UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the fiscal year ended DECEMBER 31, 2006
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: 000-17313
GOVERNMENT TRUST 2-F
(Exact name of registrant as specified in its charter)
Illinois 36-6915817
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
The Bank of New York Trust Company, NA
(formerly JPMorgan Trust Company, NA), Trustee
2 North LaSalle Street, Suite 1020
Chicago, Illinois 60602
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (312) 827-8617
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
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 12-b-2 of the Exchange Act.
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 Act). Yes [ ] No [X]
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last business day of the registrant's most recently completed second fiscal
quarter. NOT APPLICABLE
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date. NOT APPLICABLE
Documents Incorporated by Reference: NONE
Item 1. Business.
NOT APPLICABLE
Item 1A. Risk Factors.
NOT APPLICABLE
Item 1B. Unresolved Staff Comments.
NONE
Item 2. Properties.
NOT APPLICABLE
Item 3. Legal Proceedings.
NONE
Item 4. Submission of Matters to a Vote of Security Holders.
NONE
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities.
Certificate Holders as of December 31, 2006, Trust 2-F: 728
Item 6. Selected Financial Data.
NOT APPLICABLE
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
NOT APPLICABLE
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
NOT APPLICABLE
Item 8. Financial Statements and Supplementary Data.
See Item 15. Exhibits, Financial Statement Schedules.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
NONE
Item 9A. Controls and Procedures.
As indicated in the certifications in Exhibit 31.1 of this report, the
Trustee has evaluated the Trust's disclosure controls and procedures
as of December 31, 2006. Based on that evaluation, the Trustee
concluded that the Trust's disclosure controls and procedures are
effective in ensuring that material information required to be in this
annual report is made known to it on a timely basis.
Item 9B. Other Information.
NONE
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
NOT APPLICABLE
Item 11. Executive Compensation.
NOT APPLICABLE
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
NOT APPLICABLE
Item 13. Certain Relationships and Related Transactions, and Director
Independence.
NONE
Item 14. Principal Accounting Fees and Services.
Deloitte & Touche 2006 Auditor Expense = $24,234.96
PART IV
Item 15. Exhibits, Financial Statement Schedules.
The following documents are filed as part of this report:
(1) The information presented in each semi annual report
(2) The report of the independent registered public accounting firm
regarding the annual audit of the financial statements of the
Trust required under the Declaration of Trust stating the
financial statements are presented in accordance with accounting
principles generally accepted in the United States of America.
(3) Exhibits:
31.1 Certification by Trustee pursuant to Rule 13a-14 or
15d-14 of the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
SIGNATURE
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.
GOVERNMENT TRUST CERTIFICATES
By: The Bank of New York Trust Company, N.A.
(formerly JP Morgan Trust Company, NA)
Not in its individual capacity but solely
as Trustee on behalf of the Trust 2-F
By: /s/ Richard Tarnas
-----------------------------------------
Name: Richard Tarnas
Title: Vice President
Date: March 30, 2007
EXHIBIT 31.1
Rule 13a-14(d)/15d-14(d) Certification
---------------------------
1. I have reviewed this annual report on Form 10-K of Government Trust 2-F, for
which The Bank of New York Trust Company, N.A. acts as Trustee;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report,
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, distributable income and changes in trust
corpus of the registrant as of, and for, the period presented in this annual
report;
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), or for
causing such procedures to be established and maintained, for the registrant and
I have:
a) designed such disclosure controls and procedures, or caused such
controls and procedures to be designed, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is
made known to me by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report my conclusions about the effectiveness
of the disclosure controls and procedures based on my evaluation as of the
Evaluation Date;
Date: March 30, 2007
By: /s/ Richard Tarnas
--------------------------------
Name: Richard Tarnas
Title: Vice President
The Bank of New York Trust Company, N.A.
(formerly JP Morgan Trust Company, NA)
REPORTS TO HOLDERS OF GOVERNMENT TRUST
May 15, 2006
To The Holders of
Government Trust Certificates
Zero Coupon Class 2-F
In accordance with Section 4.1 of the Declaration of Trust ("Trust"), JP Morgan
Trust Company formerly (Bank One Trust Company, N.A.), as Trustee and not in its
individual capacity ("Trustee"), hereby provides the holders of the
above-mentioned certificates this Semi-annual Report relating to the May 15,
2006 Certificate Payment Date.
Any capitalized terms used herein shall have the meaning assigned to them in the
Trust.
1. The aggregate dollar amount distributed to holders of Class 2-F
Certificates: $102,858,568.68.
2. The Principal Balance of the Class 2-F Note after the May 3, 2006 Note
Payment Date: $471,828,000.00.
3. The Deficient amount of the Note Payment: $-0-
Neither a delinquency in payment under any of the Notes nor an Event of Default
has occurred and is continuing.
I, Vanessa F. Williams, a Responsible Officer of the Trustee, to the best of my
knowledge and belief, certify that this Semi-annual Report is complete and
accurate.
/s/ Vanessa Williams
---------------------------------
Vanessa Williams
Trust Officer
For JP Morgan Trust Company, NA (formerly Bank
One Trust Company), as Trustee and not in its
individual capacity.
REPORTS TO HOLDERS OF GOVERNMENT TRUST
November 15, 2006
To The Holders of
Government Trust Certificates
Zero Coupon Class 2-F
In accordance with Section 4.1 of the Declaration of Trust ("Trust"), JP Morgan
Trust Company formerly (Bank One Trust Company, N.A.), as Trustee and not in its
individual capacity ("Trustee"), hereby provides the holders of the
above-mentioned certificates this Semi-annual Report relating to the November
15, 2006 Certificate Payment Date.
Any capitalized terms used herein shall have the meaning assigned to them in the
Trust.
1. The aggregate dollar amount distributed to holders of Class 2-F
Certificates: $106,531,689.19.
2. The Principal Balance of the Class 2-F Note after the November 3, 2006
Note Payment Date: $388,259,000.00.
3. The Deficient amount of the Note Payment: $-0-
Neither a delinquency in payment under any of the Notes nor an Event of Default
has occurred and is continuing.
I, Lawrence M. Kusch, a Responsible Officer of the Trustee, to the best of my
knowledge and belief, certify that this Semi-annual Report is complete and
accurate. If you have any questions regarding this notice please contact our
Customer Service group directly at (800)275-2048 for further assistance.
/s/ Lawrence M. Kusch
-------------------------
Lawrence M. Kusch
AVP, Relationship Manager
For The Bank of New York Trust Company, N.A.
(formerly JP Morgan Trust Company, NA), as
Trustee and not in its individual capacity.
GOVERNMENT TRUST 2-F
Financial Statements as of December 31, 2006
and Report of Independent Registered Public Accounting Firm
----------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Government Trust 2-F
We have audited the accompanying balance sheet of Government Trust 2-F (the
"Trust") as of December 31, 2006, 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 Trust's management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Trust is not required to have,
nor were we engaged to perform, an audit of its internal control over financial
reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Trust's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. Our procedures included confirmation of the securities held by the
Depository as of December 31, 2006 for the account of the Government of Israel,
for the purpose described in Note 4 of the notes to financial statements, by
correspondence with the Depository. We believe that our audit provides 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 Government Trust 2-F at
December 31, 2006, 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.
/s/ Deloitte & Touche LLP
- -------------------------
New York, NY
March 23, 2007
GOVERNMENT TRUST 2-F
BALANCE SHEET
DECEMBER 31, 2006
- ------------------------------------------
ASSETS
LOAN NOTE RECEIVABLE - At amortized cost,
inclusive of unamortized premium of $1,873,486 $ 390,132,812
ACCRUED INTEREST RECEIVABLE 6,093,277
----------------------
TOTAL $ 396,226,089
======================
LIABILITIES AND TRUST BALANCE
ACCRUED EXPENSES PAYABLE $ 4,691
TRUST BALANCE - Comprised of owners'
equity in Government Trust Certificates 396,221,398
----------------------
TOTAL $ 396,226,089
======================
See notes to financial statements.
GOVERNMENT TRUST 2-F
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2006
- ------------------------------------------
INTEREST INCOME ON THE LOAN NOTE $ 46,152,308
TRUSTEE FEES AND OTHER EXPENSES (36,313)
---------------------
NET INCOME $ 46,115,995
=====================
See notes to financial statements.
GOVERNMENT TRUST 2-F
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2006
- ------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Principal and interest received on the Loan Notes $ 209,428,534
Trustee fees and other expenses paid (38,244)
---------------------
Net cash provided by operating activities 209,390,290
---------------------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Distributions to certificate owners (209,390,290)
---------------------
NET INCREASE IN CASH -
---------------------
CASH BALANCE - Beginning of year -
---------------------
CASH BALANCE - End of year $ -
=====================
Reconciliation of net income to net cash provided by operating activities:
Net income $ 46,115,995
Amortization of premium on Loan Note receivable 1,012,026
Decrease in Loan Note receivable 159,757,000
Decrease in accrued interest receivable 2,507,200
Decrease in accrued expenses (1,931)
---------------------
Net cash provided by operating activities $ 209,390,290
=====================
See notes to financial statements.
GOVERNMENT TRUST 2-F
STATEMENT OF CHANGES IN TRUST BALANCE
YEAR ENDED DECEMBER 31, 2006
- ------------------------------------------
Trust Trust
Balance, Distributions to Balance,
January 1, 2006 Net Income Certificate Owners December 31, 2006
$ 559,495,693 $ 46,115,995 $ (209,390,290) $ 396,221,398
=============== ============== ================== =================
See notes to financial statements.
GOVERNMENT TRUST 2-F
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006
- ------------------------------------------
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 Bank of New York (formerly,
JPMorgan Trust Company, N.A., formerly, Bank One Trust Company, N.A.,
formerly, 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 "DSA"), 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.
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 Loan Note is carried at amortized cost on the
accompanying 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.
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 (each a "Note Payment Date"). On
May 3, 2006 and November 3, 2006 Note Payment Dates, Israel made its
scheduled payments of principal on the Loan Note in the amounts of
$76,188,000 and $83,569,000, respectively. Scheduled principal payments are
due on each Note Payment Date as follows:
Payment Principal Payment Principal
Date Payment Date Payment
May 3, 2007 $92,261,000 November 3, 2010 $5,236,000
November 3, 2007 59,148,000 May 3, 2011 12,154,000
May 3, 2008 33,390,000 November 3, 2011 20,279,000
November 3, 2008 29,620,000 May 3, 2012 29,620,000
May 3, 2009 30,629,000 November 3, 2012 8,888,000
November 3, 2009 29,620,000 May 3, 2013 8,885,000
May 3, 2010 28,529,000
The Government of the United States, acting through the DSA, 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, 2006 was approximately $429,793,000. 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.
3. THE ZERO COUPON CERTIFICATES
On November 29, 1988, the Trust issued 49 separate series of Certificates,
Class 2-F. Thirty-six of such series of Certificates matured prior to
December 31, 2006. Each of the remaining series of Certificates will mature
on one of the semiannual certificate payment dates from May 15, 2007 to May
15, 2013 (each, a "Maturity Date"). Scheduled distributions are due on the
Maturity Dates as follows:
Maturity Distribution Maturity Distribution
Date Amount Date Amount
May 15, 2007 $111,156,595 November 15, 2010 $9,375,755
November 15, 2007 73,553,483 May 15, 2011 16,038,932
May 15, 2008 44,916,897 November 15, 2011 23,572,427
November 15, 2008 39,521,890 May 15, 2012 31,926,499
May 15, 2009 39,089,358 November 15, 2012 9,752,967
November 15, 2009 36,589,721 May 15, 2013 9,317,411
May 15, 2010 34,057,190
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.
4. THE COLLATERAL
In accordance with the Collateral Depository Agreement (the "Depository
Agreement") between Israel, the Trustee, and The Bank of New York, 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 Maturity 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.
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.
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.
7. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In September 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 157 entitled Statement of Financial Accounting Standards
No. 157, Fair Value Measurements ("SFAS 157"). SFAS 157 is effective for
fiscal years beginning after November 15, 2007. SFAS 157 defines fair
value, establishes a framework for measuring fair value, and expands
disclosure requirements about fair value measurements. The Trust is
currently evaluating the impact of adopting SFAS 157 on its financial
statements. At this time, the impact to the Trust's financial statements
has not been determined.
In July 2006, the FASB released "Accounting for Uncertainty in Income
Taxes" ("FIN 48"), which is effective for fiscal years beginning after
December 15, 2006. FIN 48 clarifies accounting for income taxes recognized
in the financial statements in accordance with FASB Statement 109,
"Accounting for Income Taxes." This interpretation prescribes a
comprehensive model for how an entity should recognize, measure, present
and disclose in its financial statements uncertain tax positions that the
entity has taken or expects to take on a tax return. The Trust is currently
evaluating the impact of adopting FIN 48 on its financial statements. At
this time, the impact to the Trust's financial statements has not been
determined.
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