<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Twenty-Six Weeks Ended June 29, 1997 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>
Mortgage Securities III Trusts A, B, C, D, E and F
Index to Form 10-Q Filing
For the Twenty-Six Weeks Ended June 29, 1997
Part I. Financial Information
Item 1. Financial Statements Page No.
Statement of Operations
Trust A 1
Trust B 2
Trust C 3
Trust D 4
Trust E 5
Trust F 6
Balance Sheets
Trust A 7
Trust B 8
Trust C 9
Trust D 10
Trust E 11
Trust F 12
Statement of Cash Flows
Trust A 13
Trust B 14
Trust C 15
Trust D 16
Trust E 17
Trust F 18
Notes to Financial Statements 19
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 19
(See Note 1)
Part II. Other Information
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)
<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 29, 1996. Though not
examined by independent public accountants, the financial
information reflects, in the opinion of management, all adjustments
necessary to present a fair statement of results for the interim
period indicated. The results of operations for the twenty-six
week period ending June 29, 1997, should not be regarded as
necessarily indicative of the results that may be expected for the
year 1997.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto
duly authorized on the 13th day of August 1997.
MORTGAGE SECURITIES III TRUSTS
A, B, C, D, E AND F
Trusts acting through Wilmington
Trust Company, not in its
capacity, but solely as Owner
Trustee
By: /s/ Denise M. Geran
Denise M. Geran
Financial Services Officer
<PAGE>
Mortgage Securities III Trust A
Statement of Operations
For the Twenty-Six Weeks Ended June 29, 1997 and June 30, 1996
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Thirteen Weeks Twenty-Six Weeks
Ended Ended
------------------ ------------------
Jun. 29, Jun. 30, Jun. 29, Jun. 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income $ 190 $ 267 $ 423 $ 537
Interest expense 184 247 401 502
-------- -------- -------- --------
Net income (Note 6) $ 6 $ 20 $ 22 $ 35
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
- 1 -
<PAGE>
Mortgage Securities III Trust B
Statement of Operations
For the Twenty-Six Weeks Ended June 29, 1997 and June 30, 1996
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Thirteen Weeks Twenty-Six Weeks
Ended Ended
------------------ ------------------
Jun. 29, Jun. 30, Jun. 29, Jun. 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income $ 545 $ 431 $ 908 $ 867
Interest expense 515 400 862 832
-------- -------- -------- --------
Net income (Note 6) $ 30 $ 31 $ 46 $ 35
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
- 2 -
<PAGE>
Mortgage Securities III Trust C
Statement of Operations
For the Twenty-Six Weeks Ended June 29, 1997 and June 30, 1996
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Thirteen Weeks Twenty-Six Weeks
Ended Ended
------------------ ------------------
Jun. 29, Jun. 30, Jun. 29, Jun. 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income $ 438 $ 376 $ 753 $ 769
Interest expense 542 379 866 787
--------- -------- -------- --------
Net loss (Note 6) $(104) $ (3) $(113) $ (18)
========= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
- 3 -
<PAGE>
Mortgage Securities III Trust D
Statement of Operations
For the Twenty-Six Weeks Ended June 29, 1997 and June 30, 1996
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Thirteen Weeks Twenty-Six Weeks
Ended Ended
------------------ ------------------
Jun. 29, Jun. 30, Jun. 29, Jun. 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income $ 251 $ 355 $ 569 $ 701
Interest expense 300 348 621 711
-------- -------- -------- --------
Net income (loss) $ (49) $ 7 $ (52) $ (10)
(Note 6) ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
- 4 -
<PAGE>
Mortgage Securities III Trust E
Statement of Operations
For the Twenty-Six Weeks Ended June 29, 1997 and June 30, 1996
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Thirteen Weeks Twenty-Six Weeks
Ended Ended
------------------ ------------------
Jun. 29, Jun. 30, Jun. 29, Jun. 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income $1,248 $1,144 $ 2,226 $ 2,248
Interest expense 3,956 1,248 5,285 2,493
Interest expense to
an affiliate (Note 5) - 710 695 1,421
-------- -------- -------- --------
Net loss (Note 6) $(2,708) $(814) $(3,754) $(1,666)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
- 5 -
<PAGE>
Mortgage Securities III Trust F
Statement of Operations
For the Twenty-Six Weeks Ended June 29, 1997 and June 30, 1996
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Thirteen Weeks Twenty-Six Weeks
Ended Ended
------------------ ------------------
Jun. 29, Jun. 30, Jun. 29, Jun. 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income $ 274 $ 327 $ 536 $ 648
Interest expense 426 363 718 683
Interest expense to
an affiliate (Note 5) - 345 180 691
-------- -------- -------- --------
Net loss (Note 6) $ (152) $(381) $(362) $ (726)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
- 6 -
<PAGE>
Mortgage Securities III Trust A
Balance Sheets
June 29, 1997 and December 29, 1996
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Jun. 29, Dec. 29,
1997 1996
-------- -------
<S> <C> <C>
ASSETS (Unaudited)
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 798 769
------- -------
799 770
Interest receivable 71 85
Government National and Federal National
Mortgage Association Certificates, net of
unamortized premium of $0 and $35
(Notes 2, 4 and 5) 9,102 10,227
-------- -------
TOTAL ASSETS - TRUST A $ 9,972 $11,082
======== ========
LIABILITIES AND OWNER'S BENEFICIAL INTEREST
Interest payable $ 206 $ 305
Collateralized mortgage obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 8,986 10,019
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Retained earnings 779 757
--------- ---------
Total Owner's Beneficial Interest 780 758
--------- ---------
TOTAL LIABILITIES AND EQUITY - TRUST A $ 9,972 $11,082
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
- 7 -
<PAGE>
Mortgage Securities III Trust B
Balance Sheets
June 29, 1997 and December 29, 1996
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Jun. 29, Dec. 29,
1997 1996
-------- -------
<S> <C> <C>
ASSETS (Unaudited)
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 1,159 897
------- -------
1,160 898
Interest receivable 114 136
Government National and Federal National
Mortgage Association Certificates, net of
unamortized discount of $0 and $197
(Notes 2, 4 and 5) 15,625 16,652
------- --------
TOTAL ASSETS - TRUST B $16,899 $17,686
======= ========
LIABILITIES AND OWNER'S BENEFICIAL INTEREST
Interest payable $ 335 $ 472
Collateralized mortgage obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 14,874 15,570
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Retained earnings 1,689 1,643
------- -------
Total Owner's Beneficial Interest 1,690 1,644
------- -------
TOTAL LIABILITIES AND EQUITY - TRUST B $16,899 $17,686
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
- 8 -
<PAGE>
Mortgage Securities III Trust C
Balance Sheets
June 29, 1997 and December 29, 1996
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Jun. 29, Dec. 29,
1997 1996
-------- -------
<S> <C> <C>
ASSETS (Unaudited)
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 532 900
------- -------
533 901
Interest receivable 96 108
Government National and Federal National
Mortgage Association Certificates, net of
unamortized discount of $0 and $154
(Notes 2, 4 and 5) 13,277 14,182
------- -------
TOTAL ASSETS - TRUST C $13,906 $15,191
======= =======
LIABILITIES AND OWNER'S BENEFICIAL INTEREST
Interest payable $ 291 $ 426
Collateralized mortgage obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 12,914 13,951
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Retained earnings 700 813
------- -------
Total Owner's Beneficial Interest 701 814
------- -------
TOTAL LIABILITIES AND EQUITY - TRUST C $13,906 $15,191
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
- 9 -
<PAGE>
Mortgage Securities III Trust D
Balance Sheets
June 29, 1997 and December 29, 1996
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Jun. 29, Dec. 29,
1997 1996
-------- -------
<S> <C> <C>
ASSETS (Unaudited)
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 255 239
------- -------
256 240
Receivable from beneficial owner 70 45
Interest receivable 99 107
Government National and Federal National
Mortgage Association Certificates, net of
unamortized premium of $0 and $60
(Notes 2, 4 and 5) 13,953 15,095
------- -------
TOTAL ASSETS - TRUST D $14,378 $15,487
======= =======
LIABILITIES AND OWNER'S BENEFICIAL INTEREST
Interest payable $ 99 $ 213
Collateralized mortgage obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 13,858 14,801
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Retained earnings 420 472
------- -------
Total Owner's Beneficial Interest 421 473
------- -------
TOTAL LIABILITIES AND EQUITY - TRUST D $14,378 $15,487
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
- 10 -
<PAGE>
Mortgage Securities III Trust E
Balance Sheets
June 29, 1997 and December 29, 1996
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Jun. 29, Dec. 29,
1997 1996
-------- -------
<S> <C> <C>
ASSETS (Unaudited)
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 2,236 2,120
-------- -------
2,237 2,121
Interest receivable 301 336
Government National Mortgage Association
Certificates, net of unamortized discount
of $0 and $339 (Notes 2, 4 and 5) 45,135 47,636
Deferred hedging costs (Note 5) - 320
-------- -------
TOTAL ASSETS - TRUST E $ 47,673 $50,413
======== =======
LIABILITIES AND OWNER'S BENEFICIAL INTEREST
Interest payable $ 925 $ 986
Collateralized mortgage obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 41,096 40,717
Payable to Weyerhaeuser Mortgage Company
(Note 5) - 35,597
Payable to beneficial owner 36,293 -
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Accumulated deficit (30,642) (26,888)
--------- ---------
Total Owner's Beneficial Interest (30,641) (26,887)
--------- ---------
TOTAL LIABILITIES AND EQUITY - TRUST E $ 47,673 $50,413
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
- 11 -
<PAGE>
Mortgage Securities III Trust F
Balance Sheets
June 29, 1997 and December 29, 1996
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Jun. 29, Dec. 29,
1997 1996
-------- -------
<S> <C> <C>
ASSETS (Unaudited)
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 871 648
-------- -------
872 649
Interest receivable 81 90
Government National and Federal National
Mortgage Association Certificates, net of
unamortized discount of $0 and $25
(Notes 2, 4 and 5) 11,101 11,949
Deferred hedging costs (Note 5) - 85
-------- -------
TOTAL ASSETS - TRUST F $ 12,054 $12,773
========= =========
LIABILITIES AND OWNER'S BENEFICIAL INTEREST
Interest payable $ 215 $ 304
Collateralized mortgage obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 9,542 9,990
Payable to Weyerhaeuser Mortgage Company
(Note 5) - 9,194
Payable to beneficial owner 9,374 -
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Accumulated deficit (7,078) (6,716)
------- -------
Total Owner's Beneficial Interest (7,077) (6,715)
------- -------
TOTAL LIABILITIES AND EQUITY - TRUST F $ 12,054 $12,773
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
- 12 -
<PAGE>
Mortgage Securities III Trust A
Statement of Cash Flows
For the Twenty-Six Weeks Ended June 29, 1997 and June 30, 1996
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Twenty-Six Weeks
Ended
---------------------
Jun. 29, Jun. 30,
1997 1996
-------- -------
<S> <C> <C>
Cash flows provided by operations:
Net income $ 22 $ 35
Non-cash charges to income:
Amortizations 85 1
Changes in:
Interest receivable 13 10
Receivable from beneficial owner - 1,746
Interest payable (99) 229
------- -------
Net cash provided by operations 21 2,021
Cash flows from investing in the business:
Collections on mortgage backed certificates 1,089 789
Cash flows from financing activities:
Dividends - (1,745)
Payments on collateralized
mortgage obligation bonds (1,081) (581)
------- -------
Cash flows from financing (1,081) (2,326)
------- -------
Net increase (decrease) in cash and equivalents 29 484
Cash and equivalents at beginning of year 770 845
------- -------
Cash and equivalents at end of quarter $ 799 $ 1,329
------- -------
Cash paid during the period for:
Interest $ 438 $ 584
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
- 13 -
<PAGE>
Mortgage Securities III Trust B
Statement of Cash Flows
For the Twenty-Six Weeks Ended June 29, 1997 and June 30, 1996
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Twenty-Six Weeks
Ended
---------------------
Jun. 29, Jun. 30,
1997 1996
-------- -------
<S> <C> <C>
Cash flows provided by operations:
Net income $ 46 $ 35
Non-cash charges to income:
Amortizations 102 7
Accretion of interest - 633
Changes in:
Interest receivable 22 11
Receivable from beneficial owner - 370
Interest payable (137) 358
------- -------
Net cash provided by operations 33 1,414
Cash flows from investing in the business:
Collections on mortgage backed certificates 1,225 2,072
Cash flows from financing activities:
Dividends - (369)
Payments on collateralized
mortgage obligation bonds (996) (1,213)
------- -------
Cash flows from financing (996) (1,582)
------- -------
Net increase (decrease) in cash and equivalents 262 1,904
Cash and equivalents at beginning of year 898 1,004
------- -------
Cash and equivalents at end of quarter $1,160 $ 2,908
------- -------
Cash paid during the period for:
Interest $ 358 $ 430
====== =======
</TABLE>
The accompanying notes are an integral part of these statements.
- 14 -
<PAGE>
Mortgage Securities III Trust C
Statement of Cash Flows
For the Twenty-Six Weeks Ended June 29, 1997 and June 30, 1996
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Twenty-Six Weeks
Ended
---------------------
Jun. 29, Jun. 30,
1997 1996
-------- -------
<S> <C> <C>
Cash flows provided by operations:
Net loss $ (113) $ (18)
Non-cash charges to income:
Amortizations 216 19
Changes in:
Interest receivable 11 17
Receivable from beneficial owner - 236
Interest payable (135) 335
------- -------
Net cash flows provided by operations (21) 589
Cash flows from investing in the business:
Collections on mortgage backed certificates 1,059 2,048
Cash flows from financing activities:
Dividends - (235)
Payments on collateralized
mortgage obligation bonds (1,406) (670)
------ ------
Cash flows from financing (1,406) (905)
------- -------
Net increase (decrease) in cash and (368) 1,732
equivalents
Cash and equivalents at beginning of year 901 1,068
------- -------
Cash and equivalents at end of quarter $ 533 $ 2,800
------- -------
Cash paid during the period for:
Interest $ 613 $ 787
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
- 15 -
<PAGE>
Mortgage Securities III Trust D
Statement of Cash Flows
For the Twenty-Six Weeks Ended June 29, 1997 and June 30, 1996
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Twenty-Six Weeks
Ended
---------------------
Jun. 29, Jun. 30,
1997 1996
-------- -------
<S> <C> <C>
Cash flows provided by operations:
Net loss $ (52) $ (10)
Non-cash charges to income:
Amortizations 160 9
Changes in:
Interest receivable 9 9
Receivable from beneficial owner (25) 1,633
Interest payable (114) 439
------- -------
Cash flows provided by operations (22) 2,080
Cash flows from investing in the business:
Collections on mortgage backed certificates 1,082 1,165
Cash flows from financing activities:
Dividends - (1,667)
Payments on collateralized
mortgage obligation bonds (1,044) (118)
------- -------
Cash flows from financing (1,044) (1,785)
Net increase (decrease) in cash and equivalents 16 1,460
Cash and equivalents at beginning of year 240 224
------- -------
Cash and equivalents at end of quarter $ 256 $ 1,684
------- -------
Cash paid during the period for:
Interest $ 313 $ 711
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
- 16 -
<PAGE>
Mortgage Securities III Trust E
Statement of Cash Flows
For the Twenty-Six Weeks Ended June 29, 1997 and June 30, 1996
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Twenty-Six Weeks
Ended
---------------------
Jun. 29, Jun. 30,
1997 1996
-------- -------
<S> <C> <C>
Cash flows provided by operations:
Net loss $(3,754) $(1,666)
Non-cash charges to income:
Amortizations 3,061 238
Accretion of interest - 1,750
Changes in:
Interest receivable 33 38
Receivable from beneficial owner - 1,821
Interest payable (60) 1,008
Interest payable to Weyerhaeuser
Mortgage Company (Note 5) (18,656) 1,421
------- -------
Cash flows provided by operations (19,376) 4,610
Cash flows from investing in the business:
Collections on mortgage backed 2,841 3,719
certificates
Cash flows from financing:
Dividends - (1,820)
Payments on collateralized
mortgage obligation bonds (2,701) (3,346)
Payments to Weyerhaeuser Mortgage Company (16,941) -
Debt due beneficial owner 36,293 -
------ -------
Cash flows from financing 16,651 (5,166)
Net increase (decrease) in cash and equivalents 116 3,163
Cash and equivalents at beginning of year 2,121 2,717
------- -------
Cash and equivalents at end of quarter $ 2,237 $5,880
------- -------
Cash paid during the period for:
Interest $ 985 $3,914
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
- 17 -
<PAGE>
Mortgage Securities III Trust F
Statement of Cash Flows
For the Twenty-Six Weeks Ended June 29, 1997 and June 30, 1996
(Unaudited)
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
Twenty-Six Weeks
Ended
---------------------
Jun. 29, Jun. 30,
1997 1996
-------- -------
<S> <C> <C>
Cash flows provided by operations:
Net loss $ (362) $ (726)
Non-cash charges to income:
Amortizations 331 103
Accretion of interest - 388
Changes in:
Interest receivable 10 9
Receivable from beneficial owner - 1,937
Interest payable (90) 262
Interest payable to Weyerhaeuser
Mortgage Company (Note 5) (8,570) 691
------- -------
Cash flows provided by operations (8,681) 2,664
Cash flows from investing in the business:
Collections on mortgage backed 873 1,297
certificates
Cash flows from financing activities:
Payments on collateralized
mortgage obligation bonds (719) (783)
Payments to Weyerhaeuser Mortgage Company (624) (7,773)
Contribution - 5,837
Debt due beneficial owner 9,374 -
------- -------
Cash flows from financing activities 8,031 (2,719)
Net increase (decrease) in cash and equivalents 223 1,242
Cash and equivalents at beginning of year 649 685
------- -------
Cash and equivalents at end of quarter $ 872 $ 1,927
------- -------
Cash paid during the period for:
Interest $ 241 $ 1,374
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
- 18 -
<PAGE>
Mortgage Securities III Trusts A, B, C, D, E and F
Notes to Financial Statements
For the Twenty-Six Weeks Ended June 29, 1997
(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 second quarter of 1997 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.
In 1997, the Company elected to write-off the unamortized
discounts and premiums on its GNMA certificates, FNMA
certificates and Bonds and carry these instruments at par
value. This decision resulted in a net expense of $ 3,550
as shown by individual Trusts below:
<TABLE>
<CAPTION>
Certificate Net
Premiums/ Bond Write-off
(Discounts) Discounts Expense
---------- --------- -----------
<S> <C> <C> <C>
Trust A $ 35 $ 49 $ 84
Trust B (197) 299 102
Trust C (154) 369 215
Trust D 60 101 161
Trust E (339) 3,081 2,742
Trust F (25) 271 246
---------- --------- -----------
Total $ (620) $ 4,170 $ 3,550
========== ========= ===========
</TABLE>
- 20 -
<PAGE>
In 1996, Trust A, B, C and D's unamortized discounts and
premiums on the certificates and Bonds were being amortized
using a method approximating the effective interest method
over the estimated life of the instruments. Trust E and
F's unamortized discounts on the certificates and Bonds
were being amortized using an interest method which
computes a constant effective yield over the contractual
life of the certificates. The Company elected to
retroactively apply the method of recognizing interest
income and expense established by Financial Accounting
Standards Board Statement No. 91 to Trust E and F, but
opted not to retroactively apply this method to the other
Trusts.
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:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Held to Maturity: Cost Gains Losses Value
<S> <C> <C> <C> <C>
Mortgage-backed
Securities
Trust A $ 9,102 $ 337 $ - $ 9,439
Trust B 15,625 692 - 16,317
Trust C 13,277 573 - 13,850
Trust D 13,953 405 - 14,358
Trust E 45,135 991 - 46,126
Trust F 11,101 382 - 11,483
</TABLE>
Note 3. Collateralized Mortgage Obligation Bonds:
Bonds at June 29, 1997 and December 29, 1996 consist of the
following:
Collateralized Mortgage Obligation Jun. 29, Dec. 29,
Bonds, Trust A: 1997 1996
-------- -------
Class 4 - 9.20%, stated maturity
July 1, 2016 $ 8,986 $10,068
Unamortized discount - (49)
-------- -------
$ 8,986 $10,019
- 21 -
<PAGE>
Collateralized Mortgage Obligation Jun. 29, Dec. 29,
Bonds, Trust B: 1997 1996
-------- --------
Class 3 - 9.00%, stated maturity
April 1, 2010 $ - $ 1,014
Class 4 - 9.00%, stated maturity
October 1, 2016 14,874 14,855
Unamortized discount - (299)
------- -------
$14,874 $15,570
======= =======
Collateralized Mortgage Obligation
Bonds, Trust C:
Class 4 - 9.00%, stated maturity
January 1, 2017 $12,914 $14,320
Unamortized discount - (369)
------- -------
$12,914 $13,951
Collateralized Mortgage Obligation
Bonds, Trust D:
Class 2 - 8.55%, stated maturity
December 1, 2014 $ - $ 302
Class 3 - 8.60%, stated maturity
March 1, 2017 13,858 14,600
Unamortized discount - (101)
------- -------
$13,858 $14,801
Collateralized Mortgage Obligation
Bonds, Trust E:
Class 3 - 9.00%, stated maturity
January 1, 2006 $ - $2,681
Class 4 - 9.00%, stated maturity
January 1, 2018 41,096 41,117
Unamortized discount - (3,081)
------- -------
$41,096 $40,717
Collateralized Mortgage Obligation
Bonds, Trust F:
Class 3 - 9.00%, stated maturity
January 1, 2014 $ 18 $1,152
Class 4 - 9.00%, stated maturity
April 1, 2018 9,524 9,109
Unamortized discount - (271)
------- -------
$ 9,542 $ 9,990
- 22 -
<PAGE>
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.
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).
- 23 -
<PAGE>
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.
Any such redemption 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 accrued interest at Bank of America's
prime rate and compounded interest annually. Both the
principal and interest related to the Weyerhaeuser Mortgage
Company payables were paid off by Weyerhaeuser Financial
Services, Inc.
- 24 -
<PAGE>
(Beneficial Owner) in March 1997, in anticipation of the
sale of Weyerhaeuser Mortgage Company to an unrelated third
party by Weyerhaeuser Financial Services and the
Weyerhaeuser Company.
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.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> CT
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> JUN-29-1997
<TOTAL-ASSETS> 114,882
0
0
<COMMON> 1
<OTHER-SE> (34,132)
<TOTAL-LIABILITY-AND-EQUITY> 114,882
<TOTAL-REVENUES> 5,412
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,213)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
