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                       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 March 27, 1998

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

                         Commission File No.: 1-7182-04
                                          
                   Delaware                            13-7108354            
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     (State or other jurisdiction of     (I.R.S. Employer Identification No.)
     incorporation or organization)

            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
--------------------------------------------------------------------------------
8% Trust Originated                  New York Stock Exchange                    
Preferred Securities ("TOPrS") 
(and the related guarantee)

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

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

                         Commission File No.: 1-7182-03
                                          
                   Delaware                            13-3926165             
--------------------------------------------------------------------------------
     (State or other jurisdiction of     (I.R.S. Employer Identification No.)
     incorporation or organization)

            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
--------------------------------------------------------------------------------
8% 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 March 27, 1998, no voting stock was held by non-affiliates of the
Registrants.

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<PAGE>

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

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

MERRILL LYNCH PREFERRED CAPITAL TRUST II
BALANCE SHEETS (UNAUDITED)
--------------------------------------------------------------------------------
                                         MARCH 27, 1998    DECEMBER 26, 1997
                                         --------------    -----------------
ASSETS

Investment in partnership
  preferred securities                     $309,278,400         $309,278,400
                                                              
Income receivable                             6,185,568            6,185,568
                                           ------------         ------------
                                                              
Total Assets                               $315,463,968         $315,463,968
                                           ============         ============
                                                              
LIABILITY AND STOCKHOLDERS' EQUITY                            
                                                              
Distributions payable                      $  6,185,568         $  6,185,568
                                           ------------         ------------
                                                              
Stockholders' equity:                                         
                                                              
  Preferred securities (8% Trust                              
    Originated Preferred Securities;                          
    12,000,000 authorized, issued,                            
    and outstanding; $25 liquidation                          
    amount per security)                    300,000,000          300,000,000
                                                              
  Common securities (8% Trust Common                          
    Securities; 371,136 authorized,                           
    issued, and outstanding;                                  
    $25 liquidation amount per security)      9,278,400            9,278,400
                                           ------------         ------------
                                                              
  Total stockholders' equity                309,278,400          309,278,400
                                           ------------         ------------
                                                              
Total Liability and Stockholders' Equity   $315,463,968         $315,463,968
                                           ============         ============
                                                              
See Notes to Financial Statements                         

                                       2
<PAGE>

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

                                           FOR THE THREE       FOR THE PERIOD
                                            MONTHS ENDED     FEBRUARY 6, 1997
                                          MARCH 27, 1998    TO MARCH 28, 1997
                                        ----------------    -----------------

EARNINGS:

Income on partnership preferred 
  securities                                 $ 6,185,568          $ 3,711,341
                                             ===========          ===========

See Notes to Financial Statements

                                       3
<PAGE>

MERRILL LYNCH PREFERRED CAPITAL TRUST II
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
--------------------------------------------------------------------------------

                                         FOR THE THREE         FOR THE PERIOD
                                          MONTHS ENDED       FEBRUARY 6, 1997
                                        MARCH 27, 1998      TO MARCH 28, 1997
                                        --------------      -----------------

PREFERRED SECURITIES

Balance, beginning of period             $ 300,000,000          $          --
                                                               
Issuance of preferred securities                    --            300,000,000
                                         -------------          -------------
                                                               
Balance, end of period                     300,000,000            300,000,000
                                         -------------          -------------
                                                               
COMMON SECURITIES                                              
                                                               
Balance, beginning of period                 9,278,400                     --
                                                               
Issuance of preferred securities                    --              9,278,400
                                         -------------          -------------
                                                               
Balance, end of period                       9,278,400              9,278,400
                                         -------------          -------------
                                                               
UNDISTRIBUTED EARNINGS                                         
                                                               
Balance, beginning of period                        --                     --
                                                               
Earnings                                     6,185,568              3,711,341
                                                               
Distributions payable                       (6,185,568)            (3,711,341)
                                         -------------          -------------
                                                               
Balance, end of period                              --                     --
                                         -------------          -------------
                                                               
Total Stockholders' Equity               $ 309,278,400          $ 309,278,400
                                         =============          =============
                                                            
See Notes to Financial Statements

                                       4
<PAGE>

MERRILL LYNCH PREFERRED CAPITAL TRUST II
STATEMENTS OF CASH FLOWS (UNAUDITED)
--------------------------------------------------------------------------------

                                            FOR THE THREE        FOR THE PERIOD
                                             MONTHS ENDED      FEBRUARY 6, 1997
                                           MARCH 27, 1998     TO MARCH 28, 1997
                                           --------------     -----------------

CASH FLOWS FROM OPERATING ACTIVITIES:

  Earnings                                  $   6,185,568         $   3,711,341
                                                                
  Increase in income receivable                        --            (3,711,341)
                                            -------------         -------------
                                                                
    Cash provided by operating activities       6,185,568                    --
                                            -------------         -------------
                                                                
CASH FLOWS FROM INVESTING ACTIVITIES:                           
                                                                
  Purchase of partnership preferred                             
     securities                                        --          (309,278,400)
                                            -------------         -------------

    Cash used for investing activities                 --          (309,278,400)
                                            -------------         -------------
                                                                
CASH FLOWS FROM FINANCING ACTIVITIES:                           
                                                                
  Proceeds from issuance of                                     
     preferred securities                              --           300,000,000
                                                                
  Proceeds from issuance of common                              
     securities                                        --             9,278,400
                                                                
  Distributions                                (6,185,568)                   --
                                            -------------         -------------
                                                                
    Cash (used for) provided by
     financing activities                      (6,185,568)          309,278,400
                                            -------------         -------------
                                                                
NET CHANGE IN CASH                                     --                    --
                                                                
CASH, BEGINNING OF PERIOD                              --                    --
                                            -------------         -------------
                                                                
CASH, END OF PERIOD                         $          --         $          --
                                            =============         =============
                                                                
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:                          
                                                           
Preferred and common distributions of $6,000,000 and $185,568, respectively,
were accrued at March 27, 1998. Preferred and common distributions of $3,600,000
and $111,341, respectively, were accrued at March 28, 1997.

See Notes to Financial Statements

                                       5
<PAGE>

MERRILL LYNCH PREFERRED CAPITAL TRUST II
NOTES TO FINANCIAL STATEMENTS
MARCH 27, 1998 (UNAUDITED)
--------------------------------------------------------------------------------

BASIS OF PRESENTATION

These unaudited financial statements should be read in conjunction with the
audited financial statements included in the Annual Report on Form 10-K of
Merrill Lynch Preferred Capital Trust II (the "Trust") for the year ended
December 26, 1997. The December 26, 1997 balance sheet was derived from the
audited financial statements. The interim financial statements for the three-
month periods are unaudited; however, in the opinion of the management of the
Trust, all adjustments, consisting only of normal recurring accruals necessary
for a fair statement of the results of operations, have been included.

                                       6
<PAGE>

MERRILL LYNCH PREFERRED FUNDING II, L.P.
BALANCE SHEETS (UNAUDITED)
--------------------------------------------------------------------------------

                                          MARCH 27, 1998    DECEMBER 26, 1997
                                         ---------------    -----------------

ASSETS

Cash                                        $      8,333         $         --

Investments:                                                     
  Affiliate debentures                       360,218,400          360,218,400
  U.S. Treasury bills                          3,855,890            3,815,078
                                            ------------         ------------
  Total investments                          364,074,290          364,033,478
                                                                 
Interest receivable                            7,204,368            7,204,368
                                            ------------         ------------
                                                                 
Total Assets                                $371,286,991         $371,237,846
                                            ============         ============
                                                                 
LIABILITY AND PARTNERS' CAPITAL                                  
                                                                 
Distributions payable                       $  7,212,701         $  7,204,368
                                            ------------         ------------
                                                                 
Partners' capital:                                               
  Limited partnership interest               309,278,400          309,278,400
  General partnership interest                54,795,890           54,755,078
                                            ------------         ------------
  Total partners' capital                    364,074,290          364,033,478
                                            ------------         ------------
                                                                 
Total Liability and Partners' Capital       $371,286,991         $371,237,846
                                            ============         ============
                                                           
See Notes to Financial Statements

                                       7
<PAGE>

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

                                         FOR THE THREE         FOR THE PERIOD
                                          MONTHS ENDED       FEBRUARY 6, 1997
                                        MARCH 27, 1998      TO MARCH 28, 1997
                                        --------------      -----------------

Interest income:
  Affiliate debentures                     $ 7,204,368            $ 4,322,621
  U.S. Treasury bills                           49,145                 24,917
                                           -----------            -----------

Earnings                                   $ 7,253,513            $ 4,347,538
                                           ===========            ===========

See Notes to Financial Statements

                                       8
<PAGE>

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

                                            FOR THE THREE         FOR THE PERIOD
                                             MONTHS ENDED       FEBRUARY 6, 1997
                                           MARCH 27, 1998      TO MARCH 28, 1997
                                           --------------      -----------------

LIMITED PARTNER'S CAPITAL

Balance, beginning of period                $ 309,278,400         $          --
                                                                
Issuance of preferred securities                       --           309,278,400
                                                                
Net income allocated to limited partner         6,185,568             3,711,341
                                                                
Preferred distribution payable                 (6,185,568)           (3,711,341)
                                            -------------         -------------
                                                                
Balance, end of period                        309,278,400           309,278,400
                                            -------------         -------------
                                                                
GENERAL PARTNER'S CAPITAL                                       
                                                                
Balance, beginning of period                   54,755,078                    --
                                                                
Capital contribution                                   --            54,579,000
                                                                
Net income allocated to general partner         1,067,945               636,197
                                                                
Distribution payable                           (1,027,133)             (611,280)
                                            -------------         -------------
                                                                
Balance, end of period                         54,795,890            54,603,917
                                            -------------         -------------
                                                                
TOTAL PARTNERS' CAPITAL                     $ 364,074,290         $ 363,882,317
                                            =============         =============
                                                              
See Notes to Financial Statements

                                       9
<PAGE>

MERRILL LYNCH PREFERRED FUNDING II, L.P.
STATEMENTS OF CASH FLOWS (UNAUDITED)
--------------------------------------------------------------------------------

                                            FOR THE THREE         FOR THE PERIOD
                                             MONTHS ENDED       FEBRUARY 6, 1997
                                           MARCH 27, 1998      TO MARCH 28, 1997
                                           --------------      -----------------

CASH FLOWS FROM OPERATING ACTIVITIES:

  Earnings                                  $   7,253,513         $   4,347,538
                                                                
  Accretion of U.S. Treasury bills                (49,145)              (24,917)
                                                                
  Increase in interest receivable                      --            (4,322,621)
                                            -------------         -------------
                                                                
    Cash provided by operating activities       7,204,368                    --
                                            -------------         -------------
                                                                
CASH FLOWS FROM INVESTING ACTIVITIES:                           
                                                                
  Purchase of affiliate debentures                     --          (360,218,400)
                                                                
  Purchases of investment securities           (3,829,287)           (3,639,000)

  Maturities of investment securtities          3,837,620                    --
                                            -------------         -------------
                                                                
    Cash provided by (used for) 
      investing activities                          8,333          (363,857,400)
                                            -------------         -------------
                                                                
CASH FLOWS FROM FINANCING ACTIVITIES:                           
                                                                
  Proceeds from the issuance                                    
     of preferred securities                           --           309,278,400
                                                                
  Capital contribution - general partner               --            54,579,000
                                                                
  Distributions to limited partner             (6,185,568)                   --
                                                                
  Distributions to general partner             (1,018,800)                   --
                                            -------------         -------------
                                                                
    Cash (used for) provided by                                 
     financing activities                      (7,204,368)          363,857,400
                                            -------------         -------------
                                                                
NET CHANGE IN CASH                                  8,333                    --
                                                                
CASH, BEGINNING OF PERIOD                              --                    --
                                            -------------         -------------
                                                                
CASH, END OF PERIOD                         $       8,333         $          --
                                            =============         =============
                                                                
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:                     
Distributions of $7,212,701 and $4,322,621 were accrued at March 27, 1998 and
March 28, 1997, respectively.

See Notes to Financial Statements

                                       10
<PAGE>

MERRILL LYNCH PREFERRED FUNDING II, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 27, 1998 (UNAUDITED)
--------------------------------------------------------------------------------

BASIS OF PRESENTATION

These unaudited financial statements should be read in conjunction with the
audited financial statements included in the Annual Report on Form 10-K of
Merrill Lynch Preferred Funding II, L.P. (the "Partnership") for the year ended
December 26, 1997. The December 26, 1997 balance sheet was derived from the
audited financial statements. The interim financial statements for the three-
month periods are unaudited; however, in the opinion of the management of the
Partnership, all adjustments, consisting only of normal recurring accruals
necessary for a fair statement of the results of operations, have been included.

                                       11
<PAGE>

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

      Merrill Lynch Preferred Capital Trust II (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 January 16, 1997, which was subsequently amended by an
amended and restated declaration of trust dated as of February 4, 1997. The
Trust exists for the exclusive purposes of (i) issuing trust securities,
consisting of 8% 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 8% Partnership Preferred Securities
(the "Partnership Preferred Securities") issued by Merrill Lynch Preferred
Funding II, 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 January 16, 1997, which was subsequently amended by an
amended and restated agreement of limited partnership dated February 6, 1997.
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
January 16, 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 January 16,
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 February 6, 1997, 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 ML & Co. 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.

                                       12
<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 January 16, 1997, of the Trust
                  (incorporated by reference to Exhibit 4.1 to Registration
                  Statement on Form S-3 (No. 333-20137) (the "Registration
                  Statement"))
            
            4.2   Amended and Restated Declaration of Trust, dated as of
                  February 4, 1997, of the Trust (incorporated by reference to
                  Exhibit 4.2 to the Trust's Quarterly Report on Form 10-Q for
                  the period ended March 28, 1997 (File No. 1-7182-04))

            4.3   Certificate of Limited Partnership, dated as of January 16,
                  1997, of the Partnership (incorporated by reference to Exhibit
                  4.3 to the Registration Statement)

            4.4   Amended and Restated Agreement of Limited Partnership, dated
                  as of February 6, 1997, of the Partnership (incorporated by
                  reference to Exhibit 4.4 to the Partnership's Quarterly Report
                  on Form 10-Q for the period ended March 28, 1997 (File No.
                  1-7182-03))

            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)

                                       13
<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 Dividends
             
            27    Financial Data Schedules*

----------

*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.

(b) Reports on Form 8-K

      None.

                                       14
<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 7th day of May,
1998.

                               MERRILL LYNCH PREFERRED CAPITAL TRUST II*

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


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


                               MERRILL LYNCH PREFERRED FUNDING II, 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.


                                       15