MERRILL LYNCH PREFERRED FUNDING III LP 10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)



þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2011



o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

MERRILL LYNCH PREFERRED CAPITAL TRUST III

(Exact name of Registrant as specified in its certificate of trust)

COMMISSION FILE NO.: 1-7182-06



Delaware (State or other jurisdiction of incorporation or organization)		13-7139561 (I.R.S. Employer Identification No.)



4 World Financial Center New York, New York (Address of principal executive offices)		10080 (Zip Code)

Registrant’s telephone number, including area code: (212) 449-1000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:



Title of each class		Name of each exchange on which registered

7% Trust Originated Preferred Securities (“TOPrS”) (and the related guarantee)		New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

MERRILL LYNCH PREFERRED FUNDING III, L.P.

(Exact name of Registrant as specified in its certificate of limited partnership)

COMMISSION FILE NO.: 1-7182-05



Delaware (State or other jurisdiction of incorporation or organization)		13-3982448 (I.R.S. Employer Identification No.)



4 World Financial Center New York, New York (Address of principal executive offices)		10080 (Zip Code)

Registrant’s telephone number, including area code: (212) 449-1000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:



Title of each class		Name of each exchange on which registered

7% Partnership Preferred Securities (and the related guarantee)		New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

Indicate by check mark if the Registrants are well-known seasoned issuers, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the Registrants are not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No þ

Indicate by check mark whether the Registrants: (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrants were required to file such reports), and (2) have been subject to such requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the Registrants have submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrants were required to submit and post such files). Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrants’ 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. þ

Indicate by check mark whether the Registrants are large accelerated filers, accelerated filers, non-accelerated filers, or smaller reporting companies. See definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)



Large accelerated filer o	Accelerated filer o	Non-accelerated filer þ	Smaller reporting company o

Indicate by check mark whether the Registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of the close of business on June 30, 2011, no voting or non-voting common equity of the Registrants was held by non-affiliates of the Registrants.

The Registrants meet the conditions set forth in General Instruction I (1) (a) and (b) of Form 10-K and are therefore filing this form with the reduced disclosure format.

DOCUMENTS INCORPORATED BY REFERENCE:

Information set forth under certain headings in the Prospectus, dated January 12, 1998, filed pursuant to Rule 424(b) in connection with Registration Statement on Form S-3 (No. 333-42859) filed by the Registrants and Merrill Lynch & Co., Inc., is incorporated by reference in this Form 10-K in response to Part I.

TABLE OF CONTENTS



PART I

ITEM 1. BUSINESS	3

ITEM 1A. RISK FACTORS	3

ITEM 1B. UNRESOLVED STAFF COMMENTS	3

ITEM 2. PROPERTIES	3

ITEM 3. LEGAL PROCEEDINGS	4

ITEM 4. MINE SAFETY DISCLOSURES	4

PART II

ITEM 5. MARKET FOR REGISTRANTS’ COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	4

ITEM 6. SELECTED FINANCIAL DATA	4

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	4

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	4

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	5

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	5

ITEM 9A. CONTROLS AND PROCEDURES	5

ITEM 9B. OTHER INFORMATION	6

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE	6

ITEM 11. EXECUTIVE COMPENSATION	6

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	6

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	6

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES	6

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	8

ITEM 15.1 INDEX TO FINANCIALS	9

SIGNATURES	9

EXHIBIT INDEX	11

Exhibit 12
Exhibit 23.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
Exhibit 99.1
Exhibit 99.2
Exhibit 101

PART I



ITEM 1.		BUSINESS

MERRILL LYNCH PREFERRED CAPITAL TRUST III

Merrill Lynch Preferred Capital Trust III (the “Trust”) is a statutory business trust formed under the Delaware Business Trust Act, as amended, pursuant to a declaration of trust and the filing of a certificate of trust with the Secretary of State of the State of Delaware on December 19, 1997, which was subsequently amended by an amended and restated declaration of trust dated as of January 12, 1998. Merrill Lynch & Co., Inc. (the “Company” or “Merrill Lynch”) is the sole owner of the Trust common securities. On January 1, 2009, the Company became a wholly-owned subsidiary of Bank of America Corporation (“Bank of America”). The Trust exists for the exclusive purposes of (i) issuing trust securities, consisting of 7% Trust Originated Preferred Securities (the “TOPrS”) and trust common securities (the “Trust Common Securities”), representing undivided beneficial ownership interests in the assets of the Trust, (ii) investing the gross proceeds of the trust securities in 7% Partnership Preferred Securities (the “Partnership Preferred Securities”) issued by Merrill Lynch Preferred Funding III, L.P. (the “Partnership”), and (iii) engaging in only those other activities necessary or incidental thereto.

MERRILL LYNCH PREFERRED FUNDING III, L.P.

The Partnership is a limited partnership formed under the Delaware Revised Uniform Limited Partnership Act, as amended, pursuant to an agreement of limited partnership and the filing of a certificate of limited partnership with the Secretary of State of the State of Delaware on December 19, 1997, which was subsequently amended by an amended and restated agreement of limited partnership dated January 16, 1998. The Company is the sole general partner of the Partnership. The Partnership is managed by the general partner and exists for the exclusive purposes of (i) issuing its partnership interests, consisting of the Company’s general partner interest and the Partnership Preferred Securities, (ii) investing the proceeds thereof in certain eligible securities of the Company and wholly-owned subsidiaries of the Company (the “Affiliate Investment Instruments”) and certain eligible debt securities, and (iii) engaging in only those other activities necessary or incidental thereto.

INCORPORATION BY REFERENCE

The information set forth under the headings “Merrill Lynch Preferred Capital Trust III,” “Merrill Lynch Preferred Funding III, L.P.,” “Description of the Trust Preferred Securities,” “Description of the Trust Guarantee,” “Description of the Partnership Preferred Securities,” and “Description of the Partnership Guarantee” contained in Exhibit 99.1 to this Form 10-K, which is excerpted from the Prospectus dated January 12, 1998 of the Trust and the Partnership, is incorporated by reference herein.



ITEM 1A.		RISK FACTORS

The assets of the Trust consist solely of the Partnership Preferred Securities. The assets of the Partnership consist principally of the Affiliate Investment Instruments, consisting of debt securities of the Company and debt securities of one or more wholly-owned subsidiaries of the Company. In addition, the Company is the sole owner of the Trust Common Securities and is the sole general partner of the Partnership. Consequently, the risk factors that are applicable to the Company also are applicable to the Partnership and the Trust. A discussion of the most significant factors that could affect the Company’s businesses, operations and financial condition is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 and is incorporated by reference from Exhibit 99.2 to this report.



ITEM 1B.		UNRESOLVED STAFF COMMENTS

Not applicable.



ITEM 2.		PROPERTIES

None.



ITEM 3.		LEGAL PROCEEDINGS

None.



ITEM 4.		MINE SAFETY DISCLOSURES

None.

PART II



ITEM 5.		MARKET FOR REGISTRANTS’ COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

All of the Trust Common Securities and the entire general partnership interest in the Partnership are owned of record and beneficially by the Company. Accordingly, there is no established public market for the Trust Common Securities or the general partnership interest in the Partnership.

The Company, as holder of the Trust Common Securities, is entitled to receive cumulative cash distributions accumulating from January 16, 1998 and payable quarterly in arrears on each March 30, June 30, September 30 and December 30, commencing March 30, 1998, at an annual rate of 7% of the liquidation amount per annum. Distributions not paid on the scheduled payment date will accumulate and compound quarterly at a rate per annum equal to 7%. The certificate of limited partnership of the Partnership does not require any regular periodic distributions to be made to the general partner; however, to the extent that aggregate payments to the Partnership on the Affiliate Investment Instruments and on certain eligible debt securities exceed distributions accumulated or payable with respect to the Partnership Preferred Securities, the Partnership may at times have excess funds which shall be allocated to and may, at the general partner’s sole discretion, be distributed to the general partner.



ITEM 6.		SELECTED FINANCIAL DATA

No disclosure is required for this Item pursuant to General Instruction I of Form 10-K.



ITEM 7.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

No disclosure is required for this Item pursuant to General Instruction I of Form 10-K. There are no material changes in the amount of revenue and expense items between the most recent year presented and the year immediately preceding it.



ITEM 7A.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

On January 16, 1998, the Trust invested the gross proceeds from the sale of the Trust Common Securities and the TOPrS in the Partnership Preferred Securities (the “Trust Assets”). The Partnership, in turn, invested the proceeds from the sale of the Partnership Preferred Securities and a capital contribution from the Company in certain Affiliate Investment Instruments and eligible securities (the “Partnership Assets”). To the extent the Partnership has funds available from the Partnership Assets, the general partner of the Partnership may declare distributions to the Trust, as holder of the Partnership Preferred Securities. The Trust’s ability to pay distributions to the holders of the TOPrS is dependent on its receipt of distributions on the Trust Assets from the Partnership. Therefore, upon the receipt by the Partnership of payments from the Partnership Assets and the distribution thereof to the Trust, the Trust will pass through such payments to the holders of the TOPrS.



ITEM 8.		FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and notes thereto and the Reports of Independent Registered Public Accounting Firm set forth on pages F-1 through F-17 are incorporated by reference herein.



ITEM 9.		CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.



ITEM 9A.		CONTROLS AND PROCEDURES

The Trust

The person who functions as the equivalent of the Chief Executive Officer and the Chief Financial Officer of the Trust has evaluated the effectiveness of the Trust’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) as of the end of the period covered by this Form 10-K. Based on that evaluation, the person who functions as the equivalent of the Chief Executive Officer and the Chief Financial Officer of the Trust has concluded that the Trust’s disclosure controls and procedures are effective, as of the end of the period covered by this report, in recording, processing, summarizing and reporting information required to be disclosed by the Trust in reports that it files or submits under the Exchange Act, within the time periods specified in the Securities and Exchange Commission's ("SEC") rules and forms.

In addition, no change in the Trust’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred in the fourth quarter of 2011 that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial reporting.

The Partnership

The person who functions as the equivalent of the Chief Executive Officer and the Chief Financial Officer of the Partnership has evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-K. Based on that evaluation, the person who functions as the equivalent of the Chief Executive Officer and the Chief Financial Officer of the Partnership has concluded that the Partnership’s disclosure controls and procedures are effective, as of the end of the period covered by this report, in recording, processing, summarizing and reporting information required to be disclosed by the Partnership in reports that it files or submits under the Exchange Act, within the time periods specified in the SEC's rules and forms.

In addition, no change in the Partnership’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred in the fourth quarter of 2011 that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

Report on Internal Control Over Financial Reporting

Management recognizes its responsibility for establishing and maintaining adequate internal control over financial reporting and has designed internal controls and procedures to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements and related notes in accordance with generally accepted accounting principles in the United States of America. Management assessed the effectiveness of the Trust’s and the Partnership’s internal control over financial reporting as of December 31, 2011. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on that assessment, management believes that the Trust and the Partnership maintained effective internal control over financial reporting as of December 31, 2011.

This report does not include an attestation report of the Trust’s or the Partnership’s independent registered public accounting firm regarding internal control over financial reporting.



ITEM 9B.		OTHER INFORMATION

None.

PART III



ITEM 10.		DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

No disclosure is required for this Item pursuant to General Instruction I of Form 10-K.



ITEM 11.		EXECUTIVE COMPENSATION

No disclosure is required for this Item pursuant to General Instruction I of Form 10-K.



ITEM 12.		SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

No disclosure is required for this Item pursuant to General Instruction I of Form 10-K.



ITEM 13.		CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

No disclosure is required for this Item pursuant to General Instruction I of Form 10-K.



ITEM 14.		PRINCIPAL ACCOUNTANT FEES AND SERVICES

Pre-Approval of Services Provided by the Independent Registered Public Accounting Firm

Subsequent to the acquisition of the Company by Bank of America and consistent with Securities and Exchange Commission (“SEC”) requirements, the Trust and the Partnership follow the policies established by the Audit Committee of the Board of Directors of Bank of America (the “BAC Audit Committee”) regarding engagements of the provision of audit services and permitted nonaudit services to the Trust and the Partnership by the independent registered public accounting firm and by any other accounting firm proposed to be retained to provide audit services (e.g., in compliance with a foreign statute) or non-audit services.

On an annual basis the BAC Audit Committee pre-approves a list of services and sets pre-approved fee levels that may be provided by PricewaterhouseCoopers LLP and their affiliates (“PwC”), the Trust’s and the Partnership’s registered independent public accounting firm, without obtaining engagement specific pre-approval from the BAC Audit Committee. The pre-approved list of services consists of audit services, audit-related services, tax services and all other services. All requests or applications for PwC audit, audit-related services, tax services or all other services must be submitted to members of Bank of America’s corporate audit function or tax function to determine if the services are included within the pre-approved list of services that have received BAC Audit Committee pre-approval. Any type of service that is not included on the pre-approved list of services must be specifically approved by the BAC Audit Committee or its designee. Any proposed service that is included on the list of pre-approved services but will cause the pre-approved fee level to be exceeded will also require specific pre-approval by the BAC Audit Committee or its designee, the BAC Audit Committee Chairman, provided that any such pre-approval by the BAC Audit Committee Chairman is presented to the full BAC Audit Committee at its next meeting. All of the services provided by, and fees paid to, PwC in 2011 were pre-approved by the BAC Audit Committee, and there were no services for which the de minimis exception permitted in certain circumstances under SEC rules was utilized.

PwC's 2011 and 2010 Fees

PwC’s fees for professional services rendered in, or provided for, 2011 and 2010, respectively, to the Trust and Partnership were:



	2011		2010
Audit Fees⁽¹⁾	$	15,000	$	15,000
Audit-related fees	—		—
Tax fees	—		—
All other fees	—		—
Total fees	$	15,000	$	15,000


(1)	Audit Fees consisted of fees billed by PwC related to the audit of the Trust’s and the Partnership’s Financial Statements filed with the SEC. Audit fees are those billed or expected to be billed for audit services related to each fiscal year.

PART IV



ITEM 15.		EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Documents filed as part of this report:



1	Financial Statements

The contents of the financial statements are listed on page F-1, and the financial statements and accompanying Reports of Independent Registered Public Accounting Firm appear on pages F-2 through F-17.



2	Exhibits

An exhibit index has been filed as part of this report on page 11 and is incorporated herein by reference.

INDEX TO FINANCIAL STATEMENTS

ITEM 15(1)




FINANCIAL STATEMENTS	PAGE

MERRILL LYNCH PREFERRED CAPITAL TRUST III

Balance Sheets, December 31, 2011 and December 31, 2010		10

Statements of Earnings, Year Ended December 31, 2011, December 31, 2010 and December 31, 2009		11

Statements of Changes in Stockholders’ Equity, Year Ended December 31, 2011, December 31, 2010 and December 31, 2009		12

Statements of Cash Flows, Year Ended December 31, 2011, December 31, 2010 and December 31, 2009		13

Notes to Financial Statements		14

Report of Independent Registered Public Accounting Firm		16

Supplemental Financial Information (Unaudited)		17

MERRILL LYNCH PREFERRED FUNDING III, L.P.

Balance Sheets, December 31, 2011 and December 31, 2010		18

Statements of Earnings, Year Ended December 31, 2011, December 31, 2010 and December 31, 2009		19

Statements of Changes in Partners' Capital, Year Ended December 31, 2011, December 31, 2010 and December 31, 2009		20

Statements of Cash Flows, Year Ended December 31, 2011, December 31, 2010 and December 31, 2009		21

Notes to Financial Statements		22

Report of Independent Registered Public Accounting Firm		24

Supplemental Financial Information (Unaudited)		25

MERRILL LYNCH PREFERRED CAPITAL TRUST III

BALANCE SHEETS

(dollars in thousands, except per security amounts)



	December 31, 2011		December 31, 2010
ASSETS
Investment in affiliate partnership preferred securities	$	773,196	$	773,196
Total Assets	$	773,196	$	773,196

STOCKHOLDERS’ EQUITY

Stockholders’ Equity:
Preferred securities (7% Trust Originated Preferred Securities; 30,000,000 authorized, issued, and outstanding; $25 liquidation amount per security)	$	750,000	$	750,000
Common securities (7% Trust Common Securities; 927,840 authorized, issued, and outstanding; $25 liquidation amount per security)	23,196		23,196
Total Stockholders’ Equity	$	773,196	$	773,196

See Notes to Financial Statements

MERRILL LYNCH PREFERRED CAPITAL TRUST III

STATEMENTS OF EARNINGS

(dollars in thousands)

See Notes to Financial Statements

MERRILL LYNCH PREFERRED CAPITAL TRUST III

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(dollars in thousands)



	FOR THE YEAR ENDED
	December 31, 2011			December 31, 2010			December 31, 2009

PREFERRED SECURITIES
Balance, beginning and end of period	$	750,000		$	750,000		$	750,000

COMMON SECURITIES
Balance, beginning and end of period	23,196			23,196			23,196

UNDISTRIBUTED EARNINGS
Balance, beginning of period	—			—			—
Earnings	54,124			54,124			54,124
Distributions	(54,124		)	(54,124		)	(54,124		)
Balance, end of period	—			—			—
Total Stockholders’ Equity	$	773,196		$	773,196		$	773,196

See Notes to Financial Statements

MERRILL LYNCH PREFERRED CAPITAL TRUST III

STATEMENTS OF CASH FLOWS

(dollars in thousands)



	FOR THE YEAR ENDED
	December 31, 2011			December 31, 2010			December 31, 2009

CASH FLOWS FROM OPERATING ACTIVITIES:
Earnings	$	54,124		$	54,124		$	54,124
Cash provided by operating activities	54,124			54,124			54,124

CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions	(54,124		)	(54,124		)	(54,124		)
Cash used for financing activities	(54,124		)	(54,124		)	(54,124		)

NET CHANGE IN CASH	—			—			—
CASH, BEGINNING OF PERIOD	—			—			—
CASH, END OF PERIOD	$	—		$	—		$	—

See Notes to Financial Statements

MERRILL LYNCH PREFERRED CAPITAL TRUST III

NOTES TO FINANCIAL STATEMENTS

December 31, 2011

1. ORGANIZATION AND PURPOSE

Merrill Lynch Preferred Capital Trust III (the “Trust”) is a statutory business trust formed under the Delaware Business Trust Act, as amended. Merrill Lynch & Co., Inc. (the “Company”) is the sole owner of the Trust common securities. The Trust exists for the exclusive purposes of (i) issuing trust securities, consisting of 7% Trust Originated Preferred Securities (the “Trust Preferred Securities”) and trust common securities (the “Trust Common Securities”), representing undivided beneficial ownership interests in the assets of the Trust, (ii) investing the gross proceeds of the trust securities in 7% Partnership Preferred Securities (the “Partnership Preferred Securities”) issued by Merrill Lynch Preferred Funding III, L.P. (the “Partnership”), and (iii) engaging in only those other activities necessary or incidental thereto.

The Company has agreed to (i) pay all fees and expenses related to the organization and operations of the Trust (including taxes, audit fees, duties, assessments, or government charges of whatever nature (other than withholding taxes) imposed by the United States or any other domestic taxing authority upon the Trust) and the offering of the Trust Preferred Securities and (ii) be responsible for all debts and other obligations of the Trust (other than with respect to the Trust Preferred Securities and the Trust Common Securities). The Company has agreed to indemnify the trustees and certain other persons to the fullest extent permitted by applicable law for expenses arising from certain claims.

On January 1, 2009, the Company became a wholly-owned subsidiary of Bank of America Corporation (“Bank of America”).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The financial statements are presented in accordance with accounting principles generally accepted in the United States of America, which require management to make estimates that affect reported amounts and disclosure of contingencies in the financial statements. As such, actual results could differ from those estimates.

INVESTMENTS

The investment in the affiliate partnership preferred securities represents a limited partnership interest and is recorded at cost. Income on the Partnership Preferred Securities is accrued when earned.

INCOME TAXES

The Trust does not incur any income tax liabilities. Such liabilities are incurred directly by the security holders.

3. INVESTMENT IN AFFILIATE PARTNERSHIP PREFERRED SECURITIES

The Trust holds 30,000,000 7% Partnership Preferred Securities and 927,840 7% Trust Common Securities, $25 liquidation amount per each security. The interest payment dates and redemption provisions of the Partnership Preferred Securities, which became redeemable on March 30, 2008 at the option of the Partnership, correspond to the distribution payment dates and redemption provisions of the Trust Preferred Securities. Upon any redemption of the Partnership Preferred Securities, the Trust Preferred Securities will be redeemed. The Company has guaranteed, on a subordinated basis, the payment of distributions by the Partnership on the Partnership Preferred Securities if, as, and when declared out of funds legally available and payments upon liquidation of the Partnership or the redemption of the Partnership Preferred Securities to the extent of funds legally available.

4. STOCKHOLDERS’ EQUITY

TRUST PREFERRED SECURITIES

The Trust issued 30,000,000 7% Trust Preferred Securities, $25 liquidation amount per security in a public offering on January 16, 1998. The Trust Preferred Securities became redeemable on March 30, 2008 at the option of the Trust, in whole or in part, at a redemption price equal to $25 per security. Distributions on the Trust Preferred Securities are cumulative from the date of original issue and are payable quarterly if, as, and when the Trust has funds available for payment. Holders of the Trust Preferred Securities have limited voting rights and are not entitled to vote to appoint, remove, or replace, or to increase or decrease the number of, trustees, which voting rights are vested exclusively in the holder of the Trust Common Securities. Under certain circumstances, the Trust Preferred Securities have preferential rights to payment relative to the Trust Common

MERRILL LYNCH PREFERRED CAPITAL TRUST III

NOTES TO FINANCIAL STATEMENTS

December 31, 2011

Securities.

The Company has guaranteed, on a subordinated basis, the payment in full of all distributions and other payments on the Trust Preferred Securities to the extent that the Trust has funds legally available. This guarantee and the partnership distribution guarantee are subordinated to all other liabilities of the Company.

TRUST COMMON SECURITIES

The Trust issued 927,840 7% Trust Common Securities, $25 liquidation amount per security, to the Company on January 16, 1998. The Trust Common Securities became redeemable on March 30, 2008 at the option of the Trust, in whole or in part, at a redemption price equal to $25 per security.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To Trustees of Merrill Lynch Preferred Capital Trust III:

In our opinion, the accompanying balance sheets and the related statements of earnings, changes in stockholders’ equity, and cash flows present fairly, in all material respects, the financial position of Merrill Lynch Preferred Capital Trust III (the “Trust”) at December 31, 2011 and December 31, 2010, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2011 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes 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. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

New York, New York

March 21, 2012

SUPPLEMENTAL FINANCIAL INFORMATION (UNAUDITED)

Quarterly Information

The unaudited quarterly results of operations of Merrill Lynch Preferred Capital Trust III for the years ended December 31, 2011 and 2010 are prepared in conformity with U.S. generally accepted accounting principles and reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results of operations for the periods presented. Results of any interim period are not necessarily indicative of results for a full year.

(dollars in thousands)



	For the Quarter Ended
	Dec. 31, 2011		Sept. 30, 2011		June 30, 2011		Mar. 31, 2011		Dec. 31, 2010		Sept. 30, 2010		June 30, 2010		Mar 31, 2010
Total Revenues	$	13,531	$	13,531	$	13,531	$	13,531	$	13,531	$	13,531	$	13,531	$	13,531
Earnings	$	13,531	$	13,531	$	13,531	$	13,531	$	13,531	$	13,531	$	13,531	$	13,531

MERRILL LYNCH PREFERRED FUNDING III, L.P.

BALANCE SHEETS

(dollars in thousands)



	December 31, 2011		December 31, 2010

ASSETS

Investments:
Affiliate debentures	$	900,547	$	900,547
U.S. Government and agencies	9,098		9,101
Total investments	909,645		909,648
Total Assets	$	909,645	$	909,648

PARTNERS’ CAPITAL

Limited partnership interest	$	773,196	$	773,196
General partnership interest	136,449		136,452
Total Partners’ Capital	$	909,645	$	909,648

See Notes to Financial Statements

MERRILL LYNCH PREFERRED FUNDING III, L.P.

STATEMENTS OF EARNINGS

(dollars in thousands)



	FOR THE YEAR ENDED
	December 31, 2011		December 31, 2010		December 31, 2009

EARNINGS
Interest income:
Affiliate debentures	$	63,038	$	63,038	$	63,038
U.S. Government and agencies	19		17		30
Earnings	$	63,057	$	63,055	$	63,068

See Notes to Financial Statements

MERRILL LYNCH PREFERRED FUNDING III, L.P.

STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL

(dollars in thousands)



	FOR THE YEAR ENDED
	December 31, 2011			December 31, 2010			December 31, 2009

LIMITED PARTNER’S CAPITAL
Balance, beginning of period	$	773,196		$	773,196		$	773,196
Net income allocated to limited partner	54,124			54,124			54,124
Distributions	(54,124		)	(54,124		)	(54,124		)
Balance, end of period	773,196			773,196			773,196

GENERAL PARTNER’S CAPITAL
Balance, beginning of period	136,452			136,456			136,452
Net income allocated to general partner	8,933			8,931			8,944
Distributions	(8,936		)	(8,935		)	(8,940		)
Balance, end of period	136,449			136,452			136,456
TOTAL PARTNERS’ CAPITAL	$	909,645		$	909,648		$	909,652

See Notes to Financial Statements

MERRILL LYNCH PREFERRED FUNDING III, L.P.

STATEMENTS OF CASH FLOWS

(dollars in thousands)



	FOR THE YEAR ENDED
	December 31, 2011			December 31, 2010			December 31, 2009

CASH FLOWS FROM OPERATING ACTIVITIES:
Earnings	$	63,057		$	63,055		$	63,068
Accretion of interest on securities issued by U.S. Government and agencies	(19		)	(17		)	(30		)
Cash provided by operating activities	63,038			63,038			63,038

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment securities	(9,096		)	(18,190		)	(18,192		)
Maturities of investment securities	9,118			18,211			18,218
Cash provided by investing activities	22			21			26

CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to limited partner	(54,124		)	(54,124		)	(54,124		)
Distributions to general partner	(8,936		)	(8,935		)	(8,940		)
Cash used for financing activities	(63,060		)	(63,059		)	(63,064		)

NET CHANGE IN CASH	—			—			—

CASH, BEGINNING OF PERIOD	—			—			—
CASH, END OF PERIOD	$	—		$	—		$	—

See Notes to Financial Statements

MERRILL LYNCH PREFERRED FUNDING III, L.P.

NOTES TO FINANCIAL STATEMENTS

December 31, 2011

1. ORGANIZATION AND PURPOSE

Merrill Lynch Preferred Funding III, L.P. (the “Partnership”) is a limited partnership formed under the Delaware Revised Uniform Limited Partnership Act, as amended. Merrill Lynch & Co. Inc. (the “Company”) is the sole general partner of the Partnership. The Partnership is managed by the general partner and exists for the exclusive purposes of (i) issuing its partnership interests, consisting of the Company’s general partner interest and the Partnership Preferred Securities, (ii) investing the proceeds thereof in certain eligible securities of the Company and wholly-owned subsidiaries of the Company (the “Affiliate Investment Instruments”) and certain eligible debt securities, and (iii) engaging in only those other activities necessary or incidental thereto.

The Company, in its capacity as sole general partner of the Partnership, has agreed to (i) pay all fees and expenses related to the organization and operations of the Partnership (including taxes, audit fees, duties, assessments, or government charges (other than withholding taxes) imposed by the United States or any other domestic taxing authority upon the Partnership) and (ii) be responsible for all debts and other obligations of the Partnership (other than with respect to the Partnership Preferred Securities). In such capacity, the Company has also agreed to indemnify certain officers and agents of the Partnership to the fullest extent permitted by applicable law for losses by reason of certain acts or omissions on behalf of the Partnership to the extent of the Partnership’s assets.

On January 1, 2009, the Company became a wholly-owned subsidiary of Bank of America Corporation (“Bank of America”).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

INVESTMENTS

The Partnership’s investment in affiliate debentures is recorded at cost. Its investment in U.S. Government and agency securities is recorded at accreted cost and matures within one year. At December 31, 2011, the estimated fair value of the investment in affiliate debentures is approximately $733 million and the fair value of the investment in U.S. Government and agency securities approximates its carrying value.

INCOME TAXES

The Partnership does not incur any income tax liabilities. Such liabilities are incurred directly by the partners.

3. INVESTMENT IN AFFILIATE DEBENTURES

The Partnership holds debentures of the Company and a wholly-owned subsidiary of the Company. The debentures mature on December 30, 2017 and bear interest at 7% per annum. The interest payment dates and redemption provisions of the debentures, which became redeemable at the option of the Company and its subsidiary on March 30, 2008, correspond to the distribution payment dates and redemption provisions of the Partnership Preferred Securities. Interest and redemption payments on the subsidiary debenture are guaranteed by the Company on a subordinated basis.

4. PARTNERS’ CAPITAL

The Partnership issued 30,000,000 7% Partnership Preferred Securities and 927,840 7% Trust Common Securities, $25 liquidation amount per each security, to the Trust on January 16, 1998. Distributions on the Partnership Preferred Securities are cumulative from the date of original issue and are payable quarterly if, as, and when declared by the general partner. The Partnership Preferred Securities became redeemable on March 30, 2008 at the option of the Partnership, at a redemption price equal to $25 per security. Except as provided in the Amended and Restated Agreement of Limited Partnership of the Partnership entered into by the Company and the Trust and the Partnership Preferred Securities Guarantee Agreement of the Partnership executed and delivered by the Company, and as otherwise provided by law, the holders of the Partnership Preferred Securities have no voting rights.

The Company has guaranteed the payment of distributions by the Partnership on the Partnership Preferred Securities if, as, and

MERRILL LYNCH PREFERRED FUNDING III, L.P.

NOTES TO FINANCIAL STATEMENTS

December 31, 2011

when declared out of funds legally available and payments upon liquidation of the Partnership or the redemption of the Partnership Preferred Securities to the extent of funds legally available. This guarantee is subordinated to all other liabilities of the Company.

Contemporaneously with the issuance of the Partnership Preferred Securities, the Company, as general partner, contributed capital to the Partnership in the amount of approximately $137 million. The Partnership may at times have excess funds which are allocated to the Company and may, in the Company’s sole discretion, be distributed to the Company to the extent that aggregate payments by the Company to the Partnership exceed distributions accumulated or payable with respect to the Partnership Preferred Securities.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the General Partner and Limited Partner of Merrill Lynch Preferred Funding III, L.P.:

In our opinion, the accompanying balance sheets and the related statements of earnings, changes in partners’ capital, and cash flows present fairly, in all material respects, the financial position of Merrill Lynch Preferred Funding III, L.P. (the “Partnership”) at December 31, 2011 and December 31, 2010, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2011 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes 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. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

New York, New York

March 21, 2012

SUPPLEMENTAL FINANCIAL INFORMATION (UNAUDITED)

Quarterly Information

The unaudited quarterly results of operations of Merrill Lynch Preferred Funding III, L.P. for the years ended December 31, 2011 and 2010 are prepared in conformity with U.S. generally accepted accounting principles and reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results of operations for the periods presented. Results of any interim period are not necessarily indicative of results for a full year.

(dollars in thousands)



	For the Quarter Ended
	Dec. 31, 2011		Sept. 30, 2011		June 30, 2011		Mar. 31, 2011		Dec. 31, 2010		Sept. 30, 2010		June 30, 2010		Mar. 31, 2010
Total Revenues	$	15,761	$	15,766	$	15,764	$	15,766	$	15,764	$	15,763	$	15,763	$	15,765
Earnings	$	15,761	$	15,766	$	15,764	$	15,766	$	15,764	$	15,763	$	15,763	$	15,765

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 21st day of March 2012.




MERRILL LYNCH PREFERRED CAPITAL TRUST III*
By:	/s/ ANGELA C. JONES
	Name:	Angela C. Jones
	Title:	Regular Trustee



*		There is no principal executive officer(s), principal financial officer, controller, principal accounting officer or board of directors of the Registrant. The Trustees of the Registrant (which include the Regular Trustees, the Property Trustee and the Delaware Trustee) together exercise all powers and perform all functions with respect to the Registrant.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant, by Merrill Lynch & Co., Inc. as General Partner, has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 21st day of March 2012.




MERRILL LYNCH PREFERRED FUNDING III, L.P.
By: MERRILL LYNCH & CO., INC., as General Partner
By:	/s/ PETER D. TAUBE
	Name:	Peter D. Taube
	Title:	Chief Accounting Officer and Controller
		Merrill Lynch & Co., Inc.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following directors and officers of Merrill Lynch & Co., Inc., General Partner of the Registrant, in the capacities indicated on the 21st day of March 2012.




SIGNATURE		TITLE

/s/ THOMAS K. MONTAG Thomas K. Montag		Director and Chief Executive Officer (Principal Executive Officer)

/s/ JENNIFER M. HILL Jennifer M. Hill		Chief Financial Officer (Principal Financial Officer)

/s/ PETER D. TAUBE Peter D. Taube		Chief Accounting Officer and Controller (Principal Accounting Officer)

/s/ BRIAN T. MOYNIHAN Brian T. Moynihan		Chairman and Director

/s/ TERRENCE P. LAUGHLIN Terrence P. Laughlin		Director

/s/ BRUCE R. THOMPSON Bruce R. Thompson		Director

EXHIBIT INDEX




4.1			Certificate of Trust dated December 19, 1997, of the Trust (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-3 (No. 333-42859) (the “Registration Statement”)).

4.2			Form of Amended and Restated Declaration of Trust of the Trust (incorporated by reference to Exhibit 4.2 to the Registration Statement).

4.3			Certificate of Limited Partnership, dated as of December 19, 1997, of the Partnership (incorporated by reference to Exhibit 4.3 to the Registration Statement).

4.4			Form of Amended and Restated Agreement of Limited Partnership of the Partnership (incorporated by reference to Exhibit 4.4 to the Registration Statement).

4.5			Form of Trust Preferred Securities Guarantee Agreement between the Company and The Bank of New York Mellon, as guarantee trustee (incorporated by reference to Exhibit 4.5 to the Registration Statement).

4.6			Form of Partnership Preferred Securities Guarantee Agreement between the Company and The Bank of New York Mellon, as guarantee trustee (incorporated by reference to Exhibit 4.6 to the Registration Statement).

4.7			Form of Subordinated Debenture Indenture between the Company and The Bank of New York Mellon, as trustee (incorporated by reference to Exhibit 4.7 to the Registration Statement on Form S-3 (No. 333-16603)).

4.8			Form of Affiliate Debenture Guarantee Agreement between the Company and The Bank of New York Mellon, as guarantee trustee (incorporated by reference to Exhibit 4.8 to the Registration Statement).

4.9			Form of Trust Preferred Security (included in Exhibit 4.2 above).

4.10			Form of Partnership Preferred Security (included in Exhibit 4.4 above).

4.11			Form of Subordinated Debenture (incorporated by reference to Exhibit 4.11 to the Registration Statement).

12			Statement re: Computation of Ratios of Earnings to Combined Fixed Charges and Preferred Securities Distributions (unaudited).⁽¹⁾

23.1			Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm of the Registrants.⁽¹⁾

31.1			Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.⁽¹⁾

31.2			Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.⁽¹⁾

32.1			Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.⁽¹⁾

32.2			Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.⁽¹⁾

99.1			Excerpt of information under the headings “Merrill Lynch Preferred Capital Trust III,” “Merrill Lynch Preferred Funding III, L.P.,” “Description of the Trust Preferred Securities,” “Description of the Trust Guarantee,” “Description of the Partnership Preferred Securities,” and “Description of the Partnership Guarantee” contained in the Prospectus dated January 12, 1998 of the Trust and the Partnership.⁽¹⁾

99.2			Excerpt of Merrill Lynch & Co., Inc. Annual Report on Form 10-K for the year ended December 31, 2011 - Item 1A. "Risk Factors".⁽¹⁾

101			The following materials from Merrill Lynch Preferred Capital Trust III and Merrill Lynch Preferred Funding III, L.P. Annual Report on Form 10-K for the fiscal year ended December 31, 2011, formatted in XBRL (Extensible Business Reporting Language): (i) the Balance Sheets, (ii) the Statements of Earnings, (iii) the Statements of Changes in Stockholders' Equity, (iv) the Statements of Cash Flows, and (v) the Notes to Financial Statements, tagged as blocks of text.⁽¹⁾⁽²⁾



		(1) Filed herewith.
		(2) These interactive data files shall not be deemed filed for purposes of Section 11or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Act 1934, as amended, or otherwise subject to liability under those sections.

FOR THE YEAR ENDED

December 31, 2011

December 31, 2010

December 31, 2009

Interest on affiliate partnership preferred securities