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.
(Removed and Reserved).
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, 2010, Trust 1-D: 885
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 of the end of the period covered by this report, an evaluation was carried out by Lawrence M. Kusch, Vice President of the Trustee, of the effectiveness of the Trust’s disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based on that evaluation, Mr. Kusch concluded that the Trust’s disclosure controls and procedures were effective because such controls and procedures did ensure that a report by management on the Trust’s internal control over financial reporting as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) was included in the Trust’s Form 10-K for the year 2010. Such report appears below.
Management of the Trustee is responsible for establishing and maintaining adequate internal control over financial reporting for the Trust, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Management of the Trustee has assessed the effectiveness of the Trust’s internal control over financial reporting as of December 31, 2010. In making this assessment, management used the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon such assessment, management of the Trustee believes that, as of December 31, 2010, the Trust’s internal control over financial reporting is effective based upon those criteria. This annual report does not include an attestation report of the Trust’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Trust’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Trust to provide only management’s report in this annual report.
There have not been any changes in the Trust’s internal controls and procedures for financial reporting as defined in Exchange Act Rule 13a-15(f) and 15d-15(f) during the fourth quarter of 2010 that have materially affected, or are reasonably likely to materially affect, the Trust’s internal control over financial reporting.
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 2010 Audit Expense = $30,596.08
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
32.1
Certification by Trustee pursuant to Section 906 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 1-D
By:
The Bank of New York Mellon 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 Government Trust 1-D
By:
/s/ Lawrence M. Kusch
----------------------------------------------------
Name:
Lawrence M. Kusch
Title:
Vice President
Date:
March 30, 2011
REPORTS TO HOLDERS OF GOVERNMENT TRUST
MAY 19, 2010
THE BANK OF NEW YORK MELLON
The Bank of New York Mellon Trust Company, N.A.
2 N. LaSalle Street
Chicago, IL 60602
May 19, 2010
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 Mellon 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 17, 2010 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: $53,444,832.81
2. The Principal Balance of the Class 1-D Note after the May 3, 2010
Note Payment Date: $197,375.000.00
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 Bondholder Relations customer service group directly at their new number (800) 254-2826 for further assistance.
/s/ Lawrence M. Kusch
------------------------------
Lawrence M. Kusch
VP, Relationship Manager
For The Bank of New York Mellon 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 17, 2010
THE BANK OF NEW YORK MELLON
The Bank of New York Mellon Trust Company, N.A.
2 N. LaSalle Street
Chicago, IL 60602
November 17, 2010
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 Mellon 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, 2010 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: $56,977,695.31
2. The Principal Balance of the Class 1-D Note after the November 3, 2010
Note Payment Date: $150,007,000.00
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 Bondholder Relations customer service group directly at their new number (800) 254-2826 for further assistance.
/s/ Lawrence M. Kusch
------------------------------
Lawrence M. Kusch
VP, Relationship Manager
For The Bank of New York Mellon 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 and for the Year Ended
December 31, 2010 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 sheet of Government Trust 1-D (the “Trust”) as of December 31, 2010, 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, 2010 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, 2010, 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, Illinois
March 30, 2011
GOVERNMENT TRUST 1-D
BALANCE SHEET
AS OF DECEMBER 31, 2010
ASSETS
LOAN NOTE RECEIVABLE - At amortized cost, inclusive
of unamortized premium of $294,517
$ 150,301,517
ACCRUED INTEREST RECEIVABLE
2,355,152
TOTAL
$ 152,656,669
LIABILITIES AND TRUST BALANCE
ACCRUED EXPENSE PAYABLE
$ 1,813
TRUST BALANCE - Comprised of owners’ equity
in Government Trust Certificates
152,654,856
TOTAL
$ 152,656,669
See notes to financial statements.
GOVERNMENT TRUST 1-D
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2010
INTEREST INCOME ON THE LOAN NOTE
$ 19,566,394
TRUSTEE FEES AND OTHER EXPENSES
(15,287
)
NET INCOME
$ 19,551,107
See notes to financial statements.
GOVERNMENT TRUST 1-D
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Principal and interest received on the loan note
$ 110,438,899
Trustee fees and other expenses paid
(16,361
)
Net cash provided by operating activities
110,422,538
CASH FLOWS USED IN FINANCING
ACTIVITIES - Distributions to certificate owners
(110,422,538
)
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
$ 19,551,107
Amortization of premium on loan note receivable
304,543
Decrease in loan note receivable
89,168,000
Decrease in accrued interest receivable
1,399,962
Decrease in accrued expenses
(1,074
)
NET CASH PROVIDED BY OPERATING ACTIVITIES
$ 110,422,538
See notes to financial statements.
GOVERNMENT TRUST 1-D
NOTES TO FINANCIAL STATEMENTS
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2010
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 Mellon Trust Company, N.A. (formerly, 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 RECEIVABLE
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, 2010 and November 3, 2010 Note Payment Dates, Israel made its scheduled payments of principal on the Loan Note in the amounts of $41,800,000 and $47,368,000, respectively. Scheduled principal payments are due on each Note Payment Date as follows:
Payment
Principal
Payment
Principal
Date
Payment
Date
Payment
May 3, 2011
$ 47,368,000
November 3, 2012
$ 16,877,000
November 3, 2011
29,248,000
May 3, 2013
16,877,000
May 3, 2012
22,773,000
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 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, 2010 was approximately $167,600,000. 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. Forty-five of such series of Certificates matured prior to December 31, 2010. Each of the remaining series of Certificates will mature on one of the semi-annual certificate payment dates from May 15, 2011 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, 2011
$ 54,671,466
November 15, 2012
$ 19,341,464
November 15, 2011
34,245,236
May 15, 2013
18,519,765
May 15, 2012
26,346,224
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 semi-annual 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 Mellon, 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 semi-annual 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 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 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 Certificate holder 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.
The Trust has adopted Financial Accounting Standards Board Codification ASC 740, Accounting for Income Taxes. Uncertain tax positions are evaluated in accordance with FASB ASC 450, Contingencies, which requires the Trust to record a liability for an estimated contingent loss if the information available indicates that it is probable that there is a tax liability incurred at the date of the financial statements, and the amount of the tax liability can be reasonably estimated. As of December 31, 2010, the Trust has evaluated the application of these provisions to the Trust, and has determined that no tax provision or liability for income tax is required in the accompanying financial statements for uncertain tax positions.
7.
SUBSEQUENT EVENTS
There have been no subsequent events that require recognition or disclosure in the financial statements.