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

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

            For the quarterly period ended September 25, 1998 

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

                         Commission File No.: 1-7182-01

              Delaware                                  13-7102991
   (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
-------------------                    -----------------------------------------
7-3/4% 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 I, L.P.
      (Exact name of Registrant as specified in its certificate of limited
                                  partnership)

                         Commission File No.: 1-7182-02

              Delaware                                  13-3917686
   (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
-------------------                    -----------------------------------------
7-3/4% Partnership Preferred           New York Stock Exchange
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 September 25, 1998, no voting stock was held by non-affiliates of the
Registrants.

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

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

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

MERRILL LYNCH PREFERRED CAPITAL TRUST I
BALANCE SHEETS (UNAUDITED)
--------------------------------------------------------------------------------
                                        SEPTEMBER 25, 1998   DECEMBER 26, 1997
                                        ------------------   -----------------
ASSETS

Investment in partnership preferred 
  securities                                 $ 283,505,200       $ 283,505,200

Income receivable                                5,492,913           5,492,913
                                             -------------       -------------
Total Assets                                 $ 288,998,113       $ 288,998,113
                                             =============       =============

LIABILITY AND STOCKHOLDERS' EQUITY

Distributions payable                        $   5,492,913       $   5,492,913
                                             -------------       -------------
Stockholders' equity:

    Preferred securities (7 3/4% Trust 
      Originated Preferred Securities; 
      11,000,000 authorized, issued, and 
      outstanding; $25 liquidation amount 
      per security)                            275,000,000         275,000,000

    Common securities (7 3/4% Trust Common 
      Securities; 340,208 authorized, issued,
      and outstanding; $25 liquidation amount
      per security)                              8,505,200           8,505,200
                                             -------------       -------------
    Total stockholders' equity                 283,505,200         283,505,200
                                             -------------       -------------
Total Liability and Stockholders' Equity     $ 288,998,113       $ 288,998,113
                                             =============       =============

See Note to Financial Statements


                                       2
<PAGE>

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


                                                FOR THE THREE MONTHS ENDED
                                        ---------------------------------------
                                        SEPTEMBER 25, 1998   SEPTEMBER 26, 1997
                                        ------------------   ------------------
EARNINGS:

Income on partnership preferred securities  $    5,492,913       $    5,492,913
                                            ==============       ==============




                                                FOR THE NINE MONTHS ENDED
                                        ---------------------------------------
                                        SEPTEMBER 25, 1998   SEPTEMBER 26, 1997
                                        ------------------   ------------------
EARNINGS:

Income on partnership preferred securities  $   16,478,739       $   16,601,197
                                            ==============       ==============

See Note to Financial Statements


                                       3
<PAGE>

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

                                                FOR THE NINE MONTHS ENDED
                                        ---------------------------------------
                                        SEPTEMBER 25, 1998   SEPTEMBER 26, 1997
                                        ------------------   ------------------
PREFERRED SECURITIES

Balance, beginning and end of period        $  275,000,000       $  275,000,000
                                            --------------       --------------
                                                                
COMMON SECURITIES                                               
                                                                
Balance, beginning and end of period             8,505,200            8,505,200
                                            --------------       --------------
                                                                
UNDISTRIBUTED EARNINGS                                          
                                                                
Balance, beginning of period                            --                   --
                                                                
Earnings                                        16,478,739           16,601,197
                                                                
Distribution paid in excess of amount                           
   accrued at December 27, 1996                         --             (122,458)
                                                                
Distributions                                  (10,985,826)         (10,985,826)
                                                                
Distributions payable                           (5,492,913)          (5,492,913)
                                            --------------       --------------
                                                                
Balance, end of period                                  --                   --
                                            --------------       --------------
                                                                
Total Stockholders' Equity                  $  283,505,200       $  283,505,200
                                            ==============       ==============
                                                            
See Note to Financial Statements


                                       4
<PAGE>

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

                                                FOR THE NINE MONTHS ENDED
                                        ---------------------------------------
                                        SEPTEMBER 25, 1998   SEPTEMBER 26, 1997
                                        ------------------   ------------------

CASH FLOWS FROM OPERATING ACTIVITIES:

   Earnings                                 $   16,478,739       $   16,601,197
                                                                
   Increase in income receivable                        --           (4,821,557)
                                            --------------       --------------
                                                                
      Cash provided by operating activities     16,478,739           11,779,640
                                            --------------       --------------
                                                                
CASH FLOWS FROM FINANCING ACTIVITIES:                           
                                                                
   Distributions                               (16,478,739)         (11,779,640)
                                            --------------       --------------
                                                                
      Cash used for financing activities       (16,478,739)         (11,779,640)
                                            --------------       --------------
                                                                
NET CHANGE IN CASH                                      --                   --
                                                                
CASH, BEGINNING OF PERIOD                               --                   --
                                            --------------       --------------
                                                                
CASH, END OF PERIOD                         $           --       $           --
                                            ==============       ==============
                                                             
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:
Preferred and common distributions of $5,328,125 and $164,788, respectively,
were accrued at September 25, 1998 and September 26, 1997.

See Note to Financial Statements


                                       5
<PAGE>

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

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 I (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-
and nine-month periods are unaudited; however, in the opinion of the Regular
Trustees 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 I, L.P.
BALANCE SHEETS (UNAUDITED)
--------------------------------------------------------------------------------

                                          SEPTEMBER 25, 1998   DECEMBER 26, 1997
                                          ------------------   -----------------
ASSETS

Investments:
   Affiliate debentures                       $  330,055,000      $  330,055,000
   U.S. Treasury bills                             3,817,861           3,677,796
                                              --------------      --------------
   Total investments                             333,872,861         333,732,796
                                                                 
Interest receivable                                6,394,816           6,394,816
                                              --------------      --------------
                                                                 
Total Assets                                  $  340,267,677      $  340,127,612
                                              ==============      ==============
                                                                 
LIABILITY AND PARTNERS' CAPITAL                                  
                                                                 
Distributions payable                         $    6,394,816      $    6,394,816
                                              --------------      --------------
Partners' capital:                                               
   Limited partnership interest                  283,505,200         283,505,200
   General partnership interest                   50,367,661          50,227,596
                                              --------------      --------------
   Total partners' capital                       333,872,861         333,732,796
                                              --------------      --------------
                                                                 
Total Liability and Partners' Capital         $  340,267,677      $  340,127,612
                                              ==============      ==============
                                                              
See Note to Financial Statements


                                       7
<PAGE>

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

                                                FOR THE THREE MONTHS ENDED
                                        ---------------------------------------
                                        SEPTEMBER 25, 1998   SEPTEMBER 26, 1997
                                        ------------------   ------------------
Interest income:
   Affiliate debentures                     $    6,394,816       $    6,394,816
   U.S. Treasury bills                              51,128               48,109
                                            --------------       --------------
                                                               
Earnings                                    $    6,445,944       $    6,442,925
                                            ==============       ==============
                                                           



                                                FOR THE NINE MONTHS ENDED
                                        ---------------------------------------
                                        SEPTEMBER 25, 1998   SEPTEMBER 26, 1997
                                        ------------------   ------------------
Interest income:
   Affiliate debentures                     $   19,184,448       $   19,326,948
   U.S. Treasury bills                             153,941              144,328
                                            --------------       --------------
                                                                
Earnings                                    $   19,338,389       $   19,471,276
                                            ==============       ==============
                                                           
See Note to Financial Statements


                                       8
<PAGE>

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

                                                FOR THE NINE MONTHS ENDED
                                        ---------------------------------------
                                        SEPTEMBER 25, 1998   SEPTEMBER 26, 1997
                                        ------------------   ------------------
LIMITED PARTNER'S CAPITAL

Balance, beginning of period                $  283,505,200       $  283,505,200
                                                              
Net income allocated to limited partner         16,478,739           16,601,197
                                                              
Distribution in excess of amount accrued                      
   at December 27, 1996                                 --             (122,458)
                                                              
Distributions                                  (10,985,826)         (10,985,826)
                                                              
Distribution payable                            (5,492,913)          (5,492,913)
                                            --------------       --------------
                                                              
Balance, end of period                         283,505,200          283,505,200
                                            --------------       --------------
                                                              
GENERAL PARTNER'S CAPITAL                                     
                                                              
Balance, beginning of period                    50,227,596           50,144,862
                                                              
Net income allocated to general partner          2,859,650            2,870,079
                                                              
Distributions                                   (1,817,682)          (1,934,081)
                                                              
Distribution payable                              (901,903)            (901,903)
                                            --------------       --------------
                                                              
Balance, end of period                          50,367,661           50,178,957
                                            --------------       --------------
                                                              
TOTAL PARTNERS' CAPITAL                     $  333,872,861       $  333,684,157
                                            ==============       ==============
                                                           
See Note to Financial Statements


                                       9
<PAGE>

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

                                                FOR THE NINE MONTHS ENDED
                                        ---------------------------------------
                                        SEPTEMBER 25, 1998   SEPTEMBER 26, 1997
                                        ------------------   ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:

   Earnings                                 $   19,338,389       $   19,471,276
                                                                
   Accretion of U.S. Treasury bills               (153,941)            (144,328)
                                                                
   Increase in interest receivable                      --           (5,613,227)
                                            --------------       --------------
                                                                
      Cash provided by operating activities     19,184,448           13,713,721
                                            --------------       --------------
                                                                
CASH FLOWS FROM INVESTING ACTIVITIES:                           
                                                                
   Purchases of investment securities           (3,655,489)              (8,805)
                                                                
   Maturities of investment securities           3,669,365                   --
                                            --------------       --------------
      Cash provided by (used for)                               
        investing activities                        13,876               (8,805)
                                            --------------       --------------
CASH FLOWS FROM FINANCING ACTIVITIES:                           
                                                                
   Distributions to limited partner            (16,478,739)         (11,779,640)
                                                                
   Distributions to general partner             (2,719,585)          (1,934,081)
                                            --------------       --------------
      Cash used for financing activities       (19,198,324)         (13,713,721)
                                            --------------       --------------
                                                                
NET CHANGE IN CASH                                      --               (8,805)
                                                                
CASH, BEGINNING OF PERIOD                               --                8,805
                                            --------------       --------------
                                                                
CASH, END OF PERIOD                         $           --       $           --
                                            ==============       ==============
                                                               
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:

Distributions of $6,394,816 were accrued at September 25, 1998 and September 26,
1997.

See Note to Financial Statements


                                       10
<PAGE>

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

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 I, 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-
and nine-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 I (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 November 20, 1996, which was subsequently amended by
an amended and restated declaration of trust dated as of December 11, 1996. The
Trust exists for the exclusive purposes of (i) issuing trust securities,
consisting of 7-3/4% Trust Originated Preferred Securities (the "TOPrS") and
trust common securities (the "Trust Common Securities"), representing undivided
beneficial ownership interests in the assets of the Trust, (ii) investing the
gross proceeds of the trust securities in 7-3/4% Partnership Preferred
Securities (the "Partnership Preferred Securities") issued by Merrill Lynch
Preferred Funding I, 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 November 20, 1996, which was subsequently amended by an
amended and restated agreement of limited partnership dated December 17, 1996.
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
November 20, 1996, 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 November 20,
1996, 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 December 17, 1996, 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 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 November 20, 1996, of the Trust
            (incorporated by reference to Exhibit 4.1 to Registration Statement
            on Form S-3 (No. 333-16603) (the "Registration Statement"))

      4.2   Amended and Restated Declaration of Trust, dated as of December 11,
            1996, of the Trust (incorporated by reference to Exhibit 4.2 to the
            Trust's Annual Report on Form 10-K for the fiscal year ended
            December 27, 1996 (File No. 1-7182-01))

      4.3   Certificate of Limited Partnership, dated as of November 20, 1996,
            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
            December 17, 1996, of the Partnership (incorporated by reference to
            Exhibit 4.2 to the Partnership's Annual Report on Form 10-K for the
            fiscal year ended December 27, 1996 (File No. 1-7182-02))

      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)


                                       13
<PAGE>

      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

      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.


                                       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 30th day of October,
1998.

                                    MERRILL LYNCH PREFERRED CAPITAL TRUST I*

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

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


                                    MERRILL LYNCH PREFERRED FUNDING I, 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
<PAGE>

                                INDEX TO EXHIBITS

Exhibits

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

27    Financial Data Schedules