<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 10-K
(Mark One)
[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, 1993
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: 33-65
33-3274
33-8705
COUNTRYWIDE MORTGAGE OBLIGATIONS III, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-4111803
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
35 North Lake Avenue, Pasadena, California 91101-1857
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (800) 669-2300
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) 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 or the past 90 days. Yes X No
--- ---
All 1,000 shares of the registrant's issued and outstanding Common Stock are
owned by Countrywide Mortgage Investments, Inc.
The Registrant meets the conditions set forth in General Instruction (J)(1)
(a) and (b) of Form 10-K and is therefore filing this Form with the reduced
disclosure format allowed by General Instruction (J)(2).
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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. Not applicable.
<PAGE>
PART I
ITEM 1. BUSINESS
- ------- --------
Countrywide Mortgage Obligations III, Inc. (the "Registrant" or the "Company"),
a Delaware corporation, was organized in the State of Delaware on March 26, 1987
as a qualified real estate investment trust ("REIT") subsidiary of its parent,
Countrywide Mortgage Investments, Inc. ("CMI" or the "Parent"). CMI,
incorporated in Maryland on July 16, 1985 and reincorporated in Delaware on
March 6, 1987, is a publicly traded REIT which prior to 1993 was primarily a
passive investor in single-family, first-lien, residential mortgage loans and
mortgage-backed securities. In 1993, the Parent adopted a new operating plan
which established another subsidiary as a jumbo and nonconforming mortgage loan
conduit. As part of its new plan, the Parent has also commenced warehouse
lending operations which provide short-term revolving financing to certain
mortgage bankers.
The Registrant was organized for the purpose of issuing and selling
collateralized mortgage obligations ("CMOs") which may be collateralized by any
of the following instruments (the "Collateral"):
(i) mortgage loans, certificates or other securities issued or guaranteed
by the Government National Mortgage Association ("GNMA Certificates");
(ii) mortgage loans, certificates or other securities issued or guaranteed
by the Federal National Mortgage Association ("FNMA Certificates");
(iii) mortgage loans, certificates or other Federal Home Loan Mortgage
Corporation ("FHLMC securities issued or guaranteed by the
Certificates"); and
(iv) mortgage loans or other types of mortgage-related securities.
Pursuant to a transfer agreement, dated May 1, 1987, the Registrant became the
depositor and holder of 100% of the equity interest in Countrywide Mortgage
Trust 1987-I (the "Trust"), a Delaware common law business trust established for
the sole purpose of issuing its Collateralized Mortgage Obligations, Series W-2,
in the aggregate principal amount of $47.6 million. The previous depositor and
equity holder was Countrywide Mortgage Obligations II, Inc., a limited purpose
finance corporation whose stock is wholly owned by CMI.
On September 15, 1987, Countrywide Mortgage Obligations, Inc. ("CMO"), a limited
purpose subsidiary of CMI, merged with the Registrant. CMO, a Maryland
corporation, was a REIT organized for the purpose of issuing and selling CMOs.
As a result of the merger, the Registrant assumed all of the rights, privileges,
powers, franchises, debts, liabilities and duties of CMO.
CMO was, and the Registrant as successor to CMO is, the issuer of 15 series of
CMOs with an aggregate initial principal amount of $1.7 billion. One of these
series was redeemed in 1992 and two were redeemed in 1993. In connection with
the merger, the Registrant entered into Indenture Supplements, each dated
September 1, 1987 (the "Indenture Supplements"), by and among the Registrant,
CMO and each of the trustees under the Indentures pursuant to which the CMOs
were issued and outstanding (the "Indentures"). Under the Indenture
Supplements, the Registrant, as successor issuer, assumed all the
representations, warranties, covenants and agreements of CMO contained in each
Indenture, each series supplement with respect to each Indenture, and each CMO
issued thereunder and agreed to be bound by and to comply with the terms
thereof.
On November 20, 1990, the Registrant entered into a Trust Agreement with
Wilmington Trust Company creating the Countrywide Cash Flow Bond Trust (the
"CCFBT"). The CCFBT is a Delaware common law business trust created for the
purpose of issuing cash flow bonds secured by the residual cash flows and
1
<PAGE>
other property of certain of the outstanding series of CMOs (the "Cash Flow
Bonds"). (The CMOs and the Cash Flow Bonds are sometimes referred to
collectively as the "CMOs.") The residual cash flows, which prior to transfer to
the CCFBT belonged to the Registrant, represent the funds remaining after the
payment of the principal and interest on and certain other obligations with
respect to a series of CMOs. On November 21, 1990, the CCFBT issued bonds with
an aggregate principal amount of $28.1 million secured by the residual cash
flows and certain other property from the Registrant's Collateralized Mortgage
Obligations Bonds Series E, F, G, I, J, K, and L. The Registrant as the sole
beneficiary of the CCFBT received the proceeds from the issuance of the Cash
Flow Bonds and loaned the proceeds to CMI.
Each series of CMOs issued by the Registrant as successor to CMO, or the Trust,
is secured by FNMA Certificates, FHLMC Certificates (collectively
"Certificates") or whole mortgage loans which were received from CMI at the time
of issuance of each series. Substantially all of such Certificates or whole
mortgage loans were subject to certain indebtedness incurred by CMI in
connection with the acquisition of the Certificates, the acquisition of the
mortgage loans underlying the Certificates, and the acquisition of the whole
mortgage loans. Concurrently with the issuance of each series of CMOs,
substantially all of the net proceeds from the sale of each series of CMOs were
used to repay the indebtedness incurred by CMI and to release the respective
liens on the Certificates or whole mortgage loans pledged to secure each series
of CMOs. The pool of Certificates or whole mortgage loans were then pledged to
a trustee under an indenture pursuant to which a series of CMOs was issued, free
and clear of any liens and encumbrances, as collateral for the CMOs.
Each series of CMOs is fully payable from the principal and interest payments on
the underlying Certificates or whole mortgage loans collateralizing such series,
any cash or other collateral required to be pledged as a condition to receiving
the desired rating on the CMOs, plus any investment income on such collateral.
Distributions of principal and interest on the Certificates are made directly to
the appropriate trustee for payment to the holders of such CMOs. Payments of
principal and interest on whole mortgage loans are collected by the servicer and
subsequently remitted to the trustee. Although the CMOs are recourse
obligations of the Registrant, the Registrant does not have, nor does it
anticipate having, any significant assets not pledged as collateral for specific
series of CMOs.
In general, each series of CMOs consists of various classes. Except in certain
circumstances relating to optional redemption of CMOs, the classes of CMOs are
retired in order of maturity. The class of CMOs with the earliest maturity
receives all principal payments until it is paid in full so that no payment of
principal will be made on a particular class of CMOs until all classes of CMOs
with earlier maturities are retired.
2
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The table below gives additional information with respect to each series of CMOs
(Dollar amounts in thousands):
<TABLE>
<CAPTION>
WEIGHTED AVERAGE PRINCIPAL
RANGE OF INTEREST RATE BALANCE
TYPE STATED OF CMOs OF CMOs
OF MATURITY AS OF AS OF
SERIES COLLATERAL DATES DECEMBER 31, 1993 DECEMBER 31, 1993
- ------------ -------------- --------- ------------------ ------------------
<S> <C> <C> <C> <C>
A FHLMC 2005-2016 11.00% $ 9,951
E FHLMC 2004-2016 8.85% 10,953
F FHLMC 2005-2016 9.55% 14,804
G FHLMC 2008-2016 9.55% 15,479
H FHLMC 2005-2016 9.33% 20,356
I FHLMC 2005-2016 9.45% 15,983
J FHLMC 2009-2016 9.10% 9,146
K FHLMC 2002-2016 9.53% 11,967
L FHLMC 2004-2016 9.27% 13,399
M FHLMC 2001-2017 8.72% 23,292
N FHLMC 1999-2017 8.75% 42,933
W-1 WHOLE LOANS 2008-2016 9.55% 2,948
W-2 WHOLE LOANS 2008-2017 8.88% 3,426
CCFBT * 1998-2012 8.77% 35,734
--------
230,371
Unamortized discounts, net (6,744)
--------
$223,627
========
</TABLE>
*Collateralized by residual cash flows and remaining property of Series E, F, G,
I, J, K, and L.
Pursuant to an agreement (the "Management Agreement") between CMI and
Countrywide Asset Management Corporation ("CAMC"), an affiliate of Countrywide
Funding Corporation ("CFC"), CAMC provides certain managerial services and
activities for the Registrant, subject to supervision by CMI's Board of
Directors. For 1992, CAMC received a management fee equal to 1/32 of 1% of such
Registrant's average invested assets, with such fee being no less than $10,000
annually for each series of CMOs. There were no such fees in 1993 due to a
change in the Management Agreement. Pursuant to agreements with Wilmington
Trust Company as owner-trustee of the Trust and the CCFBT, CAMC manages the
Trust and the CCFBT. CAMC receives no additional fee under the agreement with
respect to the Trust and receives an annual fee of $1,000 under the agreement
with respect to the CCFBT.
The Company has entered into servicing agreements appointing CFC as servicer of
two series of CMOs that are collateralized by pools of whole mortgage loans.
CFC receives an annual servicing fee of up to .32% of the aggregate unpaid
balance of such whole mortgage loans. These servicing fees are deducted from
interest payments on the mortgage loans prior to their remittance to the trustee
for the holders of the CMOs secured thereby.
The Registrant's remaining activities consist solely of reporting activities
required by the Indentures and routine corporate administration.
The Registrant has no salaried employees. All accounting and managerial
services are provided by the Parent.
3
<PAGE>
Competition
- -----------
In issuing the CMOs, the Registrant competes with thrifts, banks, mortgage
bankers, insurance companies, other lenders, mutual funds, investment bankers,
the Government National Mortgage Association, the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation, many of which have
greater financial resources than the Registrant. Additionally, the CMOs face
competition from other investment opportunities available to prospective
investors.
ITEM 2. PROPERTIES
- ------- ----------
The Registrant does not own any real property for use in connection with its
operations. The executive and administrative offices of the Registrant and CMI
are located at 35 North Lake Avenue, Pasadena, California 91101-1857, telephone
(800) 669-2300.
ITEM 3. LEGAL PROCEEDINGS
- ------- -----------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
Not required pursuant to General Instruction J(2)(c) of Form 10-K.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
- ------- -------------------------------------
AND RELATED STOCKHOLDER MATTERS
-------------------------------
All 1,000 shares of the Registrant's common stock are owned by CMI. There is no
established public trading market for these securities. Because the Registrant
is a qualified REIT subsidiary, it is required, in effect, to distribute
annually at least 95% of its otherwise taxable income, subject to certain
adjustments, to the sole owner of its common stock, CMI.
4
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
- ------- -----------------------
The financial data presented below should be read in conjunction with the
Financial Statements and related notes set forth in Item 8.
<TABLE>
<CAPTION>
(DOLLAR AMOUNT IN THOUSANDS)
DECEMBER 31, 1993 1992 1991 1990 1989
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Selected Statements of
Earnings Data For The
Year Ended
Interest Income $ 31,657 $ 64,737 $ 99,038 $ 111,849 $ 125,616
Net (Loss) Earnings ($5,107) ($8,185) $ 2,459 $ 5,231 $ 6,777
Selected Balance Sheet
Data At Year End
Total Assets $285,399 $586,476 $1,025,932 $1,194,749 $1,318,404
CMOs $223,627 $514,618 $ 933,065 $1,100,066 $1,222,727
</TABLE>
- --------------------------------------------------------------------------------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- ------- ---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
GENERAL
- -------
The Company's principal source of earnings is net interest income generated from
its investments. Investments that collateralize CMOs are fixed interest rate
mortgage loans and mortgage-backed securities. The amount of net interest
earned on these investments financed by CMOs is directly related to the rate of
principal repayments (including prepayments) of the related mortgage loans.
When interest rates decline (as they did in 1992 and 1993), prepayments on the
underlying mortgage loans generally tend to increase as mortgagors refinance
their existing loans. The cash flow generated by these unanticipated
prepayments is ultimately used by the Company to repay the CMOs.
Several factors cause the net yield to the Company to decline from the yield
that would have been realized if the mortgage loans had not been prepaid. These
are discussed below.
A time lag of from 24 to 45 days exists from the date the underlying mortgage is
prepaid to the date the Company actually receives the cash related to the
prepayment. During this interim period, the Company does not earn interest
income on the portion of the mortgage loans or mortgage-backed security that has
been prepaid. The prepayment, as well as scheduled principal and interest, is
deposited in a guaranteed investment contract ("GIC"), as required by certain of
the indentures relating to the CMOs, pending the next bond payment date. The
GIC earns interest at a substantially lower rate than the mortgage loans and
mortgage-backed securities.
The amount of the prepayment is ultimately (after a period ranging from
approximately 5 to 65 days) used to repay the CMOs. The class of each series of
CMOs with the shortest maturity receives all principal payments until it is
repaid in full. After the first class is fully retired, the second class will
receive all principal payments until retired and so forth. The CMOs were
structured with the shortest maturity class generally having the lowest interest
rate and with interest rates increasing as the maturity of the class increases.
Therefore, prepayments are generally applied to the bond class with the lowest
interest rate. This has the effect of repaying CMOs with relatively low
interest rates and of increasing the weighted average interest rate of the
remaining outstanding bonds payable.
5
<PAGE>
As prepayments occur, therefore, mortgage loans and mortgage-backed securities
which may have relatively high interest rates are reduced and the proceeds are
used to repay CMOs with relatively low interest rates. This decreases the
interest rate spread earned from investments financed by CMOs in future periods.
On the other hand, if interest rates increase (as occurred in certain prior
years), prepayments on the underlying mortgage loans tend to decrease. This has
the effect of lengthening the time (toward the contractual due dates) in which
the Company realizes favorable interest spreads.
The Company has incurred certain costs in connection with acquiring its
portfolio of fixed-rate mortgage loans and mortgage-backed securities and
issuing its CMOs. These items, mortgage loan premium, bond issuance costs and
original issue discount, are amortized over the period of repayment of the
related asset or liability. As unanticipated prepayments increase, the rate of
amortization of these costs increases. This has the effect of decreasing the
interest yield from originally anticipated levels. In an increasing interest
rate environment, however, the likely decline in prepayment rates tends to
maximize the period over which the mortgage loan premium, deferred bond issuance
costs and original issue discount are amortized.
RESULTS OF OPERATIONS 1993 COMPARED TO 1992
- -------------------------------------------
The Company's net loss for 1993 was $5.1 million compared to a net loss of $8.2
million for 1992. The Company's primary source of revenue is interest income
from the Company's Collateral for CMOs. Interest income totaled $31.7 million
for 1993 versus $64.7 million for 1992. This 51% decrease in interest income
resulted primarily from the principal repayments (including prepayments) of the
Company's Collateral for CMOs, which reduced the average outstanding principal
balance from $698.2 million for 1992 to $360.6 million for 1993, combined with a
decrease in the effective yield earned on the collateral from 9.27% in 1992 to
8.78% in 1993.
The Company incurred interest expense of $37.3 million with respect to CMOs
outstanding for 1993, representing a 49% decrease from the $73.5 million of
interest expense for 1992. This decrease was primarily due to a decrease in
outstanding CMOs from December 31, 1992, partially offset by an increase in the
weighted average cost of CMOs from 10.01% in 1992 to 11.05% in 1993. The
average outstanding principal balance of CMOs was $338.1 million for 1993
compared to $734.4 million for 1992.
General and administrative expenses declined to $334,000 from $403,000 for 1993
and 1992, respectively. This decline is attributable to lower legal and
professional fees in the administration of the CMOs. Management fees for 1992
were $227,000. There were no such fees in 1993 due to a change in the
Management Agreement.
RESULTS OF OPERATIONS 1992 COMPARED TO 1991
- -------------------------------------------
The Company's net loss for 1992 was $8.2 million, compared to net earnings of
$2.5 million for 1991. Interest income totaled $64.7 million for 1992 versus
$99.0 million for 1991. This decrease in interest income resulted primarily
from the principal repayments (including prepayments) of the Company's
Collateral for CMOs which reduced the average outstanding principal balance from
$1.0 billion for 1991 to $698.2 million for 1992, combined with a decrease in
the effective yield earned on the collateral from 9.56% in 1991 to 9.27% in
1992.
The Company incurred interest expense of $73.5 million with respect to CMOs
outstanding for 1992, representing a 23% decrease from the $95.8 million of
interest expense for 1991. This decrease was due to a decrease in outstanding
CMOs, partially offset by an increase in the weighted average interest rate on
the CMOs from 9.37% in 1991 to 10.01% in 1992. The average outstanding
principal balance of CMOs was $734.4 million for 1992 compared to $1.0 billion
for 1991.
6
<PAGE>
General and administrative expenses declined to $403,000 from $417,000 for 1992
and 1991, respectively. This decline is attributable to lower legal and
professional fees in the administration of the CMOs. Management fees for 1992
declined to $227,000 from $323,000 for 1991. This decrease resulted principally
from the decrease in average invested assets pledged to secure CMOs.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's source of funds for repayment of the CMOs are the payments of
interest and principal on the mortgage loans and mortgage-backed securities
securing the CMOs and income from reinvestment thereof. Management believes
that the Company will have sufficient liquidity and capital resources to pay
principal and interest on the CMOs as they become due and all other anticipated
expenses of the Company.
INFLATION
- ---------
Inflation affects the Company to the extent that it influences interest rates.
Interest rates generally will tend to increase during periods of high inflation.
High levels of interest rates generally will tend to decrease the rate at which
existing investments in mortgage loans prepay. A decrease in the rate of
prepayments may lengthen the estimated average life of CMOs resulting in a
higher positive net spread between the yield on the investments in mortgage
loans pledged to secure the CMOs and the interest cost of the respective CMOs
for a longer period of time than originally anticipated.
PROSPECTIVE TRENDS
- ------------------
During 1993, lower long-term interest rates resulted in a high rate of mortgage
refinancings. As discussed above, this adversely affects the Company's
financial results. Sustained high levels of refinancings and the resulting
prepayments could continue to adversely affect the Company's earnings.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------
The information called for by this Item 8 is hereby incorporated by reference to
the Registrant's Financial Statements beginning at page F-1 of this Form 10-K.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
- ------- ----------------------------------------------------
None.
7
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------- --------------------------------------------------
Not required pursuant to General Instruction J(2)(c) of Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
- -------- ----------------------
Not required pursuant to General Instruction J(2)(c) of Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
- -------- -----------------------------
BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------
Not required pursuant to General Instruction J(2)(c) of Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------
Not required pursuant to General Instruction J(2)(c) of Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
- -------- ----------------------------------------
AND REPORTS ON FORM 8-K
-----------------------
(a) (1) and (2): Financial Statements and Schedules:
The information called for by these sections of Item 14 is set forth in the
Index to Financial Statements beginning at page F-2 of this Form 10-K.
(a) (3) and (c): Exhibits
The information called for by these sections of Item 14 is set forth beginning
at page E-1 of this Form 10-K.
(b): Reports on Form 8-K
None.
8
<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, in the City of Pasadena,
State of California, on March 30, 1994.
COUNTRYWIDE MORTGAGE OBLIGATIONS III, INC.
BY: STANFORD L. KURLAND
-----------------------------------
Stanford L. Kurland
Director
BY: GERALD L. BAKER
-----------------------------------
Gerald L. Baker
Director
BY: MARSHALL M. GATES
-----------------------------------
Marshall M. Gates
Director
BY: MICHAEL W. PERRY
-----------------------------------
Michael W. Perry
Chief Executive Officer
(Principal Financial and Accounting Officer)
9
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS AND
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
COUNTRYWIDE MORTGAGE OBLIGATIONS III, INC.
(A WHOLLY OWNED SUBSIDIARY OF
COUNTRYWIDE MORTGAGE INVESTMENTS, INC.)
DECEMBER 31, 1993, 1992 AND 1991
F-1
<PAGE>
COUNTRYWIDE MORTGAGE OBLIGATIONS III, INC.
(A WHOLLY OWNED SUBSIDIARY OF
COUNTRYWIDE MORTGAGE INVESTMENTS, INC.)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Certified Public Accountants F-3
Consolidated Financial Statements
Balance Sheets F-4
Statements of Earnings F-5
Statement of Shareholder's Equity F-6
Statements of Cash Flows F-7
Notes to Financial Statements F-8
Schedule XII - Mortgage Loans on Real Estate F-12
</TABLE>
All other schedules have been omitted since the required information is not
applicable or not present in amounts sufficient to require submission of the
schedules, or because the information required is included in the consolidated
financial statements or notes thereto.
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Countrywide Mortgage Investments, Inc.
We have audited the accompanying consolidated balance sheets of Countrywide
Mortgage Obligations III, Inc. (a wholly owned subsidiary of Countrywide
Mortgage Investments, Inc.) as of December 31, 1993 and 1992, and the related
consolidated statements of earnings, shareholder's equity, and cash flows for
each of the three years in the period ended December 31, 1993. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Countrywide Mortgage
Obligations III, Inc. as of December 31, 1993 and 1992, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted accounting principles.
We have also audited Schedule XII of Countrywide Mortgage Obligations III, Inc.
as of December 31, 1993. In our opinion, this schedule presents fairly, in all
material respects, the information required to be set forth therein.
GRANT THORNTON
Los Angeles, California
February 28, 1994
F-3
<PAGE>
COUNTRYWIDE MORTGAGE OBLIGATIONS III, INC.
(A WHOLLY OWNED SUBSIDIARY Of COUNTRYWIDE MORTGAGE INVESTMENTS, INC.)
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION> December 31,
----------------------------
1993 1992
--------- ----------
<S> <C> <C>
ASSETS
Guaranteed Investment Contracts $18,647 $39,761
Collateral for CMOs 230,123 509,767
Accrued interest receivable 3,401 6,545
Deferred bond issuance costs 2,685 3,717
Due from affiliate 30,490 26,635
Other assets 53 51
--------- ---------
$285,399 $586,476
========= =========
LIABILITIES AND SHAREHOLDER'S EQUITY
Collateralized Mortgage Obligations $223,627 $514,618
Accrued interest payable 2,479 5,443
Accounts payable and accrued liabilities 73 92
--------- --------
Total liabilities 226,179 520,153
Commitments and contingencies - -
Shareholder's equity
Common stock-authorized, issued and outstanding,
1000 shares of $.01 par value - -
Additional paid-in capital 83,311 83,311
Cumulative earnings 19,927 25,034
Cumulative distribution to shareholder (44,018) (42,022)
-------- --------
Total shareholder's equtiy 59,220 66,323
-------- --------
$285,399 $586,476
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
COUNTRYWIDE MORTGAGE OBLIGATIONS III, INC.
(A WHOLLY OWNED SUBSIDIARY OF COUNTRYWIDE MORTGAGE INVESTMENTS, INC.)
CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------
1993 1992 1991
-------- --------- --------
<S> <C> <C> <C>
Revenues
Interest income $31,657 $64,737 $99,038
Interest expense 37,347 73,492 95,839
-------- -------- -------
Net interest (expense) income (5,690) (8,755) 3,199
-------- -------- -------
Gain on sale of securities 917 1,200 -
Expenses
General and administrative 334 403 417
Management fees to affiliate - 227 323
-------- -------- -------
Total expenses 334 630 740
-------- -------- -------
Net (loss) earnings ($5,107) ($8,185) $ 2,459
======== ======== =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
COUNTRYWIDE MORTGAGE OBLIGATIONS III, INC.
(A WHOLLY OWNED SUBSIDIARY OF COUNTRYWIDE MORTGAGE INVESTMENTS, INC.)
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Additional Cumulative
Number of Common Paid-in Cumulative Distribution to
Three years ended December 31, 1993 Shares Stock Capital Earnings Shareholder Total
--------- -------- ---------- ---------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1990 1,000 $ - $83,311 $30,760 ($30,760) $83,311
Net earnings for the year - - - 2,459 - 2,459
Cash dividends paid - $2,459 per share - - - - (2,459) (2,459)
-------- --------- --------- -------- ---------- -------
Balance at December 31, 1991 1,000 - 83,311 33,219 (33,219) 83,311
Net loss for the year - - - (8,185) - (8,185)
Cash dividends paid - $8,803 per share - - - (8,803) (8,803)
--------- --------- --------- -------- ---------- --------
Balance at December 31, 1992 1,000 - 83,311 25,034 (42,022) 66,323
Net loss for the year - - - (5,107) - (5,107)
Cash dividends paid - $1,996 per share - - - - (1,996) (1,996)
--------- --------- --------- --------- --------- --------
Balance at December 31, 1993 1,000 $ - $83,311 $19,927 ($44,018) $59,220
========= ========= ========= ========= ========= ========
</TABLE>
The accompanying notes are an integral part of this statement.
F-6
<PAGE>
COUNTRYWIDE MORTGAGE OBLIGATIONS III, INC.
(A WHOLLY OWNED SUBSIDIARY OF COUNTRYWIDE MORTGAGE INVESTMENTS, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Years ended December 31
------------------------------------------------
1993 1992 1991
----------- ---------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) earnings ($5,107) ($8,185) $ 2,459
Adjustments to reconcile net (loss) earnings
to net cash (used in) operating activities:
Amortization 6,985 10,315 4,859
Gain on sale of securities (917) (1,200) -
Increase in other assets and liabilities (3,740) (20,653) (23,217)
----------- ---------- -----------
Net cash (used in) operating activities (2,779) (19,723) (15,899)
Cash flows from investing activities:
Principal payments on collateral 242,808 457,276 190,965
Proceeds from sale of collateral for CMOs, net 2,640 6,090 -
----------- ---------- -----------
Net cash provided by investing activities 245,448 463,366 190,965
Cash flows from financing activities:
Principal payments on securities (261,787) (421,463) (167,372)
Cash dividends paid (1,996) (8,803) (2,459)
----------- ---------- -----------
Net cash used in financing activities (263,783) (430,266) (169,831)
----------- ---------- -----------
Net increase in cash (21,114) 13,377 5,235
GICs at beginning of period 39,761 26,384 21,149
GICs at end of period ----------- ---------- -----------
$18,647 $39,761 $26,384
=========== ========== ===========
Supplemental cash flow information:
Cash paid for interest $25,895 $64,431 $96,285
=========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
COUNTRYWIDE MORTGAGE OBLIGATIONS III, INC.
(A WHOLLY OWNED SUBSIDIARY OF
COUNTRYWIDE MORTGAGE INVESTMENTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Company's significant accounting policies applied in the
preparation of the accompanying consolidated financial statements follows:
1. BASIS OF PRESENTATION
---------------------
Certain amounts for 1992 and 1991 have been reclassified to conform to the
1993 presentation.
2. INCOME TAXES
------------
The Company is a qualified real estate investment trust subsidiary ("QRS") of
Countrywide Mortgage Investments, Inc. (the "Parent") which operates as a
real estate investment trust ("REIT") under the provisions of the Internal
Revenue Code. As a QRS, the Company is not treated as a separate corporation
for income tax purposes and all assets, liabilities and items of income,
deductions and credits of the Company are treated as such items of the REIT.
Accordingly, no provision for income taxes on the net earnings of the Company
has been made in the accompanying financial statements.
If in any tax year the Company fails to continue to qualify as a QRS, then
the Parent would be disqualified as a REIT and, therefore, the Parent would
be subject to income taxes on its and the Company's earnings.
3. COLLATERAL FOR CMOS
-------------------
Collateral for CMOs consist of mortgage loans and mortgage-backed securities
and is carried at the outstanding principal balances net of unamortized
purchase discounts or premiums.
4. COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS) AND DEFERRED BOND ISSUANCE COSTS
---------------------------------------------------------------------------
Collateralized mortgage obligations are carried at their outstanding
principal balances net of unamortized original issue discounts or premiums.
Issuance costs have been deferred and are amortized to expense over the
estimated life of the CMOs using the straight-line method with effect given
to principal reductions.
5. REVENUE RECOGNITION
-------------------
Interest is recognized as revenue when earned according to the terms of the
mortgage loans and when, in the opinion of management, it is collectable.
Premiums paid and discounts obtained on collateral for CMOs are amortized to
interest income over the estimated life of the mortgage loans using the
interest method with effect given to principal reductions. CMO discounts or
premiums are amortized to interest expense using the interest method with
effect given to principal reductions.
F-8
<PAGE>
COUNTRYWIDE MORTGAGE OBLIGATIONS III, INC.
(A WHOLLY OWNED SUBSIDIARY OF
COUNTRYWIDE MORTGAGE INVESTMENTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1993, 1992 AND 1991
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," requires that the Company disclose estimated
fair values for its financial instruments.
Collateral for CMOs cannot be sold until the related obligations mature or
are otherwise paid or redeemed. In addition, early redemption of a CMO
series is restricted by the respective indenture. Accordingly, due to the
nature of Collateral for CMOs and CMOs, such market values are not disclosed.
As a REIT, the Company's ability to sell these assets for gain also is
subject to restrictions under the Internal Revenue Code and any such sale may
result in substantial additional tax liability.
Fair values of guaranteed investment contracts ("GICs"), accrued interest
receivable, deferred bond issuance costs, due from affiliate, other assets,
accrued interest payable and accounts payable and accrued liabilities are not
separately disclosed as such values approximate carrying amounts because of
the nature of the underlying asset of liability.
NOTE B - COLLATERAL FOR CMOS
Collateral for CMOs consists of fixed-rate mortgage loans secured by first liens
(enforceable through foreclosure proceedings) on one-to-four family residential
real estate and mortgage-backed securities.
All principal and interest on the collateral is remitted to a trustee, and
together with any reinvestment income earned thereon, is available for payment
on the CMOs. Generally, any default of a mortgage loan which is the basis for a
foreclosure action is covered (up to an aggregate benefit limit) under a pool
insurance policy provided by a private mortgage insurer. Furthermore, the
Company's mortgage-backed securities are guaranteed as to the repayment of
principal and interest of the underlying mortgages by the Federal Home Loan
Mortgage Corporation. The maximum amount of credit risk related to the
Company's Collateral is represented by the outstanding principal balance of the
mortgage loans plus accrued interest.
Collateral for CMOs is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1993 1992
--------- -----------
<S> <C> <C>
(Dollar amounts in thousands)
Mortgage loans $ 9,217 $ 29,056
Mortgage-backed securities 217,856 473,907
-------- --------
227,073 502,963
Unamortized premiums, net 3,050 6,804
-------- --------
Collateral for CMOs $230,123 $509,767
======== ========
</TABLE>
F-9
<PAGE>
COUNTRYWIDE MORTGAGE OBLIGATIONS III, INC.
(A WHOLLY OWNED SUBSIDIARY OF
COUNTRYWIDE MORTGAGE INVESTMENTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
The mortgage loans and mortgage-backed securities, together with GICs, which are
all held by trustees, collateralized 14 series of CMOs at December 31, 1993. A
time lag of 24 to 45 days exists from the date the underlying mortgage is
prepaid to the date the Company actually receives the cash related to the
prepayment. During this interim period, the Company does not earn interest
income on the portion of the mortgage loan or mortgage-backed security that has
been prepaid. The weighted average coupon on collateral for CMOs, net of the
related servicing fees, was 9.71% at December 31, 1993.
NOTE C - COLLATERALIZED MORTGAGE OBLIGATIONS
Collateralized mortgage obligations are secured by a pledge of mortgage loans,
mortgage-backed securities or residual cash flows from such loans or securities.
As required by the Indentures relating to the CMOs, the pledged collateral is in
the custody of a trustee. The trustee also holds investments in GICs amounting
to $18.6 million and $39.8 million as of December 31, 1993 and 1992,
respectively, as additional collateral which is legally restricted to use in
servicing the CMOs. The trustee collects principal and interest payments on
the underlying collateral, reinvests such amounts in the GICs and makes
corresponding principal and interest payments on the CMOs to the bondholders.
The separate assets of the Company, included in the consolidated financial
statements of the Parent, substantially all of which collateralize the CMOs, are
generally not available for the satisfaction of the creditors of the Parent. In
addition, the contributed capital of the Company which amounted to $83.3 million
at December 31, 1993, is generally not available for transfer in the form of
cash dividends, loans or advances.
In general, each series of CMOs consists of various classes which are retired in
order of maturity with the shortest maturity class receiving all principal
payments until it is paid in full. After the first class is fully retired, the
second class will receive principal until retired and so forth. Each series is
also subject to redemption according to specific terms of the respective
indentures. As a result, the actual maturity of any class of a CMO series is
likely to occur earlier than its stated maturity.
Interest is payable quarterly for all classes other than deferred interest
classes. Interest on deferred interest classes is accrued and added to the
principal balance and will not be paid until all other classes in the series
have been paid in full. The weighted average coupon on CMOs was 9.22% at
December 31, 1993.
CMOs are summarized as follows:
<TABLE>
<CAPTION>
December 31,
1993 1992
------------- ------------
(Dollar amounts in thousands)
<S> <C> <C>
Collateralized mortgage obligations $ 230,371 $ 524,447
Unamortized discounts, net (6,744) (9,829)
------------ ------------
Collateralized mortgage obligations, net $ 223,627 $ 514,618
============ ============
Range of weighted average interest 8.72%-11.00% 8.63%-10.96%
rates, by series
Range of stated maturities 1998-2017 1998-2017
Number of series 14 16
</TABLE>
F-10
<PAGE>
COUNTRYWIDE MORTGAGE OBLIGATIONS III, INC.
(A WHOLLY OWNED SUBSIDIARY OF
COUNTRYWIDE MORTGAGE INVESTMENTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
During 1993, the Company redeemed two series of CMOs (the "Series"), in
accordance with the terms of the indentures governing the Series. The mortgage-
backed securities that collateralized the Series were sold and the Company
recognized a gain of $917,000.
NOTE D - RELATED PARTY TRANSACTIONS
The Parent has entered into an agreement (the "Management Agreement") with
Countrywide Asset Management Corporation (the "Manager") to advise the Parent on
various facets of its business and manage its operations, subject to supervision
by the Parent's Board of Directors. The Manager has entered into a subcontract
with its affiliate, Countrywide Funding Corporation ("CFC"), to perform such
services for the Parent as the Manager deems necessary.
For performing these services in 1992, the Manager received a management fee
equal to 1/32 of 1% of such average invested assets, with such fee being no less
than $10,000 annually for each series of CMOs, except the CCFBT, for which the
annual fee is $1,000. In 1992, the Manager earned management fees from the
Company totaling $227,000. There were no such fees in 1993 due to a change in
the Management Agreement. The Management Agreement is renewable annually and
expires May 15, 1994.
The Company has entered into servicing agreements appointing CFC as servicer of
two series of CMOs that are collateralized by pools of whole mortgage loans. CFC
is entitled under each agreement to an annual fee up to .32% of the aggregate
unpaid principal balance of the pledged mortgage loans. Net servicing fees paid
to CFC under such agreements were $61,000, $181,000 and $318,000 for 1993, 1992
and 1991, respectively.
The Manager and CFC are wholly owned subsidiaries of Countrywide Credit
Industries, Inc., a diversified financial services company whose shares of
common stock are traded on the New York Stock Exchange.
In connection with the issuance in 1990 of bonds secured by residual cash flows
from Collateral for CMOs (the cash flow bonds), the Company received the
proceeds of $22.9 million and loaned such amount to the Parent. For each year,
the Company earned interest of $2.4 million on this receivable. The principal
and interest receivable totaling $30.5 at December 31, 1993 is included in due
from affiliate in the accompanying consolidated balance sheet.
F-11
<PAGE>
COUNTRYWIDE MORTGAGE OBLIGATIONS III, INC.
(A WHOLLY OWNED SUBSIDIARY OF COUNTRYWIDE MORTGAGE INVESTMENTS, INC.)
SCHEDULE XII - MORTGAGE LOANS ON REAL ESTATE
(DOLLAR AMOUNTS IN THOUSANDS)
December 31, 1993
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
- ---------------------------- ------------ -------------- ------------- ------------ ----------------
Principal
Amount
of Loans
(1)(2)(3)(6) Subject to Amount of
Range of Number Carrying Delinquent Mortgage
Carrying Amount of Prior Amount of Principal Being Range of
of Mortgage Loans Liens Mortgages or Interest Foreclosed(5) Interest Rates(4)
- --------------------------- ------------ -------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
50-100 2 $0 $187 $0 $0 9.750-10.125
101-150 15 0 1,969 143 0 10.013-10.750
151-200 23 0 3,926 1,630 159 10.086-11.000
201 - 250 8 0 1,796 447 0 9.875-11.000
251 - 300 5 0 1,339 520 0 10.273-10.625
--------- ------------ -------------- ------------ ------------
53 $0 9,217 $2,740 $159
========= ============ ============ ============
Premium 60
-------------
$9,277
=============
</TABLE>
- ----------------
(1) All mortgage loans are fixed-rate, conventional mortgage loans secured by
single (one-to-four) family residential properties.
(2) Information with respect to the geographic breakdown of first mortgages on
single-family residential housing as of December 31, 1993 is as follows:
California 49% with no other state comprising more than 14%.
(3) The aggregate cost for federal income tax purposes is $9,277.
(4) Interest earned on mortgages by range of carrying amounts is not reasonably
obtainable.
(5) Generally, any default of a mortgage loan which is the basis of a
foreclosure action is covered (up to an aggregate benefit limit) under a
pool insurance policy provided by a private mortgage insurer.
(6) Balance at beginning of period $29,056
Additions during period -
-------
29,056
Deductions during period:
Collections of principal 19,839
-------
Balance at close of period $9,217
=======
F-12
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit
No. Description
---- ------------
<C> <S>
2.1* Agreement of Merger, dated as of September 11, 1987, between Countrywide
Mortgage Obligations, Inc. ("CMO") and Countrywide Mortgage Obligations
III, Inc. (the "Registrant") (incorporated by reference to Exhibit 2 of
the Registrant's Report on Form 8-K filed with the Securities and Exchange
Commission (the "SEC") on October 9, 1987.
3.1* Certificate of Incorporation of the Registrant, filed with the Secretary
of State of the State of Delaware on March 26, 1987.
3.2* Bylaws of the Registrant.
4.1* Indenture (the "Indenture"), dated as of December 1, 1985, between CMO and
Bankers Trust Company, as Trustee ("BTC") (incorporated by reference to
Exhibit 4.1 to CMO's Report on Form 8-K filed with the SEC on January 24,
1986).
4.2* Series A Supplement, dated as of December 1, 1985, to the Indenture
(incorporated by reference to Exhibit 4.2 to CMO's Report on Form 8-K
filed with the SEC on January 24, 1986).
4.3* Series B Supplement, dated as of February 1, 1986, to the Indenture
(incorporated by reference to Exhibit 4.1 to CMO's Report on Form 8-K
filed with the SEC on March 31, 1986).
4.4* Series C Supplement, dated as of April 1, 1986, to the Indenture
(incorporated by reference to Exhibit 4.4 to CMO's Amendment No. 1 to Form
S-11 Registration Statement (No. 33-3274) filed with the SEC on May 13,
1986).
4.5* Series D Supplement, dated as of May 1, 1986, to the Indenture
(incorporated by reference to Exhibit 4.1 to CMO's Report on Form 8-K
filed with the SEC on July 28, 1986).
4.6* Series E Supplement, dated as of June 1, 1986, to the Indenture
(incorporated by reference to Exhibit 4.1 to CMO's Report on Form 8-K
filed with the SEC on August 1, 1986).
4.7* Series F Supplement, dated as of August 1, 1986, to the Indenture
(incorporated by reference to Exhibit 4.1 to CMO's Report on Form 8-K
filed with the SEC on August 14, 1986).
4.8* Series G Supplement, dated as of August 1, 1986, to the Indenture
(incorporated by reference to Exhibit 4.8 to CMO's Form S-11 Registration
Statement (No. 33-8705) filed with the SEC on September 12, 1986).
4.9* Series H Supplement, dated as of September 1, 1986, to the Indenture
(incorporated by reference to Exhibit 4.1 to CMO's Report on Form 8-K
filed with the SEC on October 7, 1986).
</TABLE>
<PAGE>
<TABLE>
<C> <S>
4.10* Series I Supplement, dated as of October 1, 1986, to the Indenture
(incorporated by reference to Exhibit 4.11 to CMO's Amendment No. 1 to
Form S-11 Registration Statement (No. 33-8705) filed with the SEC on
October 27, 1986).
4.11* Series J Supplement, dated as of October 15, 1986, to the Indenture
(incorporated by reference to Exhibit 4.1 to CMO's Report on Form 8-K
filed with the SEC on November 12, 1986).
4.12* Series K Supplement, dated as of December 1, 1986, to the Indenture
(incorporated by reference to Exhibit 4.1 to CMO's Report on Form 8-K
filed with the SEC on March 16, 1987).
4.13* Series L Supplement, dated as of December 1,1986, to the Indenture
(incorporated by reference to Exhibit 4.2 to CMO's Report on Form 8-K
filed with the SEC on March 16, 1987).
4.14* Series M Supplement, dated as of January 1, 1987, to the Indenture
(incorporated by reference to Exhibit 4.3 to CMO's Report on Form 8-K
filed with the SEC on March 16, 1987).
4.15* Indenture (the "SPNB Indenture"), dated as of December 1, 1986, between
CMO and Security Pacific National Bank, as Trustee ("SPNB") (incorporated
by reference to Exhibit 4.1 to CMO's Report on Form 8-K filed with the SEC
on January 9, 1987).
4.16* Series W-1 Supplement, dated as of December 1, 1986, to the SPNB Indenture
(incorporated by reference to Exhibit 4.2 to CMO's Report on Form 8-K
filed with the SEC on January 9,1987). 4.17* Series N Supplement, dated as
of February 1, 1987, to the SPNB Indenture March 16, 1987). 4.18*
Indenture, dated as of February 1, 1987, between Countrywide Mortgage
Trust 1987-I (the "1987-I Trust") and SPNB (incorporated by reference to
Exhibit 4.18 to Countrywide Mortgage Investments, Inc.'s ("CMI") Annual
Report on Form 10-K filed with the SEC on March 31, 1987).
4.19* Indenture Supplement, dated as of September 1, 1987, between the
Registrant, CMO and BTC (incorporated by reference to Exhibit 4.1 to the
Registrant's Report on Form 8-K filed with the SEC on October 9, 1987).
4.20* Indenture Supplement, dated as of September 1, 1987, between the
registrant, CMO and SPNB (incorporated by reference to Exhibit 4.2 to the
Registrant's Report on Form 8-K filed with the SEC on October 9, 1987).
4.21* Indenture, dated as of November 20, 1990, between Countrywide Cash Flow
Bond Trust ("CCFBT") and BTC (incorporated by reference to Exhibit 4.22 to
CMI's Annual Report on Form 10-K filed with the SEC on March 28, 1991).
10.1* 1991 Amended and Extended Management Agreement, dated as of May 15, 1991,
between CMI and Countrywide Asset Management Corporation (the "Manager")
(incorporated by reference to Exhibit 10.1 to CMI's Annual Report on Form
10-K filed with the SEC on March 5, 1992).
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.2* Servicing Agreement, dated as of November 15, 1986, among CMO, Countrywide
Funding Corporation ("CFC") and SPNB (incorporated by reference to CMO's
Report on Form 8-K filed with the SEC on January 9, 1987).
10.3* Transfer Agreement, dated as of May 1, 1987, among CMI, Countrywide
Mortgage Obligations II, Inc. and the Registrant (incorporated by
reference to Exhibit 10.12 to CMI's Quarterly Report on Form 10-Q filed
with the SEC on August 14, 1987).
10.4* Management Agreement, dated as of February 1, 1987, between Wilmington
Trust Company, as Owner Trustee of the 1987-I Trust, and the Manager
(incorporated by reference to Exhibit 10.17 to CMI's Annual Report on Form
10-K filed with the SEC on March 31, 1987).
10.5* Servicing Agreement, dated as of February 1, 1987, among the 1987-I Trust,
SPNB and CFC (incorporated by reference to Exhibit 10.18 to CMI's Annual
report on Form 10-K filed with the SEC on March 31, 1987).
10.6* Trust Agreement , dated as of November 20, 1990, between the Registrant
and Wilmington Trust Company relating to the CCFBT (incorporated by
reference to Exhibit 10.31 to CMI's Annual Report on Form 10-K filed with
the SEC on March 28, 1991.)
10.7* Management Agreement, dated as of November 20, 1990, between CCFBT and the
Manager (incorporated by reference to Exhibit 10.33 to CMI's Annual Report
on Form 10-K filed with the SEC on March 28, 1991).
10.8* Amendment, dated as of November 21, 1990, to the 1990 Amended and Extended
Management Agreement between CMI and the Manager (incorporated by
reference to Exhibit 10.34 to CMI's Annual Report on Form 10-K filed with
the SEC on March 28, 1991).
10.9* Assignment Agreement, dated as of November 21, 1990, between the
Registrant and CCFBT (incorporated by reference to Exhibit 10.35 to CMI's
Annual Report on Form 10-K filed with the SEC on March 28, 1991).
</TABLE>
___________
* Incorporated by reference herein.
