UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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MERGER PROPOSED — YOUR VOTE IS VERY IMPORTANT

 

Dear Stockholder:

 

On September 15, 2008, Merrill Lynch & Co., Inc. and Bank of America Corporation announced a strategic business combination in which a subsidiary of Bank of America will merge with and into Merrill Lynch. If the merger is completed, holders of Merrill Lynch common stock will have a right to receive 0.8595 of a share of Bank of America common stock for each share of Merrill Lynch common stock held immediately prior to the merger. In connection with the merger, Bank of America expects to issue approximately 1.710 billion shares of common stock and 359,100 shares of preferred stock (the terms of which are described starting on page 93).

 

The market value of the merger consideration will fluctuate with the market price of Bank of America common stock. The following table shows the closing sale prices of Bank of America common stock and Merrill Lynch common stock as reported on the New York Stock Exchange on September 12, 2008, the last trading day before public announcement of the merger, and on October 30, 2008, the last practicable trading day before the distribution of this document. This table also shows the implied value of the merger consideration proposed for each share of Merrill Lynch common stock, which we calculated by multiplying the closing price of Bank of America common stock on those dates by 0.8595, the exchange ratio.

 

 

The merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and holders of Merrill Lynch common stock are not expected to recognize any gain or loss for United States federal income tax purposes on the exchange of shares of Merrill Lynch common stock for shares of Bank of America common stock in the merger, except with respect to any cash received instead of fractional shares of Bank of America common stock. However, under some circumstances described in this document, the merger will not qualify as a reorganization, and each of us has agreed that in such circumstances we would complete the merger on a taxable basis.

 

The market prices of both Bank of America common stock and Merrill Lynch common stock will fluctuate before the merger. You should obtain current stock price quotations for Bank of America common stock and Merrill Lynch common stock. Bank of America common stock is quoted on the NYSE under the symbol “BAC.” Merrill Lynch common stock is quoted on the NYSE under the symbol “MER.”

 

At a special meeting of Bank of America stockholders, Bank of America stockholders will be asked to vote on the issuance of Bank of America common stock in the merger and certain other matters. The stock issuance proposal requires the votes cast in favor of such proposal to exceed the votes cast against such proposal at the special meeting by holders of Bank of America common stock and 7% Cumulative Redeemable Preferred Stock, Series B, which we refer to as Series B Preferred Stock, voting together without regard to class.

 

At a special meeting of Merrill Lynch stockholders, Merrill Lynch stockholders will be asked to vote on the adoption of the merger agreement and certain other matters. To adopt the merger agreement and to approve the related certificate amendment requires the affirmative vote of the holders of a majority of the outstanding shares of Merrill Lynch common stock entitled to vote.

 

Holders of Merrill Lynch preferred stock and holders of depositary shares representing Merrill Lynch preferred stock are not entitled to and are not being requested to vote at the Merrill Lynch special meeting.

 

The Bank of America board of directors unanimously recommends that Bank of America stockholders vote FOR the proposal to issue shares of Bank of America common stock in the merger and FOR the other related proposals.

 

The Merrill Lynch board of directors unanimously recommends that Merrill Lynch stockholders vote FOR adoption of the merger agreement and FOR the other related proposals.

 

This document describes the special meetings, the merger, the documents related to the merger and other related matters. Please carefully read this entire document, including “Risk Factors” beginning on page 23 for a discussion of the risks relating to the proposed merger. You also can obtain information about our companies from documents that each of us has filed with the Securities and Exchange Commission.

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved the Bank of America common stock or preferred stock to be issued under this document or determined if this document is accurate or adequate. Any representation to the contrary is a criminal offense.

 

The date of this document is October 31, 2008, and it is first being mailed or otherwise delivered to Bank of America and Merrill Lynch stockholders on or about November 3, 2008.

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

 

Merrill Lynch & Co., Inc. (Merrill Lynch) will hold a special meeting of stockholders at Merrill Lynch Headquarters, 4 World Financial Center, New York, NY at 8:00 a.m., local time, on December 5, 2008 to consider and vote upon the following matters:

 

 

The Merrill Lynch board of directors has fixed the close of business on October 10, 2008 as the record date for the holders of Merrill Lynch common stock for the special meeting. The Merrill Lynch & Co., Canada Ltd. (Merrill Lynch Canada) board of directors has fixed the close of business on October 21, 2008 as the record date for the holders of exchangeable securities issued by Merrill Lynch Canada for the special meeting. Only Merrill Lynch stockholders (including holders of exchangeable securities issued by Merrill Lynch Canada) of record at the applicable time are entitled to notice of, and to vote at, the special meeting, or any adjournment or postponement of the special meeting. In order for the merger and the certificate amendment proposal to be approved, the holders of at least a majority of the Merrill Lynch shares outstanding and entitled to vote thereon must vote in favor of adoption of the merger agreement and approval of the certificate amendment.

 

Regardless of whether you plan to attend the special meeting, please submit your proxy with voting instructions. Please vote as soon as possible by accessing the internet site listed on the Merrill Lynch proxy card, by calling the toll-free number listed on the Merrill Lynch proxy card or by submitting your proxy card by mail. If you hold your stock in “street name” through a bank or broker, you must direct your bank or broker to vote in accordance with the instruction form included with these materials and forwarded to you by your bank or broker. This voting instruction form provides instructions on voting by mail, telephone or the internet at www.proxyvote.com. This will not prevent you from voting in person, but it will help to secure a quorum and avoid added solicitation costs. Any holder of Merrill Lynch common stock who is present at the special meeting may vote in person instead of by proxy, thereby canceling any previous proxy. In any event, a proxy may be revoked in writing at any time before the special meeting in the manner described in the accompanying document.

 

If you plan to attend, we ask that you notify our Corporate Secretary by calling (212) 670-0432 or sending an email to corporate_secretary@ml.com.

 

Holders of Merrill Lynch preferred stock and holders of depositary shares representing Merrill Lynch preferred stock are not entitled to and are not being requested to vote at the special meeting.

 

The Merrill Lynch board of directors, by unanimous vote at a meeting duly called, approved the merger and the merger agreement and unanimously recommends that Merrill Lynch stockholders vote “FOR” adoption of the merger agreement and “FOR” approval of the related certificate amendment proposal and “FOR” the adjournment of the Merrill Lynch special meeting if necessary or appropriate to permit further solicitation of proxies.

 

Please do not send any stock certificates at this time.

 

BY ORDER OF THE BOARD OF DIRECTORS,

 

Judith A. Witterschein

Corporate Secretary

 

October 31, 2008

 

 

 

 

 

REFERENCES TO ADDITIONAL INFORMATION

 

This document incorporates by reference important business and financial information about Bank of America and Merrill Lynch from documents that are not included in or delivered with this document. You can obtain documents incorporated by reference in this document, other than certain exhibits to those documents, by requesting them in writing or by telephone from the appropriate company at the following addresses:

 

 

You will not be charged for any of these documents that you request. Bank of America and Merrill Lynch stockholders requesting documents should do so by November 28, 2008, in order to receive them before their respective special meetings.

 

You should rely only on the information contained or incorporated by reference into this document. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this document. This document is dated October 31, 2008, and you should assume that the information in this document is accurate only as of such date. You should assume that the information incorporated by reference into this document is accurate as of the date of such document. Neither the mailing of this document to Merrill Lynch stockholders or Bank of America stockholders nor the issuance by Bank of America of shares of Bank of America common stock in connection with the merger will create any implication to the contrary.

 

This document does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in this document regarding Merrill Lynch has been provided by Merrill Lynch and information contained in this document regarding Bank of America has been provided by Bank of America.

 

See “Where You Can Find More Information” on page 123.

TABLE OF CONTENTS

 

 

APPENDICES

 

 

QUESTIONS AND ANSWERS ABOUT VOTING PROCEDURES FOR THE SPECIAL MEETINGS

Q:		What do Merrill Lynch stockholders need to do now?
A:		After you have carefully read this document and have decided how you wish to vote your shares, please vote your shares promptly. Please vote as soon as possible by accessing the internet site listed on the Merrill Lynch proxy card, by calling the toll-free number listed on the Merrill Lynch proxy card or by submitting your proxy card by mail. If you hold your stock in “street name” through a bank or broker, you must direct your bank or broker to vote in accordance with the instruction form included with these materials and forwarded to you by your bank or broker. This voting instruction form provides instructions on voting by mail, telephone or the internet at www.proxyvote.com. Submitting your proxy card or directing your bank or broker to vote your shares will ensure that your shares are represented and voted at the Merrill Lynch special meeting. If you participate in the Merrill Lynch Retirement Accumulation Plan, the Merrill Lynch Employee Stock Ownership Plan or the Merrill Lynch 401(k) Savings & Retirement Plan, and your account has investments in shares of Merrill Lynch common stock, you must provide voting instructions to the plan trustee (either via the proxy card or by internet or telephone) in order for your shares to be voted as you instruct. If no voting instructions are received, the trustees will vote these shares in the same ratio as the shares for which voting instructions have been provided. Your voting instructions will be held in strict confidence. If you participate in the Merrill Lynch Employee Stock Purchase Plan, your shares must be voted in order to count. If you would like to attend the Merrill Lynch special meeting, see “Can I attend the Merrill Lynch special meeting and vote my shares in person?”
Q:		What do Bank of America stockholders need to do now?
A:		After you have carefully read this document and have decided how you wish to vote your shares, please vote promptly by accessing the internet site listed on your proxy card, by calling the toll-free number listed on your proxy card or by submitting your proxy card by mail. If you hold your stock in “street name” through a bank or broker, you must direct your bank or broker to vote in accordance with the instructions you have received from your bank or broker. Submitting your proxy card or directing your bank or broker to vote your shares will ensure that your shares are represented and voted at the Bank of America special meeting; see “Can I attend the Bank of America special meeting and vote my shares in person?” If you participate in The Bank of America 401(k) Plan, The Bank of America 401(k) Plan for Legacy Companies or the Countrywide Financial Corporation 401(k) Savings and Investment Plan and your account has investments in shares of Bank of America common stock, you must provide voting instructions to the plan trustees (either via the proxy card or by internet or telephone) in order for your shares to be voted as you instruct. If no voting instructions are received, your shares will not be voted. Your voting instructions will be held in strict confidence.
Q:		Why is my vote as a Merrill Lynch stockholder important?
A:		If you do not vote by proxy, telephone or internet or vote in person at the Merrill Lynch special meeting, it will be more difficult for Merrill Lynch to obtain the necessary quorum to hold its special meeting. In addition, your failure to vote, by proxy, telephone, internet or in person, will have the same effect as a vote against adoption of the merger agreement and approval of the related certificate amendment. The merger agreement must be adopted and the related certificate amendment must be approved by the holders of a majority of the outstanding shares of Merrill Lynch common stock entitled to vote at a special meeting. The Merrill Lynch board of directors unanimously recommends that you vote to adopt the merger agreement and approve the related certificate amendment.
Q:		Why is my vote as a Bank of America stockholder important?
A:		If you do not vote by proxy, telephone or internet or vote in person at the Bank of America special meeting, it will be more difficult for Bank of America to obtain the necessary quorum to hold its special meeting. In addition, your failure to vote, by proxy telephone, internet or in person, will have the same effect as a vote against the proposal to increase the number of authorized shares of Bank of America common stock. The proposal to increase the number of authorized shares of Bank of America common stock must be approved by the holders of a majority of the votes represented by the outstanding shares of Bank of

		America common stock and Series B Preferred Stock entitled to vote at its special meeting, voting together without regard to class. Under Delaware law, the affirmative vote of a majority of the votes represented by the outstanding shares of Bank of America common stock entitled to vote at the special meeting, counted separately as a class without the Series B Preferred Stock, is also required to increase the number of authorized shares of Bank of America common stock. In addition, the proposals to issue Bank of America common stock in the merger and to amend the Stock Plan each require the votes cast in favor of each such proposal to exceed the votes cast against such proposal at the special meeting, assuming a quorum. The Bank of America board of directors unanimously recommends that you vote to approve the issuance of the common stock in the merger, the increase the number of authorized shares of common stock and the amendment to the Stock Plan.
Q:		If my shares are held in street name by my broker, will my broker automatically vote my shares for me?
A:		No.  Your broker cannot vote your shares without instructions from you. You should instruct your broker as to how to vote your shares, following the directions your broker provides to you. Please check the voting form used by your broker. Without instructions, your shares will not be voted, which will have the effect described below.
Q:		What if I abstain from voting or fail to instruct my broker?
A:		If you are a Merrill Lynch stockholder and you abstain from voting or fail to instruct your broker to vote your shares and the broker submits an unvoted proxy, a “broker non-vote,” the abstention or broker non-vote will be counted toward a quorum at the Merrill Lynch special meeting, but it will have the same effect as a vote against adoption of the merger agreement and against approval of the related certificate amendment. With respect to the proposal to adjourn the special meeting if necessary or appropriate in order to solicit additional proxies, an abstention will have the same effect as a vote against this proposal. If you fail to instruct your broker to vote your shares your broker may vote your shares in its discretion on this proposal.
		If you are a Bank of America stockholder, an abstention or broker non-vote will be counted toward a quorum at the Bank of America special meeting, but it will have the same effect as a vote against the proposal to increase the number of authorized shares of Bank of America common stock. Abstentions from voting, as well as broker non-votes, are not treated as votes cast and, therefore, will have no effect on the proposal to approve the issuance of shares of Bank of America common stock in the merger or the proposal to amend the Stock Plan, assuming a quorum.
Q:		Can I attend the Merrill Lynch special meeting and vote my shares in person?

A:		Yes.  All holders of Merrill Lynch common stock and exchangeable shares (issued by one of Merrill Lynch’s Canadian subsidiaries, each exchangeable into one share of Merrill Lynch common stock), including stockholders of record and stockholders who hold their shares through banks, brokers, nominees or any other holder of record, are invited to attend the Merrill Lynch special meeting. Holders of record of Merrill Lynch common stock and exchangeable shares as of their respective record dates can vote in person at the Merrill Lynch special meeting. If you are not a stockholder of record, you must obtain a proxy, executed in your favor, from the record holder of your shares, such as a broker, bank or other nominee, to be able to vote in person at the Merrill Lynch special meeting. If you plan to attend the Merrill Lynch special meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership and you must bring a form of personal photo identification with you in order to be admitted. Merrill Lynch reserves the right to refuse admittance to anyone without proper proof of share ownership or without proper photo identification.

Q:		Can I attend the Bank of America special meeting and vote my shares in person?
A:		Yes.  All holders of Bank of America common stock and Series B Preferred Stock, including stockholders of record and stockholders who hold their shares through banks, brokers, nominees or any other holder of record, are invited to attend the Bank of America special meeting. Holders of Bank of America common

		stock and Series B Preferred Stock can vote in person at the Bank of America special meeting. If you are not a stockholder of record, you must obtain a proxy, executed in your favor, from the record holder of your shares, such as a broker, bank or other nominee, to be able to vote in person at the special meeting. If you plan to attend the Bank of America special meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership and you must bring a form of personal photo identification with you in order to be admitted. Bank of America reserves the right to refuse admittance to anyone without proper proof of share ownership or without proper photo identification.
Q:		Will Merrill Lynch be required to submit the merger agreement to its stockholders even if the Merrill Lynch board of directors has withdrawn, modified or qualified its recommendation?
A:		Yes.  Unless the merger agreement is terminated before the Merrill Lynch special meeting, Merrill Lynch is required to submit the merger agreement to its stockholders even if the Merrill Lynch board of directors has withdrawn, modified or qualified its recommendation, consistent with the terms of the merger agreement.
Q:		Will Bank of America be required to submit the proposal to issue shares of Bank of America common stock in the merger to its stockholders even if the Bank of America board of directors has withdrawn, modified or qualified its recommendation?
A:		Yes.  Unless the merger agreement is terminated before the Bank of America special meeting, Bank of America is required to submit the proposal to issue shares of Bank of America common stock in the merger to its stockholders even if the Bank of America board of directors has withdrawn, modified or qualified its recommendation, consistent with the terms of the merger agreement.
Q:		Is the merger expected to be taxable to Merrill Lynch stockholders?
A:		The merger is currently intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, which we refer to as the Code, and holders of Merrill Lynch common stock are not expected to recognize any gain or loss for United States federal income tax purposes on the exchange of shares of Merrill Lynch common stock for shares of Bank of America common stock in the merger, except with respect to cash received instead of fractional shares of Bank of America common stock.
		However, as discussed below under “Recent Developments,” under some circumstances Merrill Lynch may issue preferred stock to the U.S. Treasury pursuant to the Treasury’s Capital Purchase Program. Because that issuance would prevent the merger from qualifying as a “reorganization,” both Bank of America and Merrill Lynch have agreed that they would waive the tax opinion conditions to completion of the merger that would otherwise apply and complete the merger as a taxable transaction. If the merger does not qualify as a “reorganization” within the meaning of Section 368(a) of the Code, the merger generally will be a taxable transaction to you, and you will generally recognize gain or loss in an amount equal to the difference, if any, between (i) the sum of the value of the Bank of America common stock plus the amount of any cash received instead of fractional shares of Bank of America common stock and (ii) your adjusted tax basis in the shares of Merrill Lynch common stock exchanged in the merger.

		You should read “United States Federal Income Tax Consequences of the Merger” beginning on page 97 for a more complete discussion of the United States federal income tax consequences of the merger. Tax matters can be complicated and the tax consequences of the merger to you will depend on your particular tax situation. You should consult your tax advisor to determine the tax consequences of the merger to you.

Q:		If I am a Merrill Lynch stockholder, can I change or revoke my vote?

A:		Yes.  Regardless of the method you used to cast your vote, if you are a holder of record, you may change your vote by signing and returning a new proxy card with a later date, by calling the toll-free number listed on the Merrill Lynch proxy card or by accessing the internet site listed on the Merrill Lynch proxy card by 11:59 p.m. Eastern time on December 4, 2008, or by attending the Merrill Lynch special meeting and voting by ballot at the special meeting.

		If you are a Merrill Lynch stockholder of record and wish to revoke rather than change your vote, you must send written, signed revocation to Merrill Lynch & Co., Inc., c/o BroadRidge Financial Services, Registered Issuer Client Services Department, 51 Mercedes Way, Edgewood, NY 11717, which must be received by 11:59 p.m. Eastern time on December 4, 2008. You must include your control number.

		If you hold your shares in street name, and wish to change or revoke your vote, please refer to the information on the voting instruction form included with these materials and forwarded to you by your bank, broker or other holder of record to see your voting options.
		Any holder of Merrill Lynch common stock entitled to vote in person at the Merrill Lynch special meeting may vote in person regardless of whether a proxy has been previously given, but the mere presence of a stockholder at the special meeting will not constitute revocation of a previously given proxy.
Q:		If I am a Bank of America stockholder, can I change my vote?

A:		Yes.  You may revoke any proxy at any time before it is voted by signing and returning a proxy card with a later date, delivering a written revocation letter pursuant to the instructions below, or by attending the Bank of America special meeting in person, notifying the Corporate Secretary and voting by ballot at the special meeting. Bank of America stockholders may send their written revocation letter to Bank of America Corporation, Attention: Corporate Secretary, 101 S. Tryon Street, NC1-002-29-01, Charlotte, North Carolina 28255. If you have voted your shares by telephone or through the internet, you may revoke your prior telephone or internet vote by recording a different vote using telephone or internet voting, or by signing and returning a proxy card dated as of a date that is later than your last telephone or internet vote.

		Any stockholder entitled to vote in person at the Bank of America special meeting may vote in person regardless of whether a proxy has been previously given, but the mere presence (without notifying the Secretary of Bank of America) of a stockholder at the special meeting will not constitute revocation of a previously given proxy.
Q:		If I am a Merrill Lynch stockholder with shares represented by stock certificates, should I send in my Merrill Lynch stock certificates now?
A:		No.  You should not send in your Merrill Lynch stock certificates at this time. After the merger, Bank of America will send you instructions for exchanging Merrill Lynch stock certificates for the merger consideration. Unless Merrill Lynch stockholders specifically request to receive Bank of America stock certificates, the shares of Bank of America stock they receive in the merger will be issued in book-entry form. Please do not send in your stock certificates with your proxy card.
Q:		When do you expect to complete the merger?
A:		We currently expect to complete the merger on or after December 31, 2008. However, we cannot assure you when or if the merger will occur. We must first obtain the approvals of Merrill Lynch and Bank of America stockholders at the special meetings and the required regulatory approvals described below in “Regulatory Approvals Required for the Merger.”
Q:		Whom should I call with questions?
A:		Merrill Lynch stockholders should call Georgeson Inc., Merrill Lynch’s proxy solicitor, toll-free at (866) 873-6990 about the merger and related transactions. Bank of America stockholders should call Laurel Hill Advisory Group, LLC, Bank of America’s proxy solicitor, toll-free at (866) 889-7083.

 

SUMMARY

										Implied Value of
										One Share of
		Bank of America				Merrill Lynch				Merrill Lynch
		Common Stock				Common Stock				Common Stock
At September 12, 2008		$	33.74			$	17.05			$	29.00
At October 30, 2008		$	22.78			$	17.78			$	19.58

	•	if a governmental entity issues a non-appealable final order prohibiting the merger;
	•	if a governmental entity which must grant a regulatory approval as a condition to the merger denies such approval of the merger and such action has become final and non-appealable;
	•	if the other party breaches the merger agreement in a way that would entitle the party seeking to terminate the agreement not to consummate the merger, subject to the right of the breaching party to cure the breach within 30 days following written notice (unless it is not possible due to the nature or timing of the breach for the breaching party to cure the breach);
	•	if the other party has committed a breach in any material respect of its obligation to use reasonable best efforts to obtain stockholder approval;
	•	if the merger has not been completed by September 15, 2009, unless the reason the merger has not been completed by that date is a breach of the merger agreement by the company seeking to terminate the merger agreement; or
	•	if Merrill Lynch stockholders do not adopt the merger agreement at the Merrill Lynch special meeting or if Bank of America stockholders do not approve the issuance of Bank of America common stock in the merger at the Bank of America special meeting.

	•	approve the issuance of Bank of America common stock in the merger;
	•	approve the amendment to the Stock Plan;
	•	approve a proposal to adopt an amendment to the Bank of America amended and restated certificate of incorporation, to increase the number of authorized shares of Bank of America common stock from 7.5 billion to 10 billion; and
	•	approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies, in the event that there are not sufficient votes at the time of the special meeting to approve the foregoing proposals.

	•	adopt the merger agreement;
	•	approve the related certificate amendment; and
	•	approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies, in the event that there are not sufficient votes at the time of the special meeting to approve the foregoing proposals.

 

SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF BANK OF AMERICA

		Six Months Ended
		June 30,								Years Ended December 31,
		2008				2007				2007				2006				2005				2004				2003
		(Dollars in millions, except per share information)
Income statement
Net interest income		$	20,612			$	16,659			$	34,433			$	34,591			$	30,737			$	27,960			$	20,505
Noninterest income			16,706				21,181				31,886				37,989				26,438				22,729				18,270
Total revenue, net of interest expense			37,318				37,840				66,319				72,580				57,175				50,689				38,775
Provision for credit losses			11,840				3,045				8,385				5,010				4,014				2,769				2,839
Noninterest expense, before merger and restructuring charges			18,377				18,126				36,600				34,792				28,269				26,394				20,155
Merger and restructuring charges			382				186				410				805				412				618				—
Income before income taxes			6,719				16,483				20,924				31,973				24,480				20,908				15,781
Income tax expense			2,099				5,467				5,942				10,840				8,015				6,961				5,019
Net income			4,620				11,016				14,982				21,133				16,465				13,947				10,762
Average common shares issued and outstanding (in thousands)			4,431,870				4,426,046				4,423,579				4,526,637				4,008,688				3,758,507				2,973,407
Average diluted common shares issued and outstanding (in thousands)			4,460,633				4,487,224				4,480,254				4,595,896				4,068,140				3,823,943				3,030,356
Performance ratios
Return on average assets			0.53	%			1.44	%			0.94	%			1.44	%			1.30	%			1.34	%			1.44	%
Return on average common stockholders’ equity			6.06				16.86				11.08				16.27				16.51				16.47				21.50
Total ending equity to total ending assets			9.48				8.85				8.56				9.27				7.86				9.03				6.76
Total average equity to total average assets			8.98				8.66				8.53				8.90				7.86				8.12				6.69
Dividend payout			134.71				45.71				72.26				45.66				46.61				46.31				39.76
Per common share data
Earnings		$	0.96			$	2.47			$	3.35			$	4.66			$	4.10			$	3.71			$	3.62
Diluted earnings			0.95				2.44				3.30				4.59				4.04				3.64				3.55
Dividends paid			1.28				1.12				2.40				2.12				1.90				1.70				1.44
Book value			31.11				29.95				32.09				29.70				25.32				24.70				16.86
Market price per share of common stock
Closing		$	23.87			$	48.89			$	41.26			$	53.39			$	46.15			$	46.99			$	40.22
High closing			45.03				54.05				54.05				54.90				47.08				47.44				41.77
Low closing			23.87				48.80				41.10				43.09				41.57				38.96				32.82
Market capitalization		$	106,292			$	216,922			$	183,107			$	238,021			$	184,586			$	190,147			$	115,926

		Six Months Ended
		June 30,								Years Ended December 31,
		2008				2007				2007				2006				2005				2004				2003
		(Dollars in millions, except per share information)
Average balance sheet
Total loans and leases		$	877,150			$	727,193			$	776,154			$	652,417			$	537,218			$	472,617			$	356,220
Total assets			1,759,770				1,541,644				1,602,073				1,466,681				1,269,892				1,044,631				749,104
Total deposits			786,813				691,898				717,182				672,995				632,432				551,559				406,233
Long-term debt			201,828				153,591				169,855				130,124				97,709				92,303				67,077
Common stockholders’ equity			140,849				130,718				133,555				129,773				99,590				84,584				50,035
Total stockholders’ equity			158,078				133,569				136,662				130,463				99,861				84,815				50,091
Asset quality
Allowance for credit losses(1)		$	17,637			$	9,436			$	12,106			$	9,413			$	8,440			$	9,028			$	6,579
Nonperforming assets measured at historical cost(2)			9,749				2,392				5,948				1,856				1,603				2,455				3,021
Allowance for loan and lease losses as a percentage of total loans and leases outstanding measured at historical cost(3)			1.98	%			1.20	%			1.33	%			1.28	%			1.40	%			1.65	%			1.66	%
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases measured at historical cost			187				397				207				505				532				390				215
Net charge-offs		$	6,334			$	2,922			$	6,480			$	4,539			$	4,562			$	3,113			$	3,106
Net charge-offs as a percentage of average loans and leases outstanding measured at historical cost (3,4)			1.46	%			0.81	%			0.84	%			0.70	%			0.85	%			0.66	%			0.87	%
Nonperforming loans and leases as a percentage of total loans and leases outstanding measured at historical cost(3)			1.06				0.30				0.64				0.25				0.26				0.42				0.77
Nonperforming assets as a percentage of total loans, leases and foreclosed properties(2,3)			1.13				0.32				0.68				0.26				0.28				0.47				0.81
Ratio of the allowance for loan and lease losses at period end to net charge-offs(4)			1.34				1.54				1.79				1.99				1.76				2.77				1.98
Capital ratios (period end)
Risk-based capital:
Tier 1			8.25	%			8.52	%			6.87	%			8.64	%			8.25	%			8.20	%			8.02	%
Total			12.60				12.11				11.02				11.88				11.08				11.73				12.05
Tier 1 Leverage			6.09				6.33				5.04				6.36				5.91				5.89				5.86

(1)		Includes the allowance for loan and lease losses, and the reserve for unfunded lending commitments.
(2)		Balances and ratios do not include nonperforming loans held-for-sale included in other assets and nonperforming available-for-sale debt securities.
(3)		Ratios do not include loans measured at fair value in accordance with Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” at and for the year ended December 31, 2007 and at and for the periods ended June 30, 2008 and 2007.
(4)		Net charge-off ratios for the six month periods are calculated on an annualized basis.

 

SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF MERRILL LYNCH

		Six Months Ended								Years Ended Last Friday in December
		June 27,				June 29,				2007				2006				2005				2004				2003
		2008				2007				(52 weeks)				(52 weeks)				(52 weeks)				(53 weeks)				(52 weeks)
		(Dollars in millions, except per share amounts)
Results of Operations
Total revenues		$	18,742			$	44,541			$	62,675			$	69,352			$	46,848			$	31,916			$	27,392
Less interest expense			17,924				25,479				51,425				35,571				21,571				10,416				7,844
Revenues, net of interest expense			818				19,062				11,250				33,781				25,277				21,500				19,548
Noninterest expenses			12,230				13,335				24,081				23,971				18,516				15,992				14,474
Pre-tax (loss)/earnings from continuing operations			(11,412	)			5,727				(12,831	)			9,810				6,761				5,508				5,074
Income tax (benefit)/expense			(4,809	)			1,687				(4,194	)			2,713				1,946				1,244				1,341
Net (loss)/earnings from continuing operations		$	(6,603	)		$	4,040			$	(8,637	)		$	7,097			$	4,815			$	4,264			$	3,733
Pre-tax earnings from discontinued operations		$	(57	)		$	391			$	1,397			$	616			$	470			$	327			$	146
Income tax expense (benefit)			(44	)			134				537				214				169				155				43
Net (loss)/earnings from discontinued operations		$	(13	)		$	257			$	860			$	402			$	301			$	172			$	103
Net (loss)/earnings applicable to common stockholders(1)		$	(7,027	)		$	4,173			$	(8,047	)		$	7,311			$	5,046			$	4,395			$	3,797
Financial Position (period end)
Total assets		$	966,210			$	1,076,324			$	1,020,050			$	841,299			$	681,015			$	628,098			$	480,233
Short-term borrowings(2)			282,711				398,759				316,545				284,226				221,389				180,058				111,727
Deposits			100,458				82,801				103,987				84,124				80,016				79,746				79,457
Long-term borrowings			270,436				226,016				260,973				181,400				132,409				119,513				85,178
Junior subordinated notes (related to trust preferred securities)			5,193				4,403				5,154				3,813				3,092				3,092				3,203
Total stockholders’ equity			34,778				42,191				31,932				39,038				35,600				31,370				28,884
Common Share Data (in thousands, except per share amounts)
(Loss)/earnings per share:
Basic (loss)/earnings per common share from continuing operations		$	(7.17	)		$	4.67			$	(10.73	)		$	7.96			$	5.32			$	4.62			$	4.10
Basic (loss)/earnings per common share from discontinued operations			(0.01	)			0.31				1.04				0.46				0.34				0.19				0.12
Basic (loss)/earnings per common share		$	(7.18	)		$	4.98			$	(9.69	)		$	8.42			$	5.66			$	4.81			$	4.22

		Six Months Ended								Years Ended Last Friday in December
		June 27,				June 29,				2007				2006				2005				2004				2003
		2008				2007				(52 weeks)				(52 weeks)				(52 weeks)				(53 weeks)				(52 weeks)
		(Dollars in millions, except per share amounts)
Diluted (loss)/earnings per common share from continuing operations		$	(7.17	)		$	4.22			$	(10.73	)		$	7.17			$	4.85			$	4.21			$	3.77
Diluted (loss)/earnings per common share from discontinued operations			(0.01	)			0.28				1.04				0.42				0.31				0.17				0.10
Diluted (loss)/earnings per common share		$	(7.18	)		$	4.50			$	(9.69	)		$	7.59			$	5.16			$	4.38			$	3.87
Weighted-average shares outstanding:
Basic			978,463				837,551				830,415				868,095				890,744				912,935				900,711
Diluted			978,463				926,778				830,415				962,962				977,736				1,003,779				980,947
Shares outstanding at period-end			985,376				862,559				939,112				867,972				919,201				931,826				949,907
Book value per share		$	21.43			$	43.55			$	29.34			$	41.35			$	35.82			$	32.99			$	29.96
Dividends paid per share			0.70				0.70				1.40				1.00				0.76				0.64				0.64
Financial Ratios
Pre-tax profit margin from continuing operations			N/M				30.0	%			N/M				29.0	%			26.7	%			25.6	%			26.0	%
Return on average assets			N/M				0.4				N/M				0.9				0.7				0.8				0.8
Return on average common stockholders’ equity from continuing operations			N/M				21.4				N/M				20.1				15.0				13.8				14.4
Other Statistics
Full-time employees(3)			60,000				61,900				64,200				56,200				54,600				50,600				48,100

(1)		Net(loss)/earnings less preferred stock dividends.
(2)		Consists of payables under repurchase agreements and securities loaned transactions and short-term borrowings.
(3)		Excludes full-time employees on salary continuation severance of 2,800 and 300 at June 27, 2008 and June 29, 2007, and 700, 100, 200, 100 and 200 at the last Friday in December 2007, 2006, 2005, 2004, and 2003, respectively.

 

UNAUDITED SELECTED PRO FORMA COMBINED FINANCIAL INFORMATION

		Six Months Ended				Twelve Months Ended
		June 30, 2008				December 31, 2007(1)
		(Dollars in millions, except per share data)
Pro Forma Combined:
Income Statement
Net interest income		$	22,319			$	39,925
Noninterest income			16,052				37,587
Total revenue, net of interest expense			38,371				77,512
Provision for credit losses			12,175				8,528
Noninterest expense before merger and restructuring charges			30,335				60,889
Merger and restructuring charges			827				410
Income (loss) from continuing operations before income taxes			(4,966	)			7,685
Income tax expense (benefit)			(2,799	)			1,615
Income (loss) from continuing operations			(2,167	)			6,070
Average common shares issued and outstanding (in thousands)			5,272,859				5,137,321
Average diluted common shares issued and outstanding (in thousands)			5,272,859				5,263,289
Performance ratios
Return on average assets			(0.15	)%			N/M
Return on average common stockholders’ equity			(3.38	)%			N/M
Total equity to total assets (period end)			7.72	%			N/M
Total average equity to total average assets			7.20	%			N/M
Dividend payout ratio(2)			—				212.39

		Six Months Ended				Twelve Months Ended
		June 30, 2008				December 31, 2007(1)
		(Dollars in millions, except per share data)
Per common share data
Earnings (loss) from continuing operations		$	(0.56	)		$	1.09
Diluted earnings (loss) from continuing operations			(0.56	)			1.07
Cash dividends paid			1.28				2.40
Book value			31.96				N/M
Average balance sheet
Total loans and leases			953,674				N/M
Total assets			2,838,792				N/M
Total deposits			890,260				N/M
Long-term debt			444,153				N/M
Common stockholders’ equity			175,969				N/M
Total stockholders’ equity			204,392				N/M
Capital Ratios
Risk-based capital			7.86	%			N/M
Tier 1			12.11	%			N/M
Total			4.78	%			N/M
Leverage

(1)		Average balance sheet amounts and capital and other ratios as of December 31, 2007 are not meaningful (N/M) as purchase accounting adjustments were calculated as of June 30, 2008.
(2)		The pro forma dividend payout ratio is not presented for the six months ended June 30, 2008 as pro forma income from continuing operations for the period is a net loss. If presented, the pro forma dividend payout ratio would be (218.06).
(3)		Bank of America’s historical per share data is as of or for the year ended December 31, 2007, and the six months ended June 30, 2008, and Merrill Lynch’s comparable information is as of or for the year ended December 28, 2007 and the six months ended June 27, 2008.

 

COMPARATIVE PER SHARE DATA

		Comparative Per Share Data
														Per
		Bank of								Pro Forma				Equivalent
		America(1)				Merrill Lynch(1)				Combined(2)				MER Share(3)
Income (loss) from continuing operations for the year ended December 2007:
Basic		$	3.35			$	(10.73	)		$	1.09			$	0.94
Diluted			3.30				(10.73	)			1.07				0.92
Income (loss) from continuing operations for the six months ended June 2008:
Basic			0.96				(7.17	)			(0.56	)			(0.48	)
Diluted			0.95				(7.17	)			(0.56	)			(0.48	)
Dividends Paid:
For the year ended December 2007			2.40				1.40				2.40				2.06
For the six months ended June 2008			1.28				0.70				1.28				1.10
Book Value(4):
As of year-end December 2007			32.09				29.34				N/M				N/M
As of month-end June 2008			31.11				21.43				31.96				27.47

(1)		Bank of America’s historical per share data is as of or for the year ended December 31, 2007, and the six months ended June 30, 2008, and Merrill Lynch’s comparable information is as of or for the year ended December 28, 2007, and the six months ended June 27, 2008.
(2)		Does not reflect the impact of business model changes as a result of current market conditions which may impact revenues, expense efficiencies, asset dispositions and share repurchases, among other factors, that may result as a consequence of the merger and, accordingly, does not attempt to predict or suggest future results.
(3)		Reflects Merrill Lynch shares at the exchange ratio of 0.8595.
(4)		Book value as of December 31, 2007, is not meaningful (N/M) as purchase accounting adjustments were calculated as of June 30, 2008.

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

	•	those discussed and identified in public filings with the SEC made by Bank of America or Merrill Lynch;
	•	completion of the merger is dependent on, among other things, receipt of stockholder and regulatory approvals, the timing of which cannot be predicted with precision and which may not be received at all;
	•	the extent and duration of continued economic and market disruptions and governmental regulatory proposals to address these disruptions;
	•	the merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events;
	•	the integration of Merrill Lynch’s business and operations with those of Bank of America may take longer than anticipated, may be more costly than anticipated and may have unanticipated adverse results relating to Merrill Lynch’s or Bank of America’s existing businesses;
	•	the anticipated cost savings and other synergies of the merger may take longer to be realized or may not be achieved in their entirety, and attrition in key client, partner and other relationships relating to the merger may be greater than expected;
	•	decisions to restructure, divest or eliminate business units or otherwise change the business mix of either company;
	•	the risk of new and changing regulation and/or regulatory actions in the U.S. and internationally; and
	•	the exposure to litigation, including the possibility that litigation relating to the merger agreement and related transactions could delay or impede the completion of the merger.

 

In addition to the other information included and incorporated by reference in this document, stockholders should consider the matters described below in determining whether to adopt the merger agreement and approve the related certificate amendment in the case of Merrill Lynch stockholders, and approve the issuance of Bank of America common stock in the merger, the amendment to the Stock Plan and the increase in the number of authorized shares of Bank of America common stock in the case of Bank of America stockholders.

 

Because the market price of Bank of America common stock will fluctuate, Merrill Lynch stockholders cannot be sure of the market value of the merger consideration they will receive.

 

Upon completion of the merger, each share of Merrill Lynch common stock will be converted into merger consideration consisting of 0.8595 of a share of Bank of America common stock. The market value of the merger consideration may vary from the closing price of Bank of America common stock on the date we announced the merger, on the date that this document was mailed to Merrill Lynch stockholders, on the date of the special meeting of the Merrill Lynch stockholders and on the date we complete the merger and thereafter. Any change in the market price of Bank of America common stock prior to completion of the merger will affect the market value of the merger consideration that Merrill Lynch stockholders will receive upon completion of the merger. Accordingly, at the time of the special meeting, Merrill Lynch stockholders will not know or be able to calculate the market value of the merger consideration they would receive upon completion of the merger. Neither company is permitted to terminate the merger agreement or resolicit the vote of Merrill Lynch stockholders solely because of changes in the market prices of either company’s stock. There will be no adjustment to the merger consideration for changes in the market price of either shares of Bank of America common stock or shares of Merrill Lynch common stock. Stock price changes may result from a variety of factors, including general market and economic conditions, changes in our respective businesses, operations and prospects, and regulatory considerations. Many of these factors are beyond our control. You should obtain current market quotations for shares of Bank of America common stock and for shares of Merrill Lynch common stock.

 

We may fail to realize all of the anticipated benefits of the merger.

 

The success of the merger will depend, in part, on our ability to realize the anticipated benefits and cost savings from combining the businesses of Bank of America and Merrill Lynch. However, to realize these anticipated benefits and cost savings, we must successfully combine the businesses of Bank of America and Merrill Lynch. If we are not able to achieve these objectives, the anticipated benefits and cost savings of the merger may not be realized fully or at all or may take longer to realize than expected.

 

Bank of America and Merrill Lynch have operated and, until the completion of the merger, will continue to operate, independently. It is possible that the integration process could result in the loss of key employees, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits of the merger. Integration efforts between the two companies will also divert management attention and resources. These integration matters could have an adverse effect on each of Merrill Lynch and Bank of America during such pre-merger transition period and for an undetermined period after consummation of the merger.

 

The market price of Bank of America common stock after the merger may be affected by factors different from those affecting the shares of Merrill Lynch or Bank of America currently.

 

The businesses of Bank of America and Merrill Lynch differ in important respects and, accordingly, the results of operations of the combined company and the market price of the combined company’s shares of common stock may be affected by factors different from those currently affecting the independent results of operations of Bank of America and Merrill Lynch. For a discussion of the businesses of Bank of America and Merrill Lynch and of certain factors to consider in connection with those businesses, see the documents

incorporated by reference in this document and referred to under “Where You Can Find More Information” beginning on page 123.

 

Merrill Lynch stockholders will have a reduced ownership and voting interest after the merger and will exercise less influence over management.

 

Merrill Lynch’s stockholders currently have the right to vote in the election of the board of directors of Merrill Lynch and on other matters affecting Merrill Lynch. When the merger occurs, each Merrill Lynch stockholder that receives shares of Bank of America common stock will become a stockholder of Bank of America with a percentage ownership of the combined organization that is much smaller than the stockholder’s percentage ownership of Merrill Lynch. It is expected that the former stockholders of Merrill Lynch as a group will own less than 23% of the outstanding shares of Bank of America immediately after the merger. Because of this, Merrill Lynch’s stockholders will have less influence on the management and policies of Bank of America than they now have on the management and policies of Merrill Lynch.

 

Termination of the merger agreement could negatively impact Merrill Lynch.

 

If the merger agreement is terminated, there may be various consequences including:

 

 

If the merger agreement is terminated and Merrill Lynch’s board of directors seeks another merger or business combination, Merrill Lynch stockholders cannot be certain that Merrill Lynch will be able to find a party willing to pay an equivalent or more attractive price than the price Bank of America has agreed to pay in the merger.

 

The opinions obtained by Merrill Lynch and Bank of America from their respective financial advisors will not reflect changes in circumstances between signing the merger agreement and the merger.

 

Neither Merrill Lynch nor Bank of America has obtained updated opinions as of the date of this document from its financial advisors. Changes in the operations and prospects of Bank of America or Merrill Lynch, general market and economic conditions and other factors that may be beyond the control of Bank of America and Merrill Lynch, and on which each financial advisor’s opinion was based, may significantly alter the value of Bank of America or Merrill Lynch or the prices of shares of Bank of America common stock or Merrill Lynch common stock by the time the merger is completed. None of the opinions speaks as of the time the merger will be completed or as of any date other than the date of such opinions. Because neither Merrill Lynch nor Bank of America currently anticipates asking any of its financial advisors to update its respective opinion, none of the opinions will address the fairness of the exchange ratio from a financial point of view at the time the merger is completed. Each of the Merrill Lynch board of directors’ recommendation that Merrill Lynch stockholders vote “FOR” adoption of the merger agreement and “FOR” approval of the related certificate amendment, and the Bank of America board of directors’ recommendation that Bank of America stockholders vote “FOR” approval of the issuance of shares of Bank of America common stock in the merger, however, is as of the date of this document. For a description of the opinions that Merrill Lynch and Bank of America received from their respective financial advisors, please refer to “The Merger — Opinion of Merrill Lynch’s Financial Advisor” and “The Merger — Opinions of Bank of America’s Financial Advisors”. For a description of the other factors considered by Merrill Lynch’s board of directors and Bank of America’s board of directors in determining to approve the merger, please refer to “The Merger — Merrill Lynch’s Reasons for the Merger; Recommendation of the Merrill Lynch Board of Directors” and “The Merger — Bank of America’s Reasons for the Merger; Recommendation of the Bank of America Board of Directors”.

The merger agreement limits Merrill Lynch’s ability to pursue alternatives to the merger.

 

The merger agreement contains “no shop” provisions that, subject to limited exceptions, limit Merrill Lynch’s ability to discuss, facilitate or commit to competing third-party proposals to acquire all or a significant part of the company. These provisions might discourage a potential competing acquiror that might have an interest in acquiring all or a significant part of Merrill Lynch from considering or proposing that acquisition even if it were prepared to pay consideration with a higher per share market price than that proposed in the merger, or might result in a potential competing acquiror’s proposing to pay a lower per share price to acquire Merrill Lynch than it might otherwise have proposed to pay. Merrill Lynch can consider and participate in discussions and negotiations with respect to an alternative proposal so long as the Merrill Lynch board of directors determines in good faith (after consultation with legal counsel) that failure to do so would cause it to violate its fiduciary duties to Merrill Lynch stockholders under applicable law.

 

The merger is subject to the receipt of consents and approvals from government entities that may impose conditions that could have an adverse effect on the combined company following the merger.

 

Before the merger may be completed, various approvals or consents must be obtained from the Federal Reserve Board and various domestic and foreign bank regulatory, securities, antitrust, insurance and other authorities. These governmental entities, including the Federal Reserve Board, may impose conditions on the completion of the merger or require changes to the terms of the merger. Although Bank of America and Merrill Lynch do not currently expect that any such conditions or changes would be imposed, there can be no assurance that they will not be, and such conditions or changes could have the effect of delaying completion of the merger or imposing additional costs on or limiting the revenues of Bank of America following the merger, any of which might have a material adverse effect on Bank of America following the merger.

 

The merger is subject to closing conditions, including stockholder approval, that, if not satisfied or waived, will result in the merger not being completed, which may result in material adverse consequences to Merrill Lynch’s business and operations.

 

The merger is subject to closing conditions, including the approval of Merrill Lynch and Bank of America stockholders that, if not satisfied, will prevent the merger from being completed. The closing condition that Merrill Lynch stockholders adopt the merger agreement, and the closing condition that Bank of America stockholders approve the issuance of Bank of America common stock in the merger, may not be waived under applicable law and must be satisfied for the merger to be completed. Merrill Lynch currently expects that all directors and executive officers of Merrill Lynch will vote their shares of Merrill Lynch common stock in favor of the proposals presented at the special meeting. Bank of America currently expects that all directors and officers of Bank of America will vote their shares of Bank of America common stock in favor of the proposals presented at the special meeting. If Merrill Lynch’s stockholders do not adopt the merger agreement or if Bank of America’s stockholders do not approve the issuance of Bank of America common stock in the merger and the merger is not completed, the resulting failure of the merger could have a material adverse impact on Merrill Lynch’s business and operations. In addition to the required approvals and consents from governmental entities and the approval of Merrill Lynch and Bank of America stockholders, the merger is subject to a number of other conditions beyond Bank of America’s and Merrill Lynch’s control that may prevent, delay or otherwise materially adversely affect its completion. We cannot predict whether and when these other conditions will be satisfied. See “The Merger Agreement — Conditions to Complete the Merger” beginning on page 88.

 

Merrill Lynch officers and directors have financial interests in the merger that differ from the interests of Merrill Lynch stockholders.

 

Merrill Lynch’s executive officers and directors have financial interests in the merger that are different from, or in addition to, the interests of Merrill Lynch’s stockholders. The members of the Merrill Lynch board of directors were aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending to Merrill Lynch stockholders that the merger

agreement be adopted. Please see “The Merger — Merrill Lynch’s Officers and Directors Have Financial Interests in the Merger” beginning on page 73 for information about these financial interests.

 

The shares of Bank of America common stock to be received by Merrill Lynch stockholders as a result of the merger will have different rights from the shares of Merrill Lynch common stock.

 

Upon completion of the merger, Merrill Lynch stockholders will become Bank of America stockholders and their rights as stockholders will be governed by the certificate of incorporation and bylaws of Bank of America. The rights associated with Merrill Lynch common stock are different from the rights associated with Bank of America common stock. Please see “Comparison of Stockholders’ Rights” beginning on page 100 for a discussion of the different rights associated with Bank of America common stock.

 

The merger may be a taxable transaction to you.

 

The merger is currently intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, and holders of Merrill Lynch common stock are not expected to recognize any gain or loss for United States federal income tax purposes on the exchange of shares of Merrill Lynch common stock for shares of Bank of America common stock in the merger, except with respect to cash received instead of fractional shares of Bank of America common stock. However, if Merrill Lynch issues preferred stock to the U.S. Treasury pursuant to the CPP, the merger will not qualify as a reorganization, and the parties have agreed to waive the tax opinion closing conditions. In the event that the merger does not qualify as a “reorganization” within the meaning of Section 368(a) of the Code, the merger generally will be a taxable transaction to you, and you will generally recognize gain or loss in an amount equal to the difference, if any, between (i) the sum of the value of the Bank of America common stock plus the amount of any cash received instead of fractional shares of Bank of America common stock and (ii) your adjusted tax basis in the shares of Merrill Lynch common stock exchanged in the merger. You should read “United States Federal Income Tax Consequences of the Merger” beginning on page 97 for a more complete discussion of the United States federal income tax consequences of the merger. Tax matters can be complicated and the tax consequences of the merger to you will depend on your particular tax situation. You should consult your tax advisor to determine the tax consequences of the merger to you.

 

This section contains information about the special meeting of Bank of America stockholders that has been called to consider and approve the issuance of shares of Bank of America common stock in the merger, the amendment to the Stock Plan and the increase in the number of authorized shares of Bank of America common stock.

 

Together with this document, Bank of America is also sending you a notice of the special meeting and a form of proxy that is solicited by the Bank of America board of directors. The special meeting will be held on December 5, 2008, at 11:00 a.m., local time, in the Palmetto Ballroom of the International Trade Center at 200 North College St., Charlotte, NC.

 

The purpose of the special meeting is to vote on

 

 

Each copy of this document mailed to holders of Bank of America common stock and Series B Preferred Stock is accompanied by a form of proxy with instructions for voting by mail, by telephone or through the internet. If you hold stock in your name as a stockholder of record and are voting by mail, you should complete and return the proxy card accompanying this document to ensure that your vote is counted at the special meeting, or at any adjournment or postponement of the special meeting, regardless of whether you plan to attend the special meeting. You may also vote your shares by telephone or through the internet. Information and applicable deadlines for voting by telephone or through the internet are set forth in the enclosed proxy card instructions.

 

If you hold your stock in “street name” through a bank or broker, you must direct your bank or broker to vote in accordance with the instructions you have received from your bank or broker.

 

If you hold stock in your name as a stockholder of record, you may revoke any proxy at any time before it is voted by signing and returning a proxy card with a later date, delivering a written revocation letter to Bank of America’s Secretary, or by attending the special meeting in person, notifying the Secretary, and voting by ballot at the special meeting. If you have voted your shares by telephone or through the internet, you may revoke your prior telephone or internet vote by recording a different vote, or by signing and returning a proxy card dated as of a date that is later than your last telephone or internet vote.

 

Any stockholder entitled to vote in person at the special meeting may vote in person regardless of whether a proxy has been previously given, but the mere presence (without notifying the Secretary) of a stockholder at the special meeting will not constitute revocation of a previously given proxy.

 

Written notices of revocation and other communications about revoking your proxy should be addressed to:

Bank of America Corporation

101 S. Tryon Street

NC1-002-29-01

Charlotte, North Carolina 28255

Corporate Secretary

 

If your shares are held in “street name” by a bank or broker, you should follow the instructions of your bank or broker regarding the revocation of proxies.

 

All shares represented by valid proxies that we receive through this solicitation, and that are not revoked, will be voted in accordance with your instructions on the proxy card or as instructed via internet or telephone. If you make no specification on your proxy card as to how you want your shares voted before signing and returning it, your proxy will be voted “FOR” approval of the issuance of shares of Bank of America common stock in the merger, “FOR” approval of the amendment to the Stock Plan, “FOR” approval of the charter amendment to increase the number of authorized shares of Bank of America common stock and “FOR” approval of the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies in the event that there are not sufficient votes at the time of the special meeting to approve the proposals. According to the Bank of America restated bylaws, business to be conducted at a special meeting of stockholders may only be brought before the meeting by means of Bank of America’s notice of the meeting or otherwise properly brought before the meeting by or at the direction of the Bank of America board of directors. No matters other than the matters described in this document are anticipated to be presented for action at the special meeting or at any adjournment or postponement of the special meeting.

 

Bank of America will bear the entire cost of soliciting proxies from its stockholders. In addition to solicitation of proxies by mail, Bank of America will request that banks, brokers, and other record holders send proxies and proxy material to the beneficial owners of Bank of America common stock and Series B Preferred Stock and secure their voting instructions. Bank of America will reimburse the record holders for their reasonable expenses in taking those actions. Bank of America has also made arrangements with Laurel Hill Advisory Group, LLC to assist it in soliciting proxies and has agreed to pay them $50,000, plus reasonable expenses for these services. If necessary, Bank of America may use several of its regular employees, who will not be specially compensated, to solicit proxies from Bank of America stockholders, either personally or by telephone, facsimile, letter or other electronic means.

 

The close of business on October 10, 2008, has been fixed as the record date for determining the Bank of America stockholders entitled to receive notice of and to vote at the special meeting. At that time, 5,021,554,382 shares of Bank of America common stock were outstanding, held by approximately 259,955 holders of record, and 7,667 shares of Series B Preferred Stock, held by approximately 30 holders of record.

 

The presence, in person or by proxy, of the holders of a majority of the aggregate number of outstanding shares of Bank of America common stock and Series B Preferred Stock entitled to vote is necessary to constitute a quorum at the special meeting. Abstentions and broker non-votes will be counted for the purpose of determining whether a quorum is present.

 

Approval of the issuance of shares of Bank of America common stock in the merger and the amendment to the Stock Plan each requires the votes cast in favor of each such proposal to exceed the votes cast against such proposal at the special meeting by the holders of the Bank of America common stock and Series B Preferred Stock, voting together without regard to class, assuming a quorum. Because the required vote is based on the votes cast in favor of such proposal exceeding the votes cast against such proposal, your failure to vote, a broker non-vote or an abstention will not be treated as a vote cast and, therefore, will have no effect on these proposals, assuming a quorum.

 

Approval of the proposal to increase the number of authorized shares of Bank of America common stock requires the affirmative vote of a majority of the votes represented by the outstanding shares of Bank of America common stock and Series B Preferred Stock entitled to vote at the special meeting, voting together without regard to class. Under Delaware law, the affirmative vote of a majority of the votes represented by the

outstanding shares of Bank of America common stock entitled to vote at the special meeting, counted separately as a class without the Series B Preferred Stock, is also required to increase the number of authorized shares of Bank of America common stock. Because approval is based on the affirmative vote of a majority of votes represented by shares outstanding, the failure to vote, a broker non-vote or an abstention will have the same effect as a vote against.

 

If there is a quorum, approval of any necessary or appropriate adjournment of the special meeting requires the votes cast in favor of such proposal to exceed the votes cast against such proposal at the special meeting by the holders of the Bank of America common stock and Series B Preferred Stock, voting together without regard to class. In the absence of a quorum, the special meeting may be adjourned by the approval of the majority of the voting power of the outstanding shares present and entitled to vote at the special meeting.

 

If you participate in The Bank of America 401(k) Plan, The Bank of America 401(k) Plan for Legacy Companies or the Countrywide Financial Corporation 401(k) Savings and Investment Plan and your account has investments in shares of Bank of America common stock, you must provide voting instructions to the plan trustees (either via the proxy card or by internet or telephone) in order for your shares to be voted as you instruct. If no voting instructions are received, your shares will not be voted. Your voting instructions will be held in strict confidence.

 

The Bank of America board of directors urges Bank of America stockholders to promptly vote by: completing, dating, and signing the accompanying proxy card and to return it promptly in the enclosed postage-paid envelope; calling the toll-free number listed in the proxy card instructions if voting by telephone; or accessing the internet site listed in the proxy card instructions if voting through the internet. If you hold your stock in “street name” through a bank or broker, please vote by following the voting instructions of your bank or broker.

 

Stockholders will vote at the meeting by ballot. Votes cast at the meeting, in person or by proxy, will be tallied by Bank of America’s Inspector of Election.

 

As of the record date:

 

 

The Bank of America board of directors has unanimously approved and adopted the merger agreement and the transactions it contemplates, including the merger. The Bank of America board of directors determined that the merger, merger agreement and the transactions contemplated by the merger agreement are advisable and in the best interests of Bank of America and its stockholders and unanimously recommends that you vote “FOR” approval of the issuance of shares of Bank of America common stock in the merger. See “The Merger — Bank of America’s Reasons for the Merger; Recommendation of the Bank of America Board of Directors” on page 54 for a more detailed discussion of the Bank of America board of directors’ recommendation.

 

The Bank of America board of directors also has unanimously approved the proposals to increase the authorized number of shares of Bank of America common stock and amend the Stock Plan. The Bank of America board of directors determined that the proposals are advisable and in the best interests of Bank of America and its stockholders. The Bank of America board of directors unanimously recommends that you vote “FOR” the proposals to increase the authorized number of shares of Bank of America common stock and to approve the amendment to the Stock Plan.

 

All holders of Bank of America common stock and Series B Preferred Stock, including stockholders of record and stockholders who hold their shares through banks, brokers, nominees or any other holder of record, are invited to attend the special meeting. Stockholders of record can vote in person at the special meeting. If you are not a stockholder of record, you must obtain a proxy executed in your favor, from the record holder of your shares, such as a broker, bank or other nominee, to be able to vote in person at the special meeting. If you plan to attend the special meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership and you must bring a form of personal photo identification with you in order to be admitted. We reserve the right to refuse admittance to anyone without proper proof of share ownership and without proper photo identification.

 

This section contains information about the special meeting of Merrill Lynch stockholders that has been called to consider and adopt the merger agreement and to approve the related certificate amendment.

 

Together with this document, Merrill Lynch is also sending you a notice of the special meeting and a form of proxy that is solicited by the Merrill Lynch board of directors. The special meeting will be held on December 5, 2008, at 8:00 a.m., local time, at Merrill Lynch headquarters, 4 World Financial Center, New York, NY, 10038.

 

The purpose of the special meeting is to vote on:

 

 

The certificate amendment is a technical change necessitated by the fact that the series of convertible preferred stock will remain Merrill Lynch securities (though they will be convertible into Bank of America common stock) immediately following the completion of the merger, and will not impact the current voting rights of the existing holders of Merrill Lynch common stock.

 

Each copy of this document mailed to holders of Merrill Lynch common stock is accompanied by a form of proxy with instructions for voting. If you hold stock in your name as a stockholder of record, you may complete, sign, date and mail your proxy card in the enclosed postage paid return envelope as soon as possible, vote by telephone by calling the toll-free number listed on the Merrill Lynch proxy card, vote by accessing the internet site listed on the Merrill Lynch proxy card or vote in person at the Merrill Lynch special meeting. If you hold your stock in “street name” through a bank or broker, you must direct your bank or broker to vote in accordance with the instruction form included with these materials and forwarded to you by your bank or broker. This voting instruction form provides instructions on voting by mail, telephone or the internet at www.proxyvote.com. To vote using the proxy card you must sign, date and return it in the enclosed postage-paid envelope. Instructions on how to vote by telephone or by the internet are included with your proxy card.

 

If you are a holder of record, to change your vote, you must:

 

 

 

 

If you wish to revoke rather than change your vote, you must send written, signed revocation to Merrill Lynch & Co., Inc., c/o BroadRidge Financial Services, Registered Issuer Client Services Department,

51 Mercedes Way, Edgewood, NY 11717 which must be received by 11:59 p.m. Eastern time on December 4, 2008. You must include your control number.

 

If you hold shares in street name, and wish to change or revoke your vote, please refer to the information on the voting instruction form included with these materials and forwarded to you by your bank, broker or other holder of record to see your voting options.

 

All shares represented by valid proxies that we receive through this solicitation, and that are not revoked, will be voted in accordance with your instructions on the proxy card. If you make no specification on your proxy card as to how you want your shares voted before signing and returning it, your proxy will be voted “FOR” adoption of the merger agreement, “FOR” approval of the related certificate amendment and “FOR” approval of the proposal to adjourn the special meeting, if necessary, to solicit additional proxies in the event that there are not sufficient votes at the time of the special meeting to adopt the merger agreement.

 

According to the Merrill Lynch restated bylaws, business to be conducted at a special meeting of stockholders may only be brought before the meeting by means of Merrill Lynch’s notice of the meeting or otherwise properly brought before the meeting by or at the direction of the Merrill Lynch board of directors. No matters other than the matters described in this document are anticipated to be presented for action at the special meeting or at any adjournment or postponement of the special meeting.

 

Merrill Lynch stockholders with shares represented by stock certificates should not send Merrill Lynch stock certificates with their proxy cards. After the merger is completed, holders of Merrill Lynch common stock will be mailed a transmittal form with instructions on how to exchange their Merrill Lynch stock certificates for the merger consideration. Unless Merrill Lynch stockholders specifically request to receive Bank of America stock certificates, the shares of Bank of America stock they receive in the merger will be issued in book-entry form.

 

Merrill Lynch will bear the entire cost of soliciting proxies from you. In addition to solicitation of proxies by mail, Merrill Lynch will request that banks, brokers, and other record holders send proxies and proxy material to the beneficial owners of Merrill Lynch common stock and secure their voting instructions. Merrill Lynch will reimburse the record holders for their reasonable expenses in taking those actions. Merrill Lynch has also made arrangements with Georgeson Inc. to assist it in soliciting proxies and has agreed to pay them approximately $50,000 plus reasonable expenses for these services. If necessary, Merrill Lynch may use several of its regular employees, who will not be specially compensated, to solicit proxies from Merrill Lynch stockholders, either personally or by telephone, facsimile, letter or other electronic means.

 

The close of business on October 10, 2008 and October 21, 2008 has been fixed as the record date for determining the Merrill Lynch common stockholders and holders of exchangeable shares issued by Merrill Lynch Canada, respectively, entitled to receive notice of and to vote at the special meeting. At that time, 1,598,690,442 shares of Merrill Lynch common stock and 1,436,244 exchangeable shares (issued by Merrill Lynch Canada each exchangeable into one share of Merrill Lynch common stock) were outstanding, held by approximately 11,819 holders of record of Merrill Lynch common stock and 2,405 holders of record of exchangeable shares.

 

The presence, in person or by proxy, of the holders of a majority of the outstanding shares of Merrill Lynch common stock entitled to vote is necessary to constitute a quorum at the special meeting. Abstentions will be counted for the purpose of determining whether a quorum is present.

 

Adoption of the merger agreement and approval of the related certificate amendment require the affirmative vote of the holders of a majority of the outstanding shares of Merrill Lynch common stock entitled to vote at the special meeting. You are entitled to one vote for each share of Merrill Lynch common stock and

for each exchangeable share you held as of the applicable record date. Holders of shares of Merrill Lynch preferred stock and holders of depositary shares representing Merrill Lynch preferred stock are not entitled to vote on the merger or otherwise at the special meeting.

 

Because the affirmative vote of the holders of a majority of the outstanding shares of Merrill Lynch common stock entitled to vote at the special meeting is needed for us to proceed with the merger, the failure to vote by proxy or in person will have the same effect as a vote against the merger. Abstentions also will have the same effect as a vote against the merger. Accordingly, the Merrill Lynch board of directors urges Merrill Lynch stockholders to promptly vote by completing, dating, and signing the accompanying proxy card and to return it promptly in the enclosed postage-paid envelope, or, if you hold your stock in “street name” through a bank or broker, by following the voting instructions of your bank or broker. If you hold stock in your name as a stockholder of record, you may complete, sign, date and mail your proxy card in the enclosed postage paid return envelope as soon as possible, vote by calling the toll-free number listed on the Merrill Lynch proxy card, vote by accessing the internet site listed on the Merrill Lynch proxy card or vote in person at the Merrill Lynch special meeting. If you hold your stock in “street name” through a bank or broker, you must direct your bank or broker to vote in accordance with the instruction form included with these materials and forwarded to you by your bank or broker. This voting instruction form provides instructions on voting by mail, telephone or on the internet.

 

Approval of the proposal to adjourn or postpone the meeting, if necessary or appropriate, for the purpose of soliciting additional proxies requires the affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the special meeting. Because approval of this proposal requires the affirmative vote of a majority of shares present or represented, abstentions will have the same effect as a vote against this proposal. If you are a registered holder, failure to vote by proxy or in person will have the same effect as a vote against this proposal. If you hold in street name, your broker may vote your shares in its discretion on this proposal.

 

Stockholders will vote at the meeting by ballot. Votes cast at the meeting, in person or by proxy, will be tallied by Merrill Lynch’s tabulator and certified by its inspector of election.

 

As of the October 10, 2008 record date, directors and executive officers of Merrill Lynch had the right to vote 2,410,356 shares of Merrill Lynch common stock, or 0.15% of the outstanding Merrill Lynch common stock at that date. We currently expect that each of these individuals will vote their shares of Merrill Lynch common stock in favor of the proposals to be presented at the special meeting.

 

The Merrill Lynch board of directors has unanimously approved the merger agreement and the transactions it contemplates, including the merger. The Merrill Lynch board of directors determined that the merger, merger agreement and the transactions contemplated by the merger agreement are advisable and in the best interests of Merrill Lynch and its stockholders and unanimously recommends that you vote “FOR” adoption of the merger agreement and “FOR” approval of the related certificate amendment. See “The Merger — Merrill Lynch’s Reasons for the Merger; Recommendation of the Merrill Lynch Board of Directors” on page 51 for a more detailed discussion of the Merrill Lynch board of directors’ recommendation.

 

All holders of Merrill Lynch common stock and holders of exchangeable shares, including holders of record and stockholders who hold their stock through banks, brokers, nominees or any other holder of record, are invited to attend the special meeting. Only stockholders of record on the applicable record date can vote in person at the special meeting. If you are not a stockholder of record, you must obtain a proxy executed in your favor, from the record holder of your shares, such as a broker, bank or other nominee, to be able to vote in person at the special meeting. If you plan to attend the special meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership and you must bring a form of personal photo identification with you in order to be admitted. We reserve the right to refuse admittance to anyone without proper proof of share ownership and without proper photo identification.

 

Bank of America is a Delaware corporation, a bank holding company and a financial holding company under U.S. federal law. Bank of America is one of the world’s largest financial institutions, serving individual consumers, small and middle market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk-management products and services. The company provides unmatched convenience in the United States, serving more than 59 million consumer and small business relationships with more than 6,000 retail banking offices, more than 18,000 ATMs and award-winning online banking with nearly 24 million active users. The company serves clients in 175 countries and has relationships with 99 percent of the U.S. Fortune 500 companies and 80 percent of the Fortune Global 500. As of June 30, 2008, Bank of America had total consolidated assets of approximately $1.7 trillion, total consolidated deposits of approximately $785 billion and total consolidated stockholders’ equity of approximately $163 billion. Bank of America is also the parent company of Countrywide Financial Corporation, which Bank of America acquired on July 1, 2008. The principal executive offices of Bank of America are located in the Bank of America Corporate Center, 100 N. Tryon Street, Charlotte, North Carolina 28255, and its telephone number is (704) 386-5681.

 

Additional information about Bank of America and its subsidiaries is included in documents incorporated by reference in this document. See “Where You Can Find More Information” on page 123.

 

Merger Sub, a wholly owned subsidiary of Bank of America, was formed solely for the purpose of consummating the merger. Merger Sub has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the transactions contemplated by the merger agreement. The principal executive offices of Merger Sub are located in the Bank of America Corporate Center, 100 N. Tryon Street, Charlotte, North Carolina, and its telephone number is (704) 386-5681.

 

Merrill Lynch was formed in 1914 and became a publicly traded company on June 23, 1971. In 1973, it created the holding company, Merrill Lynch & Co., Inc., a Delaware corporation that, through its subsidiaries, is one of the world’s leading capital markets, advisory and wealth management companies with offices in 40 countries and territories and total client assets of approximately $1.5 trillion at September 26, 2008. As an investment bank, it is a leading global trader and underwriter of securities and derivatives across a broad range of asset classes, and it serves as a strategic advisor to corporations, governments, institutions and individuals worldwide. In addition, Merrill Lynch owns a 45% voting interest and approximately half of the economic interest of BlackRock, Inc., one of the world’s largest publicly traded investment management companies with approximately $1.3 trillion in assets under management at September 30, 2008. The principal executive offices of Merrill Lynch are located at 4 World Financial Center, New York, New York 10080, and its telephone number is (212) 449-1000.

 

Additional information about Merrill Lynch and its subsidiaries is included in documents incorporated by reference in this document. See “Where You Can Find More Information” on page 123.

 

Bank of America Corporation — Unaudited

 

Third Quarter Earnings

 

On October 6, 2008, Bank of America announced third quarter earnings of $1.18 billion, or $0.15 per diluted share, compared to $3.70 billion, or $0.82 per diluted share, earned in the third quarter of 2007.

 

Bank of America’s third quarter earnings were impacted by, among other things, a significant increase in provision expense, as credit costs continued to rise, partially offset by advances in various income categories as a result of the acquisition of Countrywide Financial Corporation on July 1, 2008 and LaSalle Bank.

 

Bank of America’s Tier 1 Capital Ratio, based on preliminary data, was 7.50% at September 30, 2008 down from 8.22% at September 30, 2007. The decrease was due to the impact of Bank of America’s $21 billion cash purchase of LaSalle Bank in October 2007 and lower net income in 2008. After giving effect to the October 10, 2008 issuance of common stock in an underwritten public offering in exchange for net proceeds of $9,759,750,000 and the anticipated October issuance of preferred stock and warrants to the U.S. Treasury in exchange for proceeds of $15 billion (each discussed under “— Other Developments” below), Bank of America’s Tier 1 Capital Ratio would have been 9.40% at September 30, 2008.

 

Other Developments

 

On October 3, 2008, President Bush signed into law the Emergency Economic Stabilization Act of 2008 (the “EESA”). Pursuant to the EESA, the U.S. Treasury has the authority to, among other things, invest in financial institutions and purchase mortgages, mortgage-backed securities and certain other financial instruments from financial institutions, in an aggregate amount up to $700 billion, for the purpose of stabilizing and providing liquidity to the U.S. financial markets. On October 14, 2008, the U.S. Treasury announced a plan, referred to as the Capital Purchase Program, or the CPP, to invest up to $250 billion of this $700 billion amount in certain eligible U.S. banks, thrifts and their holding companies in the form of non-voting, senior preferred stock initially paying quarterly dividends at a 5% annual rate. In the event the U.S. Treasury makes any such senior preferred investment in any company it will also receive 10-year warrants to acquire common shares of the company having an aggregate market price of 15% of the amount of the senior preferred investment. In connection with Treasury’s 2008 announcement, Bank of America was identified as one of the nine financial institutions (including Merrill Lynch) that agreed in principle to participate in the first $125 billion of Treasury investments. As a result, on October 26, 2008, Bank of America entered into a purchase agreement with the U.S. Treasury pursuant to which it will issue to the U.S. Treasury $15 billion of a new series of preferred stock of Bank of America. In connection with this investment, Bank of America has also agreed to issue to the U.S. Treasury warrants to purchase approximately 73 million shares of Bank of America common stock at an exercise price of $30.79 per share. This investment is expected to be completed on or about October 28, 2008. If the merger is completed prior to Treasury making an investment in Merrill Lynch as described below under “— Merrill Lynch & Co Developments — Unaudited — Recent Developments,” Treasury will purchase from Bank of America an additional $10 billion of a new series of preferred stock of Bank of America and receive warrants to purchase approximately 49 million shares, all on the same terms applicable to the $15 billion investment.

 

On October 8, 2008, Bank of America announced a settlement in principle with the SEC, the New York State Attorney General’s office, and a coalition of other state regulators represented by the North American Securities Administrators Association under which it has established a repurchase and compensation program with respect to certain auction rate securities purchased prior to specified dates in February 2008 and either held by certain of its retail brokerage customers or sold by those customers at a loss between February 11, 2008 and October 8, 2008. Bank of America had previously announced a substantially similar settlement with the Massachusetts Securities Division on September 10, 2008. Bank of America will pay a $50 million penalty in connection with the settlement, and neither admits nor denies allegations of wrongdoing.

On October 10, 2008, Bank of America issued 455 million shares of common stock at a public offering price of $22.00 per share in an underwritten public offering. The net proceeds of the offering to Bank of America, after underwriting discounts and commissions, were $9,759,750,000.

 

Merrill Lynch & Co. — Unaudited

 

Third Quarter Earnings

 

On October 16, 2008, Merrill Lynch announced a net loss from continuing operations for the third quarter of $5.1 billion, or $5.56 per diluted share, compared to a net loss from continuing operations of $2.4 billion, or $2.99 per diluted share, in the third quarter of 2007.

 

Merrill Lynch’s third quarter results were impacted by, among other things, net write-downs of $5.7 billion resulting from the previously announced sale of U.S. super senior ABS CDOs and the termination and potential settlement of related hedges with monoline guarantor counterparties; a net pre-tax gain of $4.3 billion from the previously announced sale of Merrill Lynch’s 20% ownership stake in Bloomberg, L.P.; net write-downs of $3.8 billion principally from severe market dislocations in September; net gains of $2.8 billion due to the impact of the widening of Merrill Lynch’s credit spreads on the carrying value of certain of its long-term debt liabilities, which was similarly impacted by the severe market movements in September; and net losses of $2.6 billion resulting primarily from completed and planned asset sales across residential and commercial mortgage exposures.

 

Other Developments

 

On August 21, 2008, Merrill Lynch announced a settlement in principle with the SEC, the New York State Attorney General’s office, and a coalition of other state regulators represented by the North American Securities Administrators Association under which it has established a repurchase and compensation program with respect to certain auction rate securities purchased prior to specified dates in February 2008 and either held by certain of its retail brokerage customers or sold by those customers at a loss between February 13, 2008 and August 21, 2008. Merrill Lynch will pay a $125 million penalty in connection with the settlement, and neither admits nor denies allegations of wrongdoing.

 

After discussions with Treasury and Bank of America, Merrill Lynch has determined that, in view of the pending merger with Bank of America, it will not sell securities to the U.S. Treasury under the CPP at this time, but may do so in the future under certain circumstances. As a result, Merrill Lynch has entered into a purchase agreement that provides for delayed settlement for a sale of $10 billion of a new series of Merrill Lynch preferred stock and warrants to purchase 64,991,334 shares of Merrill Lynch Common Stock at an exercise price of $23.08 per share. The agreement provides that the closing will take place on the earlier of (i) the second business day following termination of the Merger Agreement with Bank of America and (ii) a date during the period beginning on January 2, 2009 and ending on January 31, 2009 if the Merger Agreement is still in effect but the merger has not been completed by the specified date, but, in the case of either (i) or (ii), in no event later than January 31, 2009. In addition, prior to January 2, 2009, if the Merger Agreement is still in effect but the merger is not been completed, Merrill Lynch has the right, after consultation with the Federal Reserve and Bank of America, to request that the U.S. Treasury consummate the CPP investment on or prior to January 1, 2009. The Purchase Agreement will terminate at 12:01 am on February 1, 2009 if the investment has not been made by that date.

 

Completion of the CPP investment prior to the termination of the Merger Agreement is subject to Bank of America’s approval. Bank of America has agreed it will not unreasonably withhold or delay its consent. After January 1, 2009, Bank of America may not withhold its consent if, after consulting with Bank of America, Merrill Lynch reasonably determines that the failure to obtain the CPP investment would have a material adverse impact on Merrill Lynch. After January 30, 2009 until 12:01 a.m. on February 1, 2009, Merrill Lynch will have the unilateral right to obtain the CPP investment and Bank of America has consented in advance to the investment at such time if the merger has not been completed at that date.

Because the merger will not qualify as a “reorganization” within the meaning of 368(a) of the Code if Merrill Lynch obtains the CPP investment, Bank of America and Merrill Lynch have also agreed that, if Merrill Lynch does obtain the CPP investment, they will each waive their closing conditions relating to the tax treatment of the merger and complete the merger on a taxable basis. Both companies have also agreed to grant such other waivers and/or amend the merger agreement as may be required to permit the CPP investment on the agreed terms.

 

Also, on October 14, 2008, the FDIC announced a new program, the Temporary Liquidity Guarantee Program, under which specific categories of newly issued senior unsecured debt issued by eligible financial institutions on or before June 30, 2009 would be guaranteed until June 30, 2012. This program also provides deposit insurance for funds in non-interest bearing transaction deposit accounts at FDIC-insured institutions. Merrill Lynch has agreed to participate in the Temporary Liquidity Guarantee Program.

 

On October 29, 2008, Merrill Lynch and Bank of America, N.A., a wholly owned subsidiary of Bank of America, entered into a $10 billion committed unsecured bank revolving credit facility with borrowings guaranteed under the Temporary Liquidity Guarantee Program. This facility will be available to Merrill Lynch until January 30, 2009 but may expire at an earlier date if the merger with Bank of America is terminated or consummated prior to January 30, 2009 or Merrill Lynch elects to participate in the CPP. If Merrill Lynch participates in the CPP, the proceeds received from the U.S. Treasury will be used to repay in full any outstanding amounts owed under this facility.

 

 

The following unaudited pro forma condensed combined financial information and explanatory notes present the impact of the merger of Bank of America and Merrill Lynch on the companies’ respective historical financial positions and results of operations under the purchase method of accounting with Bank of America treated as the acquirer. Under this method of accounting, the assets and liabilities of Merrill Lynch will be recorded by Bank of America at their estimated fair values as of the date the merger is completed. The unaudited pro forma condensed combined financial information combines the historical financial information of Bank of America and Merrill Lynch as of and for the six months ended June 30, 2008, and June 27, 2008, respectively, and for the year ended December 31, 2007, and December 28, 2007, respectively. The unaudited pro forma condensed combined balance sheet as of June 30, 2008, assumes the merger was completed on that date. The unaudited pro forma condensed combined statements of income give effect to the merger as if the merger had been completed on January 1, 2007.

 

The merger agreement was announced on September 15, 2008, and provides for each outstanding share of Merrill Lynch common stock other than shares beneficially owned by Merrill Lynch and Bank of America to be converted into the right to receive 0.8595 of a share of Bank of America common stock. Shares of Merrill Lynch preferred stock will be converted on a one-for-one basis into Bank of America preferred stock having the same terms (to the fullest extent possible) as the corresponding Merrill Lynch preferred stock, except for the shares of Merrill Lynch convertible preferred stock, which will remain issued and outstanding and will have the rights, privileges, powers and preferences as set forth in the surviving company’s certificate of incorporation, as amended. The unaudited pro forma condensed combined financial information has been derived from and should be read in conjunction with the historical consolidated combined financial statements and the related notes of both Bank of America and Merrill Lynch, which are incorporated in the document by reference. See “Where You Can Find More Information” on page 123.

 

The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and does not indicate the financial results of the combined companies had the companies actually been combined at the beginning of each period presented, nor the impact of possible business model changes. The unaudited pro forma condensed combined financial information also does not consider any potential impacts of current market conditions on revenues, expense efficiencies, asset dispositions, and share repurchases, among other factors. In addition, as explained in more detail in the accompanying notes to the unaudited pro forma condensed combined financial information, the allocation of the pro forma purchase price reflected in the unaudited pro forma condensed combined financial information is subject to adjustment and may vary significantly from the actual purchase price allocation that will be recorded upon completion of the merger. During the past few weeks, market conditions have been extremely volatile and a number of significant events have occurred including actions taken by the federal government. These items may have a significant impact on a number of items (e.g., whole loans held-for-sale, mortgage-backed and other securities, etc.) which will affect the actual purchase price allocation that will be recorded upon completion of the merger. For more information on these items, see the discussion “Recent Developments” on page 35.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 2008 AND JUNE 27, 2008

 

The following unaudited pro forma condensed combined balance sheet combines the historical balance sheets of Bank of America and Merrill Lynch assuming the companies had been combined on June 30, 2008, on a purchase accounting basis.