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, 2007
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, N.A.
(formerly J.P. Morgan Trust Company, N.A.), 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. Not Applicable.
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of "large accelerated filer," "accelerated filer" and
"smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ]
Accelerated filer [ ]
Non-accelerated filer [X] (Do not check if a smaller reporting company)
Smaller reporting company [ ]
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
List hereunder the following documents if incorporated by reference and the part
of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1 Any annual report to security holders; (2) Any proxy
information statement; and, (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended date December 24, 1980). None
PART I
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, 2007, Trust 2-F: 470
Item 6. Selected Financial Data.
Not Applicable.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
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, 2007. 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 LLP 2007 Audit Expense = $25,689.06
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 J.P. Morgan Trust Company, N.A.)
Not in its individual capacity but solely
as Trustee on behalf of the Trust 2-F
By: /s/ Lawrence M. Kusch
-----------------------------------------
Name: Lawrence M. Kusch
Title: Assistant Vice President
Date: March 31, 2008
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)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)), 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) designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c) 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
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; and
d) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's last fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and;
5. I have disclosed, based on my most recent evaluation of internal
control over financial reporting, to the registrant's auditors:
a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves persons who
have a significant role in the registrant's internal control
over financial reporting.
Date: March 31, 2008
By: /s/ Lawrence M. Kusch
--------------------------------
Name: Lawrence M. Kusch
Title: Assistant Vice President
The Bank of New York Trust Company, N.A.
(formerly JP Morgan Trust Company, N.A.)
REPORTS TO HOLDERS OF GOVERNMENT TRUST
May 15, 2007
The Bank of New York Trust Company, N.A.
2 N LaSalle Street, Suite 1020
Chicago, IL 60602
1-800-254-2826
May 15, 2007
To The Holders of
Government Trust Certificates
Zero Coupon Class 2-F
In accordance with Section 4.1 of the Declaration of Trust ("Trust"), The Bank
of New York Trust Company, N.A. (formerly J.P. Morgan 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, 2007 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: $111,156,594.88.
2. The Principal Balance of the Class 2-F Note after the May 3, 2007
Note Payment Date: $295,998,000.00.
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) 254-2826 for further assistance.
/s/ Lawrence M. Kusch
-------------------------
Lawrence M. Kusch
AVP, Relationship Manager
For The Bank of New York Trust Company, N.A.
(formerly J.P. Morgan Trust Company, N.A.), as
Trustee and not in its individual capacity.
REPORTS TO HOLDERS OF GOVERNMENT TRUST
November 15, 2007
The Bank of New York Trust Company, N.A.
2 N LaSalle Street, Suite 1020
Chicago, IL 60602
1-800-254-2826
November 15, 2007
To The Holders of
Government Trust Certificates
Zero Coupon Class 2-F
In accordance with Section 4.1 of the Declaration of Trust ("Trust"), The Bank
of New York Trust Company, N.A. (formerly J.P. Morgan 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, 2007 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: $73,553.482.67.
2. The Principal Balance of the Class 2-F Note after the November 2, 2007
Note Payment Date: $236,850,000.00.
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) 254-2826 for further assistance.
/s/ Lawrence M. Kusch
-------------------------
Lawrence M. Kusch
AVP, Relationship Manager
For The Bank of New York Trust Company, N.A.
(formerly J.P. Morgan Trust Company, N.A.), as
Trustee and not in its individual capacity.
GOVERNMENT TRUST 2-F
Financial Statements as of December 31, 2007
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 sheets of Government Trust 2-F (the
"Trust") as of December 31, 2007, 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, 2007 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, such financial statements present fairly, in all material
respects, the financial position of Government Trust 2-F at December 31, 2007,
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
- -------------------------
Deloitte & Touche LLP
Chicago, IL
March 28, 2008
GOVERNMENT TRUST 2-F
BALANCE SHEET
DECEMBER 31, 2007
- ------------------------------------------
ASSETS
LOAN NOTE RECEIVABLE - at amortized cost,
inclusive of unamortized premium of $1,205,119 $ 238,055,445
ACCRUED INTEREST RECEIVABLE 3,781,176
----------------------
TOTAL $ 241,836,621
======================
LIABILITIES AND TRUST BALANCE
ACCRUED EXPENSES PAYABLE $ 2,911
TRUST BALANCE - Comprised of owners'
equity in Government Trust Certificates 241,833,710
----------------------
TOTAL $ 241,836,621
======================
See notes to financial statements.
GOVERNMENT TRUST 2-F
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2007
- ------------------------------------------
INTEREST INCOME ON THE LOAN NOTE $ 30,346,301
TRUSTEE FEES AND OTHER EXPENSES (23,880)
---------------------
NET INCOME $ 30,322,421
=====================
See notes to financial statements.
GOVERNMENT TRUST 2-F
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2007
- ------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Principal and interest received on the Loan Notes $ 184,735,769
Trustee fees and other expenses paid (25,660)
---------------------
Net cash provided by operating activities 184,710,109
----------------------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Distributions to certificate owners (184,710,109)
----------------------
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 $ 30,322,421
Amortization of premium on Loan Note receivable 668,367
Decrease in Loan Note receivable 151,409,000
Decrease in accrued interest receivable 2,312,101
Decrease in accrued expenses (1,780)
----------------------
Net cash provided by operating activities $ 184,710,109
======================
See notes to financial statements.
GOVERNMENT TRUST 2-F
STATEMENT OF CHANGES IN TRUST BALANCE
YEAR ENDED DECEMBER 31, 2007
- ------------------------------------------
Trust Trust
Balance, Distributions to Balance,
January 1, 2007 Net Income Certificate Owners December 31, 2007
$ 396,221,398 $ 30,322,421 $ (184,710,109) $ 241,833,710
=============== ============== ================== =================
See notes to financial statements.
GOVERNMENT TRUST 2-F
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
- ------------------------------------------
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 Bank of New York Trust
Company, N.A. (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, 2007 and November 3, 2007 Note Payment
Dates, Israel made its scheduled payments of principal on the Loan Note in
the amounts of $92,261,000 and $59,148,000, respectively. Scheduled
principal payments are due on each Note Payment Date as follows:
Payment Principal Payment Principal
Date Payment Date Payment
May 3, 2008 $33,390,000 May 3, 2011 $12,154,000
November 3, 2008 29,620,000 November 3, 2011 20,279,000
May 3, 2009 30,629,000 May 3, 2012 29,620,000
November 3, 2009 29,620,000 November 3, 2012 8,888,000
May 3, 2010 28,529,000 May 3, 2013 8,885,000
November 3, 2010 5,236,000
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, 2007 was approximately
$272,552,000. 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-eight of such series of Certificates matured prior to
December 31, 2007. Each of the remaining series of Certificates will
mature on one of the semiannual certificate payment dates from
May 15, 2008 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, 2008 $44,916,897 May 15, 2011 $16,038,932
November 15, 2008 39,521,890 November 15, 2011 23,572,427
May 15, 2009 39,089,358 May 15, 2012 31,926,499
November 15, 2009 36,589,721 November 15, 2012 9,752,967
May 15, 2010 34,057,190 May 15, 2013 9,317,411
November 15, 2010 9,375,755
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.
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 adopted FIN 48 effective January 1, 2007 for all open tax
years and has determined that no material uncertain tax positions exist.
As a result, the Trust has not recorded any liabilities for material
unrecognized tax benefits as of December 31, 2007.
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.
******