UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2010
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 COMMISSION FILE NO.: 1-7182-06
 MERRILL LYNCH PREFERRED CAPITAL TRUST III
  Delaware
    
    13-7139561(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)4 World Financial CenterNew York, New York
    
    10080(Address of principal executive offices)
    
    (Zip Code)
  COMMISSION FILE NO.: 1-7182-05
 MERRILL LYNCH PREFERRED FUNDING III, L.P.
  Delaware
    
    13-3982448(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)4 World Financial CenterNew York, New York
    
    10080(Address of principal executive offices)
    
    (Zip Code)
  þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o
 Yes o No þ




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##### 



PART I  FINANCIAL INFORMATION
 
  
 March 31, 2010
    
    
    December 31, 2009ASSETSInvestment in affiliate partnership preferred securities
    
    $
    773,196
    
    
    $
    773,196Total Assets
    
    $
    773,196
    
    
    $
    773,196STOCKHOLDERS EQUITYPreferred securities (7% Trust Originated Preferred
Securities; 30,000,000 authorized, issued, and
outstanding; $25 liquidation amount per security)
    
    $
    750,000
    
    
    $
    750,000Common securities (7% Trust Common Securities;
927,840 authorized, issued, and outstanding;
$25 liquidation amount per security)
    
    
    23,196
    
    
    
    23,196Total Stockholders Equity
    
    $
    773,196
    
    
    $
    773,196
   2




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##### 



FOR THE THREE MONTHS ENDEDMarch 31, 2010
    
    
    March 31, 2009EARNINGSInterest on affiliate partnership preferred securities
    
    $
    13,531
    
    
    $
    13,531
   3




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##### 



FOR THE THREE MONTHS ENDEDMarch 31, 2010
    
    
    March 31, 2009PREFERRED SECURITIESBalance, beginning and end of period
    
    $
    750,000
    
    
    $
    750,000COMMON SECURITIESBalance, beginning and end of period
    
    
    23,196
    
    
    
    23,196UNDISTRIBUTED EARNINGSBalance, beginning of period
    
    
    
    
    
    
    Earnings
    
    
    13,531
    
    
    
    13,531Distributions
    
    
    (13,531
    )
    
    
    (13,531
    )Balance, end of period
    
    
    
    
    
    
    Total Stockholders Equity
    
    $
    773,196
    
    
    $
    773,196
   4




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##### 



FOR THE THREE MONTHS ENDEDMarch 31, 2010
    
    
    March 31, 2009CASH FLOWS FROM OPERATING ACTIVITIES:Earnings
    
    $
    13,531
    
    
    $
    13,531Cash provided by operating activities
    
    
    13,531
    
    
    
    13,531CASH FLOWS FROM FINANCING ACTIVITIES:Distributions
    
    
    (13,531
    )
    
    
    (13,531
    )Cash used for financing activities
    
    
    (13,531
    )
    
    
    (13,531
    )NET CHANGE IN CASH
    
    
    
    
    
    
    CASH, BEGINNING OF PERIOD
    
    
    
    
    
    
    CASH, END OF PERIOD
    
    $
    
    
    
    $
    
   5




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##### 



6




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##### 



March 31, 2010
    
    
    December 31, 2009ASSETSInvestments:Affiliate debentures
    
    $
    900,547
    
    
    $
    900,547U.S. Government and agencies
    
    
    9,097
    
    
    
    9,105Total investments
    
    
    909,644
    
    
    
    909,652Total Assets
    
    $
    909,644
    
    
    $
    909,652PARTNERS CAPITALLimited partnership interest
    
    $
    773,196
    
    
    $
    773,196General partnership interest
    
    
    136,448
    
    
    
    136,456Total Partners Capital
    
    $
    909,644
    
    
    $
    909,652
   7




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##### 



FOR THE THREE MONTHS ENDEDMarch 31, 2010
    
    
    March 31, 2009EARNINGSInterest income:Affiliate debentures
    
    $
    15,760
    
    
    $
    15,760U.S. Government and
agencies
    
    
    5
    
    
    
    11Earnings
    
    $
    15,765
    
    
    $
    15,771
   8




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##### 



FOR THE THREE MONTHS ENDEDMarch 31, 2010
    
    
    March 31, 2009LIMITED PARTNERS CAPITALBalance, beginning of period
    
    $
    773,196
    
    
    $
    773,196Net income allocated to limited
partner
    
    
    13,531
    
    
    
    13,531Distributions
    
    
    (13,531
    )
    
    
    (13,531
    )Balance, end of period
    
    
    773,196
    
    
    
    773,196GENERAL PARTNERS CAPITALBalance, beginning of period
    
    
    136,456
    
    
    
    136,452Net income allocated to general
partner
    
    
    2,234
    
    
    
    2,240Distributions
    
    
    (2,242
    )
    
    
    (2,229
    )Balance, end of period
    
    
    136,448
    
    
    
    136,463TOTAL PARTNERS CAPITAL
    
    $
    909,644
    
    
    $
    909,659
   9




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##### 



FOR THE THREE MONTHS ENDEDMarch 31, 2010
    
    
    March 31, 2009CASH FLOWS FROM OPERATING ACTIVITIES:Earnings
    
    $
    15,765
    
    
    $
    15,771Accretion of interest on securities issued by
U.S. Government and agencies
    
    
    (5
    )
    
    
    (11
    )Cash provided by operating activities
    
    
    15,760
    
    
    
    15,760CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of investment securities
    
    
    (9,095
    )
    
    
    Maturities of investment securities
    
    
    9,108
    
    
    
    Cash provided by investing activities
    
    
    13
    
    
    
    CASH FLOWS FROM FINANCING ACTIVITIES:Distributions to limited partner
    
    
    (13,531
    )
    
    
    (13,531
    )Distributions to general partner
    
    
    (2,242
    )
    
    
    (2,229
    )Cash used for financing activities
    
    
    (15,773
    )
    
    
    (15,760
    )NET CHANGE IN CASH
    
    
    
    
    
    
    CASH, BEGINNING OF PERIOD
    
    
    
    
    
    
    CASH, END OF PERIOD
    
    $
    
    
    
    $
    
   10




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11




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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
  ITEM 4.
    
    CONTROLS AND PROCEDURES
    12




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##### 



Item 1A.
    
    Risk Factors
  ITEM 6.
    
    EXHIBITS
 12
    
    
    Computation of Ratios of Earnings to Combined Fixed Charges and
Preferred Securities Distributions.31.1
    
    

Rule 13a - 14(a) Certification.31.2
    
    

Rule 13a - 14(a) Certification.32.1
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  13




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##### 



MERRILL LYNCH PREFERRED
CAPITAL TRUST III*By:
    /s/ MARLENE DEBELName:
    Marlene DebelTitle:
    Regular TrusteeMERRILL LYNCH PREFERRED FUNDING III, L.P.*By:
    MERRILL LYNCH & CO., INC., as General PartnerBy:
    /s/ THOMAS W. PERRYName:
    Thomas W. PerryTitle:
    Chief Accounting Officer and Controller
Merrill Lynch & Co., Inc.  
 *
    
    There is no principal executive officer(s), principal financial officer,
controller, principal accounting officer or board of directors of the
Registrants. The Trustees of the Trust (which include the Regular Trustees, the
Property Trustee and the Delaware Trustee) together exercise all powers and
perform all functions with respect to the Trust.  14




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12
    *
    
    Computation of Ratios of Earnings to Combined Fixed Charges and
Preferred Securities Distributions.31.1
    *
    

Rule 13a - 14(a) Certification.31.2
    *
    

Rule 13a - 14(a) Certification.32.1
    *
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    *
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith  15