UNITED STATES
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 [FEE REQUIRED]
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 [NO FEE REQUIRED]
For the transition period from -------------- to ------------------
Commission file number 333-2440
USA Group Secondary Market Services, Inc.
(Exact name of registrant as specified in its charter)
Delaware 35-1872185
State or other jurisdiction of (I.R.S. Employer
Incorporation or orgainization Identification No.)
8350 Craig Street, Indianapolis, Indiana 46250
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (317) 578-6702
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Asset-Backed Securities, SMS Student Loan Trust 1996-A, Class A-1 Senior Notes,
Class A-2 Senior Notes and Subordinate Notes
(Title of class)
<PAGE>
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. [ X ] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulations S-K (ss. 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ X ]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing.
(See definition of affiliate in Rule 405, 17 CFR 230.405.)
Note: If a determination as to whether a particular person is an affiliate
cannot be made without involving unreasonable effort and expense, the aggregate
market value of the common stock held by non-affiliates may be calculated on the
basis of assumptions reasonable under the circumstances, provided that the
assumptions are set forth in this Form: NOT APPLICABLE.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [ ] Yes [ ] No
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. NOT APPLICABLE
DOCUMENTS INCORPORATED BY REFERENCE
List here under the following documents if incorporated by reference and
the Part of the For 10-K (e.g., Part I, Part II, etc.) Into which the document
is incorporated: (1) Any annual report to security holders; (2) any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 24, 1980). NOT APPLICABLE
<PAGE>
PART I
Item 1. Not Applicable
Item 2. Properties - The Officers' Certificates of Compliance for the Servicer
and Administrator with respect to the assets of the Trust and the reports of the
Independent auditors with respect to compliance with the Administration and
Servicing agreement are included herein as Exhibits under Item 14 hereof.
Item 3. Legal Proceedings - None.
Item 4. Submission of Matters to a Vote of Security Holders - None.
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. -
There is no established public trading market.
Item 6. Not Applicable
Item 7. Not Applicable
Item 8. Not Applicable
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure. - None
Part III
Item 10. Not Applicable
Item 11. Not Applicable
Item 12. Security Ownership of Certain Beneficial Owners and Management -
Not Applicable
<PAGE>
Item 13. Certain Relationships and Related Transactions - None.
Item 14. Exhibits
(a) (3) Listing of Exhibits
Exhibit Number Description
99.01 Officers' Certificate of the
Administrator regarding compliance
with the Administration Agreement
for the SMS Student Loan Trust
1996-A.
99.02 Officers' Certificate of the Servicer regarding compliance
with the Servicing Agreement for the SMS Student Loan
Trust 1996-A.
99.03 Report of Independent auditors as to Administrator's
Compliance with Administration Agreement.
99.04 Report of Independent auditors as to Servicer's
Compliance with Servicing Agreement.
(b) Reports on Form 8-K - The Trustee filed (1) Form 8-K dated
as of January 27, 1997, providing a copy of the Quarterly
Report of Distribution for the period from October 1, 1996
to December 31, 1996, which distribution was made on
January 27, 1997, for SMS Student Loan Trust 1996-A and
(2) Form 8-K dated as of October 28, 1997, providing a
copy of the Quarterly Report of Distribution for the
period from July 1, 1996 to September 30, 1996,
which distribution was made on October 28, 1996, for
SMS Student Loan Trust 1996-A.
<PAGE>
SIGNATURES
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.
USA GROUP SECONDARY MARKET SERVICES, INC.
(Registrant)
By: The First National Bank of Chicago
not in its individual capacity but solely
as Eligible Lender Trustee of SMS
Student Loan Trust 1996-A
By: __/s/ Jeffrey L. Kinney______________
Jeffrey L. Kinney
Assistant Vice President
Date: __March 28, 1997______________________
SMS STUDENT LOAN TRUST 1996-A
OFFICERS' CERTIFICATE
In accordance with Section 3(a) of the Administration Agreement, dated
as of April 1, 1996, among SMS Student Loan Trust 1996-A, a Delaware trust (the
"Issuer"), USA Group Secondary Market Services, Inc., a Delaware corporation, as
administrator (the "Administrator"), and Bankers Trust Company, a New York
banking corporation, not in its individual capacity but solely as Indenture
Trustee (the "Indenture Trustee"), the undersigned, in their official capacities
as Authorized Officers, on behalf of the Administrator, hereby certify that a
review of the activities of the Administrator during the period from the closing
date to December 31, 1996 and of its performance under the Administration
Agreement has been made under our supervision, and to the best of our knowledge,
based on such review, the Administrator has fulfilled all its obligations under
the Administration Agreement throughout such period.
Terms used herein and not specifically herein defined shall have the
meaning ascribed to them in the Administration Agreement.
In witness whereof, the undersigned, on behalf of the Administrator,
have signed their names as of March 17, 1997.
USA GROUP SECONDARY MARKET SERVICES, INC.,
Administrator
By: /s/ Stephen W. Clinton
Stephen W. Clinton, President
By: /s/ Cheryl E. Watson
Cheryl E. Watson, Senior Vice President
SMS STUDENT LOAN TRUST 1996-A
OFFICERS' CERTIFICATE
To: i) First National Bank of Chicago, not in its individual capacity but
solely as Eligible Lender Trustee, and
ii) Bankers Trust Company, New York, N.Y., Indenture Trustee
In accordance with Section 3.08 of the Servicing Agreement among SMS
Student Loan Trust 1996-A, as Issuer, USA Group Loan Services, Inc., as Servicer
("Servicer"), USA Group Secondary Market Services, Inc., as Seller, and The
First National Bank of Chicago, not in its individual capacity but solely as
Eligible Lender Trustee, dated as of April 1, 1996 ("Servicing Agreement"), the
undersigned, in their official capacities as Authorized Officers of Servicer,
hereby certify as follows:
a) a review of the activities of Servicer during the period from the
Closing Date to December 31, 1996 and of its performance has been
made under such officers' supervision, and
b) to the best of such officers' knowledge, based on such review,
Servicer has fulfilled all its obligations under the Servicing
Agreement in all material respects throughout such period.
Unless otherwise indicated, capitalized terms have the meanings ascribed to them
in the Servicing Agreement.
In witness whereof, USA Group Loan Services, Inc., has caused this Annual
Statement as to Compliance to be duly executed as of March 17, 1997.
USA GROUP LOAN SERVICES, INC.
by____/s/ Laura S. Blackburn ______________
Laura S. Blackburn, Vice President
by___/s/ Daniel L. Yost __________________
Daniel L. Yost, Senior Vice President
ERNST & YOUNG LLP (letterhead)
Independent Auditor's Report on Compliance
SMS Student Loan Trust 1996-A
USA Group Secondary Market Services, Inc.
8350 Craig Street
Indianapolis, Indiana 46250
and
Bankers Trust Company
Four Albany Street
New York, New York 10006
and
The First National Bank of Chicago
One First National Plaza, Ste. 0126
Chicago, Illinois 60670
We are independent public accountants with respect to USA Group Secondary Market
Services, Inc. (SMS) within the meaning of the Code of Professional Ethics of
the American Institute of Certified Public Accountants.
We have audited, in accordance with generally accepted auditing standards, the
consolidated balance sheets of SMS and subsidiary as of September 30, 1996 and
the related consolidated statements of income, shareholder's equity and cash
flows for the year then ended, and have issued our report thereon dated November
20, 1996.
In connection with our audit, nothing came to our attention that caused us to
believe that SMS failed to comply with the terms, covenants, provisions or
conditions of Sections 2(a) through 2(h) of the Administration Agreement ("the
Agreement") dated as of April 1, 1996 between SMS, as administrator, and Bankers
Trust Company, ("the Trustee") as indenture trustee on behalf of the noteholders
and certificateholders of SMS Student Loan Trust 1996-A ("the Issuer"), for the
period April 24, 1996 to September 30, 1996 insofar as they relate to accounting
matters. However, our audit was not directed primarily toward obtaining
knowledge of such noncompliance. Further, we make no representations as to the
sufficiency of the foregoing procedures for your purposes.
<PAGE>
We have performed the procedures enumerated below, which were agreed to by SMS,
the Eligible Lender Trustee, and the Indenture Trustee, solely to assist you
with respect to SMS's administration of the Student Loan Trust 1996-A
receivables pursuant to sections 2 (c) (vii), 2 (d), 2 (e) (i), 2 (f) (i), 2 (g)
and 2 (h) of the Agreements. This engagement to apply agreed-upon procedures was
performed in accordance with standards established by the American Institute of
Certified Public Accountants. The sufficiency of the procedures is solely the
responsibility of the specified users of the report. Consequently, we make no
representation regarding the sufficiency of the procedures described below
either for the purpose for which this report has been requested or for any other
purpose.
Our procedures were as follows:
1. We obtained access to all bank statements and reconciliations of trust
accounts performed by SMS pursuant to section 2 (c) (vii) of the Agreement
and, on a test basis, compared balances to the Monthly Servicing Reports -
SMS Student Loan Trust 1996-A for the period April 24, 1996 through
September 30, 1996, noting such amounts to be in agreement.
2. We compared the initial deposit to the reserve account required by sections
2 (e) (i) of the Agreement to the respective bank statements, noting such
amounts to be in agreement.
3. We obtained the Monthly Servicing Reports - SMS Student Loan Trust 1996-A
for the period April 24, 1996 through September 30, 1996 prepared by SMS
pursuant to section 2 (d) and 2 (h) of the Agreement and, on a test basis,
performed the following:
a. We compared the balances and percentages reported in segment I
"Original Deal Parameter Inputs", segment II "Inputs From Previous
Quarterly Servicer Reports" and segment III "Inputs From Previous
Monthly Servicer Reports" on a test basis, to the SMS Student Loan
Trust 1996-A prospectus, noting such amounts and percentages to be in
agreement.
b. We compared the individual monthly balances accumulated and reported in
segment IV "Interest Rate Calculation", on a test basis, to system
reports prepared by USA Group Loan Services (Loan Services), noting
agreement. We added the "net expected interest collections" and
recalculated the interest rates in segment IV (M) through IV (T) and
compared the resulting amounts and percentages to those reported,
noting such amounts and percentages to be in agreement.
c. We compared the individual monthly balances accumulated and reported in
segments V "Servicing Fee Calculation", VI "Cash Inputs" and VII "Other
Inputs (from Servicer)", on a test basis, to system reports prepared by
Loan Services, noting such amounts to be in agreement.
<PAGE>
d. We compared the individual monthly balances accumulated and reported in
segment VIII "Inputs From Other Sources," on a test basis, to bank
statements and reports prepared by Loan Services, noting such amounts
to be in agreement.
e. We added the balances in the Monthly Servicing Report - SMS Student
Loan Trust 1996-A segments "Monthly Cash", "Distributions",
"Reconciliation of Reserve Account", "Reconciliation of Collateral
Reinvestment Account", "Reconciliation of Class A-1 Interest Account"
and "Other Reporting Requirements", and compared the totals to the
inputs in segments I through VIII, noting amounts to be in agreement.
We were not engaged to, and did not perform an audit of the Monthly Servicing
Reports of the Student Loan Trust 1996-A, the objective of which would be the
expression of an opinion on the specified elements, accounts or items thereof.
Accordingly, we do not express such an opinion. Had we performed additional
procedures, other matters might have come to our attention that would have been
reported to you.
For your information, we have audited, in accordance with generally accepted
auditing standards, the statement of financial position of Loan Services as of
September 30, 1996 and the related statement of revenues and expenses and
changes in net assets, and the statement of cash flows for the year then ended,
and have issued our report thereon dated November 20, 1996. At the request of
SMS, however, we did not perform any tests of Loan Services' servicing of the
Student Loan Trust 1996-A receivables, because a separate single auditor report
of Loan Services' servicing systems has been issued by other auditors. Had we
performed additional procedures or had we made an examination of Loan Services'
servicing of the Student Loan Trust 1996-A, other matters may have come to our
attention that would have been reported to you.
This report is intended solely for the use of the specified users listed above
and should not be used by those who have not agreed to the procedures and taken
responsibilities for the sufficiency of the procedures for their purposes.
/s/ Ernst & Young LLP
November 20, 1996
Coopers Coopers & Lybrand L.L.P.
& Lybrand a professional services firm
IV. Report of Independent Accountants
USA Group Loan Services, Inc.
8085 Knue Road
Indianapolis, Indiana 46250
We have examined the assertions of USA Group Loan Services, Inc. (Loan Services)
management that Loan Services complied with the requirements described on the
foregoing pages, relative to Loan Services' preparation of quarterly Lender's
Interest and Special Allowance Request and Reports (ED Form 799s) prepared and
either submitted to its customers for their submission to the U.S. Department of
Education (ED) or submitted directly to ED on behalf of certain customers during
year ended September 30, 1996. Loan Services' management is responsible for
compliance with those requirements. Our responsibility is to express an opinion
on management's assertions about Loan Services' compliance based on our
examination.
Our examination was made in accordance with Government Auditing Standards,
issued by the Comptroller General of the United States; standards established by
the American Institute of Certified Public Accountants; and the Audit Guide,
Compliance Audits (Attestation Engagements) of the Federal Family Education Loan
Program at Participating Lenders (the Audit Guide), issued by the U.S.
Department of Education, Office of Inspector General, dated March 1995 and,
accordingly, included examining, on a test basis, evidence about Loan Services'
compliance with those requirements and performing such other procedures as we
considered necessary in the circumstances. We believe that our examination
provides a reasonable basis for our opinion. Our examination does not provide a
legal determination on Loan Services' compliance with specified requirements.
In our opinion, management's assertions that Loan Services complied with the
aforementioned requirements relative to the quarterly ED Form 799s prepared by
Loan Services during the year ended September 30, 1996 are fairly stated, in all
material respects.
As noted in Section II of this report, ED provided FFEL Program participants
additional time for implementation of certain regulations. Loan Services'
implementation of these provisions is noted in Section II of this report.
The report is intended solely for the use of Loan Services' management, Loans
Services' customers and their independent auditors.
/s/ Coopers + Lybrand L.L.P.
Indianapolis, Indiana
November 11, 1996
Coopers & Lybrand L.L.P. is a member of Coopers & Lybrand International, a
limited liability association incorporated in Switzerland.
