ITEM 1. BUSINESS
ML Asset Backed Corporation (the "Company"), incorporated in the State of Delaware on September 22, 1987, is a wholly-owned, limited purpose subsidiary of Merrill Lynch Mortgage Capital Inc., which is an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc.
The Company was established for the sole purpose of engaging in the following activities: (a) issuing, selling, authorizing and delivering bonds, notes and other evidences of indebtedness (the "Notes"), (b) acting as settlor or depositor of trusts formed to issue Notes or to issue participation certificates (the "Certificates") that are secured or collateralized by (1) receivables (the "Receivables") including, without limitation, automobile installment sale contracts, automobile leases, equipment leases, revolving credit card accounts, truck receivables, recreational vehicle loans, manufactured housing loans, student loans and other receivables, (2) pass-through certificates (the "Pass-Through Certificates") evidencing a fractional undivided ownership interest in the assets of one or more trusts or in one or more pools of Receivables, (3) bonds, notes and other evidences of indebtedness (the "Bonds") secured or collateralized by one or more pools of Receivables, or (4) any combination of Receivables, Bonds and Pass-Through Certificates, (c) acquiring, owning, holding, selling, assigning, pledging and otherwise dealing with the Receivables and related insurance policies and agreements, including agreements with automobile dealers and other originators or servicers of Receivables, (d) authorizing, issuing, selling and delivering subordinated indebtedness, and (e) engaging in any activity and exercising any powers permitted to corporations under the laws of the State of Delaware that are incidental to the foregoing and necessary or convenient to accomplish the foregoing.
Each series of the Company's Notes or Certificates will be secured by, or represent ownership of, a separate and identifiable pool of Receivables purchased in connection with the issuance of such Notes or Certificates. Additional security for each series will be provided by collections and/or distributions on the Receivables which will be remitted to an account or accounts to be established with the trustee (the "Trustee") under the indenture, sale and servicing agreement or other similar agreement pursuant to which such Notes or Certificates will be issued, and may also include cash and other investments deposited with the Trustee at the time of issuance of such Notes or Certificates, as well as other credit enhancements that may be used to secure or support the
Notes or Certificates. The Receivables for each series of Notes or Certificates will be pledged with or sold to the Trustee on behalf of the holders of the Notes or Certificates of that series, and will not be available for the Notes or Certificates of any other series. The Company will use the net proceeds from the sale of the Notes or Certificates to simultaneously purchase the Receivables to be pledged as security for, or sold in connection with, the issuance of such Notes or Certificates.
During 1996, $694 million of 5.5% Total Rate of Return Asset Backed Notes, due May 15, 1998, and $925 million of 5.125% Total Rate Asset Backed Notes, due July 15, 1998, were retired. As of December 27, 1996, there were no notes outstanding.
At December 27, 1996, the Company had two registration statements on Form S-3 with the Securities and Exchange Commission for the issuance of approximately $191 million of securities.
ITEM 2.
ITEM 2. PROPERTIES
The Company does not own any buildings or real estate and has no physical properties.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings, nor is the Company aware of any proceedings contemplated by governmental authorities.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Pursuant to General Instruction J of Form 10-K, the information required by item 4 is omitted.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
(a) There is no established public trading market for the Company's common stock.
(b) The number of holders of record as of December 27, 1996 was as follows:
Number of Record Holders ---------------- Common Stock 1
(c) No dividend has been declared during the fiscal years 1994, 1995, and 1996.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Pursuant to General Instruction J of Form 10-K, the information required by item 6 is omitted.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Pursuant to General Instruction J of Form 10-K, there were no material changes in the financial condition or in the results of operations.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index Page ----- ----
Independent Auditors' Report 5
Balance Sheets as of December 27, 1996 and December 29, 1995 6
Statements of Operations and Retained Earnings for the Years Ended December 27, 1996, December 29, 1995, and December 30, 1994 7
Statements of Cash Flows for the Years Ended December 27, 1996, December 29, 1995, and December 30, 1994 8
Notes to Financial Statements 9-10
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of ML Asset Backed Corporation:
We have audited the accompanying balance sheets of ML Asset Backed Corporation as of December 27, 1996 and December 29, 1995 and the related statements of operations and retained earnings and cash flows for each of the three years in the period ended December 27, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of ML Asset Backed Corporation at December 27, 1996 and December 29, 1995 and the results of its operations and its cash flows for each of the three years in the period ended December 27, 1996 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP New York, New York March 25, 1997
ML ASSET BACKED CORPORATION NOTES TO FINANCIAL STATEMENTS
Note 1. Description of Business
ML Asset Backed Corporation (the "Company"), incorporated in the State of Delaware on September 22, 1987, is a wholly-owned, limited purpose subsidiary of Merrill Lynch Mortgage Capital Inc., which is an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML&Co").
The Company was established for the sole purpose of engaging in the following activities: (a) issuing, selling, authorizing and delivering bonds, notes and other evidences of indebtedness (the "Notes"), (b) acting as settlor or depositor of trusts formed to issue Notes or to issue participation certificates (the "Certificates") that are secured or collateralized by (1) receivables (the "Receivables") including, without limitation, automobile installment sale contracts, automobile leases, equipment leases, revolving credit card accounts, truck receivables, recreational vehicle loans, manufactured housing loans, student loans and other receivables, (2) pass-through certificates (the "Pass-Through Certificates") evidencing a fractional undivided ownership interest in the assets of one or more trusts or in one or more pools of Receivables, (3) bonds, notes and other evidences of indebtedness (the "Bonds") secured or collateralized by one or more pools of Receivables, or (4) any combination of Receivables, Bonds and Pass-Through Certificates, (c) acquiring, owning, holding, selling, assigning, pledging and otherwise dealing with the Receivables and related insurance policies and agreements, including agreements with automobile dealers and other originators or servicers of Receivables, (d) authorizing, issuing, selling and delivering subordinated indebtedness, and (e) engaging in any activity and exercising any powers permitted to corporations under the laws of the State of Delaware that are incidental to the foregoing and necessary or convenient to accomplish the foregoing.
Each series of the Company's Notes or Certificates will be secured by, or represent ownership of, a separate and identifiable pool of Receivables purchased in connection with the issuance of such Notes or Certificates. Additional security for each series will be provided by collections and/or distributions on the Receivables which will be remitted to an account or accounts to be established with the trustee (the "Trustee") under the indenture, sale and servicing agreement or other similar agreement pursuant to which such Notes or Certificates will be issued, and may also
include cash and other investments deposited with the Trustee at the time of issuance of such Notes or Certificates, as well as other credit enhancements that may be used to secure or support the Notes or Certificates. The Receivables for each series of Notes or Certificates will be pledged with or sold to the Trustee on behalf of the holders of the Notes or Certificates of that series, and will not be available for the Notes or Certificates of any other series. The Company will use the net proceeds from the sale of the Notes or Certificates to simultaneously purchase the Receivables to be pledged as security for, or sold in connection with, the issuance of such Notes or Certificates.
During 1996, $694 million of 5.5% Total Rate of Return Asset Backed Notes, due May 15, 1998, and $925 million of 5.125% Total Rate Asset Backed Notes, due July 15, 1998, were retired. As of December 27, 1996, there were no notes outstanding.
At December 27, 1996, the Company had two registration statements on Form S-3 with the Securities and Exchange Commission for the issuance of approximately $191 million of securities.
Note 2. Accounting Policies
The Company borrows funds from an affiliate, as required. Interest expense is allocated to the Company based on the rate of the asset financed. All other operating expenses are charged directly to the Parent.
Note 3. Income Taxes
The results of operations of the Company are included in the consolidated Federal income tax return of ML&Co. ML&Co. allocates the income taxes to its subsidiaries in a manner that approximates the separate company method.
The Company uses the asset and liability method in providing income taxes on all transactions that have been recognized in the financial statements. The asset and liability method requires that deferred taxes be adjusted to reflect the tax rates at which future taxable amounts will be settled or realized. The effects of tax rate changes on future deferred tax liabilities and deferred tax assets, as well as other changes in income tax laws, are recognized in net earnings in the period such changes are enacted.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction J of Form 10-K, the information required by item 10 is omitted.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Pursuant to General Instruction J of Form 10-K, the information required by item 11 is omitted.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There were no notes outstanding at December 27, 1996.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction J of Form 10-K, the information required by item 13 is omitted.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 15
(a) 1. See index in Item 8 appearing on page 4. 2. Not applicable. 3. Exhibits:
(3)(I) Certificate of Incorporation of the Company (Incorporated by reference to Form 10, dated October 16, 1987).
(3)(ii) Amendment to the Certificate of Incorporation of the Company (Incorporated by reference to Form 10, dated October 16, 1987).
(3)(iii) By-Laws of the Company (Incorporated by reference to Form 10, dated October 16, 1987).
(23) Independent Auditors' Consent.
(b) Not applicable. (c) Not applicable. (d) 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, thereunto duly authorized.
ML ASSET BACKED CORPORATION
By: /s/ Richard M. Fuscone Name: Richard M. Fuscone Title: President and Chairman of the Board Dated: March 25, 1997
Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been executed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
By: /s/ Daniel Pace Name: Daniel Pace Title: Treasurer Date: March 25, 1997
By: /s/ Michael M. McGovern Name: Michael M. McGovern Title: Secretary Date: March 25, 1997
EXHIBITS INDEX PAGE NO.
(23) Independent Auditors' Consent 14 (27) Financial Data Schedule 15