UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal year ended ____12/31/2002________ Commission file number 33-30048
Government Trusts 3-C
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(Exact name of registrant as specified in its charter)
Illinois 36-6913824
- ----------------------------------- -------------------------------------
(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 IL1-0540, 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) fo 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 12-31-2002
Trust 3-C: 220
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
1. 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.
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
Trust 3C.
By: /s/ Joan E. Blume
-------------------------
Joan E. Blume
Trust Officer
Date: as of December 31, 2002
Government Trust 3-C
Independent Auditors' Report
Financial Statements
As of December 31, 2002
INDEPENDENT AUDITORS' REPORT
Government Trust 3-C:
We have audited the accompanying balance sheet of Government Trust 3-C (the
"Trust") as of December 31, 2002 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, 2002 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, 2002 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.
March 14, 2003
Government Trust 3-C
Balance Sheet
December 31, 2002
Assets
------
Loan Note Receivable - at amortized cost,
inclusive of unamortized premium of $2,212,957 $302,623,903
Accrued Interest Receivable 4,334,131
------------
Total Assets $306,958,034
============
Liabilities and Trust Balance
-----------------------------
Accrued Expenses Payable $ 7,260
Trust Balance - Comprised of Owners'
Equity in Government Trust Certificates 306,950,774
------------
Total Liabilities and Trust Balance $306,958,034
============
The accompanying notes are an integral part of these financial statements.
Government Trust 3-C
Statement of Income
For the year ended December 31, 2002
Interest Income on the Loan Note $26,445,522
Trustee Fees and Other Expenses (45,130)
-----------
Net Income $26,400,392
===========
The accompanying notes are an integral part of these financial statements.
Government Trust 3-C
Statement of Cash Flows
For the year ended December 31, 2002
Increase (Decrease) in Cash
Cash Flows from Operating Activities:
Trustee Fees and Other Expenses paid $ (45,153)
Principal and Interest received on the Loan Note 27,765,816
-----------
Net Cash Flows from Operating Activities 27,720,663
-----------
Cash Flows used in Financing Activites:
Distributions to Certificate Owners (27,720,663)
-----------
Net Cash Flows used in Financing Activities (27,720,663)
-----------
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 3-C
Statement of Changes in Trust Balance
For the year ended December 31, 2002
Trust Trust
Balance at Distributions to Balance at
January 1, 2002 Net Income Certificate Owners December 31, 2002
- --------------- ---------- ------------------ -----------------
$308,271,045 $26,400,392 $(27,720,663) $306,950,774
============ =========== ============ ============
The accompanying notes are an integral part of these financial statements.
GOVERNMENT TRUST 3-C
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
Note 1. Organization and Operations
Government Trust 3-C (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 are not
subject to prepayment or acceleration.
Note 2. Loan Note
The Loan Note in the original principal amount of $304,460,946 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 August 22, 1989 between the Trust
and Israel. The Loan Note is carried at amortized cost in the Balance Sheet
because of the Trust's intent and ability to hold the Loan Note to maturity. 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 8.9549% are due on the Loan Note on each May 3 and November 3 (each a
"Note Payment Date"). On the May 3, 2002 and November 3, 2002 Note Payment
Dates, Israel made its scheduled payments of principal on the Loan Note in the
amounts of $405,000 and $405,000, respectively. Scheduled principal payments are
due on each Note Payment Date as follows:
Payment Principal Payment Principal
Date Payment Date Payment
- ------------------- ------------ ------------------- -------------
May 3, 2003 $ 1,495,000 May 3, 2007 $ 3,617,000
November 3, 2003 15,101,000 November 3, 2007 8,937,000
May 3, 2004 15,973,000 May 3, 2008 12,600,000
November 3, 2004 53,217,000 November 3, 2008 12,600,000
May 3, 2005 32,626,000 May 3, 2009 12,600,000
November 3, 2005 37,213,000 November 3, 2009 12,600,000
May 3, 2006 25,791,000 May 3, 2010 11,946,000
November 3, 2006 12,600,000 November 3, 2010 17,471,000
May 3, 2011 10,553,000
November 3, 2011 3,470,946
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
Loan 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, 2002
was approximately $378 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 Zero Coupon Certificates
On August 22, 1989, the Trust issued 45 separate series of Certificates, Class
3-C. Twenty-seven series of such Certificates matured prior to December 31,
2002. Each of the remaining series of Certificates will mature on one of the
semiannual certificate payment dates from May 15, 2003 to November 15, 2011.
Scheduled distributions are due on the maturity dates as follows:
Maturity Distribution Maturity Distribution
Date Amount Date Amount
- -------------------- ------------- ------------------ --------------
May 15, 2003 $14,923,177 May 15, 2008 $16,794,601
November 15, 2003 28,462,351 November 15, 2008 16,231,387
May 15, 2004 28,659,344 May 15, 2009 15,668,174
November 15, 2004 65,189,359 November 15, 2009 15,104,960
May 15, 2005 42,219,585 May 15, 2010 13,887,746
November 15, 2005 45,348,220 November 15, 2010 18,878,766
May 15, 2006 32,262,817 May 15, 2011 11,179,821
November 15, 2006 17,918,972 November 15, 2011 3,625,107
May 15, 2007 8,372,759
November 15, 2007 13,531,081
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 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 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 Note, 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 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 for tax purposes 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 net 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.
* * * * * *