Item 1. Business
Mortgage Securities III Trusts A, B, C, D, E and F (the "Trusts") were established under the laws of Delaware by a trust agreement. Prior to December 27, 1987, the trust agreement was among Mortgage Securities III Corporation, Weyerhaeuser Real Estate Company and Wilmington Trust Company. On December 27, 1987, Weyerhaeuser Real Estate Company dividended its beneficial interests in Mortgage Securities III Trusts A, B, C, D, E and F to Weyerhaeuser Company which in turn contributed its beneficial interests in the Trusts to Weyerhaeuser Financial Services, Inc., a wholly-owned subsidiary of Weyerhaeuser Company. The Trusts were organized to, and are engaged to raise funds through the issuance and sale of Collateralized Mortgage Obligation bonds collateralized by Government National Mortgage Association (GNMA) and Federal National Mortgage Association (FNMA) certificates. The Trusts A, B, C, D, E and F were established on April 8, 1986 and commenced business on June 30, 1986, September 30, 1986, December 30, 1986, February 27, 1987, December 22, 1987 and March 30, 1988, respectively.
Each Trust has issued a series of Collateralized Mortgage Obligations (the "Bonds"). Trust A, B, C, D and F's Bonds are collateralized by GNMA and FNMA certificates and Trust E's Bonds are collateralized by GNMA certificates.
Item 2.
Item 2. Properties The Trusts A, B, C, D, E and F have no physical properties. Item 3.
Item 3. Legal Proceedings The Trusts A, B, C, D, E and F are not a party to any material pending proceedings. Item 4.
Item 4. Submission of Matters to a Vote of Security Holders Omitted pursuant to General Instruction J(2)(c) of Form 10-K.
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PART II
Item 5.
Item 5. Market for the Registrant's Beneficial Interest and Related Security Holder Matters
As of March 14, 1997, the Trusts' beneficial interest is owned by Mortgage Securities III Corporation and is not traded on any stock exchange or on the over-the-counter market.
Item 6.
Item 6. Selected Financial Data
Omitted pursuant to General Instruction J(2)(a) of Form 10-K.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Business activity during 1997, 1996 and 1995 consisted of the collection of principal and interest by the trustee on the GNMA and FNMA certificates and the disbursement of the required payment of interest and principal to the bondholders.
The following table outlines principal payments made by the Trusts during 1997 to the Class 2, 3 and 4 bondholders (in thousands). Accrued interest was added to the principal balance of Class 4 bonds for Collateralized Mortgage Obligation Bonds Trusts B, E and F.
This rate of payment is sufficient to retire the Bonds prior to their stated maturity.
Item 8.
Item 8. Financial Statements and Supplementary Data
The financial statements of the Trusts, together with the related Notes to Financial Statements and Report of Independent Public Accountants, for the three years ended December 28, 1997, are included herein.
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Item 9.
Item 9. Disagreements on Accounting and Financial Disclosures
There was no change in accountants, nor any material disagreement with accountants on any matter of accounting principles, practices or financial statement disclosures, during the year ended December 28, 1997.
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PART III
Item 10.
Item 10.Directors and Executive Officers of the Registrant Omitted pursuant to General Instruction J(2)(c) of Form 10-K.
Item 11.
Item 11.Executive Compensation Omitted pursuant to General Instruction J(2)(c) of Form 10-K.
Item 12.
Item 12.Security Ownership of Certain Beneficial Owners and Management Omitted pursuant to General Instruction J(2)(c) of Form 10-K.
Item 13.
Item 13.Certain Relationships and Related Transactions Omitted pursuant to General Instruction J(2)(c) of Form 10-K.
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PART IV
Item 14.
Item 14.Exhibits, Financial Statement Schedules and Reports on Form 8-K
(1) The following documents are filed as part of this report:
(a) Report of Independent Public Accountants.
(b) Financial Statements:
Statements of Operations
Trust A. for the Three Years Ended December 28,1997 Trust B. for the Three Years Ended December 28,1997 Trust C. for the Three Years Ended December 28,1997 Trust D. for the Three Years Ended December 28,1997 Trust E. for the Three Years Ended December 28,1997 Trust F. for the Three Years Ended December 28,1997
Balance Sheets
Trust A. as of December 28, 1997 and December 29,1996 Trust B. as of December 28, 1997 and December 29,1996 Trust C. as of December 28, 1997 and December 29,1996 Trust D. as of December 28, 1997 and December 29,1996 Trust E. as of December 28, 1997 and December 29,1996 Trust F. as of December 28, 1997 and December 29,1996
Statements of Changes in Owner's Beneficial Interest
Trust A. for the Three Years Ended December 28,1997 Trust B. for the Three Years Ended December 28,1997 Trust C. for the Three Years Ended December 28,1997 Trust D. for the Three Years Ended December 28,1997 Trust E. for the Three Years Ended December 28,1997 Trust F. for the Three Years Ended December 28,1997
Statements of Cash Flows
Trust A. for the Three Years Ended December 28,1997 Trust B. for the Three Years Ended December 28,1997 Trust C. for the Three Years Ended December 28,1997 Trust D. for the Three Years Ended December 28,1997 Trust E. for the Three Years Ended December 28,1997 Trust F. for the Three Years Ended December 28,1997
Notes to Financial Statements for the Three Years Ended December 28,1997.
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(c) Financial Statement Schedules:
Schedule IV-Indebtedness to Related Parties - Not Current Trust E
Schedule IV-Indebtedness to Related Parties - Not Current Trust F
Schedule XIII - Other Security Investments Trust A Schedule XIII - Other Security Investments Trust B Schedule XIII - Other Security Investments Trust C Schedule XIII - Other Security Investments Trust D Schedule XIII - Other Security Investments Trust E Schedule XIII - Other Security Investments Trust F
(d) Exhibits:
Certificate of Incorporation of Mortgage Securities III Corporation (incorporated by reference to 3(a) to Registration Statement on Form S-11 dated December 18, 1985).
Bylaws of Mortgage Securities III Corporation (incorporated by reference to Exhibit 3(b) to Registration Statement on Form S-11 dated December 18, 1985).
Form of Indenture dated June 1, 1986 between the Trust and Texas Commerce Bank National Association, as Trustee, relating to GNMA and FNMA Collateralized Mortgage Obligations (incorporated by reference to Exhibit 4(a) to Registration Statement on Form S-11 dated December 18, 1985).
Form of Supplemental Indenture dated as of June 1, 1986 (incorporated by reference to Exhibit 4(a) to Registration Statement on Form S-11 dated July 11, 1986).
(2) Exhibits are included in Item (1)(d) above.
(3) Financial Statement Schedules required by Regulation S-X are included in Item (1)(c) above.
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 11th day of February 1998.
MORTGAGE SECURITIES III TRUSTS A, B, C, D, E AND F
Trusts acting through Wilmington Trust Company, not in its individual capacity, but solely as Owner Trustee
By: /s/
Denise M. Geran Financial Services Officer
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Report of Independent Public Accountants
To the Beneficial Owner of Mortgage Securities III Trusts A, B, C, D, E and F
We have audited the accompanying balance sheets of Mortgage Securities III Trusts A, B, C, D, E and F (trusts established under the laws of the State of Delaware) as of December 28, 1997 and December 29, 1996, and the related statements of operations, changes in owner's beneficial interest, and cash flows for each of the three years in the period ended December 29, 1997. These financial statements and the schedules referred to below are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Mortgage Securities III Trusts A, B, C, D, E and F, as of December 28, 1997 and December 29, 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 28, 1997 in conformity with generally accepted accounting principles.
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Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in the index to financial statements are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Seattle, WA February 11, 1998
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The accompanying notes are an integral part of these statements.
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The accompanying notes are an integral part of these statements.
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The accompanying notes are an integral part of these statements.
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The accompanying notes are an integral part of these statements.
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The accompanying notes are an integral part of these statements.
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The accompanying notes are an integral part of these statements.
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The accompanying notes are an integral part of these statements.
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The accompanying notes are an integral part of these statements.
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The accompanying notes are an integral part of these statements.
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The accompanying notes are an integral part of these statements.
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The accompanying notes are an integral part of these statements.
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The accompanying notes are an integral part of these statements.
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The accompanying notes are an integral part of these statements.
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The accompanying notes are an integral part of these statements.
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The accompanying notes are an integral part of these statements.
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The accompanying notes are an integral part of these statements.
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The accompanying notes are an integral part of these statements.
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The accompanying notes are an integral part of these statements.
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The accompanying notes are an integral part of these statements.
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The accompanying notes are an integral part of these statements.
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The accompanying notes are an integral part of these statements.
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The accompanying notes are an integral part of these statements.
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The accompanying notes are an integral part of these statements.
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The accompanying notes are an integral part of these statements.
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Mortgage Securities III Trusts A, B, C, D, E and F Notes to Financial Statements For the Three Years Ended December 28, 1997
(Dollar amounts in thousands)
Note 1.Description of business:
Mortgage Securities III Trusts A, B, C, D, E and F (the "Trusts") were established under the laws of Delaware by a trust agreement. Prior to December 27, 1987, the trust agreement was among Mortgage Securities III Corporation, Weyerhaeuser Real Estate Company and Wilmington Trust Company. On December 27, 1987, Weyerhaeuser Real Estate Company dividended its beneficial interests in Mortgage Securities III Trusts A, B, C, D, E and F to Weyerhaeuser Company which in turn contributed its beneficial interests in the Trusts to Weyerhaeuser Financial Services, Inc., a wholly-owned subsidiary of Weyerhaeuser Company. The Trusts were organized to, and are engaged to raise funds through the issuance and sale of Collateralized Mortgage Obligation bonds collateralized by Government National Mortgage Association (GNMA) and Federal National Mortgage Association (FNMA) certificates. The Trusts A, B, C, D, E and F were established on April 8, 1986 and commenced business on June 30, 1986, September 30, 1986, December 30, 1986, February 27, 1987, December 22, 1987 and March 30, 1988, respectively.
Each Trust has issued a series of Collateralized Mortgage Obligations (the "Bonds"). Trust A, B, C, D and F's Bonds are collateralized by GNMA and FNMA certificates and Trust E's Bonds are collateralized by GNMA certificates.
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Activity during 1997, 1996 and 1995, primarily consisted of the collection of principal and interest on the GNMA and FNMA certificates and disbursement of the required payment of principal and interest to the bondholders.
Note 2.Accounting policies:
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
In 1997, the bonds in Trusts A and F were called and any remaining discounts were written off. The bond discounts on Trusts B, C, and D were written off as management intends to prepay the bonds at the earliest allowable prepayment date and the amounts are no longer material. The bond discount for Trust E is amortized on a straight line basis over the remaining life of the instruments.
Cash and equivalents include cash held in the collection accounts and invested in short term investments with original maturities of less than three months.
The amortized cost and estimated market values of investments in debt securities are as follows:
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Per the terms of the prospectus, the Trusts are legally precluded from selling the investments in debt securities, except in the case of a call of the Collateralized Mortgage Obligation bonds as discussed in Note 3.
Note 3.Collateralized Mortgage Obligation Bonds:
The stated maturity is the date such class will be fully paid, assuming that scheduled interest and principal payments (with no prepayments) on the certificates are timely received.
All collections on the certificates pledged as security for the Bonds will be remitted directly to a collection account (the "Collection Account") established with the Trustee and together with the reinvestment earnings thereon, will be available for application to the payment of principal and interest on the bonds on the following payment date.
Each Trust's Bonds are subject to a special redemption, in whole or in part, if, as a result of substantial payments of principal on the underlying mortgage loans and/or low reinvestment yields, the Trusts determine that the amount of cash anticipated to be on deposit in the Collection Accounts on the next payment date might be insufficient to make required payments on the Bonds. Any such redemption would not exceed the principal amount of Bonds that would otherwise be required to be paid on the next payment date. As a result, a special redemption of Bonds will not result in a payment to bondholders more than two months earlier than the payment date on which such payment would otherwise have been received. The Bonds are not otherwise subject to call at the option of the Trusts except that (a) Trust B, C, and E's Class 4 Bonds may be redeemed in whole, but not in part, at the Trusts' option on any payment date on or
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after October 1, 2001, January 1, 2002 and January 1, 2003, respectively, (or on any earlier payment date if the current principal amount of Trust B, C and E's Class 4 Bonds are less than $6,100, $10,500 and $13,160, respectively) and (b) Trust D's Class 3 Bonds may be redeemed in whole, but not in part, at the Trust's option on any payment date on or after March 1, 2002, or on any earlier payment date if the aggregate outstanding principal amount of the Bonds of the class to be redeemed is less than 10 percent of its aggregate initial principal amount.
Any such redemptions at the option of the Trusts shall be at a price equal to 100 percent of the unpaid principal amount of such Bonds plus accrued interest.
The maturities of the Collateralized Mortgage Obligation Bonds are based on the prepayment speed (liquidation's) on the GNMA and FNMA certificates collateralizing the Bonds and the reinvestment of scheduled distributions at the assumed reinvestment rates. Maturities for the succeeding five years which estimates liquidations based on current market interest rates are as follows:
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Note 4. Assets pledged:
Trust B, C and D's Bonds are collateralized by the Trusts' GNMA and FNMA certificates and the Collection Accounts (see Note 3). Trust E's Bonds are collateralized by Trust E's GNMA certificates. Collections on the certificates are used to meet the quarterly Bond interest payments and to reduce the outstanding principal balance on the Bonds. As of December 28, 1997, certificates are guaranteed by the Government National Mortgage Association and the Federal National Mortgage Association as follows:
Note 5. Related parties:
Trusts A, B, C and D purchased from an affiliate, Weyerhaeuser Mortgage Company, GNMA and FNMA certificates which were used to collateralize the Bonds. The purchases were at par value, plus Trust A and D's purchase premiums and less Trust B and C's purchase discounts. The purchases were financed with market-rate short-term debt from this affiliate until proceeds from the bond issuance were obtained.
Trust E purchased from an affiliate, Weyerhaeuser Mortgage Company, GNMA certificates which were used to collateralize the Bonds. Trust F purchased from an affiliate, Weyerhaeuser Mortgage Company, GNMA and FNMA certificates which were used to collateralize the Bonds. The purchases were at par value, less the purchase discounts. The purchases were financed with the proceeds received from the Bond issuances and notes due to Weyerhaeuser Mortgage Company. The notes accrued interest at Bank of America's prime rate and compounded interest annually. Both the principal and interest related to the Weyerhaeuser Mortgage Company payables were paid off by Weyerhaeuser Financial Services, Inc. (Beneficial Owner) in March 1997, in anticipation of the sale of Weyerhaeuser Mortgage Company to an unrelated third party by Weyerhaeuser Financial Services, Inc. and the Weyerhaeuser Company. In August 1997, Weyerhaeuser Financial Services, Inc. contributed capital to Trusts E & F, increasing beneficial owner's interest.
The Beneficial Owner advanced funds to Trusts A and F during the third quarter. The funds were repaid during the fourth quarter. No interest was charged as the advances were treated as a current payable.
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Certain ongoing administrative and accounting functions are provided by the Beneficial Owner at no cost to each Trust.
Note 6. Results of operations:
All results of operations will be transferred to the Beneficial Owner of the Trusts. Mortgage Securities III Corporation will be responsible for all tax liabilities incurred relating to the Trusts' operations.
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On December 22, 1987, Trust E purchased from an affiliate, Weyerhaeuser Mortgage Company, GNMA certificates which were used to collateralize the Bonds. The purchases were at par value, less the purchase discounts. The purchases were financed with the proceeds received from the Bond issuances and 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 were paid off 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. (Beneficial Owner) contributed capital to Trusts E, increasing Beneficial Owner's interest.
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On March 30, 1988, Trust F purchased from an affiliate, Weyerhaeuser Mortgage Company, GNMA and FNMA certificates which were used to collateralize the Bonds. The purchases were at par value, less the purchase discounts. The purchases were financed with the proceeds received from the Bond issuances and notes due to Weyerhaeuser Mortgage Company. The notes accrued interest at Bank of America's prime rate and compounded interest annually. Both the principal and interest related to the Weyerhaeuser Mortgage Company payables were paid off 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. (Beneficial Owner) contributed capital to Trusts F, increasing Beneficial Owner's interest.
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INDEX TO EXHIBITS
Exhibit Number Description of Exhibits Page
3(a) Certificate of Incorporation of the Mortgage Securities III Corporation (incorporated by reference to Exhibit 3(a) to Registration Statement on Form S-11 dated December 18, 1985). *
3(b) Bylaws of Mortgage Securities III Corporation (incorporated by reference to Exhibit 3(b) to Registration Statement on Form S-11 dated December 18, 1985). *
4(a) Form of Indenture dated June 1, 1986 between the Trust and Texas Commerce Bank National Association, as trustee, relating to GNMA and FNMA Collateralized Mortgage Obligations (incorporated by reference to Exhibit 4(a) to Registration Statement on Form S-11 dated December 18, 1985). *
4(a) Form of Supplemental Indenture dated as of June 1, 1986 (incorporated by reference to Exhibit 4(a) to Registration Statement on Form S-11 dated July 11, 1986). *
*Incorporated by reference.