Annual Report (Form 10-K), fiscal year 1993

Item 1. Business - ------- --------
Organization - ------------
Guaranteed Mortgage Corporation III (the "Company") was incorporated under the laws of the State of Michigan on October 18, 1982, as a wholly-owned limited purpose financing subsidiary of Pulte Financial Companies, Inc. ("PFCI"), a wholly-owned subsidiary of Pulte Corporation (formerly known as PHM Corporation), a publicly-owned holding company listed on the New York Stock Exchange.
Issuance of Collateralized Mortgage Bonds - -----------------------------------------
The Company was organized to facilitate the financing of long-term mortgage loans on single-family residential homes, including homes built by Pulte Home Corporation ("PHC"), through the issuance and sale of bonds secured by mortgage-backed securities ("Certificates") or by funding agreements with various limited-purpose financing companies ("Funding Companies") and the notes issued thereunder that are secured by Certificates ("Funding Notes"), or by a combination thereof. Such Certificates consist of Guaranteed Mortgage Pass-Through Certificates ("FNMA Certificates"), issued and guaranteed as to the full and timely payment of principal and interest by the Federal National Mortgage Association, Fully Modified Pass-Through mortgage-backed certificates ("GNMA Certificates"), guaranteed as to the full and timely payment of principal and interest by the Government National Mortgage Association, Mortgage Participation Certificates ("FHLMC Certificates"), issued and guaranteed as to the full and timely payment of interest and as to the ultimate payment of principal by the Federal Home Loan Mortgage Corporation, or a combination of such Certificates. To accomplish its purpose, the Company issued collateralized mortgage bonds in series and used the net proceeds of such sales to purchase Certificates backed by mortgage loans, some of which were originated by ICM Mortgage Corporation, a wholly-owned subsidiary of PHC, and are secured by homes, some of which were built by PHC. Alternatively, the Company remitted a portion of the net proceeds of such sales of collateralized mortgage bonds in series to a Funding Company that, in turn, pledged to the Company certain Funding Notes, which, together with certain other collateral, serve as security for the obligations of that Funding Company to the Company.
The Company, although incorporated in October, 1982 and capitalized in August, 1984, did not commence operations until it issued its first series of bonds on October 24, 1984. Prior to 1993, the Company issued fifteen series of bonds, all of which were offered and sold to the public pursuant to a registration statement filed with the Securities and Exchange Commission. The bonds had an aggregate original principal amount of $1,208,697,000, with stated annual interest rates ranging from 7.0% to 12.5%. The Company did not issue any additional series of bonds in 1993. At December 31, 1993, the Company had $270,921,793 in aggregate principal amount of bonds outstanding, with stated annual interest rates ranging from 8.50% to 9.00%. This aggregate principal amount includes $29,961,727 in outstanding aggregate principal amount of the Company's Series H Bonds, secured by Funding Notes, and $82,929,778 in outstanding aggregate principal amount of the Company's Series L and Series M Bonds, all of which are non-recourse obligations and do not represent a liability of the Company.
Each series of the Company's bonds is secured by a separate collateral package consisting, in part, of the Certificates purchased in connection with the issuance of a bond series, or Funding Notes or a combination thereof, additional pledged GNMA certificates and cash. The collateral package for a series is pledged to NBD Bank, N.A., as trustee on behalf of the holders of the bonds of such series. Funds held by the trustee with respect to the bonds are restricted so as to assure the payment of principal and interest on the bonds to the extent of such funds.
Under the Company's articles of incorporation and the terms of the indenture governing the issuance of the Company's collateralized mortgage bonds, the Company may only issue collateralized mortgage bonds rated in the highest category by Standard & Poor's Corporation.
Item 2.



Item 2. Properties - ------ ----------
The Company has no material physical properties. Its primary asset is ownership of the various Certificates, and the mortgage loans underlying such Certificates, pledged to NBD Bank, N.A., as trustee, to secure the Company's collateralized mortgage bonds.
Item 3.

Item 3. Legal Proceedings - ------- -----------------
None.
Item 4.

Item 4. Submission of Matters to a Vote of - ------- Security Holders ----------------------------------
Information in response to this item is omitted pursuant to General Instruction J(2).
PART II -------
Item 5.

Item 5. Market for Registrant's Common Equity - ------- and Related Stockholder Matters -------------------------------------
The Company is a wholly-owned subsidiary of PFCI. (See "Business - Organization" in Item 1 of this Report.) Thus, there is no market for its common stock.
Item 6.

Item 6. Selected Financial Data - ------- -----------------------
Information in response to this item is omitted pursuant to General Instruction J(2).
Item 7.

Item 7. Management's Discussion and Analysis of - ------- Financial Condition and Results of Operations ---------------------------------------------
Results of Operations - ---------------------
The Company's mortgage-backed securities (Certificates) or finance companies' notes secured by Certificates (Funding Notes) are used as collateral for associated bonds payable. Mortgage-backed securities were acquired from affiliates. Any difference between the acquisition price and the principal balance of the securities at their date of acquisition (mortgage discounts/premiums) is amortized into operations over the estimated lives of the securities.
The Company's pretax loss before extraordinary item was $794,434 for 1993 as compared to pretax income before extraordinary item of $4,905,355 and $1,439,721 for 1992 and 1991, respectively. Earnings decreased during 1993 from 1992 primarily due to reduced net interest carry as a result of volume declines resulting from accelerated mortgage prepayments related to heavy refinancing activity in 1993.
Earnings increased during 1992 from 1991 primarily due to gains from the sale of mortgage-backed securities in conjunction with the early redemption of certain bonds prior to scheduled maturity. This increase was partially offset by reduced interest carry (i.e. interest income less interest expense) as a result of volume declines.
Pretax extraordinary losses from the bond extinguishments during 1993 and 1992 were $2,028,327 and $1,872,795, respectively. These losses resulted from the write-off of unamortized bond discounts and issue costs. There was no similar activity in 1991.
Financial Condition - -------------------
The Company will have no additional capital or liquidity requirements, assuming the mortgage-backed securities continue to pay principal and interest in accordance with their terms.
Item 8.


Item 8. Financial Statements and Supplementary Data - ------- --------------------------------------------
Page -----
Balance Sheets at December 31, 1993 and 1992 8
Statements of Operations for the years ended December 31, 1993, 1992 and 1991 9
Statements of Shareholder's Equity for the years ended December 31, 1993, 1992 and 1991 10
Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991 11
Notes to Financial Statements 13
Report of Ernst & Young, Independent Auditors 16