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, 2010
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001-16833
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MERRILL LYNCH DEPOSITOR, INC.
(ON BEHALF OF PREFERREDPLUS TRUST SERIES QWS-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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ONE BRYANT PARK
3RD FLOOR — STRUCTURED CREDIT TRADING
NEW YORK, NEW YORK
(Address of principal
executive offices)
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10036
(Zip Code)
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Registrant’s telephone number, including area code: (212) 449-1000
Securities registered pursuant to Section 12(b) of the Act:
PreferredPLUS Trust Certificates Series QWS-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.
Yes
þ
No
o
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files).
Yes
o
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 registrant’s 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 a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act.
Large
accelerated filer
o
Accelerated filer
o
Non-accelerated filer
þ
Smaller reporting filer
o
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 lost sold, or the average bid and asked price of such common equity,
as of the last business day of the registrant’s most recently completed second
fiscal quarter.
Not Applicable.
Indicate the number of shares outstanding for each of the registrant’s classes
of common stock, as of the latest practicable date.
Not Applicable.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
DOCUMENTS INCORPORATED BY REFERENCE
None.
PART I
ITEM 1. BUSINESS
For information with respect to the underlying
securities held by PreferredPLUS Trust Series QWS-2,
please refer to Qwest Communications International
Inc.’s (Commission file number 001-15577) periodic
reports, including annual reports on Form 10-K,
quarterly reports on Form 10-Q and current reports on
Form 8-K, and other information on file with the
Securities and Exchange Commission (the “SEC”). You can
read and copy these reports and other information at
the public reference facilities maintained by the SEC
at Room 1580, 100 F Street, N.E., Washington, D.C.
20549. You may obtain copies of this material for a
fee by writing to the SEC’s Public Reference Section
of the SEC at 100 F Street, N.E., Washington, D.C.
20549. You may obtain information about the operation
of the Public Reference Room by calling the SEC at 1-
800-SEC-0330. You can also access some of this
information electronically by means of the SEC’s
website on the Internet at http://www.sec.gov, which
contains reports, proxy and information statements and
other information that the underlying securities
guarantor and the underlying securities issuer has
filed electronically with the SEC.
Although we have no reason to believe the information
concerning the guarantee and underlying securities or
the underlying securities guarantor and the underlying
securities issuer contained in the underlying
securities guarantor’s Exchange Act reports is not
reliable, neither the depositor nor the trustee
participated in the preparation of such documents, or
made any due diligence inquiry with respect to the
information provided therein. No investigation with
respect to the underlying securities guarantor and
underlying securities issuer (including, without
limitation, no investigation as to their respective
financial condition or creditworthiness) or of the
underlying securities and guarantee has been made. You
should obtain and evaluate the same information
concerning the underlying securities issuer and the
underlying securities guarantor as you would obtain
and evaluate if your investment were directly in the
underlying securities or in other securities issued by
the underlying securities issuer or the underlying
securities guarantor. There can be no assurance that
events affecting the underlying securities and
guarantee or the underlying securities issuer and
underlying securities guarantor have not occurred or
have not yet been publicly disclosed which would
affect the accuracy or completeness of the publicly
available documents described above.
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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 also carefully
consider any risk factors and other information that
the underlying securities guarantor 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 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.
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 guarantor 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
trustee’s 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
AND THE UNDERLYING SECURITIES GUARANTOR
The trust certificates represent interests in
obligations of the underlying securities issuer and
the underlying securities guarantor. In particular,
the trust certificates will be subject to all the
risks associated with directly investing in both the
underlying securities issuer’s and the underlying
securities guarantor’s 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 or the underlying securities
guarantor.
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 and unsubordinated 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.
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The rights of the trust certificateholders through the
underlying guarantee to participate in any
distribution of assets of a subsidiary of the
underlying securities guarantor could be found to be
subordinate to the prior claims of the creditors of
such subsidiary
The underlying guarantee is an unsecured obligation of
the underlying securities guarantor and ranks equally
with all other unsecured and unsubordinated
indebtedness of the underlying securities guarantor.
However, because the underlying securities guarantor
is a holding company that conducts substantially all
of its operations through subsidiaries, the right of
the underlying securities guarantor, and hence the
right of creditors of the underlying securities
guarantor (including holders of the underlying
securities through the guarantee), to participate in
any distribution of assets of any subsidiary upon its
liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors
of such subsidiary, except to the extent that claims
of the underlying securities guarantor itself as a
creditor of the subsidiary may be recognized.
THE RATINGS OF THE TRUST CERTIFICATES MAY CHANGE
At the time of issuance, Moody’s and/or 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 initial 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.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not Applicable.
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ITEM 2. PROPERTIES
None.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. (REMOVED AND RESERVED)
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
The Trust Certificates issued by PreferredPLUS Trust
Series QWS-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. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Not Applicable.
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.
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ITEM 9A. CONTROLS AND PROCEDURES
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, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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, AND DIRECTOR INDEPENDENCE
None.
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
7
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 the Vice President of Registrant
dated March 28, 2011, 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 Registrant’s
Annual Report on Form 10-K for the year
ended December 31, 2010.
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99.1.
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Trustee’s Annual Compliance Certificate
dated March 4, 2011.
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99.2.
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Report of PricewaterhouseCoopers LLP,
Independent Registered Public Accounting
Firm, dated March 21, 2011, Registrant’s
Assertion on Compliance with PPLUS Minimum
Servicing Standards dated March 21, 2011
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 2, 2011, The Bank of New York Mellon’s
Assertion on Compliance with PPLUS Minimum
Servicing Standards dated March 2,
2011 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.
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, 2011
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By:
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/s/ John Marciano
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Name:
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John Marciano
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Title:
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Vice President
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