9 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 2007
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NO.: 1-7182-06
MERRILL LYNCH PREFERRED CAPITAL TRUST III
(Exact name of Registrant as specified in its certificate of trust)
Delaware 13-7139561
(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
COMMISSION FILE NO.: 1-7182-05
MERRILL LYNCH PREFERRED FUNDING III, L.P.
(Exact name of Registrant as specified in its
certificate of limited partnership)
Delaware 13-3982448
(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
The Registrants meet the conditions set forth in General Instruction H (1)(a)
and (b) of Form 10-Q and are therefore filing this form with the reduced
disclosure format.
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 filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
(Check one):
Large Accelerated Filer___ Accelerated Filer ___ Non-Accelerated Filer _X__
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
YES ___ NO _X__
As of November 9, 2007 no common stock was held by non-affiliates of the
Registrants.
================================================================================
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
--------------------
MERRILL LYNCH PREFERRED CAPITAL TRUST III
CONDENSED BALANCE SHEETS (unaudited)
(dollars in thousands, except per security amounts)
- -------------------------------------------------------------------------------------------------------------------------------
September 28, 2007 December 29, 2006
------------------ -----------------
ASSETS
Investment in affiliate partnership preferred securities $ 773,196 $ 773,196
Interest receivable from affliate 13,531 -
---------- ----------
Total Assets $ 786,727 $ 773,196
========== ==========
LIABILITY AND STOCKHOLDERS' EQUITY
Distributions Payable $ 13,531 $ -
---------- ----------
STOCKHOLDERS' EQUITY
Stockholders' equity:
Preferred securities (7% Trust Originated Preferred Securities; 30,000,000
authorized, issued, and outstanding; $25 liquidation
amount per security) $ 750,000 $ 750,000
Common securities (7% Trust Common Securities;
927,840 authorized, issued, and outstanding
$25 liquidation amount per security) 23,196 23,196
---------- ----------
Total Stockholders' Equity $ 773,196 $ 773,196
---------- ----------
Total Liability and Stockholders' Equity $ 786,727 $ 773,196
========== ==========
See Note to Condensed Financial Statements
2
MERRILL LYNCH PREFERRED CAPITAL TRUST III
CONDENSED STATEMENTS OF EARNINGS (unaudited)
(dollars in thousands)
- -------------------------------------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED
---------------------------------
September 28, 2007 September 29, 2006
------------------ -----------------
EARNINGS
Interest on affiliate partnership preferred securities $ 13,531 $ 13,531
========= =========
FOR THE NINE MONTHS ENDED
---------------------------------
September 28, 2007 September 29, 2006
------------------ ------------------
EARNINGS
Interest on affiliate partnership preferred securities $ 40,593 $ 40,593
========= =========
See Note to Condensed Financial Statements
3
MERRILL LYNCH PREFERRED CAPITAL TRUST III
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)
(dollars in thousands)
- -------------------------------------------------------------------------------------------------------------------------------
FOR THE NINE MONTHS ENDED
----------------------------------
September 28, 2007 September 29, 2006
------------------ ------------------
PREFERRED SECURITIES
Balance, beginning and end of period $ 750,000 $ 750,000
---------- ----------
COMMON SECURITIES
Balance, beginning and end of period 23,196 23,196
---------- ----------
UNDISTRIBUTED EARNINGS
Balance, beginning of period - -
Earnings 40,593 40,593
Distributions (27,062) (27,062)
Distributions payable (13,531) (13,531)
---------- ----------
Balance, end of period - -
---------- ----------
Total Stockholders' Equity $ 773,196 $ 773,196
========== ==========
See Note to Condensed Financial Statements
4
MERRILL LYNCH PREFERRED CAPITAL TRUST III
CONDENSED STATEMENTS OF CASH FLOWS (unaudited)
(dollars in thousands)
- -------------------------------------------------------------------------------------------------------------------------------
FOR THE NINE MONTHS ENDED
---------------------------------
September 28, 2007 September 29, 2006
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Earnings $ 40,593 $ 40,593
Interest receivable from affiliate (13,531) (13,531)
---------- ----------
Cash provided by operating activities 27,062 27,062
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions (27,062) (27,062)
---------- ----------
Cash used for financing activities (27,062) (27,062)
---------- ----------
NET CHANGE IN CASH - -
CASH, BEGINNING OF PERIOD - -
---------- ----------
CASH, END OF PERIOD $ - $ -
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:
Preferred and common distributions of $13,125 and $406, were accrued at
September 28, 2007 and September 29, 2006, respectively.
See Note to Condensed Financial Statements
5
MERRILL LYNCH PREFERRED CAPITAL TRUST III
NOTE TO CONDENSED FINANCIAL STATEMENTS (unaudited)
September 28, 2007
- -------------------------------------------------------------------------------
BASIS OF PRESENTATION
These unaudited condensed 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 III (the "Trust") for the year ended
December 29, 2006. The December 29, 2006 balance sheet information was derived
from the audited financial statements. The interim condensed financial
statements for the three- and nine- month periods are unaudited; however, in the
opinion of the Regular Trustee of the Trust, all adjustments, consisting only of
normal recurring accruals necessary for a fair statement of the results of
operations, have been included.
INVESTMENTS
The Trust's investment in Merrill Lynch Preferred Funding III, L.P. (the
"Partnership") Preferred Securities represents a limited partnership interest in
the Partnership and is recorded at cost. At quarter end, the fair value of the
investment approximates its carrying value. Income on the Partnership Preferred
Securities is accrued when earned.
6
MERRILL LYNCH PREFERRED FUNDING III, L.P.
CONDENSED BALANCE SHEETS (unaudited)
(dollars in thousands)
- -------------------------------------------------------------------------------------------------------------------------------
September 28, 2007 December 29, 2006
------------------ -----------------
ASSETS
Investments:
Affiliate debentures $ 900,547 $ 900,547
U.S. Government and agencies 9,253 9,141
---------- ----------
Total investments 909,800 909,688
Interest receivable from affiliate 15,759 -
---------- ----------
Total Assets $ 925,559 $ 909,688
========== ==========
LIABILITY AND PARTNERS' CAPITAL
Distribution payable $ 15,759 $ -
---------- ----------
PARTNERS' CAPITAL
Partners' capital:
Limited partnership interest $ 773,196 $ 773,196
General partnership interest 136,604 136,492
---------- ----------
Total Partners' Capital $ 909,800 $ 909,688
---------- ----------
Total Liability and Partners' Capital $ 925,559 909,688
========== ==========
See Note to Condensed Financial Statements
7
MERRILL LYNCH PREFERRED FUNDING III, L.P.
CONDENSED STATEMENTS OF EARNINGS (unaudited)
(dollars in thousands)
- -------------------------------------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED
---------------------------------
September 28, 2007 September 29, 2006
------------------ ------------------
EARNINGS
Interest income:
Affiliate debentures $ 15,759 $ 15,760
U.S. Government and agencies 114 115
---------- ----------
Earnings $ 15,873 $ 15,875
========== ==========
FOR THE NINE MONTHS ENDED
---------------------------------
September 28, 2007 September 29, 2006
------------------ ------------------
EARNINGS
Interest income:
Affiliate debentures $ 47,277 $ 47,279
U.S. Government and agencies 345 312
---------- ----------
Earnings $ 47,622 $ 47,591
========== ==========
See Note to Condensed Financial Statements
8
MERRILL LYNCH PREFERRED FUNDING III, L.P.
CONDENSED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (unaudited)
(dollars in thousands)
- -------------------------------------------------------------------------------------------------------------------------------
FOR THE NINE MONTHS ENDED
---------------------------------
September 28, 2007 September 29, 2006
------------------ ------------------
LIMITED PARTNER'S CAPITAL
Balance, beginning of period $ 773,196 $ 773,196
Net income allocated to limited partner 40,593 40,593
Distributions (27,062) (27,062)
Distributions payable (13,531) (13,531)
---------- ----------
Balance, end of period 773,196 773,196
---------- ----------
GENERAL PARTNER'S CAPITAL
Balance, beginning of period 136,492 136,485
Net income allocated to general partner 7,030 6,998
Distributions (4,689) (4,648)
Distributions payable (2,229) (2,229)
---------- ----------
Balance, end of period 136,604 136,606
---------- ----------
TOTAL PARTNERS' CAPITAL $ 909,800 $ 909,802
========== ==========
See Note to Condensed Financial Statements
9
MERRILL LYNCH PREFERRED FUNDING III, L.P.
CONDENSED STATEMENTS OF CASH FLOWS (unaudited)
(dollars in thousands)
- -------------------------------------------------------------------------------------------------------------------------------
FOR THE NINE MONTHS ENDED
---------------------------------
September 28, 2007 September 29, 2006
------------------ -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Earnings $ 47,622 $ 47,591
Accretion of interest on securities issued by U.S. Government and agencies (345) (312)
Interest receivable from affiliates (15,759) (15,760)
---------- ----------
Cash provided by operating activities 31,518 31,519
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Investment Securities (9,094) (9,096)
Maturities of Investment Securities 9,327 9,287
---------- ----------
Cash provided by investing activities 233 191
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to limited partner (27,062) (27,062)
Distributions to general partner (4,689) (4,648)
---------- ----------
Cash used for financing activities (31,751) (31,710)
---------- ----------
NET CHANGE IN CASH - -
CASH, BEGINNING OF PERIOD - -
---------- ----------
CASH, END OF PERIOD $ - $ -
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:
Distributions of $15,759 and $15,760 was accrued at September 28, 2007, and
September 29, 2006 respectively.
See Note to Condensed Financial Statements
10
MERRILL LYNCH PREFERRED FUNDING III, L.P.
NOTE TO CONDENSED FINANCIAL STATEMENTS (unaudited)
September 28, 2007
- --------------------------------------------------------------------------------
BASIS OF PRESENTATION
These unaudited condensed 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 III, L.P. (the "Partnership") for the year
ended December 29, 2006. The December 29, 2006 balance sheet information was
derived from the audited financial statements. The interim condensed 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.
INVESTMENTS
The Partnership's investment in affiliate debentures, which is recorded at cost,
and its investment in securities issued by U.S. Government and agencies, which
is recorded at accreted cost and which matures within one year, are classified
as available-for-sale, which both approximate fair value.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
No disclosure is required for this Item pursuant to General Instruction H of
Form 10-Q. There are no material changes in the amount of revenue and expense
items between the most recent fiscal year-to-date period presented and the
corresponding year-to-date period in the preceding fiscal year.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
No disclosure is required for this Item pursuant to General Instruction H of
Form 10-Q.
ITEM 4. CONTROLS AND PROCEDURES
The persons who function as the equivalent of the chief executive officer and
chief financial officer of the Trust and the Partnership have evaluated the
effectiveness of the Trust's and the Partnership's disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of
1934) as of the end of the period covered by this Report. Based on that
evaluation, the persons who function as the equivalent of the chief executive
officer and chief financial officer of the Trust and the Partnership have
concluded that the Trust's and the Partnership's disclosure controls and
procedures were effective as of the end of the period covered by this Report.
In addition, no change in the Trust's and the Partnership's internal control
over financial reporting (as defined in Rule 13a-15(f) under the Securities
Exchange Act of 1934) occurred during the third fiscal quarter of 2007 that
has materially affected, or is reasonably likely to materially affect, the
Trust's or the Partnership's internal control over financial reporting.
12
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS
12 Computation of Ratios of Earnings to Combined Fixed Charges and
Preferred Securities Distributions.
31.1 Rule 13a - 14(a) Certification.
31.2 Rule 13a - 14(a) Certification.
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
13
SIGNATURES
Pursuant to the requirements 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.
MERRILL LYNCH PREFERRED CAPITAL TRUST III*
By: /s/ MARLENE DEBEL
---------------------------------------------
Name: Marlene Debel
Title: Regular Trustee
MERRILL LYNCH PREFERRED FUNDING III, L.P.*
By: MERRILL LYNCH & CO., INC., as General Partner
By: /s/ GARY CARLIN
---------------------------------------------
Name: Gary Carlin
Title: Controller, Merrill Lynch & Co., Inc.
November 9, 2007
- ----------------
* 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.
14
INDEX TO EXHIBITS
EXHIBITS
12 Computation of Ratios of Earnings to Combined Fixed Charges and
Preferred Securities Distributions.
31.1 Rule 13a - 14(a) Certification.
31.2 Rule 13a - 14(a) Certification.
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
15