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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
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 33-20166
_________________
RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (TEX-LA) 1988-T1
(Exact name of registrant as specified in its charter)
NEW YORK
(State or other jurisdiction of incorporation or organization)
36-6878773
(I.R.S. Employer Identification Number)
2201 Cooperative Way, Herndon, VA 22071-3025
(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:
1. Form of Trust Agreement
2. Loan Agreement
3. Loan Guarantee and Servicing Agreement
Exhibit Index located on page 13.
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Part I
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
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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 March 29, 1996 there were two holders 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.
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Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K
a) 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, 1995 and 1994
Statement of Income and Expenses, for the Years Ended
December 31, 1995, 1994 and 1993
Statement of Cash Flows, for the Years Ended
December 31, 1995, 1994 and 1993
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. 33-
20166]).
10.1 Loan Agreement (incorporated by reference to
Exhibit 10.1 to Registration Statement on Form S-1
[No. 33-20166]).
10.2 Loan Guarantee and Servicing Agreement
(incorporated by reference to Exhibit 10.2 to
Registration Statement on Form S-1 [No. 33-20166]).
b) Form 8-K dated December 20, 1995.
Semi-annual Report to Certificateholders dated December 15, 1995.
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.
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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 29th day of March, 1996.
RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (TEX-LA) 1988 T-1
By: NATIONAL RURAL UTILITIES COOPERATIVE
FINANCE CORPORATION as Servicer
By: /s/ Sheldon C. Petersen
Sheldon C. Petersen, Governor and
Chief Executive Officer
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RURAL ELECTRIC COOPERATIVE GRANTOR
TRUST (TEX-LA) 1988-T1
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1995, 1994 AND 1993
TOGETHER WITH AUDITORS' REPORT
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Report of Independent Public Accountants
To the Trustee of
Rural Electric Cooperative Grantor Trust
(Tex-La) 1988-T1, 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 (Tex-La) 1988-T1 as of December 31, 1995 and
1994, and the related statements of income and expenses and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Trust's management. Our responsi-
bility is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an 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 (Tex-La) 1988-T1 as of December 31, 1995 and 1994, and its
operations and its cash flows for the years ended December 31, 1995, 1994 and
1993, in conformity with generally accepted accounting principles.
March 11, 1996 /s/ Arthur Andersen LLP
Washington, D. C.
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RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (TEX-LA) 1988-T1
STATEMENTS OF ASSETS AND LIABILITIES
AS OF DECEMBER 31, 1995 AND 1994
1995 1994
A S S E T S
Interest Receivable $ 86,689 $94,601
Note Receivable 12,325,000 13,450,000
Total Assets $12,411,689 $13,544,601
L I A B I L I T I E S
Interest Payable - Grantor Trust $ 84,118 $ 91,796
Certificates
Servicer Fees Payable 2,571 2,805
Rural Electric Cooperative
Grantor Trust Certificates 12,325,000 13,450,000
Total Liabilities $12,411,689 $13,544,601
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<TABLE>
<CAPTION>
RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (TEX-LA) 1988-T1
STATEMENTS OF INCOME AND EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993
<S> <C> <C> <C>
INCOME:
Interest on note receivable $1,253,440 $1,350,269 $1,437,720
EXPENSES:
Interest on grantor trust certificates 1,216,272 1,310,229 1,395,087
Servicer fees 37,168 40,040 42,633
Total expenses 1,253,440 1,350,269 1,437,720
Net Income $ - $ - $ -
</TABLE>
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<TABLE>
<CAPTION>
RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (TEX-LA) 1988 - T1
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received on note receivable $1,253,440 $1,357,479 $1,444,226
Interest paid to Certificateholders (1,216,272) (1,317,225) (1,401,400)
Fees paid to Servicer (37,168) (40,254) (42,826)
Net cash provided by operating activities - - -
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from principal payment on note 1,125,000 1,025,000 925,000
Net cash provided by investing activities 1,125,000 1,025,000 925,000
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payment to Certificateholders (1,125,000) (1,025,000) (925,000)
Net cash used in financing activities (1,125,000) (1,025,000) (925,000)
NET CHANGE IN CASH - - -
CASH, beginning of year - - -
CASH, end of year $ - $ - $ -
ACCRUAL TO CASH BASIS RECONCILIATION:
Accrual basis income $ - $ - $ -
Change in accrual accounts:
Decrease in interest receivable 7,912 7,210 6,506
Decrease in interest payable (7,678) (6,996) (6,313)
Decrease in servicer fees payable (234) (214) (193)
Total change in accrual accounts - - -
Net cash provided by operating activities $ - $ - $ -
</TABLE>
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RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (TEX-LA) 1988-T1
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
1. ORGANIZATION AND OPERATIONS
Rural Electric Cooperative Grantor Trust (Tex-La) 1988-T1 (the "Trust") was
formed under a Trust Agreement dated February 15, 1988 among National Rural
Utilities Cooperative Finance Corporation ("CFC"), Tex-La Electric Cooperative
of Texas, Inc. (the "Cooperative") and The First National Bank of Chicago (the
Trustee"). On that date, CFC made a loan to the Cooperative which issued a
note (the "Note"), evidencing the borrowing, to the Trust. The Trust issued
to CFC Rural Electric Cooperative Grantor Trust (Tex-La) 9.10% Certificates
Due 2002 (the "Certificates") in the amount of $17,120,000. The Certificates
are solely the obligations of the Trust and are not insured or guaranteed by
CFC, the Cooperative, the Trustee, the Rural Utilities Service ("RUS") of the
United States Department of Agriculture ("USDA") nor any other governmental
agency. Each Certificate represents an undivided fractional interest in the
Trust. CFC is the depositor of the Trust and acts as Servicer of the Note.
CFC filed, on behalf of the Trust, a Registration Statement on Form S-1
(Registration No. 33-20166) which become effective on March 9, 1988, and CFC
resold the Certificates thereunder.
The assets of the Trust consist primarily of the Note which is guaranteed
(the "Guarantee") as to timely payment of principal and interest by the United
States of America, acting through the Administrator of RUS. The amounts of
principal and interest payments on the Note held by the Trust are sufficient
to cover the scheduled principal and interest payments on the Certificates
issued by the Trust and the scheduled amounts of servicer fees. The General
Counsel of the USDA has issued an opinion that the Guarantee is supported by
the full faith and credit of the United States of America.
Debt service and servicer fee payments on the Note are made to the Trustee
semi-annually (June 4 and December 4) by the Cooperative. The Trustee deposits
all such receipts in the Trust account. The Trustee is authorized by the Trust
Agreement to invest all funds in the Trust account at the direction of CFC in
certain eligible investments that mature no later than the business day next
preceding the day (June 15 and December 15) such amounts are to be distributed
to the Certificateholders and the Servicer. The interest earned on the
investments is distributed to the Cooperative. Any funds that are not so
invested must be held by the Trustee in the Trust account. The Trustee may not
reinvest any returns of principal or investment earnings on eligible invest-
ments and the Trustee may not sell any eligible investment prior to its
maturity except, at the direction of CFC, to preserve the value of the corpus
of the Trust.
On or before five business days after each date on which payments are made on
the Certificates, the Trustee is obligated to supply the holders of such
Certificate a report provided by the Servicer, which includes certain pertinent
information as to how the payment is to be allocated to principal, interest,
servicer fees and premium, if any, as well as the principal balance outstanding
after such payment.
The fiscal year of the Trust is the calendar year. Within the prescribed
period of time for tax reporting purposes, after the end of each calendar
year during the term of the Trust Agreement, the Trustee is obligated to
prepare and mail to each Certificateholder of record for the Trust, at any
time during each year, a report setting forth the information as is reasonably
necessary for the preparation of such Certificateholder's Federal income tax
return.
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Payments of principal on the Certificates are scheduled to be repaid over a
period of thirteen years which began in 1990. The principal payments over
the next 5 years and thereafter are as follows:
1996 $ 1,250,000
1997 1,400,000
1998 1,550,000
1999 1,725,000
2000 1,925,000
Thereafter 4,475,000
Total $ 12,325,000
The Certificates are not subject to full redemption prior to December 15,
1997. Thereafter, such Certificates are subject to optional redemption,
for the entire remaining balance and without premium, upon redemption or
purchase of the related Note. The Trust Agreement will terminate after
payment in full has been made on the Certificates issued thereunder.
2. TAX STATUS OF THE TRUST
Milbank, Tweed, Hadley & McCloy, counsel to CFC, 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 Certificateholder 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.
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 ten basis
points of the outstanding principal balance of the Certificates and the Note.
4. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial instruments
is made in accordance with FASB Statement 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, 1995, 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, 1995.
The carrying amounts reported for Interest Receivable, Interest Payable -
Grantor Trust Certificates, 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.
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Rural Electric Cooperative Grantor Trust Certificates
The fair value of the Certificate is estimated using quoted market prices for
similar notes over the same remaining maturities.
The carrying and estimated fair values of the Trust's financial instruments
as of December 31, 1995, are as follows:
1995
Carrying Fair
Value Value
Assets:
Interest Receivable 86,689 86,689
Note Receivable 12,325,000 15,248,661
Liabilities:
Interest Payable - Grantor Trust
Certificates 84,118 84,118
Servicer Fees Payable 2,571 2,571
Rural Electric Cooperative
Grantor Trust Certificates 12,325,000 15,257,064
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RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (TEX-LA) 1988 T-1
Exhibit Index
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. 33-20166]).
10.1 Loan Agreement (incorporated by reference to Exhibit 10.1 to
Registration Statement on Form S-1 [No. 33-20166]).
10.2 Loan Guarantee and Servicing Agreement (incorporated by reference to
Exhibit 10.2 to Registration Statement on Form S-1 [No. 33-20166]).
