<PAGE> 1
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, 1996
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 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:
1. Form of Trust Agreement
2. Loan Agreement
3. Loan Guarantee and Servicing Agreement
Exhibit Index located on page 13.
<PAGE> 2
Part I
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
<PAGE> 3
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 28, 1997 there was one 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.
<PAGE> 4
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, 1996 and 1995
Statement of Income and Expenses, for the
Years Ended December 31, 1996, 1995 and 1994
Statement of Cash Flows, for the Years Ended
December 31, 1996, 1995 and 1994
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 17, 1996.
Semi-annual Report to Certificateholders dated December
15, 1996.
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.
<PAGE> 5
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,
1997.
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
<PAGE> 6
RURAL ELECTRIC COOPERATIVE GRANTOR
TRUST (TEX-LA) 1988-T1
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996 AND 1995,
AND FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
TOGETHER WITH AUDITORS' REPORT
<PAGE> 7
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,
1996 and 1995, and the related statements of income and expenses and cash
flows for each of the three years in the period ended December 31, 1996.
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 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, 1996 and 1995,
and the results of its operations and its cash flows for the years ended
December 31, 1996, 1995 and 1994, in conformity with generally accepted
accounting principles.
March 24, 1997
Washington, D. C.
<PAGE> 8
<TABLE>
<CAPTION>
RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (TEX-LA) 1988-T1
STATEMENTS OF ASSETS AND LIABILITIES
AS OF DECEMBER 31, 1996 AND 1995
_____________________________________________________________________
1996 1995
<S> <C> <C>
ASSETS
Interest Receivable $77,897 $86,689
Note Receivable 11,075,000 12,325,000
Total Assets $11,152,897 $12,411,689
LIABILITIES
Interest Payable-
Grantor Trust Certificates $75,587 $84,118
Servicer Fees Payable 2,310 2,571
Rural Electric Cooperative
Grantor Trust Certificates 11,075,000 12,325,000
Total Liabilities $11,152,897 $12,411,689
</TABLE>
The accompanying notes are an integral part
of these financial statements
<PAGE> 9
<TABLE>
<CAPTION>
RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (TEX-LA) 1988-T1
STATEMENTS OF INCOME AND EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
_____________________________________________________________________
1996 1995 1994
<S> <C> <C> <C>
INCOME:
Interest on note receivable $1,147,058 $1,253,440 $1,350,269
EXPENSES:
Interest on
grantor trust certificates 1,113,044 1,216,272 1,310,229
Servicer fees 34,014 37,168 40,040
Total Expenses 1,147,058 1,253,440 1,350,269
Net Income $ - $ - $ -
</TABLE>
The accompanying notes are an integral part
of these financial statements
<PAGE> 10
<TABLE>
<CAPTION>
RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (TEX-LA) 1988-T1
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
_____________________________________________________________________
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Interest received on
note receivable $1,147,058 $1,253,440 $1,350,269
Interest paid to
Certificateholders (1,113,044) (1,216,272) (1,310,229)
Fees paid to Servicer ( 34,014) (37,168) (40,040)
Net cash provided by
operating activities - - -
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from principal
payment on note 1,250,000 1,125,000 1,025,000
Net cash provided from
investing activities 1,250,000 1,125,000 1,025,000
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payment to
Certificateholders (1,250,000) (1,125,000) (1,025,000)
Net cash used in
financing activities (1,250,000) (1,125,000) (1,025,000)
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 8,792 7,912 7,210
Decrease in interest
payable (8,531) (7,678) (6,996)
Decrease in servicer
fees payable (261) (234) (214)
Total change in
accrual accounts - - -
Net cash provided by
operating activities $ - $ - $ -
</TABLE>
The accompanying notes are an integral part
of these financial statements
<PAGE> 11
RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (TEX-LA) 1988-T1
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996, 1995 AND 1994
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, bearing
interest at 9.38% and maturing 2002, 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 investments 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.
<PAGE> 12
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:
1997 $ 1,400,000
1998 1,550,000
1999 1,725,000
2000 1,925,000
2001 2,125,000
Thereafter 2,350,000
Total $ 11,075,000
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 and recognition
of conversion fees over the life of the loan.
4. FAIR VALUE OF FINANCIAL INSTRUMENTS
Use Of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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.
<PAGE> 13
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, 1996 and 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,
1996 and 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.
Rural Electric Cooperative Grantor Trust Certificates
The fair value of the Certificates 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, 1996 and 1995, are as follows:
<TABLE>
<CAPTION>
1996 1995
Carrying Fair Carrying Fair
Value Value Value Value
<S> <C> <C> <C> <C>
Assets:
Interest Receivable 77,897 77,897 86,689 86,689
Note Receivable 11,075,000 12,491,061 12,325,000 14,595,858
Liabilities:
Interest Payable - Grantor
Trust Certificates 72,587 75,587 84,118 84,118
Servicer Fees Payable 2,310 2,310 2,571 2,571
Rural Electric Cooperative
Grantor Trust Certificates 11,075,000 12,502,837 12,325,000 14,574,395
</TABLE>
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]).
<END>
