SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended Commission File
December 29, 1996 Number 33-2253
MORTGAGE SECURITIES III TRUSTS A, B, C, D, E AND F
Delaware Trusts (IRS Employer Identification
No. 91-1314537)
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-K and is therefore, filing
this form with the reduced disclosure format.
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trusts A, B, C, D, E and F
TABLE OF CONTENTS
Page
<S> <C>
PART I
Item 1. Business 1
Item 2. Properties 1
Item 3. Legal Proceedings 1
Item 4. Submission of Matters to a Vote of
Security Holders 1
PART II
Item 5. Market for the Registrant's Beneficial Interest
and Related Security Holder Matters 2
Item 6. Selected Financial Data 2
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 2
Item 8. Financial Statements and Supplementary Data 3
Item 9. Disagreements on Accounting and Financial
Disclosures 3
PART III
Item 10. Directors and Executive Officers of the
Registrant 4
Item 11. Executive Compensation 4
Item 12. Security Ownership of Certain Beneficial
Owners and Management 4
Item 13. Certain Relationships and Related Transactions 4
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 5
SIGNATURE 8
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES 9
INDEX TO EXHIBITS 55
</TABLE>
<PAGE>
PART I
Item 1. 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.
<CAPTION>
Trust Date Issued Bonds Issued
----- ------------------ ------------
<S> <S> <C>
A June 30, 1986 $100,000,000
B September 30, 1986 $100,000,000
C December 30, 1986 $100,000,000
D February 27, 1987 $ 75,600,000
E December 22, 1987 $131,600,000
F March 30, 1988 $129,250,000
</TABLE>
Item 2. Properties
The Trusts A, B, C, D, E and F have no physical properties.
Item 3. Legal Proceedings
The Trusts A, B, C, D, E and F are not a party to any material
pending proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
Omitted pursuant to General Instruction J(2)(c) of Form 10-K.
-1-
<PAGE>
PART II
Item 5. Market for the Registrant's Beneficial Interest
and Related Security Holder Matters
As of March 14, 1997, the Trusts' beneficial interest is owned
by Mortgage Securities III Corporation and is not traded on any
stock exchange or on the over-the-counter market.
Item 6. Selected Financial Data
Omitted pursuant to General Instruction J(2)(a) of Form 10-K.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Business activity during 1996, 1995 and 1994 consisted of
the collection of principal and interest by the trustee on the
GNMA and FNMA certificates and the disbursement of the required
payment of interest and principal to the bondholders.
<TABLE>
The following table outlines principal payments made by the
Trusts during 1996 to the Class 2, 3 and 4 bondholders. Accrued
interest was added to the principal of Class 4 Bonds for
Collateralized Mortgage Obligation Bonds Trusts B, E and F.
<CAPTION>
Class 2 Class 3 Class 4 Total
------- ------- ------- -----
<S> <C> <C> <C> <C>
Trust A $ - $ - $ 1,655,373 $ 1,655,373
Trust B - 4,523,745 (1,264,973) 3,258,772
Trust C - - 3,673,354 3,673,354
Trust D 1,935,447 - N/A 1,935,447
Trust E - 10,505,651 (3,501,382) 7,004,269
Trust F - 3,584,406 (775,724) 2,808,682
This rate of payment is sufficient to retire the Bonds prior to
their stated maturity.
</TABLE>
-2-
<PAGE>
In December 1986, the Financial Accounting Standards Board
issued Statement No. 91, which established 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 is applicable 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 was 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.
Item 8. Financial Statements and Supplementary Data
The financial statements of the Trusts, together with the related
Notes to Financial Statements and Report of Independent Public
Accountants, for the three years ended December 29, 1996, are
included herein.
Item 9. Disagreements on Accounting and Financial Disclosures
There was no change in accountants, nor any material disagreement
with accountants on any matter of accounting principles,
practices or financial statement disclosures, during the year
ended December 29, 1996.
-3-
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Omitted pursuant to General Instruction J(2)(c) of Form 10-K.
Item 11. Executive Compensation
Omitted pursuant to General Instruction J(2)(c) of Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners
and Management
Omitted pursuant to General Instruction J(2)(c) of Form 10-K.
Item 13. Certain Relationships and Related Transactions
Omitted pursuant to General Instruction J(2)(c) of Form 10-K.
-4-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements:
Report of Independent Public Accountants.
Statements of Operations for the Three Years Ended
December 29, 1996 Trust A.
Statements of Operations for the Three Years Ended
December 29, 1996 Trust B.
Statements of Operations for the Three Years Ended
December 29, 1996 Trust C.
Statements of Operations for the Three Years Ended
December 29, 1996 Trust D.
Statements of Operations for the Three Years Ended
December 29, 1996 Trust E.
Statements of Operations for the Three Years Ended
December 29, 1996 Trust F.
Balance Sheets as of December 29, 1996 and December 31,
1995 Trust A.
Balance Sheets as of December 29, 1996 and December 31,
1995 Trust B.
Balance Sheets as of December 29, 1996 and December 31,
1995 Trust C.
Balance Sheets as of December 29, 1996 and December 31,
1995 Trust D.
Balance Sheets as of December 29, 1996 and December 31,
1995 Trust E.
Balance Sheets as of December 29, 1996 and December 31,
1995 Trust F.
-5-
<PAGE>
Statements of Changes in Owner's Beneficial Interest for
the Three Years Ended December 29, 1996 Trust A.
Statements of Changes in Owner's Beneficial Interest for
the Three Years Ended December 29, 1996 Trust B.
Statements of Changes in Owner's Beneficial Interest for
the Three Years Ended December 29, 1996 Trust C.
Statements of Changes in Owner's Beneficial Interest for
the Three Years Ended December 29, 1996 Trust D.
Statements of Changes in Owner's Beneficial Interest for
the Three Years Ended December 29, 1996 Trust E.
Statements of Changes in Owner's Beneficial Interest for
the Three Years Ended December 29, 1996 Trust F.
Statements of Cash Flows for the Three Years Ended
December 29, 1996 Trust A.
Statements of Cash Flows for the Three Years Ended
December 29, 1996 Trust B.
Statements of Cash Flows for the Three Years Ended
December 29, 1996 Trust C.
Statements of Cash Flows for the Three Years Ended
December 29, 1996 Trust D.
Statements of Cash Flows for the Three Years Ended
December 29, 1996 Trust E.
Statements of Cash Flows for the Three Years Ended
December 29, 1996 Trust F.
Notes to Financial Statements for the Three Years
Ended December 29, 1996
-6-
<PAGE>
(2) Financial Statement Schedules:
Schedule IV-Indebtedness to Related Parties - Not Current
Trust E
Schedule IV-Indebtedness to Related Parties - Not Current
Trust F
Schedule XIII - Other Security Investments Trust A
Schedule XIII - Other Security Investments Trust B
Schedule XIII - Other Security Investments Trust C
Schedule XIII - Other Security Investments Trust D
Schedule XIII - Other Security Investments Trust E
Schedule XIII - Other Security Investments Trust F
(3) Exhibits:
Certificate of Incorporation of Mortgage Securities
III Corporation (incorporated by reference to
3(a) to Registration Statement on Form S-11 dated
December 18, 1985).
Bylaws of Mortgage Securities III
Corporation (incorporated by reference to Exhibit 3(b) to
Registration Statement on Form S-11 dated December 18,
1985).
Form of Indenture dated June 1, 1986 between the
Trust and Texas Commerce Bank National Association, as
Trustee, relating to GNMA and FNMA Collateralized Mortgage
Obligations (incorporated by reference to Exhibit 4(a) to
Registration Statement on Form S-11 dated December 18,
1985).
Form of Supplemental Indenture dated as of June 1,
1986 (incorporated by reference to Exhibit 4(a) to
Registration Statement on Form S-11 dated July 11, 1986).
(b) Exhibits are included in Item (a)(3) above.
(c) Financial Statement Schedules required by Regulation S-X
are included in Item (a)(2) above.
-7-
<PAGE>
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 this 22nd day of January 1997.
MORTGAGE SECURITIES III TRUSTS
A, B, C, D, E AND F
Trusts acting through Wilmington
Trust Company, not in its
individual capacity, but solely as
Owner Trustee
By:/s/ Denise M. Geran
Name: Denise M. Geran
Title: Financial Services Officer
-8-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trusts A, B, C, D, E and F
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following financial statements are referenced in Item 8:
Page
<S> <C>
Report of Independent Public Accountants 12
Statements of Operations for the Three Years Ended
December 29, 1996 Trust A 14
Statements of Operations for the Three Years Ended
December 29, 1996 Trust B 15
Statements of Operations for the Three Years Ended
December 29, 1996 Trust C 16
Statements of Operations for the Three Years Ended
December 29, 1996 Trust D 17
Statements of Operations for the Three Years Ended
December 29, 1996 Trust E 18
Statements of Operations for the Three Years Ended
December 29, 1996 Trust F 19
Balance Sheets as of December 29, 1996 and December 31, 1995
Trust A 20
Balance Sheets as of December 29, 1996 and December 31, 1995
Trust B 21
Balance Sheets as of December 29, 1996 and December 31, 1995
Trust C 22
Balance Sheets as of December 29, 1996 and December 31, 1995
Trust D 23
Balance Sheets as of December 29, 1996 and December 31, 1995
Trust E 24
Balance Sheets as of December 29, 1996 and December 31, 1995
Trust F 25
-9-
<PAGE>
Page
Statements of Changes in Owner's Beneficial Interest for the
Three Years Ended December 29, 1996 Trust A 26
Statements of Changes in Owner's Beneficial Interest for the
Three Years Ended December 29, 1996 Trust B 27
Statements of Changes in Owner's Beneficial Interest for the
Three Years Ended December 29, 1996 Trust C 28
Statements of Changes in Owner's Beneficial Interest for the
Three Years Ended December 29, 1996 Trust D 29
Statements of Changes in Owner's Beneficial Interest for the
Three Years Ended December 29, 1996 Trust E 30
Statements of Changes in Owner's Beneficial Interest for the
Three Years Ended December 29, 1996 Trust F 31
Statements of Cash Flows for the Three Years Ended December
29, 1996 Trust A 32
Statements of Cash Flows for the Three Years Ended December
29, 1996 Trust B 33
Statements of Cash Flows for the Three Years Ended December
29, 1996 Trust C 34
Statements of Cash Flows for the Three Years Ended December
29, 1996 Trust D 35
Statements of Cash Flows for the Three Years Ended December
29, 1996 Trust E 36
Statements of Cash Flows for the Three Years Ended December
29, 1996 Trust F 37
Notes to Financial Statements for the Three Years Ended
December 29, 1996 38
-10-
<PAGE>
Page
The following financial statement schedules are included herein:
Schedule IV-Indebtedness to Related Parties - Not Current
Trust E 47
Schedule IV-Indebtedness to Related Parties - Not Current
Trust F 48
Schedule XIII-Other Security Investments Trust A 49
Schedule XIII-Other Security Investments Trust B 50
Schedule XIII-Other Security Investments Trust C 51
Schedule XIII-Other Security Investments Trust D 52
Schedule XIII-Other Security Investments Trust E 53
Schedule XIII-Other Security Investments Trust F 54
</TABLE>
-11-
<PAGE>
Report of Independent Public Accountants
To the Beneficial Owner of Mortgage
Securities III Trusts A, B, C, D, E and F
We have audited the accompanying balance sheets of Mortgage
Securities III Trusts A, B, C, D, E and F (trusts established under
the laws of the State of Delaware) as of December 29, 1996 and
December 31, 1995, and the related statements of operations, changes
in owner's beneficial interest, and cash flows for each of the
three years in the period ended December 29, 1996. These financial
statements and the schedules referred to below are the responsibility
of the Trust's management. Our responsibility is to express an opinion on
these financial statements and schedules 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 financial statements referred to above
present fairly, in all material respects, the financial position of
Mortgage Securities III Trusts A, B, C, D, E and F, as of December
29, 1996 and December 31, 1995, and the results of their operations
and their cash flows for each of the three years in the period ended
December 29, 1996 in conformity with generally accepted accounting
principles.
-12-
<PAGE>
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedules listed
in the index to financial statements are presented for purposes of
complying with the Securities and Exchange Commission's rules and are
not part of the basic financial statements. These schedules have
been subjected to the auditing procedures applied in our audits of
the basic financial statements and, in our opinion, fairly state in
all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Los Angeles, California
January 22, 1997
-13-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust
A Statements of Operations
For the Three Years Ended December 29, 1996
(Dollar amounts in thousands)
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Interest income $1,035 $1,203 $1,498
Interest expense 970 1,144 1,504
------ ------ ------
Net income(loss) $ 65 $ 59 $ (6)
====== ====== ======
The accompanying notes are an integral part of these statements.
</TABLE>
-14-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust B
Statements of Operations
For the Three Years Ended December 29, 1996
(Dollar amounts in thousands)
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Interest income $1,634 $1,927 $2,329
Interest expense 1,573 1,870 2,346
------ ------ ------
Net income(loss) $ 61 $ 57 $ (17)
====== ====== ======
The accompanying notes are an integral part of these statements.
</TABLE>
-15-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust C
Statements of Operations
For the Three Years Ended December 29, 1996
(Dollar amounts in thousands)
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Interest income $1,441 $1,725 $2,076
Interest expense 1,490 1,761 2,225
------ ------ ------
Net loss $ (49) $ (36) $ (149)
====== ====== ======
The accompanying notes are an integral part of these statements.
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust D
Statements of Operations
For the Three Years Ended December 29, 1996
(Dollar amounts in thousands)
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Interest income $1,363 $1,554 $1,780
Interest expense 1,357 1,538 1,813
------ ------ ------
Net income(loss) $ 6 $ 16 $ (33)
====== ====== ======
The accompanying notes are an integral part of these statements.
</TABLE>
-17-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust E
Statements of Operations
For the Three Years Ended December 29, 1996
(Dollar amounts in thousands)
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Interest income $ 4,305 $ 4,854 $ 5,487
Interest expense 5,195 5,387 6,582
Interest expense to affiliate (Note 5) 2,892 2,753 2,058
------- ------- -------
Net loss $(3,782) $(3,286) $(3,153)
======= ======= =======
The accompanying notes are an integral part of these statements.
</TABLE>
-18-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust F
Statements of Operations
For the Three Years Ended December 29, 1996
(Dollar amounts in thousands)
1996 1995 1994
------- ------- ------
<S> <C> <C> <C>
Interest income $ 1,211 $ 1,398 $1,776
Interest expense 1,246 1,400 2,011
Interest expense to affiliate (Note 5) 1,068 1,338 1,000
------- ------- -------
Net loss $(1,103) $(1,340) $(1,235)
======= ======= =======
The accompanying notes are an integral part of these statements.
</TABLE>
-19-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust A
Balance Sheets
December 29, 1996 and December 31, 1995
(Dollar amounts in thousands)
1996 1995
-------- --------
<S> <C> <C>
Assets
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 769 844
-------- --------
770 845
Receivable from beneficial owner - 1,746
Interest receivable 85 98
Government National and Federal National
Mortgage Association Certificates, net
of unamortized premium of $35 and
$41 (Notes 2, 4, 5 and 7) 10,227 11,772
-------- --------
$ 11,082 $ 14,461
======== ========
Liabilities and Owner's Beneficial Interest
Interest payable $ 305 $ 355
Collateralized Mortgage Obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 10,019 11,667
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Retained earnings 757 2,438
-------- --------
Total Owner's Beneficial Interest 758 2,439
-------- --------
$ 11,082 $ 14,461
======== ========
The accompanying notes are an integral part of these balance sheets.
</TABLE>
-20-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust B
Balance Sheets
December 29, 1996 and December 31, 1995
(Dollar amounts in thousands)
1996 1995
-------- --------
<S> <C> <C>
Assets
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 897 1,003
-------- --------
898 1,004
Receivable from beneficial owner - 370
Interest receivable 136 161
Government National and Federal National
Mortgage Association Certificates, net
of unamortized discount of $197 and
$233 (Notes 2, 4, 5 and 7) 16,652 19,751
-------- --------
$ 17,686 $ 21,286
======== ========
Liabilities and Owner's Beneficial Interest
Interest payable $ 472 $ 570
Collateralized Mortgage Obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 15,570 18,763
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Retained earnings 1,643 1,952
-------- --------
Total Owner's Beneficial Interest 1,644 1,953
-------- --------
$ 17,686 $ 21,286
======== ========
The accompanying notes are an integral part of these balance sheets.
</TABLE>
-21-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust C
Balance Sheets
December 29, 1996 and December 31, 1995
(Dollar amounts in thousands)
1996 1995
-------- --------
<S> <C> <C>
Assets
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 900 1,067
-------- --------
901 1,068
Receivable from (payable to) beneficial
owner - 236
Interest receivable 108 138
Government National and Federal National
Mortgage Association Certificates, net
of unamortized discount of $154 and
$194 (Notes 2, 4, 5 and 7) 14,182 17,721
-------- --------
$ 15,191 $ 19,163
======== ========
Liabilities and Owner's Beneficial Interest
Interest payable $ 426 $ 535
Collateralized Mortgage Obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 13,951 17,529
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Retained earnings 813 1,098
-------- --------
Total Owner's Beneficial Interest 814 1,099
-------- --------
$ 15,191 $ 19,163
======== ========
The accompanying notes are an integral part of these balance sheets.
</TABLE>
-22-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust D
Balance Sheets
December 29, 1996 and December 31, 1995
(Dollar amounts in thousands)
1996 1995
-------- --------
<S> <C> <C>
Assets
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 239 223
-------- --------
240 224
Receivable from beneficial owner 45 1,653
Interest receivable 107 124
Government National and Federal National
Mortgage Association Certificates, net
of unamortized premium of $60 and
$68 (Notes 2, 4, 5 and 7) 15,095 17,097
-------- --------
$ 15,487 $ 19,098
======== ========
Liabilities and Owner's Beneficial Interest
Interest payable $ 213 $ 241
Collateralized Mortgage Obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 14,801 16,725
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Retained earnings 472 2,131
-------- --------
Total Owner's Beneficial Interest 473 2,132
-------- --------
$ 15,487 $ 19,098
======== ========
The accompanying notes are an integral part of these balance sheets.
</TABLE>
-23-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust E
Balance Sheets
December 29, 1996 and December 31, 1995
(Dollar amounts in thousands)
1996 1995
-------- --------
<S> <C> <C>
Assets
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 2,120 2,716
--------- ---------
2,121 2,717
Receivable from beneficial owner - 1,662
Interest receivable 336 389
Government National and Federal National
Mortgage Association Certificates, net
of unamortized discount of $339
and $488 (Notes 2, 4, 5 and 7) 47,636 54,032
Deferred hedging costs (Note 2) 320 460
--------- ---------
$ 50,413 $ 59,260
========= =========
Liabilities and Owner's Beneficial Interest
Interest payable $ 986 $ 1,143
Collateralized Mortgage Obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 40,717 46,855
Payable to an affiliate (Note 5) 35,597 32,705
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Accumulated deficit (26,888) (21,444)
-------- --------
Total Owner's Beneficial Interest (26,887) (21,443)
-------- --------
$ 50,413 $ 59,260
======== ========
The accompanying notes are an integral part of these balance sheets.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust F
Balance Sheets
December 29, 1996 and December 31, 1995
(Dollar amounts in thousands)
1996 1995
-------- --------
<S> <C> <C>
Assets
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 648 684
-------- --------
649 685
Receivable from beneficial owner - 1,937
Interest receivable 90 111
Government National and Federal National
Mortgage Association Certificates, net
of unamortized discount of $25
and $54 (Notes 2, 4, 5 and 7) 11,949 14,604
Deferred hedging costs (Note 2) 85 178
-------- --------
$ 12,773 $ 17,515
======== ========
Liabilities and Owner's Beneficial Interest
Interest payable $ 304 $ 389
Collateralized Mortgage Obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 9,990 12,676
Payable to an affiliate (Note 5) 9,194 15,899
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Accumulated deficit (6,716) (11,450)
-------- --------
Total Owner's Beneficial Interest (6,715) (11,449)
-------- --------
$ 12,773 $ 17,515
======== ========
The accompanying notes are an integral part of these balance sheets.
</TABLE>
-25-
<PAGE>
<TABLE>
<CAPTION>
Mortgage SEcurities III Trust A
Statements of Changes in Owner's Beneficial Interest
For the Three Years Ended December 29, 1996
(Dollar amounts in thousands)
Owner's
Beneficial Retained
Interest Earnings Total
---------- -------- -----
<S> <C> <C> <C>
Balance at December 26, 1993 $1 $2,385 $2,386
Net loss - (6) (6)
-- ------ ------
Balance at December 25, 1994 1 2,379 2,380
Net income - 59 59
-- ------ ------
Balance at December 31, 1995 1 2,438 2,439
Dividends paid - (1,746) (1,746)
Net income - 65 65
-- ------ ------
Balance at December 29, 1996 $1 $ 757 $ 758
== ====== ======
The accompanying notes are an integral part of these statements.
</TABLE>
-26-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust B
Statements of Changes in Owner's Beneficial Interest
For the Three Years Ended December 29, 1996
(Dollar amounts in thousands)
Owner's
Beneficial Retained
Interest Earnings Total
---------- -------- -----
<S> <C> <C> <C>
Balance at December 26, 1993 $1 $1,912 $1,913
Net loss - (17) (17)
-- ------ ------
Balance at December 25, 1994 1 1,895 1,896
Net income - 57 57
-- ------ ------
Balance at December 31, 1995 1 1,952 1,953
Dividends paid - (370) (370)
Net income - 61 61
-- ------ ------
Balance at December 29, 1996 $1 $1,643 $1,644
== ====== ======
The accompanying notes are an integral part of these statements.
</TABLE>
-27-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust C
Statements of Changes in Owner's Beneficial Interest
For the Three Years Ended December 29, 1996
(Dollar amounts in thousands)
Owner's
Beneficial Retained
Interest Earnings Total
---------- -------- -----
<S> <C> <C> <C>
Balance at December 26, 1993 $1 $1,283 $1,284
Net loss - (149) (149)
-- ------ ------
Balance at December 25, 1994 1 1,134 1,135
Net loss - (36) (36)
-- ------ ------
Balance at December 31, 1995 1 1,098 1,099
Dividends paid - (236) (236)
Net loss - (49) (49)
-- ------ ------
Balance at December 29, 1996 $1 $ 813 $ 814
== ====== ======
The accompanying notes are an integral part of these statements.
</TABLE>
-28-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust D
Statements of Changes in Owner's Beneficial Interest
For the Three Years Ended December 29, 1996
(Dollar amounts in thousands)
Owner's
Beneficial Retained
Interest Earnings Total
---------- -------- -----
<S> <C> <C> <C>
Balance at December 26, 1993 $1 $2,148 $2,149
Net loss - (33) (33)
-- ------ ------
Balance at December 25, 1994 1 2,115 2,116
Net income - 16 16
-- ------ ------
Balance at December 31, 1995 1 2,131 2,132
Dividends paid - (1,665) (1,665)
Net income - 6 6
-- ------ ------
Balance at December 29, 1996 $1 $ 472 $ 473
== ====== ======
The accompanying notes are an integral part of these statements.
</TABLE>
-29-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust E
Statements of Changes in Owner's Beneficial Interest
For the Three Years Ended December 29, 1996
(Dollar amounts in thousands)
Owner's
Beneficial Accumulated
Interest Deficit Total
---------- ----------- -----
<S> <C> <C> <C>
Balance at December 26, 1993 $1 $(15,005) $(15,004)
Net loss - (3,153) (3,153)
-- -------- --------
Balance at December 25, 1994 1 (18,158) (18,157)
Net loss - (3,286) (3,286)
-- -------- --------
Balance at December 31, 1995 1 (21,444) (21,443)
Dividends paid - (1,662) (1,662)
Net loss - (3,782) (3,782)
-- -------- --------
Balance at December 29, 1996 $1 $(26,888) $(26,887)
== ======== ========
The accompanying notes are an integral part of these statements.
</TABLE>
-30-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust F
Statements of Changes in Owner's Beneficial Interest
For the Three Years Ended December 29, 1996
(Dollar amounts in thousands)
Owner's
Beneficial Accumulated
Interest Deficit Total
---------- ----------- -----
<S> <C> <C> <C>
Balance at December 26, 1993 $1 $ (8,875) $ (8,874)
Net loss - (1,235) (1,235)
-- -------- --------
Balance at December 25, 1994 1 (10,110) (10,109)
Net loss - (1,340) (1,340)
-- -------- --------
Balance at December 31, 1995 1 (11,450) (11,449)
Contribution - 5,837 5,837
Net loss - (1,103) (1,103)
-- -------- --------
Balance at December 29, 1996 $1 $ (6,716) $ (6,715)
== ======== ========
The accompanying notes are an integral part of these statements.
</TABLE>
-31-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust A
Statements of Cash Flows
For the Three Years Ended December 29, 1996
(Dollar amounts in thousands)
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operations:
Net income(loss) $ 65 $ 59 $ (6)
Adjustments to reconcile net
loss to net cash provided
by operations:
Amortization, net 13 19 58
Accretion of interest - - 470
Changes in:
Interest receivable 13 16 59
Receivable from beneficial
owner 1,746 - -
Interest payable (50) (69) (256)
-------- -------- --------
Net cash provided by operations 1,787 25 325
-------- -------- --------
Cash flows from investing:
Mortgage-backed certificates--
Collections on principal 1,539 2,059 6,653
-------- -------- --------
Cash flows from financing:
Dividends paid (1,746) - -
Collateralized Mortgage
Obligation bonds --
Payments on principal (1,655) (2,260) (9,391)
-------- -------- --------
Cash flows from financing (3,401) (2,260) (9,391)
-------- -------- --------
Net increase (decrease) in cash and
equivalents (75) (176) (2,413)
Cash and equivalents at beginning
of year 845 1,021 3,434
-------- -------- --------
Cash and equivalents at end of year $ 770 $ 845 $ 1,021
======== ======== ========
Supplemental disclosure:
Cash paid during the year for
interest $ 1,012 $ 1,201 $ 1,255
The accompanying notes are an integral part of these statements.
</TABLE>
-32-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust B
Statements of Cash Flows
For the Three Years Ended December 29, 1996
(Dollar amounts in thousands)
1996 1995 1994
------- ------- --------
<S> <C> <C> <C>
Cash flows from operations:
Net income(loss) $ 61 $ 57 $ (17)
Adjustments to reconcile net
loss to net cash provided
by operations:
Amortization, net 29 23 62
Accretion of interest 1,266 1,157 1,059
Changes in:
Interest receivable 25 21 71
Receivable from beneficial
owner 370 - -
Interest payable (98) (86) (330)
------- ------- -------
Net cash provided by operations 1,653 1,172 845
------- ------- -------
Cash flows from investing:
Mortgage-backed certificates--
Collections on principal 3,135 2,807 7,644
------- ------- -------
Cash flows from financing:
Dividends paid (370) - -
Collateralized Mortgage
Obligation bonds --
Payments on principal (4,524) (4,068) (13,132)
------- ------- -------
Cash flows from financing (4,894) (4,068) (13,132)
------- ------- -------
Net increase (decrease) in cash
and equivalents (106 ) (89) (4,643)
Cash and equivalents at beginning
of year 1,004 1,093 5,736
------- ------- --------
Cash and equivalents at end of year $ 898 $ 1,004 $ 1,093
======= ======= ========
Supplemental disclosure:
Cash paid during the year for
interest $ 340 $ 741 $ 1,466
The accompanying notes are an integral part of these statements.
</TABLE>
-33-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust C
Statements of Cash Flows
For the Three Years Ended December 29, 1996
(Dollar amounts in thousands)
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operations:
Net loss $ (49) $ (36) $ (149)
Adjustments to reconcile net
loss to net cash provided
by operations:
Amortization, net 56 41 121
Accretion of interest - - 1,332
Changes in:
Interest receivable 30 16 69
Receivable from beneficial
owner 236 - -
Interest payable (110) (75) (312)
------- ------- -------
Net cash provided by operations 163 (54) 1,061
------- ------- -------
Cash flows from investing:
Mortgage-backed certificates --
Collections on principal 3,579 2,592 7,505
------- ------- -------
Cash flows from financing:
Dividends paid (236) - -
Collateralized Mortgage
Obligation bonds --
Payments on principal (3,673) (2,485) (12,714)
------- ------- -------
Cash flows from financing (3,909) (2,485) (12,714)
------- ------- -------
Net increase (decrease) in cash and
equivalents (167) 53 (4,148)
Cash and equivalents at beginning
of year 1,068 1,015 5,163
------- ------- -------
Cash and equivalents at end of year $ 901 $ 1,068 $ 1,015
======= ======= =======
Supplemental disclosure:
Cash paid during the year for
interest $ 1,504 $ 1,767 $ 1,004
The accompanying notes are an integral part of these statements.
</TABLE>
-34-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust D
Statements of Cash Flows
For the Three Years Ended December 29, 1996
(Dollar amounts in thousands)
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Cash flows from operations:
Net income(loss) $ 6 $ 16 $ (33)
Adjustments to reconcile net
loss to net cash used in
operations:
Amortization, net 21 20 60
Changes in:
Interest receivable 15 12 41
Receivable from beneficial
owner 1,608 (81) (79)
Interest payable (28) (25) (99)
------- ------- -------
Net cash used in operations 1,622 (58) (110)
------- ------- -------
Cash flows from investing:
Mortgage-backed certificates --
Collections on principal 1,994 1,784 5,586
------- ------- -------
Cash flows from financing:
Dividends paid (1,665) - -
Collateralized Mortgage
Obligation bonds --
Payments on principal (1,935) (1,781) (6,900)
------- ------- -------
Cash flows from financing (3,600) (1,781) (6,900)
------- ------- -------
Net increase (decrease) in cash
and equivalents 16 (55) (1,424)
Cash and equivalents at beginning
of year 224 279 1,703
------- ------- -------
Cash and equivalents at end of year $ 240 $ 224 $ 279
======= ======= =======
Supplemental disclosure:
Cash paid during the year for
interest $ 1,372 $ 1,551 $ 1,874
The accompanying notes are an integral part of these statements.
</TABLE>
-35-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust E
Statements of Cash Flows
For the Three Years Ended December 29, 1996
(Dollar amounts in thousands)
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operations:
Net loss $ (3,782) $ (3,286) $ (3,153)
Adjustments to reconcile net
loss to net cash provided
by operations:
Amortization, net 859 474 891
Accretion of interest 3,501 3,203 2,930
Changes in:
Interest receivable 53 38 113
Receivable from beneficial
owner 1,662 - -
Interest payable (158) (133) (447)
Interest payable to
an affiliate (Note 5) 2,892 2,753 2,058
------- ------- -------
Net cash provided by operations 5,027 3,049 2,392
------- ------- -------
Cash flows from investing:
Mortgage-backed certificates --
Collections on principal 6,544 6,038 13,047
------- ------- -------
Cash flows from financing:
Dividends paid (1,662) - -
Collateralized Mortgage
Obligation bonds --
Payments on principal (10,505) (9,082) (22,819)
------- ------- -------
Cash flows from financing (12,167) (9,082) (22,819)
------- ------- -------
Net (decrease) increase in cash
and equivalents (596) 5 (7,380)
Cash and equivalents at beginning
of year 2,717 2,712 10,092
------- ------- -------
Cash and equivalents at end of year $ 2,121 $ 2,717 $ 2,712
======= ======= =======
Supplemental disclosure:
Cash paid during the year for
interest $ 845 $ 1,716 $ 3,055
The accompanying notes are an integral part of these statements.
</TABLE>
-36-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust F
Statements of Cash Flows
For the Three Years Ended December 29, 1996
(Dollar amounts in thousands)
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operations:
Net loss $ (1,103) $ (1,340) $ (1,235)
Adjustments to reconcile net loss
to net cash provided by/(used
in) operations:
Amortization, net 187 144 323
Accretion of interest 776 710 649
Changes in:
Interest receivable 21 17 97
Interest payable (85) (75) (455)
Receivable from beneficial
owner 1,937 - -
Interest payable to
an affiliate (Note 5) 1,068 1,338 1,000
------- ------- -------
Net cash provided by operations 2,801 794 379
------- ------- -------
Cash flows from investing:
Mortgage-backed certificates--
Collections on principal 2,684 1,971 9,769
------- ------- -------
Cash flows from financing:
Contribution 5,837 - -
Payment on Weyerhaeuser Mortgage
Company note (7,773) - -
Collateralized Mortgage
Obligation bonds --
Payments on principal (3,585) (3,317) (17,602)
------- ------- -------
Cash flows from financing (5,521) (3,317) (17,602)
------- ------- -------
Net increase (decrease) in cash and
equivalents (36) (552) (7,454)
Cash and equivalents at beginning
of year 685 1,237 8,691
------- ------- -------
Cash and equivalents at end of year $ 649 $ 685 $ 1,237
======= ======= =======
Supplemental disclosure:
Cash paid during the year for
interest $ 339 $ 606 $ 1,455
The accompanying notes are an integral part of these statements.
</TABLE>
-37-
<PAGE>
Mortgage Securities III Trusts A, B, C, D, E and F
Notes to Financial Statements
For the Three Years Ended December 29, 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.
-38-
<PAGE>
<CAPTION>
Trust Date Issued Bonds Issued
----- ------------------ ------------
<S> <S> <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 1996, 1995 and 1994, 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:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
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, revisions
are made each quarter 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 and includes estimates of future prepayments on the
certificates in the calculation of the constant effective
yield. Hedging costs related to holding GNMA and FNMA
certificates have been deferred and are also being
amortized using the interest method and includes
estimates of future prepayments on the certificates in
the calculation of the constant effective yield. The
Bonds are carried at par value less unamortized
-39-
<PAGE>
discounts. These discounts are amortized using the
interest method and include estimates of future
prepayments on the Bonds in the calculation of the
constant effective yield. Semi-annually differences
between anticipated future prepayments and actual
prepayments are calculated. The effective yield is
then recalculated to reflect actual prepayments to
date and anticipated future prepayments. The unamortized
discounts and accumulated hedging amortization
are adjusted (with a corresponding charge or credit to
interest income/expense) to reflect the amount that would
have existed had the new effective yield been applied since
the purchase of certificates and/or issuance of Bonds.
In December 1986, the Financial Accounting Standards
Board issued Statement No. 91, which established 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 was 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 are 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.
-40-
<PAGE>
Cash and equivalents include cash held in the
collection accounts and invested in short term investments
with original maturities of less than three months.
Note 3.Collateralized Mortgage Obligation Bonds:
<TABLE>
Bonds at December 29, 1996 and December 31, 1995 consist
of the following:
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Collateralized Mortgage Obligation
Bonds, Trust A:
Class 4 - 9.20%, stated maturity
July 1, 2016 $ 10,068 $ 11,723
Unamortized discount (49) (56)
-------- --------
$ 10,019 $ 11,667
======== ========
Collateralized Mortgage Obligation
Bonds, Trust B:
Class 3 - 9.00%, stated maturity
April 1, 2010 $ 1,014 $ 5,538
Class 4 - 9.00%, stated maturity
October 1, 2016 14,855 13,590
Unamortized discount (299) (365)
-------- --------
$ 15,570 $ 18,763
======== ========
Collateralized Mortgage Obligation
Bonds, Trust C:
Class 4 - 9.00%, stated maturity
January 1, 2017 $ 14,320 $ 17,994
Unamortized discount (369) (465)
-------- --------
$ 13,951 $ 17,529
======== ========
-41-
<PAGE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Collateralized Mortgage Obligation
Bonds, Trust D:
Class 2 - 8.55%, stated maturity
December 1, 2014 $ 302 $ 2,237
Class 3 - 8.60%, stated maturity
March 1, 2017 14,600 14,600
(101) (112)
-------- --------
$ 14,801 $ 16,725
======== ========
Collateralized Mortgage Obligation
Bonds, Trust E:
Class 3 - 9.00%, stated maturity
January 1, 2006 $ 2,681 $ 13,186
Class 4 - 9.00%, stated maturity
January 1, 2018 41,117 37,616
Unamortized discount (3,081) (3,947)
-------- --------
$ 40,717 $ 46,855
======== ========
Collateralized Mortgage Obligation
Bonds, Trust F:
Class 3 - 9.00%, stated maturity
January 1, 2014 $ 1,152 $ 4,736
Class 4 - 9.00%, stated maturity
April 1, 2018 9,109 8,334
Unamortized discount (271) (394)
-------- --------
$ 9,990 $ 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.
-42-
<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 1, 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 percent 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 and $12,925, respectively).
Trust D's Class 1 and 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.
-43-
<PAGE>
Any such redemptions at the option of the Trusts shall be at
a price equal to 100 percent of the unpaid principal amount
of such Bonds plus such accrued interest.
<TABLE>
The maturities of the Collateralized Mortgage Obligation
Bonds are based on the prepayment speed (liquidations) on the
GNMA and FNMA certificates collateralizing the Bonds and the
reinvestment of scheduled distributions at the assumed
reinvestment rates. Maturities for the succeeding five years
which estimates liquidations based on current market interest
rates are as follows:
<CAPTION>
Trust A Trust B Trust C Trust D Trust E Trust F
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
1997 $ 2,307 $ 3,404 $ 2,778 $ 2,684 $ 8,208 $ 2,748
1998 1,863 2,816 2,298 2,211 7,001 2,248
1999 1,508 2,338 1,902 1,819 5,987 1,852
2000 1,225 1,948 1,576 1,496 5,137 1,540
2001 992 1,626 1,306 1,225 4,427 1,295
</TABLE>
Note 4. Assets pledged:
<TABLE>
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 Bonds are collateralized by Trust E's
GNMA certificates. Collections on the certificates are used
to meet the quarterly Bond interest payments and to reduce the
outstanding principal balance on the Bonds. As of December
29, 1996, certificates are guaranteed by the Government
National Mortgage Association and the Federal National
Mortgage Association as follows:
<CAPTION>
Government National Federal National
Mortgage Association Mortgage Association
-------------------- --------------------
<S> <C> <C>
Trust A $ 6,819 $3,373
Trust B 14,403 2,446
Trust C 10,055 4,281
Trust D 12,843 2,192
Trust E 47,975 N/A
Trust F 2,462 9,512
</TABLE>
-44-
<PAGE>
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 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 accrued interest on
the notes will be paid by the Trusts with the proceeds of a
capital contribution from 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.
The receivable from beneficial owner, Mortgage Securities
III Corporation, represents cash received from GNMA and
FNMA certificates in excess of bond principal and interest
payments required on Class 1 bonds which has been
advanced to the beneficial owner. This amount is non-
interest bearing and has no fixed repayment terms.
Certain ongoing administrative and accounting functions
are provided by the beneficial owner at no cost to each
Trust.
-45-
<PAGE>
Note 6. Results of operations:
All results of operations will be transferred to
the beneficial owner of the Trusts. Mortgage
Securities III Corporation will be responsible for all
tax liabilities incurred relating to the Trusts'
operations.
Note 7. Investment securities:
<TABLE>
All investment securities held by the Trusts are classified
as "held to maturity". The amortized cost and estimated
market values of investments in debt securities are as
follows:
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Held to Maturity:
Mortgage-backed
Securities
Trust A $ 10,227 $ 651 $ - $ 10,878
Trust B 16,652 940 - 17,592
Trust C 14,182 780 - 14,962
Trust D 15,095 536 - 15,631
Trust E 47,636 1,416 - 49,052
Trust F 11,949 597 - 12,546
Per the terms of the prospectus, the Trusts are
legally precluded from selling the investments in debt
securities, except in the case of a call of the
Collateralized Mortgage Obligation bonds as discussed in
Note 3.
</TABLE>
-46-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust E
Schedule IV - Indebtedness to Related Parties - Not Current
December 29, 1996
(Dollar amounts in thousands)
Name of December 31, Indebtedness to December 29,
Related Party 1995 Additions Deductions 1996
-------------- ------------ --------- ---------- ------------
<S> <C> <C> <C> <C>
Weyerhaeuser
Mortgage Company $32,705 $2,892 $ - $35,597
======= ====== ======= =======
On December 22, 1987, the Trust purchased from an affiliate,
Weyerhaeuser Mortgage Company, GNMA certificates which were
used to collateralize the Bonds. The purchase was financed
with the proceeds received from the bond issuance and an
interest bearing note due to Weyerhaeuser Mortgage Company.
</TABLE>
-47-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust F
Schedule IV - Indebtedness to Related Parties - Not Current
December 29, 1996
(Dollar amounts in thousands)
Name of December 31, Indebtedness to December 29,
Related Party 1995 Additions Deductions 1996
------------- ------------ --------- ---------- ------------
<S> <C> <C> <C> <C>
Weyerhaeuser
Mortgage Company $15,899 $1,068 $(7,773) $9,194
======= ====== ======== ======
On March 30, 1988, the Trust purchased from an
affiliate, Weyerhaeuser Mortgage Company, GNMA and FNMA
certificates which were used to collateralize the Bonds. The
purchase was financed with the proceeds received from the
bond issuance and an interest bearing note due to Weyerhaeuser
Mortgage Company.
-48-
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust A
Schedule XIII - Other Security Investments
December 29, 1996
(Dollar amounts in thousands)
Number of
Certificates Market
Type of Security Held Cost1<F1> Value2<F2>
---------------------- ------------ ---- -----
<S> <C> <C> <C>
Government National
Mortgage Association
Certificates 27 $ 6,819 $ 7,241
Federal National
Mortgage Association
Certificates 14 3,373 3,637
-- ------- -------
41 10,192 10,878
Plus: Unamortized
premium - 35 -
-- ------- -------
41 $10,227 $10,878
== ======= =======
<FN>
<F1>
1 Cost represents the uncollected principal balance of the
mortgage loans underlying the certificates. Investments
are grouped and are carried at cost plus unamortized
premium on the balance sheet.
<F2>
2 Market value is an estimate based on the most current
information available.
</FN>
</TABLE>
-49-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust B
Schedule XIII - Other Security Investments
December 29, 1996
(Dollar amounts in thousands)
Number of
Certificates Market
Type of Security Held Cost1<F1> Value2<F2>
---------------------- ------------ ---- -----
<S> <C> <C> <C>
Government National
Mortgage Association
Certificates 33 $14,403 $14,997
Federal National
Mortgage Association
Certificates 26 2,446 2,595
-- ------- -------
59 16,849 17,592
Less: Unamortized
discount - (197) -
-- ------- -------
59 $16,652 $17,592
== ======= =======
<FN>
<F1>
1 Cost represents the uncollected principal balance of
the mortgage loans underlying the certificates. Investments
are grouped and are carried at cost less unamortized
discount on the balance sheet.
<F2>
2 Market value is an estimate based on the most current
information available.
</FN>
</TABLE>
-50-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust C
Schedule XIII - Other Security Investments
December 29, 1996
(Dollar amounts in thousands)
Number of
Certificates Market
Type of Security Held Cost1<F1> Value2<F2>
---------------------- ------------ ---- -----
<S> <C> <C> <C>
Government National
Mortgage Association
Certificates 25 $ 10,055 $10,441
Federal National
Mortgage Association
Certificates 26 4,281 4,521
-- ------- -------
51 14,336 14,962
Less: Unamortized
discount - (154) -
-- ------- -------
51 $ 14,182 $14,962
== ======= =======
<FN>
<F1>
1 Cost represents the uncollected principal balance of
the mortgage loans underlying the certificates. Investments
are grouped and are carried at cost less unamortized
discount on the balance sheet.
<F2>
2 Market value is an estimate based on the most current
information available.
</FN>
</TABLE>
-51-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust D
Schedule XIII - Other Security
Investments
December 29, 1996
(Dollar amounts in thousands)
Number of
Certificates Market
Type of Security Held Cost1<F1> Value2<F2>
---------------------- ------------ ---- -----
<S> <C> <C> <C>
Government National
Mortgage Association
Certificates 23 $12,843 $13,316
Federal National
Mortgage Association
Certificates 15 2,192 2,315
-- ------- -------
38 15,035 15,631
Plus: Unamortized
premium - 60 -
-- ------- -------
38 $15,095 $15,631
== ======= =======
<FN>
<F1>
1 Cost represents the uncollected principal balance of the
mortgage loans underlying the certificates. Investments
are grouped and are carried at cost plus
unamortized premium on the balance sheet.
<F2>
2 Market value is an estimate based on the most current
information available.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust E
Schedule XIII - Other Security Investments
December 29, 1996
(Dollar amounts in thousands)
Number of
Certificates Market
Type of Security Held Cost1<F1> Value2<F2>
---------------------- ------------ ---- -----
<S> <C> <C> <C>
Government National
Mortgage Association
Certificates 76 $47,975 $49,052
Less: Unamortized
discount - (339) -
-- ------- -------
76 $47,636 $49,052
== ======= =======
<FN>
<F1>
1 Cost represents the uncollected principal balance of
the mortgage loans underlying the certificates.
Investments are grouped and are carried at cost less
unamortized discount on the balance sheet.
<F2>
2 Market value is an estimate based on the most current
information available.
</FN>
</TABLE>
-53-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust F
Schedule XIII - Other Security Investments
December 29, 1996
(Dollar amounts in thousands)
Number of
Certificates Market
Type of Security Held Cost1<F1> Value2<F2>
---------------------- ------------ ---- -----
<S> <C> <C> <C>
Government National
Mortgage Association
Certificates 7 $ 2,462 $ 2,612
Federal National
Mortgage Association
Certificates 44 9,512 9,934
-- ------- -------
51 11,974 12,546
Less: Unamortized
discount - (25) -
-- ------- -------
51 $ 11,949 $ 12,546
== ======= =======
<FN>
<F1>
1 Cost represents the uncollected principal balance of
the mortgage loans underlying the certificates.
Investments are grouped and are carried at cost less
unamortized discount on the balance sheet.
<F2>
2 Market value is an estimate based on the most current
information available.
</FN>
</TABLE>
-54-
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibits Page
------- -------------------------------------------------- ----
3(a) Certificate of Incorporation of the Mortgage
Securities III Corporation (incorporated by
reference to Exhibit 3(a) to Registration
Statement on Form S-11 dated December 18, 1985). *
3(b) Bylaws of Mortgage Securities III Corporation
(incorporated by reference to Exhibit 3(b) to
Registration Statement on Form S-11 dated
December 18, 1985). *
4(a) Form of Indenture dated June 1, 1986 between
the Trust and Texas Commerce Bank National
Association, as trustee, relating to GNMA and
FNMA Collateralized Mortgage Obligations (incorporated
by reference to Exhibit 4(a) to Registration Statement
on Form S-11 dated December 18, 1985). *
4(a) Form of Supplemental Indenture dated as of
June 1, 1986 (incorporated by reference to
Exhibit 4(a) to Registration Statement on
Form S-11 dated July 11, 1986). *
-----------------------------------
*Incorporated by reference.
-55-
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> DEC-29-1996
<CASH> 5573
<SECURITIES> 0
<RECEIVABLES> 907
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 122632
<CURRENT-LIABILITIES> 0
<BONDS> 105047
0
0
<COMMON> 0
<OTHER-SE> (29913)
<TOTAL-LIABILITY-AND-EQUITY> 122632
<SALES> 0
<TOTAL-REVENUES> 10989
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15791
<INCOME-PRETAX> (4802)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4802)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
