~Thus~~as a result of dealings with the GSEs, itthe isagreements ~~our~~generally ~~objective~~include toa ~~maintain high-quality~~representation ~~credit~~that ~~ratings~~underwriting practices were prudent and customary.

~~Credit~~The ~~ratings~~following table details the population of loans originated between 2004 and ~~outlooks~~2008 ~~are~~and ~~opinions~~the onpopulation anof ~~issuer’s creditworthiness~~loans sold as whole loans or ~~that~~in non-GSE private-label securitizations by entity together with the defaulted and severely delinquent loans stratified by the number of ~~its~~payments ~~obligations~~the borrower made prior to default or ~~securities~~becoming severely delinquent at December 31, ~~including~~ ~~long-term~~2011. ~~debt~~In connection with these transactions, ~~short~~we provided representations and warranties, and the whole loan investors may retain those rights even when the whole loans were aggregated with other collateral into private-~~term~~label ~~borrowings~~securitizations sponsored by the whole loan investors. At least 25 payments have been made on approximately 63% of the defaulted and severely delinquent loans. Merrill Lynch believes many of the defaults observed in these securitizations have been, and continue to be, driven by external factors, such as the substantial depreciation in home prices, persistently high unemployment and other ~~securities~~ negative economic trends, diminishing the likelihood that any loan defect (assuming one exists at all) was the cause of a loan's default. As of December 31, 2011, approximately 35% of the loans sold to non-GSEs that were originated between 2004 and 2008 have defaulted or are severely delinquent.

Following the acquisition of Merrill Lynch by Bank of America, the major credit ratings agencies have indicated that the primary drivers of Merrill Lynch’s credit ratings are Bank of America’s credit ratings. Bank of America’s credit ratings and outlooks are subject to ongoing review by the ratings agencies and thus may change from time to time based on a number of factors, including Bank of America’s financial strength and operations as well as factors not under Bank of America’s control, such as rating-agency-specific criteria or frameworks for the financial services industry or certain security types, which are subject to revision from time to time, and conditions affecting the financial services industry generally. In light of these factors, there can be no assurance that Bank of America will maintain its current ratings.



(dollars in billions)
	Principal Balance										Principal at Risk
Entity	Original Principal Balance		Outstanding Principal Balance December 31, 2011		Outstanding Principal Balance Over 180 Days		Defaulted Principal Balance		Defaulted or Severely Delinquent		Borrower Made Less than 13 Payments		Borrower Made 13 to 24 Payments		Borrower Made 25 to 36 Payments		Borrower Made More Than 36 Payments
Merrill Lynch (excluding First Franklin)	$	50	$	16	$	6	$	12	$	18	$	3	$	4	$	3	$	8
First Franklin	82		21		7		21		28		4		6		5		13
Total⁽¹⁾	$	132	$	37	$	13	$	33	$	46	$	7	$	10	$	8	$	21

During 2009 and 2010, the ratings agencies took numerous actions, many of which were negative, to adjust Bank of America’s and our credit ratings and the outlooks on those ratings. Currently, ML & Co.’s long-term senior debt and outlook expressed by the ratings agencies are as follows: A2 (~~negative~~1) byExcludes ~~Moody’s~~transactions ~~Investors~~sponsored ~~Services, Inc. (“Moody’s”), A (negative)~~ by ~~Standard~~Merrill ~~and Poor’s~~Lynch ~~Ratings~~where ~~Services,~~no arepresentations division of The McGraw-Hill Companies, Inc. (“S&P”), and A+ (Rating Watch Negative) by Fitch, Inc. (“Fitch”). The ratings agencies have indicated that as a systemically important financial institution, Bank of America’s credit ratings currently reflect their expectation that, if necessary, Bank of America would receive significant support from the U.S. Government. All three ratings agencies have indicated, however, that they will reevaluate and could reduce the uplift they include in Bank of America’s ratings for government support for reasons arising from financial services regulatory reform proposals or ~~legislation.~~warranties Inwere ~~February 2010, S&P affirmed our current credit ratings but revised the outlook to negative from stable, based on their belief that it is less certain whether the U~~made.~~S. Government~~ would be willing to provide extraordinary support. In July 2010, Moody’s affirmed our current ratings but revised the outlook to negative from stable due to their expectation for lower levels of government support over time as a result of the passage of the Financial Reform Act. Also, in October 2010, Fitch placed our credit ratings on Rating Watch Negative from stable outlook due to proposed rulemaking that could negatively impact its assessment of future systemic government support. In addition to Bank of America’s credit ratings, other factors that influence our credit ratings (as well as those for Bank of America) include changes to the ratings agencies’ methodologies, the ratings agencies’ assessment of the general operating environment, our relative positions in the markets in which we compete, our reputation, our liquidity position, diversity of funding sources, the level and volatility of our earnings, our corporate governance and risk management policies, our capital position, and future regulatory and legislative initiatives.

APrior ~~reduction~~to in2011, ~~certain~~the majority of ~~our~~the ~~credit~~claims ~~ratings~~that ~~would~~we ~~likely~~received ~~have~~were ~~a material~~from ~~adverse~~third-party ~~effect~~whole-loan oninvestors. In ~~our liquidity~~2011, ~~access~~we toreceived ~~credit markets~~$665 million of new repurchase claims from whole-loan and private-label securitization investors, predominately from private-label securitization trustees received in the ~~related~~fourth ~~cost~~quarter of ~~funds~~2011. In addition, ~~our~~there ~~businesses~~has ~~and~~been ~~on certain~~an ~~trading~~increase ~~revenues,~~ in requests for loan files from private-label securitization trustees. We believe it is likely that these requests will lead to an increase in repurchase claims from private-label securitization trustees that meet the required standards.

42 41

Table of Contents

~~particularly~~Legal in those businesses where counterparty creditworthiness is critical. In connection with certain OTC derivatives contracts and other trading agreements, counterparties may require us to provide additional collateral or to terminate these contracts, agreements and collateral financing arrangements in the event of a credit ratings downgrade of Bank of America (and consequently, ML & Co.). Termination of these contracts and agreements could cause us to sustain losses and impair our liquidity because we would be required to make significant cash payments or pledge securities as collateral. If Bank of America Corporation’s or Bank of America, N.A.’s commercial paper or short-term credit ratings (which currently have the following ratings: P-1 by Moody’s, A-1 by S&P and F1+ by Fitch) were downgraded by one or more levels, the potential loss of short-term funding sources such as repurchase agreement financing and the effect on our incremental cost of funds would be material. The amount of additional collateral required depends on the contract and is usually a fixed incremental amount and/or an amount related to the market value of the exposure. At December 31, 2010, the amount of additional collateral and termination payments that would be required for such derivatives transactions and trading agreements was approximately $0.8 billion in the event of a downgrade to low single-A by all credit agencies. A further downgrade of ML & Co.’s long-term senior debt credit rating to the BBB+ or equivalent level would require approximately $0.7 billion of additional collateral. Our liquidity risk analysis considers the impact of additional collateral outflows due to changes in ML & Co. credit ratings, as well as for collateral that is owed by us and is available for payment, but has not been called for by our counterparties. Matters

43 Merrill Lynch has been named as a defendant in various legal actions, including arbitrations, class actions, and other litigation arising in connection with its activities as a global diversified financial services institution. Refer to Note 14 to the Consolidated Financial Statements for further information, including the estimated aggregate range of possible loss.

~~Table of Contents~~Derivatives

~~Item~~We 7Arecord all derivative transactions at fair value on our Consolidated Balance Sheets. ~~Quantitative~~We do not monitor our exposure to derivatives based on the notional amount because that amount is not a relevant indicator of our risk to these contracts, as it is generally not indicative of the amount that we would owe on the contract. Instead, a risk framework is used to define risk tolerances and ~~Qualitative~~establish ~~Disclosures~~limits ~~About~~to ~~Market~~help ~~Risk~~to ensure that certain risk-related losses occur within acceptable, predefined limits. Derivatives that meet the accounting definition of a guarantee and credit derivatives are included in Note 6 to the Consolidated Financial Statements.

~~Market Risk~~Involvement ~~Management~~ with VIEs

We transact with VIEs in a variety of capacities, including those that we help establish as well as those initially established by third parties. We utilize VIEs in the ordinary course of business to support our own and our customers' financing and investing needs. Merrill Lynch ~~defines~~securitizes ~~market~~loans ~~risk~~and debt securities using VIEs as ~~the~~a ~~potential~~source ~~change~~of ~~in value~~funding and a means of ~~financial~~transferring ~~instruments~~the ~~caused~~economic byrisk ~~fluctuations~~of the loans or debt securities to third parties. We also administer, structure or invest in ~~interest~~ ~~rates~~or enter into derivatives with other VIEs, ~~exchange~~including ~~rates~~multi-seller conduits, ~~equity~~municipal bond trusts, collateralized debt obligations ("CDOs") and ~~commodity~~other ~~prices~~entities, ~~credit~~ ~~spreads,~~as described in more detail below. Our involvement with VIEs can vary and ~~related~~we ~~risks~~are required to continuously reassess prior consolidation and disclosure conclusions. Refer to Note 1 to the Consolidated Financial Statements for a discussion of our consolidation accounting policy and for information regarding new VIE accounting rules that became effective on January 1, 2010. Types of VIEs with which we have historically transacted include:

~~Control~~ • Municipal bond securitization VIEs: VIEs that issue medium-term paper, purchase municipal bonds as collateral and ~~Governance~~purchase ~~Structure~~ a guarantee to enhance the creditworthiness of the collateral.

On• ~~January 1,~~Asset-backed ~~2009,~~securities ~~pursuant~~VIEs: toVIEs ~~the~~that ~~acquisition~~issue ofdifferent ~~Merrill Lynch~~classes ~~by Bank~~ of ~~America~~debt, ~~Merrill~~from ~~Lynch~~super ~~adopted~~senior ~~Bank~~to ~~of America’s~~subordinated, ~~risk management~~ and ~~governance~~equity ~~practices to maintain consistent risk measurement~~ and ~~disciplined~~purchase ~~risk taking.~~assets ~~Bank~~as ofcollateral, ~~America’s~~including ~~risk~~residential ~~management~~mortgages, ~~structure~~commercial ~~as applicable~~mortgages, toauto ~~Merrill~~leases ~~Lynch~~and iscredit ~~described~~card ~~below~~receivables.

~~Bank~~• ofCDOs: ~~America’s~~VIEs ~~Global~~that ~~Markets~~issue ~~Risk~~different ~~Committee (“GRC”),~~classes ~~chaired by Bank~~ of ~~America’s Global Markets Risk Executive~~debt, ~~has~~from ~~been~~super ~~designated~~senior byto ~~its~~subordinated, ~~Asset~~ and ~~Liability~~ ~~Market~~equity ~~Risk~~and ~~Committee~~purchase ~~(“ALMRC”) as the primary governance authority for Global Markets Risk Management~~securities, including ~~trading risk management. The GRC’s focus is to take a forward~~asset-~~looking~~backed ~~view~~securities ofcollateralized ~~the~~by ~~primary~~residential ~~credit~~mortgages, ~~and~~commercial ~~market risks~~mortgages, ~~impacting~~auto ~~Bank~~leases ~~of America’s Global Banking~~ and ~~Markets~~ ~~business~~credit ~~(which~~card ~~includes~~receivables ~~Merrill~~as ~~Lynch’s~~well ~~sales~~as ~~and trading~~corporate ~~businesses) and prioritize those that need a proactive risk mitigation strategy~~bonds. ~~Market risks that impact lines of business outside of the Global Banking and Markets business are monitored and governed by their respective governance authorities.~~

~~The~~• ~~GRC~~Synthetic ~~monitors~~CDOs: ~~significant~~VIEs ~~daily~~that ~~revenues~~issue ~~and~~different ~~losses~~classes ~~by business and the primary drivers~~ of ~~the~~debt, ~~revenues~~from orsuper ~~losses. Thresholds~~senior ~~are in place for each business in order~~ to ~~determine if~~subordinated, ~~the~~and ~~revenue~~equity, orpurchase ~~loss~~high-grade isassets ~~considered~~as tocollateral beand ~~significant~~enter ~~for~~into ~~that business.~~a Ifportfolio ~~any~~ of ~~the~~credit ~~thresholds~~default ~~are~~swaps ~~exceeded, an explanation of the variance is provided~~ to ~~the~~synthetically ~~GRC.~~create ~~The thresholds are developed in coordination with~~ the ~~respective~~credit risk ~~managers~~of ~~to highlight~~the ~~those~~issued ~~revenues or losses that exceed what is considered to be normal daily income statement volatility~~debt.

~~Value~~• Credit-atlinked note VIEs: VIEs that issue notes linked to the credit risk of a company, purchase high-~~Risk (“VaR”)~~ grade assets as collateral and enter into credit default swaps to synthetically create the credit risk to pay the return on the notes.

As• ~~part~~Trust ofpreferred ~~Bank~~security ofVIEs: ~~America’s~~These ~~risk~~VIEs ~~management~~hold ~~practices, risk~~junior insubordinated debt issued by ML & Co. or our ~~trading~~subsidiaries, ~~activities~~and isissue ~~evaluated~~preferred bystock ~~focusing~~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 ~~actual~~ distributions and ~~potential~~other ~~volatility~~payments ofon ~~individual~~the ~~positions~~preferred asstock ~~well~~ to the extent that the VIEs have funds legally available. The debt we issue into the VIE is classified as ~~portfolios~~long-term borrowings on our Consolidated Balance Sheets. The ML & Co. parent guarantees of its own subsidiaries are not required to be recorded in the Consolidated Financial Statements.

VaR is a statistic used to measure market risk. A VaR model simulates the value of a portfolio under a range of hypothetical scenarios in order to generate a distribution of potential gains and losses. VaR represents the worst loss the portfolio is expected to experience based on historical trends with a given level of confidence and depends on the volatility of the positions in the portfolio and on how strongly their risks are correlated. Within any VaR model, there are significant and numerous assumptions that will differ from company to company. In addition, the accuracy of a VaR model depends on the availability and quality of historical data for each of the positions in the portfolio. A VaR model may require additional modeling assumptions for new products that do not have extensive historical price data or for illiquid positions for which accurate daily prices are not consistently available. 42

ATable ~~VaR model is an effective tool in estimating ranges~~ of ~~potential~~ gains and losses on our trading portfolios. There are however many limitations inherent in a VaR model as it utilizes historical results over a defined time period to estimate future performance. Historical results may not always be indicative of future results and changes in market conditions or in the composition of the underlying portfolio could have a material impact on the accuracy of the VaR model. To ensure that the VaR model reflects current market conditions, we update the historical data underlying our VaR model on a bi-weekly basis and regularly review the assumptions underlying the model. Contents

WeContractual continually review, evaluate and enhance our VaR model to ensure that it reflects the material risks in our trading portfolio. Nevertheless, due to the limitations mentioned above, we have historically used the VaR model as only one of the components in managing our trading risk and also use other techniques such as stress testing and desk level limits. Periods of extreme market stress influence the reliability of these techniques to various degrees. Obligations

44 We have contractual obligations to make future payments of debt, lease and other agreements. Additionally, in the normal course of business, we enter into contractual arrangements whereby we commit to future purchases of products or services from unaffiliated parties. Other obligations include our contractual funding obligations related to our employee benefit plans. See Notes 12, 14 and 15 to the Consolidated Financial Statements.

~~Table~~FUNDING ofAND ~~Contents~~LIQUIDITY

The accompanying table presents year-end, average, high and low daily trading VaR for the year ended December 31, 2010, as well as a comparison to the year-end VaR as of December 31, 2009. On November 1, 2010, BAS, a broker-dealer subsidiary of Bank of America, merged into MLPF&S, one of ML & Co.’s broker-dealer subsidiaries, with MLPF&S as the surviving corporation. The VaR statistics in the table below have been computed as if the merger had occurred on January 1, 2009. Funding

~~2010 Trading~~We ~~Activities~~fund ~~Market~~our ~~Risk~~assets ~~VaR~~ primarily with a mix of secured and unsecured liabilities through a globally coordinated funding strategy with Bank of America. We fund a portion of our trading assets with secured liabilities, including repurchase agreements, securities loaned and other short-term secured borrowings, which are less sensitive to our credit ratings due to the underlying collateral. Refer to Note 12 to the Consolidated Financial Statements for additional information regarding our borrowings.

(dollars in millions)
				2010
	2010			Quarterly			2010		2010		2009
	Year End			Average(3)			High		Low		Year End
Trading value-at-risk(1)
Foreign exchange	$	18		$	17		$	36	$	7	$	36
Interest rate		37			48			58		37		47
Credit		128			180			244		128		244
Real estate/mortgage		69			75			94		65		65
Commodities		19			19			23		16		20
Equities		30			37			58		23		58
Subtotal(2)		301			376							470
Diversification benefit		(127	)		(160	)						(191	)
Overall	$	174		$	216						$	279

Beginning late in the third quarter of 2009, in connection with the update or renewal of certain Merrill Lynch international securities offering programs, Bank of America agreed to guarantee debt securities, warrants and/or certificates issued by certain subsidiaries of ML & Co. on a going forward basis. All existing ML & Co. guarantees of securities issued by those same Merrill Lynch subsidiaries under various international securities offering programs will remain in full force and effect as long as those securities are outstanding, and Bank of America has not assumed any of those prior ML & Co. guarantees or otherwise guaranteed such securities. There were approximately $5.2 billion of securities guaranteed by Bank of America at December 31, 2011. In addition, Bank of America has guaranteed the performance of Merrill Lynch on certain derivative transactions. The aggregate amount of such derivative liabilities was approximately $0.6 billion at December 31, 2011.

(1)		Based on a 99% confidence level and a one-day holding period.
(2)		Subtotals are not provided for highs and lows as they are not meaningful.
(3)		Amounts represent the average of the quarter-end VaR results for 2010.

Following the completion of Bank of America's acquisition of Merrill Lynch, ML & Co. became a subsidiary of Bank of America and established intercompany lending and borrowing arrangements to facilitate centralized liquidity management. Included in these intercompany agreements is a $75 billion one-year revolving unsecured line of credit that allows ML & Co. to borrow funds from Bank of America at a spread to the London Interbank Offered Rate ("LIBOR") that is reset periodically and is consistent with other intercompany agreements. This credit line was renewed effective January 1, 2012 with a maturity date of January 1, 2013. The credit line will automatically be extended by one year to the succeeding January 1st unless Bank of America provides written notice not to extend at least 45 days prior to the maturity date. The agreement does not contain any financial or other covenants. There were no outstanding borrowings against the line of credit at December 31, 2011.

~~The~~In ~~decrease~~addition into ~~VaR~~the ~~during~~$75 billion ~~2010~~unsecured ~~resulted~~line of credit, a $25 billion 364-day revolving unsecured line of credit that allows ML & Co. to borrow funds from ~~reduced~~Bank ~~exposures in~~of ~~several~~America ~~businesses~~was established on February 15, 2011. Interest on the line of credit is based on prevailing short-term market rates. The agreement does not contain any financial or other covenants. The line of credit matures on February 12, 2013. There were no outstanding borrowings against the line of credit at December 31, 2011.

~~Credit Risk~~Following ~~Management~~ the merger of BAS into MLPF&S, Bank of America agreed to guarantee the short-term, senior unsecured obligations issued by MLPF&S under its short-term master note program on a going forward basis. During 2011, Merrill Lynch decided to reduce short-term unsecured obligations. At December 31, 2011, there were no longer any borrowings outstanding under this program.

~~Counterparty Credit~~Also ~~Risk~~ in connection with the merger of BAS into MLPF&S, MLPF&S either assumed or established the following agreements:

~~Credit~~• ~~risk~~MLPF&S isassumed ~~the risk of loss arising from the inability or unwillingness of a borrower or counterparty to meet its obligations. Credit risk can also arise from operational failures that result in~~ an ~~erroneous~~approximately ~~advance, commitment or investment of funds~~$1.5 ~~Merrill~~billion ~~Lynch~~subordinated defines the credit exposure to a borrower or counterparty as the loss potential arising from all product classifications including loans, derivatives, assets held-for-sale and unfunded lending commitments that include loan ~~commitments, letters~~agreement ofwith ~~credit~~Bank ~~and financial guarantees. Derivative positions are recorded at fair value and assets held-for-sale are recorded at the lower~~ of cost or fair value. Certain loans and unfunded commitments are accounted for under the fair value option election. Credit risk for these categories of assets is not accounted for as part of the allowance for credit losses but as part of the fair value adjustments recorded in earnings in the period incurred. For derivative positionsAmerica, ~~our~~which ~~credit~~bears ~~risk is~~interest ~~measured~~based ason ~~the net replacement cost in the event the counterparties with contracts in~~ a ~~gain~~spread ~~position~~ to usLIBOR, ~~fail~~and ~~to perform~~has ~~under~~a ~~the~~scheduled ~~terms~~maturity ofdate those contracts. We use the current mark-to-market value to represent credit exposure without considering future mark-to-market changes. The credit risk amounts take into consideration the effects of ~~legally~~December ~~enforceable~~31, ~~master netting agreements and cash collateral~~2013. ~~Our consumer and commercial credit extension and review procedures take into account funded and unfunded credit exposures.~~ The

We manage credit risk based on the risk profile of the borrower or counterparty, repayment sources, the nature of underlying collateral, and other support given current events, conditions and expectations. Merrill Lynch mitigates its credit risk to counterparties through a variety of techniques, including, where appropriate, the right to require initial collateral or margin, the right to terminate transactions or to obtain collateral should unfavorable events occur, the right to call for collateral when certain exposure thresholds are exceeded, the right to call for third party guarantees, and the purchase of credit default protection. 43

45 Table of Contents

~~Table~~loan agreement contains a provision that automatically extends the loan's maturity by one year unless Bank of ~~Contents~~America provides 13 months written notice not to extend prior to the scheduled maturity date.

~~Credit~~• ~~risk~~MLPF&S ~~management~~assumed ~~for~~a ~~the~~$7 ~~commercial~~billion ~~portfolio~~revolving ~~begins~~subordinated ~~with an~~line ~~assessment~~ of ~~the~~ credit ~~risk~~with ~~profile~~Bank of ~~the~~America. ~~borrower~~The ~~or counterparty~~subordinated ~~based~~line ~~on an analysis~~ of ~~its financial position. As part of the overall~~ credit ~~risk~~bears ~~assessment,~~interest ~~our commercial credit exposures are assigned a risk rating and are subject to approval~~ based on ~~defined~~a ~~credit~~spread ~~approval standards. Subsequent~~ to ~~loan origination~~LIBOR, ~~risk ratings are monitored on an ongoing basis,~~ and ifhas ~~necessary,~~a ~~adjusted~~scheduled tomaturity ~~reflect~~date ~~changes~~of inOctober ~~the financial condition~~1, ~~cash~~2013. ~~flow,~~The ~~risk~~revolving ~~profile~~subordinated orline ~~outlook~~ of ~~a borrower or counterparty. In making~~ credit ~~decisions,~~contains ~~we consider~~a ~~risk~~provision ~~rating,~~that ~~collateral,~~automatically ~~country,~~extends ~~industry and single name concentration limits while also balancing~~ the ~~total borrower~~maturity orby ~~counterparty~~one ~~relationship.~~year ~~Our~~unless ~~lines~~Bank of ~~business~~America ~~and risk~~provides ~~management~~13 ~~personnel~~months ~~use~~written anotice ~~variety~~not ~~of tools~~ to ~~continuously monitor~~extend ~~the~~prior ~~ability of a borrower or counterparty~~ to ~~perform under~~the ~~its~~scheduled ~~obligations~~maturity date. WeAt ~~use~~December ~~risk~~31, ~~rating~~2011, ~~aggregations to measure and evaluate concentrations within portfolios~~$1.1 ~~In addition,~~billion ~~risk~~was ~~ratings~~outstanding ~~are~~on ~~a factor in determining~~ the ~~level~~subordinated line of ~~assigned~~ ~~economic capital and the allowance for~~ credit ~~losses~~.

~~Commercial~~• ~~credit~~On ~~risk~~November is1, ~~evaluated~~2010, ~~and~~a ~~managed~~$4 ~~with~~billion ~~the~~one-year ~~goal that~~revolving ~~concentrations~~unsecured line of credit ~~exposure~~that doallows ~~not~~MLPF&S ~~result~~to ~~in undesirable~~borrow ~~levels~~funds from Bank of ~~risk.~~America Wewas ~~review,~~established. ~~measure~~Interest ~~and~~on ~~manage concentrations~~the line of credit ~~exposure~~is bybased ~~industry,~~on ~~product, geography,~~prevailing ~~customer~~short-term ~~relationship~~market ~~and~~rates. ~~loan~~The ~~size.~~credit Weline ~~also~~will ~~review~~mature on November 1, ~~measure~~ 2012 and ~~manage~~may ~~commercial~~automatically ~~real~~be ~~estate~~extended ~~loans~~ by ~~geographic location~~one ~~and~~year ~~property~~to ~~type.~~the Insucceeding ~~addition,~~November ~~within~~1st ~~our international~~unless ~~portfolio,~~Bank weof ~~evaluate~~America ~~exposures~~provides bywritten ~~region~~notice ~~and~~not ~~by country.~~to Weextend ~~also~~at ~~utilize~~least ~~syndication~~45 ofdays ~~exposure~~prior to ~~third parties,~~the ~~loan~~maturity ~~sales,~~date. ~~hedging~~At ~~and~~December ~~other~~31, ~~risk~~2011, ~~mitigation techniques~~there towere ~~manage~~no ~~the~~borrowings ~~size~~outstanding ~~and~~on ~~risk~~the ~~profile~~line of ~~the commercial~~ credit ~~portfolio~~.

We• ~~account~~On ~~for~~February ~~certain~~22, ~~large~~2011, ~~corporate~~a ~~loans~~$15 ~~and~~billion ~~loan commitments~~364-day ~~(including~~revolving ~~issued~~unsecured ~~but~~line ~~unfunded letters~~ of credit ~~which~~ ~~are considered utilized for credit risk management purposes)~~ that ~~exceed~~allows ~~our~~MLPF&S ~~single~~to ~~name~~borrow ~~credit~~funds ~~risk~~from ~~concentration guidelines~~Bank ~~under~~of ~~the~~America ~~fair~~was ~~value option~~established. ~~Lending~~Interest ~~commitments, both~~on ~~funded and unfunded, are actively managed and monitored, and as appropriate, credit risk for these lending relationships may be mitigated through~~ the ~~use~~line of credit ~~derivatives,~~is ~~with~~based ~~our credit~~on ~~view~~prevailing ~~and~~short-term market ~~perspectives~~rates. ~~determining~~The ~~the~~line ~~size and timing~~ of ~~the~~credit ~~hedging~~matures ~~activity.~~on InFebruary ~~addition~~19, ~~credit protection is purchased to cover the funded portion as well as the unfunded portion of certain other credit exposures~~2013. ToAt ~~lessen~~December ~~the cost of obtaining our desired credit protection levels~~31, ~~credit exposure may be added within an industry~~2011, ~~borrower~~approximately ~~or counterparty group by selling protection~~$1.5 ~~These~~billion ~~credit~~was ~~derivatives~~outstanding doon ~~not meet~~ the ~~requirements~~ ~~for~~line ~~treatment~~of ~~as accounting hedges~~credit. ~~They are carried at fair value with changes in fair value recorded in earnings.~~

InBank ~~the normal course~~ of ~~business,~~America and Merrill Lynch ~~executes, settles,~~have entered into certain intercompany lending and ~~finances~~borrowing ~~various~~arrangements ~~customer~~to ~~securities~~facilitate ~~transactions~~centralized liquidity management. ~~Execution~~ ofIncluded in these ~~transactions~~arrangements ~~includes~~is ~~the~~a ~~purchase~~$50 billion ~~and~~extendible ~~sale of~~one-year ~~securities~~revolving bycredit ~~Merrill~~facility ~~Lynch.~~that ~~These~~allows ~~activities~~Bank ~~may~~of ~~expose~~ America to borrow funds from Merrill Lynch toat ~~default~~a ~~risk~~spread ~~arising~~to ~~from~~LIBOR ~~the~~that ~~potential~~is ~~that customers~~reset orperiodically ~~counterparties~~and ~~may~~is ~~fail~~consistent towith ~~satisfy~~other ~~their obligations~~intercompany agreements. InThe ~~these~~credit ~~situations~~facility matures on January 1, ~~Merrill~~2013 ~~Lynch~~and ~~may~~will automatically be ~~required~~ extended by one year to ~~purchase~~the orsucceeding ~~sell~~January 1st unless ~~financial~~Merrill ~~instruments~~Lynch atprovides ~~unfavorable~~written ~~market prices~~notice not to ~~satisfy~~extend ~~obligations~~at least 45 days prior to ~~other~~the ~~customers~~maturity ~~or counterparties~~date. There were no amounts outstanding at December 31, 2011 and approximately $6.1 billion outstanding at December 31, 2010 under this credit facility. In addition, in October 2011, Merrill Lynch ~~seeks~~entered into a short-term revolving credit facility that will allow Bank of America to ~~control~~borrow up to an additional $25 billion. Interest on borrowings under the ~~risks~~ ~~associated~~credit ~~with~~facility ~~its~~is ~~customer~~based ~~margin~~on ~~activities~~prevailing ~~by requiring~~short-term ~~customers~~market torates. ~~maintain~~At ~~collateral~~December in31, ~~compliance~~2011, ~~with regulatory~~approximately ~~and~~$3.7 ~~internal~~billion ~~guidelines~~was outstanding under this credit facility.

Credit risk management for the consumer portfolio begins with initial underwriting and continues throughout a borrower’s credit cycle. Statistical techniques in conjunction with experiential judgment are used in all aspects of portfolio management including underwriting, product pricing, risk appetite, setting credit limits, operating processes and metrics to quantify and balance risks and returns. Statistical models are built using detailed behavioral information from external sources such as credit bureaus and/or internal historical experience. These models are a component of our consumer credit risk management process and are used, in part, to help determine both new and existing credit decisions, portfolio management strategies including authorizations and line management, collection practices and strategies, determination of the allowance for loan and lease losses, and economic capital allocations for credit risk. Ratings

46 Our borrowing costs and ability to raise funds are directly impacted by our credit ratings. In addition, credit ratings may be important to customers or counterparties when we compete in certain markets and when we seek to engage in certain transactions, including OTC derivatives. Thus, it is our objective to maintain high-quality credit ratings.

~~Table~~Credit ratings and outlooks are opinions on our creditworthiness and that of ~~Contents~~our obligations or securities, including long-term debt, short-term borrowings and other securities, including asset securitizations. Following the acquisition of Merrill Lynch by Bank of America, the primary credit rating agencies have indicated that the major drivers of Merrill Lynch's credit ratings are Bank of America's credit ratings. Bank of America's credit ratings are subject to ongoing review by the rating agencies, which consider a number of factors, including Bank of America's financial strength, performance, prospects and operations as well as factors not under Bank of America's control.

~~Derivatives~~ Other factors that influence Bank of America's and our credit ratings include changes to the rating agencies' methodologies for our industry or certain security types, the rating agencies' assessment of the general operating environment for financial services companies, our mortgage exposures, our relative positions in the markets in which we compete, reputation, liquidity position, diversity of funding sources, funding costs, the level and volatility of earnings, corporate governance and risk management policies, capital position, capital management practices and current or future regulatory and legislative initiatives.

We enter into International Swaps and Derivatives Association, Inc. (“ISDA”) master agreements or their equivalent (“master netting agreements”) with almost all of our derivative counterparties. Master netting agreements provide protection in bankruptcy in certain circumstances and, in some cases, enable receivables and payables with the same counterparty to be offset for risk management purposes. Netting agreements are generally negotiated bilaterally and can require complex terms. While we make reasonable efforts to execute such agreements, it is possible that a counterparty may be unwilling to sign such an agreement and, as a result, would subject us to additional credit risk. The enforceability of master netting agreements under bankruptcy laws in certain countries or in certain industries is not free from doubt, and receivables and payables with counterparties in these countries or industries are accordingly recorded on a gross basis. 44

ToTable ~~reduce the risk~~ of loss, we require collateral, principally cash and U.S. Government and agency securities, on certain derivative transactions. From an economic standpoint, we evaluate risk exposures net of related collateral that meets specified standards. In addition to obtaining collateral, we attempt to mitigate counterparty default risk on derivatives whenever possible by entering into transactions with provisions that enable us to terminate or reset the terms of our derivative contracts. Contents

47 Each of the three primary rating agencies, Moody's, S&P and Fitch, downgraded Bank of America's and ML & Co.'s ratings in late 2011. They have each also indicated that, as a systemically important financial institution, Bank of America's (and consequently ML & Co.'s) credit ratings currently reflect their expectation that, if necessary, Bank of America would receive significant support from the U.S. government. They have indicated that they will continue to assess this view of support as financial services regulations and legislation evolve. On December 15, 2011, Fitch downgraded Bank of America's and ML & Co.'s long-term and short-term debt ratings as a result of Fitch's decision to lower its "support floor" for systemically important U.S. financial institutions. This downgrade resolves the Rating Watch Negative that Fitch placed on Bank of America's and ML & Co.'s ratings on October 22, 2010. On November 29, 2011, S&P downgraded Bank of America's and ML & Co.'s long-term and short-term debt ratings as a result of S&P's implementation of revised methodologies for determining Banking Industry Country Risk Assessments and bank ratings. On September 21, 2011, Moody's downgraded Bank of America's and ML & Co.'s long-term and short-term debt ratings as a result of Moody's lowering the amount of uplift for potential U.S. government support it incorporates into ratings. On February 15, 2012, Moody's placed Bank of America's long-term debt ratings on review for possible downgrade as part of their review of financial institutions with global capital markets operations. Any adjustment to Bank of America's (and consequently, our) ratings will be determined based on Moody's review; however, the agency offered guidance that downgrades to Bank of America's ratings, if any, would likely be limited to one notch. The rating agencies could make further adjustments to Bank of America's (and consequently, our) ratings at any time and provide no assurances that they will maintain our ratings at current levels.

~~Table~~Currently, Bank of ~~Contents~~America's and ML & Co.'s long-term/short-term senior debt ratings and outlooks expressed by the rating agencies are as follows: Baa1/P-2 (negative) by Moody's; A-/A-2 (negative) by S&P; and A/F1 (stable) by Fitch. MLPF&S's long-term/short-term senior debt ratings and outlooks are A/A-1 (negative) by S&P and A/F1 (stable) by Fitch. Merrill Lynch International, a U.K.-based registered investment firm and subsidiary of ML & Co., has a long-term/short-term senior debt rating and outlook of A/A-1 (negative) by S&P. Merrill Lynch International Bank Limited, an Ireland-based bank subsidiary of ML & Co., has a long-term/short-term senior debt rating and outlook of A/F1 (stable) by Fitch.

~~Item~~A 8further reduction in certain of our credit ratings may have a material adverse effect on our liquidity, access to credit markets, the related cost of funds, our businesses and on certain trading revenues, particularly in those businesses where counterparty creditworthiness is critical. ~~Financial~~In ~~Statements~~addition, under the terms of certain OTC derivative contracts and ~~Supplementary~~other ~~Data~~trading agreements, the counterparties to those agreements may require us to provide additional collateral, or to terminate these contracts or agreements, which could cause us to sustain losses and/or adversely impact our liquidity. If Bank of America's or ML & Co's short-term credit ratings, or those of our bank or broker-dealer subsidiaries, were downgraded by one or more levels, the potential loss of access to short-term funding sources such as repurchase agreement financing, and the effect on our incremental cost of funds and earnings could be material.

~~REPORT~~At ~~OF INDEPENDENT~~December ~~REGISTERED~~31, ~~PUBLIC~~2011, ~~ACCOUNTING~~if ~~FIRM~~ the rating agencies had downgraded their long-term senior debt ratings for ML & Co. or certain subsidiaries by one incremental notch, the amount of additional collateral contractually required by derivative contracts and other trading agreements would have been approximately $0.4 billion. If the rating agencies had downgraded their long-term senior debt ratings for ML & Co. or certain subsidiaries by a second incremental notch, approximately $0.3 billion in additional collateral would have been required.

ToAlso, if the ~~Board~~rating agencies had downgraded their long-term senior debt ratings for ML & Co. or certain subsidiaries by one incremental notch, the derivative liability that would be subject to unilateral termination by counterparties as of ~~Directors~~December ~~and~~31, ~~Stockholder~~2011 was $0.5 billion, against which $0.3 billion of ~~Merrill~~collateral ~~Lynch~~had ~~and~~ been posted. Further, if the rating agencies had downgraded their long-term debt ratings for ML & Co. or certain subsidiaries by a second incremental notch, ~~Inc~~the derivative liability that would be subject to unilateral termination by the counterparties as of December 31, 2011 was an incremental $3.: 5 billion, against which $3.4 billion of collateral had been posted.

InWhile ~~our~~certain ~~opinion,~~potential ~~the~~impacts ~~accompanying~~are ~~consolidated~~contractual ~~balance sheets as of December 31, 2010~~ and ~~December 31~~quantifiable, ~~2009 and~~ the ~~related~~ ~~consolidated~~full ~~statements~~consequences of ~~earnings/(loss),~~a ofcredit ~~changes in~~ratings ~~stockholders’~~downgrade equity, of comprehensive income/(loss), and of cash flows for each of the two years in the period ended December 31, 2010 and the consolidated statements of earnings/(loss) and of comprehensive income/(loss) for the period from December 27, 2008 to ~~December 31,~~a ~~2008 present fairly, in all material respects, the~~ financial ~~position of~~institution ~~Merrill~~are ~~Lynch &~~inherently ~~Co.~~uncertain, Inc. and its subsidiaries (“the Company”) at December 31, 2010 and December 31, 2009, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2010 and the results of their operations for the period from December 27, 2008 to December 31, 2008, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as ~~of December 31,~~they ~~2010,~~depend ~~based~~upon onnumerous criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statementsdynamic, ~~for~~complex ~~maintaining effective internal control over financial reporting~~ and for its assessment of the effectiveness of internal control over financial reporting, included in the Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. inter-

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. 45

~~Because~~Table of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Contents

/related factors and assumptions, including whether any downgrade of a firm's/ ~~PricewaterhouseCoopers~~long-term ~~LLP~~ credit ratings precipitates downgrades to its short-term credit ratings, and assumptions about the potential behaviors of various customers, investors and counterparties.

~~New~~During ~~York~~the third quarter of 2011, ~~New~~Moody's ~~York~~ and S&P placed the sovereign rating of the U.S. on review for possibility of a default on the government's debt obligations because of a failure to increase the debt limit. On August 2, 2011, Moody's affirmed its Aaa rating and revised its outlook to negative. On August 5, 2011, S&P downgraded the long-term sovereign credit rating of the U.S. to AA+, and affirmed the short-term sovereign credit rating; the outlook is negative. On November 28, 2011, Fitch affirmed its AAA long-term rating of the U.S., but changed the outlook from stable to negative. On the same day, Fitch affirmed its F1+ short-term rating of the U.S. All three rating agencies have indicated that they will continue to assess fiscal projections and consolidation measures, as well as the medium-term economic outlook for the U.S.

~~February 28, 2011~~ 46

48 Table of Contents

~~Table~~Item of7A. ~~Contents~~Quantitative and Qualitative Disclosures About Market Risk

~~REPORT~~Market ~~OF INDEPENDENT~~Risk ~~REGISTERED PUBLIC ACCOUNTING FIRM~~ Management

ToMerrill Lynch defines market risk as the ~~Board~~potential change in value of ~~Directors~~financial instruments caused by fluctuations in interest rates, exchange rates, equity and ~~Stockholders~~commodity ofprices, ~~Merrill Lynch &~~credit ~~Co.~~spreads, ~~Inc~~and related risks.:

WeControl ~~have audited the accompanying consolidated statements of earnings/(loss), changes in stockholders’ equity, comprehensive income/(loss)~~ and ~~cash~~Governance flows of Merrill Lynch & Co., Inc. and subsidiaries (“Merrill Lynch”) for the year ended December 26, 2008 (“2008 consolidated financial statements”). These financial statements are the responsibility of Merrill Lynch’s management. Our responsibility is to express an opinion on these financial statements based on our audits. Structure

WeOn ~~conducted~~January 1, ~~our~~2009, ~~audit~~pursuant into ~~accordance with~~ the ~~standards~~acquisition of ~~the Public~~Merrill ~~Company~~Lynch ~~Accounting~~by ~~Oversight~~Bank ~~Board~~of ~~(United~~America, ~~States).~~Merrill ~~Those standards~~Lynch ~~require~~adopted ~~that~~Bank ~~we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free~~ of ~~material~~America's ~~misstatement.~~risk Anmanagement ~~audit~~and ~~includes~~governance ~~examining,~~practices onto ~~a test~~maintain ~~basis,~~consistent ~~evidence~~risk ~~supporting~~measurement ~~the amounts~~ and ~~disclosures~~disciplined ~~in the~~risk ~~financial statements~~taking. AnBank ~~audit~~of ~~also~~America's ~~includes~~risk ~~assessing the accounting principles used and significant estimates made by~~ management, asstructure ~~well~~ as ~~evaluating~~applicable ~~the~~to ~~overall~~Merrill ~~financial statement~~Lynch ~~presentation.~~is Wedescribed ~~believe that our audit provides a reasonable basis for our opinion~~below.

InThe ~~our~~Global ~~opinion~~Markets Risk Committee (“GRC”), ~~such~~chaired ~~2008~~by ~~consolidated~~the ~~financial~~Global ~~statements present~~Markets ~~fairly~~Risk Executive, inhas ~~all~~been ~~material~~designated ~~respects,~~by the ~~result~~Asset, ofLiability ~~their operations~~ and ~~their~~Market ~~cash~~Risk ~~flows~~Committee ~~for~~(“ALMRC”) as the ~~year~~primary ~~ended December 26,~~governance ~~2008,~~authority infor ~~conformity~~global ~~with~~markets ~~accounting~~risk ~~principles generally~~management ~~accepted~~including intrading risk management. The GRC's focus is to take a forward-looking view of the ~~United~~primary ~~States~~credit and market risks impacting Bank of America's Global Banking and Markets business (which includes Merrill Lynch's sales and trading businesses) and prioritize those that need a proactive risk mitigation strategy. Market risks that impact businesses outside of the Global Banking and Markets business are monitored and governed by their respective governance authorities.

AsThe ~~discussed~~GRC inmonitors ~~Note 1,~~significant ~~Merrill~~daily ~~Lynch~~revenues ~~became~~and alosses ~~wholly-owned subsidiary~~by business and the primary drivers of ~~Bank~~the revenues or losses. Thresholds are in place for each of ~~America~~our ~~Corporation~~businesses onin ~~January 1~~order to determine if the revenue or loss is considered to be significant for that business. If any of the thresholds are exceeded, ~~2009~~ an explanation of the variance is provided to the GRC. The thresholds are developed in coordination with the respective risk managers to highlight those revenues or losses that exceed what is considered to be normal daily income statement volatility.

AsValue-at-Risk ~~discussed in Note 3, the disclosures in the accompanying 2008 consolidated financial statements have been retrospectively adjusted for a change in the composition of reportable segments.~~ (“VaR”)

~~/s/ Deloitte &~~To ~~Touche~~evaluate ~~LLP~~risk in our trading activities, we focus on the actual and potential volatility of individual positions as well as portfolios. VaR is a key statistic used to measure market risk. In order to manage day-to-day risks, VaR is subject to trading limits both for our overall trading portfolio and within individual businesses. All limit excesses are communicated to management for review.

~~New~~A ~~York~~VaR model simulates the value of a portfolio under a range of hypothetical scenarios in order to generate a distribution of potential gains and losses. VaR represents the worst loss the portfolio is expected to experience based on historical trends with a given level of confidence and depends on the volatility of the positions in the portfolio and on how strongly their risks are correlated. Within any VaR model, ~~New~~there ~~York~~ are significant and numerous assumptions that will differ from company to company. In addition, the accuracy of a VaR model depends on the availability and quality of historical data for each of the positions in the portfolio. A VaR model may require additional modeling assumptions for new products that do not have extensive historical price data or for illiquid positions for which accurate daily prices are not consistently available.

~~February 23~~A VaR model is an effective tool in estimating ranges of potential gains and losses on our trading portfolios. There are, ~~2009~~ however, many limitations inherent in a VaR model as it utilizes historical results over a defined time period to estimate future performance. Historical results may not always be indicative of future results and changes in market conditions or in the composition of the underlying portfolio could have a material impact on the accuracy of the VaR model. In order for the VaR model to reflect current market conditions, we update the historical data underlying our VaR model on a bi-weekly basis and regularly review the assumptions underlying the model. Our VaR model utilizes three years of historical data. This time period was chosen to ensure that the VaR reflects both a broad range of market movements as well as being sensitive to recent changes in market volatility.

~~(March 10~~We continually review, ~~2010~~evaluate asand enhance our VaR model to ~~Note 3)~~ ensure that it reflects the material risks in our trading portfolio. Nevertheless, due to the limitations previously discussed, we have historically used the VaR model as only one of the components in managing our trading risk and also use other techniques such as stress

49 47

Table of Contents

~~Merrill Lynch &~~testing ~~Co.,~~and ~~Inc~~desk level limits. ~~and~~Periods ~~Subsidiaries Consolidated~~of ~~Statements~~extreme market stress influence the reliability of ~~Earnings/(Loss)~~ these techniques to various degrees.

							Predecessor Company
	Successor Company						For the Period from
	For the Year Ended			For the Year Ended			December 27, 2008 to			For the Year Ended
(dollars in millions, except per share amounts)	December 31, 2010			December 31, 2009			December 31, 2008			December 26, 2008
Revenues
Principal transactions	$	7,074		$	5,121		$	(280	)	$	(27,225	)
Commissions		5,760			6,008			22			6,895
Managed account and other fee-based revenues		4,516			4,317			22			5,544
Investment banking		5,313			5,558			12			3,733
Earnings from equity method investments		898			1,679			-			4,491
Other revenues/(loss)		4,800			4,057			19			(10,065	)
Other-than-temporary impairment losses on available-for-sale debt securities:
Total other-than-temporary impairment losses on AFS debt securities		(174	)		(660	)		-			-
Less: Portion of other-than-temporary impairment losses recognized in
OCI on AFS debt securities		2			4			-			-
Subtotal		28,189			26,084			(205	)		(16,627	)
Interest and dividend revenues		9,303			15,476			34			33,383
Less interest expense		9,621			12,041			-			29,349
Net interest (expense)/income		(318	)		3,435			34			4,034
Revenues, net of interest expense		27,871			29,519			(171	)		(12,593	)
Non-interest expenses
Compensation and benefits		15,069			13,333			64			14,763
Communications and technology		1,993			2,015			-			2,201
Occupancy and related depreciation		1,395			1,316			-			1,267
Brokerage, clearing, and exchange fees		1,022			1,087			10			1,394
Advertising and market development		444			396			-			652
Professional fees		986			769			-			1,058
Office supplies and postage		157			173			-			215
Other		2,882			2,441			-			2,402
Payment related to price reset on common stock offering		-			-			-			2,500
Goodwill impairment charge		-			-			-			2,300
Restructuring charge		-			-			-			486
Total non-interest expenses		23,948			21,530			74			29,238
Pre-tax earnings/(loss)		3,923			7,989			(245	)		(41,831	)
Income tax expense/(benefit)		147			649			(92	)		(14,280	)
Net earnings/(loss) from continuing operations		3,776			7,340			(153	)		(27,551	)
Discontinued operations:
Pre-tax loss from discontinued operations		-			-			-			(141	)
Income tax benefit		-			-			-			(80	)
Net loss from discontinued operations		-			-			-			(61	)
Net earnings/(loss)	$	3,776		$	7,340		$	(153	)	$	(27,612	)
Preferred stock dividends		134			153			-			2,869
Net earnings/(loss) applicable to common stockholder	$	3,642		$	7,187		$	(153	)	$	(30,481	)
Basic loss per common share from continuing operations		N/A			N/A		$	(0.10	)	$	(24.82	)
Basic loss per common share from discontinued operations		N/A			N/A			-			(0.05	)
Basic loss per common share		N/A			N/A		$	(0.10	)	$	(24.87	)
Diluted loss per common share from continuing operations		N/A			N/A		$	(0.10	)	$	(24.82	)
Diluted loss per common share from discontinued operations		N/A			N/A			-			(0.05	)
Diluted loss per common share		N/A			N/A		$	(0.10	)	$	(24.87	)
Average shares used in computing losses per common share
Basic		N/A			N/A			1,600.3			1,225.6
Diluted		N/A			N/A			1,600.3			1,225.6

The accompanying table presents year-end, average, high and low daily trading VaR for the year ended December 31, 2011, as well as a comparison to the year-end VaR as of December 31, 2010.

~~See~~2011 ~~Notes~~Trading toActivities ~~Consolidated Financial~~Market ~~Statements.~~ Risk VaR



(dollars in millions)
	2011 Year End			2011 Quarterly Average⁽³⁾			2011 High		2011 Low		2010 Year End
Trading value-at-risk⁽¹⁾
Foreign exchange	$	14		$	15		$	23	$	10	$	18
Interest rate	39			40			48		31		37
Credit	56			102			132		56		128
Real estate/mortgage	32			64			90		32		69
Commodities	14			18			28		14		19
Equities	18			33			43		18		30
Subtotal⁽²⁾	173			272							301
Diversification benefit	(93		)	(130		)					(127		)
Overall	$	80		$	142						$	174

~~Table~~(1) ofBased ~~Contents~~on a 99% confidence level and a one-day holding period.

~~Merrill Lynch &~~(2) ~~Co.,~~Subtotals ~~Inc.~~are not provided for highs and ~~Subsidiaries Consolidated~~lows ~~Balance~~as ~~Sheets~~ they are not meaningful.

	December 31,		December 31,
(dollars in millions, except per share amounts)	2010		2009
ASSETS
Cash and cash equivalents	$	17,220	$	15,142
Cash and securities segregated for regulatory purposes or deposited with clearing organizations		12,424		20,455
Securities financing transactions
Receivables under resale agreements (includes $51,132 in 2010 and $53,462 in 2009 measured at fair value in accordance with the fair value option election)		138,219		100,263
Receivables under securities borrowed transactions (includes $1,672 in 2010 and $2,888 in 2009 measured at fair value in accordance with the fair value option election)		60,458		78,048
		198,677		178,311
Trading assets, at fair value (includes securities pledged as collateral that can be sold or repledged of $33,933 in 2010 and $37,042 in 2009):
Derivative contracts		39,371		49,966
Equities and convertible debentures		34,204		35,136
Non-U.S. governments and agencies		22,248		21,283
Corporate debt and preferred stock		27,703		30,317
Mortgages, mortgage-backed, and asset-backed		10,994		13,122
U.S. Government and agencies		41,378		32,679
Municipals, money markets, physical commodities and other		14,759		12,128
		190,657		194,631
Investment securities (includes $310 in 2010 and $253 in 2009 measured at fair value in accordance with the fair value option election)		17,769		32,882
Securities received as collateral, at fair value		20,363		16,377
Receivables from Bank of America		60,655		69,195
Other receivables
Customers (net of allowance for doubtful accounts of $8 in 2010 and $10 in 2009)		22,080		34,281
Brokers and dealers		16,483		13,254
Interest and other		10,633		14,889
		49,196		62,424
Loans, notes, and mortgages (net of allowances for loan losses of $170 in 2010 and $33 in 2009) (includes $3,190 in 2010 and $4,649 in 2009 measured at fair value in accordance with the fair value option election)		25,803		37,663
Equipment and facilities (net of accumulated depreciation and amortization of $1,320 in 2010 and $729 in 2009)		1,712		2,331
Goodwill and other intangible assets		9,714		9,868
Other assets		17,436		17,610
Total Assets	$	621,626	$	656,889
Assets of Consolidated VIEs Included in Total Assets Above (pledged as collateral)
Trading assets, excluding derivative contracts	$	10,838
Derivative contracts		41
Investment securities		309
Loans, notes, and mortgages (net)		221
Other assets		1,597
Total Assets of Consolidated VIEs	$	13,006

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