PPLUS Trust Certificates Series JPM-1 listed on The New York Stock Exchange.
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.
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.
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 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 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 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.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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 issuer may file in its
Exchange Act reports as referenced in Item 1 above.
YOU MAY SUFFER LOSSES AS A RESULT OF ANY SWAP EARLY
TERMINATION PAYMENT UPON THE LIQUIDATION OF THE
UNDERLYING SECURITIES
In the event the underlying securities are liquidated
as a result of a default by the underlying securities
issuer on its obligations or the underlying
securities issuer ceases to file Exchange Act
reports, or upon an underlying securities bankruptcy
event, trust swap payment default or a trust
regulatory event, you will not receive any
distributions payable to you until after the payment
of the early termination payment (if any is then
payable) to the swap counterparty. Unless the
proceeds received from the liquidation of the
underlying securities are sufficient to pay any early
termination payment plus the certificate principal
balance and accrued and unpaid interest then due on
the trust certificates, you will suffer a loss as a
result of such early termination payment and such
liquidation. This loss could be quite substantial in
relation to the total value of your trust
certificates.
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 and the swap
agreement. If the underlying securities or payments
made under the swap agreement are insufficient to
make distributions on the trust certificates, no
other assets will be available for payment of the
deficiency.
The underlying securities issuer conducts its
business through subsidiaries. Accordingly, its
ability to meet its obligations under the underlying
securities is dependent on the earnings and cash
flows of those subsidiaries and the abilities of
those subsidiaries to pay dividends or to advance or
repay funds to the underlying securities issuer. In
addition, the rights that the underlying securities
issuer and its creditors would have to participate in
the assets of any such subsidiary upon the
subsidiarys liquidation or recapitalization will be
subject to the prior claims of the subsidiarys
creditors. Certain subsidiaries of the underlying
securities issuer have incurred substantial amounts
of debt in the expansion of their businesses, and the
underlying securities issuer anticipates that certain
of its subsidiaries will do so in the future.
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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
three 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;
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in either event, any funds or underlying
securities distributed by the trust to the trust
certificateholders may be less than the stated
amount or present value (if applicable) of your
trust certificates; and
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any such distribution of funds will be subject to
the payment by the trust to the swap counterparty
of any early termination payment.
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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.
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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
unsubordinated 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.
In addition, the holders of the underlying security
are subordinated to the senior indebtedness of the
underlying securities issuer, and as a result, may be
paid less than holders of the senior indebtedness.
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 unsecured and rank equally with all
other unsecured and unsubordinated indebtedness of
the underlying securities issuer.
IF THE SWAP AGREEMENT IS TERMINATED AS A RESULT OF A
SWAP AGREEMENT TERMINATION EVENT WHICH IS NOT A TRUST
TERMINATION EVENT, THEN THE YIELD ON THE TRUST
CERTIFICATES WILL BE CONVERTED FROM A FLOATING RATE
TO A FIXED RATE AND DISTRIBUTIONS TO YOU WILL BE MADE
SEMIANNUALLY INSTEAD OF QUARTERLY
The ability of the trust to make quarterly payments
on interest rate distributions on the trust
certificates will be dependent on the performance by
the swap counterparty of its payment obligations
under the swap agreement. If the swap agreement were
to be terminated as a result of a swap agreement
termination event that is not also a trust
termination event, then (i) the trust will remain in
existence without any rights or obligations under the
swap agreement and (ii) you will receive a pro rata
share of the fixed rate interest payments received by
the trust in respect of the underlying securities on
a semiannual basis, instead of a pro rata share of
the floating rate payments under the swap agreement
received by the trust on a quarterly basis.
DISTRIBUTIONS
AND OTHER PAYMENTS WITH RESPECT TO YOUR
TRUST CERTIFICATES AND YOUR EXPECTED INVESTMENT YIELD
MAY BE AFFECTED BY FACTORS SUCH AS THE PERFORMANCE OF
THE TRUST ASSETS, THE REDEMPTION OF THE UNDERLYING
SECURITIES AND THE EARLY TERMINATION OF THE SWAP
AGREEMENT
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A number of factors may affect the timing of
distributions with respect to your trust certificates
and the yield that you realize on your trust
certificates, including:
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the purchase price you pay for your trust
certificates;
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the interest rate on the trust certificates,
which will be greater than or equal to 3.25% and
will not exceed 9.25%;
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the performance of the underlying securities;
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whether the underlying securities issuer redeems,
repurchases or repays the underlying securities
before their maturity;
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whether the underlying securities issuer defaults
under the underlying securities;
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the possibility that if there is a swap
termination event that is not a trust termination
event a fixed rate of 4.875% per annum will be
payable on the trust certificates, instead of the
floating rate distribution amount payable under
the swap agreement; and
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the possibility that the swap agreement may be
terminated early in certain circumstances,
resulting in the termination of the trust prior
to its scheduled termination date.
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We cannot predict whether the underlying securities
will be redeemed, repaid, repurchased or accelerated.
UPON A SWAP TERMINATION EVENT WHEREBY THE SWAP
COUNTERPARTY IS THE DEFAULTING PARTY OR AFFECTED
PARTY, YOU ARE NOT LIKELY TO RECEIVE FROM THE SWAP
COUNTERPARTY ANY INTEREST THAT HAS ACCRUED
Upon a swap termination event that is not a trust
termination event whereby the swap counterparty is
the defaulting party (especially upon the bankruptcy,
insolvency or reorganization of the swap
counterparty), it is unlikely that you will receive
from the swap counterparty any interest that has
accrued since the last quarterly payment of the
interest distribution amount.
IF THE TRUST CERTIFICATES ARE PREPAID WHEN PREVAILING
MARKET INTEREST RATES FOR SECURITIES OF A COMPARABLE
CREDIT RATING ARE LOWER THAN THE YIELD ON YOUR TRUST
CERTIFICATES, YOU MAY BE UNABLE TO REALIZE A
COMPARABLE YIELD WHEN YOU REINVEST THE FUNDS THAT YOU
RECEIVE FROM THE PREPAYMENT OF YOUR TRUST
CERTIFICATES
If the trust certificates are prepaid when prevailing
market interest rates for securities of a comparable
credit rating are lower than the yield on your trust certificates, you may be unable to realize
a comparable yield when you reinvest the funds that
you receive from the prepayment of your trust
certificates.
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In addition, if the prevailing market
value of the trust certificates exceeds the
redemption price to you upon a redemption of the
underlying securities, you will not be able to
realize such excess.
THE INTEREST RATE CAP ON THE TRUST CERTIFICATES MAY
LIMIT YOUR INTEREST PAYMENTS AND MAY NEGATIVELY
IMPACT THE MARKET VALUE OF YOUR TRUST CERTIFICATES
The interest paid on the trust certificates is based
on a floating rate that will not exceed 9.25%. If
interest rates exceed 9.25%, your trust certificates
will not receive interest based on the higher
interest rate but rather will be capped at 9.25%. The
market value of your trust certificates will also be
negatively affected as interest rates rise.
THE RATINGS OF THE TRUST CERTIFICATES MAY CHANGE
At the time of issuance, S&P assigned a rating 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.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not Applicable.
ITEM 2. PROPERTIES
None.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
The Trust Certificates issued by PPLUS Trust Series
JPM-1 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.
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
The Registrant has procedures in place 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.
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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
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 25, 2013,
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,
2012.
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99.1.
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Trustees Annual Compliance Certificate dated February 25, 2013.
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99.2.
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Report of PricewaterhouseCoopers LLP, Independent Registered Public
Accounting Firm, dated March 22, 2013, Registrants Assertion
on Compliance with PPLUS Minimum Servicing Standards dated March 22,
2013 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 February 13, 2013, The Bank
of New York Mellons Assertion on Compliance with PPLUS Minimum
Servicing Standards dated February 13, 2013 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 26, 2013
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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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