Background

Beginning on November 9, 2007, several putative class actions were filed against Merrill Lynch & Co., Inc. (“Merrill Lynch”) and various other defendants on behalf of participants in or beneficiaries of the Merrill Lynch & Co., Inc. 401(k) Savings and Investment Plan (the “SIP”), the Merrill Lynch & Co., Inc. Retirement Accumulation Plan (the “RAP”), and the Merrill Lynch & Co., Inc. Employee Stock Ownership Plan (the “ESOP”) (collectively, the “Plans”) whose accounts included investments in Merrill Lynch common stock. These actions alleged breaches of fiduciary duty in violation of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

On March 12, 2008, the Honorable Leonard B. Sand of the United States District Court Southern District of New York consolidated these actions into the ERISA Action, Master File No. 07-cv-9633, and appointed Keller Rohrback L.L.P. and Cohen Milstein Sellers & Toll PLLC as Interim Co-Lead Counsel to manage the prosecution of the ERISA Action on behalf of the putative class.

On May 21, 2008, Plaintiffs Carl Esposito, Barbara Boland, Alan Maltzman, and Mary Gidaro (collectively, “Named Plaintiffs”) filed a Consolidated Amended Complaint on behalf of all persons, other than Defendants, who were participants in or beneficiaries of the Plans, and whose accounts included investments in Merrill Lynch common stock during the proposed Class Period.

On September 23, 2008, Named Plaintiffs filed a Consolidated Supplemental Complaint (the “Complaint”), seeking relief on behalf of a proposed class of persons who were participants or beneficiaries of the Plans who invested in Merrill Lynch common stock through their Plan account during the proposed Class Period. The Complaint alleges that the Plans’ fiduciaries violated their fiduciary duties under ERISA by: (1) failing to prudently and loyally manage the Plans’ assets; (2) failing to monitor fiduciaries; (3) failing to disclose necessary information to co-fiduciaries; and (4) failing to provide complete and accurate information to the Class. Named Plaintiffs also allege that certain Defendants are liable as co-fiduciaries.

Named Plaintiffs allege that Defendants knew or should have known that the Plans’ investment in Merrill Lynch common stock was not a prudent retirement investment and that Defendants acted imprudently by not preventing further investment in Merrill Lynch common stock and not liquidating those holdings.

On September 26, 2008, Defendants moved to dismiss the Complaint. Named Plaintiffs’ filed their opposition to Defendants’ motion to dismiss on October 6, 2008 and Defendants’ filed their reply on October 19, 2008. This motion is fully briefed, and at the time the Settlement was reached the motion was pending before the Court.

The Class

On August 21, 2009 U.S. District Judge Jed S. Rakoff granted the final approval of the ERISA Settlement on behalf of everyone who, subject to certain exceptions identified below, fits the following description:

(a) all current and former participants and beneficiaries of any of the Plans whose individual Plan account(s) included investments in Merrill Lynch stock at any time between September 30, 2006 and December 31, 2008, inclusive and (b) as to each Person within the scope of subsection (a) of this Paragraph, his, her or its beneficiaries, alternate payees (including spouses of deceased Persons who were participants of one or more of the Plans), Representatives and Successors-In-Interest, provided, however, that the Class shall not include any Defendant or any of their Immediate Family, beneficiaries, alternate payees (including spouses of deceased Persons who were Plan participants), Representatives or Successors-In-Interest, except for spouses and immediate family members who themselves are or were participants in any of the Plans, who shall be considered members of the Class with respect to their own Plan accounts.

The Settlement

The Court has not decided in favor of Named Plaintiffs or the Defendants. Instead, the Named Plaintiffs and Defendants have agreed to a settlement to resolve the ERISA Action. In reaching the Settlement, they have avoided the cost and time of a trial. As with any litigation, the Named Plaintiffs would face an uncertain outcome if this case proceeded, including the risk of dismissal upon pending and future motions as well as the risk of not prevailing at trial.

Pursuant to the Stipulation and Agreement of Settlement ERISA Action (the “Settlement Stipulation”) a Gross Settlement Fund has been established consisting of a deposit of $75,000,000.00 in cash paid by Merrill Lynch, plus interest earned thereon.

The Net Settlement Fund will consist of the Gross Settlement Fund less certain amounts described in the Settlement Stipulation, including expenses associated with Class Notice, Court-approved attorneys’ fees and expenses and case contribution awards, taxes and other costs related to the administration of the Gross Settlement Fund and implementation of the Plan of Allocation, and will be allocated among the Settlement Class in accordance with the Plan of Allocation.

On March 16, 2009, the Court entered an Order Preliminarily Approving the Settlement. On June 26, 2009, Plaintiffs' Co-Lead Counsel filed and posted to the Settlement website (www.merrilllynchERISAsettlement.com) the following documents: Plaintiffs’ Motion and Memorandum of Law in Support of Motion for Final Approval of Class Action Settlement and Plan of Allocation; Plaintiffs’ Motion and Memorandum of Law in Support of Motion for Award of Attorneys’ Fees, Expenses, and Case Contribution Awards; the Joint Declaration of Lynn L. Sarko and Marc I. Machiz in Support of Motion for Final Approval of Class Action Settlement and Plan of Allocation and Motion for Award of Attorneys’ Fees, Expenses, and Case Contribution Awards; and the [Proposed] Order and Final Judgment. The Court has taken these motions under advisement.

Objections to Plaintiffs’ Motion for Final Approval of Class Action Settlement and Plan of Allocation and/or Plaintiffs’ Motion for an Award of Attorneys’ Fees, Expenses, and Case Contribution Awards were to be filed with the Court, and served upon the counsel listed in the Notice of Proposed Settlement, in the manner set forth in the Notice, by July 6, 2009.

On July 20, 2009, Plaintiffs filed their Reply in Further Support of Motion for Final Approval of Class Action Settlement and Plan of Allocation; Plaintiffs’ Motion and Memorandum of Law in Support of Motion for Award of Attorneys’ Fees, Expenses, and Case Contribution Awards, as well as the Supplemental Joint Declaration of Lynn L. Sarko and Marc I. Machiz in Support of Motion for Final Approval of Class Action Settlement and Plan of Allocation and Motion for Award of Attorneys’ Fees, Expenses, and Case Contribution Awards.

The Court held a Fairness Hearing on July 27, 2009, at 4:00 p.m. to decide whether to grant Plaintiffs’ Motion for Final Approval of Class Action Settlement and Plan of Allocation and Plaintiffs’ Motion for an Award of Attorneys’ Fees, Expenses, and Case Contribution Awards. On August 21, 2009, the Court granted final approval of the Settlement.

Settlement FAQ:

Q: How do I know if I am part of the settlement?

The Court has certified the ERISA Action as a class action. The Settlement Class consists of the following persons: (a) all current and former participants and beneficiaries of any of the Plans whose individual Plan account(s) included investments in Merrill Lynch stock at any time during the Class Period (i.e., September 30, 2006 through December 31, 2008, inclusive) and (b) as to each Person within the scope of subsection (a) of this paragraph, his, her or its beneficiaries, alternate payees (including spouses of deceased Persons who were participants of one or more of the Plans), Representatives and Successors-In-Interest, provided, however, that the Class shall not include any Defendant or any of their Immediate Family, beneficiaries, alternate payees (including spouses of deceased Persons who were Plan participants), Representatives or Successors-In-Interest, except for spouses and immediate family members who themselves are or were participants in any of the Plans, who shall be considered members of the Class with respect to their own Plan accounts.

If you are a member of the Settlement Class, your share of the Net Settlement Fund, if any, will be determined by the Court-approved Plan of Allocation, which was filed as part of Memorandum of Law in Support of Plaintiffs’ Motion for Final Approval of Class Action Settlement and Plan of Allocation, and was also described in Section 7 in the Notice.

Q: How much will my payment be?

On June 26, 2009, Plaintiffs submitted a detailed Plan of Allocation to the Court for approval at or after the Fairness Hearing. The Plan of Allocation, which, is available at www.merrilllynchERISAsettlement.com, or by contacting Co-Lead Counsel, describes the manner by which the Settlement proceeds paid into the Plans (the “Net Settlement Fund”) will be distributed to Settlement Class members. In general terms, the Plan of Allocation provides that each Settlement Class member’s share of the Net Settlement Fund will be calculated as follows:

The Net Proceeds shall be distributed among Settlement Class members in proportion to their “Net Losses.” Each Class member’s Net Loss will be the total of the member’s “Merrill Lynch Common Stock Fund Net Loss,” which will be, for each Settlement Class member, the greater of (a) zero, or (b) the result obtained by (i) taking a percentage of the dollar amount of the Settlement Class member’s Plan account balance invested in the Merrill Lynch Stock Fund at the beginning of the Class Period; (ii) adding the dollar amount added to the Settlement Class member’s Plan account balance invested in the Merrill Lynch Stock Fund during the Class Period (including the value of Merrill Lynch common stock received as a dividend); and (iii) subtracting the dollar amount credited to the Settlement Class member’s Plan account balance resulting from dispositions from the Merrill Lynch Stock Fund as well as the balance of any stock held in the Plan on the earlier of either the last day of the Class Period or on the last day the member was a participant in the Plan.

The Net Losses of the Settlement Class members will be aggregated. Each Settlement Class member will be assigned a “Net Loss Percentage,” showing the percentage of the Settlement Class member’s Net Loss in relation to all Settlement Class members’ Net Losses. Each Settlement Class member’s share of the Net Proceeds will be equal to the Net Proceeds multiplied by the member’s Net Loss Percentage.

The trustee or record keeper will perform all calculations for you and determine both whether you are entitled to a share of the Net Proceeds and your share amount. The trustee or record keeper will have access to all available records so you do not need to be concerned if you no longer have your Plan account statements. The Court has approved the Plan of Allocation.

Q. When would I get my payment?

Payment is conditioned on the Court’s approval of the Settlement becoming Final and no longer subject to any appeals. Upon satisfaction of various conditions, the Net Settlement Fund will be allocated to Settlement Class members’ Plan accounts or to accounts created for them pursuant to the Plan of Allocation (described above) as soon as possible after Final approval has been obtained for the Settlement, including the exhaustion of any appeals. Any appeal of the Final approval could take several years. Interest accrued on the Settlement Fund from March 20, 2009 forward will be included in the amount allocated and paid to the Settlement Class. The Settlement Stipulation may be terminated on several grounds. If the Settlement Stipulation is terminated, the Settlement will also be terminated, and the Action will proceed as if the Settlement had not been reached.

If you have any questions about the ERISA Action Settlement, please send an email to info@merrilllynchERISAsettlement.com. This email will be directed to the individuals handling the Settlement. Co-Lead Counsel has also set up a toll free number 1 (800) 255-0894, if you prefer to call with your questions.