ITEM 1. BUSINESS.
ORGANIZATION
CMC Securities Corporation III (the "Company") was incorporated in Delaware on May 6, 1992 as a special-purpose finance corporation and is a wholly-owned subsidiary of Capstead Mortgage Corporation ("CMC"). The Company was acquired from CMF Mortgage Funding Corporation ("CMF"), a former subsidiary of CMC, on July 29, 1994 pursuant to an Agreement and Plan of Merger (see below). CMC is a publicly-owned real estate investment trust ("REIT") that, until late in 1995, operated as a mortgage conduit, purchasing and securitizing single-family residential mortgage loans. CMF originally acquired the Company from CMC on September 14, 1993 prior to commencement of operations. The Company is managed by CMC (the "Manager"). The Company believes it has qualified as a qualified REIT subsidiary of CMC under the Internal Revenue Code of 1986 (the "Code"); therefore, for federal income tax purposes it is combined with CMC. Under applicable sections of the Code, REITs are required to distribute annually to stockholders at least 90% of their taxable income. It is the Company's and CMC's policy to distribute 100% of combined taxable income.
Pursuant to the Agreement and Plan of Merger dated July 29, 1994 (the "Agreement") between the Company and CMC Securities Corporation III-A ("CMCSC III-A"), a newly formed and wholly-owned subsidiary of CMC with a corporate charter and organizational structure that is identical in almost all respects to that of the Company, the Company was merged with and into CMCSC III-A, whereby the existence of the Company ceased and CMCSC III-A acquired all of the assets and assumed all of the liabilities of the Company as the surviving entity. As a part of the merger, CMCSC III-A changed its name to CMC Securities Corporation III, and from July 29, 1994 forward has been referred to as the "Company."
The Company was formed primarily for the purpose of issuing and selling collateralized mortgage obligations ("Bonds" or "CMOs"), collateralized by mortgage-backed, pass-through certificates ("Certificates") that evidence an interest in a pool of mortgage loans secured by single-family residences. The Certificates pledged as collateral for the Bonds will either be contributed by an affiliate of CMC or purchased from third parties and will either be Ginnie Mae certificates, Fannie Mae certificates, Freddie Mac certificates or mortgage pass-through ("Non-Agency") certificates.
On December 15, 1993 the Securities and Exchange Commission declared effective an amended registration statement filed by the Company covering the offering of a maximum of $4 billion aggregate principal amount of CMOs. The Company commenced operations with the December 1993 issuance of its first series of CMOs. As of December 31, 2002, the Company had issued ten series of CMOs (none since 2000) with an aggregate original principal balance of $3,518,009,000, $8,788,000 of which were issued outside the registration statement as private placements. The Company retained no beneficial interest in these CMOs, and as such, no economic benefit will be received and no related net income or loss will be recognized. These issuances were accounted for as financings. The Company has remaining capacity to issue $490,779,000 of CMOs under this shelf registration.
SPECIAL-PURPOSE FINANCE CORPORATION
Article III of the Company's Certificate of Incorporation limits the Company's purposes to (i) issuing and selling CMOs, and receiving, owning, holding and pledging as collateral therefore the related Certificates, (ii) investing cash balances on an interim basis in high quality, short-term securities, and (iii) engaging in other activities which are necessary or convenient to accomplish the foregoing and are incidental thereto.
COMPETITION
The Company competes with other issuers of similar obligations, both with respect to the acquisition of mortgage-related collateral securing the Bonds and placement of the CMOs. The Company also competes with entities that issue and/or market numerous other competitive financial products.
EMPLOYEES
The Manager provides all executive and administrative personnel required by the Company.
MANAGEMENT AGREEMENT
Pursuant to a management agreement, the Manager advises the Company with respect to its investments and administers the day-to-day operations of the Company. The management agreement is nonassignable except by consent of the Company and the Manager. The management agreement may be terminated without cause at any time upon 90 days written notice. In addition, the Company has the right to terminate the management agreement upon the happening of certain specified events, including a breach by the Manager of any provision contained in the management agreement which remains uncured for 30 days after notice of such breach and the bankruptcy or insolvency of the Manager.
The Manager is at all times subject to the supervision of the Company's Board of Directors and has only such functions and authority as the Company delegates to it. The Manager is responsible for the day-to-day operations of the Company and performs such services and activities relating to the assets and operations of the Company as may be appropriate. The Manager receives an annual basic management fee of $10,000 per year for managing the assets pledged to secure Bonds issued by the Company.
The Manager is required to pay employment expenses of its personnel (including salaries, wages, payroll taxes, insurance, fidelity bonds, temporary help and cost of employee benefit plans), and other office expenses, travel and other expenses of directors, officers and employees of the Manager, accounting fees and expenses and expenses incurred in supervising and monitoring the Company's investments or relating to performance by the Manager of its functions. The Company is required to pay all other expenses of operations (as defined in the Management Agreement).
SERVICING AND ADMINISTRATION
The originators of mortgage loans backing the Non-Agency Certificates may elect, if they meet the Company's criteria for servicers, either to service the loans they sell or to sell the loans with no agreement with respect to
servicing. The Company enters into servicing agreements with each servicer. As compensation for services rendered under the servicing agreements, the servicers retain a servicing fee, payable monthly, generally 1/4 of 1% per annum of the outstanding principal balance of each mortgage loan serviced as of the last day of each month.
In addition, CMC is the administrator with respect to certain of the Company's Non-Agency Certificates and CMOs. During 2002, 2001 and 2000, CMC retained fees for administering Non-Agency Certificates and CMOs of $440,000, $633,000 and $796,000, respectively.
ITEM 2.
ITEM 2. PROPERTIES.
The Company conducts operations at CMC's offices in Dallas, Texas.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
As of the date hereof, there are no material legal proceedings outside the normal course of business to which the Company was a party or of which any of its property was the subject.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
All of the Company's common stock is owned by CMC. Accordingly, there is no public trading market for its common stock. The Company may periodically distribute excess capital, if any, to its stockholder in the form of dividends.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The Company elected Real Estate Mortgage Investment Conduit ("REMIC") status for tax purposes on issued CMOs which have been accounted for as financings. As financings, CMO collateral and Bonds are reflected on the balance sheet.
Since the Company did not retain any investment in the CMOs issued, no economic benefit was or will be received and thus no net income or loss was or will be recognized related to these CMOs. The Company's net losses are due to operational costs incurred (management fees and professional fees).
LIQUIDITY AND CAPITAL RESOURCES
All ongoing cash CMO expenses are paid out of the excess cash flows on the CMOs issued before the residual holders receive their residual interest. The Company believes that the excess cash flows will be sufficient to pay ongoing cash CMO expenses. Cash flow requirements due to ongoing operational costs are funded by CMC.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As discussed above, the Company will receive no economic benefit from the CMOs it has issued. Accordingly the Company has no exposure to market risks, including interest rate risk.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT AUDITORS
Stockholder and Board of Directors CMC Securities Corporation III
We have audited the accompanying balance sheets of CMC Securities Corporation III (a wholly-owned subsidiary of Capstead Mortgage Corporation) as of December 31, 2002 and 2001, and the related statements of operations, stockholder's equity, and cash flows for each of the three years in the period ended December 31, 2002. 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 auditing standards generally accepted in the United States. 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 CMC Securities Corporation III at December 31, 2002 and 2001, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States.
ERNST & YOUNG LLP
Dallas, Texas January 31, 2003
CMC SECURITIES CORPORATION III BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE DATA)
See notes to accompanying financial statements.
CMC SECURITIES CORPORATION III STATEMENTS OF OPERATIONS (IN THOUSANDS)
See notes to accompanying financial statements.
CMC SECURITIES CORPORATION III STATEMENTS OF STOCKHOLDER'S EQUITY THREE YEARS ENDED DECEMBER 31, 2002 (IN THOUSANDS)
See accompanying notes to financial statements.
CMC SECURITIES CORPORATION III STATEMENTS OF CASH FLOWS (IN THOUSANDS)
See accompanying notes to financial statements.
CMC SECURITIES CORPORATION III NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002
NOTE A -- BUSINESS
CMC Securities Corporation III (the "Company"), was incorporated in Delaware on May 6, 1992 as special-purpose finance corporation primarily to issue bonds collateralized by whole loans or mortgage-backed securities. The Company is a wholly-owned subsidiary of Capstead Mortgage Corporation ("CMC").
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
SECURITIES HELD-TO-MATURITY
Management determines the appropriate classification of debt securities at the time of purchase and reevaluates such designation as of each balance sheet date. Debt securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at amortized cost.
MORTGAGE SECURITIES COLLATERAL
Mortgage securities collateral consists of debt securities classified as held-to-maturity. Amortized cost is adjusted for amortization of premiums and discounts over the estimated life of the security using the interest method. Such amortization is included in related interest income.
Mortgage securities collateral is subject to changes in value because of changes in interest rates and rates of prepayment, as well as failure of the mortgagor to perform under the mortgage agreement. The Company has limited its exposure to these risks by issuing collateralized mortgage securities using a senior/subordinate structure (see Note F).
ALLOWANCE FOR POSSIBLE LOSSES
The Company provides for possible losses on its investments in amounts which it believes are adequate relative to the risk inherent in such investments.
COLLATERALIZED MORTGAGE SECURITIES
Collateralized mortgage securities are carried at their unpaid principal balances, net of unamortized discount or premium. Any discount or premium is recognized as an adjustment to interest expense by the interest method over the life of the related securities.
INCOME TAXES
Since July 29, 1994 the Company has operated as a qualified real estate investment trust ("REIT") subsidiary of CMC, which itself is a REIT, under the Internal Revenue Code of 1986 (the "Code"), and, for federal income tax purposes is combined with CMC. Under applicable sections of the Code, a REIT is required to meet certain asset, income and stock ownership requirements as well as distribute at least 90% of its taxable income, the distribution of which may extend into the subsequent taxable year. It is CMC's policy to distribute 100% of taxable income within the time limits prescribed by the Code. Accordingly, no provision has been made for federal income taxes.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and highly liquid investment with original maturities of three months or less.
NOTE C -- MORTGAGE SECURITIES COLLATERAL
Mortgage securities collateral consists of conventional single-family mortgage loans which are pledged to secure repayment of the collateralized mortgage securities. All principal and interest payments on the collateral are remitted directly to a collection account maintained by a trustee. The trustee is responsible for reinvesting those funds in short-term investments. All collections on the collateral and the reinvestment income earned thereon is available for payment of principal and interest on the collateralized mortgage securities.
During March 2000 the Company acquired from an affiliate conventional mortgage loans with unpaid principal balances of $234 million that were pledged as collateral for the simultaneous issuance of CMO Series 2000-I. All loans were acquired at an amount equal to the net proceeds of the related issuance. The components of mortgage securities collateral are summarized as follows (in thousands):
The weighted average effective interest rate for mortgage securities collateral was 6.75% and 7.06% during 2002 and 2001, respectively.
NOTE D -- COLLATERALIZED MORTGAGE SECURITIES
Each series of collateralized mortgage securities consists of various classes, some of which may be deferred interest, interest-only and principal-only securities. Interest is payable monthly at specified rates for all classes other than the deferred interest securities. Generally, principal
payments on each series are made to each class in the order of their stated maturities so that no payment of principal will be made on any class until all classes having an earlier stated maturity have been paid in full. Generally, payments of principal and interest on deferred interest securities will commence only upon payment in full of some or all other classes. Prior to that time, interest accrues on the deferred interest securities and the amount accrued is added to the unpaid principal balance. Interest payments on interest-only bonds are based on a specified notional amount used only for the calculation of interest and no payments of principal are made. Principal-only bonds remit principal payments and no interest is paid. The components of collateralized mortgage securities are summarized as follows (dollars in thousands):
The maturity of each series of securities is directly affected by the rate of principal prepayments on the related mortgage securities collateral. Each series of securities is also subject to redemption at the Company's option provided that certain requirements specified in the related indenture have been met (referred to as "clean-up calls"). As a result, the actual maturity of any series of securities is likely to occur earlier than its stated maturity.
The weighted average effective interest rate for collateralized mortgage securities was 6.74% and 7.06% during 2002 and 2001, respectively. Interest payments on collateralized mortgage securities of $83,971,000, $129,285,000 and $143,491,000 were made during 2002, 2001 and 2000, respectively.
NOTE E -- DISCLOSURES REGARDING FAIR VALUES OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments have been determined by the Company using available market information and appropriate valuation methodologies; however, considerable judgment is required in interpreting market data to develop these estimates. In addition, fair values fluctuate on a daily basis. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
The fair value of mortgage securities collateral was estimated using either quoted market prices, when available, including quotes made by CMC's lenders in connection with designating collateral for repurchase arrangements. The fair value of collateralized mortgage securities is dependent upon the characteristics of the mortgage securities collateral pledged to secure the issuance. Therefore, fair value was based on the same method used for
determining fair value for the underlying mortgage securities collateral, adjusted for credit enhancements. The following table summarizes the fair value of financial instruments (in thousands):
The fair values of mortgage securities collateral reflect unrealized gains of $7.4 million and unrealized losses of $4.0 million at December 31, 2002, unrealized gains of $1.2 million and unrealized losses of $9.3 million at December 31, 2001.
NOTE F -- ALLOWANCE FOR POSSIBLE LOSSES
The Company has limited exposure to losses on mortgage securities collateral because the Company's collateralized mortgage securities are issued in a senior/subordinate structure where the investor in the subordinate classes assumes the risks of losses due to typical mortgagor default and special hazards. Special hazards are typically catastrophic events that are unable to be predicted (e.g., earthquakes). Because of its limited exposure to losses, the Company has determined that an allowance for possible losses is not warranted at December 31, 2002 and 2001.
Since approximately 21%, 13% and 10% of mortgage securities collateral are secured by properties located in California, Virginia and Texas, respectively, the Company has a concentration of risk related to these markets. However, the Company's exposure arising from this concentration is reduced by the use of the senior/subordinate structure for securitizations.
NOTE G -- MANAGEMENT AGREEMENT
The Company operates under a $10,000 per year management agreement with CMC (the "Manager"). The agreement provides that the Manager will advise the Company with respect to all facets of its business and administer the day-to-day operations of the Company under the supervision of the Company's Board of Directors. The Manager pays, among other things, salaries and benefits of its personnel, accounting fees and expenses, and other office expenses incurred in supervising and monitoring the Company's investments.
The management agreement is nonassignable except by consent of the Company and the Manager. The management agreement may be terminated without cause at any time upon 90 days written notice. In addition, the Company has the right to terminate the management agreement upon the happening of certain specified events, including a breach by the Manager of any provision contained in the management agreement which remains uncured for 30 days after notice of such breach and the bankruptcy or insolvency of the Manager.
NOTE H -- TRANSACTIONS WITH RELATED PARTY
CMC acts as administrator in relation to certain of the Company's Non-Agency Certificates and CMOs in which it performs certain administrative functions. CMC receives a fee of approximately 0.015% to 0.04% per annum of the outstanding principal amount of the bonds, after deducting trustee fees, for its services. Such fees totaled $440,000, $633,000 and $796,000 during 2002, 2001 and 2000, respectively.
On a monthly basis, the Company's excess cash is advanced to CMC for which the Company earns interest based on the annual federal short-term rate. At the end of each quarter, these advances are accounted for as distributions to CMC and treated as returns of capital.
The Company has a $1 million revolving subordinated promissory note with CMC under which interest accrues on amounts payable based on the annual federal short-term rate as published by the Internal Revenue Service. This note, which was not drawn upon as of December 31, 2002, expires January 1, 2004. Repayments may be made as funds are available.
NOTE I -- NET INTEREST INCOME ANALYSIS (UNAUDITED)
The following summarizes interest income and interest expense and the average effective interest rate for mortgage securities collateral and collateralized mortgage securities (dollars in thousands):
The following summarizes the amount of change in interest income and interest expense due to changes in interest rates versus changes in volume (in thousands):
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 14.
ITEM 14. CONTROLS AND PROCEDURES
As of December 31, 2002, an evaluation was performed under the supervision and with the participation of the Company's management, including the Chief Executive Officer ("CEO") and Senior Vice President - Control ("CFO"), of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on that evaluation, the Company's management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of December 31, 2002. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to December 31, 2002.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this report:
1. The following financial statements of the Company are included in ITEM 8:
2. Financial Statement Schedules: None.
All schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted.
3. Exhibits:
EXHIBIT NUMBER
2.1 Agreement and Plan of Merger between the Company and CMCSC III-A dated July 28, 1994(4)
3.1 Certificate of Incorporation of CMCSC III-A filed July 29, 1994 with the Secretary of State of Delaware(4)
3.2 Certificate of Merger of the Company with and into CMCSC III-A, filed July 29, 1994 with the Secretary of State of Delaware(11)
PART IV ITEM 15. - CONTINUED
3.3 Bylaws for CMCSC III-A(12)
3.4 Certificate of Incorporation of CMCSC III-A, which includes Articles of Incorporation(12)
4.1 Form of Indenture between Registrant and Texas Commerce Bank, National Association, as Trustee(1)
4.2 Form of First Supplement to the Indenture(5)
4.3 Form of Second Supplement to the Indenture(6)
4.4 Form of Third Supplement to the Indenture(7)
4.5 Form of Fourth Supplement to the Indenture(8)
4.6 Form of Fifth Supplement to the Indenture(9)
4.7 Form of Sixth Supplement to the Indenture(10)
4.8 Form of Seventh Supplement to the Indenture(11)
4.9 Form of Eighth Supplement to the Indenture(13)
4.10 Form of Ninth Supplement to the Indenture(14)
4.11 Form of Tenth Supplement to the Indenture(15)
10.1 Management Agreement between the Company and Capstead Advisers, Inc. dated January 1, 1993(2)
10.2 Amended Management Agreement between the Company and Capstead Advisers, Inc. dated October 1, 1993(3)
23 Consent of Ernst & Young LLP, Independent Auditors*
99.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
(b) Reports on Form 8-K: None.
- -----------
(1) Previously filed with the Commission as an exhibit to the Company's Registration Statement on Form S-3 (No. 33-47913) filed May 14, 1992.
(2) Previously filed with the Commission as an exhibit to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992.
(3) Previously filed with the Commission as an exhibit to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993.
(4) Previously filed with the Commission as an exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994.
(5) Previously filed with the Commission as an exhibit to the Registrant's Current Report on Form 8-K on December 22, 1993.
(6) Previously filed with the Commission as an exhibit to the Registrant's Current Report on Form 8-K on January 28, 1994.
(7) Previously filed with the Commission as an exhibit to the Registrant's Current Report on Form 8-K on January 28, 1994.
(8) Previously filed with the Commission as an exhibit to the Registrant's Current Report on Form 8-K on February 28, 1994.
(9) Previously filed with the Commission as an exhibit to the Registrant's Current Report on Form 8-K on February 28, 1994.
(10) Previously filed with the Commission as an exhibit to the Registrant's Current Report on Form 8-K on March 31, 1994.
(11) Previously filed with the Commission as an exhibit to the Registrant's Current Report on Form 8-K on May 31, 1994.
(12) Previously filed with the Commission as an exhibit to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994.
(13) Previously filed with the Commission as an exhibit to the Registrant's Current Report on Form 8-K on April 4, 1998.
(14) Previously filed with the Commission as an exhibit to the Registrant's Current Report on Form 8-K on October 14, 1998.
(15) Previously filed with the Commission as an exhibit to the Registrant's Current Report on Form 424B5 on April 4, 2000.
* Filed herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CMC SECURITIES CORPORATION III REGISTRANT
Date: March 28, 2003 By: /s/ ANDREW F. JACOBS --------------------------------- Andrew F. Jacobs Chairman, Chief Executive Officer and President
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 indicated below and on the dates indicated.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT.
No annual report or proxy material has been sent to security holders.
CERTIFICATIONS
I, Andrew F. Jacobs, certify that:
1. I have reviewed this annual report on Form 10-K of CMC Securities Corporation III;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant is made known to us by others within the entity, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors:
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: March 28, 2003 By: /s/ ANDREW F. JACOBS --------------------------------- Andrew F. Jacobs Chairman, Chief Executive Officer and President
CERTIFICATIONS
I, Phillip A. Reinsch, certify that:
1. I have reviewed this annual report on Form 10-K of CMC Securities Corporation III;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant is made known to us by others within the entity, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors:
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: March 28, 2003 By: /s/ PHILLIP A. REINSCH -------------------------------- Phillip A. Reinsch Senior Vice President - Control
INDEX TO EXHIBITS
- -----------
(1) Previously filed with the Commission as an exhibit to the Company's Registration Statement on Form S-3 (No. 33-47913) filed May 14, 1992.
(2) Previously filed with the Commission as an exhibit to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992.
(3) Previously filed with the Commission as an exhibit to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993.
(4) Previously filed with the Commission as an exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994.
(5) Previously filed with the Commission as an exhibit to the Registrant's Current Report on Form 8-K on December 22, 1993.
(6) Previously filed with the Commission as an exhibit to the Registrant's Current Report on Form 8-K on January 28, 1994.
(7) Previously filed with the Commission as an exhibit to the Registrant's Current Report on Form 8-K on January 28, 1994.
(8) Previously filed with the Commission as an exhibit to the Registrant's Current Report on Form 8-K on February 28, 1994.
(9) Previously filed with the Commission as an exhibit to the Registrant's Current Report on Form 8-K on February 28, 1994.
(10) Previously filed with the Commission as an exhibit to the Registrant's Current Report on Form 8-K on March 31, 1994.
(11) Previously filed with the Commission as an exhibit to the Registrant's Current Report on Form 8-K on May 31, 1994.
(12) Previously filed with the Commission as an exhibit to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994.
(16) Previously filed with the Commission as an exhibit to the Registrant's Current Report on Form 8-K on April 4, 1998.
(14) Previously filed with the Commission as an exhibit to the Registrant's Current Report on Form 8-K on October 14, 1998.
(15) Previously filed with the Commission as an exhibit to the Registrant's Current Report on Form 424B5 on April 4,2000.
* Filed herewith.