SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Twenty-six Weeks Ended June 30, 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 33-2253
MORTGAGE SECURITIES III TRUSTS A, B, C, D, E AND F
Delaware Trusts (IRS Employer Identification
No. 91-1314537)
Wilmington, DE 19890
Telephone (302) 651-1730
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by a 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 meets the conditions set forth in General
Instruction J(1)(a) and (b) of Form 10-Q and is therefore, filing
this form with the reduced disclosure format.
<PAGE>
Securities and Exchange Commission
Mortgage Securities III Trusts A, B, C, D, E and F
Index to Form 10-Q Filing
For the Twenty-six Weeks Ended June 30, 1996
[CAPTION]
Part I. Financial Information
[S] (C)
Item 1. Statement of Operations Trust A 1
Statement of Operations Trust B 2
Statement of Operations Trust C 3
Statement of Operations Trust D 4
Statement of Operations Trust E 5
Statement of Operations Trust F 6
Balance Sheets Trust A 7
Balance Sheets Trust B 8
Balance Sheets Trust C 9
Balance Sheets Trust D 10
Balance Sheets Trust E 11
Balance Sheets Trust F 12
Statement of Cash Flows Trust A 13
Statement of Cash Flows Trust B 14
Statement of Cash Flows Trust C 15
Statement of Cash Flows Trust D 16
Statement of Cash Flows Trust E 17
Statement of Cash Flows Trust F 18
Notes to Financial Statements 19
<TABLE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations See pg. 19 (Note 1)
<CAPTION>
Part II. Other Information
<S> <C>
Item 1. Legal Proceedings (Not applicable)
Item 2. Changes in Securities (Not applicable)
Item 3. Default upon Senior Securities (Not applicable)
Item 4. Submission of Matters to a Vote
of Security Holders (Not applicable)
Item 5. Other Information (Not applicable)
</TABLE>
<PAGE>
The financial information included in this report has been prepared
in conformity with accounting practices and methods reflected in
the financial statements included in Trust A, B, C, D, E and F's
annual reports (Form 10-K) filed with the Securities and Exchange
Commission for the year ended December 31, 1995. Though not
examined by independent public accountants, the financial
information reflects, in the opinion of management, all adjustments
necessary to present a fair statement of results for the interim
period indicated. The results of operations for the Twenty-six
week period ending June 30, 1996, should not be regarded as
necessarily indicative of the results that may be expected for the
year 1996.
SIGNATURE
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 on the 5th day of August 1996.
MORTGAGE SECURITES III TRUSTS
A, B, C, D, E AND F
Trusts acting through Wilmington
Trust Company, not in its
capacity, but solely as Owner
Trustee
By:/s/ John M. Beeson, Jr.
Name: John M. Beeson, Jr.
Title: Vice President
<PAGE>
Mortgage Securities III Trust A
Statement of Operations
For the Twenty-six Weeks Ended June 30, 1996 and June 25, 1995
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Thirteen Twenty-six
Weeks Ended Weeks Ended
June 30, June 25, June 30, June 25,
1996 1995 1996 1995
<S> <C> <C> <C>
<C>
Interest income $ 267 $ 307 $ 537 $ 625
Interest expense 247 291 502 595
Net income (Note 6) $ 20 $ 16 $ 35 $ 30
</TABLE>)
The accompanying notes are an integral part of these statements.
-1-
<PAGE>)
Mortgage Securities III Trust B
Statement of Operations
For the Twenty-six Weeks Ended June 30, 1996 and June 25, 1995
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Thirteen Twenty-six
Weeks Ended Weeks Ended
June 30, June 25, June 30, June 25,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest income $ 431 $ 491 $ 867 $ 995
Interest expense 400 477 832 966
Net income (Note 6) $ 31 $ 14 $ 35 $ 29
</TABLE>
The accompanying notes are an integral part of these statements.
-2-
<PAGE>
<TABLE>
Mortgage Securities III Trust C
Statement of Operations
For the Twenty-six Weeks Ended June 30, 1996 and June 25, 1995
(Unaudited)
<CAPTION>
(Dollar amounts in thousands)
Thirteen Twenty-six
Weeks Ended Weeks Ended
June 30, June 25, June 30, June 25,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest income $ 376 $ 439 $ 769 $ 890
Interest expense 379 444 787 904
Net loss (Note 6) $ (3) $ (5) $ (18) $ (14)
</TABLE>
The accompanying notes are an integral part of these statements.
-3-
<PAGE>
Mortgage Securities III Trust D
Statement of Operations
For the Twenty-six Weeks Ended June 30, 1996 and June 25, 1995
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Thirteen Twenty-six
Weeks Ended Weeks Ended
June 30, June 25, June 30, June 25,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest income $ 355 $ 394 $ 701 $ 796
Interest expense 348 388 711 785
Net income/(loss) (Note 6) $ 7 $ 6 $ (10) $ 11
</TABLE>
The accompanying notes are an integral part of these statements.
-4-
<PAGE>
Mortgage Securities III Trust E
Statement of Operations
For the Twenty-six Weeks Ended June 30, 1996 and June 25, 1995
(Unaudited)
[CAPTION]
(Dollar amounts in thousands)
<TABLE>
Thirteen Twenty-six
Weeks Ended Weeks Ended
June 30, June 25, June 30, June 25,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest income $ 1,144 $ 1,231 $ 2,248 $ 2,475
Interest expense 1,248 1,369 2,493 2,736
Interest expense to
affiliate (Note 5) 710 691 1,421 1,348
Net loss (Note 6) $ (814) $ (829) $ (1,666) $ (1,609)
</TABLE>
The accompanying notes are an integral part of these statements.
-5-
<PAGE>
Mortgage Securities III Trust F
Statement of Operations
For the Twenty-six Weeks Ended June 30, 1996 and June 25, 1995
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Thirteen Twenty-six
Weeks Ended Weeks Ended
June 30, June 25, June 30, June 25,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest income $ 327 $ 357 $ 648 $ 724
Interest expense 363 356 683 726
Interest expense to
affiliate (Note 5) 345 336 691 655
Net loss (Note 6) $ (381) $ (335) $ (726) $ (657)
(/TABLE)
The accompanying notes are an integral part of these statements.
-6-
<PAGE>
Mortgage Securities III Trust A
Balance Sheets
June 30, 1996 and December 31, 1995
</TABLE>
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
June 30, Dec. 31,
Assets 1996 1995
(Unaudited)
<S> <C> <C>
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 1,328 844
1,329 845
Receivable from beneficial owner (Note 5) - 1,746
Interest receivable 88 98
Government National and Federal National
Mortgage Association Certificates, net
of unamortized premium of $40 and $46
(Notes 2, 4 and 5) 10,984 11,772
$12,401 $14,461
Liabilities and Owner's Beneficial Interest
Interest payable $ 584 $ 355
Collateralized mortgage obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 11,087 11,667
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Retained earnings 729 2,438
Total Owner's Beneficial Interest 730 2,439
$12,401 $14,461
</TABLE>
The accompanying notes are an integral part of these balance sheets.
-7-
<PAGE>
Mortgage Securities III Trust B
Balance Sheets
June 30, 1996 and December 31, 1995
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
June 30, Dec. 31,
Assets 1996 1995
(Unaudited)
<S> <C> <C>
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 2,907 1,003
2,908 1,004
Receivable from beneficial owner (Note 5) - 370
Interest receivable 150 161
Government National and Federal National
Mortgage Association Certificates, net
of unamortized discount of $214 and
$259 (Notes 2, 4 and 5) 17,715 19,751
$20,773 $21,286
Liabilities and Owner's Beneficial Interest
Interest payable $ 928 $ 570
Collateralized mortgage obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 18,227 18,763
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Retained earnings 1,617 1,952
Total Owner's Beneficial Interest 1,618 1,953
$20,773 $21,286
</TABLE>
The accompanying notes are an integral part of these balance sheets.
-8-
<PAGE>
Mortgage Securities III Trust C
Balance Sheets
June 30, 1996 and December 31, 1995
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
June 30, Dec. 31,
Assets 1996 1995
(Unaudited)
<S> <C> <C>
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 2,799 1,067
2,800 1,068
Receivable from beneficial owner - 236
Interest receivable 121 138
Government National and Federal National
Mortgage Association Certificates, net
of unamortized discount of $179 and
$216 (Notes 2, 4 and 5) 15,701 17,721
$18,622 $19,163
Liabilities and Owner's Beneficial Interest
Interest payable $ 870 $ 535
Collateralized mortgage obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 16,905 17,529
Payable to beneficial owner (Note 5)
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Retained earnings 846 1,098
Total Owner's Beneficial Interest 847 1,099
$18,622 $19,163
</TABLE>
The accompanying notes are an integral part of these balance sheets.
-9-
<PAGE>
Mortgage Securities III Trust D
Balance Sheets
June 30, 1996 and December 31, 1995
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
June 30, Dec. 31,
Assets 1996 1995
(Unaudited)
<S> <C> <C>
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 1,683 223
1,684 224
Receivable from beneficial owner 20 1,653
Interest receivable 115 124
Government National and Federal National
Mortgage Association Certificates, net
of unamortized premium of $64 and
$74 (Notes 2, 4 and 5) 15,936 17,097
$17,755 $19,098
Liabilities and Owner's Beneficial Interest
Interest payable $ 680 $ 241
Collateralized mortgage obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 16,619 16,725
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Retained earnings 455 2,131
Total Owner's Beneficial Interest 456 2,132
$17,755 $19,098
</TABLE>
The accompanying notes are an integral part of these balance sheets.
-10-
<PAGE>
Mortgage Securities III Trust E
Balance Sheets
June 30, 1996 and December 31, 1995
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
June 30, Dec. 31,
Assets 1996 1995
(Unaudited)
<S> <C> <C>
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 5,879 2,716
5,880 2,717
Receivable from beneficial owner 1,661 1,662
Interest receivable 351 389
Government National and Federal National
Mortgage Association Certificates, net
of unamortized discount of $465
and $597 (Notes 2, 4 and 5) 50,417 54,032
Deferred hedging costs (Note 5) 376 460
$ 58,685 $ 59,260
Liabilities and Owner's Beneficial Interest
Interest payable $ 2,151 $ 1,143
Collateralized mortgage obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 45,516 46,855
Payable to Weyerhaeuser Mortgage Company
(Note 5) 35,946 32,705
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Accumulated deficit (24,929) (21,444)
Total Accumulated Deficit (24,928) (21,443)
$ 58,685 $ 59,260
The accompanying notes are an integral part of these balance sheets.
</TABLE>
-11-
<PAGE>
Mortgage Securities III Trust F
Balance Sheets
June 30, 1996 and December 31, 1995
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
June 30, Dec. 31,
Assets 1996 1995
(Unaudited)
<S> <C> <C>
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 1,926 684
1,927 685
Receivable from beneficial owner - 1,937
Interest receivable 102 111
Government National and Federal National
Mortgage Association Certificates, net
of unamortized discount of $53
and $64 (Notes 2, 4 and 5) 13,331 14,604
Deferred hedging costs (Note 5) 115 178
$ 15,475 $ 17,515
Liabilities and Owner's Beneficial Interest
Interest payable $ 651 $ 389
Collateralized mortgage obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 12,344 12,676
Payable to Weyerhaeuser Mortgage Company
(Note 5) 8,817 15,899
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Accumulated deficit (6,338) (11,450)
Total Accumulated Deficit (6,337) (11,449)
$ 15,475 $ 17,515
</TABLE>
The accompanying notes are an integral part of these balance sheets.
-12-
<PAGE>
Mortgage Securities III Trust A
Statement of Cash Flows
For the Twenty-six Weeks Ended June 30, 1996 and June 25, 1995
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Twenty-six
Weeks Ended
June 30, June 25,
1996 1995
<S> <C> <C>
Cash flows from operations:
Net income $ 35 $ 30
Adjustments to reconcile net income
to net cash provided by operations:
Amortization 1 9
Accretion of interest
Changes in:
Interest receivable 10 9
Receivable from beneficial owner 1,746 -
Interest payable 229 (38)
Cash flows from operations 2,021 10
Cash flows from investing:
Mortgage backed certificates --
Collections on principal 789 967
Cash flows from financing:
Dividends (1,745) -
Collateralized mortgage obligation bonds --
Payments on principal (581) (1,276)
Net increase (decrease) in cash and equivalents 484 (299)
Cash and equivalents at beginning of year 845 1,021
Cash and equivalents at end of quarter $ 1,329 $ 722
Supplemental disclosures:
Cash paid during the period for interest $ 584 $ 627
</TABLE>
The accompanying notes are an integral part of these statements.
-13-
<PAGE>
Mortgage Securities III Trust B
Statement of Cash Flows
For the Twenty-six Weeks Ended June 30, 1996 and June 25, 1995
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Twenty-six
Weeks Ended
June 30, June 25,
1996 1995
<S> <C> <C>
Cash flows from operations:
Net income $ 35 $ 29
Adjustments to reconcile net income
to net cash provided by operations:
Amortization 7 10
Accretion of interest 633 566
Changes in:
Interest receivable 11 8
Receivable from beneficial owner 370 0
Interest payable 358 (37)
Cash flows from operations 1,414 576
Cash flows from investing:
Mortgage backed certificates --
Collections on principal 2,072 1,245
Cash flows from financing:
Dividends (369) -
Payments on principal-CMO Bonds (1,213) (1,807)
Net increase (decrease) in cash and equivalents 1,904 14
Cash and equivalents at beginning of year 1,004 1,093
Cash and equivalents at end of quarter $ 2,908 $ 1,107
Supplemental disclosures:
Cash paid during the period for interest $ 430 $ 412
</TABLE>
The accompanying notes are an integral part of these statements.
-14-
<PAGE>
Mortgage Securities III Trust C
Statement of Cash Flows
For the Twenty-six Weeks Ended June 30, 1996 and June 25, 1995
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Twenty-six
Weeks Ended
June 30, June 25,
1996 1995
<S> <C> <C>
Cash flows from operations:
Net loss $ (18) $ (14)
Adjustments to reconcile net loss
to net cash provided by operations:
Amortization 19 16
Accretion of interest
Changes in:
Interest receivable 17 7
Receivable from beneficial owners 236 0
Interest payable 335 (35)
Cash flows from operations 589 (26)
Cash flows from investing:
Mortgage backed certificates --
Collections on principal 2,048 1,119
Cash flows from financing:
Dividends (235) -
Collateralized mortgage obligation bonds --
Payments on principal (670) (1,168)
Net increase (decrease) in cash and equivalents 1,732 (75)
Cash and equivalents at beginning of year 1,068 1,015
Cash and equivalents at end of quarter $ 2,800 $ 940
Supplemental disclosures:
Cash paid during the period for interest $ 787 $ 909
</TABLE>
The accompanying notes are an integral part of these statements.
-15-
<PAGE>
Mortgage Securities III Trust D
Statement of Cash Flows
For the Twenty-six Weeks Ended June 30, 1996 and June 25, 1995
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Twenty-six
Weeks Ended
June 30, June 25,
1996 1995
<S> <C> <C>
Cash flows from operations:
Net income/(loss) $ (10) $ 11
Adjustments to reconcile net income
to net cash provided by operations:
Amortization 9 6
Changes in:
Interest receivable 9 6
Receivable from beneficial owner 1,633 (37)
Interest payable 439 (8)
Cash flows from operations 2,080 (22)
Cash flows from investing:
Mortgage backed certificates --
Collections on principal 1,165 761
Cash flows from financing:
Dividends (1,667) -
Collateralized mortgage obligation bonds --
Payments on principal (118) (546)
Net increase (decrease) in cash and equivalents 1,460 193
Cash and equivalents at beginning of year 224 279
Cash and equivalents at end of quarter $ 1,684 $ 472
Supplemental disclosures:
Cash paid during the period for interest $ 711 $ 790
</TABLE>
The accompanying notes are an integral part of these statements.
-16-
<PAGE>
Mortgage Securities III Trust E
Statement of Cash Flows
For the Twenty-six Weeks Ended June 30, 1996 and June 25, 1995
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>)
Twenty-six
Weeks Ended
June 30, June 25,
1996 1995
<S> <C> <C>
Cash flows from operations:
Net loss $ (1,666) $ (1,609)
Adjustments to reconcile net loss to
net cash provided for operations:
Amortization, net 238 228
Accretion of interest 1,750 1,566
Changes in:
Interest receivable 38 16
Receivable from beneficial owners 1,821 -
Interest payable 1,008 (56)
Ppayable to Weyerhaeuser
Mortgage Company (Note 5) 1,421 1,349
Cash flows from operations 4,610 1,494
Cash flows from investing:
Mortgage backed certificates --
Collections on principal 3,719 2,749
Cash flows from financing:
Dividends (1,820) -
Collateralized mortgage obligation bonds --
Payments on principal (3,346) (4,005)
Net increase (decrease)in cash and equivalents 3,163 238
Cash and equivalents at beginning of year 2,717 2,712
Cash and equivalents at end of quarter $ 5,880 $ 2,950
Supplemental disclosures:
Cash paid during the period for interest $ 3,914 $ 952
</TABLE>
The accompanying notes are an integral part of these statements.
-17-
<PAGE>
Mortgage Securities III Trust F
Statement of Cash Flows
For the Twenty-six Weeks Ended June 30, 1996 and June 25, 1995
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Twenty-six
Weeks Ended
June 30, June 25,
1996 1995
<S> <C> <C>
Cash flows from operations:
Net loss $ (726) $ (657)
Adjustments to reconcile net loss
to net cash provided by operations:
Amortization, net 103 71
Accretion of interest 388 347
Changes in:
Interest receivable 9 8
Receivable from beneficial owner 1,937 -
Interest payable 262 (40)
Interest payable to Weyerhaeuser
Mortgage Company (Note 5) 691 656
Cash flows from operations 2,664 385
Cash flows from investing:
Mortgage backed certificates --
Collections on principal 1,297 903
Cash flows from financing:
Collateralized mortgage obligation bonds --
Payments on principal (783) (1,780)
Payment on Weyerhaeuser Mtg Co. note (7,773) -
Contribution 5,837 -
Net increase (decrease) in cash and equivalents 1,242 (492)
Cash and equivalents at beginning of year 685 1,237
Cash and equivalents at end of quarter $ 1,927 $ 745
Supplemental disclosures:
Cash paid during the period for interest $ 1,374 $ 338
</TABLE>
The accompanying notes are an integral part of these statements.
-18-
<PAGE>
Mortgage Securities III Trusts A, B, C, D, E and F
Notes to Financial Statements
For the Twenty-six Weeks Ended June 30, 1996
(Dollar amounts in thousands)
Note 1. Description of business:
Mortgage Securities III Trusts A, B, C, D, E and F (the
"Trusts") were established under the laws of Delaware by a
trust agreement. Prior to December 27, 1987, the trust
agreement was among Mortgage Securities III Corporation,
Weyerhaeuser Real Estate Company and Wilmington Trust
Company. On December 27, 1987, Weyerhaeuser Real Estate
Company dividended its beneficial interests in Mortgage
Securities III Trusts A, B, C, D, E and F to Weyerhaeuser
Company which in turn contributed its beneficial interests
in the Trusts to Weyerhaeuser Financial Services, Inc., a
wholly-owned subsidiary of Weyerhaeuser Company. The
Trusts were organized to, and are engaged to raise funds
through the issuance and sale of Collateralized Mortgage
Obligation Bonds collateralized by Government National
Mortgage Association (GNMA) and Federal National Mortgage
Association (FNMA) certificates. The Trusts A, B, C, D, E
and F were established on April 8, 1986 and commenced
business on June 30, 1986, September 30, 1986, December
30, 1986, February 27, 1987, December 22, 1987, and March
30, 1988, respectively.
<TABLE>
Each Trust has issued a series of Collateralized Mortgage
Obligations (the "Bonds"). Trust A, B, C, D and F's Bonds
are collateralized by GNMA and FNMA certificates and Trust
E's Bonds are collateralized by GNMA certificates.
-19-
<PAGE>
<CAPTION>
Trust Date Issued Bonds Issued
<S> <C> <C>
A June 30, 1986 $100,000
B September 30, 1986 $100,000
C December 30, 1986 $100,000
D February 27, 1987 $ 75,600
E December 22, 1987 $131,600
F March 30, 1988 $129,250
</TABLE>
Activity during the second quarter of 1996 consisted of
the collection of principal and interest on the GNMA and
FNMA certificates and disbursement of the required payment
of principal and interest to the bondholders.
Note 2. Accounting policies:
Trust A, B, C and D's GNMA and FNMA certificates are
carried at par value adjusted for any unamortized premiums
or discounts. These premiums and discounts are amortized
using a method approximating the effective interest method
over the estimated life of the underlying mortgage loans.
The Bonds are carried at par value less unamortized
discounts. These discounts are amortized using a method
approximating the effective interest method over the
estimated life of the Bonds. Due to prepayments on the
underlying mortgage loans, each quarter revisions are made
to the remaining period to maturity of the certificates
and the bonds. The amortization described above reflects
these revisions.
Trust E's GNMA certificates and Trust F's GNMA and FNMA
certificates are carried at par value less unamortized
discounts. These discounts are amortized using an
interest method which computes a constant effective yield
over the contractual life of the certificates. Hedging
costs related to holding GNMA and FNMA certificates have
-20-
<PAGE>
been deferred and are also being amortized using the
interest method. The Bonds are carried at par value less
unamortized discounts. These discounts are amortized using
an interest method which computes a constant effective
yield over the contractual life of the Bonds.
In December 1986 the Financial Accounting Standards Board
issued Statement No. 91, which establishes a new method of
accounting for nonrefundable fees and costs associated
with purchasing a group of loans and the method of
recognizing interest income and expense. This statement
must be applied prospectively to all transactions entered
into for fiscal years beginning after December 15, 1987.
Retroactive application with restatement of the financial
statements for all years presented is optional. Upon
evaluation of this accounting statement and the current
method of accounting, the Company elected to adopt
Statement No. 91 prospectively for Trusts E and F. Under
the new standard, all discounts and hedging costs will be
recognized over the contractual life of the loan as a
yield adjustment. The Company elected not to adopt
Statement No. 91 retroactively for Trusts A, B, C and D.
Since no transactions have been entered into after the
effective date of this statement, the Company will
continue to use its current method, which approximates the
effective interest method, for Trusts A, B, C and D.
Cash and equivalents include cash held in the collection
account and invested in short term investments with
maturities of less than three months.
All investment securities held by the Trusts are
classified as "held to maturity." The amortized cost and
estimated market value of investments in debt securities
are as follows:
-21-
<PAGE>
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
Held to Maturity:
<S> <C> <C> <C> <C>
Mortgage-backed
Securities
Trust A $ 10,984 $ 418 $ - $ 11,402
Trust B 17,715 610 - 18,325
Trust C 15,701 519 - 16,220
Trust D 15,936 538 - 16,474
Trust E 50,417 399 - 50,816
Trust F 13,331 372 - 13,703
</TABLE>
Note 3. Collateralized Mortgage Obligation Bonds:
Bonds at June 30, 1996 and December 31, 1995 consist of
the following:
Collateralized Mortgage Obligation June 30, Dec. 31,
Bonds, Trust A: 1996 1995
Class 4 - 9.20%, stated maturity
July 1, 2016 $11,142 $11,724
Unamortized discount (55) (57)
$11,087 $11,667
Collateralized Mortgage Obligation
Bonds, Trust B:
Class 3 - 9.00%, stated maturity
April 1, 2010 $ 4,596 $ 5,538
Class 4 - 9.00%, stated maturity
October 1, 2016 13,793 13,590
Unamortized discount (162) (365)
$18,227 $18,763
Collateralized Mortgage Obligation
Bonds, Trust C:
Class 4 - 9.00%, stated maturity
January 1, 2017 $17,324 $17,994
Unamortized discount (419) (465)
$16,905 $17,529
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Collateralized Mortgage Obligation June 30, Dec. 31,
Bonds, Trust D: 1996 1995
Class 2 - 8.55%, stated maturity
December 1, 2014 $ 2,119 $ 2,237
Class 3 - 8.60%, stated maturity
March 1, 2017 14,600 14,600
Unamortized discount (100) (112)
$ 16,619 $ 16,725
Collateralized Mortgage Obligation
Bonds, Trust E:
Class 3 - 9.00%, stated maturity
January 1, 2006 $ 10,744 $ 13,186
Class 4 - 9.00%, stated maturity
January 1, 2018 38,462 37,616
Unamortized discount (3,690) (3,947)
$ 45,516 $ 46,855
Collateralized Mortgage Obligation
Bonds, Trust F:
Class 3 - 9.00%, stated maturity
January 1, 2014 $ 4,154 $ 4,736
Class 4 - 9.00%, stated maturity
April 1, 2018 8,521 8,334
Unamortized discount (331) (394)
$ 12,344 $ 12,676
The stated maturity is the date such class will be fully
paid, assuming that scheduled interest and principal
payments (with no prepayments) on the certificates are
timely received.
All collections on the certificates pledged as security for
the Bonds will be remitted directly to a collection account
(the "Collection Account") established with the Trustee and
together with the reinvestment earnings thereon, will be
available for application to the payment of principal and
interest on the bonds on the following payment date.
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<PAGE>
Each Trust's Bonds are subject to a special redemption, in
whole or in part, if, as a result of substantial payments
of principal on the underlying mortgage loans and/or low
reinvestment yields, the Trusts determine that the amount
of cash anticipated to be on deposit in the Collection
Accounts on the next payment date might be insufficient to
make required payments on the Bonds. Any such redemption
would not exceed the principal amount of Bonds that would
otherwise be required to be paid on the next payment date.
As a result, a special redemption of Bonds will not result
in a payment to bondholders more than two months earlier
than the payment date on which such payment would otherwise
have been received. The Bonds are not otherwise subject to
call at the option of the Trusts except that the Class 2
and Class 3 Bonds may, in the case of each such class, be
redeemed in whole, but not in part, at the Trusts' option
on any payment date if the aggregate outstanding
principal amount of the Bonds of the class to be redeemed
is less than 10% of its aggregate initial principal amount.
Trust A, B, C, E and F's Class 4 Bonds may be redeemed in
whole, but not in part, at the Trusts' option on any
payment date on or after July 1, 2001, October 1, 2001,
January 1, 2002, January 1, 2003, and April 1, 2003,
respectively, if only the Class 4 Bonds are then
outstanding (or on any earlier payment date if only the
Class 4 Bonds are then outstanding and the current
principal amount of Trust A, B, C, E and F's Class 4 Bonds
are less than $10,560, $6,100, $10,500, $13,160, $12,925,
respectively).
Trust D's Class 2 Bonds may be redeemed in whole, but not
in part, at the Trust's option on any payment date on or
after March 1, 1997 and the Class 3 Bonds may be redeemed
in whole, but not in part, at the Trust's option on any
payment date on or after March 1, 2002.
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<PAGE>
Any such redemptions at the option of the Trusts shall be at
a price equal to 100% of the unpaid principal amount of such
Bonds, plus accrued interest.
Note 4. Assets pledged:
Trust A, B, C, D and F's Bonds are collateralized by the
Trusts' GNMA and FNMA certificates and the Collection
Accounts (see Note 3). Trust E's Bonds are collateralized
by the Trust's GNMA certificates and the Collection Account
(see Note 3). Collections on the certificates are used to
meet the quarterly Bond interest payments and to reduce the
outstanding principal balance on the Bonds.
Note 5. Related parties:
Trusts A, B, C and D purchased from an affiliate,
Weyerhaeuser Mortgage Company, GNMA and FNMA certificates
which were used to collateralize the Bonds. The purchases
were at par value, plus Trust A and D's purchase premiums
and less Trust B and C's purchase discounts. The purchases
were financed with market-rate short-term debt from this
affiliate until proceeds from the Bond issuance were
obtained.
Trust E purchased from an affiliate, Weyerhaeuser Mortgage
Company, GNMA certificates which were used to collateralize
the Bonds. Trust F purchased from an affiliate,
Weyerhaeuser Mortgage Company, GNMA and FNMA certificates
which were used to collateralize the Bonds. The purchases
were at par value, less the purchase discounts. The
purchases were financed with the proceeds received from the
Bond issuances and notes due to Weyerhaeuser Mortgage
Company. The notes will bear interest at Bank of America's
prime rate and interest shall be compounded annually. The
principal balances and all accrued interest shall be due on
each note on January 1, 2018 ("Maturity"). The principal
and
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<PAGE>
(accrued interest on the notes are guaranteed by
Weyerhaeuser Financial Services, Inc., to the extent that
residual payments from the GNMA and FNMA certificates are
insufficient to retire the debt and related interest.
Certain ongoing administrative and accounting functions are
provided by the beneficial owner at no cost to each Trust.
Note 6. Results of operations:
All results of operations will be transferred to the
beneficial owner of the Trusts. The beneficial owner of
the Trusts being Mortgage Securities III Corporation.
Mortgage Securities III will be responsible for all tax
liabilities incurred relating to the Trusts' operations.
-26-
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