<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Twenty-Six Weeks Ended June 25, 2000 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 B, D AND E
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 I(1)(a)
and (b) of Form 10-Q and is therefore, filing this form with the reduced
disclosure format.
<PAGE>
Mortgage Securities III Trusts B, D and E
Index to Form 10-Q Filing
For the Twenty-Six Weeks Ended June 25, 2000
-------------------------------------------------------
Page No.
Part I. Financial Information
Item 1. Financial Statements
Statement of Operations
Trust B 3
Trust D 4
Trust E 5
Balance Sheets
Trust B 6
Trust D 7
Trust E 8
Statement of Cash Flows
Trust B 9
Trust D 10
Trust E 11
Notes to Financial Statements 12
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>
Part I. Financial Information
Item 1. Financial Statements
See the Company's financial statements attached hereto beginning
at page 2.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Activity during the second fiscal quarter of 2000 consisted
of the collection of principal and interest on the GNMA and
FNMA certificates and disbursements of the required payment of
principal and interest to the bondholders.
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 4th day of August 2000.
MORTGAGE SECURITIES III TRUSTS
B, D AND E
Trusts acting through Wilmington
Trust Company, not in its
capacity, but solely as Owner
Trustee
By: __________________________
Mary Kay Pupillo
Financial Services Officer
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<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 the Trusts' annual reports (Form 10-K)
filed with the Securities and Exchange Commission for
the fiscal year ended December 26, 1999. Though not
audited by independent public accountants, the
financial information reflects, in the opinion of
management, all adjustments necessary to present a
fair statement of results for the interim period
indicated. The results of operations for the twenty-
six weeks ended June 25, 2000, should not be regarded
as necessarily indicative of the results that may be
expected for the fiscal year 2000.
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<PAGE>
Mortgage Securities III Trust B
Statement of Operations
For the Periods Ended June 25, 2000 and June 27, 1999
(Unaudited)
--------------------------------------------------------------------
(Dollar amounts in thousands)
Thirteen Weeks Ended Twenty-Six Weeks Ended
Jun. 25 Jun. 27 Jun. 25 Jun. 27
2000 1999 2000 1999
--------------------------------------------------------------------
Interest income $ 174 $ 219 $ 349 $ 461
Interest expense 134 195 275 405
--------------------------------------------------------------------
Net income $ 40 $ 24 $ 74 $ 56
====================================================================
The accompanying notes are an integral part of these statements.
-3-
<PAGE>
Mortgage Securities III Trust D
Statement of Operations
For the Periods Ended June 25, 2000 and June 27, 1999
(Unaudited)
--------------------------------------------------------------------
(Dollar amounts in thousands)
Thirteen Weeks Ended Twenty-Six Weeks Ended
Jun. 25 Jun. 27 Jun. 25 Jun. 27
2000 1999 2000 1999
--------------------------------------------------------------------
Interest income $ 145 $ 179 $ 304 $ 377
Interest expense 143 180 290 378
--------------------------------------------------------------------
Net income (loss) $ 2 $ (1) $ 14 $ (1)
====================================================================
The accompanying notes are an integral part of these statements.
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<PAGE>
Mortgage Securities III Trust E
Statement of Operations
For the Periods Ended June 25, 2000 and June 27, 1999
(Unaudited)
--------------------------------------------------------------------
(Dollar amounts in thousands)
Thirteen Weeks Ended Twenty-Six Weeks Ended
Jun. 25 Jun. 27 Jun. 25 Jun. 27
2000 1999 2000 1999
--------------------------------------------------------------------
Interest income $ 478 $ 568 $ 958 $ 1,211
Interest expense 551 694 1,120 1,461
--------------------------------------------------------------------
Net loss $ (73) $ (126) $ (1) $ (250)
====================================================================
The accompanying notes are an integral part of these statements.
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<PAGE>
Mortgage Securities III Trust B
Balance Sheets
June 25, 2000 and December 26, 1999
--------------------------------------------------------------------
(Dollar amounts in thousands)
Jun. 25 Dec. 26
2000 1999
--------------------------------------------------------------------
(Unaudited)
Assets
Cash and equivalents:
Trust account $ 1 $ 1
Collection account 447 584
--------------------------------------------------------------------
448 585
Interest receivable 55 59
Government National and Federal National
Mortgage Association certificates 7,736 8,186
--------------------------------------------------------------------
Total assets - Trust B $ 8,239 $ 8,830
====================================================================
Liabilities and owner's beneficial interest
Interest payable $ 181 $ 199
Collateralized mortgage obligation bonds, net 6,102 6,749
Owner's beneficial interest:
Owner's beneficial interest 1 1
Retained earnings 1,955 1,881
--------------------------------------------------------------------
Total owner's beneficial interest 1,956 1,882
--------------------------------------------------------------------
Total liabilities and owner's beneficial
interest - $ 8,239 $ 8,830
Trust B
====================================================================
The accompanying notes are an integral part of these statements.
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<PAGE>
Mortgage Securities III Trust D
Balance Sheets
June 25, 2000 and December 26, 1999
--------------------------------------------------------------------
(Dollar amounts in thousands)
Jun. 25 Dec. 26
2000 1999
--------------------------------------------------------------------
(Unaudited)
Assets
Cash and equivalents:
Trust account $ 1 $ 1
Collection account 68 104
--------------------------------------------------------------------
69 105
Receivable from beneficial owner 157 143
Interest receivable 46 40
Government National and Federal National
Mortgage Association certificates 6,663 7,126
--------------------------------------------------------------------
Total assets - Trust D $ 6,935 $ 7,414
====================================================================
Liabilities and owner's beneficial interest
Interest payable $ 94 $ 101
Collateralized mortgage obligation
bonds, net 6,555 7,041
Owner's beneficial interest:
Owner's beneficial interest 1 1
Retained earnings 285 271
--------------------------------------------------------------------
Total owner's beneficial interest 286 272
--------------------------------------------------------------------
Total liabilities and owner's beneficial
interest - Trust D $ 6,935 $ 7,414
====================================================================
The accompanying notes are an integral part of these statements.
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<PAGE>
Mortgage Securities III Trust E
Balance Sheets
June 25, 2000 and December 26, 1999
--------------------------------------------------------------------
(Dollar amounts in thousands)
Jun. 25 Dec. 26
2000 1999
--------------------------------------------------------------------
(Unaudited)
Assets
Cash and equivalents:
Trust account $ 1 $ 1
Collection account 1,448 1,516
--------------------------------------------------------------------
1,449 1,517
Interest receivable 142 164
Government National Mortgage Association
certificates 23,205 24,899
--------------------------------------------------------------------
Total assets - Trust E $ 24,796 $ 26,580
====================================================================
Liabilities and owner's beneficial interest
Interest payable $ 414 $ 456
Collateralized mortgage obligation
bonds, net 17,453 19,033
Owner's beneficial interest:
Owner's beneficial interest 36,294 36,294
Accumulated deficit (29,365) (29,203)
--------------------------------------------------------------------
Total owner's beneficial interest 6,929 7,091
--------------------------------------------------------------------
Total liabilities and owner's beneficial
interest - Trust E $ 24,796 $ 26,580
====================================================================
The accompanying notes are an integral part of these statements.
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<PAGE>
Mortgage Securities III Trust B
Statement of Cash Flows
For the Periods Ended June 25, 2000 and June 27, 1999
(Unaudited)
--------------------------------------------------------------------
(Dollar amounts in thousands)
Twenty-Six Weeks Ended
Jun. 25 Jun. 27
2000 1999
--------------------------------------------------------------------
Cash flows from operations:
Net income $ 74 $ 56
Changes in:
Interest receivable 4 10
Interest payable (18) (40)
--------------------------------------------------------------------
Net cash flows from operations 60 26
--------------------------------------------------------------------
Cash flows from investing activities:
Collections on mortgage backed
certificates 450 1,288
Cash flows from financing activities:
Payments on collateralized
mortgage obligation bonds (647) (1,300)
--------------------------------------------------------------------
Net (decrease) increase in cash and (137) 14
equivalents
Cash and equivalents at beginning of year 585 859
--------------------------------------------------------------------
Cash and equivalents at end of period $ 448 $ 873
====================================================================
Supplemental disclosure:
Cash paid during the period for
interest $ 293 $ 445
The accompanying notes are an integral part of these statements.
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<PAGE>
Mortgage Securities III Trust D
Statement of Cash Flows
For the Periods Ended June 25, 2000 and June 27, 1999
(Unaudited)
--------------------------------------------------------------------
(Dollar amounts in thousands)
Twenty-Six Weeks Ended
Jun. 25 Jun. 27
1999 2000
--------------------------------------------------------------------
Cash flows from operations:
Net income $ 14 $ (1)
Changes in:
Interest receivable (6) 12
Receivable from beneficial owner (14) (20)
Interest payable (7) (25)
--------------------------------------------------------------------
Net cash flows from operations (13) (34)
--------------------------------------------------------------------
Cash flows from investing activities:
Collections on mortgage backed
certificates 463 1,695
Cash flows from financing activities:
Payments on collateralized
mortgage obligation bonds (486) (1,678)
--------------------------------------------------------------------
Net decrease in cash and equivalents (36) (17)
Cash and equivalents at beginning of year 105 213
--------------------------------------------------------------------
Cash and equivalents at end of period $ 69 $ 196
====================================================================
Supplemental disclosure:
Cash paid during the period for $ 297 $ 403
interest
The accompanying notes are an integral part of these statements.
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<PAGE>
Mortgage Securities III Trust E
Statement of Cash Flows
For the Periods Ended June 25, 2000 and June 27, 1999
(Unaudited)
--------------------------------------------------------------------
(Dollar amounts in thousands)
Twenty-Six Weeks Ended
Jun. 25 Jun. 27
1999 2000
--------------------------------------------------------------------
Cash flows from operations:
Net loss $ (162) $ (250)
Non-cash charges to income:
Amortization 276 275
Changes in:
Interest receivable 22 40
Interest payable (42) (128)
--------------------------------------------------------------------
Net cash flows from operations 94 (63)
--------------------------------------------------------------------
Cash flows from investing activities:
Collections on mortgage backed
certificates 1,694 5,830
Cash flows from financing activities:
Payments on collateralized
mortgage obligation bonds (1,856) (5,739)
--------------------------------------------------------------------
Net (decrease) increase in cash and
equivalents (68) 28
Cash and equivalents at beginning of 1,517 3,329
year
--------------------------------------------------------------------
Cash and equivalents at end of period $ 1,449 $ 3,357
====================================================================
Supplemental disclosure:
Cash paid during the period for $ 886 $ 1,314
interest
The accompanying notes are an integral part of these statements.
-11-
<PAGE>
Mortgage Securities III Trusts B, D and E
Notes to Financial Statements
For the Twenty-Six Weeks Ended June 25, 2000
(Dollar amounts in thousands)
--------------------------------------------------------------------
Note 1. Description of business:
Mortgage Securities III Trusts B, D and E (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 B, D and E
to Weyerhaeuser Company which in turn
contributed its beneficial interests in the
Trusts to Weyerhaeuser Financial Services,
Inc., a whollyowned subsidiary of Weyerhaeuser
Company. The Trusts were organized and are
engaged to raise funds through the issuance
and sale of collateralized mortgage
obligation bonds (the "Bonds") collateralized
by Government National Mortgage Association
(GNMA) and Federal National Mortgage
Association (FNMA) certificates. The Trusts
B, D and E were established on April 8,
1986 and commenced business on September 30,
1986, February 27, 1987 and December 22, 1987,
respectively.
Each Trust has issued a series of Bonds as follows:
Trust Date Issued Bonds Issued
-----------------------------------------------------
B September 30, 1986 $100,000
D February 27, 1987 $ 75,600
E December 22, 1987 $131,600
-12-
<PAGE>
Trust B and D's remaining Bonds are
collateralized by GNMA and FNMA
certificates and Trust E's Bonds are
collateralized by GNMA certificates.
Activity during the second quarter of 2000
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.
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 were 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 maturities at date of
purchase of less than three months.
The cost and estimated market values of
investments in
debt securities at June 25, 2000, were as follows:
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<PAGE>
Gross Gross Estimated
Unrealized Unrealized Market
Held to Maturity: Cost Gains Losses Value
------------------------------------------------------------
Mortgage-backed
securities
Trust B $ 7,736 $ 169 $ - $ 7,905
Trust D 6,663 125 - 6,788
Trust E 23,205 90 - 23,295
The Trusts are legally precluded from selling the
investments in debt securities, except in the
case of a call of the Bonds as discussed in
Note 3.
Note 3. Collateralized mortgage obligation bonds:
Collateralized mortgage obligation bonds at
June 25, 2000 and December 26, 1999 consist of
the following:
Jun. 25 Dec. 26
1999 2000
------------------------------------------------------------
Trust B:
Class 4 - 9.00%, stated maturity
October 1, 2016 $ 6,102 $ 6,749
============================================================
Trust D:
Class 3 - 8.60%, stated maturity
March 1, 2017 $ 6,555 $ 7,041
============================================================
Trust E:
Class 4 - 9.00%, stated maturity
January 1, 2018 $ 18,408 $ 20,264
Unamortized discount (955) (1,231)
------------------------------------------------------------
$ 17,453 $ 19,033
============================================================
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.
-14-
<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 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 its
aggregate initial principal amount of
$14,600).
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.
-15-
<PAGE>
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. 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 B 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
D's purchase premium and less Trust B's
purchase discount. The purchases were financed
with marketrate 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. The purchase was at par value, less
the purchase discount. The purchase was
financed with the proceeds received from
the Bond issuances and a note due to
Weyerhaeuser Mortgage Company. The note accrued
interest at Bank of America's prime rate
and compounded interest annually. Both the
principal and interest related to the
Weyerhaeuser Mortgage Company payable was
paid off by Weyerhaeuser Financial Services,
Inc., (the "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 Trust E,
increasing the
Beneficial Owner's interest.
Certain ongoing administrative and accounting
functions are provided by the Beneficial Owner
at no cost to each Trust.
-16-
<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.
-17-
