================================================================================
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                             ----------------------

                                    FORM 10-K

                      ANNUAL REPORT PURSUANT TO SECTION 13
                 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                 -----------------------------------------------
                   For the fiscal year ended December 29, 2000

                     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)

    4  World Financial Center
         New York, New York                               10080
(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  Preferred        New York Stock  Exchange
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)

    4  World Financial Center
         New York, New York                               10080
(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 |_|

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best  of  the  Registrants'   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. |X|

As of  March  28,  2001,  no voting  stock  was  held by  non-affiliates  of the
Registrants.
<PAGE>

                      DOCUMENTS INCORPORATED BY REFERENCE:

PROSPECTUS, DATED FEBRUARY 4, 1997, FILED PURSUANT TO RULE 424(b) IN CONNECTION
WITH REGISTRATION STATEMENT ON FORM S-3 (No. 333-20137) FILED BY THE REGISTRANTS
AND  MERRILL LYNCH & CO., INC.- INCORPORATED  BY  REFERENCE  IN  PART  I
================================================================================



                                     PART I
                                     ------

ITEM 1.  BUSINESS
         --------

         MERRILL LYNCH PREFERRED CAPITAL TRUST II

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.



         MERRILL LYNCH PREFERRED FUNDING II, L.P.

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  information set forth under the headings  "Merrill Lynch Preferred  Capital
Trust II", "Merrill Lynch Preferred Funding II, L.P.", "Description of the Trust
Preferred Securities", "Description of the Trust Guarantee", "Description of the
Partnership Preferred Securities",  "Description of the Partnership  Guarantee",
and "Use of Proceeds" in the Prospectus  dated February 4, 1997 of the Trust and
the Partnership is incorporated by reference herein.

ITEM 2.  PROPERTIES
         ----------

Not Applicable.

ITEM 3.  LEGAL PROCEEDINGS
         -----------------

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

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         ---------------------------------------------------

No matter was  submitted to a vote of holders of any  securities of the Trust or
the Partnership during the fiscal year covered by this report.

<PAGE>


                                     PART II
                                     -------

ITEM 5.  MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
         ---------------------------------------------------------------------

(a) There is no established public market for the Trust Common Securities or the
general partnership interest in the Partnership.

(b) All of the  Trust  Common  Securities  and the  entire  general  partnership
interest in the Partnership are owned of record and beneficially by the Company.

(c) The  Company,  as holder of the Trust  Common  Securities,  is  entitled  to
receive  cumulative cash  distributions  accumulating  from February 6, 1997 and
payable  quarterly  in  arrears  on each  March 30,  June 30,  September  30 and
December  30,  commencing  March  30,  1997,  at an  annual  rate  of 8% of  the
liquidation  amount per annum.  Distributions  not paid on the scheduled payment
date will accumulate and compound quarterly at a rate per annum equal to 8%. The
certificate  of limited  partnership  of the  Partnership  does not  require any
regular periodic  distributions to be made to the general partner;  however,  to
the  extent  that  aggregate  payments  to  the  Partnership  on  the  Affiliate
Investment   Instruments  and  on  certain   eligible  debt  securities   exceed
distributions  accumulated or payable with respect to the Partnership  Preferred
Securities,  the  Partnership  may at times have  excess  funds  which  shall be
allocated to and may, in the general  partner's sole discretion,  be distributed
to the general partner.

ITEM 6.  SELECTED FINANCIAL DATA
         -----------------------

The Registrants'  activities are limited to issuing securities and investing the
proceeds as described in ITEM 1. - Business, above.  Accordingly, the financial
statements  included  herein in response to ITEM 8. - Financial Statements  and
Supplementary Data are incorporated by reference in response to this item.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         ---------------------------------------------------------------
         RESULTS OF OPERATIONS
         ---------------------

The Registrants'  activities are limited to issuing securities and investing the
proceeds  as  described  in Item 1. -  Business,  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 7A. 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.



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
         -------------------------------------------

In response to this ITEM 8, the financial  statements  and notes thereto and the
independent   auditors'  reports  set  forth  on  pages  F-1  through  F-15  are
incorporated by reference herein.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         ---------------------------------------------------------------
         FINANCIAL DISCLOSURES
         ---------------------

None.

<PAGE>


                                    PART III
                                    --------

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
         --------------------------------------------------

         The Trustees of the Trust are as follows:

                  Regular Trustees:         John C. Stomber
                                            Stanley Schaefer

                  Property Trustee:         The Chase Manhattan Bank

                  Delaware Trustee:         Chase Manhattan Bank Delaware

Stanley  Schaefer is Senior  Director of  Corporate  Tax for the Company and has
served in that  capacity or another  capacity with the Company for the last five
years.  John C. Stomber is Senior Vice  President  and Treasurer of the Company.
Mr.  Stomber  joined the Company in March 1999.  Mr.  Stomber was an employee of
Deutsche Bank from 1991 to March 1999,  serving as Deutsche Bank's Treasurer for
the Americas Region starting in 1996.

With the exception of Mr.  Stomber,  each Trustee has served since the Trust was
organized on January 16, 1997. Mr. Stomber has served since  September 30, 1999.
The Trustees  serve at the  pleasure of the Company,  as the holder of the Trust
Common Securities.

The Partnership has no directors or executive officers.


ITEM 11. EXECUTIVE COMPENSATION
         ----------------------

Neither the Trust nor the Partnership has any executive officers. No employee of
the Company receives any compensation for serving as a Regular Trustee or acting
in any  capacity  for the  Trust  or the  Partnership  separate  from his or her
compensation as an employee of the Company.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
         --------------------------------------------------------------

The  information  in ITEM 1. - Business  and ITEM 5. - Market  for  Registrants'
Common Equity and Related  Stockholder  Matters with respect to ownership of the
Trust Common Securities is incorporated by reference in response to this item.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
         ----------------------------------------------

None.



                                     PART IV
                                     -------

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
         ---------------------------------------------------------------

(a)      Documents filed as part of this Report:

         1.       Financial Statements

                  The  contents  of the  financial  statements  are  listed  on
                  page  F-1  hereof,  and the  financial  statements  and
                  accompanying independent auditors' reports appear on pages
                  F-2 through F-15.

         2.       Financial Statement Schedules

                  None.
<PAGE>

         3.       Exhibits

                  Certain of the following  exhibits were  previously  filed as
                  exhibits to other  reports or  registration  statements
                  filed by the Registrants  and are  incorporated  herein by
                  reference to such reports or  registration  statements as
                  indicated parenthetically below by the appropriate report
                  reference date or registration statement number.

         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 of the Trust,
                  dated as of February 4, 1997  (incorporated by reference to
                  Exhibit 4.2 to the Trust's Quarterly Report on Form 10-Q
                  for the quarter 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 of the
                  Partnership  (incorporated by reference to Exhibit 4.4
                  to the Partnership's Quarterly Report on Form 10-Q for the
                  quarter 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)

         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

         23*      Consent of Deloitte & Touche LLP

         24*      Powers of Attorney


(b)      Reports on Form 8-K

         None.

___________________

* Filed herewith


<PAGE>


                          INDEX TO FINANCIAL STATEMENTS
                          -----------------------------
                                  ITEM 14(a)(1)

FINANCIAL STATEMENTS                                                      PAGE
--------------------                                                      ----

MERRILL LYNCH PREFERRED CAPITAL TRUST II

     Balance Sheets, December 29, 2000 and December 31, 1999               F-2

     Statements of Earnings, Years Ended December 29, 2000,
           December 31, 1999 and December 25, 1998                         F-3

     Statements of Changes in  Stockholders' Equity,  Years
           Ended  December  29, 2000, December 31, 1999 and
           December 25, 1998                                               F-4

     Statements of Cash Flows, Years Ended December 29, 2000,
           December 31, 1999 and December 25, 1998                         F-5

     Notes to Financial Statements                                         F-6

     Independent Auditors' Report                                          F-8


MERRILL LYNCH PREFERRED FUNDING II, L.P.

     Balance Sheets, December 29, 2000 and December 31, 1999               F-9

     Statements of Earnings, Years Ended December 29, 2000,
           December 31, 1999 and December 25, 1998                         F-10

     Statements of Changes in Partners' Capital, Years Ended
           December  29, 2000, December 31, 1999 and
           December 25, 1998                                               F-11

     Statements of Cash Flows, Years Ended December 29, 2000,
           December 31, 1999 and December 25, 1998                         F-12

     Notes to Financial Statements                                         F-13

     Independent Auditors' Report                                          F-15



                                       F-1

<PAGE>

<TABLE>
<CAPTION>

MERRILL LYNCH PREFERRED CAPITAL TRUST II
BALANCE SHEETS
(dollars in thousands, except per security amounts)
-------------------------------------------------------------------------------------------------------


                                                              DECEMBER 29, 2000       DECEMBER 31, 1999
                                                              -----------------       -----------------
<S>                                                           <C>                     <C>


ASSETS

Investment in partnership preferred securities                       $  309,278              $  309,278
Income receivable                                                         6,186                       -
                                                                     ----------              ----------
Total Assets                                                         $  315,464              $  309,278
                                                                     ==========              ==========

LIABILITY AND STOCKHOLDERS' EQUITY

Distributions payable                                                $    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              $  309,278
                                                                     ==========              ==========

</TABLE>

See Notes to Financial Statements

                                       F-2

<PAGE>

<TABLE>
<CAPTION>

MERRILL LYNCH PREFERRED CAPITAL TRUST II
STATEMENTS OF EARNINGS
(dollars in thousands)
---------------------------------------------------------------------------------------------------------------------------



                                                                                   FOR THE YEAR ENDED
                                                          -----------------------------------------------------------------
                                                          DECEMBER 29, 2000        DECEMBER 31, 1999      DECEMBER 25, 1998
                                                          -----------------        -----------------    -------------------
<S>                                                       <C>                      <C>                    <C>

EARNINGS

Income on partnership preferred securities                        $  24,742                $  24,742              $  24,742
                                                                  =========                =========              =========



</TABLE>

See Notes to Financial Statements

                                       F-3

<PAGE>

<TABLE>
<CAPTION>

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


                                                                               FOR THE YEAR ENDED
                                                     -----------------------------------------------------------------
                                                     DECEMBER 29, 2000         DECEMBER 31, 1999     DECEMBER 25, 1998
                                                     -----------------         -----------------   -------------------

<S>                                                  <C>                       <C>                   <C>

PREFERRED SECURITIES
Balance, beginning and end of period                         $ 300,000                 $ 300,000             $ 300,000


COMMON SECURITIES
Balance, beginning and end of period                             9,278                     9,278                 9,278


UNDISTRIBUTED EARNINGS
Balance, beginning of period                                         -                         -                     -
Earnings                                                        24,742                    24,742                24,742
Distributions                                                  (18,556)                  (24,742)              (18,556)
Distributions payable                                           (6,186)                        -                (6,186)
                                                             ---------                 ---------             ---------
Balance, end of period                                               -                         -                     -
                                                             ---------                 ---------             ---------
Total Stockholders' Equity                                   $ 309,278                 $ 309,278             $ 309,278
                                                             =========                 =========             =========


</TABLE>
See Notes to Financial Statements

                                       F-4

<PAGE>

<TABLE>
<CAPTION>

MERRILL LYNCH PREFERRED CAPITAL TRUST II
STATEMENTS OF CASH FLOWS
(dollars in thousands)
---------------------------------------------------------------------------------------------------------------

                                                                        FOR THE YEAR ENDED
                                                   ------------------------------------------------------------
                                                   DECEMBER 29, 2000    DECEMBER 31, 1999     DECEMBER 25, 1998
                                                   -----------------    -----------------     -----------------
<S>                                                <C>                  <C>                   <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
  Earnings                                                  $ 24,742             $ 24,742              $ 24,742
 (Increase) Decrease in income receivable                     (6,186)               6,186                     -
                                                            --------             --------              --------
        Cash provided by operating activities                 18,556               30,928                24,742
                                                            --------             --------              --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Distributions                                              (18,556)             (30,928)              (24,742)
  Proceeds from issuance of preferred securites                    -                    -                     -
  Proceeds from issuance of common securities                      -                    -                     -
                                                            --------             --------              --------
        Cash used for financing activities                   (18,556)             (30,928)              (24,742)
                                                            --------             --------              --------

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 $186,  respectively,  were
accrued at December 29, 2000 and December 25, 1998 and distributed in the
following fiscal years.

</TABLE>

See Notes to Financial Statements

                                       F-5

<PAGE>

MERRILL LYNCH PREFERRED CAPITAL TRUST II
NOTES TO FINANCIAL STATEMENTS
December 29, 20000
--------------------------------------------------------------------------------


1. ORGANIZATION AND PURPOSE

Merrill Lynch  Preferred  Capital Trust II (the "Trust") is a statutory business
trust  formed  under the laws of the State of Delaware on January 16, 1997 for
the exclusive  purposes of (i) issuing its preferred and common  securities (the
"Trust Preferred  Securities" and the "Trust Common Securities",  respectively),
(ii) purchasing  partnership  preferred  securities (the "Partnership  Preferred
Securities"),  representing  the limited  partnership  interest of Merrill Lynch
Preferred Funding II, L.P. (the  "Partnership"), with the proceeds from the sale
of Trust Preferred and Common Securities, and (iii) engaging in only those other
activities necessary or incidental thereto.

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 (i) pay all fees and  expenses  related to the  organization  and
operations of the Trust (including  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 Trust) and the offering
of the Trust  Preferred  Securities  and (ii) be  responsible  for all debts and
other  obligations of the Trust (other than with respect to the Trust  Preferred
and Common  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 accounting  principles
generally accepted in the United States of America,  which require management to
make estimates that affect reported  amounts and disclosure of  contingencies in
the  financial  statements.  As such,  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. At year end,
the fair value of the investment  approximates its carrying value. Income on the
Partnership Preferred Securities is accrued when earned.

INCOME TAXES

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

                                       F-6

<PAGE>

MERRILL LYNCH PREFERRED CAPITAL TRUST II
NOTES TO FINANCIAL STATEMENTS
December 29, 2000
--------------------------------------------------------------------------------

3. INVESTMENT IN PARTNERSHIP PREFERRED SECURITIES

The  Trust  holds  12,371,136  8% Partnership  Preferred  Securities,  $25
liquidation  preference per security.  The interest payment dates and redemption
provisions of the Partnership Preferred  Securities,  which are redeemable after
March 30, 2007  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 12,000,000 8% Trust Preferred  Securities,  $25 liquidation
amount per  security  in a public  offering  on  February 6, 1997.  The Trust
Preferred  Securities are redeemable on or after March 30, 2007 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 rank equally with the most senior preferred stock of the Company.

TRUST COMMON SECURITIES

The Trust issued 371,136 8% Trust Common Securities,  $25 liquidation amount
per security,  to the Company on February 6, 1997. The Trust Common  Securities
are  redeemable  on or after  March 30, 2007 at the option of the Trust,  in
whole or in part, at a redemption price equal to $25 per security.

                                       F-7

<PAGE>


INDEPENDENT AUDITORS' REPORT

To the Trustees of
  Merrill Lynch Preferred Capital Trust II

We have  audited the  accompanying  balance  sheets of Merrill  Lynch  Preferred
Capital  Trust II (the  "Trust") as of December  29, 2000 and December 31, 1999,
and the related statements of earnings, changes in stockholders' equity and cash
flows for each of the three years in the period ended  December 29, 2000.  These
financial  statements  are the  responsibility  of the Trust's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our  opinion,  such  financial  statements  present  fairly,  in all material
respects,  the financial position of the Trust at December 29, 2000 and December
31, 1999,  and the results of its  operations and its cash flows for each of the
three years in the period ended December 29, 2000 in conformity  with accounting
principles generally accepted in the United States of America.



/s/  Deloitte & Touche LLP

New York, New York
March 28, 2001


                                       F-8
<PAGE>






<TABLE>
<CAPTION>

MERRILL LYNCH PREFERRED FUNDING II, L.P.
BALANCE SHEETS
(dollars in thousands)
-------------------------------------------------------------------------------------------------------

                                                           DECEMBER 29, 2000          DECEMBER 31, 1999
                                                           -----------------          -----------------

<S>                                                        <C>                         <C>

ASSETS

Cash                                                             $        1                  $        -

Investments:
     Affiliate debentures                                           360,218                     360,218
     U.S. Treasury bills                                              3,683                       3,673
                                                                 ----------                  ----------
     Total investments                                              363,901                     363,891

Interest receivable                                                   7,204                           -
                                                                 ----------                  ----------
Total Assets                                                     $  371,106                  $  363,891
                                                                 ==========                  ==========

LIABILITY AND PARTNERS' CAPITAL

Distributions payable                                            $    7,204                  $        -
                                                                 ----------                  ----------
Partners' capital:
     Limited partnership interest                                   309,278                     309,278
     General partnership interest                                    54,624                      54,613
                                                                 ----------                  ----------
     Total partners' capital                                        363,902                     363,891
                                                                 ----------                  ----------
Total Liability and Partners' Capital                            $  371,106                  $  363,891
                                                                 ==========                  ==========

</TABLE>

See Notes to Financial Statements

                                       F-9

<PAGE>

<TABLE>
<CAPTION>

MERRILL LYNCH PREFERRED FUNDING II, L.P.
STATEMENTS OF EARNINGS
(dollars in thousands)
------------------------------------------------------------------------------------------------------------------


                                                                        FOR THE YEAR ENDED
                                            ----------------------------------------------------------------------
                                            DECEMBER 29, 2000           DECEMBER 31, 1999        DECEMBER 25, 1998
                                            -----------------           -----------------      -------------------
<S>                                         <C>                         <C>                      <C>


EARNINGS

Interest income:
     Affiliate debentures                           $  28,817                   $  28,817                $  28,817
     U.S. Treasury bills                                  211                         186                      200
                                                    ---------                   ---------                ---------
Earnings                                            $  29,028                   $  29,003                $  29,017
                                                    =========                   =========                =========


</TABLE>

See Notes to Financial Statements

                                      F-10

<PAGE>

<TABLE>
<CAPTION>

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

                                                                       FOR THE YEAR ENDED
                                                ---------------------------------------------------------------
                                                DECEMBER 29, 2000       DECEMBER 31, 1999     DECEMBER 25, 1998
                                                -----------------       -----------------     -----------------
<S>                                              <C>                     <C>                   <C>

LIMITED PARTNER'S CAPITAL
Balance, beginning of period                            $ 309,278               $ 309,278             $ 309,278
Net income allocated to limited partner                    24,742                  24,742                24,742
Distributions                                             (18,556)                (24,742)              (18,556)
Distributions payable                                      (6,186)                      -                (6,186)
                                                        ---------               ---------             ---------
Balance, end of period                                    309,278                 309,278               309,278
                                                        ---------               ---------             ---------

GENERAL PARTNER'S CAPITAL
Balance, beginning of period                               54,613                  54,712                54,755
Net income allocated to general partner                     4,286                   4,261                 4,275
Distributions                                              (3,257)                 (4,360)               (3,300)
Distributions payable                                      (1,018)                      -                (1,018)
                                                        ---------               ---------             ---------
Balance, end of period                                     54,624                  54,613                54,712
                                                        ---------               ---------             ---------
TOTAL PARTNERS' CAPITAL                                 $ 363,902               $ 363,891             $ 363,990
                                                        =========               =========             =========


</TABLE>

See Notes to Financial Statements

                                      F-11

<PAGE>

<TABLE>
<CAPTION>

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


                                                                                FOR THE YEAR ENDED
                                                        ---------------------------------------------------------------
                                                        DECEMBER 29, 2000        DECEMBER 31, 1999    DECEMBER 25, 1998
                                                        -----------------        -----------------  -------------------

<S>                                                     <C>                      <C>                  <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
     Earnings                                                    $ 29,028                 $ 29,003             $ 29,017
     Accretion of U.S. Treasury bills                                (211)                    (186)                (200)
     (Increase) decrease  in interest receivable                   (7,204)                   7,204                    -
                                                                 --------                 --------             --------
        Cash provided by operating activities                      21,613                   36,021               28,817
                                                                 --------                 --------             --------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of investment securities                            (7,277)                  (7,277)              (7,474)
     Maturities of investment securities                            7,478                    7,562                7,717
                                                                 --------                 --------             --------
        Cash provided by investing activities                         201                      285                  243
                                                                 --------                 --------             --------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Distributions to limited partner                             (18,556)                 (30,928)             (24,742)
     Distributions to general partner                              (3,257)                  (5,378)              (4,318)
                                                                 --------                 --------             --------
        Cash used for financing activities                        (21,813)                 (36,306)             (29,060)
                                                                 --------                 --------             --------

NET CHANGE IN CASH                                                      1                        -                    -
                                                                 --------                 --------             --------
CASH, BEGINNING OF PERIOD                                               -                        -                    -
                                                                 --------                 --------             --------
CASH, END OF PERIOD                                              $      1                 $      -             $      -
                                                                 ========                 ========             ========




SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:

Distributions of $7,204 were accrued at December 29, 2000 and December 25, 1998
and distributed in the following fiscal years.

</TABLE>

See Notes to Financial Statements

                                      F-12

<PAGE>

MERRILL LYNCH PREFERRED FUNDING II, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 29, 2000
--------------------------------------------------------------------------------


1. ORGANIZATION AND PURPOSE

Merrill Lynch Preferred  Funding II, L.P. (the  "Partnership") is a limited
partnership   that  was  formed  under  the  Delaware  Revised  Uniform  Limited
Partnership  Act on January 16,  1997 for the  exclusive  purpose of  purchasing
certain  eligible debt  instruments of Merrill Lynch & Co., Inc. (the "Company")
and wholly owned subsidiaries of the Company with (i) the proceeds from the sale
of  its  preferred   securities  (the   "Partnership   Preferred   Securities"),
representing a limited  partner  interest,  to Merrill Lynch  Preferred  Capital
Trust II (the  "Trust")  and (ii) a capital  contribution  from the  Company  in
exchange for the general partnership interest in the Partnership.

The Company,  in its capacity as sole general  partner of the  Partnership,  has
agreed  to (i) pay  all  fees  and  expenses  related  to the  organization  and
operations  of  the  Partnership  (including  taxes,  duties,   assessments,  or
government  charges (other than withholding  taxes) imposed by the United States
or any  other  domestic  taxing  authority  upon  the  Partnership)  and (ii) be
responsible for all debts and other  obligations of the Partnership  (other than
with  respect to the  Partnership  Preferred  Securities).  The Company has also
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 accounting  principles
generally accepted in the United States of America,  which require management to
make estimates that affect reported  amounts and disclosure of  contingencies in
the  financial  statements.  As such,  actual  results  could  differ from those
estimates.

INVESTMENTS

The  Partnership's  investment in affiliate  debentures is recorded at cost, and
its investment in U.S.  Treasury bills is classified as  available-for-sale  and
recorded at accreted cost, which approximates fair value.

INCOME TAXES

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

                                      F-13

<PAGE>

MERRILL LYNCH PREFERRED FUNDING II, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 29, 2000
--------------------------------------------------------------------------------


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 8% 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, 2007, 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 12,371,136 8% Partnership Preferred  Securities,  $25
liquidation  preference  per  security,  to the  Trust  on  February 6, 1997.
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, 2007 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  equally  with the most  senior  preferred  stock of the
Company.

                                      F-14

<PAGE>


INDEPENDENT AUDITORS' REPORT

To the General Partner and Limited Partner of
  Merrill Lynch Preferred Funding II, L.P.

We have  audited the  accompanying  balance  sheets of Merrill  Lynch  Preferred
Funding II, L.P.  (the  "Partnership")  as of December 29, 2000 and December 31,
1999, and the related statements of earnings,  changes in partners' capital, and
cash flows for each of the three years in the period  ended  December  29, 2000.
These  financial   statements  are  the   responsibility  of  the  Partnership's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our  opinion,  such  financial  statements  present  fairly,  in all material
respects,  the financial  position of the  Partnership  at December 29, 2000 and
December 31, 1999, and the results of its operations and its cash flows for each
of the three years in the period  ended  December  29, 2000 in  conformity  with
accounting principles generally accepted in the United States of America.


/s/  Deloitte & Touche LLP

New York, New York
March 28, 2001


                                       F-15
<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 28th day of March,
2001.

                              MERRILL LYNCH PREFERRED CAPITAL TRUST II*

                              By: /s/ John C. Stomber
                              --------------------------------------------------
                              Name: John C. Stomber
                              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/ John C. Stomber
                              --------------------------------------------------
                              Name: John C. Stomber
                              Title: Senior Vice President and Treasurer, and as
                              Attorney-in-Fact for a majority of the Board of
                              Directors**

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

 **   Pursuant to Powers of Attorney filed as Exhibit 24 hereto.


<PAGE>



                                EXHIBIT INDEX

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 of the Trust,  dated as of
         February  4, 1997  (incorporated  by  reference  to Exhibit 4.2 to the
         Trust's  Quarterly Report on Form 10-Q for the quarter 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 Registration Statement)

4.4      Amended  and  Restated   Agreement  of  Limited   Partnership   of  the
         Partnership   (incorporated   by   reference  to  Exhibit  4.4  to  the
         Partnership's  Quarterly Report on Form 10-Q for the  quarter 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)

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

23*      Consent of Deloitte & Touche LLP

24*      Powers of Attorney


------------------

* Filed herewith