UNITED STATES
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
For the Fiscal year ended 12/31/2000 Commission file number 33-25441
--- --------
Government Trusts 2-E and 2-F.
--------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-6915816 36-6915817
- ----------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Bank One Trust Company, NA (formerly The
First National Bank of Chicago), Trustee
One North State Street, Ninth Floor
Suite IL1-0126, Chicago Illinois 60670
- ------------------------------------------ ------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 312 407 2797
Securities registered pursuant to Section 12(b) or Section 12(g) 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 ___ No X
---
State the aggregate market value of the voting stock help by non-affiliates of
the registrant:
NOT APPLICABLE
Indicate the number of shares outstanding of each of registrant's classes of
common stock, as of the last practical date: NOT APPLICABLE
Document Incorporated by Reference
----------------------------------
None
Part I
Item 3 Legal Proceedings
NONE
Item 4 Submissions of matters to a Vote of Security Holders:
NONE
Part II
Item 5 Market for Registrant's common Equity and Related Stockholder Matters
Certificate Holders as of 12-31-2000
Trust 2-E: 5
Trust 2-F: 1,262
Item 9 Charges and Disagreements with Accountants on Accounting and Financial
Disclosure
NONE
Part III
Item 13 Certain Relationships and Related Transactions
NONE
Item 14 Exhibits Financial Statement Schedules and Reports as Form 8-K
The following documents are filed as part of this report
2. The information presented in each Semi Annual Report
2. The letter of independent public accountant regarding the
annual audit of the books and records of each trust required
under the Declaration of Trust stating that the financial
statements are presented in accordance with Generally Accepted
Accounting Principles.
INDEPENDENT AUDITORS' REPORT
Government Trust 2-E:
We have audited the accompanying balance sheet of Government Trust 2-E (the
"Trust") as of December 31, 2000 and the related statements of income, cash
flows and changes in Trust balance for the year then ended. These financial
statements are the responsibility of the management of the Trust. Our
responsibility is to express our opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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. Our procedures included confirmation of the securities that the
Depository was holding as of December 31, 2000 for the account of the Government
of Israel, for the purpose described in Note 4 of the notes to 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 audit provides a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Trust at December 31, 2000 and the
results of its operations, cash flows and changes in Trust balance for the year
then ended in conformity with accounting principles generally accepted in the
United States of America.
DELOITTE & TOUCHE LLP
New York, New York
March 19, 2001
Government Trust 2-E
Balance Sheet
December 31, 2000
Assets
------
Loan Note Receivable - at amortized cost,
net of unamortized discount of $16,300 $40,342,700
Accrued Interest Receivable 611,702
-----------
Total Assets $40,954,402
===========
Liabilities and Trust Balance
-----------------------------
Accrued Expenses Payable $ 488
Trust Balance - Comprised of Owners' Equity
in Government Trust Certificates 40,953,914
-----------
Total Liabilities and
Trust Balance $40,954,402
===========
The accompanying notes are an integral part of these financial statements.
Government Trust 2-E
Statement of Income
For the year ended December 31, 2000
Interest Income on the Loan Note $10,234,177
Trustee Fees and other expenses (8,110)
-----------
Net Income $10,226,067
===========
The accompanying notes are an integral part of these financial statements.
Government Trust 2-E
Statement of Cash Flows
For the year ended December 31, 2000
Increase (Decrease) in Cash
Cash Flows used in Operating Activities:
Distributions to Certificate Owners $(125,277,164)
Trustee Fees and Other Expenses Paid (9,480)
-------------
Net Cash Flows used in Operating Activities (125,286,644)
-------------
Cash Flows from Operating Activities:
Principal and Interest Received on the Loan Note 125,286,644
--------------
Net Cash Flows from Operating Activities 125,286,644
--------------
Net Increase in Cash 0
--------------
Cash Balance at the beginning of period 0
--------------
Cash Balance at the end of period $ 0
==============
The accompanying notes are an integral part of these financial statements.
Government Trust 2-E
Statement of Changes in Trust Balance
For the year ended December 31, 2000
Trust Trust
Balance at Distributions to Balance at
January 1, 2000 Net Income Certificate Owners December 31, 2000
- --------------- ----------- ------------------ -----------------
$156,005,011 $10,226,067 $(125,277,164) $40,953,914
=========== ========== ============= ==========
The accompanying notes are an integral part of these financial statements.
GOVERNMENT TRUST 2-E
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
Note 1. Organization and Operations
---------------------------
Government Trust 2-E (the "Trust") is a limited purpose trust established under
the laws of the state of Illinois pursuant to a Declaration of Trust (the
"Declaration"), between the Trust and the First National Bank of Chicago, as
Trustee (the "Trustee"). The Trust was created for the sole purpose of the
issuance and sale of a single class of Current Coupon Certificates (the
"Certificates"). The assets of the Trust consist of a Promissory Note (a "Loan
Note") from the Government of Israel ("Israel"). The Loan Note is backed by a
full faith and credit guaranty (the "Guaranty") issued by the United States of
America, acting through the Defense Security Assistance Agency of the Department
of Defense (the "DSAA"), of the due and punctual payment of 90% of all payments
of principal and interest due on the Loan Note (the "Guaranteed Portion") and a
security interest in certain collateral, consisting of non-callable securities
issued or guaranteed by the United States Government, sufficient to pay the
remaining 10% of all payments of principal and interest due on the Loan Note
(the "Unguaranteed Secured Portion"). The Loan Note and Certificates will not be
subject to prepayment or acceleration.
In connection with the issuance of the Certificates, underwriting discounts of
approximately $2,700,000 and a portion of the total offering expenses of
approximately $835,000 associated with the offering of the Trust and the
simultaneous offerings of Government Trust 2-A through 2-D and 2-F, each similar
in organization and operation to the Trust, were paid out of the proceeds to the
Trust.
Note 2. Loan Note
---------
The Loan Note in the original principal amount of $400,000,000 evidences a loan
made by the Trust to Israel subject to the terms and conditions of a Loan
Agreement (the "Loan Agreement") dated as of November 29, 1988 between the Trust
and Israel. The proceeds from the Loan Note were used to prepay certain loans
made to Israel from the Federal Financing Bank. Semiannual payments of interest
at an annual rate of 9.4075% are due on the Loan Note on each May 3 and November
3 (each a "Note Payment Date"). On the May 3, 2000 and November 3, 2000 Note
Payment Dates, Israel made its scheduled payments of principal on the Loan Note
in the amounts of $54,696,000 and $58,699,000, respectively. Scheduled principal
payments are due on each Note Payment Date as follows:
Payment Principal Payment Principal
Date Payment Date Payment
- ------------------- ------------ --------------- -------------
May 3, 2001 $ 18,277,000 May 3, 2002 $ 7,094,000
November 3, 2001 14,988,000
The Government of the United States, acting through the DSAA, has agreed to
guarantee the repayment of the Guaranteed Portion of amounts due to the Trust
under the Loan Note. Israel has also agreed to pledge certain collateral as
security for the repayment of the Unguaranteed Secured Portion, as more fully
described in Note 4. The Loan Note is carried on the balance sheet of the Trust
at amortized cost. The estimated fair value of the Loan Note approximates the
fair value of the Certificates. The estimated fair value of the Certificates at
December 31, 2000 was approximately $42 million. The estimate of the fair value
of the Certificates is based upon the present values of the cash flows using
risk-adjusted spreads to the U.S. Treasury curve.
Although management of the Trust is not aware of any factor that would
significantly affect the estimated fair value of the Loan Note or the
Certificates, the Loan Note and the Certificates have not been revalued for
purposes of these financial statements since that date and, therefore, current
estimates of fair value may differ significantly from the amount presented
herein.
Note 3. The Current Coupon Certificates
-------------------------------
On November 29, 1988, the Trust issued Certificates, Class 2-E in the aggregate
principal amount of $400,000,000, bearing interest at an annual rate of 9.40%
and having a final maturity date of May 15, 2002.
Each of the Certificates evidences an undivided fractional interest in the
Trust, and represents the right to receive a portion of the semiannual payments
due on the Loan Note held by the Trust.
Semiannual payments of interest on the Certificates are due on May 15 and
November 15 of each year (each a "Certificate Payment Date"). On the May 15,
2000 and November 15, 2000 Certificate Payment Dates, the Trust made its
scheduled payments of principal on the certificates in the amounts of
$54,696,000 and $58,699,000, respectively. Scheduled principal payments are due
on each Certificate Payment Date as follows:
Payment Principal Payment Principal
Date Payment Date Payment
- ----------------- ---------- ------------- ------------
May 15, 2001 $18,277,000 May 15, 2002 $7,094,000
November 15, 2001 14,988,000
Note 4. The Collateral
--------------
In accordance with the Collateral Depository Agreement (the "Depository
Agreement") between Israel, the Trustee, and Chase Manhattan Bank as depository
(the "Depository"), and in order to provide security for the payment of the
Unguaranteed Secured Portion, Israel has pledged certain collateral, consisting
of non-callable securities issued or guaranteed by the United States Government
(together with the proceeds thereof, the "Collateral"). The Collateral is of
such amounts and has such payment dates as to enable the Trustee to receive on
or immediately prior to each Certificate Payment Date an amount sufficient to
pay the Unguaranteed Secured Portion if timely payment on the Loan Note has not
been received by the related Note Payment Date. All of the Collateral was
deposited with the Depository on the date that the loans evidenced by the Loan
Note were made by the Trust to Israel.
Note 5. The Trustee
-----------
Pursuant to the Declaration the Trustee established a separate trust account for
the Trust. All payments received with respect to the Loan Notes, the Guaranty
and any relevant Collateral are deposited in the trust account for the benefit
of the holders of the Certificates after deducting the fees of the Trustee, the
Depository and any additional expenses of the Trust. Any excess funds remaining
in the trust account after the payment of interest and principal on the
Certificates will revert back to Israel to the extent such funds were provided
by Israel but not needed for the above purpose.
Note 6. Income Taxes
------------
The Trust is classified as a Grantor Trust and will not be subject to Federal
income taxes. Each Certificateholder will be treated for Federal income tax
purposes as the owner of a pro rata undivided fractional interest in the assets
held by the Trust. The difference between the financial reporting and income tax
bases of the Trust's assets and liabilities is not significant.
9337
INDEPENDENT AUDITORS' REPORT
Government Trust 2-F:
We have audited the accompanying balance sheet of Government Trust 2-F (the
"Trust") as of December 31, 2000 and the related statements of income, cash
flows and changes in Trust balance for the year then ended. These financial
statements are the responsibility of the management of the Trust. Our
responsibility is to express our opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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. Our procedures included confirmation of the securities that the
Depository was holding as of December 31, 2000 for the account of the Government
of Israel, for the purpose described in Note 4 of the notes to 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 audit provides a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Trust at December 31, 2000 and the
results of its operations, cash flows and changes in Trust balance for the year
then ended in conformity with accounting principles generally accepted in the
United States of America.
DELOITTE & TOUCHE LLP
New York, New York
March 19, 2001
Government Trust 2-F
Balance Sheet
December 31, 2000
Assets
------
Loan Note Receivable - at amortized cost,
net of unamortized premium of $10,509,247 $ 989,135,573
Accrued Interest Receivable 15,358,398
--------------
Total Assets $1,004,493,971
==============
Liabilities and Trust Balance
-----------------------------
Accrued Expenses Payable $ 11,825
Trust Balance - Comprised of Owners' Equity
in Government Trust Certificates 1,004,482,146
--------------
Total Liabilities and
Trust Balance $1,004,493,971
==============
The accompanying notes are an integral part of these financial statements.
Government Trust 2-F
Statement of Income
For the year ended December 31, 2000
Interest Income on the Loan Note $93,881,666
Trustee Fees and other expenses (73,397)
-----------
Net Income $93,808,269
===========
The accompanying notes are an integral part of these financial statements.
Government Trust 2-F
Statement of Cash Flows
For the year ended December 31, 2000
Increase (Decrease) in Cash
Cash Flows used in Operating Activities:
Distributions to Certificate Owners $(95,254,562)
Trustee Fees and Other Expenses Paid (73,397)
------------
Net Cash Flows used in Operating Activities (95,327,959)
------------
Cash Flows from Investing Activities:
Interest Received on the Loan Notes 95,327,959
------------
Net Cash Flows from Operating Activities 95,327,959
------------
Net Increase in Cash 0
------------
Cash balance at the beginning of period 0
------------
Cash balance at the end of period $ 0
============
The accompanying notes are an integral part of these financial statements.
Government Trust 2-F
Statement of Changes in Trust Balance
For the year ended December 31, 2000
Trust Trust
Balance at Distributions to Balance at
January 1, 2000 Net Income Certificate Owners December 31, 2000
- --------------- ---------- ------------------ -----------------
$1,005,928,439 $93,808,269 $(95,254,562) $1,004,482,146
============= ========== =========== =============
The accompanying notes are an integral part of these financial statements.
GOVERNMENT TRUST 2-F
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
Note 1. Organization and Operations
---------------------------
Government Trust 2-F (the "Trust") is a limited purpose trust established under
the laws of the state of Illinois pursuant to a Declaration of Trust (the
"Declaration") between the Trust and the First National Bank of Chicago, as
Trustee (the "Trustee"). The Trust was created for the sole purpose of the
issuance and sale of a single class of Zero Coupon Certificates (the
"Certificates"). The assets of the Trust consist of a Promissory Note (a "Loan
Note") from the Government of Israel ("Israel"). The Loan Note is backed by a
full faith and credit guaranty (the "Guaranty") issued by the United States of
America, acting through the Defense Security Assistance Agency of the Department
of Defense (the "DSAA"), of the due and punctual payment of 90% of all payments
of principal and interest due on the Loan Note (the "Guaranteed Portion") and a
security interest in certain collateral, consisting of non-callable securities
issued or guaranteed by the United States Government, sufficient to pay the
remaining 10% of all payments of principal and interest due on the Loan Note
(the "Unguaranteed Secured Portion"). The Loan Note and Certificates will not be
subject to prepayment or acceleration.
In connection with the issuance of the Certificates, underwriting discounts of
approximately $8,242,000 and a portion of the total offering expenses of
approximately $835,000 associated with the offering of the Trust and the
simultaneous offerings of Government Trust 2-A through 2-E, each similar in
organization and operation to the Trust, were paid out of the proceeds to the
Trust.
Note 2. Loan Note
---------
The Loan Note in the original principal amount of $978,626,000 evidences a loan
made by the Trust to Israel subject to the terms and conditions of a Loan
Agreement (the "Loan Agreement") dated as of November 29, 1988 between the Trust
and Israel. The proceeds from the Loan Note were used to prepay certain loans
made to Israel from the Federal Financing Bank. Semi-annual payments of interest
at an annual rate of 9.7410% are due on the Loan Note on each May 3 and November
3 beginning in 2002 (each a "Note Payment Date"). Scheduled principal payments
are due on each Note Payment Date as follows:
Payment Principal Payment Principal
Date Payment Date Payment
- --------------------- ----------- ---------------- -------------
May 3, 2002 $20,058,000 May 3, 2008 $33,390,000
November 3, 2002 35,720,000 November 3, 2008 29,620,000
May 3, 2003 45,437,000 May 3, 2009 30,629,000
November 3, 2003 74,682,000 November 3, 2009 29,620,000
May 3, 2004 80,922,000 May 3, 2010 28,529,000
November 3, 2004 43,020,000 November 3, 2010 5,236,000
May 3, 2005 66,005,000 May 3, 2011 12,154,000
November 3, 2005 64,766,000 November 3, 2011 20,279,000
May 3, 2006 76,188,000 May 3, 2012 29,620,000
November 3, 2006 83,569,000 November 3, 2012 8,888,000
May 3, 2007 92,261,000 May 3, 2013 8,885,000
November 3, 2007 59,148,000
The Government of the United States, acting through the DSAA, has agreed to
guarantee the repayment of the Guaranteed Portion due to the Trust under the
Note. Israel has agreed to pledge certain collateral as security for the
repayment of the Unguaranteed Secured Portion, as more fully described in Note
4. The estimated fair value of the Loan Note approximates the fair value of the
Certificates. The estimated fair value of the Certificates at December 31, 2000
was approximately $1.2 billion. The estimate of the fair value of the
Certificates is based upon the present values of the cash flows using
risk-adjusted spreads to the U.S. Treasury curve.
Although management of the Trust is not aware of any factor that would
significantly affect the estimated fair value of the Loan Note or the
Certificates, the Loan Note and the Certificates have not been revalued for
purposes of these financial statements since that date and, therefore, current
estimates of fair value may differ significantly from the amount presented
herein.
Note 3. The Zero Coupon Certificates
----------------------------
On November 29, 1988, the Trust issued 49 separate series of Certificates, Class
2-F. Twenty-four of such series matured prior to December 31, 2000. Each of the
remaining series of Certificates will mature on one of the semiannual
certificate payment dates from May 15, 2001 to May 15, 2013 (each, a "Maturity
Date"). Scheduled distributions are due on each Maturity Date as follows:
Maturity Distribution Maturity Distribution
Date Amount Date Amount
- ----------------- -------------- ----------------- -------------
May 15, 2001 $ 47,627,281 May 15, 2008 $ 44,916,897
November 15, 2001 47,627,281 November 15, 2008 39,521,890
May 15, 2002 67,685,281 May 15, 2009 39,089,358
November 15, 2002 82,371,108 November 15, 2009 36,589,721
May 15, 2003 90,349,705 May 15, 2010 34,057,190
November 15, 2003 117,383,400 November 15, 2010 9,375,755
May 15, 2004 119,988,814 May 15, 2011 16,038,932
November 15, 2004 78,148,542 November 15, 2011 23,572,427
May 15, 2005 99,039,866 May 15, 2012 31,926,499
November 15, 2005 94,588,568 November 15, 2012 9,752,967
May 15, 2006 102,858,569 May 15, 2013 9,317,411
November 15, 2006 106,531,689
May 15, 2007 111,156,595
November 15, 2007 73,553,483
Each of the Certificates evidences an undivided fractional interest in the
Trust, and represents the right to receive a portion of the semiannual payments
due on the Loan Note held by the Trust.
Note 4. The Collateral
--------------
In accordance with the Collateral Depository Agreement (the "Depository
Agreement") between Israel, the Trustee, and Chase Manhattan Bank, as depository
(the "Depository"), and in order to provide security for the payment of the
Unguaranteed Secured Portion, Israel has agreed to pledge certain collateral,
consisting of non-callable securities issued or guaranteed by the United States
Government (together with the proceeds thereof, the "Collateral"). The
Collateral is of such amounts and has such payment dates as to enable the
Trustee to receive on or immediately prior to each semiannual Certificate
Payment Date an amount sufficient to pay the Unguaranteed Secured Portion if
timely payment on the Loan Note has not been received by the related Note
Payment Date. All of the Collateral was deposited with the Depository on the
date that the loans evidenced by the Loan Note were made by the Trust to Israel.
Note 5. The Trustee
-----------
Pursuant to the Declaration the Trustee established a separate trust account for
the Trust. All payments received with respect to the Loan Notes, the Guaranty
and any relevant Collateral are deposited in the trust account for the benefit
of the holders of the Certificates after deducting fees of the Trustee and any
additional expenses of the Trust. Any excess funds remaining in the trust
account after the payment of principal on the Certificates will revert back to
Israel to the extent such funds were provided by Israel but not needed for the
above purpose.
Note 6. Income Taxes
------------
The Trust is classified as a Grantor Trust and will not be subject to Federal
income taxes. Each Certificateholder will be treated for Federal income tax
purposes as the owner of a pro rata undivided fractional interest in the assets
held by the Trust. The difference between the financial reporting and income tax
bases of the Trust's assets and liabilities is not significant.
9338
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, Bank
One Trust Company, NA (formerly The First National Bank of Chicago) has duly
caused this report to be signed for the registrant Trust by a duly authorized
signatory of the Trustee.
GOVERNMENT TRUST CERTIFICATES
By: Bank One Trust Company, NA
-------------------------------
(formerly The First National
Bank of Chicago)
Not in its individual capacity
but solely as Trustee on behalf
of the Trusts 1-C & 1-D.
By: /s/ JOAN E. BLUME
------------------------------------
Joan E. Blume
Trust Officer
Date: as of December 31, 2000