Item 1. Business
JHM Acceptance Corporation III ("JMAC III") was organized as a Maryland corporation on December 16, 1985. JMAC III is a limited-purpose financing corporation organized to issue and sell bonds, notes and obligations and to acquire, own, hold and pledge mortgage-backed certificates ("Mortgage Certificates") issued and guaranteed as to principal and interest by the Government National Mortgage Association, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and obligations of others which are secured by these types of instruments, mortgages and other mortgage-related collateral.
JMAC III filed a Registration Statement with the Securities and Exchange Commission which became effective March 31, 1986, registering its collateralized mortgage obligations ("Bonds") in the aggregate principal amount of $1.0 billion. Between June 30, 1986 and October 30, 1986, JMAC III issued its Series A, Series B and Series C Bonds, totaling $450,000,000 secured by Mortgage Certificates with a similar aggregate principal amount. On February 6, 1987, JMAC III filed an additional bridge shelf registration providing for the issuance of up to $850,000,000 aggregate principal amount of Bonds.
During 1987, JMAC III issued its Series D and Series E Bonds totaling $800,828,000 collateralized by Mortgage Certificates with an aggregate principal amount of approximately $800,000,000. JMAC III sold its entire interest in the future economic benefit in the Mortgage Certificates securing the Series D and E Bonds for $32,200,000 simultaneously with the sale of the Bonds.
JMAC III's Series F Bonds were also issued in 1987 in the aggregate principal amount of $400,100,000 collateralized by Mortgage Certificates having an aggregate principal balance of approximately $400,000,000. During 1987, JMAC III sold the residual cash flow streams related to its Series A, Series B, Series C and Series F Bonds for approximately $8,438,000, net of sales expenses.
During 1988, all of the issued and outstanding capital stock of JMAC III was purchased by JDS Capital Corporation, formerly known as JHM Capital Corporation ("JCC") as part of an overall transaction involving the purchase of several corporations by JCC. Of the purchase price, $1,000 was allocated to JMAC III based upon the perceived value of its underlying assets and liabilities.
Each series of JMAC III's Bonds is secured by collateral consisting of Mortgage Certificates pledged in connection with such Bond series. The collateral for each series is pledged with a trustee on behalf of the holders of the Bonds of each series and is not available for payment of Bonds of any other series or any other liabilities of JMAC III. Management believes that distributions on the Mortgage Certificates pledged as collateral for each series of Bonds issued by JMAC III will be sufficient to pay the Bonds in accordance with their terms. The Bonds are rated "AAA" by Standard & Poor's Corporation.
JDS Financial Services Corporation ("JFSC"), a wholly-owned subsidiary of JCC provides management, administrative, and investment services to JMAC III under an administration agreement ("Administration Agreement").
The principal business of JFSC is the management and structuring of the mortgage-backed securities and related transactions for JMAC III, its affiliates and third party customers. Pursuant to the Administration Agreement, JFSC will provide management, administrative and investment services to JMAC III. JMAC III does not have any employees.
JMAC III had been active in the issuance of arbitrage collateralized mortgage obligations. However, numerous other well-known national financing and investment banking companies issue arbitrage collateralized mortgage obligations. In addition, Federal National Mortgage Association and Federal Home Loan Mortgage Corporation have become the dominant issuers of collateralized mortgage obligations. These companies and agencies offer intense competition in the business and many are much larger in size and have greater financial resources than JMAC III. However, JMAC III expects that it may issue additional series of Bonds.
Item 2.
Item 2. Properties
JMAC III does not own any real property for use in connection with its operations.
Item 3.
Item 3. Legal Proceedings
Inapplicable.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
Inapplicable.
PART II
Item 5.
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters
(a) Market Information
No public trading market exists for the common stock of JMAC III
(b) Holders
As of June 25, 1997, all the common stock of JMAC III was owned by one stockholder.
(c) Dividends
No dividends have been declared or paid for the year ended March 31, 1997.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Capital Resources and Liquidity
JMAC III's sources of funds with respect to its Bonds are receipts of principal and interest on the Mortgage Certificates, pledged as collateral for each series of Bonds, and the reinvestment income thereon. Management believes that these sources of funds will be sufficient to pay the Bonds in accordance with their terms. As of March 31, 1988, JMAC III had sold the residual cash flows for all of its outstanding series. As a result, JMAC III currently has (a) no sources of cash flow from operations as all cash flows from the Mortgage Certificates are restricted and must be paid first to the bondholders and then any excess (net of expenses) is distributed to the residual interest holders; and (b) no responsibility for expenses related to its remaining series. As a consequence, in accordance with the guidance given by the Emerging Issues Task Force in Issue No. 89-4, "Accounting for a Purchased Investment in a Collateralized Mortgage Obligation Instrument", such issuances are not consolidated by JMAC III. In connection with the subsequent sales of the residual cash flow streams of its Series A, Series, B, Series C and Series F Bonds, JMAC III recorded the net proceeds as sales after deducting sales expenses. Additionally, residual interests resulting from the issuance of Series D and Series E were sold simultaneously with the related bond issuance and treated as sales.
At March 31, 1997 JMAC III had a remaining balance available for issuance of additional bonds of $199,000,000 from previous shelf registrations.
Results of Operations
JMAC III executes arbitrage collateralized mortgage obligations and simultaneously or subsequently sells the residual cash flows created by these transactions. JMAC III issued its Series A, Series B and Series C Bonds in 1986 and Series D, Series E and Series F in February 1987, April 1987 and May 1987, respectively.
Effects of Inflation
The level of inflation that our economy experiences will affect the amount of interest charged on fixed-rate mortgages similar to those underlying the Mortgage Certificates used to secure the Bonds. Generally, when interest rates on fixed-rate mortgages are above the level charged on the underlying mortgages securing the Bonds, prepayments will be slower, while when interest rates are below the level of the underlying mortgages securing the Bonds, prepayments will be faster due to refinancing of the underlying mortgages. In no case would the level of scheduled payments on the underlying mortgages extend the maturity of the Bonds beyond the stated maturity, but the level of prepayments could result in one or more classes of Bonds being paid in full prior to their stated maturity.
Item 8.	Financial Statements and Supplementary Data
Page ---- JHM Acceptance Corporation III
Report of Independent Public Accountants 10 Balance Sheets as of March 31, 1997 and March 31, 1996 11 Statements of Loss for the Years Ended March 31, 1997, March 31, 1996 and March 31, 1995 12 Statements of Changes in Stockholder's Equity for the Years Ended March 31, 1997, March 31, 1996 and March 31, 1995 13 Statements of Cash Flows for the Years Ended March 31, 1997, March 31, 1996 and March 31, 1995 14 Notes to Financial Statements 15-16
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of JHM Acceptance Corporation III:
We have audited the accompanying balance sheets of JHM Acceptance Corporation III (the "Company," a Maryland corporation and a wholly owned subsidiary of JDS Capital Corporation) as of March 31, 1997 and 1996, and the related statements of loss, changes in stockholder's equity and cash flows for each of the three years in the period ended March 31, 1997. 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 an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of JHM Acceptance Corporation III as of March 31, 1997 and 1996, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 1997, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Washington, D.C., June 25, 1997
JHM ACCEPTANCE CORPORATION III NOTES TO FINANCIAL STATEMENTS As of March 31, 1997 and 1996
Note 1. Organization
JHM Acceptance Corporation III ("JMAC III") was organized as a Maryland corporation on December 16, 1985. JMAC III was organized for the purpose of issuing and selling collateralized mortgage obligations ("CMOs" or "Bonds"), other notes and obligations, and acquiring, owning, holding, and pledging Mortgage-Backed Certificates guaranteed by the Government National Mortgage Association ("GNMA Certificates"), Guaranteed Mortgage Pass-Through Certificates issued by the Federal National Mortgage Association ("FNMA Certificates"), Mortgage Participation Certificates issued by the Federal Home Loan Mortgage Corporation ("FHLMC Certificates")--collectively, the "Mortgage Certificates," and obligations of others that are secured by the types of instruments referred to above, mortgages and other mortgage-related collateral.
Note 2. Basis of Presentation
As of March 31, 1988, JMAC III had sold the residual cash flows for all outstanding series of Bonds. As a result, JMAC III currently has no sources of cash flows from operations. All cash flows from the Mortgage Certificates are restricted and must be paid first to the bondholders and then any excess (net of expenses) is distributed to the residual interest holders. JMAC III has no responsibility for expenses related to its remaining series. An affiliate, also owned by JCC, performs the administration for JMAC III's issuances, and has agreed to defer fees for such services to the extent that the fees exceed currently available excess cash flows.
Based on guidance promulgated by the Emerging Issues Task Force Issue No. 89-4, "Accounting for a Purchased Investment in a Collateralized-Mortgage Obligation Instrument," JMAC III has not consolidated the accounts of CMO issuances in which the entire interest in future economic benefits has been sold.
JMAC III had been active in the issuance of arbitrage collateralized mortgage obligations. However, numerous other well-known national financing and investment banking companies issue arbitrage collateralized-mortgage obligations. In addition, the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation have become the dominant issuers of collateralized mortgage obligations. These companies and agencies offer intense competition in the business, and many are much larger in size and have greater financial resources than JMAC III. However, JMAC III expects that it may issue an additional series of Bonds.
Preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that could affect the amounts represented in the financial statements and accompanying notes. Actual results could differ from these estimates.
Note 3. Summary of Significant Accounting Policies
Income Taxes
In accordance with an informal tax-sharing plan, JMAC III files a consolidated tax return with its parent, JDS Capital Corporation. In accordance with the plan, JMAC III receives no benefit for net operating losses. No significant timing differences exist as of March 31, 1997. No provision for taxes has been recorded for the years ended March 31, 1997, and March 31, 1996, due to net operating losses.
Note 4.Transactions with Affiliates
JMAC III has an administration agreement (the "Administration Agreement") with JDS Financial Services Corporation ("JFSC"), a wholly owned subsidiary of JCC. Pursuant to the Administration Agreement, JFSC receives bond administration fees for the three series of Bonds. These fees are paid from cash flows accruing to the holders of the residual interests. JMAC III has no responsibility for expenses related to its remaining series. JFSC performs the administration for JMAC III's issuances and has agreed to defer fees for such services to the extent that the fees exceed currently available excess cash flows.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Inapplicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
The directors and executive officers of JMAC III are as follows:
Stephen P. Gavula Chairman of the Board of Directors and Chief Executive Officer
Carole R. Parker Vice President, Secretary and Chief Financial and Accounting Officer
The ages and principal occupations, for at least the last five years, of the persons named in the foregoing table are as follows:
STEPHEN P. GAVULA (47) has been Chairman of the Board of Directors and Chief Executive Officer since February, 1988. He also serves in the same capacities for JCC, JFSC and JHM Acceptance Corporation ("JMAC"). From August, 1987 through August, 1994, Mr. Gavula served in similar capacities for JHM Mortgage Capital Corporation ("JMCC"). Prior to February, 1988, Mr. Gavula had been President and Chief Operating Officer of Oxford Mortgage Securities Corporation ("OMSC"), Oxford Acceptance Corporation ("OAC"), Oxford Acceptance Corporation III ("OAC III") and Oxford Acceptance Corporation IV ("OAC IV") since their organization. Mr. Gavula is a graduate of Fordham University.
CAROLE R. PARKER (55) has been Vice President of JMAC III since April, 1988, and Secretary and Chief Financial and Accounting Officer since April, 1997. She also serves in the same capacity for JMAC and as Vice President and Secretary of JCC and JFSC. From April, 1988 through April, 1997, she served as Vice President and Assistant Secretary of the above entities. From August, 1987 through August, 1994, Mrs. Parker was Vice President and Assistant Secretary of JMCC. Prior to April, 1988, Mrs. Parker was an officer of OMSC, OAC, OAC III and OAC IV since their organization.
All directors and executive officers of JMAC III will serve in their respective positions until successors are chosen.
(d) Family relationships. Inapplicable.
(f) Involvement in Certain Legal Proceedings. Inapplicable.
(g) Promoter and Control Persons. Inapplicable.
Item 11.Executive Compensation
Directors and officers do not receive any remuneration from JMAC III. JMAC III has entered into an Administration Agreement with JFSC whereby JFSC will provide management, administrative and investment services to JMAC III.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners; and,
(b) Security Ownership of Management
Name and Address Amount and Nature of Title of Class of Owner Beneficial Ownership % of Class
Common Stock JDS Capital Corporation 677 Shares 100% Executive Offices, Inc. 42C Read's Way New Castle, Delaware 19720
(c) Changes in Control
On March 31, 1997, JCC redeemed a 31.25% ownership interest in the outstanding equity interests of JCC. As a result of this redemption, Stephen P. Gavula is the owner of 100% of the outstanding equity interests of JCC. Prior to this redemption, Mr. Gavula owned 68.25% outstanding equity interests of JCC.
Item 13. Certain Relationships and Related Transactions
(a) Transactions with Management and Others:
Inapplicable.
(b) Certain Business Relationships:
Inapplicable.
(c) Indebtedness of Management:
Inapplicable.
(d) Transactions with Promoters:
Inapplicable.
PART IV
Item 14.Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) Financial Statements:
See the index to Financial Statements on page 9 for a list of all financial statements filed as required by Item 8 of this report.
(2) Financial Statement Schedules:
Financial Statement Schedules are omitted because the required information is inapplicable, or it is in the financial statements or notes thereto.
(3) Exhibits:
3.1 Articles of Incorporation of Registrant (incorporated by reference to Exhibit 3(a) to Registrant's Registration Statement on Form S-11 (No. 33-2416) filed with the Commission on December 24, 1985)
3.2 Articles of Incorporation of Registrant (incorporated by reference to Exhibit 3(a) to Registrant's Registration Statement on Form S-11 (No. 33-2416) filed with the Commission on March 26, 1986)
3.3 By-laws of Registrant (incorporated by reference to Exhibit 3(b) Registrant's Registration Statement on Form S-11 (No. 33-2416) filed with the Commission on December 24, 1985)
4.1 Form of Indenture (incorporated by reference to Exhibit 4(a) to Amendment No. 2 to Registration Statement on Form S-11 (No. 33-2416) filed with the Commission on December 24, 1985)
4.2 Form of Indenture (incorporated by reference to Exhibit 4(a) to Amendment No. 2 to Registration Statement on Form S-11 (No. 33-2416) filed with the Commission on March 26, 1986)
4.3 Form of Indenture Supplement between Registrant and Trustee (incorporated by reference to Exhibit 4(b) to Registrant's Registration Statement on Form S-11 (No. 33-2416) filed with the Commission on February 26, 1986)
4.4 Form of Guaranty Agreement with Respect to Single-Family (Level Payment) Mortgage-Backed Certificates between Servicer and GNMA (incorporated by reference to Exhibit 4(c) to Registrant's Registration Statement on Form S-11 (No. 33-2416) filed with the Commission on December 24, 1985)
4.5 Form of Guaranty Agreement with Respect to Graduated Payment Mortgage- Backed Certificates between Servicer and GNMA (incorporated by reference to Exhibit 4(d) to Registrant's Registration Statement on Form S-11 (No. 33-2416) filed with the Commission on December 24, 1985)
4.6 Form of Schedule of Subscribers and GNMA II Contractual Agreement (incorporated by reference to Exhibit 4(e) to Registrant's Registration Statement on Form S-11 (No. 33-2416) filed with the Commission on December 24, 1985)
4.7 Trust Indenture of Federal National Mortgage Association and Sixth Supplemental Indenture thereto (incorporated by reference to Exhibit 3(a) to Registrant's Registration Statement on Form S-11 (No. 33-2416) filed with the Commission on December 24, 1985)
4.8 Form of Indenture dated June 1, 1986 between the Registrant and The First National Bank of Chicago, as Trustee (incorporated by reference to Exhibit 2 to the Registrant's Current Report on Form 8-K dated June 30, 1876)
4.9 Series A Supplement to the Indenture between the Registrant and Trustee, dated June 15, 1986 (incorporated by reference to Exhibit 3 to the Registrant's Current Report on Form 8-K dated June 30, 1986)
4.10 Series B Supplement to the Indenture between the Registrant and Trustee, dated July 30, 1986 (incorporated by reference to Exhibit 3 to the Registrant's Current Report on Form 8-K dated July 30, 1986)
4.11 Series C Supplement to the Indenture between the Registrant and Trustee, dated October 30, 1986 (incorporated by reference to Exhibit 3 to the Registrant's Current Report on Form 8-K dated October 30, 1986)
4.12 Series D Supplement to the Indenture between the Registrant and Trustee, dated February 27, 1987 (incorporated by reference to Exhibit 4 to the Registrant's Current Report on Form 8-K dated February 27, 1987)
4.13 Series D Supplement to the Indenture between the Registrant and] Trustee, dated February 27, 1987 (Schedule A to exhibit was illegible in previous filing) incorporated by reference to Exhibit 4(b) to the Registrant's March 31, 1987 Quarterly Report on Form 10-Q)
4.14 Amendment No. 1, dated April 1, 1987, to the Series D Supplement to the Indenture between the Registrant and Trustee, dated February 27, 1987 (incorporated by reference to Exhibit 4(c) to the Registrant's March 31, 1987 Quarterly Report on Form 10-Q)
4.15 Series E Supplement to the Indenture between the Registrant and Trustee dated April 29, 1987 (incorporated by reference to Exhibit 4(d) to the Registrant's March 31, 1987 Quarterly Report on Form 10-Q)
4.16 Series F Supplement to the Indenture between the Registrant and Trustee, dated May 28, 1987 (incorporated by reference to Exhibit 4(b) to the Registrant's Current Report on Form 8-K dated February 27, 1987)
10.1 Form of Administration Agreement between Registrant and Oxford Mortgage Securities Corporation (incorporated by reference to Exhibit 10(a) to Registrant's Amendment No. 1 to Registration Statement on Form S-11 (No. 33-2416) filed with the Commission on February 26, 1986)
(b) JMAC III filed no reports on Form 8-K during the quarter ended March 31, 1996.
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.
JHM ACCEPTANCE CORPORATION III Registrant
June 25, 1997 Stephen P. Gavula Date Stephen P. Gavula Chairman of the Board of Directors and Chief Executive Officer
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.
June 25, 1997 Stephen P. Gavula Date Stephen P. Gavula Chairman of the Board of Directors and Chief Executive Officer
June 25, 1997 Carole R. Parker Date Carole R. Parker Vice President and Chief Financial and Accounting Officer
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Capital Resources and Liquidity
JMAC III's sources of funds with respect to its Bonds are receipts of principal and interest on the Mortgage Certificates, pledged as collateral for each series of Bonds, and the reinvestment income thereon. Management believes that these sources of funds will be sufficient to pay the Bonds in accordance with their terms. As of March 31, 1988, JMAC III had sold the residual cash flows for all of its outstanding series. As a result, JMAC III currently has (a) no sources of cash flow from operations as all cash flows from the Mortgage Certificates are restricted and must be paid first to the bondholders and then any excess (net of expenses) is distributed to the residual interest holders; and (b) no responsibility for expenses related to its remaining series. As a consequence, in accordance with the guidance given by the Emerging Issues Task Force in Issue No. 89-4, "Accounting for a Purchased Investment in a Collateralized Mortgage Obligation Instrument", such issuances are not consolidated by JMAC III. In connection with the subsequent sales of the residual cash flow streams of its Series A, Series, B, Series C and Series F Bonds, JMAC III recorded the net proceeds as sales after deducting sales expenses. Additionally, residual interests resulting from the issuance of Series D and Series E were sold simultaneously with the related bond issuance and treated as sales.
At March 31, 1997 JMAC III had a remaining balance available for issuance of additional bonds of $199,000,000 from previous shelf registrations.
Results of Operations
JMAC III executes arbitrage collateralized mortgage obligations and simultaneously or subsequently sells the residual cash flows created by these transactions. JMAC III issued its Series A, Series B and Series C Bonds in 1986 and Series D, Series E and Series F in February 1987, April 1987 and May 1987, respectively.
Effects of Inflation
The level of inflation that our economy experiences will affect the amount of interest charged on fixed-rate mortgages similar to those underlying the Mortgage Certificates used to secure the Bonds. Generally, when interest rates on fixed-rate mortgages are above the level charged on the underlying mortgages securing the Bonds, prepayments will be slower, while when interest rates are below the level of the underlying mortgages securing the Bonds, prepayments will be faster due to refinancing of the underlying mortgages. In no case would the level of scheduled payments on the underlying mortgages extend the maturity of the Bonds beyond the stated maturity, but the level of prepayments could result in one or more classes of Bonds being paid in full prior to their stated maturity.
Item 8.
Item 8.	Financial Statements and Supplementary Data
Page ---- JHM Acceptance Corporation III
Report of Independent Public Accountants 10 Balance Sheets as of March 31, 1997 and March 31, 1996 11 Statements of Loss for the Years Ended March 31, 1997, March 31, 1996 and March 31, 1995 12 Statements of Changes in Stockholder's Equity for the Years Ended March 31, 1997, March 31, 1996 and March 31, 1995 13 Statements of Cash Flows for the Years Ended March 31, 1997, March 31, 1996 and March 31, 1995 14 Notes to Financial Statements 15-16
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of JHM Acceptance Corporation III:
We have audited the accompanying balance sheets of JHM Acceptance Corporation III (the "Company," a Maryland corporation and a wholly owned subsidiary of JDS Capital Corporation) as of March 31, 1997 and 1996, and the related statements of loss, changes in stockholder's equity and cash flows for each of the three years in the period ended March 31, 1997. 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 an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of JHM Acceptance Corporation III as of March 31, 1997 and 1996, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 1997, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Washington, D.C., June 25, 1997
JHM ACCEPTANCE CORPORATION III NOTES TO FINANCIAL STATEMENTS As of March 31, 1997 and 1996
Note 1. Organization
JHM Acceptance Corporation III ("JMAC III") was organized as a Maryland corporation on December 16, 1985. JMAC III was organized for the purpose of issuing and selling collateralized mortgage obligations ("CMOs" or "Bonds"), other notes and obligations, and acquiring, owning, holding, and pledging Mortgage-Backed Certificates guaranteed by the Government National Mortgage Association ("GNMA Certificates"), Guaranteed Mortgage Pass-Through Certificates issued by the Federal National Mortgage Association ("FNMA Certificates"), Mortgage Participation Certificates issued by the Federal Home Loan Mortgage Corporation ("FHLMC Certificates")--collectively, the "Mortgage Certificates," and obligations of others that are secured by the types of instruments referred to above, mortgages and other mortgage-related collateral.
Note 2. Basis of Presentation
As of March 31, 1988, JMAC III had sold the residual cash flows for all outstanding series of Bonds. As a result, JMAC III currently has no sources of cash flows from operations. All cash flows from the Mortgage Certificates are restricted and must be paid first to the bondholders and then any excess (net of expenses) is distributed to the residual interest holders. JMAC III has no responsibility for expenses related to its remaining series. An affiliate, also owned by JCC, performs the administration for JMAC III's issuances, and has agreed to defer fees for such services to the extent that the fees exceed currently available excess cash flows.
Based on guidance promulgated by the Emerging Issues Task Force Issue No. 89-4, "Accounting for a Purchased Investment in a Collateralized-Mortgage Obligation Instrument," JMAC III has not consolidated the accounts of CMO issuances in which the entire interest in future economic benefits has been sold.
JMAC III had been active in the issuance of arbitrage collateralized mortgage obligations. However, numerous other well-known national financing and investment banking companies issue arbitrage collateralized-mortgage obligations. In addition, the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation have become the dominant issuers of collateralized mortgage obligations. These companies and agencies offer intense competition in the business, and many are much larger in size and have greater financial resources than JMAC III. However, JMAC III expects that it may issue an additional series of Bonds.
Preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that could affect the amounts represented in the financial statements and accompanying notes. Actual results could differ from these estimates.
Note 3. Summary of Significant Accounting Policies
Income Taxes
In accordance with an informal tax-sharing plan, JMAC III files a consolidated tax return with its parent, JDS Capital Corporation. In accordance with the plan, JMAC III receives no benefit for net operating losses. No significant timing differences exist as of March 31, 1997. No provision for taxes has been recorded for the years ended March 31, 1997, and March 31, 1996, due to net operating losses.
Note 4.Transactions with Affiliates
JMAC III has an administration agreement (the "Administration Agreement") with JDS Financial Services Corporation ("JFSC"), a wholly owned subsidiary of JCC. Pursuant to the Administration Agreement, JFSC receives bond administration fees for the three series of Bonds. These fees are paid from cash flows accruing to the holders of the residual interests. JMAC III has no responsibility for expenses related to its remaining series. JFSC performs the administration for JMAC III's issuances and has agreed to defer fees for such services to the extent that the fees exceed currently available excess cash flows.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Inapplicable.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
The directors and executive officers of JMAC III are as follows:
Stephen P. Gavula Chairman of the Board of Directors and Chief Executive Officer
Carole R. Parker Vice President, Secretary and Chief Financial and Accounting Officer
The ages and principal occupations, for at least the last five years, of the persons named in the foregoing table are as follows:
STEPHEN P. GAVULA (47) has been Chairman of the Board of Directors and Chief Executive Officer since February, 1988. He also serves in the same capacities for JCC, JFSC and JHM Acceptance Corporation ("JMAC"). From August, 1987 through August, 1994, Mr. Gavula served in similar capacities for JHM Mortgage Capital Corporation ("JMCC"). Prior to February, 1988, Mr. Gavula had been President and Chief Operating Officer of Oxford Mortgage Securities Corporation ("OMSC"), Oxford Acceptance Corporation ("OAC"), Oxford Acceptance Corporation III ("OAC III") and Oxford Acceptance Corporation IV ("OAC IV") since their organization. Mr. Gavula is a graduate of Fordham University.
CAROLE R. PARKER (55) has been Vice President of JMAC III since April, 1988, and Secretary and Chief Financial and Accounting Officer since April, 1997. She also serves in the same capacity for JMAC and as Vice President and Secretary of JCC and JFSC. From April, 1988 through April, 1997, she served as Vice President and Assistant Secretary of the above entities. From August, 1987 through August, 1994, Mrs. Parker was Vice President and Assistant Secretary of JMCC. Prior to April, 1988, Mrs. Parker was an officer of OMSC, OAC, OAC III and OAC IV since their organization.
All directors and executive officers of JMAC III will serve in their respective positions until successors are chosen.
(d) Family relationships. Inapplicable.
(f) Involvement in Certain Legal Proceedings. Inapplicable.
(g) Promoter and Control Persons. Inapplicable.
Item 11.
Item 11.Executive Compensation
Directors and officers do not receive any remuneration from JMAC III. JMAC III has entered into an Administration Agreement with JFSC whereby JFSC will provide management, administrative and investment services to JMAC III.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners; and,
(b) Security Ownership of Management
Name and Address Amount and Nature of Title of Class of Owner Beneficial Ownership % of Class
Common Stock JDS Capital Corporation 677 Shares 100% Executive Offices, Inc. 42C Read's Way New Castle, Delaware 19720
(c) Changes in Control
On March 31, 1997, JCC redeemed a 31.25% ownership interest in the outstanding equity interests of JCC. As a result of this redemption, Stephen P. Gavula is the owner of 100% of the outstanding equity interests of JCC. Prior to this redemption, Mr. Gavula owned 68.25% outstanding equity interests of JCC.
Item 13.
Item 13. Certain Relationships and Related Transactions
(a) Transactions with Management and Others:
Inapplicable.
(b) Certain Business Relationships:
Inapplicable.
(c) Indebtedness of Management:
Inapplicable.
(d) Transactions with Promoters:
Inapplicable.
PART IV
Item 14.
Item 14.Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) Financial Statements:
See the index to Financial Statements on page 9 for a list of all financial statements filed as required by Item 8 of this report.
(2) Financial Statement Schedules:
Financial Statement Schedules are omitted because the required information is inapplicable, or it is in the financial statements or notes thereto.
(3) Exhibits:
3.1 Articles of Incorporation of Registrant (incorporated by reference to Exhibit 3(a) to Registrant's Registration Statement on Form S-11 (No. 33-2416) filed with the Commission on December 24, 1985)
3.2 Articles of Incorporation of Registrant (incorporated by reference to Exhibit 3(a) to Registrant's Registration Statement on Form S-11 (No. 33-2416) filed with the Commission on March 26, 1986)
3.3 By-laws of Registrant (incorporated by reference to Exhibit 3(b) Registrant's Registration Statement on Form S-11 (No. 33-2416) filed with the Commission on December 24, 1985)
4.1 Form of Indenture (incorporated by reference to Exhibit 4(a) to Amendment No. 2 to Registration Statement on Form S-11 (No. 33-2416) filed with the Commission on December 24, 1985)
4.2 Form of Indenture (incorporated by reference to Exhibit 4(a) to Amendment No. 2 to Registration Statement on Form S-11 (No. 33-2416) filed with the Commission on March 26, 1986)
4.3 Form of Indenture Supplement between Registrant and Trustee (incorporated by reference to Exhibit 4(b) to Registrant's Registration Statement on Form S-11 (No. 33-2416) filed with the Commission on February 26, 1986)
4.4 Form of Guaranty Agreement with Respect to Single-Family (Level Payment) Mortgage-Backed Certificates between Servicer and GNMA (incorporated by reference to Exhibit 4(c) to Registrant's Registration Statement on Form S-11 (No. 33-2416) filed with the Commission on December 24, 1985)
4.5 Form of Guaranty Agreement with Respect to Graduated Payment Mortgage- Backed Certificates between Servicer and GNMA (incorporated by reference to Exhibit 4(d) to Registrant's Registration Statement on Form S-11 (No. 33-2416) filed with the Commission on December 24, 1985)
4.6 Form of Schedule of Subscribers and GNMA II Contractual Agreement (incorporated by reference to Exhibit 4(e) to Registrant's Registration Statement on Form S-11 (No. 33-2416) filed with the Commission on December 24, 1985)
4.7 Trust Indenture of Federal National Mortgage Association and Sixth Supplemental Indenture thereto (incorporated by reference to Exhibit 3(a) to Registrant's Registration Statement on Form S-11 (No. 33-2416) filed with the Commission on December 24, 1985)
4.8 Form of Indenture dated June 1, 1986 between the Registrant and The First National Bank of Chicago, as Trustee (incorporated by reference to Exhibit 2 to the Registrant's Current Report on Form 8-K dated June 30, 1876)
4.9 Series A Supplement to the Indenture between the Registrant and Trustee, dated June 15, 1986 (incorporated by reference to Exhibit 3 to the Registrant's Current Report on Form 8-K dated June 30, 1986)
4.10 Series B Supplement to the Indenture between the Registrant and Trustee, dated July 30, 1986 (incorporated by reference to Exhibit 3 to the Registrant's Current Report on Form 8-K dated July 30, 1986)
4.11 Series C Supplement to the Indenture between the Registrant and Trustee, dated October 30, 1986 (incorporated by reference to Exhibit 3 to the Registrant's Current Report on Form 8-K dated October 30, 1986)
4.12 Series D Supplement to the Indenture between the Registrant and Trustee, dated February 27, 1987 (incorporated by reference to Exhibit 4 to the Registrant's Current Report on Form 8-K dated February 27, 1987)
4.13 Series D Supplement to the Indenture between the Registrant and] Trustee, dated February 27, 1987 (Schedule A to exhibit was illegible in previous filing) incorporated by reference to Exhibit 4(b) to the Registrant's March 31, 1987 Quarterly Report on Form 10-Q)
4.14 Amendment No. 1, dated April 1, 1987, to the Series D Supplement to the Indenture between the Registrant and Trustee, dated February 27, 1987 (incorporated by reference to Exhibit 4(c) to the Registrant's March 31, 1987 Quarterly Report on Form 10-Q)
4.15 Series E Supplement to the Indenture between the Registrant and Trustee dated April 29, 1987 (incorporated by reference to Exhibit 4(d) to the Registrant's March 31, 1987 Quarterly Report on Form 10-Q)
4.16 Series F Supplement to the Indenture between the Registrant and Trustee, dated May 28, 1987 (incorporated by reference to Exhibit 4(b) to the Registrant's Current Report on Form 8-K dated February 27, 1987)
10.1 Form of Administration Agreement between Registrant and Oxford Mortgage Securities Corporation (incorporated by reference to Exhibit 10(a) to Registrant's Amendment No. 1 to Registration Statement on Form S-11 (No. 33-2416) filed with the Commission on February 26, 1986)
(b) JMAC III filed no reports on Form 8-K during the quarter ended March 31, 1996.
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.
JHM ACCEPTANCE CORPORATION III Registrant
June 25, 1997 Stephen P. Gavula Date Stephen P. Gavula Chairman of the Board of Directors and Chief Executive Officer
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.
June 25, 1997 Stephen P. Gavula Date Stephen P. Gavula Chairman of the Board of Directors and Chief Executive Officer
June 25, 1997 Carole R. Parker Date Carole R. Parker Vice President and Chief Financial and Accounting Officer