================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ----------------------

                                    FORM 10-Q

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

                For the quarterly period ended September 25, 1998

                    Merrill Lynch Preferred Capital Trust III
       (Exact name of Registrant as specified in its certificate of trust)

                         Commission File No.: 1-7182-06

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

       World Financial Center
             North Tower
         New York, New York                               10281
(Address of principal executive offices)                (Zip Code)

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

           Securities registered pursuant to Section 12(b) of the Act:

Title of each class                    Name of each exchange on which registered
-------------------                    -----------------------------------------
7% Trust Originated Preferred          New York Stock Exchange 
Securities (and the related guarantee)

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

                    Merrill Lynch Preferred Funding III, L.P.
                  (Exact name of Registrant as specified in its
                       certificate of limited partnership)

                         Commission File No.: 1-7182-05

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

       World Financial Center
             North Tower
         New York, New York                               10281
 (Address of principal executive offices)               (Zip Code)

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

           Securities registered pursuant to Section 12(b) of the Act:

Title of each class                    Name of each exchange on which registered
-------------------                    -----------------------------------------
7% Partnership Preferred Securities    New York Stock Exchange
(and the related guarantee)

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

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

As of September 25, 1998, no voting stock was held by non-affiliates of the
Registrants.

================================================================================
<PAGE>

                         PART I - FINANCIAL INFORMATION
                         ------------------------------

ITEM 1. FINANCIAL STATEMENTS
        --------------------

MERRILL LYNCH PREFERRED CAPITAL TRUST III
BALANCE SHEET (UNAUDITED)
--------------------------------------------------------------------------------

                                                              SEPTEMBER 25, 1998
                                                              ------------------
ASSETS

Investment in partnership preferred securities                      $773,196,000
                                                                 
Income receivable                                                     13,530,930
                                                                    ------------
Total Assets                                                        $786,726,930
                                                                    ============
                                                                 
                                                                 
LIABILITY AND STOCKHOLDERS' EQUITY                               
                                                                 
Distributions payable                                               $ 13,530,930
                                                                    ------------
Stockholders' equity:                                            

   Preferred securities (7% Trust Originated                     
    Preferred Securities; 30,000,000 authorized,                 
    issued, and outstanding; $25 liquidation                     
    amount per security)                                             750,000,000
                                                                 
   Common securities (7% Trust Common Securities;                
    927,840 authorized, issued, and outstanding;                 
    $25 liquidation amount per security)                              23,196,000
                                                                    ------------
  Total stockholders' equity                                         773,196,000
                                                                    ------------
Total Liability and Stockholders' Equity                            $786,726,930
                                                                    ============
                                                              
See Notes to Financial Statements


                                       2
<PAGE>

MERRILL LYNCH PREFERRED CAPITAL TRUST III
STATEMENTS OF EARNINGS (UNAUDITED)
--------------------------------------------------------------------------------

                                           FOR THE THREE          FOR THE PERIOD
                                            MONTHS ENDED        JANUARY 16, 1998
                                      SEPTEMBER 25, 1998   TO SEPTEMBER 25, 1998
                                      ------------------   ---------------------
EARNINGS:

Income on partnership preferred
  securities                               $  13,530,930            $ 38,195,891
                                           =============            ============

See Notes to Financial Statements


                                       3
<PAGE>

MERRILL LYNCH PREFERRED CAPITAL TRUST III
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
--------------------------------------------------------------------------------

                                                                 FOR THE PERIOD
                                                               JANUARY 16, 1998
                                                          TO SEPTEMBER 25, 1998
                                                          ---------------------

PREFERRED SECURITIES

Balance, beginning of period                                       $         --

Issuance of preferred securities                                    750,000,000
                                                                   ------------
Balance, end of period                                              750,000,000
                                                                   ------------

COMMON SECURITIES

Balance, beginning of period                                                 --

Issuance of preferred securities                                     23,196,000
                                                                   ------------
Balance, end of period                                               23,196,000
                                                                   ------------

UNDISTRIBUTED EARNINGS

Balance, beginning of period                                                 --

Earnings                                                             38,195,891

Distributions                                                       (24,664,961)

Distribution payable                                                (13,530,930)
                                                                   ------------
Balance, end of period                                                       --
                                                                   ------------
Total Stockholders' Equity                                         $773,196,000
                                                                   ============

See Notes to Financial Statements


                                       4
<PAGE>

MERRILL LYNCH PREFERRED CAPITAL TRUST III
STATEMENT OF CASH FLOWS (UNAUDITED)
--------------------------------------------------------------------------------

                                                                 FOR THE PERIOD
                                                               JANUARY 16, 1998
                                                          TO SEPTEMBER 25, 1998
                                                          ---------------------
CASH FLOWS FROM OPERATING ACTIVITIES:

  Earnings                                                         $ 38,195,891

  Increase in income receivable                                     (13,530,930)
                                                                   ------------
    Cash provided by operating activities                            24,664,961
                                                                   ------------
CASH FLOWS FROM INVESTING ACTIVITIES:

  Purchase of partnership preferred securities                     (773,196,000)
                                                                   ------------
    Cash used for investing activities                             (773,196,000)
                                                                   ------------
CASH FLOWS FROM FINANCING ACTIVITIES:

  Distributions                                                     (24,664,961)

  Proceeds from issuance of preferred securities                    750,000,000

  Proceeds from issuance of common securities                        23,196,000
                                                                   ------------
    Cash provided by financing activities                           748,531,039
                                                                   ------------
NET CHANGE IN CASH                                                           --

CASH, BEGINNING OF PERIOD                                                    --
                                                                   ------------

CASH, END OF PERIOD                                                $         --
                                                                   ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:
Preferred and common distributions of $13,125,000 and $405,930, respectively,
were accrued at September 25, 1998.

See Notes to Financial Statements


                                       5
<PAGE>

MERRILL LYNCH PREFERRED CAPITAL TRUST III
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 25, 1998 
--------------------------------------------------------------------------------


1. ORGANIZATION AND PURPOSE

Merrill Lynch Preferred Capital Trust III (the "Trust") is a statutory business
trust formed on December 19, 1997 under the laws of the State of Delaware for
the exclusive purposes of (i) issuing the Trust Originated Preferred Securities
(the "Trust Preferred Securities") and the Trust Common Securities (together
with the Trust Preferred Securities, the "Trust Securities") representing
undivided beneficial ownership interests in the assets of the Trust, (ii)
purchasing Partnership Preferred Securities (the "Partnership Preferred
Securities") representing the limited partnership interests of Merrill Lynch
Preferred Funding III, L.P. (the "Partnership") with the proceeds from the sale
of the Trust Securities, and (iii) engaging in only those other activities
necessary or incidental thereto. The Trust has a perpetual existence, subject to
certain termination events as provided in the Declaration of Trust under which
it was formed.

Merrill Lynch & Co., Inc. (the "Company") has paid compensation to the
underwriters of the offering of the Trust Preferred Securities. The Company also
has agreed to pay all fees and expenses related to the organization and
operations of the Trust (including any taxes, duties, assessments or
governmental charges of whatever nature (other than withholding taxes) imposed
by the United States or any other domestic taxing authority upon the Trust) and
be responsible for all debts and other obligations of the Trust (other than the
Trust Securities). The Company has agreed to indemnify the trustees and certain
other persons.


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION
The financial statements are presented in accordance with generally accepted
accounting principles, which require management to make estimates that affect
reported amounts and disclosure of contingencies in the financial statements.
Actual results could differ from those estimates.

INVESTMENT
The investment in Partnership Preferred Securities represents a limited
partnership interest in the Partnership and is recorded at cost. As of September
25, 1998, the carrying value of the investment approximates its fair value.

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


                                       6
<PAGE>

MERRILL LYNCH PREFERRED CAPITAL TRUST III
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 25, 1998
--------------------------------------------------------------------------------


3. INVESTMENT IN PARTNERSHIP PREFERRED SECURITIES

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


4. STOCKHOLDERS' EQUITY

TRUST PREFERRED SECURITIES
The Trust issued 30,000,000 7% Trust Preferred Securities, $25 liquidation
amount per security, in a public offering on January 16, 1998. The Trust
Preferred Securities are redeemable on or after March 30, 2008 at the option of
the Trust, in whole or in part, at a redemption price equal to $25 per security.
Distributions on the Trust Preferred Securities are cumulative from the date of
original issue and are payable quarterly if, as, and when the Trust has funds
available for payment. Holders of the Trust Preferred Securities have limited
voting rights and are not entitled to vote to appoint, remove or replace, or to
increase or decrease the number of, trustees, which voting rights are vested
exclusively in the holder of the Trust Common Securities. Under certain
circumstances, the Trust Preferred Securities have preferential rights to
payment relative to the Trust Common Securities. The Company has guaranteed, on
a subordinated basis, the payment in full of all distributions and other
payments on the Trust Preferred Securities to the extent that the Trust has
funds legally available. This guarantee and the partnership distribution
guarantee are subordinated to all other liabilities of the Company and ranks
pari passu with the most senior preferred stock of the Company.

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


                                       7
<PAGE>

MERRILL LYNCH PREFERRED FUNDING III, L.P.
BALANCE SHEET (UNAUDITED)
--------------------------------------------------------------------------------

                                                              SEPTEMBER 25, 1998
                                                              ------------------
ASSETS

Investments:
  Affiliate debentures                                              $900,546,600
  U.S. Treasury bills                                                  9,415,448
                                                                    ------------
  Total investments                                                  909,962,048

Interest receivable                                                   15,759,566
                                                                    ------------

Total Assets                                                        $925,721,614
                                                                    ------------

LIABILITY AND PARTNERS' CAPITAL

Distributions payable                                               $ 15,759,566
                                                                    ------------
Partners' capital:
  Limited partnership interest                                       773,196,000
  General partnership interest                                       136,766,048
                                                                    ------------
  Total partners' capital                                            909,962,048
                                                                    ------------

Total Liability and Partners' Capital                               $925,721,614
                                                                    ============

See Notes to Financial Statements


                                       8
<PAGE>

MERRILL LYNCH PREFERRED FUNDING III, L.P.
STATEMENTS OF EARNINGS (UNAUDITED)
--------------------------------------------------------------------------------

                                            FOR THE THREE         FOR THE PERIOD
                                             MONTHS ENDED       JANUARY 16, 1998
                                       SEPTEMBER 25, 1998  TO SEPTEMBER 25, 1998
                                       ------------------  ---------------------
Interest income:
  Affiliate debentures                       $ 15,759,566           $ 44,487,003
  U.S. Treasury bills                             121,197                321,717
                                             ------------           ------------
Earnings                                     $ 15,880,763           $ 44,808,720
                                             ============           ============

See Notes to Financial Statements


                                       9
<PAGE>

MERRILL LYNCH PREFERRED FUNDING III, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (UNAUDITED)
--------------------------------------------------------------------------------

                                                                 FOR THE PERIOD
                                                               JANUARY 16, 1998
                                                          TO SEPTEMBER 25, 1998
                                                          ---------------------
LIMITED PARTNER'S CAPITAL

Issuance of preferred securities                                   $773,196,000

Net income allocated to limited partner                              38,195,891

Distributions                                                       (24,664,961)

Distribution payable                                                (13,530,930)
                                                                   ------------
Balance, end of period                                              773,196,000
                                                                   ------------

GENERAL PARTNER'S CAPITAL

Capital contribution                                               $136,447,000

Net income allocated to general partner                               6,612,829

Distributions                                                        (4,065,145)

Distribution payable                                                 (2,228,636)
                                                                   ------------
Balance, end of period                                              136,766,048
                                                                   ------------

TOTAL PARTNERS' CAPITAL                                            $909,962,048
                                                                   ============

See Notes to Financial Statements


                                       10
<PAGE>

MERRILL LYNCH PREFERRED FUNDING III, L.P.
STATEMENT OF CASH FLOWS (UNAUDITED)
--------------------------------------------------------------------------------

                                                                 FOR THE PERIOD
                                                               JANUARY 16, 1998
                                                          TO SEPTEMBER 25, 1998
                                                          ---------------------
CASH FLOWS FROM OPERATING ACTIVITIES:

  Earnings                                                         $ 44,808,720

  Accretion of U.S. Treasury bills                                     (321,717)

  Increase in interest receivable                                   (15,759,566)
                                                                   ------------
    Cash provided by operating activities                            28,727,437
                                                                   ------------
CASH FLOWS FROM INVESTING ACTIVITIES:

  Purchase of affiliate debentures                                 (900,546,600)

  Purchases of investment securities                                (18,413,731)

  Maturity of investment securities                                   9,320,000
                                                                   ------------
    Cash used for investing activities                             (909,640,331)
                                                                   ------------
CASH FLOWS FROM FINANCING ACTIVITIES:

  Distributions                                                     (28,730,106)

  Proceeds from the issuance of preferred securities                773,196,000

  Capital contribution - general partner                            136,447,000
                                                                   ------------
    Cash provided by provided by financing activities               880,912,894
                                                                   ------------

NET CHANGE IN CASH                                                           --

CASH, BEGINNING OF PERIOD                                                    --
                                                                   ------------

CASH, END OF PERIOD                                                $         --
                                                                   ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:
Distributions of $15,759,566 were accrued at September 25, 1998.

See Notes to Financial Statements


                                       11
<PAGE>

MERRILL LYNCH PREFERRED FUNDING III, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 25, 1998
--------------------------------------------------------------------------------


1. ORGANIZATION AND PURPOSE

Merrill Lynch Preferred Funding III, L.P. (the "Partnership") is a limited
partnership that was formed under the Delaware Revised Uniform Limited
Partnership Act on December 19, 1997 for the exclusive purposes of purchasing
certain eligible debt instruments of Merrill Lynch & Co., Inc. (the "Company")
and wholly-owned subsidiaries of the Company (the "Affiliate Investment
Instruments") with the proceeds from the sale of Partnership Preferred
Securities (the "Partnership Preferred Securities") to Merrill Lynch Preferred
Capital Trust III (the "Trust") and a capital contribution from the Company in
exchange for the general partnership interest in the Partnership.

The Company serves as the sole general partner of the Partnership. The Company,
in its capacity as General Partner of the Partnership, has agreed to pay all
fees and expenses related to the organization and operations of the Partnership
(including any taxes, duties, assessments or government charges of whatever
nature (other than withholding taxes) imposed by the United States or any other
domestic taxing authority upon the Partnership) and be responsible for all debts
and other obligations of the Partnership (other than with respect to the
Partnership Preferred Securities). The General Partner has agreed to indemnify
certain officers and agents of the Partnership.


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION
The financial statements are presented in accordance with generally accepted
accounting principles, which require management to make estimates that affect
reported amounts and disclosure of contingencies in the financial statements.
Actual results could differ from those estimates.

INVESTMENTS 
The Partnership's investments in affiliate debentures is recorded at cost, and
its investment in U.S. Treasury Bills are classified as available-for-sale and
recorded at accreted cost. As of September 25, 1998, the carrying values of
these investments approximate their fair values.

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


                                       12
<PAGE>

MERRILL LYNCH PREFERRED FUNDING III, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 25, 1998
--------------------------------------------------------------------------------


3. INVESTMENT IN AFFILIATE DEBENTURES

The Partnership holds debentures of the Company and a wholly-owned subsidiary of
the Company. The debentures have a term of approximately 20 years and bear
interest at 7% per annum. The interest payment dates and redemption provisions
of the debentures, which are redeemable at the option of the Company and its
subsidiary on or after March 30, 2008, correspond to the distribution payment
dates and redemption provisions of the Partnership Preferred Securities.
Interest and redemption payments on the subsidiary debenture are guaranteed by
the Company on a subordinated basis.


4. PARTNERS' CAPITAL

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

The Company has guaranteed the payment of distributions by the Partnership on
the Partnership Preferred Securities if, as, and when declared out of funds
legally available and payments upon liquidation of the Partnership or the
redemption of the Partnership Preferred Securities to the extent of funds
legally available. This guarantee is subordinated to all other liabilities of
the Company and ranks pari passu with the most senior preferred stock of the
Company.


                                       13
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations.

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

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

      The Registrants' activities are limited to issuing securities and
investing the proceeds as described above. Since the Trust was organized on
December 19, 1997, its activities, as specified in its declaration of trust,
have been limited to the issuance of the TOPrS and the Trust Common Securities,
the investing of the proceeds in the Partnership Preferred Securities, and the
payment of distributions on the TOPrS and the Trust Common Securities in
accordance with their terms. Since the Partnership was organized on December 19,
1997, its activities, as specified in its agreement of limited partnership, have
been limited to the issuance of the Partnership Preferred Securities, the
receipt of a capital contribution from the Company, as general partner, the
investment of the proceeds in Affiliate Investment Instruments and certain
eligible debt securities, and the payment of distributions on the Partnership
Preferred Securities.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

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


                                       14
<PAGE>

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings

      The Registrants know of no material legal proceedings involving the Trust,
the Partnership, or the assets of either of them.

Item 2. Changes in Securities

      Not applicable.

Item 3. Defaults upon Senior Securities

      Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

      Not applicable.

Item 5. Other Information

      Not applicable.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

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

      4.2   Amended and Restated Declaration of Trust of the Trust, dated as of
            January 12, 1998, (incorporated by reference to Exhibit 4.2 to the
            Registration Statement)

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

      4.4   Amended and Restated Agreement of Limited Partnership of the
            Partnership, dated January 16, 1998, (incorporated by reference to
            Exhibit 4.4 to the Registration Statement)

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

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


                                       15
<PAGE>

      4.7   Form of Subordinated Debenture Indenture between the Company and The
            Chase Manhattan Bank, as trustee (incorporated by reference to
            Exhibit 4.7 to the Registration Statement)

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

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

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

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

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

      27    Financial Data Schedules*

(b) Reports on Form 8-K

      None.

-----------
*The Financial Data Schedules to be contained in Exhibit 27 are required to be
submitted only in the Registrants' electronic filing of this Form 10-Q by means
of the EDGAR system.


                                       16
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrants have duly caused this report to be signed on their
behalf by the undersigned, thereunto duly authorized on the 30th day of October,
1998.


                              MERRILL LYNCH PREFERRED CAPITAL TRUST III*

                              By: /s/ THERESA LANG
                                  ----------------------------------------------
                                  Name: Theresa Lang
                                  Title: Regular Trustee

                              By  /s/ STANLEY SCHAEFER
                                  ----------------------------------------------
                                  Name: Stanley Schaefer
                                  Title: Regular Trustee


                              MERRILL LYNCH PREFERRED FUNDING III, L.P.*

                              By: MERRILL LYNCH & CO., INC.,  as General Partner

                              By: /s/ THERESA LANG
                                  ----------------------------------------------
                                  Name: Theresa Lang
                                  Title: Senior Vice President and Treasurer

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


                                       17
<PAGE>

                                INDEX TO EXHIBITS

Exhibits

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

27    Financial Data Schedules