<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Thirty-nine Weeks Ended September 27, 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 Thirty-nine Weeks Ended September 27, 1998
Part I. Financial Information
Item 1. Financial Statements Page No.
Statement of Operations
Trust A ............................. 4
Trust B ............................. 5
Trust C ............................. 6
Trust D ............................. 7
Trust E ............................. 8
Trust F ............................. 9
Balance Sheets
Trust A ............................. 10
Trust B ............................. 11
Trust C ............................. 12
Trust D ............................. 13
Trust E ............................. 14
Trust F ............................. 15
Statement of Cash Flows
Trust A ............................. 16
Trust B ............................. 17
Trust C ............................. 18
Trust D ............................. 19
Trust E ............................. 20
Trust F ............................. 21
Notes to Financial Statements 22
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations ............................. 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>
Item 1. Financial Information
See the Company's financial
statements attached hereto beginning at page 3.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Activity during the third quarter of 1998 consisted
of the collection of principal and interest on the
GNMA and FNMA certificates and disbursments of the
required payment of principal and interest to the
bondholders.
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 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
- 1 -
<PAGE>
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.
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 25th day of
March 1999.
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
- 2 -
<PAGE>
Financial Statements
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
September 27, 1998, should not be regarded as necessarily
indicative of the results that may be expected for the year 1998.
- 3 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust A
Statement of Operations
For the Periods Ended September 27, 1998 and September 28, 1997
(Unaudited)
(Dollar amounts in thousands)
Thirteen Weeks Thirty-nine Weeks
Ended Ended
------------------- -------------------
Sep. 27, Sep. 28, Sep. 27, Sep. 28,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income $ - $ 258 $ - $ 681
Interest expense - 194 - 595
-------- -------- -------- --------
Net income $ - $ 64 $ - $ 86
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements
- 4 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust B
Statement of Operations
For the Periods Ended September 27, 1998 and September 28, 1997
(Unaudited)
(Dollar amounts in thousands)
Thirteen Weeks Thirty-nine Weeks
Ended Ended
------------------- -------------------
Sep. 27, Sep. 28, Sep. 27, Sep. 28,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income $ 272 $ 338 $ 881 $ 1,247
Interest expense 244 318 894 1,180
-------- -------- -------- --------
Net income (loss) $ 28 $ 20 $ (13) $ 67
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements
- 5 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust C
Statement of Operations
For the Periods Ended September 27, 1998 and September 28, 1997
(Unaudited)
(Dollar amounts in thousands)
Thirteen Weeks Thirty-nine Weeks
Ended Ended
------------------- -------------------
Sep. 27, Sep. 28, Sep. 27, Sep. 28,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income $ 241 $ 285 $ 749 $1,039
Interest expense 156 286 743 1,152
-------- -------- -------- --------
Net income (loss) $ 85 $ (1) $ 6 $ (113)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements
- 6 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust D
Statement of Operations
For the Periods Ended September 27, 1998 and September 28, 1997
(Unaudited)
(Dollar amounts in thousands)
Thirteen Weeks Thirty-nine Weeks
Ended Ended
------------------- -------------------
Sep. 27, Sep. 28, Sep. 27, Sep. 28,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income $ 241 $ 295 $ 762 $ 865
Interest expense 237 292 840 914
-------- -------- -------- --------
Net income (loss) $ 4 $ 3 $ (78) $ (49)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements
- 7 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust E
Statement of Operations
For the Periods Ended September 27, 1998 and September 28, 1997
(Unaudited)
(Dollar amounts in thousands)
Thirteen Weeks Thirty-nine Weeks
Ended Ended
------------------- -------------------
Sep. 27, Sep. 28, Sep. 27, Sep. 28,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income $ 754 $ 899 $ 2,399 $ 3,125
Interest expense 872 1,033 2,773 3,726
Interest expense to
an affiliate (Note 5) - 1 - 696
-------- -------- -------- --------
Net loss $ (118) $ (135) $ (374) $(1,297)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements
- 8 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust F
Statement of Operations
For the Periods Ended September 27, 1998 and September 28, 1997
(Unaudited)
(Dollar amounts in thousands)
Thirteen Weeks Thirty-nine Weeks
Ended Ended
------------------- -------------------
Sep. 27, Sep. 28, Sep. 27, Sep. 28,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income $ - $ 292 $ - $ 828
Interest expense - 200 - 918
Interest expense to
an affiliate (Note 5) - 180
-------- -------- -------- --------
Net income (loss) $ - $ 92 $ - $ (270)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements
- 9 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust A
Balance Sheets
September 27, 1998 and December 28, 1997
(Dollar amounts in thousands)
Sep. 27, Dec. 28,
1998 1997
-------- --------
<S> <C> <C>
(Unaudited)
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
======== ========
The accompanying notes are an integral part of these statements
- 10 -
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust B
Balance Sheets
September 27, 1998 and December 28, 1997
(Dollar amounts in thousands)
Sep. 27, Dec. 28,
1998 1997
-------- --------
<S> <C> <C>
(Unaudited)
Assets
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 1,148 699
-------- --------
1,149 700
Interest receivable 86 105
Government National and Federal National
Mortgage Association Certificates (Notes 2, 11,896 14,671
4 and 5)
-------- --------
TOTAL ASSETS - TRUST B $13,131 $15,476
======== ========
Liabilities and Owner's Beneficial Interest
Interest payable $ 325 $ 302
Collateralized Mortgage Obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 11,083 13,438
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Retained earnings 1,722 1,735
-------- --------
Total Owner's Beneficial Interest 1,723 1,736
-------- --------
TOTAL LIABILITIES AND OWNER'S BENEFICIAL
INTEREST - TRUST B $13,131 $15,476
======== ========
The accompanying notes are an integral part of these statements
- 11 -
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust C
Balance Sheets
September 27, 1998 and December 28, 1997
(Dollar amounts in thousands)
Sep. 27, Dec. 28,
1998 1997
-------- --------
<S> <C> <C>
(Unaudited)
Assets
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 10,803 889
-------- --------
10,804 890
Interest receivable 74 87
Government National and Federal National
Mortgage Association Certificates (Notes 2, 10,350 12,238
4 and 5)
-------- --------
TOTAL ASSETS - TRUST C $21,228 $13,215
======== ========
Liabilities and Owner's Beneficial Interest
Interest payable $ 233 $ 274
Collateralized Mortgage Obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 10,367 12,241
Payable to beneficial owner (Note 5) 9,922 -
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Retained earnings 705 699
-------- --------
Total Owner's Beneficial Interest 706 700
-------- --------
TOTAL LIABILITIES AND OWNER'S BENEFICIAL
INTEREST - TRUST C $21,228 $13,215
======== ========
The accompanying notes are an integral part of these statements
- 12 -
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust D
Balance Sheets
September 27, 1998 and December 28, 1997
(Dollar amounts in thousands)
Sep. 27, Dec. 28,
1998 1997
-------- --------
<S> <C> <C>
(Unaudited)
Assets
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 647 120
-------- --------
648 121
Receivable from beneficial owner 78 28
Interest receivable 76 88
Government National and Federal National
Mortgage Association Certificates (Notes 2, 10,415 12,697
4 and 5)
-------- --------
TOTAL ASSETS - TRUST D $11,217 $12,934
======== ========
Liabilities and Owner's Beneficial Interest
Interest payable $ 155 $ 90
Collateralized Mortgage Obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 10,790 12,494
Owner's Beneficial Interest:
Owner's beneficial interest 1 1
Retained earnings 271 349
-------- --------
Total Owner's Beneficial Interest 272 350
-------- --------
TOTAL LIABILITIES AND OWNER'S BENEFICIAL
INTEREST - TRUST D $11,217 $12,934
======== ========
The accompanying notes are an integral part of these statements
- 13 -
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust E
Balance Sheets
September 27, 1998 and December 28, 1997
(Dollar amounts in thousands)
Sep. 27, Dec. 28,
1998 1997
-------- --------
<S> <C> <C>
(Unaudited)
Assets
Cash and equivalents:
Trust account $ 1 $ 1
Collection account (Notes 3 and 4) 2,935 2,312
-------- --------
2,936 2,313
Interest receivable 240 281
Government National Mortgage Association
Certificates (Notes 2, 4 and 5) 36,033 42,071
-------- --------
TOTAL ASSETS - TRUST E $39,209 $44,665
======== ========
Liabilities and Owner's Beneficial Interest
Interest payable $ 737 $ 858
Collateralized Mortgage Obligation bonds,
net (Notes 1, 2, 3, 4 and 5) 30,858 35,819
Owner's Beneficial Interest:
Owner's beneficial interest 36,294 36,294
Accumulated deficit (28,680) (28,306)
-------- --------
Total Owner's Beneficial Interest 7,614 7,988
-------- --------
TOTAL LIABILITIES AND OWNER'S BENEFICIAL
INTEREST - TRUST E $39,209 $44,665
======== ========
</TABLE>
The accompanying notes are an integral part of these statements
- 14 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust F
Balance Sheets
September 27, 1998 and December 28, 1997
(Dollar amounts in thousands)
Sep. 27, Dec. 28,
1998 1997
-------- --------
<S> <C> <C>
(Unaudited)
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
======== ========
The accompanying notes are an integral part of these statements
- 15 -
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust A
Statement of Cash Flows
For the Periods Ended September 27, 1998 and September 28, 1997
(Unaudited)
(Dollar amounts in thousands)
Thirty-nine Weeks
Ended
---------------------
Sep. 27, Sep. 28,
1998 1997
---------- ---------
<S> <C> <C>
Cash flows from operations:
Net income $ - $ 86
Non-cash charges to income:
Amortizations - 4
Write-offs - 81
Changes in:
Interest receivable - 17
Interest payable - (112)
---------- ---------
Net cash flows from operations - 76
---------- ---------
Cash flows from investing activities:
Sale of/collections on mortgage
backed certificates - 1,468
Cash flows from financing activities:
Receivable from beneficial owner (2) 8,597
Payments on collateralized
mortgage obligation bonds - (1,672)
---------- ---------
Net cash flows from financing (2) 6,925
---------- ---------
Net (decrease) increase in cash and
equivalents (2) 8,469
Cash and equivalents at beginning
of year 2 770
---------- ---------
Cash and equivalents at end of period $ - $ 9,239
========== =========
Supplemental disclosure:
Cash paid during the period for
interest $ - $ 631
</TABLE>
The accompanying notes are an integral part of these statements
- 16 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust B
Statement of Cash Flows
For the Periods Ended September 27, 1998 and September 28, 1997
(Unaudited)
(Dollar amounts in thousands)
<CAPTION>
Thirty-nine Weeks
Ended
---------------------
Sep. 27, Sep. 28,
1998 1997
---------- ---------
<S> <C> <C>
Cash flows from operations:
Net (loss) income $ (13) $ 67
Non-cash charges to income:
Amortizations - 3
Write-offs - 99
Accretion of interest - 334
Changes in:
Interest receivable 19 27
Interest payable 23 (156)
---------- ---------
Net cash flows from operations 29 374
---------- ---------
Cash flows from investing activities:
Collections on mortgage backed 2,775 1,809
certificates
Cash flows from financing activities:
Payments on collateralized
mortgage obligation bonds (2,355) (2,153)
---------- ---------
Net increase in cash and equivalents 449 30
Cash and equivalents at beginning
of year 700 898
---------- ---------
Cash and equivalents at end of period $ 1,149 $ 928
========== =========
Supplemental disclosure:
Cash paid during the period for
interest $ 871 $ 674
</TABLE>
The accompanying notes are an integral part of these statements
- 17 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust C
Statement of Cash Flows
For the Periods Ended September 27, 1998 and September 28, 1997
(Unaudited)
(Dollar amounts in thousands)
Thirty-nine Weeks
Ended
---------------------
Sep. 27, Sep. 28,
1998 1997
---------- ---------
<S> <C> <C>
Cash flows from operations:
Net income(loss) $ 6 $ (113)
Non-cash charges to income:
Amortizations - 14
Write-offs - 202
Changes in:
Interest receivable 13 16
Interest payable (41) (141)
---------- ---------
Net cash flows from operations (22) (22)
---------- ---------
Cash flows from investing activities:
Collections on mortgage backed 1,888 1,489
certificates
Cash flows from financing activities:
Payments on collateralized
mortgage obligation bonds (1,874) (1,649)
Payable to beneficial owner 9,922 -
---------- ---------
Cash flows from financing 8,048 (1,649)
---------- ---------
Net increase (decrease) in cash and
equivalents 9,914 (182)
Cash and equivalents at beginning
of year 890 901
---------- ---------
Cash and equivalents at end of period $10,804 $ 719
========== =========
Supplemental disclosure:
Cash paid during the period for
interest $ 784 $ 744
</TABLE>
The accompanying notes are an integral part of these statements
- 18 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust D
Statement of Cash Flows
For the Periods Ended September 27, 1998 and September 28, 1997
(Unaudited)
(Dollar amounts in thousands)
Thirty-nine Weeks
Ended
---------------------
Sep. 27, Sep. 28,
1998 1997
---------- ---------
<S> <C> <C>
Cash flows from operations:
Net loss $ (78) $ (49)
Non-cash charges to income:
Amortizations - 6
Write-offs - 154
Changes in:
Interest receivable 12 11
Receivable from beneficial owner (50) 30
Interest payable 65 (118)
---------- ---------
Net cash flows from operations (51) 34
---------- ---------
Cash flows from investing activities:
Collections on mortgage backed 2,282 1,586
certificates
Cash flows from financing activities:
Dividends - (70)
Payments on collateralized
mortgage obligation bonds (1,704) (1,503)
Cash flows from financing (1,704) (1,573)
---------- ---------
Net increase in cash and equivalents 527 47
Cash and equivalents at beginning
of year 121 240
---------- ---------
Cash and equivalents at end of period $ 648 $ 287
========== =========
Supplemental disclosure:
Cash paid during the period for
interest $ 775 $ 931
</TABLE>
The accompanying notes are an integral part of these statements
- 19 -
<PAGE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust E
Statement of Cash Flows
For the Periods Ended September 27, 1998 and September 28, 1997
(Unaudited)
(Dollar amounts in thousands)
Thirty-nine Weeks
Ended
---------------------
Sep. 27, Sep. 28,
1998 1997
---------- ---------
<S> <C> <C>
Cash flows from operations:
Net loss $ (374) $(1,297)
Non-cash charges to income:
Amortizations 408 608
Accretion of interest - 925
Changes in:
Interest receivable 41 48
Interest payable (121) (91)
Interest payable to Weyerhaeuser
Mortgage Company (Note 5) - (18,656)
---------- ---------
Net cash flows from operations (46) (18,463)
---------- ---------
Cash flows from investing activities:
Collections on mortgage backed 6,038 4,469
certificates
Cash flows from financing activities:
Debt due beneficial owner - 36,293
Payments on collateralized
mortgage obligation bonds (5,369) (4,938)
Payments of Weyerhaeuser Mortgage
Company - (16,941)
note
Cash flows from financing activities (5,369) 14,414
---------- ---------
Net increase in cash and equivalents 623 420
Cash and equivalents at beginning
of year 2,313 2,121
---------- ---------
Cash and equivalents at end of period $ 2,936 $ 2,541
---------- ---------
Supplemental disclosure:
Cash paid during the period for
interest $ 2,486 $ 985
<PAGE>
The accompanying notes are an integral part of these statements
- 20 -
</TABLE>
<TABLE>
<CAPTION>
Mortgage Securities III Trust F
Statement of Cash Flows
For the Periods Ended September 27, 1998 and September 28, 1997
(Unaudited)
(Dollar amounts in thousands)
Thirty-nine Weeks
Ended
---------------------
Sep. 27, Sep. 28,
1998 1997
---------- ---------
<S> <C> <C>
Cash flows from operations:
Net loss $ - $ (270)
Non-cash charges to income:
Amortizations - 71
Write-offs - 260
Accretion of interest - 415
Changes in:
Interest receivable - 12
Interest payable - (104)
Interest payable to Weyerhaeuser
Mortgage Company (Note 5) - (8,570)
---------- ---------
Net cash flows from operations - (8,186)
---------- ---------
Cash flows from investing activities:
Collections on mortgage backed - 1,151
certificates
Cash flows from financing activities:
Contributions - 9,374
Receivable from beneficial owner (2) 9,096
Payments on collateralized
mortgage obligation bonds - (1,790)
Payments of Weyerhaeuser Mortgage
Company - (624)
note
Cash flows from financing activities (2) 16,056
---------- ---------
Net (decrease)increase in cash and (2) 9,021
equivalents
Cash and equivalents at beginning
of year 2 649
---------- ---------
Cash and equivalents at end of period $ - $ 9,670
========== =========
Supplemental disclosure:
Cash paid during the period for
interest $ - $ 441
</TABLE>
The accompanying notes are an integral part of these statements
- 21 -
<PAGE>
Mortgage Securities III Trusts A, B, C, D, E and F
Notes to Financial Statements
For the Thirty-nine Weeks Ended September 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 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>
- 22 -
<PAGE>
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.
Activity during the third 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 September 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 at September 27, 1998, were as follows:
- 23 -
<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 11,896 625 - 12,521
Trust C 10,350 525 - 10,875
Trust D 10,415 528 - 10,943
Trust E 36,033 1,484 - 37,517
</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 September 27,
1998 and December 28, 1997 consist of the following:
Sep. 27, Dec. 28,
1998 1997
--------- ---------
<S> <C> <C>
Trust B:
Class 4 - 9.00%, stated maturity
October 1, 2016 $11,083 $13,438
Trust C:
Class 4 - 9.00%, stated maturity
January 1, 2017 $10,367 $12,241
Trust D:
Class 3 - 8.60%, stated maturity
March 1, 2017 $10,790 $12,494
Trust E:
Class 4 - 9.00%, stated maturity
January 1, 2018 32,770 38,140
Unamortized discount (1,912) (2,321)
------- -------
$30,858 $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.
- 24 -
<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.
- 25 -
<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.
- 26 -
<PAGE>
The Beneficial Owner advanced funds to call Trust C's bonds
during the third quarter. The funds were repaid from the
proceeds of the collateral sale during the fourth quarter.
No interest was charged as the advance was treated as a
current payable
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.
- 27 -
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> CT
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> SEP-27-1998
<TOTAL-ASSETS> 88,884
0
0
<COMMON> 0
<OTHER-SE> 14,415
<TOTAL-LIABILITY-AND-EQUITY> 88,884
<TOTAL-REVENUES> 4,791
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (459)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
