UNITED STATES 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 December 27, 1998
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-K and is therefore, filing
this form with the reduced disclosure format.
<PAGE>
Mortgage Securities III Trusts A, B, C, D, E and F
Table of Contents
Page No.
--------
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.....4
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...........................................................7
Report of Independent Public Accountants............................8
Statements of Operations for the Three Years Ended December 27, 1998
Trust A................................................. 10
Trust B................................................. 11
Trust C................................................. 12
Trust D................................................. 13
Trust E................................................. 14
Trust F................................................. 15
Balance Sheets as of December 27, 1998 and December 28, 1997
Trust A................................................. 16
Trust B................................................. 17
Trust C................................................. 18
Trust D................................................. 19
Trust E................................................. 20
Trust F................................................. 21
<PAGE>
Mortgage Securities III Trusts A, B, C, D, E and F
Table of Contents
Page No.
-------
Statements of Changes in Owner's Beneficial Interest for the
Three Years Ended December 27, 1998
Trust A................................................. 22
Trust B................................................. 23
Trust C................................................. 24
Trust D................................................. 25
Trust E................................................. 26
Trust F................................................. 27
Statements of Cash Flows for the Three Years Ended December 27,
1998
Trust A................................................. 28
Trust B................................................. 29
Trust C................................................. 30
Trust D................................................. 31
Trust E................................................. 32
Trust F................................................. 33
Notes to Financial Statements for the Three Years Ended
December 27, 1998............................................... 34
Schedule XIII-Other Security Investments
Trust B................................................. 40
Trust D................................................. 41
Trust E................................................. 42
INDEX TO EXHIBITS................................................ 43
<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.
Each Trust 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.
<TABLE>
<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 22, 1999, 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 1998, 1997 and 1996 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.
The following table outlines principal payments made by
the Trusts during 1998 to the bondholders (in thousands).
<TABLE>
<CAPTION>
Class 3 Class 4 Total
------- ------- -----
<S> <C> <C> <C>
Trust A $ - $ - $ -
Trust B - 3,254 3,254
Trust C - 12,241 12,241
Trust D 2,677 N/A 2,677
Trust E - 7,566 7,566
Trust F - - -
</TABLE>
This rate of payment is sufficient to retire the Bonds
prior to their stated maturity.
The Year 2000 challenge arises from the nearly universal
practice in the computer industry of using two digits
rather than four digits to designate the calendar year
(e.g. DD/MM/YY). This can lead to incorrect results when
computer software performs arithmetic operations,
comparisons or data field sorting involving years later
than 1999. The business activities of the Trusts, which
consists of the collection of principal and interest on
the GNMA and FNMA certificates securing the bonds issued
by the Trusts and disbursing the required payment of
principal and interest to the bondholders, is conducted by
- 2 -
<PAGE>
third party suppliers to the Trusts. Certain accounting,
administrative and clerical services are provided to the
Trusts by an affiliate. Consequently, the Trusts have not
incurred any expenses for remediation of their internal
systems and do not expect to incur any such expenses in
the future.
Depending on whether suppliers on which the Trusts rely
are able to successfully address the Year 2000 issue, the
Trusts ability to comply with their payment obligations
under the outstanding bonds could be materially adversely
affected. As a result, the Trusts have requested
information regarding Year 2000 readiness from such
suppliers. Each such supplier has given the Trusts
written assurances that the supplier expects to have
completed its Year 2000 remediation before the date when
Year 2000 sensitivities could materially affect its
ability to perform its obligations to the Trusts. In
addition, each supplier has indicated that it has
developed or is developing contingency plans in the event
the supplier's significant systems are disrupted by the
Year 2000 problem. The Trusts currently expect that in
the event of systems failures of suppliers they would be
able to continue to do business, although such operations
may be at a higher cost.
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 27, 1998, are included herein.
- 3 -
<PAGE>
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 27, 1998.
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
(1) The following documents are filed as part of this report:
(a) Report of Independent Public Accountants.
(b) Financial Statements:
Statements of Operations
Trust A for the Three Years Ended December 27, 1998
Trust B for the Three Years Ended December 27, 1998
Trust C for the Three Years Ended December 27, 1998
Trust D for the Three Years Ended December 27, 1998
Trust E for the Three Years Ended December 27, 1998
Trust F for the Three Years Ended December 27, 1998
Balance Sheets
Trust A as of December 27, 1998 and December 28, 1997
Trust B as of December 27, 1998 and December 28, 1997
Trust C as of December 27, 1998 and December 28, 1997
Trust D as of December 27, 1998 and December 28, 1997
Trust E as of December 27, 1998 and December 28, 1997
Trust F as of December 27, 1998 and December 28, 1997
Statements of Changes in Owner's Beneficial Interest
Trust A for the Three Years Ended December 27, 1998
Trust B for the Three Years Ended December 27, 1998
Trust C for the Three Years Ended December 27, 1998
Trust D for the Three Years Ended December 27, 1998
Trust E for the Three Years Ended December 27, 1998
Trust F for the Three Years Ended December 27, 1998
Statements of Cash Flows
Trust A for the Three Years Ended December 27, 1998
Trust B for the Three Years Ended December 27, 1998
Trust C for the Three Years Ended December 27, 1998
Trust D for the Three Years Ended December 27, 1998
Trust E for the Three Years Ended December 27, 1998
Trust F for the Three Years Ended December 27, 1998
Notes to Financial Statements for the Three Years
Ended December 27,1998.
- 5 -
<PAGE>
(c) Financial Statement Schedules:
Schedule XIII - Other Security Investments Trust B
Schedule XIII - Other Security Investments Trust D
Schedule XIII - Other Security Investments Trust E
(d) Exhibits:
Certificate of Incorporation of Mortgage Securities
III Corporation (incorporated by reference to Exhibit
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).
(2) Exhibits are included in Item (1)(d) above.
(3) Financial Statement Schedules required by Regulation S-X are
included in Item (1)(c) above.
- 6 -
<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
March 1999.
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
Financial Services Officer
- 7 -
<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 27, 1998 and
December 28, 1997, 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 27, 1998. 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
27, 1998 and December 28, 1997, and the results of their operations
and their cash flows for each of the three years in the period
ended December 27, 1998 in conformity with generally accepted
accounting principles.
- 8 -
<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
Seattle, WA
February 10, 1999
- 9 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust A
Statements of Operations
For the Three Years Ended December 27, 1998
(Dollar amounts in thousands)
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Interest income $ - $ 676 $ 1,035
Interest expense - 594 970
Other income - 425 -
--------- --------- ---------
Net income $ - $ 507 $ 65
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements
- 10 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust B
Statements of Operations
For the Three Years Ended December 27, 1998
(Dollar amounts in thousands)
1998 1997 1996
-------- --------- ---------
<S> <C> <C> <C>
Interest income $ 1,136 $ 1,573 $ 1,634
Interest expense 1,118 1,481 1,573
--------- --------- ---------
Net income $ 18 $ 92 $ 61
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements
- 11 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust C
Statements of Operations
For the Three Years Ended December 27, 1998
(Dollar amounts in thousands)
1998 1997 1996
-------- --------- ---------
<S> <C> <C> <C>
Interest income $ 742 $1,312 $ 1,441
Interest expense 742 1,426 1,490
Gain on sale 272 - -
--------- --------- ---------
Net income (loss) 272 $(114) $ (49)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements
- 12 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust D
Statements of Operations
For the Three Years Ended December 27, 1998
(Dollar amounts in thousands)
1998 1997 1996
-------- --------- ---------
<S> <C> <C> <C>
Interest income $ 983 $1,145 $1,363
Interest expense 1,058 1,198 1,357
--------- --------- ---------
Net (loss) income $ (75) $ (53) $ 6
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements
- 13 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust E
Statements of Operations
For the Three Years Ended December 27, 1998
(Dollar amounts in thousands)
1998 1997 1996
-------- --------- ---------
<S> <C> <C> <C>
Interest income $ 3,106 $3,994 $4,305
Interest expense 3,597 4,716 5,195
Interest expense to affiliate - 696 2,892
(Note 5)
--------- --------- ---------
Net loss $ (491) $(1,418) $(3,782)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements
- 14 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust F
Statements of Operations
For the Three Years Ended December 27, 1998
(Dollar amounts in thousands)
1998 1997 1996
-------- --------- ---------
<S> <C> <C> <C>
Interest income $ - $ 822 $1,211
Interest expense - 917 1,246
Interest expense to affiliate - 180 1,068
(Note 5)
Other income - 450 -
--------- --------- ---------
Net income (loss) $ - $ 175 $(1,103)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements
- 15 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust A
Balance Sheets
December 27, 1998 and December 28, 1997
(Dollar amounts in thousands)
1998 1997
------- --------
<S> <C> <C>
Assets
Cash and equivalents:
Collection account $ - $ 2
Receivable from Beneficial Owner - 1,263
-------- --------
TOTAL ASSETS - TRUST A $ - $1,265
======== ========
Owner's Beneficial Interest
Owner's beneficial interest $ - $ 1
Retained earnings - 1,264
-------- --------
TOTAL OWNER'S BENEFICIAL INTEREST - TRUST A $ - $1,265
======== ========
</TABLE>
The accompanying notes are an integral part of these statements
- 16 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust B
Balance Sheets
December 27, 1998 and December 28, 1997
(Dollar amounts in thousands)
1998 1997
-------- --------
<S> <C> <C>
Assets
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 858 699
-------- --------
859 700
Interest receivable 82 105
Government National and Federal National
Mortgage Association Certificates 11,298 14,671
-------- --------
TOTAL ASSETS - TRUST B 12,239 15,476
======== ========
Liabilities and Owner's Beneficial Interest
Interest payable $ 301 $ 302
Collateralized Mortgage Obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 10,184 13,438
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Retained earnings 1,753 1,735
-------- --------
Total Owner's Beneficial Interest 1,754 1,736
-------- --------
TOTAL LIABILITIES AND OWNER'S BENEFICIAL
INTEREST - TRUST B $12,239 $15,476
======== ========
</TABLE>
The accompanying notes are an integral part of these statements
- 17 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust C
Balance Sheets
December 27, 1998 and December 28, 1997
(Dollar amounts in thousands)
1998 1997
-------- --------
<S> <C> <C>
Assets
Cash and equivalents:
Trust account $ - $ 1
Collection account (Notes 3 and 4) - 889
-------- --------
- 890
Receivable from beneficial owner 972 -
Interest receivable - 87
Government National and Federal National
Mortgage Association Certificates - 12,238
-------- --------
TOTAL ASSETS - TRUST C $ 972 $13,215
======== ========
Liabilities and Owner's Beneficial Interest
Interest payable $ - $ 274
Collateralized Mortgage Obligation bonds,
net (Notes 1, 2, 3, and 5) - 12,241
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Retained earnings 971 699
-------- --------
Total Owner's Beneficial Interest 972 700
-------- --------
TOTAL LIABILITIES AND OWNER'S BENEFICIAL
INTEREST - TRUST C $ 972 $13,215
======== ========
</TABLE>
The accompanying notes are an integral part of these statements
- 18 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust D
Balance Sheets
December 27, 1998 and December 28, 1997
(Dollar amounts in thousands)
1998 1997
-------- --------
<S> <C> <C>
Assets
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 212 120
-------- --------
213 121
Receivable from beneficial owner 95 28
Interest receivable 70 88
Government National and Federal National
Mortgage Association Certificates 9,855 12,697
-------- --------
TOTAL ASSETS - TRUST D $10,233 $12,934
======== ========
Liabilities and Owner's Beneficial Interest
Interest payable $ 141 $ 90
Collateralized Mortgage Obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 9,817 12,494
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Retained earnings 274 349
-------- --------
Total Owner's Beneficial Interest 275 350
-------- --------
TOTAL LIABILITIES AND OWNER'S BENEFICIAL
INTEREST - TRUST D $10,233 $12,934
======== ========
</TABLE>
The accompanying notes are an integral part of these statements
- 19 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust E
Balance Sheets
December 27, 1998 and December 28, 1997
(Dollar amounts in thousands)
1998 1997
-------- --------
<S> <C> <C>
Assets
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 3,328 2,312
-------- --------
3,329 2,313
Interest receivable 222 281
Government National Mortgage Association
Certificates 33,430 42,071
-------- --------
TOTAL ASSETS - TRUST E $36,981 $44,665
======== ========
Liabilities and Owner's Beneficial Interest
Interest payable $ 687 $ 858
Collateralized Mortgage Obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 28,797 35,819
Owner's Beneficial Interest:
Owner's beneficial interest 36,294 36,294
Accumulated deficit (28,797) (28,306)
-------- --------
Total Owner's Beneficial Interest 7,497 7,988
-------- --------
TOTAL LIABILITIES AND OWNER'S BENEFICIAL
INTEREST - TRUST E $36,981 $44,665
========= ========
</TABLE>
The accompanying notes are an integral part of these statements
- 20 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust F
Balance Sheets
December 27, 1998 and December 28, 1997
(Dollar amounts in thousands)
1998 1997
-------- --------
<S> <C> <C>
Assets
Cash and equivalents:
Collection account $ - $ 2
Receivable from beneficial owner - 2,832
-------- --------
TOTAL ASSETS - TRUST F $ - $ 2,834
======== ========
Owner's Beneficial Interest
Owner's beneficial interest $ - $ 9,375
Accumulated deficit - (6,541)
-------- --------
TOTAL OWNER'S BENEFICIAL INTEREST - TRUST F $ - $ 2,834
-------- --------
</TABLE>
The accompanying notes are an integral part of these statements
- 21 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust A
Statements of Changes in Owner's Beneficial Interest
For the Three Years Ended December 27, 1998
(Dollar amounts in thousands)
Owner's
Beneficial Retained
Interest Earnings Total
----------- ---------- ---------
<S> <C> <C> <C>
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
Net income - 507 507
----------- ---------- ---------
Balance at December 28, 1997 1 1,264 1,265
Dividends paid - (1,264) (1,264)
Return of owner's beneficial (1) - (1)
interest
----------- ---------- ---------
Balance at December 27, 1998 $ - $ - $ -
</TABLE>
The accompanying notes are an integral part of these statements
- 22 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust B
Statements of Changes in Owner's Beneficial Interest
For the Three Years Ended December 27, 1998
(Dollar amounts in thousands)
Owner's
Beneficial Retained
Interest Earnings Total
----------- ---------- ---------
<S> <C> <C> <C>
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
Net income - 92 92
----------- ---------- ---------
Balance at December 28, 1997 1 1,735 1,736
Net income - 18 18
----------- ---------- ---------
Balance at December 27, 1998 $ 1 $ 1,753 $1,754
</TABLE>
The accompanying notes are an integral part of these statements
- 23 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust C
Statements of Changes in Owner's Beneficial Interest
For the Three Years Ended December 27, 1998
(Dollar amounts in thousands)
Owner's
Beneficial Retained
Interest Earnings Total
----------- ---------- ---------
<S> <C> <C> <C>
Balance at December 31, 1995 $ 1 $ 1,098 $1,099
Dividends paid - (236) (236)
Net loss - (49) (49)65
----------- ---------- ---------
Balance at December 29, 1996 1 813 814
Net loss - (114) (114)
----------- ---------- ---------
Balance at December 28, 1997 1 699 700
Net income - 272 272
----------- ---------- ---------
Balance at December 27, 1998 $ 1 $ 971 $ 972
</TABLE>
The accompanying notes are an integral part of these statements
- 24 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust D
Statements of Changes in Owner's Beneficial Interest
For the Three Years Ended December 27, 1998
(Dollar amounts in thousands)
Owner's
Beneficial Retained
Interest Earnings Total
----------- ---------- ---------
<S> <C> <C> <C>
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
Dividends paid - (70) (70)
Net loss - (53) (53)
----------- ---------- ---------
Balance at December 28, 1997 1 349 350
Net loss - (75) (75)
----------- ---------- ---------
Balance at December 27, 1998 $ 1 $ 274 $ 275
</TABLE>
The accompanying notes are an integral part of these statements
- 25 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust E
Statements of Changes in Owner's Beneficial Interest
For the Three Years Ended December 27, 1998
(Dollar amounts in thousands)
<S> <C> <C> <C>
Owner's
Beneficial Accumulated
Interest Deficit Total
----------- ---------- ---------
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)
Contribution 36,293 - 36,293
Net loss - (1,418) (1,418)
----------- ---------- ---------
Balance at December 28, 1997 36,294 (28,306) 7,988
Net loss - (491) (491)
----------- ---------- ---------
Balance at December 27, 1998 $ 36,294 $(28,797) $ 7,497
</TABLE>
The accompanying notes are an integral part of these statements
- 26 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust F
Statements of Changes in Owner's Beneficial Interest
For the Three Years Ended December 27, 1998
(Dollar amounts in thousands)
Owner's
Beneficial Accumulated
Interest Deficit Total
----------- ---------- ---------
<S> <C> <C> <C>
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)
Contribution 9,374 - 9,374
Net income - 175 175
----------- ---------- ---------
Balance at December 28, 1997 9,375 (6,541) 2,834
Return of owner's beneficial (9,375) 6,541 (2,834)
interest
----------- ---------- ---------
Balance at December 27, 1998 $ - $ - $ -
</TABLE>
The accompanying notes are an integral part of these statements
- 27 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust A
Statements of Cash Flows
For the Three Years Ended December 27, 1998
(Dollar amounts in thousands)
1998 1997 1996
----------- ---------- ---------
<S> <C> <C> <C>
Cash flows from operations:
Net income $ - $ 507 $ 65
Non-cash charges to income:
Amortization - 3 13
Write-offs - 81 -
Changes in:
Interest receivable - 85 13
Receivable from beneficial owner 1,263 (1,263) 1,746
Interest payable - (305) (50)
----------- ---------- ---------
Cash flows from operations 1,263 (892) 1,787
----------- ---------- ---------
Cash flows from investing
activities:
Sale of/collections on mortgage
backed certificates - 10,192 1,539
----------- ---------- ---------
Cash flows from financing
activities:
Return of owner's beneficial (1) - -
interest
Dividends paid (1,264) - (1,746)
Payments on collateralized
mortgage obligation bonds. - (10,068) (1,655)
----------- ---------- ---------
Cash flows from financing activities (1,265) (10,068) (3,401)
----------- ---------- ---------
Net decrease in cash and equivalents (2) (768) (75)
Cash and equivalents at beginning
of year 2 770 845
----------- ---------- ---------
Cash and equivalents at end of year - $ 2 $ 770
=========== ========== =========
Supplemental disclosure:
Cash paid during the year for
interest $ - $ 850 $ 1,012
</TABLE>
The accompanying notes are an integral part of these statements
- 28 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust B
Statements of Cash Flows
For the Three Years Ended December 27, 1998
(Dollar amounts in thousands)
1998 1997 1996
----------- ---------- ---------
<S> <C> <C> <C>
Cash flows from operations:
Net income $ 18 $ 92 $ 61
Non-cash charges to income:
Amortization - 3 30
Write-offs - 99 -
Accretion of interest - 334 1,265
Changes in:
Interest receivable 23 31 25
Receivable from beneficial owner - - 370
Interest payable (1) (170) (98)
----------- ---------- ---------
Cash flows from operations 40 389 1,653
----------- ---------- ---------
Cash flows from investing
activities:
Collections on mortgage backed
certificates 3,373 2,178 3,135
----------- ---------- ---------
Cash flows from financing
activities:
Dividends paid - - (370)
Payments on collateralized
mortgage obligation bonds (3,254) (2,765) (4,524)
----------- ---------- ---------
Cash flows from financing activities (3,254) (2,765) (4,894)
----------- ---------- ---------
Net increase (decrease) in cash and
equivalents 159 (198) (106)
Cash and equivalents at beginning
of year 700 898 1,004
----------- ---------- ---------
Cash and equivalents at end of year 859 $ 700 $ 898
=========== ========== =========
Supplemental disclosure:
Cash paid during the year for
interest $ 1,119 $ 1,353 $ 340
</TABLE>
The accompanying notes are an integral part of these statements
- 29 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust C
Statements of Cash Flows
For the Three Years Ended December 27, 1998
(Dollar amounts in thousands)
1998 1997 1996
----------- ---------- ---------
<S> <C> <C> <C>
Cash flows from operations:
Net income (loss) $ 272 $ (114) $ (49)
Non cash charges:
Amortization - 13 55
Write-offs - 202 -
Gain on sale (272) - -
Changes in:
Interest receivable 87 21 30
Receivable from beneficial owner (972) - 236
Interest payable (274) (152) (109)
----------- ---------- ---------
Cash flows from operations (1,159) (30) 163
----------- ---------- ---------
Cash flows from investing activities
Collections on mortgage backed
certificates 12,510 2,098 3,579
Cash flows from financing
activities:
Dividends paid - - (236)
Payments on collateralized
mortgage obligation bonds (12,241) (2,079) (3,673)
----------- ---------- ---------
Cash flows from financing activities (12,241) (2,079) (3,909)
----------- ---------- ---------
Net decrease in cash and equivalents (890) (11) (167)
Cash and equivalents at beginning
of year 890 901 1,068
----------- ---------- ---------
Cash and equivalents at end of year - $ 890 $ 901
----------- ---------- ---------
Supplemental disclosure:
Cash paid during the year for
interest $ 1,016 $ 1,207 $1,504
</TABLE>
The accompanying notes are an integral part of these statements
- 30 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust D
Statements of Cash Flows
For the Three Years Ended December 27, 1998
(Dollar amounts in thousands)
1998 1997 1996
----------- ---------- ---------
<S> <C> <C> <C>
Cash flows from operations:
Net (loss) income $ (75) $ (53) $ 6
Non-cash charges:
Amortization - 7 19
Write-offs - 154 -
Changes in:
Interest receivable 18 19 17
Receivable from beneficial owner (67) 17 1,608
Interest payable 51 (123) (28)
----------- ---------- ---------
Cash flows from operations (73) 21 1,622
----------- ---------- ---------
Cash flows from investing
activities:
Collections on mortgage backed
certificates 2,842 2,338 1,994
Cash flows from financing
activities:
Dividends paid - (70) (1,665)
Payments on collateralized
mortgage obligation bonds (2,677) (2,408) (1,935)
----------- ---------- ---------
Cash flows from financing activities (2,677) (2,478) (3,600)
----------- ---------- ---------
Net increase (decrease) in cash
and equivalents 92 (119) 16
Cash and equivalents at beginning
of year 121 240 224
----------- ---------- ---------
Cash and equivalents at end of year $ 213 $ 121 $ 240
----------- ---------- ---------
Supplemental disclosure:
Cash paid during the year for
interest $ 1,007 $1,220 $ 1,372
</TABLE>
The accompanying notes are an integral part of these statements
- 31 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust E
Statements of Cash Flows
For the Three Years Ended December 27, 1998
(Dollar amounts in thousands)
1998 1997 1996
----------- ---------- ---------
<S> <C> <C> <C>
Cash flows from operations:
Net loss $ (491) $(1,418) $(3,782)
Non-cash charges:
Amortization 544 758 858
Write-offs - (17) -
Accretion of interest - 925 3,501
Changes in:
Interest receivable 59 55 53
Receivable from beneficial owner - - 1,662
Interest payable (171) (128) (157)
Interest payable to
Weyerhaeuser Mortgage Company - (18,656) 2,892
(Note 5)
----------- ---------- ---------
Cash flows from operations (59) (18,481) 5,027
----------- ---------- ---------
Cash flows from investing
activities:
Collections on mortgage backed
certificates 8,641 5,904 6,544
Cash flows from financing
activities:
Contribution - 36,293 -
Dividends paid - - (1,662)
Payments on collateralized
mortgage obligation bonds (7,566) (6,583) (10,505)
Payments to Weyerhaeuser
Mortgage Company - - (16,941)
Company
----------- ---------- ---------
Cash flows from financing (7,566) 12,769 (12,167)
activities:
Net increase (decrease) in cash
and equivalents 1,016 192 (596)
Cash and equivalents at beginning
of year 2,313 2,121 2,717
----------- ---------- ---------
Cash and equivalents at end of year $ 3,329 $ 2,313 $ 2,121
----------- ---------- ---------
Supplemental disclosure:
Cash paid during the year for
interest $ 3,224 $23,118 $ 845
</TABLE>
The accompanying notes are an integral part of these statements
- 32 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust F
Statements of Cash Flows
For the Three Years Ended December 27, 1998
(Dollar amounts in thousands)
1998 1997 1996
----------- ---------- ---------
<S> <C> <C> <C>
Cash flows from operations:
Net income (loss) $ - $ 175 $(1,103)
Non-cash charges to income:
Amortization - 71 187
Write-offs - 260 -
Accretion of interest - 415 776
Changes in:
Interest receivable - 90 21
Interest payable - (304) (85)
Receivable from beneficial 2,832 (2,832) 1,937
owner
Interest payable to
Weyeraheuser Mortgage - (8,570) 1,068
Company (Note 5) ----------- ---------- ---------
Cash flows from operations 2,832 (10,695) 2,801
----------- ---------- ---------
Cash flows from investing
activities:
Sale of/collections on mortgage
backed certificates - 11,974 2,684
Cash flows from financing
activities:
Contribution - 9,374 5,837
Return of owner's beneficial
interest (2,834) - -
Payments on Weyerhaeuser
Mortgage Company note - (624) (7,773)
Payments on collateralized
mortgage obligation bonds - (10,676) (3,585)
----------- ---------- ---------
Cash flows from financing (2,834) (1,926) (5,521)
activities
----------- ---------- ---------
Net decrease in cash and (2) (647) (36)
equivalents
Cash and equivalents at beginning
of year 2 649 685
----------- ---------- ---------
Cash and equivalents at end of $ - $ 2 $ 649
year
----------- ---------- ---------
Supplemental disclosure:
Cash paid during the year for
interest $ - $ 9,616 $ 339
</TABLE>
The accompanying notes are an integral part of these statements
- 33 -
<PAGE>
Mortgage Securities III Trusts A, B, C, D, E and F
Notes to Financial Statements
For the Three Years Ended December 27, 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 issued a series of Collateralized Mortgage
Obligations (the "Bonds"). Trust B and D's Bonds are
collateralized by GNMA and FNMA certificates and Trust E's
Bonds are collateralized by GNMA certificates. Trust A, C
and F had no remaining Bonds or related collateralization
at December 27, 1998.
- 34 -
<PAGE>
<TABLE>
<CAPTION>
Bonds originally issued were as follows:
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 1998, 1997 and 1996, primarily 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. In
1998, the Bonds in Trust C were called and in 1997, the
Bonds in Trusts A an F were called. All GNMA and FNMA
certificates of these Trusts were sold and all Bond
principal and interest were paid to the bondholders when
the Bonds were called.
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.
The bond discounts on Trusts B and D were written off in
1997 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, which approximates the
effective interest method, over the remaining life of the
instruments.
Cash and equivalents include cash held in the collection
accounts and invested in short term investments with
purchased maturities of less than three months.
- 35 -
<PAGE>
The cost and estimated market values of investments in
debt securities are as follows:
<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 11,298 608 - 11,906
Trust D 9,855 510 - 10,365
Trust E 33,430 1,290 - 34,720
</TABLE>
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:
Collateralized Mortgage Obligation Bonds at December 27,
1998 and December 28, 1997 consist of the following:
<TABLE>
<CAPTION>
1998 1997
-------- -------
<S> <C> <C>
Trust B:
Class 4 - 9.00%, stated maturity
October 1, 2016 $10,184 $13,438
Trust C:
Class 4 - 9.00%, stated maturity
January 1, 2017 $ - $12,241
Trust D:
Class 3 - 8.60%, stated maturity
March 1, 2017 $ 9,817 $12,494
Trust E:
Class 4 - 9.00%, stated maturity
January 1, 2018 $ 30,574 $38,140
Unamortized discount (1,777) (2,321)
-------- --------
$ 28,797 $35,819
-------- --------
</TABLE>
- 36 -
<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 (a) Trust B
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 and January 1, 2003, respectively, (or on
any earlier payment date if the current principal amount of
Trust B and E's Class 4 Bonds are less than $6,100 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 Class 3 Bonds is less than 10
percent of the aggregate initial principal amount of
$75,600.
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.
- 37 -
<PAGE>
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:
<TABLE>
<CAPTION>
Trust B Trust D Trust E
-------- -------- -------
<S> <C> <C> <C>
1999 2,721 2,259 7,831
2000 2,152 1,759 6,185
2001 1,704 1,366 4,903
2002 1,352 1,044 3,906
2003 1,093 808 3,129
</TABLE>
Note 4. Assets pledged:
Trust B and D's Bonds are collateralized by the Trusts' GNMA
and FNMA certificates and the Collection Accounts. Trust
E's Bonds are collateralized by Trust E'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. As of December 27, 1998, certificates are
guaranteed by the Government National Mortgage Association
and the Federal National Mortgage Association as follows:
<TABLE>
<CAPTION>
Government National Federal National
Mortgage Association Mortgage Association
-------------- -------------
<S> <C> <C>
Trust B 9,873 1,425
Trust D 8,709 1,146
Trust E 33,430 N/A
</TABLE>
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.
- 38 -
<PAGE>
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 the Weyerhaeuser Company. In August 1997,
Weyerhaeuser Financial Services, Inc. contributed capital to
Trusts E & F, increasing beneficial owner's interest.
The Beneficial Owner advanced funds to Trust C during the
third quarter of 1998. The funds were repaid during the
fourth quarter of 1998. No interest was charged as the
advances were treated as a current payable.
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. Mortgage Securities III
Corporation will be responsible for all tax liabilities
incurred relating to the Trusts' operations.
- 39 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust B
Schedule XIII - Other Security Investments
December 27, 1998
(Dollar amounts in thousands)
Number of
Certificates Market
Type of Security Held Cost Value
- -------------------- ---------- --------- -----------
<S> <C> <C> <C>
Government National
Mortgage Association
Certificates 33 $ 9,873 $10,402
Federal National
Mortgage Association
Certificates 23 1,425 1,504
---------- --------- -----------
56 $11,298 $11,906
---------- --------- -----------
<FN>
<F1>
1. Cost represents the uncollected principal balance of the
mortgage loans underlying the certificates. Investments are
grouped and are carried at cost.
<F2>
2. Market value is an estimate based on the most current
information available.
</FN>
</TABLE>
- 40 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust D
Schedule XIII - Other Security Investments
December 27, 1998
(Dollar amounts in thousands)
Number of
Certificates Market
Type of Security Held Cost Value
- -------------------- ---------- --------- -----------
<S> <C> <C> <C>
Government National
Mortgage Association
Certificates 23 $ 8,709 $ 9,156
Federal National
Mortgage Association
Certificates 11 1,146 1,209
---------- --------- -----------
34 $ 9,855 $10,365
---------- --------- -----------
<FN>
<F1>
1. Cost represents the uncollected principal balance of the
mortgage loans underlying the certificates. Investments are
grouped and are carried at cost.
<F2>
2. Market value is an estimate based on the most current
information available.
</FN>
</TABLE>
- 41 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust E
Schedule XIII - Other Security Investments
December 27, 1998
(Dollar amounts in thousands)
Number of
Certificates Market
Type of Security Held Cost Value
- -------------------- ---------- --------- -----------
<S> <C> <C> <C>
Government National
Mortgage Association
Certificates 72 $33,430 $34,720
<FN>
<F1>
<F1>
1. Cost represents the uncollected principal balance of the
mortgage loans underlying the certificates. Investments are
grouped and are carried at cost.
<F2>
2. Market value is an estimate based on the most current
information available.
</FN>
</TABLE>
- 42 -
<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.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> CT
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-27-1998
<PERIOD-END> DEC-27-1998
<TOTAL-ASSETS> 60,425
0
0
<COMMON> 0
<OTHER-SE> 10,498
<TOTAL-LIABILITY-AND-EQUITY> 60,425
<TOTAL-REVENUES> 6,239
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 276
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
