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 28, 1998 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 28, 1998
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 28, 1997. 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 periods ended
June 28, 1998, should not be regarded as necessarily indicative of
the results that may be expected for the year 1998.
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 11th day of August 1998.
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: __________________________
Denise M. Geran
Financial Services Officer
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust A
Statement of Operations
For the Periods Ended June 28, 1998 and June 29, 1997
(Unaudited)
(Dollar amounts in thousands)
Thirteen Weeks Twenty-Six Weeks
Ended Ended
------------------- -------------------
Jun. 28, Jun. 29, Jun. 28, Jun. 29,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income $ - $ 190 $ - $ 423
Interest expense - 184 - 401
-------- -------- -------- --------
Net income $ - $ 6 $ - $ 22
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements
- 1 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust B
Statement of Operations
For the Periods Ended June 28, 1998 and June 29, 1997
(Unaudited)
(Dollar amounts in thousands)
Thirteen Weeks Twenty-Six Weeks
Ended Ended
------------------- -------------------
Jun. 28, Jun. 29, Jun. 28, Jun. 29,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income $ 294 $ 545 $ 609 $ 908
Interest expense 265 515 650 862
-------- -------- -------- --------
Net income (loss) $ 29 $ 30 $ (41) $ 46
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements
- 2 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust C
Statement of Operations
For the Periods Ended June 28, 1998 and June 29, 1997
(Unaudited)
(Dollar amounts in thousands)
Thirteen Weeks Twenty-Six Weeks
Ended Ended
------------------- -------------------
Jun. 28, Jun. 29, Jun. 28, Jun. 29,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income $ 247 $ 438 $ 508 $ 753
Interest expense 243 542 587 866
-------- -------- -------- --------
Net income (loss) $ 4 $(104) $ (79) $(113)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements
- 3 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust D
Statement of Operations
For the Periods Ended June 28, 1998 and June 29, 1997
(Unaudited)
(Dollar amounts in thousands)
Thirteen Weeks Twenty-Six Weeks
Ended Ended
------------------- -------------------
Jun. 28, Jun. 29, Jun. 28, Jun. 29,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income $ 253 $ 251 $ 521 $ 569
Interest expense 250 300 603 621
-------- -------- -------- --------
Net income (loss) $ 3 $ (49) $ (82) $ (52)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements
- 4 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust E
Statement of Operations
For the Periods Ended June 28, 1998 and June 29, 1997
(Unaudited)
(Dollar amounts in thousands)
Thirteen Weeks Twenty-Six Weeks
Ended Ended
------------------- -------------------
Jun. 28, Jun. 29, Jun. 28, Jun. 29,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income $ 805 $1,248 $1,645 $ 2,226
Interest expense 940 1,364 1,901 2,693
Interest expense to
an affiliate (Note 5) - - - 695
-------- -------- -------- --------
Net loss $(135) $(116) $(256) $(1,162)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements
- 5 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust F
Statement of Operations
For the Periods Ended June 28, 1998 and June 29, 1997
(Unaudited)
(Dollar amounts in thousands)
Thirteen Weeks Twenty-Six Weeks
Ended Ended
------------------- -------------------
Jun. 28, Jun. 29, Jun. 28, Jun. 29,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income $ - $ 274 $ - $ 536
Interest expense - 426 - 718
Interest expense to
an affiliate (Note 5) - 180
-------- -------- -------- --------
Net loss $ - $(152) $ - $(362)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements
- 6 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust A
Balance Sheets
June 28, 1998 and December 28, 1997
(Dollar amounts in thousands)
Jun. 28, Dec. 28,
1998 1997
-------- --------
(Unaudited)
<S> <C> <C>
Assets
Collection account (Notes 3 and 4) $ - $ 2
Receivable from Beneficial Owner 1,265 1,263
-------- --------
TOTAL ASSETS - TRUST A $1,265 $ 1,265
======== ========
Liabilities and Owner's Beneficial Interest
Owner's Beneficial Interest:
Owner's beneficial interest $ 1 $ 1
Retained earnings 1,264 1,264
-------- --------
Total Owner's Beneficial Interest 1,265 1,265
-------- --------
TOTAL LIABILITIES AND OWNER'S BENEFICIAL
INTEREST - TRUST A $1,265 $ 1,265
======== ========
</TABLE>
The accompanying notes are an integral part of these statements
- 7 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust B
Balance Sheets
June 28, 1998 and December 28, 1997
(Dollar amounts in thousands)
Jun. 28, Dec. 28,
1998 1997
-------- --------
(Unaudited)
<S> <C> <C>
Assets
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 1,384 699
-------- --------
1,385 700
Interest receivable 93 105
Government National and Federal National
Mortgage Association Certificates (Notes 2, 12,767 14,671
4 and 5)
-------- --------
TOTAL ASSETS - TRUST B $14,245 $15,476
======== ========
Liabilities and Owner's Beneficial Interest
Interest payable $ 357 $ 302
Collateralized Mortgage Obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 12,193 13,438
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Retained earnings 1,694 1,735
-------- --------
Total Owner's Beneficial Interest 1,695 1,736
-------- --------
TOTAL LIABILITIES AND OWNER'S BENEFICIAL
INTEREST - TRUST B $14,245 $15,476
======== ========
</TABLE>
The accompanying notes are an integral part of these statements
- 8 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust C
Balance Sheets
June 28, 1998 and December 28, 1997
(Dollar amounts in thousands)
Jun. 28, Dec. 28,
1998 1997
-------- --------
(Unaudited)
<S> <C> <C>
Assets
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 901 889
-------- --------
902 890
Interest receivable 79 87
Government National and Federal National
Mortgage Association Certificates (Notes 2, 10,986 12,238
4 and 5)
-------- --------
TOTAL ASSETS - TRUST C $11,967 $13,215
======== ========
Liabilities and Owner's Beneficial Interest
Interest payable $ 326 $ 274
Collateralized Mortgage Obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 11,020 12,241
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Retained earnings 620 699
-------- --------
Total Owner's Beneficial Interest 621 700
-------- --------
TOTAL LIABILITIES AND OWNER'S BENEFICIAL
INTEREST - TRUST C $11,967 $13,215
======== ========
</TABLE>
The accompanying notes are an integral part of these statements
- 9 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust D
Balance Sheets
June 28, 1998 and December 28, 1997
(Dollar amounts in thousands)
Jun. 28, Dec. 28,
1998 1997
-------- --------
(Unaudited)
<S> <C> <C>
Assets
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 422 120
-------- --------
423 121
Receivable from Beneficial Owner 55 28
Interest receivable 80 88
Government National and Federal National
Mortgage Association Certificates (Notes 2, 11,298 12,697
4 and 5)
-------- --------
TOTAL ASSETS - TRUST D $11,856 $12,934
======== ========
Liabilities and Owner's Beneficial Interest
Interest payable $ 164 $ 90
Collateralized Mortgage Obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 11,424 12,494
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Retained earnings 267 349
-------- --------
Total Owner's Beneficial Interest 268 350
-------- --------
TOTAL LIABILITIES AND OWNER'S BENEFICIAL
INTEREST - TRUST D $11,856 $12,934
======== ========
</TABLE>
The accompanying notes are an integral part of these statements
- 10 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust E
Balance Sheets
June 28, 1998 and December 28, 1997
(Dollar amounts in thousands)
Jun. 28, Dec. 28,
1998 1997
-------- --------
(Unaudited)
<S> <C> <C>
Assets
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 3,671 2,312
-------- --------
3,672 2,313
Interest receivable 254 281
Government National Mortgage Association
Certificates (Notes 2, 4 and 5) 38,199 42,071
-------- --------
TOTAL ASSETS - TRUST E $42,125 $44,665
======== ========
Liabilities and Owner's Beneficial Interest
Interest payable $ 802 $ 858
Collateralized Mortgage Obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 33,591 35,819
Owner's Beneficial Interest:
Owner's beneficial interest 36,294 36,294
Accumulated deficit (28,562) (28,306)
-------- --------
Total Owner's Beneficial Interest 7,732 7,988
-------- --------
TOTAL LIABILITIES AND OWNER'S BENEFICIAL
INTEREST - TRUST E $42,125 $44,665
======== ========
</TABLE>
The accompanying notes are an integral part of these statements
- 11 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust F
Balance Sheets
June 28, 1998 and December 28, 1997
(Dollar amounts in thousands)
Jun. 28, Dec. 28,
1998 1997
-------- --------
(Unaudited)
<S> <C> <C>
Assets
Collection account (Notes 3 and 4) $ - $ 2
Receivable from Beneficial Owner 2,834 2,832
-------- --------
TOTAL ASSETS - TRUST F $2,834 $ 2,834
======== ========
Liabilities and Owner's Beneficial Interest
Owner's Beneficial Interest:
Owner's beneficial interest $9,375 $ 9,375
Accumulated deficit (6,541) (6,541)
-------- --------
Total Owner's Beneficial Interest 2,834 2,834
-------- --------
TOTAL LIABILITIES AND OWNER'S BENEFICIAL
INTEREST - TRUST F $2,834 $ 2,834
======== ========
</TABLE>
The accompanying notes are an integral part of these statements
- 12 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust A
Statement of Cash Flows
For the Periods Ended June 28, 1998 and June 29, 1997
(Unaudited)
(Dollar amounts in thousands)
Twenty-Six Weeks Ended
---------------------
Jun. 28, Jun. 29,
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operations:
Net income $ - $ 22
Non-cash charges to income:
Amortizations - 4
Write-offs - 81
Changes in:
Interest receivable - 13
Interest payable - (99)
--------- ---------
Net cash flows from operations - 21
--------- ---------
Cash flows from investing activities:
Sale of/collections on mortgage
backed certificates - 1,089
Cash flows from financing activities:
Receivable from beneficial owner (2) -
Payments on collateralized
mortgage obligation bonds - (1,081)
--------- ---------
Net cash flows from financing (2) 21
--------- ---------
Net increase (decrease) in cash and
equivalents (2) 29
Cash and equivalents at beginning
of year 2 770
--------- ---------
Cash and equivalents at end of period $ - $ 799
--------- ---------
Supplemental disclosure:
Cash paid during the period for
interest $ - $ 438
</TABLE>
The accompanying notes are an integral part of these statements
- 13 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust B
Statement of Cash Flows
For the Periods Ended June 28, 1998 and June 29, 1997
(Unaudited)
(Dollar amounts in thousands)
Twenty-Six Weeks Ended
---------------------
Jun. 28, Jun. 29,
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operations:
Net income (loss) $ (41) $ 46
Non-cash charges to income:
Amortizations - 3
Write-offs - 99
Accretion of interest - 334
Changes in:
Interest receivable 12 22
Interest payable 55 (137)
--------- ---------
Net cash flows from operations 26 367
--------- ---------
Cash flows from investing activities:
Collections on mortgage backed 1,904 1,225
certificates
Cash flows from financing activities:
Payments on collateralized
mortgage obligation bonds (1,245) (1,330)
--------- ---------
Net increase in cash and equivalents 685 262
Cash and equivalents at beginning
of year 700 898
--------- ---------
Cash and equivalents at end of period $ 1,385 $ 1,160
--------- ---------
Supplemental disclosure:
Cash paid during the period for
interest $ 595 $ 358
</TABLE>
The accompanying notes are an integral part of these statements
- 14 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust C
Statement of Cash Flows
For the Periods Ended June 28, 1998 and June 29, 1997
(Unaudited)
(Dollar amounts in thousands)
Twenty-Six Weeks Ended
---------------------
Jun. 28, Jun. 29,
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operations:
Net loss $ (79) $ (113)
Non-cash charges to income:
Amortizations - 14
Write-offs - 202
Changes in:
Interest receivable 8 11
Interest payable 52 (135)
--------- ---------
Net cash flows from operations (19) (21)
--------- ---------
Cash flows from investing activities:
Collections on mortgage backed 1,252 1,059
certificates
Cash flows from financing activities:
Payments on collateralized
mortgage obligation bonds (1,221) (1,406)
Net increase (decrease) in cash and
equivalents 12 (368)
Cash and equivalents at beginning
of year 890 901
--------- ---------
Cash and equivalents at end of period $ 902 $ 533
--------- ---------
Supplemental disclosure:
Cash paid during the period for
interest $ 535 $ 613
</TABLE>
The accompanying notes are an integral part of these statements
- 15 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust D
Statement of Cash Flows
For the Periods Ended June 28, 1998 and June 29, 1997
(Unaudited)
(Dollar amounts in thousands)
Twenty-Six Weeks Ended
---------------------
Jun. 28, Jun. 29,
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operations:
Net loss $ (82) $ (52)
Non-cash charges to income:
Amortizations - 6
Write-offs - 154
Changes in:
Interest receivable 8 9
Receivable from beneficial owner (27) (25)
Interest payable 74 (114)
--------- ---------
Net cash flows from operations (27) (22)
--------- ---------
Cash flows from investing activities:
Collections on mortgage backed 1,399 1,082
certificates
Cash flows from financing activities:
Payments on collateralized
mortgage obligation bonds (1,070) (1,044)
Net increase in cash and equivalents 302 16
Cash and equivalents at beginning
of year 121 240
--------- ---------
Cash and equivalents at end of period $ 423 $ 256
--------- ---------
Supplemental disclosure:
Cash paid during the period for
interest $ 529 $ 313
</TABLE>
The accompanying notes are an integral part of these statements
- 16 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust E
Statement of Cash Flows
For the Periods Ended June 28, 1998 and June 29, 1997
(Unaudited)
(Dollar amounts in thousands)
Twenty-Six Weeks Ended
---------------------
Jun. 28, Jun. 29,
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operations:
Net loss $ (256) $(1,162)
Non-cash charges to income:
Amortizations 273 469
Accretion of interest - 925
Changes in:
Interest receivable 27 33
Interest payable (56) (60)
Interest payable to Weyerhaeuser
Mortgage Company (Note 5) - (18,656)
--------- ---------
Net cash flows from operations (12) (18,451)
--------- ---------
Cash flows from investing activities:
Collections on mortgage backed 3,872 2,841
certificates
Cash flows from financing activities:
Debt due beneficial owner - 36,293
Payments on collateralized
mortgage obligation bonds (2,501) (3,626)
Payments of Weyerhaeuser Mortgage
Company note - (16,941)
Cash flows from financing activities (2,501) 15,726
--------- ---------
Net increase in cash and equivalents 1,359 116
Cash and equivalents at beginning
of year 2,313 2,121
--------- ---------
Cash and equivalents at end of quarter $ 3,672 $ 2,237
--------- ---------
Supplemental disclosure:
Cash paid during the period for
interest $ 1,684 $ 985
</TABLE>
The accompanying notes are an integral part of these statements
- 17 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust F
Statement of Cash Flows
For the Periods Ended June 28, 1998 and June 29, 1997
(Unaudited)
(Dollar amounts in thousands)
Twenty-Six Weeks Ended
---------------------
Jun. 28, Jun. 29,
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operations:
Net loss $ - $ (362)
Non-cash charges to income:
Amortizations - 71
Write-offs - 260
Accretion of interest - 415
Changes in:
Interest receivable - 10
Interest payable - (90)
Interest payable to Weyerhaeuser
Mortgage Company (Note 5) - (8,570)
--------- ---------
Net cash flows from operations - (8,266)
--------- ---------
Cash flows from investing activities:
Collections on mortgage backed - 873
certificates
Cash flows from financing activities:
Debt due beneficial owner (2) 9,374
Payments on collateralized
mortgage obligation bonds - (1,134)
Payments of Weyerhaeuser Mortgage
Company note - (624)
Cash flows from financing activities (2) 7,616
--------- ---------
Net decrease in cash and equivalents (2) 223
Cash and equivalents at beginning
of year 2 649
--------- ---------
Cash and equivalents at end of quarter $ - $ 872
--------- ---------
Supplemental disclosure:
Cash paid during the period for
interest $ - $ 241
</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 28, 1998
(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") as follows:
<TABLE>
<CAPTION>
Trust Date Issued Bonds Issued
<S> <S> <C>
B September 30, 1986 $100,000
C December 30, 1986 $100,000
D February 27, 1987 $ 75,600
E December 22, 1987 $131,600
</TABLE>
Trust B, C and D's remaining Bonds are collateralized by
GNMA and FNMA certificates and Trust E's Bonds
are collateralized by GNMA certificates. Trust A and F
Bonds have been fully repaid.
- 19 -
<PAGE>
<TABLE>
<CAPTION>
Trust Date Issued Bonds Issued
<S> <S> <C>
B September 30, 1986 $100,000
C December 30, 1986 $100,000
D February 27, 1987 $ 75,600
E December 22, 1987 $131,600
</TABLE>
Activity during the second quarter of 1998 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 bonds in Trusts A and F were called and any
remaining discounts were written off. The bond discounts
on Trusts B, C, and D were written off as management
intends to prepay the bonds at the earliest allowable
prepayment date and the amounts are no longer material.
The bond discount for Trust E is amortized on a straight
line basis over the remaining life of the instruments.
The June 1997 10-Q was issued with the Trust E bond
discount written off; the discount was subsequently
reinstated in the fourth quarter of the same year.
Cash and equivalents include cash held in the collection
accounts and invested in short term investments with
original maturities of less than three months.
The cost and estimated market values of investments in
debt securities are as follows:
- 20 -
<PAGE>
<TABLE>
<CAPTION>
Gross Gross Estimate
Unrealized Unrealized Market
Held to Maturity: Cost Gains Losses Value
------- --------- -------- --------
<S> <C> <C> <C> <C>
Mortgage-backed
Securities
Trust B 12,767 696 - 13,463
Trust C 10,986 565 - 11,551
Trust D 11,298 573 - 11,871
Trust E 38,199 1,415 - 39,614
</TABLE>
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.
Note 3.Collateralized Mortgage Obligation Bonds:
<TABLE>
<CAPTION>
Collateralized Mortgage Obligation Bonds at June 28, 1998
and December 28, 1997 consist of the following:
Jun. 28, Dec. 28,
1998 1997
--------- ----------
<S> <C> <C>
Trust B:
Class 4 - 9.00%, stated maturity
October 1, 2016 $12,193 $13,438
Trust C:
Class 4 - 9.00%, stated maturity
January 1, 2017 $11,020 $12,241
Trust D:
Class 3 - 8.60%, stated maturity
March 1, 2017 $11,424 $12,494
Trust E:
Class 4 - 9.00%, stated maturity
January 1, 2018 35,639 38,140
Unamortized discount (2,048) (2,321)
-------- -------
$ 33,591 $ 35,819
/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.
- 21 -
<PAGE>
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 (a) Trust B, C
and E's Class 4 Bonds may be redeemed in whole, but not in
part, at the Trusts' option on any payment date on or after
October 1, 2001, January 1, 2002 and January 1, 2003,
respectively, (or on any earlier payment date if the
current principal amount of Trust B, C and E's Class 4
Bonds are less than $6,100, $10,500 and $13,160,
respectively) and (b) Trust D's 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, or on any
earlier 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.
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 accrued interest.
- 22 -
<PAGE>
Note 4. Assets pledged:
Trust B, C and D'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 Trust E's
GNMA certificates and the Collection Account. 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. (Beneficial Owner) in March 1997, in
anticipation of the sale of Weyerhaeuser Mortgage Company to
an unrelated third party by Weyerhaeuser Financial Services,
Inc. and Weyerhaeuser Company. In August 1997, Weyerhaeuser
Financial Services, Inc. contributed capital to Trusts E &
F, increasing beneficial owner's interest.
Certain ongoing administrative and accounting functions are
provided by the Beneficial Owner at no cost to each Trust.
- 23 -
<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.
</TABLE>
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-29-1998
<TOTAL-ASSETS> 84,292
0
0
<COMMON> 0
<OTHER-SE> 14,415
<TOTAL-LIABILITY-AND-EQUITY> 84,292
<TOTAL-REVENUES> 3,283
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (458)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>