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, 1999
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 333-25029
_________________
RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (KEPCO) SERIES 1997
(Exact name of registrant as specified in its charter)
NEW YORK
(State or other jurisdiction of incorporation or organization)
Applied For
(36-7233686)
2201 Cooperative Way, Herndon, VA 20171-3025
(Address of principal executive offices)
(Registrant's telephone number, including area code, is 703-709-6700)
___________________
Securities Registered pursuant to Section 12(b) 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) 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
The Registrant has no common or voting stock.
DOCUMENTS INCORPORATED BY REFERENCE:
None.
<PAGE>
Part I
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Part II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
a) There is no established trading market for the certificates
representing ownership of the beneficial interest in the
Trust.
b) As of December 31, 1999 there was one record holder of
certificates representing ownership of the beneficial interest
in the Trust.
Item 8. Financial Statements and Supplementary Data
See attached audited financial statements.
Item 9. Disagreements on Accounting and Financial Disclosure
None.
Part III
Item 13. Certain Relationships and Related Transactions
None.
2
<PAGE>
Part IV
Item 14. Exhibits and Financial Statement Schedules and Reports
On Form 8-K
The following documents are filed as part of this report:
1. Financial Statements
Report of Independent Public Accountants
Statement of Assets and Liabilities as of
December 31, 1999 and 1998
Statement of Income and Expenses for the Year Ended
December 31, 1999, 1998 and 1997
Statement of Cash Flows for the Year Ended
December 31, 1999, 1998 and 1997
Notes to Financial Statements
2. Financial Statement Schedules are omitted because they
are inapplicable.
3. Exhibits
Exhibit
Number Description of Exhibit
4.1 Form of Trust Agreement, including the
form of Rural Electric Cooperative Grantor
Trust Certificate (incorporated by
reference to Exhibit 4.1 to Registration
Statement on Form S-1 [No. 333-25029]).
4.2 First Amendment to Trust Agreement
(incorporated by reference to Exhibit 4.2
to Registration Statement on Form S-1 [No.
333-25029]).
10.1 Loan Agreement dated as of February 15,
1988 between CFC and the Cooperative
(including form of Note and Guarantee)
(incorporated by reference to Exhibit 10.1
to Registration Statement on Form S-1 [No.
33-16789 filed on August 27, 1987]).
10.2 First Amendment to Loan Agreement
(incorporated by reference to Exhibit 10.2
to Registration Statement on Form S-1 [No.
333-25029]).
10.3 Loan Guarantee and Servicing Agreement,
dated as of February 15, 1988, among the
Administrator of the RUS, the Cooperative,
the Servicer, the Lender and the Trustee
(incorporated by reference to Exhibit 10.2
to Registration Statement on Form S-1 [No.
33-16789 filed on August 27, 1987]).
10.4 First Amendment to Loan Guarantee and
Servicing Agreement (incorporated by
reference to Exhibit 10.4 to Registration
Statement on Form S-1 [No. 333-25029]).
10.5 Remarketing Agreement (incorporated by
reference to Exhibit 10.5 to Registration
Statement on Form S-1 [No. 333-25029]).
3
<PAGE>
10.6 Swap Agreement (incorporated by reference
to Exhibit 10.6 to Registration Statement
on Form S-1 [No. 333-25029]).
10.7 Liquidity Protection (incorporated by
reference to Exhibit 10.7 to Registration
Statement on Form S-1 [No. 333-25029]).
10.8 Form of Standby Certificate Purchase
Agreement (incorporated by reference to
Exhibit 10.8 to Registration Statement on
Form S-1 [No. 333-25029]).
27 Financial Data Schedule.
99 Morgan Guaranty Trust Company of New York
(Swap Counterparty) Financial Information.
b) Forms 8-K dated December 20, 1999 and June 20, 1999.
Semi-annual Reports to Certificateholders dated December 20,
1999 and June 20, 1999.
Supplemental information to be furnished with reports filed pursuant to
Section 15(d) of the Act by Registrants which have not registered securities
pursuant to Section 12 of the Act.
No annual report, proxy statement, form of proxy or other proxy
soliciting material has been sent to Certificateholders, and the
Registrant does not presently contemplate sending any such material
subsequent to the filing of this report.
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the
County of Fairfax, Commonwealth of Virginia on the 31st day of March,
2000.
RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (KEPCO) SERIES 1997
By: NATIONAL RURAL UTILITIES COOPERATIVE
FINANCE CORPORATION as Servicer
By:
/s/ Sheldon C. Petersen
Governor and Chief Executive Officer
4
<PAGE>
RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (KEPCO) SERIES 1997
Exhibit Index
Exhibit
Number Description of Exhibit
27 Financial Data Schedule.
99 Morgan Guaranty Trust Company of New York (Swap Counterparty)
Financial Information.
5
<PAGE>
RURAL ELECTRIC COOPERATIVE GRANTOR
TRUST (KEPCO) SERIES 1997
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999, 1998 AND 1997
TOGETHER WITH AUDITORS' REPORT
6
<PAGE>
Report of Independent Public Accountants
To the Trustee of
Rural Electric Cooperative Grantor Trust
(KEPCO) SERIES 1997, and
To the Board of Directors of
National Rural Utilities Cooperative
Finance Corporation
We have audited the accompanying statements of assets and liabilities of
Rural Electric Cooperative Grantor Trust (KEPCO) SERIES 1997 (the "Trust")
as of December 31, 1999 and 1998, and the related statements of income
and expenses and cash flows for each of the three years in the period ended
December 31, 1999. 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 audits.
We conducted our audits in accordance with auditing standards generally
accepted in the 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. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the 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 audits provide 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 Rural Electric
Cooperative Grantor Trust (KEPCO) SERIES 1997 as of December 31, 1999 and
1998, and the results of its operations and its cash flows for each of
the three years in the period ended December 31,1999, in conformity with
accounting principles generally accepted in the United States.
Vienna, VA
March 17, 2000
7
<PAGE>
RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (KEPCO) SERIES 1997
STATEMENTS OF ASSETS AND LIABILITIES
AS OF DECEMBER 31, 1999 AND 1998
1999 1998
ASSETS
Interest receivable - KEPCO $ 303,361 $ 345,096
Interest receivable - Swap provider 309,169 261,092
Notes receivable 55,290,000 56,390,000
Total Assets $55,902,530 $56,996,188
LIABILITIES
Interest payable-Grantor Trust Certificates $ 309,169 $ 261,092
Servicer fees payable 3,714 4,225
Swap provider interest payable 299,647 340,871
Rural Electric Cooperative
GrantorTrust Certificates 55,290,000 56,390,000
Total Liabilities $55,902,530 $56,996,188
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (KEPCO) SERIES 1997
STATEMENTS OF INCOME AND EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 and 1997
1999 1998 1997
INCOME:
Interest on note receivable $4,277,913 $4,364,794 $170,668
Interest on swap agreement 3,008,729 3,264,892 135,026
Total Income 7,286,642 7,629,686 305,694
EXPENSES:
Interest to
certificate holders 3,008,729 3,264,892 135,026
Interest to swap provider 4,225,544 4,311,347 168,593
Servicer fees 52,369 53,447 2,075
Total Expenses 7,286,642 7,629,686 305,694
Net Income $ - $ - $ -
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (KEPCO) SERIES 1997
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1999 1998 1999
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received on note receivable $ 4,307,748 $ 4,190,366 $ -
Interest received on swap agreement 2,960,652 3,138,826 -
Interest paid to certificate holders (2,960,652) (3,138,826) -
Interest paid to swap provider (4,255,014) (4,139,069) -
Fees paid to servicer (52,734) (51,297) -
Net cash provided by operating activities - - -
CASH FLOWS
FROM INVESTING ACTIVITIES:
Principal payment to certificate holders (1,100,000) (1,000,000) -
Principal payment on note receivable 1,100,000 1,000,000 -
Net cash provided by investing activities - - -
NET CHANGE IN CASH - - -
CASH, beginning of year - - -
CASH, end of year $ - $ - $ -
ACCRUAL TO CASH BASIS RECONCILIATION:
Accrual basis income $ - $ - $ -
Change in accrual accounts:
Increase in interest receivable (6,342) (300,494) (305,694)
Increase in interest payable 48,077 126,066 135,026
(Decrease)/increase in swap
provider interest payable (41,224) 172,278 168,593
(Decrease)/Increase in
servicer fees payable (511) 2,150 2,075
Total change in accrual accounts - - -
Net cash provided by operating activities $ - $ - $ -
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest expense $4,255,014 $4,139,069 $ -
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (KEPCO) SERIES 1997
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
1. ORGANIZATION AND OPERATIONS
Rural Electric Cooperative Grantor Trust (KEPCO) SERIES 1997 (the
"Trust") was formed under a Trust Agreement dated December 20, 1996
among National Rural Utilities Cooperative Finance Corporation
("CFC"), Kansas Electric Power Cooperative, Inc. (the "Cooperative")
and The First National Bank of Chicago (the "Trustee"). The assets
of the Trust consist of lender loan notes (the "1997 Note") bearing
interest at 7.597% and maturing in 2017. In addition, the Trust also
holds certain rights under an interest rate swap agreement (the
"Swap Agreement").
Rural Electric Cooperative Grantor Trust (KEPCO) Trusts K-1 and K-2
were created on February 15, 1988 resulting from a refinancing of
loans from the Federal Financing Bank ("FFB") which were guaranteed
by the Rural Electrification Administration, as predecessor in
intent To the Rural Utilities Service ("RUS"). The FFB loans were
refinanced through CFC and in exchange the Cooperative executed
lender loan notes (the "Notes") to CFC. CFC then deposited the
Notes into separate Trusts. In turn, the Trusts issued to CFC, as
depositor of the Trusts, two certificates: Rural Electric Cooperative
Grantor Trust (KEPCO) 9.23% Certificates, due 2002 and Rural Electric
Cooperative Grantor Trust (KEPCO) 9.73% Certificates, due 2017 (the
"Certificates") in the amounts of $11,075,000 and $51,340,000,
respectively. The Certificates were not subject to full redemption
prior to December 15, 1997. On December 18, 1997, the Notes were
refinanced, the outstanding Certificates were redeemed, and Trusts
K-1 and K-2 were terminated. The Notes in the outstanding principal
amount of $57,390,000 were then deposited into the Trust. The Trust
issued Certificates of beneficial interest (the "Series 1997
Certificates") which bear interest at a variable rate, mature in
2017 and are guaranteed by RUS.
In order to mitigate the interest rate risk inherent in the Trust,
which held a fixed rate asset (the 1997 Note) and a variable rate
obligation, the Cooperative assigned to the Trust certain rights
under an interest rate swap agreement (the "Swap Agreement"). The
counterparty to the Swap Agreement is Morgan Guaranty Trust Company
of New York ("Morgan"). Pursuant to the Swap Agreement, the Trust
pays to Morgan a fixed rate of interest on the outstanding notional
amount, and Morgan pays the Trust a variable rate of interest on the
outstanding notional amount. The structure is designed such that
the interest amounts paid by the Cooperative to the Trust are the
same amounts paid to Morgan, pursuant to the Swap Agreement, plus
the amounts payable to CFC, as servicer. The amounts Morgan pays to
the Trust under the Swap Agreement are the same amounts as the
interest payable by the Trust to the Certificate holders.
The notional amount of the Swap Agreement (which is not included on
the Trust's Statements of Assets and Liabilities) was established at
$57,390,000 and declines in amount over time such that the
outstanding notional amount is always equal to the outstanding
balance of the 1997 Notes and the 1997 Certificates. The Swap
Agreement terminates in 2017, but is subject to early termination
upon the early redemption of the Certificates.
Derivative Financial Instruments
The KEPCO Trust is neither a dealer nor a trader in derivative
financial instruments. The Trust uses interest rate and currency
exchange agreements to manage its interest rate risk. The Trust
accounts for these agreements on an accrual basis. The Trust does
not value the interest rate exchange agreements on its balance
sheet, but values the underlying hedged debt at cost. The Trust
does not recognize a gain or loss on these agreements, but includes
the difference between the interest rate paid and interest rate
received in the
11
<PAGE>
overall cost of funding. No agreement to which the Trust was a
party has been terminated early. In the event that an agreement
were terminated early, the Trust would record the fee paid or
received due to the early termination as part of the overall
cost of funding.
In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The
statement establishes accounting and reporting standards for
derivative instruments and for hedging activities. It requires that
all derivatives be recognized as an asset or liability in the
statement of financial position and recorded at fair value. The
statement was originally effective for all fiscal years beginning
after June 15, 1999. The FASB has amended the statement to be
effective for all fiscal years beginning after June 15, 2000. The
Trust will be required to implement this statement as of June 1,
2001. The Trust has not yet determined the impact of implementing
this statement on its overall financial position.
Grantor Trust Certificates
Principal payments on the Certificates began in 1998 and will extend
over a period of twenty years. The principal payments over the next
5 years and thereafter are as follows:
2000 $ 1,200,000
2001 1,400,000
2002 1,350,000
2003 1,700,000
2004 1,900,000
Thereafter 47,740,000
Total $55,290,000
The Certificates are subject to redemption at any time at the
remaining principal amount plus accrued interest. The principal
payments received on the note receivable from the Cooperative
coincide with the payments due to the certificate holders.
Each Certificate represents an undivided fractional interest in the
Trust. CFC is the depositor of the Trust and acts as servicer of
the Note.
Because of the structure of the refinancing, the credit behind the
Series 1997 Certificates will be bifurcated. First, Series 1997
certificate holders will look to the guarantee provided by the
United States of America for payment of principal, which will
continue to be distributed to Series 1997 certificate holders each
December 15. Second, Series 1997 certificate holders will look to
the credit of Morgan with regard to the variable rate payments of
interest to be made monthly on the Series 1997 Certificates. If
Morgan fails to make any variable rate payments when due and the
Swap Agreement terminates without replacement of an alternate swap
agreement, amounts received by the Trustee representing fixed
interest rate payments under the note receivable, will become
payable to the Series 1997 certificate holders. CFC's servicer fee
will continue to be paid by the cooperative.
2. TAX STATUS OF THE TRUST
Vinson & Elkins, Counsel to the Cooperative, has advised CFC with
respect to the Trust that, in its opinion, (i) the Trust will not be
classified as an association taxable as a corporation, but will be
classified as a grantor trust and (ii) each certificate holder will
be treated for Federal income tax purposes as the owner of an
undivided fractional interest in each of the assets held by the
Trust.
12
<PAGE>
It is expected that the Trust will not have any liability for
Federal or state income taxes for the current or future years.
3. INTEREST AND SERVICER FEE ACCOUNTING
The Trust records interest income as it is earned and accrues
interest expense and servicer fees as they are incurred. Servicer
fees represent 9.3 basis points of the outstanding principal balance
of the Certificates and the Note and recognition of conversion fees
occurs over the life of the loan.
4. FAIR VALUE OF FINANCIAL INSTRUMENTS
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of expenses during
the reported period. The estimates involve judgments with respect
to, among other things, various future factors which are difficult to
predict and are beyond the control of the Trust. With regards to the
fair values below, actual amounts could differ from these estimates.
The following disclosure of the estimated fair value of financial
instruments is made in accordance with Statement of Financial
Accounting Standards No. 107, "Disclosure about Fair Value of
Financial Instruments." Whenever possible, the estimated fair
value amounts have been determined using quoted market
information as of December 31, 1999 and 1998 along with other
valuation methodologies which are summarized below. Below is
a summary of significant methodologies used in estimating fair
value amounts and a schedule of fair values at December 31, 1999
and 1998.
The carrying amounts reported for interest receivable, interest
payable, and servicer fees payable approximate fair values due to
the short-term maturity of these instruments.
Note Receivable
Fair value is estimated by discounting the future cash flows using
the current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities.
Rural Electric Cooperative Grantor Trust Certificates
The trust certificates pay a variable rate of interest that is reset
weekly, and as such are considered to be carried at fair value.
Swap Agreement
The fair market value is estimated as the amount the Trust would pay
to terminate the agreement, taking into account the current market
rate of interest.
The carrying and estimated fair values of the Trust's financial
instruments as of December 31, 1999 and 1998 are as follows:
13
<PAGE>
<TABLE>
<CAPTION>
1999 1998
Carrying Fair Carrying Fair
Value Value Value Value
<S> <C> <C> <C> <C>
Assets:
Interest receivable $ 612,530 $ 612,530 $ 606,188 $ 606,188
Note receivable 55,290,000 56,120,421 56,390,000 $64,323,332
Liabilities:
Interest payable - Grantor
Trust Certificates 309,169 309,169 261,092 $ 261,092
Servicer fees payable 3,714 3,714 4,225 4,225
Swap provider interest payable 299,647 299,647 340,871 340,871
Rural Electric Cooperative
Grantor Trust Certificates 55,290,000 55,290,000 56,390,000 $56,390,000
Off-Balance Sheet Instruments:
Swap Agreements - $ (621,081) - $(7,932,544)
</TABLE>
14
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
December 31, 1999, Form 10-K and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 55,902,530
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,812,530
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 55,902,530
<CURRENT-LIABILITIES> 1,812,530
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 54,090,000
<TOTAL-LIABILITY-AND-EQUITY> 55,902,530
<SALES> 0
<TOTAL-REVENUES> 7,286,642
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 52,369
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,234,273
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
Exhibit 99.
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
Morgan Guaranty Trust Company of New York (herein, "Morgan
Guaranty") is a wholly owned subsidiary and the principal asset of J.P.
Morgan & Co. Incorporated ("J.P. Morgan"), a Delaware corporation whose
principal office is located in New York, New York. Morgan Guaranty is a
commercial bank offering a wide range of banking services to its customers
both domestically and internationally. Its business is subject to
examination and regulation by Federal and New York State banking
authorities. Morgan Guaranty currently has a long-term credit rating of
"AA" from S&P and "Aa3" from Moody's.
The following table (on the next page) sets forth certain summarized
financial information of Morgan Guaranty as of the dates and for the periods
indicated. The information presented is in accordance with generally
accepted accounting principles, except for the Income statement data for the
twelve months ended December 31, 1999, 1998, 1997, 1996 and 1995. Such data
was prepared on a regulatory basis and substantially complies with generally
accepted accounting principles.
<PAGE>
<TABLE>
<CAPTION>
December 31,
(Dollars in millions) 1999 1998 1997 1996 1995
Balance Sheet Data(1)
<S> <S> <S> <S> <S> <S>
Trading Account Assets $ 84,786 $ 90,770 $ 89,345 $ 72,899 $ 55,373
Total Loans $ 26,352 $ 25,346 $ 31,396 $ 27,943 $ 23,319
Total Assets $ 167,666 $ 175,246 $ 196,418 $ 164,813 $ 135,713
Total Deposits $ 47,716 $ 56,221 $ 60,743 $ 53,074 $ 47,074
Total Liabilities $ 157,071 $ 164,768 $ 185,985 $ 154,922 $ 126,728
Allowance for Credit Losses $ 405 $ 595 $ 730 $ 1,115 $ 1,129
Stockholder's Equity $ 10,595 $ 10,478 $ 10,433 $ 9,891 $ 8,985
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in millions) 1999 1998 1997 1996 1995
Income Statement Data(1)
<S> <S> <S> <S> <S> <S>
Net Interest Revenue $ - $ - $ 1,550 $ 1,807 $ 2,139
Provision for Credit Losses $ (175) $ 100 $ (8) $ (1) $ (10)
Net Interest Revenue After
Provision for Credit Losses $ 1,817 $ 1,279 $ 1,558 $ 1,808 $ 2,149
Non-Interest Revenue $ 4,673 $ 3,552 $ 3,721 $ 3,110 $ 2,312
Operating Expenses $ 3,952 $ 4,154 $ 3,728 $ 3,121 $ 2,886
Income before Income Taxes,
Extraordinary Items, and
Cumulative Effect of Change
in Accounting Method $ 2,538 $ 677 $ 1,551 $ 1,797 $ 1,575
Income Taxes $ 950 $ 296 $ 554 $ 599 $ 569
Income before Extraordinary
Items and Cumulative Effect of
Change in Accounting Method $ 1,588 $ 381 $ 997 $ 1,198 $ 1,006
Extraordinary Items and
Cumulative Effect of Change
in Accounting Method $ - $ - $ - $ - $ -
Net Income $ 1,588 $ 381 $ 997 $ 1,198 $ 1,006
</TABLE>
______________________
1 Prior period balances were restated to reflect the merger of J.P. Morgan
Delaware with Morgan Guaranty Trust Company of New York effective June
1996.
2 Prepared on a regulatory basis.
<PAGE>
The consolidated statement of condition of Morgan Guaranty as of
December 31, 1999, is set forth on page 63 of Exhibit 13 to Form 10-K dated
March 8, 2000, as filed by J.P. Morgan with the Securities and Exchange
Commission. Morgan Guaranty will provide without charge to each person to
whom this 10-K is delivered, on the request of any such person, a copy of
the Form 10-K referred to above and a copy of the most recent quarterly
Consolidated Reports of Condition and Income of Morgan Guaranty filed with
the Board of Governors of the Federal Reserve System, with exhibits
omitted. Written requests should be directed to: Morgan Guaranty Trust
Company of New York, 60 Wall Street, New York, New York 10260-0060,
Attention: Office of the Secretary. Telephone requests may be directed to
(212) 648-3380.
The information set forth above relates to and has been obtained
from Morgan Guaranty Trust Company of New York. The delivery of this 10-K
shall not create any implication that there has been no change in the
affairs of Morgan Guaranty Trust Company of New York since the date hereof,
of that the information contained herein or referred to above is correct as
of any time subsequent to its date.
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
County of Fairfax, Commonwealth of Virginia on the 28th day of March, 2000.
RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (KEPCO) 1997
By: NATIONAL RURAL UTILITIES COOPERATIVE
FINANCE CORPORATION as Servicer
By: /s/ Sheldon C. Petersen
Governor and Chief Executive Officer
