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 Thirteen Weeks Ended March 31, 1996 or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number 33-2253
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 Thirteen Weeks Ended March 31, 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 thirteen week
period ending March 31, 1996, should not be regarded as necessarily
indicative of the results that may be expected for the year 1996.
<PAGE>
Mortgage Securities III Trust A
Statement of Operations
For the Thirteen Weeks Ended March 31, 1996 and March 26, 1995
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Thirteen
Weeks Ended
March 31, March 26,
1996 1995
<S> <C> <C>
Interest income $ 271 $ 318
Interest expense 255 304
---- ----
Net income/(loss) $ 16 $ 14
</TABLE> ==== ===
The accompanying notes are an integral part of these statements.
-1-
<PAGE>
Mortgage Securities III Trust B
Statement of Operations
For the Thirteen Weeks Ended March 31, 1996 and March 26, 1995
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Thirteen
Weeks Ended
March 31, March 26,
1996 1995
<S> <C> <C>
Interest income $ 436 $ 504
Interest expense 432 489
---- ----
Net income/(loss) (Note 6) $ 4 $ 15
</TABLE> ==== ====
The accompanying notes are an integral part of these statements.
-2-
<PAGE>
<TABLE>
Mortgage Securities III Trust C
Statement of Operations
For the Thirteen Weeks Ended March 31, 1996 and March 26, 1995
(Unaudited)
<CAPTION>
(Dollar amounts in thousands)
Thirteen
Weeks Ended
March 31, March 26,
1996 1995
<S> <C> <C>
Interest income $ 393 $ 451
Interest expense 408 460
---- ----
Net income/(loss)(Note 6) $ (15) $ (9)
</TABLE> ==== ====
The accompanying notes are an integral part of these statements.
-3-
<PAGE>
Mortgage Securities III Trust D
Statement of Operations
For the Thirteen Weeks Ended March 31, 1996 and March 26, 1995
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Thirteen
Weeks Ended
March 31, March 26,
1996 1995
<S> <C> <C>
Interest income $ 346 $ 402
Interest expense 363 397
---- ----
Net income/(loss) (Note 6) $ (17) $ 5
</TABLE> ==== ====
The accompanying notes are an integral part of these statements.
-4-
<PAGE>
Mortgage Securities III Trust E
Statement of Operations
For the Thirteen Weeks Ended March 31, 1996 and March 26, 1995
(Unaudited)
[CAPTION]
(Dollar amounts in thousands)
<TABLE>
Thirteen
Weeks Ended
March 31, March 26,
1996 1995
<S> <C> <C>
Interest income $ 1,104 $ 1,244
Interest expense 1,245 1,367
Interest expense to
affiliate (Note 5) 711 657
----- -----
Net income/(loss)(Note 6) $ (852) $ (780)
</TABLE> ===== =====
The accompanying notes are an integral part of these statements.
-5-
<PAGE>
Mortgage Securities III Trust F
Statement of Operations
For the Thirteen Weeks Ended March 31, 1996 and March 26, 1995
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Thirteen
Weeks Ended
March 31, March 26,
1996 1995
<S> <C> <C>
Interest income $ 321 $ 367
Interest expense 320 370
Interest expense to
affiliate (Note 5) 346 319
---- ----
Net income/(loss) (Note 6) $ (345) $ (322)
</TABLE> ==== ====
The accompanying notes are an integral part of these statements.
-6-
<PAGE>
Mortgage Securities III Trust A
Balance Sheets
March 31, 1996 and December 31, 1995
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
March 31, Dec. 31,
Assets 1996 1995
(Unaudited)
<S> <C> <C>
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 577 844
----- -----
578 845
Receivable from beneficial owner (Note 5) 1,746 1,746
Interest receivable 89 98
Government National and Federal National
Mortgage Association Certificates, net
of unamortized premium of $40 and $46
(Notes 2, 4 and 5) 11,469 11,772
------ ------
$13,882 $14,461
====== ======
Liabilities and Owner's Beneficial Interest
Interest payable $ 339 $ 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 2,455 2,438
----- -----
Total Owner's Beneficial Interest 2,456 2,439
----- -----
$13,882 $14,461
</TABLE> ====== ======
The accompanying notes are an integral part of these balance sheets.
-7-
<PAGE>
Mortgage Securities III Trust B
Balance Sheets
March 31, 1996 and December 31, 1995
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
March 31, Dec. 31,
Assets 1996 1995
(Unaudited)
<S> <C> <C>
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 1,714 1,003
----- -----
1,715 1,004
Receivable from beneficial owner (Note 5) 370 370
Interest receivable 154 161
Government National and Federal National
Mortgage Association Certificates, net
of unamortized discount of $214 and
$259 (Notes 2, 4 and 5) 18,474 19,751
------ ------
$20,713 $21,286
Liabilities and Owner's Beneficial Interest
Interest payable $ 547 $ 570
Collateralized mortgage obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 18,209 18,763
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Retained earnings 1,956 1,952
----- -----
Total Owner's Beneficial Interest 1,957 1,953
$20,713 $21,286
</TABLE> ====== ======
The accompanying notes are an integral part of these balance sheets.
-8-
<PAGE>
Mortgage Securities III Trust C
Balance Sheets
March 31, 1996 and December 31, 1995
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
March 31, Dec. 31,
Assets 1996 1995
(Unaudited)
<S> <C> <C>
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 1,450 1,067
----- -----
1,451 1,068
Receivable from beneficial owner 236 236
Interest receivable 122 138
Government National and Federal National
Mortgage Association Certificates, net
of unamortized discount of $179 and
$216 (Notes 2, 4 and 5) 16,675 17,721
------ ------
$18,484 $19,163
Liabilities and Owner's Beneficial Interest
Interest payable $ 512 $ 535
Collateralized mortgage obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 16,886 17,529
Payable to beneficial owner (Note 5)
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Retained earnings 1,085 1,098
----- -----
Total Owner's Beneficial Interest 1,086 1,099
$18,484 $19,163
</TABLE> ====== ======
The accompanying notes are an integral part of these balance sheets.
-9-
<PAGE>
Mortgage Securities III Trust D
Balance Sheets
March 31, 1996 and December 31, 1995
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
March 31, Dec. 31,
Assets 1996 1995
(Unaudited)
<S> <C> <C>
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 1,063 223
----- ----
1,064 224
Receivable from beneficial owner 1,673 1,653
Interest receivable 116 124
Government National and Federal National
Mortgage Association Certificates, net
of unamortized premium of $64 and
$74 (Notes 2, 4 and 5) 16,211 17,097
------ ------
$19,064 $19,098
====== ======
Liabilities and Owner's Beneficial Interest
Interest payable $ 337 $ 241
Collateralized mortgage obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 16,613 16,725
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Retained earnings 2,113 2,131
----- -----
Total Owner's Beneficial Interest 2,114 2,132
$19,064 $19,098
</TABLE> ====== ======
The accompanying notes are an integral part of these balance sheets.
-10-
<PAGE>
Mortgage Securities III Trust E
Balance Sheets
March 31, 1996 and December 31, 1995
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
March 31, Dec. 31,
Assets 1996 1995
(Unaudited)
<S> <C> <C>
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 2,658 2,716
----- -----
2,659 2,717
Receivable from beneficial owner 1,662 1,662
Interest receivable 357 389
Government National and Federal National
Mortgage Association Certificates, net
of unamortized discount of $465
and $597 (Notes 2, 4 and 5) 52,492 54,032
Deferred hedging costs (Note 5) 438 460
------ ------
$ 57,608 $ 59,260
Liabilities and Owner's Beneficial Interest
Interest payable $ 1,096 $ 1,143
Collateralized mortgage obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 45,388 46,855
Payable to Weyerhaeuser Mortgage Company
(Note 5) 33,419 32,705
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Accumulated deficit (22,296) (21,444)
------ ------
Total Owner's Beneficial Interest (22,295) (21,443)
$ 57,608 $ 59,260
====== ======
</TABLE>
The accompanying notes are an integral part of these balance sheets.
-11-
<PAGE>
Mortgage Securities III Trust F
Balance Sheets
March 31, 1996 and December 31, 1995
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
March 31, Dec. 31,
Assets 1996 1995
(Unaudited)
<S> <C> <C>
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 478 684
------ -----
479 685
Receivable from beneficial owner 1,937 1,937
Interest receivable 106 111
Government National and Federal National
Mortgage Association Certificates, net
of unamortized discount of $53
and $64 (Notes 2, 4 and 5) 14,447 14,604
Deferred hedging costs (Note 5) 175 178
------ ------
$ 17,144 $ 17,515
Liabilities and Owner's Beneficial Interest
Interest payable $ 379 $ 389
Collateralized mortgage obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 12,313 12,676
Payable to Weyerhaeuser Mortgage Company
(Note 5) 16,246 15,899
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Accumulated deficit (11,795) (11,450)
------ ------
Total Owner's Beneficial Interest (11,794) (11,449)
$ 17,144 $ 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 Thirteen Weeks Ended March 31, 1996 and March 26, 1995
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Thirteen
Weeks Ended
March 31, March 26,
1996 1995
<S> <C> <C>
Cash flows from operations:
Net income/(loss) $ 16 $ 14
Adjustments to reconcile net income
to net cash provided by operations:
Amortization 3 6
Accretion of interest
Changes in:
Interest receivable 9 4
Interest payable (16) (21)
---- ----
Cash flows from operations 12 3
---- ----
Cash flows from investing:
Mortgage backed certificates --
Collections on principal 302 552
---- ----
Cash flows from financing:
Collateralized mortgage obligation bonds --
Payments on principal (581) (705)
----- -----
Net increase (decrease) in cash and equivalents (267) (150)
Cash and equivalents at beginning of year 844 1,021
----- -----
Cash and equivalents at end of quarter $ 577 $ 871
===== =====
Supplemental disclosures:
Cash paid during the period for interest $ 254 $ 322
</TABLE>
The accompanying notes are an integral part of these statements.
-13-
<PAGE>
Mortgage Securities III Trust B
Statement of Cash Flows
For the Thirteen Weeks Ended March 31, 1996 and March 26, 1995
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Thirteen
Weeks Ended
March 31, March 26,
1996 1995
<S> <C> <C>
Cash flows from operations:
Net income/(loss) $ 4 $ 15
Adjustments to reconcile net income
to net cash provided by operations:
Amortization 6 4
Accretion of interest 306 280
Changes in:
Interest receivable 7 4
Interest payable (23) (18)
---- ----
Cash flows from operations 300 285
---- ----
Cash flows from investing:
Mortgage backed certificates --
Collections on principal 991 618
---- ----
Cash flows from financing:
Collateralized mortgage obligation bonds --
Payments on principal (580) (884)
----- -----
Net increase (decrease) in cash and equivalents 711 19
Cash and equivalents at beginning of year 1,003 1,093
----- -----
Cash and equivalents at end of quarter $ 1,714 $ 1,112
===== =====
Supplemental disclosures:
Cash paid during the period for interest $ 408 $ 216
</TABLE>
The accompanying notes are an integral part of these statements.
-14-
<PAGE>
Mortgage Securities III Trust C
Statement of Cash Flows
For the Thirteen Weeks Ended March 31, 1996 and March 26, 1995
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Thirteen
Weeks Ended
March 31, March 26,
1996 1995
<S> <C> <C>
Cash flows from operations:
Net loss $ (15) $ (9)
Adjustments to reconcile net income
to net cash provided by operations:
Amortization 13 10
Accretion of interest
Changes in:
Interest receivable 15 3
Interest payable (23) (17)
---- ----
Cash flows from operations (10) (13)
---- ----
Cash flows from investing:
Mortgage backed certificates --
Collections on principal 1,063 610
------ -----
Cash flows from financing:
Collateralized mortgage obligation bonds --
Payments on principal (670) (558)
------ -----
Net increase (decrease) in cash and equivalents 383 39
Cash and equivalents at beginning of year 1,068 1,015
----- -----
Cash and equivalents at end of quarter $ 1,451 $ 1,054
===== =====
Supplemental disclosures:
Cash paid during the period for interest $ 382 $ 461
</TABLE>
The accompanying notes are an integral part of these statements.
-15-
<PAGE>
Mortgage Securities III Trust D
Statement of Cash Flows
For the Thirteen Weeks Ended March 31, 1996 and March 26, 1995
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Thirteen
Weeks Ended
March 31, March 26,
1996 1995
<S> <C> <C>
Cash flows from operations:
Net income/(loss) $ (17) $ 5
Adjustments to reconcile net income
to net cash provided by operations:
Amortization 11 4
Changes in:
Interest receivable 6 3
Receivable from beneficial owner (22) (22)
Interest payable (96) (6)
---- ----
Cash flows from operations (118) (16)
----- ----
Cash flows from investing:
Mortgage backed certificates --
Collections on principal 840 340
----- ----
Cash flows from financing:
Collateralized mortgage obligation bonds --
Payments on principal 118 (441)
----- -----
Net increase (decrease) in cash and equivalents 840 (117)
Cash and equivalents at beginning of year 223 279
----- -----
Cash and equivalents at end of quarter $ 1,063 $ 162
===== =====
Supplemental disclosures:
Cash paid during the period for interest $ 356 $ 400
</TABLE>
The accompanying notes are an integral part of these statements.
-16-
<PAGE>
Mortgage Securities III Trust E
Statement of Cash Flows
For the Thirteen Weeks Ended March 31, 1996 and March 26, 1995
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Thirteen
Weeks Ended
March 31, March 26,
1996 1995
<S> <C> <C>
Cash flows from operations:
Net loss $ (852) $ (780)
Adjustments to reconcile net loss to
net cash provided for operations:
Amortization, net 106 109
Accretion of interest 846 774
Changes in:
Interest receivable 32 9
Interest payable (47) (33)
Interest payable to Weyerhaeuser
Mortgage Company (Note 5) 714 657
----- ----
Cash flows from operations 799 736
----- ----
Cash flows from investing:
Mortgage backed certificates --
Collections on principal 1,562 993
----- ----
Cash flows from financing:
Collateralized mortgage obligation bonds --
Payments on principal (2,419) (2,228)
------- -------
Net increase (decrease)in cash and equivalents (58) (499)
Cash and equivalents at beginning of year 2,717 2,712
------ ------
Cash and equivalents at end of quarter $ 2,659 $ 2,213
===== =====
Supplemental disclosures:
Cash paid during the period for interest $ 1,096 $ 501
</TABLE>
The accompanying notes are an integral part of these statements.
-17-
<PAGE>
Mortgage Securities III Trust F
Statement of Cash Flows
For the Thirteen Weeks Ended March 31, 1996 and March 26, 1995
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Thirteen
Weeks Ended
March 31, March 26,
1996 1995
<S> <C> <C>
Cash flows from operations:
Net loss $ (345) $ (322)
Adjustments to reconcile net income
to net cash provided by operations:
Amortization, net 139 37
Accretion of interest 188 172
Changes in:
Interest receivable 6 6
Interest payable (10) (24)
Interest payable to Weyerhaeuser
Mortgage Company (Note 5) 346 319
---- ----
Cash flows from operations 324 188
---- ----
Cash flows from investing:
Mortgage backed certificates --
Collections on principal 160 509
---- ----
Cash flows from financing:
Collateralized mortgage obligation bonds --
Payments on principal (690) (1,062)
----- -------
Net increase (decrease) in cash and equivalents (206) (365)
Cash and equivalents at beginning of year 685 1,237
----- ------
Cash and equivalents at end of quarter $ 479 $ 872
===== ======
Supplemental disclosures:
Cash paid during the period for interest $ 379 $ 181
</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 Thirteen Weeks Ended March 31, 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.
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>
<TABLE>
<CAPTION>
Date Bonds
Trust Issued 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 first 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 $ 11,469 $ 437 $ - $ 11,906
Trust B 18,474 637 - 19,111
Trust C 16,675 551 - 17,226
Trust D 11,211 210 - 16,421
Trust E 52,492 416 - 52,908
Trust F 14,447 404 - 14,851
</TABLE>
Note 3. Collateralized Mortgage Obligation Bonds:
<TABLE>
Bonds at March 31, 1996 and December 31, 1995 consist of
the following:
<S> <C> <C>
Collateralized Mortgage Obligation March 31, 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 (180) (365)
------- -------
$18,209 $18,763
====== ======
Collateralized Mortgage Obligation
Bonds, Trust C:
Class 4 - 9.00%, stated maturity
January 1, 2017 $17,324 $17,994
Unamortized discount (438) (465)
------- -------
$16,886 $17,529
====== ======
-22-
<PAGE>
Collateralized Mortgage Obligation March 31, Dec. 31,
Bonds, Trust D: 1996 1995
--------- --------
Class 2 - 8.55%, stated maturity
December 1, 2014 $ 2,065 $ 2,237
Class 3 - 8.60%, stated maturity
March 1, 2017 14,600 14,600
Unamortized discount (52) (112)
------- -------
$ 16,613 $ 16,725
====== ======
Collateralized Mortgage Obligation
Bonds, Trust E:
Class 3 - 9.00%, stated maturity
January 1, 2006 $ 10,745 $ 13,186
Class 4 - 9.00%, stated maturity
January 1, 2018 38,462 37,616
Unamortized discount (3,819) (3,947)
------- -------
$ 45,388 $ 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 (362) (394)
------- -------
$ 12,313 $ 12,676
====== ======
</TABLE>
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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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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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
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and 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.
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