<PAGE>

================================================================================
                       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 June 25, 1999

                    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
      (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.
                  (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                     New York Stock Exchange
   Preferred Securities
   (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 June 25, 1999, 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 II
BALANCE SHEETS  (UNAUDITED)
(dollars in thousands, except per security amounts)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>




                                               JUNE 25, 1999   DECEMBER 25, 1998
                                               -------------   -----------------
<S>                                               <C>            <C>

ASSETS

Investment in partnership preferred securities     $ 309,278           $ 309,278

Income receivable                                      6,186               6,186
                                                   ---------           ---------

Total Assets                                       $ 315,464           $ 315,464
                                                   =========           =========



LIABILITY AND STOCKHOLDERS' EQUITY

Distributions payable                              $   6,186           $   6,186
                                                   ---------           ---------

Stockholders' equity:

   Preferred securities (8% Trust Originated
     Preferred Securities; 12,000,000 authorized,
     issued, and outstanding; $25 liquidation
     amount per security)                            300,000             300,000

   Common securities (8% Trust Common Securities;
     371,136 authorized, issued, and outstanding;
     $25 liquidation amount per security)              9,278               9,278
                                                   ---------           ---------

   Total stockholders' equity                        309,278             309,278
                                                   ---------           ---------


Total Liability and Stockholders' Equity           $ 315,464           $ 315,464
                                                   =========           =========

</TABLE>

See Note to Financial Statements



                                       2
<PAGE>

MERRILL LYNCH PREFERRED CAPITAL TRUST II
STATEMENTS OF EARNINGS  (UNAUDITED)
(dollars in thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>




                                                    FOR THE THREE MONTHS ENDED
                                                  ------------------------------

                                                  JUNE 25, 1999    JUNE 26, 1998
                                                  -------------    -------------
<S>                                               <C>            <C>
EARNINGS

Income on partnership preferred securities           $    6,185       $    6,185
                                                     ==========       ==========






                                                     FOR THE SIX MONTHS ENDED
                                                  ------------------------------

                                                  JUNE 25, 1999    JUNE 26, 1998
                                                  -------------    -------------

EARNINGS

Income on partnership preferred securities           $   12,371       $   12,371
                                                     ==========       ==========

</TABLE>


See Note to Financial Statements



                                       3
<PAGE>

MERRILL LYNCH PREFERRED CAPITAL TRUST II
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY  (UNAUDITED)
(dollars in thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>




                                                    FOR THE SIX MONTHS ENDED
                                                  -----------------------------

                                                  JUNE 25, 1999   JUNE 26, 1998
                                                  -------------   -------------
<S>                                                 <C>              <C>

PREFERRED SECURITIES

Balance, beginning and end of period                  $ 300,000       $ 300,000
                                                      ---------       ---------


COMMON SECURITIES

Balance, beginning and end of period                      9,278           9,278
                                                      ---------       ---------


UNDISTRIBUTED EARNINGS

Balance, beginning of period                               -               -

Earnings                                                 12,371          12,371

Distributions                                            (6,186)         (6,186)

Distributions payable                                    (6,185)         (6,185)
                                                      ---------       ---------

Balance, end of period                                     -               -
                                                      ---------       ---------

 Total Stockholders' Equity                           $ 309,278       $ 309,278
                                                      =========       =========


</TABLE>

See Note to Financial Statements



                                       4
<PAGE>

MERRILL LYNCH PREFERRED CAPITAL TRUST II
STATEMENTS OF CASH FLOWS  (UNAUDITED)
(dollars in thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>




                                                     FOR THE SIX MONTHS ENDED
                                                  -----------------------------
                                                  JUNE 25, 1999   JUNE 26, 1998
                                                  -------------   -------------

<S>                                               <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

  Earnings                                            $  12,371       $  12,371
                                                      ---------       ---------

    Cash provided by operating activities                12,371          12,371
                                                      ---------       ---------


CASH FLOWS FROM FINANCING ACTIVITIES:

  Distributions                                         (12,371)        (12,371)
                                                      ---------       ---------

    Cash used for financing activities                  (12,371)        (12,371)
                                                      ---------       ---------
NET CHANGE IN CASH                                         -               -

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

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



SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:
Preferred and common distributions of $6,000 and $185, respectively, were
accrued at June 25, 1999 and June 26, 1998.


</TABLE>


See Note to Financial Statements




                                       5
<PAGE>

MERRILL LYNCH PREFERRED CAPITAL TRUST II
NOTE TO FINANCIAL STATEMENTS  (UNAUDITED)
JUNE 25, 1999
--------------------------------------------------------------------------------



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  25, 1998.  The  December  25, 1998 balance  sheet was derived from the
audited financial  statements.  The interim financial  statements for the three-
and  six-month  periods are  unaudited;  however,  in the opinion of the Regular
Trustee 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)
(dollars in thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>




                                              JUNE 25, 1999    DECEMBER 25, 1998
                                              -------------    -----------------
<S>                                           <C>                  <C>
ASSETS


Investments:
  Affiliate debentures                           $  360,218           $  360,218
  U.S. Treasury bills                                 3,666                3,772
                                                 ----------           ----------
  Total investments                                 363,884              363,990

Interest receivable                                   7,204                7,204
                                                 ----------           ----------

Total Assets                                     $  371,088           $  371,194
                                                 ==========           ==========



LIABILITY AND PARTNERS' CAPITAL

Distributions payable                            $    7,204           $    7,204
                                                 ----------           ----------

Partners' capital:
  Limited partnership interest                      309,278              309,278
  General partnership interest                       54,606               54,712
                                                 ----------           ----------

  Total partners' capital                           363,884              363,990
                                                 ----------           ----------


Total Liability and Partners' Capital            $  371,088           $  371,194
                                                 ==========           ==========


</TABLE>


See Note to Financial Statements



                                       7
<PAGE>

MERRILL LYNCH PREFERRED FUNDING II, L.P.
STATEMENTS OF EARNINGS  (UNAUDITED)
(dollars in thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>




                                                  FOR THE THREE MONTHS ENDED
                                              ----------------------------------

                                              JUNE 25, 1999        JUNE 26, 1998
                                              -------------        -------------
<S>                                            <C>                 <C>

EARNINGS

Interest income:
  Affiliate debentures                           $    7,204           $    7,204
  U.S. Treasury bills                                    46                   50
                                                 ----------           ----------

Earnings                                         $    7,250           $    7,254
                                                 ==========           ==========






                                                   FOR THE SIX MONTHS ENDED
                                             ----------------------------------

                                              JUNE 25, 1999        JUNE 26, 1998
                                              -------------        -------------

EARNINGS

Interest income:
  Affiliate debentures                           $   14,409           $   14,409
  U.S. Treasury bills                                    95                   99
                                                 ----------           ----------

Earnings                                         $   14,504           $   14,508
                                                 ==========           ==========

</TABLE>

See Note to Financial Statements



                                       8
<PAGE>

MERRILL LYNCH PREFERRED FUNDING II, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL  (UNAUDITED)
(dollars in thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>




                                                     FOR THE SIX MONTHS ENDED
                                                  -----------------------------

                                                  JUNE 25, 1999   JUNE 26, 1998
                                                  -------------   -------------

<S>                                                <C>              <C>

LIMITED PARTNER'S CAPITAL

Balance, beginning of period                         $  309,278      $  309,278

Net income allocated to limited partner                  12,371          12,371

Distributions                                            (6,186)         (6,186)

Distributions payable                                    (6,185)         (6,185)
                                                     ----------      ----------

Balance, end of period                                  309,278         309,278
                                                     ----------      ----------


GENERAL PARTNER'S CAPITAL

Balance, beginning of period                             54,712          54,755

Net income allocated to general partner                   2,133           2,137

Distributions                                            (1,220)         (1,026)

Distributions payable                                    (1,019)         (1,019)
                                                     ----------      ----------

Balance, end of period                                   54,606          54,847
                                                     ----------      ----------


TOTAL PARTNERS' CAPITAL                              $  363,884      $  364,125
                                                     ==========      ==========


</TABLE>


See Note to Financial Statements





                                       9
<PAGE>

MERRILL LYNCH PREFERRED FUNDING II, L.P.
STATEMENTS OF CASH FLOWS  (UNAUDITED)
(dollars in thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>




                                                  FOR THE SIX MONTHS ENDED
                                              ---------------------------------

                                              JUNE 25, 1999       JUNE 26, 1998
                                              -------------       -------------
<S>                                          <C>                  <C>


CASH FLOWS FROM OPERATING ACTIVITIES:

  Earnings                                       $   14,504          $   14,508

  Accretion of U.S. Treasury bills                      (95)                (99)
                                                 ----------          ----------

    Cash provided by operating activities            14,409              14,409
                                                 ----------          ----------


CASH FLOWS FROM INVESTING ACTIVITIES:

  Purchases of investment securities                 (3,639)             (7,474)

  Maturities of investment securities                 3,840               7,717
                                                 ----------          ----------

    Cash provided by investing activities               201                 243
                                                 ----------          ----------


CASH FLOWS FROM FINANCING ACTIVITIES:

  Distributions to limited partner                  (12,371)            (12,371)

  Distributions to general partner                   (2,239)             (2,046)
                                                 ----------          ----------

    Cash used for financing activities              (14,610)            (14,417)
                                                 ----------          ----------

NET CHANGE IN CASH                                     -                    235

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

CASH, END OF PERIOD                              $     -             $      235
                                                 ==========          ==========



SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:
Distributions of $7,204 were accrued at June 25, 1999 and June 26, 1998.


</TABLE>


See Note to Financial Statements






                                       10
<PAGE>

MERRILL LYNCH PREFERRED FUNDING II, L.P.
NOTE TO FINANCIAL STATEMENTS  (UNAUDITED)
JUNE 25, 1999
--------------------------------------------------------------------------------



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  25, 1998.  The  December  25, 1998 balance  sheet was derived from the
audited financial  statements.  The interim financial  statements for the three-
and  six-month  periods are  unaudited;  however,  in the opinion of the General
Partner 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 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.



                                       12
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
        --------------------------------

(a)   Exhibits

      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.



                                       13
<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 9th day of August,
1999.


                                MERRILL LYNCH PREFERRED CAPITAL TRUST II*


                                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/ JOHN C. STOMBER
                                    --------------------------------------------
                                Name: John C. Stomber
                                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
      Registrants. The Trustees of the Trust (which include the Regular Trustee,
      the  Property  Trustee and the  Delaware  Trustee)  together  exercise all
      powers and perform all functions with respect to the Trust.



                                       14
<PAGE>

                                INDEX TO EXHIBITS

Exhibits

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

27    Financial Data Schedules






                                       15