<PAGE>
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, 1997
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 333-23243
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 organization Identification No.)
30 South Meridian Street, Indianapolis, Indiana 46204
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (317) 951-5644
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 1997-A, Floating Rate Asset
Backed Senior Notes
<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 Form 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
report of the independent auditors with respect to compliance with the
Administration 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 1997-A.
99.02 Officers' Certificate of the Servicer regarding
compliance with the Servicing Agreement for the
SMS Student Loan Trust 1997-A.
99.03 Report of Independent Auditors as to
Administrator's Compliance with Administration
Agreement.
(b) Reports on Form 8-K. The Trustee filed (1) Form
8-K dated as of January 27, 1998, providing a
copy of the Quarterly Report of Distribution for
the period from October 1, 1997 through
December 31, 1997, which distribution was made on
January 27, 1998 for SMS Student Loan Trust
1997-A and (2) Form 8-K dated as of
October 27, 1997 providing a copy of the
Quarterly Report of Distribution for the period
from July 1, 1997 through September 30, 1997,
which distribution was made on October 27, 1997
for SMS Student Loan Trust 1997-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 1997-A
By: /s/ Steve Husbands
Steve Husbands
Assistant Vice President
Date: March 31, 1998
<PAGE>
<PAGE>
SMS STUDENT LOAN TRUST 1997-A
OFFICERS' CERTIFICATE
In accordance with Section 3(a) of the Administration Agreement, dated
as of April 1, 1997, among SMS Student Loan Trust 1997-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 September 30, 1997 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 September 30, 1997.
USA GROUP SECONDARY MARKET SERVICES, INC.,
Administrator
By: /s/ Stephen W. Clinton, President
Stephen W. Clinton, President
By:/s/ Cheryl E. Watson
Cheryl E. Watson, Vice President
Prepared by Heidi Lange
<PAGE>
SMS STUDENT LOAN TRUST 1997-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 1997-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, 1997 ("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 September 30, 1997 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 September 30, 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
cc: USA Group Secondary Market Services, Inc.
Prepared by Heidi Lange
<PAGE>
ERNST & YOUNG (Letterhead)
Independent Auditor's Report on Compliance
SMS Student Loan Trust 1997-A
USA Group Secondary Market Services, Inc.
30 South Meridian
Indianapolis, Indiana 46204
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, 1997 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
24, 1997.
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(g) of the Administration Agreement ("the
Agreement") dated April 1, 1997 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 1997- A ("the Issuer"), for the
period April 29, 1997 through September 30, 1997 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.
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
<PAGE>
administration of the Student Loan Trust 1997-A receivables pursuant to sections
2 (c) (i through iii) (vii), 2 (d), 2 (e) (i) and 2 (g) of the Agreement. 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:
We obtained access to all bank statements and reconciliations of trust accounts
performed by SMS pursuant to section 2 (c) (i through iii) of the Agreement and,
on a test basis, compared balances to the Quarterly Servicing Report - SMS
Student Loan Trust 1997-A for the period April 24, 1997 through September 30,
1997, noting that such amounts agree.
2. We compared the initial deposit to the reserve account required by section 2
(e) (i) of the Agreement to the respective bank statement, noting such amounts
to be in agreement.
We obtained the Quarterly Servicing Report - SMS Student Loan Trust 1997-A for
the period April 24, 1997 through September 30, 1997 prepared by SMS pursuant to
section 2 (d) and 2 (g) of the Agreement and performed the following:
We compared the balances and percentages reported in segments I "Original Deal
Parameter Inputs," and II "Inputs from Previous Quarterly Servicer Reports,"on a
test basis, to the SMS Student Loan Trust 1997-A prospectus, noting that such
amounts and percentages agree.
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, Inc. (Loan Services), noting agreement. We added the
"Net Expected Interest Collections" and recalculated the percentages in segment
IV (L) through IV (P) and compared the resulting amounts and percentages to
those reported, noting that such amounts and percentages agree.
We compared the individual monthly balances accumulated and reported in segments
III "Inputs for Servicing Fee and Administration Fee," V "Servicing Fee
Calculation," VI "Cash Inputs," VII "Other Inputs (from Servicer)," and IX
"Principal Inputs," on a test basis, to system reports prepared by Loan
Services, noting that such amounts agree. We recalculated the "Net Reduction/
(Increase) in Student Loan Principal Balance" and compared the resulting amount
to that reported, noting agreement.
We compared the individual monthly balances accumulated and reported in segment
VIII "Inputs from Other Sources," on a test basis, to bank statements, noting
such amounts agree.
We compared the individual monthly balances accumulated and reported in segment
X "Uninsured Loss and Recoveries Reporting for the Period," on a test basis, to
system reports prepared by Loan Services, noting such amounts to be in
agreement.
We recalculated the balances in the Quarterly Servicing Report - SMS Student
Loan Trust 1997-A segments "Quarterly Cash," "Distributions," "Reconciliation of
Reserve Account," "Reconciliation of Collateral Reinvestment Account,"
"Additional Reporting Requirements," and "Bond and Pool Balances and Factors"
and compared the totals to the inputs in segments I through X, noting that such
amounts agree.
We were not engaged to, and did not perform an audit of the Quarterly Servicing
Report - SMS Student Loan Trust 1997-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, 1997 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 24, 1997. At the request of
SMS, however, we did not perform any tests of Loan Services' servicing of the
Student Loan Trust 1997-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 1997-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 24, 1997