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
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For the fiscal year ended:
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Commission file number:
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December 31, 2007
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001-16809
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MERRILL LYNCH DEPOSITOR, INC.
(ON BEHALF OF PREFERREDPLUS TRUST SERIES LMG-2)
(Exact name of registrant as specified in its charter)
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DELAWARE
(State or other
jurisdiction of
incorporation)
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13-3891329
(I. R. S. Employer
Identification No.)
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WORLD FINANCIAL CENTER,
NEW YORK, NEW YORK
(Address of principal
executive offices)
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10080
(Zip Code)
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Registrants telephone number, including area code: (212) 449-1000
Securities registered pursuant to Section 12(b) of the Act:
PreferredPLUS Trust Certificates Series LMG-2, listed on The New York Stock
Exchange.
Securities registered pursuant to Section 12(g) of the Act:
Not Applicable.
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.
Yes
o
No
þ
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.
Yes
o
No
þ
Indicate by check mark whether the Registrant (1) has 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 Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past
90 days.
o
Yes
þ
No
o
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 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.
o
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes
o
No
þ
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes
o
No
þ
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last business day of the registrants most recently completed second fiscal
quarter.
Not Applicable.
Indicate the number of shares outstanding for each of the registrants classes
of common stock, as of the latest practicable date.
Not Applicable.
ITEM 1A. RISK FACTORS
Your investment in the trust certificates will
involve certain risks. You should carefully consider
the following discussion of risks, and the other
information included or incorporated by reference in
the applicable prospectus supplement and the
accompanying prospectus. You should carefully
consider any risk factors and other information that
the underlying securities issuer may file in its
Exchange Act reports as referenced in Item 1 above.
IF THE UNDERLYING SECURITIES ARE REDEEMED PRIOR TO
THEIR MATURITY DATE OR IF ANY CALL WARRANTS ARE
EXERCISED, YOU MAY NOT BE ABLE TO REINVEST YOUR
REDEMPTION OR CALL PROCEEDS AT A YIELD COMPARABLE TO
THE YIELD YOU WOULD HAVE RECEIVED ON YOUR TRUST
CERTIFICATES
The yield you will realize on your trust certificates
depends upon several factors, including:
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the purchase price of the trust certificates,
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when you acquire your trust certificates,
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whether the underlying securities issuer exercises
its option to redeem the underlying securities,
and
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whether the call warrant holders exercise their
optional rights to purchase outstanding trust
certificates.
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The underlying securities issuer has the right to
redeem the underlying securities at its option.
Because the underlying securities issuer has the
right to redeem the underlying securities early, we
cannot assure you that the trust will be able to hold
the underlying securities until their maturity date.
Although the call warrant holders are not obligated
to exercise the call warrants, the yield you will
realize on your trust certificates depends on whether
the call warrant holders exercise their call warrants
to purchase the trust certificates.
Prevailing interest rates at the time of an early
redemption or a call exercise may be lower than the
yield on your trust certificates. Therefore, you may
be unable to realize a comparable yield upon
reinvesting the funds you receive from an early
redemption or exercise of any call warrants. In
addition, if the prevailing market value of the trust
certificates exceeds the redemption price, the call
exercise price paid to you upon a redemption of the
underlying securities or the exercise of a call, you
will not be able to realize such excess.
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YOU MAY NOT BE PAID IF THE ASSETS OF THE TRUST ARE
INSUFFICIENT
Currently, the trust has no significant assets other
than the underlying securities. If the underlying
securities are insufficient to make payments or
distributions on the trust certificates, no other
assets will be available for payment of the
deficiency.
YOU MAY NOT RECOVER THE WHOLE OF THE PRESENT VALUE OR
STATED AMOUNT (IF APPLICABLE) OF YOUR TRUST
CERTIFICATES IF THE TRUST DISPOSES OF THE UNDERLYING
SECURITIES ON A DEFAULT BY THE UNDERLYING SECURITIES
ISSUER OR IN THE EVENT THE UNDERLYING SECURITIES
ISSUER CEASES FILING EXCHANGE ACT REPORTS
If the underlying securities issuer defaults on its
obligations under the underlying securities or the
underlying securities issuer ceases to file Exchange
Act reports, then the trust will either distribute
the underlying securities to the trust
certificateholders or dispose of them and distribute
the proceeds to the trust certificateholders. Your
recovery in either of those events may be limited by
two factors:
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if a default occurs, the market value of the
underlying securities may be adversely affected
and the proceeds of their disposition may be lower
than the aggregate present value or stated amount
(if applicable) of the trust certificates; and
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in either event, any distribution of funds or
underlying securities by the trust to the trust
certificateholders will be done in accordance
with the allocation ratio as described in the
applicable prospectus supplement relating to the
trust certificates. The funds or aggregate
principal amount of underlying securities you
receive on that distribution may be less than the
present value or stated amount (if applicable) of
your trust certificates.
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THE TRUSTEE WILL NOT MANAGE THE UNDERLYING SECURITIES
Except as described below, the trust will not dispose
of any underlying securities, even if an event occurs
that adversely affects the value of the underlying
securities or that adversely affects the underlying
securities issuer. As provided in the applicable
trust agreement, the trust will dispose of the
underlying securities only if:
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there is a payment default on any underlying
securities,
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there is another type of default that accelerates
the maturity of the underlying securities, or
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the underlying securities issuer ceases to file
Exchange Act reports.
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Under the first circumstance listed above, the
trustee must sell the underlying securities on behalf
of the trust, even if adverse market conditions
exist. The trustee has no discretion to do otherwise.
If adverse market conditions do exist at the time of
the trustees sale of the underlying securities, you
may incur greater losses than if the trust continued
to hold the underlying securities.
THE TRUST CERTIFICATES ARE SUBJECT TO THE
CREDITWORTHINESS OF THE UNDERLYING SECURITIES
ISSUER
The trust certificates represent interests in
obligations of the underlying securities issuer. In
particular, the trust certificates will be subject to
all the risks associated with directly investing in
the underlying securities issuers unsecured
subordinated debt obligations. Neither the underlying
indenture nor the underlying securities place a
limitation on the amount of indebtedness that may be
incurred by the underlying securities issuer.
THE PAYMENTS OWED TO THE TRUST CERTIFICATEHOLDERS ARE
UNSECURED OBLIGATIONS
In a liquidation, holders of the underlying
securities, including the trust, will be paid only
after holders of secured obligations of the
underlying securities issuer. According to the
underlying securities prospectus, the underlying
securities are general unsecured obligations of the
underlying securities issuer, which rank equally with
all other unsecured senior indebtedness of the
underlying securities issuer. However, if the
underlying securities issuer subjects any of its
property to a lien then the underlying securities,
and any other obligations which are then outstanding
and subject to a similar covenant, will be secured
ratably with the indebtedness or obligation secured
by that lien and for the same length of time, subject
to certain exceptions.
THE RATINGS OF THE TRUST CERTIFICATES MAY CHANGE
At the time of issuance, Moodys and S&P assigned
ratings to the trust certificates equivalent to the
ratings of the underlying securities, as of the date
of the applicable prospectus supplement.
Any rating issued with respect to the trust
certificates is not a recommendation to purchase,
sell or hold a security. Ratings do not comment on
the market price of the trust certificates or their
suitability for a particular investor. We cannot
assure you that these ratings will remain for any
given period of time or that a ratings agency would
not revise or withdraw entirely the ratings if, in
its judgment, circumstances (including, without
limitation, the rating of the underlying securities)
merit. A revision or withdrawal of a rating may
adversely affect the market price of the trust
certificates.
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If the underlying securities issuers credit rating
is downgraded, your trust certificates may become
less liquid and subject to increased price
volatility. If the underlying securities were
downgraded, the trust certificates would be similarly
downgraded. The market value of the underlying
securities would be expected to decrease in the event
of a downgrade. As a result, a downgrade could result
in the market price of the trust certificates
becoming increasingly volatile as the value of the
underlying security changes. Also, if the trust
certificates are downgraded to below investment grade
status, and enter what is commonly called junk
status, the trust certificates could become less
liquid.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not Applicable.
ITEM 2. PROPERTIES
None.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
The Trust Certificates issued by PreferredPLUS Trust
Series LMG-2 are represented by one or more physical
certificates registered in the name of Cede & Co.,
the nominee of the Depository Trust Company. The
Trust Certificates are listed on the New York Stock
Exchange.
ITEM 6. SELECTED FINANCIAL DATA
Not Applicable.
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Not Applicable.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not Applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Not Applicable.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
With respect to the July 2007 distribution date, The Bank of New York (the Trustee) made a late disbursement to
certificateholders due to its conversion and migration to a new database platform and because the Trustees debt
service system logic required additional enhancement to systemically release payments. The Trustee notified the
Registrant of the late disbursement upon its discovery thereof which was made after the 8-K filing period.
Therefore, the Registrants current report on Form 8-K filed with the Securities and Exchange Commission on March
21, 2008 (filed pursuant to Item 6.04 thereof) with respect to the late disbursement was filed late. The Trustee
has informed the Registrant that it has implemented additional controls and enhanced procedures to correct the
problems that resulted in the late distribution.
The Registrant has procedures so as to provide
reasonable assurance that its future Exchange Act
filings will be filed within the applicable time
periods.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Not Applicable.
ITEM 11. EXECUTIVE COMPENSATION
Not Applicable.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
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(a)
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Securities Authorized For Issuance Under Equity
Compensation Plans: None.
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(b)
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Security Ownership Of Certain Beneficial Owners:
None.
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(c)
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Security Ownership Of Management: Not Applicable.
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(d)
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Changes In Control: None.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Not Applicable.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)(1) Financial Statements: Not Applicable.
(a)(2) Financial Statement Schedules: Not Applicable.
(a)(3) List of Exhibits
The following exhibits are filed as part of, and
incorporated by reference into, this Annual Report on
Form 10-K:
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31.1.
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Certification of Vice President of
Registrant dated March 14, 2008,
pursuant to Rules 13a-14 and 15d-14
under the Securities Exchange Act of
1934, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of
2002, with respect to the
Registrants Annual Report on Form
10-K for the year ended December 31,
2007.
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99.1.
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Trustees Annual Compliance
Certificate dated March 6, 2008.
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99.2.
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Report of Deloitte & Touche LLP,
Independent Registered Public
Accounting Firm, dated March 14,
2008, Registrants Assertion on
Compliance with PPLUS Minimum
Servicing Standards dated March 14,
2008 and PPLUS Minimum Servicing
Standards.
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99.3.
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Report of KPMG LLP,
Independent Registered Public
Accounting Firm, dated March 5,
2008, The Bank of New Yorks
Assertion on Compliance with PPLUS
Minimum Servicing Standards dated March 5, 2008 and PPLUS Minimum
Servicing Standards.
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(b) Exhibits
The Registrant hereby files as part of this
Annual Report on Form 10-K the exhibits listed in
Item 15(a)(3) set forth above.
(c) Financial Statement Schedules
Not applicable.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, hereunto duly authorized.
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MERRILL LYNCH DEPOSITOR, INC.
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Date: March 28, 2008
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By:
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/s/
Ronald Monaco
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Name:
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Ronald Monaco
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Title:
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Vice President
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