Item 1. Business.
Not Applicable.
Item 1A.
Item 1A. Risk Factors.
Not Applicable.
Item 1B.
Item 1B. Unresolved Staff Comments.
None.
Item 2.
Item 2. Properties.
Not Applicable.
Item 3.
Item 3. Legal Proceedings.
None.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5.
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 1-D: 1,168
Item 6.
Item 6. Selected Financial Data.
Not Applicable.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Not Applicable.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.
Item 8.
Item 8. Financial Statements and Supplementary Data.
See Item 15. Exhibits, Financial Statement Schedules.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A.
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.
Item 9B. Other Information.
None.
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance.
Not Applicable.
Item 11.
Item 11. Executive Compensation.
Not Applicable.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Not Applicable.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
None.
Item 14.
Item 14. Principal Accounting Fees and Services.
Deloitte & Touche LLP 2007 Audit Expense = $ $25,689.06
PART IV
Item 15.
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 1-D
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 1-D, 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 J.P. 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 1-D
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 1-D Certificates: $74,966,315.56
2. The Principal Balance of the Class 1-D Note after the May 3, 2007 Note Payment Date: $677,080,000.00
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
2 N LaSalle Street, Suite 1020 Chicago, IL 60602
November 15, 2007
To The Holders of Government Trust Certificates Zero Coupon Class 1-D
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 1-D Certificates: $100,809,332.50
2. The Principal Balance of the Class 1-D Note after the November 2, 2007 Note Payment Date: $609,236,000.00
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 1-D Financial Statements as of December 31, 2007 and Report of Independent Registered Public Accounting Firm ----------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Government Trust 1-D
We have audited the accompanying balance sheets of Government Trust 1-D (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 1-D 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 1-D BALANCE SHEET DECEMBER 31, 2007 - --------------------------------------
ASSETS
LOAN NOTE RECEIVABLE - at amortized cost, inclusive of unamortized premium of $1,877,845 $ 611,113,845
ACCRUED INTEREST RECEIVABLE 9,730,092 ------------------------
TOTAL $ 620,843,937 ========================
LIABILITIES AND TRUST BALANCE
ACCRUED EXPENSES PAYABLE $ 7,488
TRUST BALANCE - Comprised of owners' equity in Government Trust Certificates 620,836,449 ------------------------
TOTAL $ 620,843,937 ========================
See notes to financial statements.
GOVERNMENT TRUST 1-D STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 2007 - --------------------------------------
INTEREST INCOME ON THE LOAN NOTE $ 65,468,302
TRUSTEE FEES AND OTHER EXPENSES (51,107) ---------------------- NET INCOME $ 65,417,195 ======================
See notes to financial statements.
GOVERNMENT TRUST 1-D STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2007 - --------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: Principal and interest received on the Loan Notes $ 175,827,931 Trustee fees and other expenses paid (52,283) ---------------------
Net cash flows from operating activities 175,775,648 ---------------------
CASH FLOWS USED IN FINANCING ACTIVITIES: Distributions to certificate owners (175,775,648) --------------------- Net cash flows used in financing activities (175,775,648)
NET INCREASE IN CASH -
CASH BALANCE - Beginning of year - --------------------- CASH BALANCE - End of year $ - =====================
Reconciliation of net income to net cash flows from operating activities: Net income $ 65,417,195 Amortization of premium on Loan Note receivable 935,566 Decrease in Loan Note receivable 107,895,000 Decrease in interest receivable 1,529,064 Decrease in accrued expenses (1,177) --------------------- Net cash flows from operating activities $ 175,775,648 =====================
See notes to financial statements.
GOVERNMENT TRUST 1-D 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
$ 731,194,902 $ 65,417,195 $ (175,775,648) $ 620,836,449 =============== ============== ================== =================
See notes to financial statements.
GOVERNMENT TRUST 1-D NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 - --------------------------------------
1. ORGANIZATION AND OPERATIONS
Government Trust 1-D (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 $1,300,000,000 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 September 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 9.7450% 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 $40,051,000 and $67,844,000, respectively. Scheduled principal payments are due on each Note Payment Date as follows:
Payment Principal Payment Principal Date Payment Date Payment
May 3, 2008 $89,940,000 May 3, 2011 $47,368,000 November 3, 2008 93,710,000 November 3, 2011 29,248,000 May 3, 2009 92,701,000 May 3, 2012 22,773,000 November 3, 2009 93,710,000 November 3, 2012 16,877,000 May 3, 2010 41,800,000 May 3, 2013 16,877,000 November 3, 2010 47,368,000 November 3, 2013 16,864,000
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 $693,194,000. 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 September 29, 1988, the Trust issued 51 separate series of Certificates, Class 1-D. Thirty-nine 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 November 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 $119,602,178 May 15, 2011 $54,671,466 November 15, 2008 118,993,224 November 15, 2011 34,245,236 May 15, 2009 113,421,718 May 15, 2012 26,346,224 November 15, 2009 109,917,338 November 15, 2012 19,341,464 May 15, 2010 53,444,833 May 15, 2013 18,519,765 November 15, 2010 56,977,695 November 15, 2013 17,685,066
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.
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