UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark On
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 1995
[ ] 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: 33-31337
STRUCTURED ASSET SECURITIES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 74-2440850
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 Vesey Street, 20th Floor, New York, NY 10285
(Address of principal executive offices) (Zip Code)
212-526-5594
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of
the Act:
Name of Each Exchange
Title of Each Class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by 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 .
Registrant had 1,000 shares of common stock outstanding (all owned indirectly by
Lehman Brothers Holdings Inc.) as of February 1, 1996.
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION J (1) (a)
AND (b) OF FORM 10-K AND THEREFORE IS FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT CONTEMPLATED THEREBY.
<PAGE>
INDEX
STRUCTURED ASSET SECURITIES CORPORATION
Cover
Index Page
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 Registrant's Common Stock
and Related Stockholder Matters ............ 2
Item 6 - Selected Financial Data .................... 2
Item 7 - Management's Discussion and Analysis of
Financial Condition and Liquidity and Capital
Resources and Results of Operations .... ... 2
Item 8 - Financial Statements and Supplementary Data. 4
Item 9 - Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 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
Signatures ............................................................ 6
<PAGE>
PART I
ITEM 1 Business
Structured Asset Securities Corporation (the "Company") was
incorporated in Delaware on January 2, 1987 as a limited-
purpose finance corporation. All of the outstanding
capital stock is owned by Lehman Commercial Paper Inc.
("LCPI"), an indirect wholly owned subsidiary of Lehman
Brothers Holdings Inc. ("Holdings").
The Company's activities consist of the issuance and sale of
debt securities (the "Bonds") collateralized by mortgages
and/or mortgage-backed securities or serving as the depositor
for one or more trusts (the "Trust(s)") which will issue
pass-through certificates representing an undivided interest
in such mortgage collateral. The Company may also serve as
seller to, depositor of or sponsor for any Trust issuing
Pass-through Certificates of interest (including stripped
participation interests) in a pool of mortgage collateral or
interest therein. The mortgage collateral may consist of
"fully modified pass-through" mortgage-backed certificates
guaranteed as to full and timely payment of principal and
interest by the Government National Mortgage Association,
which guaranty is backed by the full faith and credit of the
United States Government, mortgage participation certificates
issued and guaranteed as to the full and timely payment of
interest and ultimate payment of principal by the Federal Home
Loan Mortgage Corporation, guaranteed mortgage pass-through
certificates issued and guaranteed as to the full and timely
payment of principal and interest by the Federal National
Mortgage Association, conventional mortgage pass-through
certificates or mortgage-backed bonds issued with respect to
or secured by a pool of mortgage loans, or a combination of
such certificates.
The Company has filed registration statements on Form S-3 with
the Securities and Exchange Commission ("the Commission")
which permit the Company to issue from time to time, Bonds and
Pass-through Certificates in the principal amount not to
exceed $11.7 billion. The Company has also filed registration
statements on Form S-3 for the issuance of $6 billion
principal amount of Bonds. As of November 30, 1995,
approximately $11.4 billion was available for issuance under
the registration statements referred to above.
ITEM 2 Properties
The Company owns no physical properties.
ITEM 3 Legal Proceedings
There are no pending legal proceedings.
ITEM 4 Submission of Matters to a Vote of Security Holders
Pursuant to General Instruction J of Form 10-K, the
information required by Item 4 is omitted.
<PAGE>
PART II
ITEM 5 Market for Registrant's Common Stock and Related
Stockholder Matters
The Company's sole class of capital stock is its $1.00 par
value common stock which is all owned by LCPI. There is no
public market for the Company's common stock.
ITEM 6 Selected Financial Data
Pursuant to General Instruction J of Form 10-K, the
information required by Item 6 is omitted.
ITEM 7 Management's Discussion and Analysis of Financial Condition
and Liquidity and Capital Resources and Results of Operations
Set forth below is management's discussion and analysis of
financial condition and liquidity and capital resources and
results of operations for the twelve months ended November 30,
1995, the eleven months ended November 30, 1994 and the twelve
months ended December 31, 1993.
Financial Condition and Liquidity and Capital Resources
The Company's assets increased from $18.2 million at November
30, 1994 to $153.0 million at November 30, 1995 primarily
related to the increase in financial instruments owned.
Financial instruments owned at November 30, 1995 aggregated
$146.0 million and represent the portion of issued securities
retained by the Company and are carried at market or fair
value, as appropriate.
Stockholder's equity increased from $9.0 million at November
30, 1994 to $149.0 million at November 30, 1995 as a result of
net capital contributions from LCPI and income earned during
the twelve months ended November 30, 1995. Capital
contributions from LCPI are made to fund securities retained
by the Company from new issuances. The Company continually
monitors its capital position and makes capital distributions
to LCPI as excess funds are realized from securities related
transactions.
Results of Operations
For the twelve months ended November 30, 1995 and eleven
months ended November 30, 1994:
During the twelve months ended November 30, 1995 the Company
issued Structured Asset Securities Corporation Multiclass
Pass-through Certificates, Series 1995-C1 totaling
approximately $394.3 million principal amount, Structured
Asset Securities Corporation Multiclass Pass-through
Certificates, Series 1995-3 totaling approximately $99.5
million principal amount, Structured Asset Securities
Corporation Mortgage Pass-through Certificates, Series 1995-1
totaling approximately $73.2 million principal amount,
Structured Asset Securities Corporation Mortgage Pass-through
Certificates, Series 1995-2, Group II, totaling approximately
$74.1 million principal amount, Structured Asset
<PAGE>
ITEM 7 Management's Discussion and Analysis of Financial Condition
and Liquidity and Capital Resources and Results of
Operations (continued)
Securities Corporation Mortgage Pass-through Certificates,
Series 1995-2, Group I, totaling approximately $174.2 million
principal amount, LB Commercial Conduit Mortgage Trust
Multiclass Pass-through Certificates, Series 1995-C2 totaling
approximately $217.0 million principal amount, and Structured
Asset Securities Corporation Multiclass Pass-through
Certificates, Series 1995-C4 totaling approximately $179.6
million principal amount. In addition, the Company issued
Structured Asset Securities Corporation Multiclass
Pass-through Certificates, Series 1995-C3 totaling
approximately $322.8 million principal amount in a private
placement.
Trading revenues totaled $9,579,548 for the twelve months
ended November 30, 1995 and $7,674,075 for the eleven months
ended November 30, 1994. Trading revenues are attributable to
the issuance and sale of securities and valuing financial
instruments owned at market or fair value.
Interest income increased from $5,868,153 during the eleven
months ended November 30, 1994 to $11,998,933 during the
twelve months ended November 30, 1995, attributable
principally to the greater amount of interest earning
securities held during 1995. Management fees increased from
$3,395,253 during the eleven months ended November 30, 1994 to
$5,407,152 during the twelve months ended November 30, 1995,
reflecting the increased trading and operating activities of
the Company. Management fees are the principal component of
general and administrative expenses in the accompanying
Statements of Operations.
For the eleven months ended November 30, 1994 and twelve
months ended December 31, 1993:
During 1994, the Company issued Structured Asset Securities
Corporation Multiclass Pass-through Certificates, Series
1994-C1 totaling approximately $421.9 million principal
amount, of which approximately $333.3 million principal amount
were offered pursuant to one of the Company's public
registration statements and $88.6 million principal amount
were offered in private placements. During 1993, the Company
issued Structured Asset Securities Corporation Multiclass
Pass-through Certificates, Series 1993-C1 totaling
approximately $451.0 million principal amount. In addition,
Structured Asset Securities Corporation Trust III, a trust
established by the Company, issued Collateralized Mortgage
Obligations, Series 1993-C2 totaling approximately $121.3
million principal amount. Also during 1993, the Company
issued, through a trust, $79.3 million of securities,
collateralized by a mortgage, in a private placement. In
December 1992, the Company purchased a 25% partnership
interest in Structured Asset Securities Corporation Trust II
("Trust II"). The Company acted as general partner of Trust
II. An affiliate of the Company owned the remaining 75% as
limited partner. On May 28, 1993, Trust II's assets were sold
to an affiliate of the Company at current market value. For
financial reporting purposes, the assets of Trust II have been
consolidated with those of the Company and minority interest
has been established for the affiliate's limited partner
interest.
<PAGE>
ITEM 7 Management's Discussion and Analysis of Financial Condition
and Liquidity and Capital Resources and Results of Operations
(continued)
Trading revenues totaled $7,674,075 for the eleven months
ended November 30, 1994 and $419,283 for the twelve months
ended December 31, 1993. Trading revenues are attributable to
the issuance and sale of securities and valuing financial
instruments owned at market or fair value.
Interest income decreased from $8,611,171 during the twelve
months ended December 31, 1993 to $5,868,153 during the eleven
months ended November 30, 1994, attributable principally to
the sale of interest earning securities owned during the
second quarter of 1994. Management fees increased from
$1,196,023 during the twelve months ended December 31, 1993 to
$3,395,253 during the eleven months ended November 30, 1994,
reflecting the increased trading and operating activities of
the Company. Management fees are the principal component of
general and administrative expenses in the accompanying
Statements of Operations.
ITEM 8 Financial Statements and Supplementary Data
The financial statements required by this Item and included in
this Report are referenced in the index appearing on page F-1.
ITEM 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
Not applicable.
PART III
ITEM 10 Directors and Executive Officers of the Registrant
Pursuant to General Instruction J of Form 10-K, the
information required by Item 10 is omitted.
ITEM 11 Executive Compensation
Pursuant to General Instruction J of Form 10-K, the
information required by Item 11 is omitted.
ITEM 12 Security Ownership of Certain Beneficial Owners and
Management
Pursuant to General Instruction J of Form 10-K, the
information required by Item 12 is omitted.
ITEM 13 Certain Relationships and Related Transactions
Pursuant to General Instruction J of Form 10-K, the
information required by Item 13 is omitted.
PART IV
ITEM 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1) and (2) Financial Statements and Schedules
See Index to Financial Statements appearing on Page F-1
(3) Exhibits
Not applicable.
(b) Reports on Form 8-K: None
<PAGE>
SIGNATURES
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.
STRUCTURED ASSET SECURITIES
CORPORATION
(Registrant)
By: THEODORE P. JANULIS
Theodore P. Janulis
President
Date: February 23, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
SIGNATURE .................... POSITION DATE
THEODORE P. JANULIS .......... President February 23, 1996
Theodore P. Janulis
DAVID GOLDFARB ............... Controller February 23, 1996
David Goldfarb
BRIAN R. ZIPP ................ Director February 23, 1996
Brian R. Zipp
MICHAEL J. O'HANLON .......... Chairman and Director February 23, 1996
Michael J. O'Hanlon
<PAGE>
STRUCTURED ASSET SECURITIES CORPORATION
NOTES to FINANCIAL STATEMENTS
Report of Independent Auditors ....................................... F-2
Statements of Operations for the twelve months ended November 30,
1995, eleven months ended November 30, 1994 and twelve months ended
December 31, 1993 .................................................. F-3
Statements of Financial Condition as of
November 30, 1995 and 1994 ......................................... F-4
Statements of Changes in Stockholder's Equity for the twelve months
ended November 30, 1995, eleven months ended November 30, 1994 and
twelve months ended December 31, 1993 .............................. F-5
Statements of Cash Flows for the twelve months ended November 30,
1995, eleven months ended November 30, 1994 and twelve months ended
December 31, 1993 .................................................. F-6
Notes to Financial Statements ................................. F-7 to F-10
Consent of Independent Auditors ...................................... F-11
<PAGE>
Report of Independent Auditors
The Board of Directors and Stockholder of
Structured Asset Securities Corporation
We have audited the accompanying statements of financial condition of Structured
Asset Securities Corporation as of November 30, 1995 and November 30, 1994, and
the related statements of operations, changes in stockholder's equity and cash
flows for the year ended November 30, 1995, for the eleven-month period ended
November 30, 1994 and for the year ended December 31, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 Structured Asset Securities
Corporation at November 30, 1995 and November 30, 1994, and the results of its
operations and its cash flows for the year ended November 30, 1995, for the
eleven month period ended November 30, 1994 and for the year ended December 31,
1993, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
January 10, 1996
<PAGE>
STRUCTURED ASSET SECURITIES CORPORATION
STATEMENTS of OPERATIONS
<TABLE>
<CAPTION>
Twelve Eleven Twelve
months months months
ended ended ended
November 30, November 30, December 31,
1995 1994 1993
<S> <C> <C> <C> <C>
Revenues:
Trading .......................... $ 9,579,548 $ 7,674,075 $ 419,283
Interest ......................... 11,998,933 5,868,153 8,611,171
----------- ----------- -----------
21,578,481 13,542,228 9,030,454
----------- ----------- -----------
Expenses:
Compensation ..................... 30,000 27,500 30,000
General and administrative ....... 5,407,152 3,402,302 1,197,508
----------- ----------- -----------
5,437,152 3,429,802 1,227,508
----------- ----------- -----------
Income before income taxes and
minority interest .............. 16,141,329 10,112,426 7,802,946
Income tax provision ........... 7,438,491 4,656,773 3,608,395
----------- ----------- -----------
Income before minority interest ..... 8,702,838 5,455,653 4,194,551
Minority interest in income
of Trust II .................. -- -- (352,798)
----------- ----------- -----------
Net income .......................... $ 8,702,838 $ 5,455,653 $ 3,841,753
=========== =========== ===========
</TABLE>
See notes to financial statements
<PAGE>
STRUCTURED ASSET SECURITIES CORPORATION
STATEMENTS of FINANCIAL CONDITION
ASSETS
<TABLE>
<CAPTION>
LIABILITIES and STOCKHOLDER'S EQUITY
November 30, November 30,
1995 1994
<S> <C> <C>
Cash $ 40,921 $ 111,735
Financial instruments owned, at fair
value 145,971,295 12,472,042
Receivables from brokers, dealers
and financial institutions 1,575,758 785,775
Receivables from affiliates 121,260 1,029,768
Due from others 1,791,245 1,730,031
Investment in collateralized mortgage
obligation trusts 170 170
Deferred registration costs, net of
accumulated amortization of$981,562
and $580,145 in 1995 and 1994,
respectively 3,609,329 2,052,855
__________________ ________________
$153,109,978 $18,182,376
================== ===============
LIABILITIES and STOCKHOLDER'S EQUITY
Liabilities:
Issuance expenses payable $ 1,316,880 $ 421,027
Payables to brokers, dealers and
financial institutions 1,431,682 337,999
Payables to affiliates 1,315,028 12,198
Income taxes payable to affiliate - 8,416,262
Other liabilities and accrued expenses 18,958 25,401
_______________ ______________
Total liabilities 4,082,548 9,212,887
_______________ ______________
Stockholder's equity:
Common stock, $1 par value;
1,000 shares authorized,
issued and outstanding 1,000 1,000
Additional paid-in capital 133,293,973 1,938,870
Retained earnings 15,732,457 7,029,619
_______________ ______________
Total stockholder's equity 149,027,430 8,969,489
_______________ ______________
$ 153,109,978 $18,182,376
================= =============
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
STRUCTURED ASSET SECURITIES CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
for the twelve months ended November 30, 1995,
eleven months ended November 30, 1994 and
twelve months ended December 31, 1993
<CAPTION>
Additional
Common Paid-in Retained
Stock Capital Earnings Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 .... $1,000 $ 26,970,147 $ 620,686 $ 27,591,833
Net income .................... -- -- 3,841,753 3,841,753
Capital contributions by parent -- 117,504,144 -- 117,504,144
Capital distributions to parent -- (65,531,324) -- (65,531,324)
------ ------------- ------------ -------------
Balance, December 31, 1993 .... 1,000 78,942,967 4,462,439 83,406,406
Net income .................... -- -- 5,455,653 5,455,653
Capital contributions by parent -- 17,771,997 -- 17,771,997
Capital distributions to parent -- (94,776,094) (2,888,473) (97,664,567)
------ ------------- ------------ -------------
Balance, November 30, 1994 .... 1,000 1,938,870 7,029,619 8,969,489
Net income .................... -- -- 8,702,838 8,702,838
Capital contributions by parent -- 234,290,454 -- 234,290,454
Capital distributions to parent -- (102,935,351) -- (102,935,351)
------ ------------- ------------ -------------
Balance, November 30, 1995 .... $1,000 $ 133,293,973 $ 15,732,457 $ 149,027,430
====== ============= ============ =============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
STRUCTURED ASSET SECURITIES CORPORATION
STATEMENTS of CASH FLOWS
<CAPTION>
Twelve months ended Eleven Months ended Twelve months ended
November 30, November 30, December 31,
1995 1994 1993
---------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income ................................................. $ 8,702,838 $ 5,455,653 $ 3,841,753
------------- ------------- -------------
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Amortization ........................................... 401,417 106,655 183,128
Minority interest in income of Trust II ................ -- -- 352,798
Effect of changes in operating assets and liabilities:
Financial instruments owned, at fair value ............. (133,499,253) 72,175,669 13,240,346
Receivables from brokers, dealers and
financial institutions ............................... (789,983) 324,681 286,045
Receivables from affiliates ............................ 908,508 (1,029,768) --
Due from others ........................................ (61,214) (1,730,031) --
Deferred registration costs ............................ (1,957,891) -- --
Issuance expenses payable .............................. 895,853 (221,285) (1,373,948)
Payables to brokers, dealers and financial
institutions ......................................... 1,093,683 280,703 57,296
Payables to affiliates ................................. 1,302,830 12,198 --
Income tax to affiliates ........................... (8,416,262) 4,656,773 2,802,166
Other .................................................. (6,443) (30,003) (9,462)
------------- ------------- -------------
Net cash (used in) provided by
operating activities .......................... (131,425,917) 80,001,245 19,380,122
------------- ------------- -------------
Cash flows from financing activities:
Capital contributions by parent ............................... 234,290,454 17,771,997 117,504,144
Capital distributions to parent ............................... (102,935,351) (97,664,567) (65,531,324)
Min-rity interest ............................................. -- (73,597,754)
------------- ------------- -------------
Cash provided by (used in)
financing activities ............................... 131,355,103 (79,892,570) (21,624,934)
------------- ------------- -------------
Net (decrease)increase in cash ............................ (70,814) 108,675 (2,244,812)
Cash at the beginning of the period .......................... 111,735 3,060 2,247,872
------------- ------------- -------------
Cash at the endd of the period ........................... $ 40,921 $ 111,735 $ 3,060
============= ============= =============
</TABLE>
See notes to financial statements
<PAGE>
STRUCTURED ASSET SECURITIES CORPORATION
NOTES to FINANCIAL STATEMENTS
1. Organization:
Structured Asset Securities Corporation ("the Company") is a
limited-purpose finance corporation. All of the outstanding
capital stock is owned by Lehman Commercial Paper Inc.("LCPI"),
an indirect wholly owned subsidiary of Lehman Brothers Holdings
Inc. ("Holdings").
The Company's activities consist of the issuance and sale of debt
securities (the "Bonds") collateralized by mortgages and/or
mortgage-backed securities or serving as the depositor for one or
more trusts (the "Trust(s)") which will issue Pass-through
Certificates, representing an undivided interest in such mortgage
collateral.
The Company has filed registration statements on Form S-3 with
the Securities and Exchange Commission which permit the Company
to issue, from time to time, Bonds and Pass-through Certificates
in principal amount not to exceed $11.7 billion. The Company has
also filed registration statements on Form S-3 for the issuance
of $6 billion principal amount of Bonds. During the twelve months
ended November 30, 1995, the Company issued Structured Asset
Securities Corporation Multiclass Pass-through Certificates,
Series 1995-C1 totaling approximately $394.3 million principal
amount, Structured Asset Securities Corporation Multiclass
Pass-through Certificates, Series 1995-3 totaling approximately
$99.5 million principal amount, Structured Asset Securities
Corporation Mortgage Pass-through Certificates, Series 1995-1
totaling approximately $73.2 million principal amount, Structured
Asset Securities Corporation Mortgage Pass-through Certificates,
Series 1995-2, Group II, totaling approximately $74.1 million
principal amount, Structured Asset Securities Corporation
Mortgage Pass-through Certificates, Series 1995-2, Group I,
totaling approximately $174.2 million principal amount, LB
Commercial Conduit Mortgage Trust Multiclass Pass-through
Certificates, Series 1995-C2 totaling approximately $217.0
million principal amount, and Multiclass Pass-through
Certificates, Series 1995-C4 totaling approximately $179.6
million principal amount. In addition, the Company issued
Structured Asset Securities Corporation Multiclass Pass-through
Certificates, Series 1995-C3 totaling approximately $322.8
million principal amount in a private placement. As of November
30, 1995, approximately $11.4 billion was available for issuance
under the registration statements referred to above.
The Company has issued Bonds and acted as depositor for various
Trusts which have issued Pass-through Certificates collateralized
by mortgages and/or mortgage securities. The Company has
surrendered to the Trusts all future economic interests in the
Bonds, Pass-through Certificates and related collateral.
According to the terms of the various Trust agreements, the
security holders can look only to the related collateral for
repayment of both principal and interest. In accordance with
generally accepted accounting principles, the Bonds, Pass-through
Certificates, and related collateral have been removed from the
accompanying Statements of Financial Condition.
During the twelve months ended November 30, 1995, LCPI
contributed $234.3 million in capital to the Company, and the
Company made capital distributions to LCPI of $102.9 million.
The December 31, 1993 Statement of Operations includes the
consolidated accounts of the Company and those of Structured
Asset Securities Corporation Trust II ("Trust II"), a partnership
in which the Company had a 25% ownership interest and acted as
general partner. An affiliate of the Company owned the remaining
75% interest in Trust II as a limited partner. On May 28,
<PAGE>
1. Organization (continued):
1993, Trust II's assets, which primarily consisted of
approximately $99 million in mortgage loans, were sold to an
affiliate of the Company at current market value. The
accompanying December 31, 1993 Statement of Operations reflects
the affiliate's minority interest share in earnings in Trust II.
2. Summary of Significant Accounting Policies:
Deferred registration costs:
Deferred registration costs relate to filing fees and other
related costs paid by the Company in connection with filings for
the registration of the securities which were or are to be issued
by the Company. These costs are deferred in anticipation of
future revenues upon the issuance of securities from the
respective shelf that has been established. Amortization of the
costs is based upon the percentage of issued securities to the
respective shelf from which the securities are issued and is
included as a component of trading revenue in the Statements of
Operations.
Financial instruments owned, at fair value:
Financial instruments owned principally represent subordinated
interests in pools of mortgage loans, with the remaining
instruments representing the right to receive certain future
interest payments on the underlying loans. Financial instruments
owned are valued at market or fair value, as appropriate, with
unrealized gains and losses reflected in trading revenue in the
Statements of Operations. Market value is generally based on
listed market prices. If listed market prices are not available,
fair value is determined based on other relevant factors,
including broker or dealer price quotations, and valuation
pricing models which take into account time value and volatility
factors underlying the financial instruments.
All securities transactions are recorded in the accompanying
financial statements on a trade date basis.
Income taxes:
The Company is included in the consolidated U.S. federal income
tax return of Holdings and in combined state and local returns
with other affiliates of Holdings. The Company computes its
income tax provision on a separate return basis in accordance
with the terms of a tax allocation agreement between Holdings and
its subsidiaries. The income tax provision is greater than that
calculated by applying the statutory federal income tax rate
principally due to state and local taxes.
Use of Estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Management
believes that the estimates utilized in preparing its financial
statements are reasonable and prudent. Actual results could
differ from these estimates.
3. Investment in Collateralized Mortgage Obligation Trusts:
The investment consists of seventeen $10 deposits made with an
owner trustee to establish the Trusts pursuant to deposit trust
agreements.
4. Related Party Transactions:
In connection with the Company's activities, mortgage collateral
is purchased from and recorded at an affiliate's carrying value,
which for such broker/dealer affiliates represents market value.
Certain directors and officers of the Company are also directors
and officers of Lehman Brothers Inc., LCPI and/or other
affiliates of the Company.
Pursuant to a management agreement (the "Agreement"), the Company
is charged a management fee for various services rendered on its
behalf by LCPI. The Agreement provides for an allocation of costs
based upon the level of activity processed by LCPI on behalf of
the Company. Management fees of $5,407,152 for the twelve months
ended November 30, 1995, $3,395,253 for the eleven months ended
November 30, 1994 and $1,196,023 for the twelve months ended
December 31, 1993 are the principal component of general and
administrative expenses in the Statements of Operations. The
Agreement is renewable each year unless expressly terminated or
renegotiated by the parties.
Compensation expense represents amounts allocated to the Company
by LCPI for compensation paid to certain common officers and
directors of the Company.
Income taxes of $15,854,753 were paid by the Company to LCPI in
accordance with the terms of the Company's tax allocation
agreement during the twelve months ended November 30, 1995. No
income taxes were paid by the Company during 1994 and 1993.
The Company believes that amounts arising through related party
transactions, including the fees referred to above, are
reasonable and approximate the amounts that would have been
recorded if the Company operated as an unaffiliated entity.
5. Financial Instruments with Off-Balance Sheet Risk and
Concentration of Credit Risk:
Certain of the Company's activities are principally conducted
with financial institutions. At November 30, 1995, the Company
had no material individual counterparty concentration of credit
risk, or any financial instruments with off-balance sheet risk.
6. Fair Value of Financial Instruments:
Statement of Financial Accounting Standards (SFAS) No. 107,
"Disclosures About Fair Value of Financial Instruments", requires
disclosure of the fair values of most on- and off-balance sheet
financial instruments, for which it is practicable to estimate
that fair value. The scope of SFAS No. 107 excludes certain
financial instruments, such as trade receivables and payables
when the carrying value approximates the fair value, employee
benefit obligations and all non-financial instruments, such as
fixed assets. The fair value of the Company's assets and
liabilities which
<PAGE>
6. Fair Value of Financial Instruments (continued):
qualify as financial instruments under SFAS No. 107 approximate
the carrying amounts presented in the Statements of Financial
Condition.
Financial instruments owned principally represent subordinated
interests in pools of mortgage loans, with the remaining
instruments representing the right to receive certain future
interest payments on the underlying loans. These financial
instruments are generally non-rated or rated as non-investment
grade by recognized rating agencies. Changes in interest rates
could potentially have an adverse impact on the future cash flows
for financial instruments owned. In addition, for certain
securities, defaults on the mortgage loans underlying these
instruments could have a greater than proportional impact on
their fair value since the payments of principal and interest are
subordinate to other securities issued in the same series. These
risks, among other risks, are incorporated in the determination
of fair value of financial instruments owned.
7. Change of Fiscal Year-End:
During 1994, the Company changed its fiscal year-end from
December 31 to November 30. Such a change to a non-calendar cycle
shifts certain year-end administrative activities to a time
period that conflicts less with the business needs of
institutional customers.
The following is selected financial data for the eleven-month
transition period ending November 30 and the comparable prior
year period:
<TABLE>
<CAPTION>
Eleven months ended
November 30, November 30,
1994 1993
(Unaudited)
<S> <C> <C> <C>
Revenues .................................. $13,542,228 $ 8,830,244
Expenses .................................. 3,429,802 1,212,389
----------- -----------
Income before income taxes and
minority interest ..................... 10,112,426 7,617,855
Income tax provision ...................... 4,656,773 3,522,496
----------- -----------
Income before minority interest ........... 5,455,653 4,095,359
Minority interest in income of
Trust II .............................. -- (352,798)
----------- -----------
Net income ................................ $ 5,455,653 $ 3,742,561
=========== ===========
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statements (Form S-11 Nos. 33-11126, 33-13826, 33-31337,
33-13986, 33-17503 and 33-48771 and Form S-3 File Nos. 33-43825
and 33-50210) of Structured Asset Securities Corporation of our
report dated January 10, 1996, with respect to the financial
statements of Structured Asset Securities Corporation included in
this Annual Report (Form 10-K) for the year ended November 30,
1995.
New York, New York ERNST & YOUNG LLP
February 23, 1996
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
This schedule contains summary financial information extracted from the
Statement of Financial Condition at November 30, 1995 and the Statement of
Operations for the twelve months ended November 30, 1995 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1994
<PERIOD-END> NOV-30-1995
<CASH> 40,921
<RECEIVABLES> 3,488,263
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 145,971,295
<PP&E> 0
<TOTAL-ASSETS> 153,109,978
<SHORT-TERM> 0
<PAYABLES> 4,063,590
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 0
<COMMON> 1,000
0
0
<OTHER-SE> 149,026,430
<TOTAL-LIABILITY-AND-EQUITY> 153,109,978
<TRADING-REVENUE> 9,579,548
<INTEREST-DIVIDENDS> 11,998,933
<COMMISSIONS> 0
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 0
<COMPENSATION> 30,000
<INCOME-PRETAX> 16,141,329
<INCOME-PRE-EXTRAORDINARY> 8,702,838
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,702,838
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
