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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
" TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 33-14843
_________________
RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (DESERET) 1988-D1
(Exact name of registrant as specified in its charter)
NEW YORK
(State or other jurisdiction of incorporation or organization)
36-6878767
(I.R.S. Employer Identification Number)
2201 Cooperative Way, Herndon, VA 20171-3025
(Address of principal executive offices)
(Registrant's telephone number, including area code, is 703-709-6700)
___________________
Securities Registered pursuant to Section 12(b) of the Act: None.
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 X No
The Registrant has no common or voting stock.
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DOCUMENTS INCORPORATED BY REFERENCE:
1. Form of Trust Agreement
2. Loan Agreement
3. Loan Guarantee and Servicing Agreement
Exhibit Index located on page 13.
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Part I
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
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Part II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
a) There is no established trading market for the certificates
representing ownership of the beneficial interest in the Trust.
b) As of March 28, 1997 there was one holder of certificates
representing ownership of the beneficial interest in the Trust.
Item 8. Financial Statements and Supplementary Data
See attached audited financial statements.
Item 9. Disagreements on Accounting and Financial Disclosure
None.
Part III
Item 13. Certain Relationships and Related Transactions
None.
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Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K
a) The following documents are filed as part of this report:
1. Financial Statements
Report of Independent Public Accountants
Statement of Assets and Liabilities as of
December 31, 1996 and 1995
Statement of Income and Expenses, for the Years Ended
December 31, 1996, 1995 and 1994
Statement of Cash Flows, for the Years Ended
December 31, 1996, 1995 and 1994
Notes to Financial Statements
2. Financial Statement Schedules are omitted because they
are inapplicable.
3. Exhibits
Exhibit
Number Description of Exhibit
4.1 Form of Trust Agreement, including the form of Rural Electric Cooperative
Grantor Trust Certificate (incorporated by reference to Exhibit 4.1 to
Registration Statement on Form S-1 [No. 33-14843]).
10.1 Loan Agreement (incorporated by reference to Exhibit 10.1 to Registration
Statement on Form S-1 [No. 33-14843]).
10.2 Loan Guarantee and Servicing Agreement (incorporated by reference to Exhibit
10.2 to Registration Statement on Form S-1 [No. 33-14843]).
b) Form 8-K dated December 17, 1996.
Semi-annual Report to Certificateholders dated December 15, 1996.
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Supplemental information to be furnished with reports filed pursuant to
Section 15(d) of the Act by Registrants which have not registered securities
pursuant to Section 12 of the Act.
No annual report, proxy statement, form of proxy or other proxy
soliciting material has been sent to Certificateholders, and the
Registrant does not presently contemplate sending any such material
subsequent to the filing of this report.
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the County of
Fairfax, Commonwealth of Virginia on the 28th day of March, 1997.
RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (DESERET) 1988 D-1
By: NATIONAL RURAL UTILITIES COOPERATIVE
FINANCE CORPORATION as Servicer
By: /s/ Sheldon C. Petersen
Sheldon C. Petersen, Governor and
Chief Executive Officer
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RURAL ELECTRIC COOPERATIVE GRANTOR
TRUST (DESERET) 1988-D1
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996 AND 1995,
AND FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
TOGETHER WITH AUDITORS' REPORT
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Report of Independent Public Accountants
To the Trustee of
Rural Electric Cooperative Grantor Trust
(Deseret) 1988-D1, and
To the Board of Directors of
National Rural Utilities Cooperative
Finance Corporation:
We have audited the accompanying statements of assets and liabilities of
Rural Electric Cooperative Grantor Trust (Deseret) 1988-D1 as of December 31,
1996 and 1995, and the related statements of income and expenses and cash
flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the Trust'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 an 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, the financial statements referred to above present fairly,
in all material respects, the financial position of Rural Electric Cooperative
Grantor Trust (Deseret) 1988-D1 as of December 31, 1996 and 1995, and the
results of its operations and its cash flows for the years ended December 31,
1996, 1995 and 1994, in conformity with generally accepted accounting
principles.
March 24, 1997
Washington, D. C.
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RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (DESERET) 1988-D1
STATEMENTS OF ASSETS AND LIABILITIES
AS OF DECEMBER 31, 1996 AND 1995
_____________________________________________________________________
1996 1995
ASSETS
Interest Receivable $143,156 $143,156
Note Receivable 19,200,000 19,200,000
Total Assets $19,343,156 $19,343,156
LIABILITIES
Interest Payable-
Grantor Trust Certificates $139,392 $139,392
Servicer Fees Payable 3,764 3,764
Rural Electric Cooperative
Grantor Trust Certificates 19,200,000 19,200,000
Total Liabilities $19,343,156 $19,343,156
The accompanying notes are an integral part
of these financial statements
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RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (DESERET) 1988-D1
STATEMENTS OF INCOME AND EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
_____________________________________________________________________
1996 1995 1994
INCOME:
Interest on note receivable $1,908,749 $1,908,749 $1,908,749
EXPENSES:
Interest on
grantor trust certificates 1,858,560 1,858,560 1,858,560
Servicer fees 50,189 50,189 50,189
Total Expenses 1,908,749 1,908,749 1,908,749
Net Income $ -- $ -- $ --
The accompanying notes are an integral part
of these financial statements
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RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (DESERET) 1988-D1
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
_____________________________________________________________________
1996 1995 1994
CASH FLOWS FROM
OPERATING ACTIVITIES:
Interest received on note receivable $1,908,749 $1,908,749 $1,908,749
Interest paid to Certificateholders ( 1,858,560) ( 1,858,560) ( 1,858,560)
Fees paid to Servicer ( 50,189) ( 50,189) ( 50,189)
Net cash provided by
operating activities -- -- --
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from principal payment on note -- -- --
Net cash provided from
investing activities -- -- --
CASH FLOWS FROM FINANCING ACTIVITES:
Principal payment to Certificateholders -- -- --
Net cash used in financing activities -- -- --
NET CHANGE IN CASH -- -- --
CASH, beginning of year -- -- --
CASH, end of year $ -- $ -- $ --
ACCRUAL TO CASH BASIS RECONCILIATION:
Accrual basis income $ -- $ -- $ --
Change in accrual accounts:
Decrease in interest receivable -- -- --
Decrease in interest payable -- -- --
Decrease in servicer fees payable -- -- --
Total change in accrual accounts -- -- --
Net cash provided by
operating activities $ -- $ -- $ --
The accompanying notes are an integral part
of these financial statements
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RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (DESERET) 1988-D1
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996, 1995 AND 1994
1. ORGANIZATION AND OPERATIONS
Rural Electric Cooperative Grantor Trust (Deseret) 1988-D1 (the "Trust")
was formed under a Trust Agreement dated February 15, 1988 among National
Rural Utilities Cooperative Finance Corporation ("CFC"), Deseret Generation
& Transmission Co-operative, Inc. (the "Cooperative") and The First
National Bank of Chicago (the "Trustee"). On that date, CFC made a loan to
the Cooperative which issued a note (the "Note"), evidencing the borrowing
to the Trust. The Trust issued to CFC Rural Electric Cooperative Grantor
Trust (Deseret) 9.68% Certificates Due 2002 (the "Certificates") in the
amount of $19,200,000. The Certificates are solely the obligations of
the Trust and are not insured or guaranteed by CFC, the Cooperative,
the Trustee, the Rural Utilities Service ("RUS") of the United States
Department of Agriculture ("USDA") nor any other governmental agency.
Each Certificate represents an undivided fractional interest in the Trust.
CFC is the depositor of the Trust and acts as Servicer of the Note.
CFC filed, on behalf of the Trust, a Registration Statement on Form S-1
(Registration No. 33-14843) which became effective on May 4, 1988, and CFC
resold the Certificates thereunder.
The assets of the Trust consist primarily of the Note, bearing interest
at 9.94% and maturing 2002, which is guaranteed (the "Guarantee") as
to timely payment of principal and interest by the United States of
America, acting through the Administrator of RUS. The amounts of
principal and interest payments on the Note held by the Trust are
sufficient to cover the scheduled principal and interest payments on the
Certificates issued by the Trust and the scheduled amounts of servicer
fees. The General Counsel of the USDA has issued an opinion that the
Guarantee is supported by the full faith and credit of the United States
of America.
Debt service and servicer fee payments on the Note are made to the Trustee
semi-annually (June 4 and December 4) by the Cooperative or RUS as
guarantor of the Note. The Trustee deposits all such receipts in the
Trust account. The Trustee is authorized by the Trust Agreement to invest
all funds in the Trust account at the direction of CFC in certain eligible
investments that mature no later than the business day next preceding
the day (June 15 and December 15) such amounts are to be distributed
to the Certificateholders and the Servicer. The interest earned on the
investments is distributed to the Cooperative. Any funds that are not
so invested must be held by the Trustee in the Trust account. The Trustee
may not reinvest any returns of principal or investment earnings on
eligible investments and the Trustee may not sell any eligible investment
prior to its maturity except, at the direction of CFC, to preserve the
value of the corpus of the Trust.
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On or before five business days after each date on which payments are made
on the Certificates, the Trustee is obligated to supply the holders of
such Certificates a report provided by the Servicer, which includes
certain pertinent information as to how the payment is to be allocated
to principal, interest, servicer fees and premium, if any, as well as
the principal balance outstanding after such payment.
The fiscal year of the Trust is the calendar year. Within the prescribed
period of time for tax reporting purposes, after the end of each calendar
year during the term of the Trust Agreement, the Trustee is obligated
to prepare and mail to each Certificateholder of record for the Trust,
at any time during such year, a report setting forth the information as
is reasonably necessary for the preparation of such Certificateholder's
Federal income tax return.
Payments of principal on the Certificates are scheduled to be repaid
over a period of five years, beginning in 1998. The principal payments
over the next 5 years and thereafter are as follows:
1997 $ 0
1998 3,100,000
1999 3,400,000
2000 3,800,000
2001 4,200,000
Thereafter 4,700,000
Total $19,200,000
The Certificates are not subject to redemption prior to December 15, 1997.
Thereafter, such Certificates are subject to optional redemption, in whole
and with premium until 2006, upon redemption or purchase of the related
Note. The Trust Agreement will terminate after payment in full has been
made on the Certificates issued thereunder.
2. TAX STATUS OF THE TRUST
Milbank, Tweed, Hadley & McCloy, counsel to CFC, has advised CFC with
respect to the Trust that, in its opinion, (i) the Trust will not be
classified as an association taxable as a corporation, but will be
classified as a grantor trust and (ii) each Certificateholder will
be treated for Federal income tax purposes as the owner of an undivided
fractional interest in each of the assets held by the Trust.
It is expected that the Trust will not have any liability for Federal
or State income taxes for the current or future years.
3. INTEREST AND SERVICER FEE ACCOUNTING
The Trust records interest income as it is earned and accrues interest
expense and servicer fees as they are incurred. Servicer fees represent
ten basis points of the outstanding principal balance of the Certificates
and the Note and recognition of conversion fees over the life of the loan.
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4. FAIR VALUE OF FINANCIAL INSTRUMENTS
Use Of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of
expenses during the reported period. The estimates involve judgments
with respect to, among other things, various future factors which are
difficult to predict and are beyond the control of the Trust. With
regards to the fair values below, actual amounts could differ from these
estimates.
The following disclosure of the estimated fair value of financial
instruments is made in accordance with FASB Statement No. 107,
"Disclosure about Fair Value of Financial Instruments." Whenever possible,
the estimated fair value amounts have been determined using quoted market
information as of December 31, 1996 and 1995, along with other valuation
methodologies which are summarized below. Below is a summary of
significant methodologies used in estimating fair value amounts and a
schedule of fair values at December 31, 1996 and 1995.
The carrying amounts reported for Interest Receivable, Interest Payable
- Grantor Trust Certificates, and Servicer Fees Payable approximate
fair values due to the short term maturity of these instruments.
Note Receivable
Fair value is estimated by discounting the future cash flows using
the current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities.
Rural Electric Cooperative Grantor Trust Certificates
The fair value of the Certificates is estimated using quoted market prices
for similar notes over the same remaining maturities.
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The carrying and estimated fair values of the Trust's financial
instruments as of December 31, 1996 and 1995, are as follows:
1996 1995
Carrying Fair Carrying Fair
Value Value Value Value
Assets:
Interest Receivable 143,156 143,156 143,156 143,156
Note Receivable 19,200,000 22,131,385 19,200,000 23,327,630
Liabilities:
Interest Payable-
Grantor Trust Certificates 139,392 139,392 139,392 139,392
Servicer Fees Payable 3,764 3,764 3,764 3,764
Rural Electric Cooperative
Grantor Trust Certificates 19,200,000 22,154,222 19,200,000 23,364,584
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RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (DESERET) 1988 D-1
Exhibit Index
Exhibit
Number Description of Exhibit
4.1 Form of Trust Agreement, including the form of Rural Electric Cooperative
Grantor Trust Certificate (incorporated by reference to Exhibit 4.1 to Registration
Statement on Form S-1 [No. 33-14843]).
10.1 Loan Agreement (incorporated by reference to Exhibit 10.1 to Registration Statement on
Form S-1 [No. 33-14843]).
10.2 Loan Guarantee and Servicing Agreement (incorporated by reference to Exhibit 10.2 to
Registration Statement on Form S-1 [No. 33-14843]).