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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1997 Commission file number 33-11459
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CORNERSTONE MORTGAGE INVESTMENT GROUP II, INC.
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(Exact name of registrant as specified in its Articles of Incorporation)
DELAWARE 43-1432378
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
201 Progress Parkway
Maryland Heights, Missouri 63043
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(Address and principal executive office) (Zip Code)
Registrant's telephone number, including area code (314) 515-2000
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Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
---- ----
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of filing date:
COMMON STOCK, $1.00 Par Value - 500 Shares
The Registrant meets the conditions set forth in General Instruction
J(1)(a) and (b) of Form 10-K and is therefore filing this form with the
reduced disclosure format.
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CORNERSTONE MORTGAGE INVESTMENT GROUP II, INC.
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TABLE OF CONTENTS
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Page
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PART I
Item 1. Business 3
Item 2. Properties 3
Item 3. Legal Proceedings 3
Item 4. Submission of Matters to a Vote of Security Holders 3
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters 4
Item 6. Selected Financial Data 4
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 4
Item 8. Financial Statements and Supplementary Data 5
Item 9. Change in and Disagreements with Accountants
on Accounting and Financial Disclosure 10
PART III
Item 10. Directors and Executive Officers of the Registrant 11
Item 11. Executive Compensation 11
Item 12. Security Ownership of Certain Beneficial Owners and
Management 11
Item 13. Certain Relationships and Related Transactions 11
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 12
SIGNATURES 13
INDEX TO EXHIBITS 14
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PART I
Item 1. BUSINESS
Cornerstone Mortgage Investment Group II, Inc. (the "Company")
was incorporated in the state of Delaware on December 22, 1986, as a wholly
owned, limited purpose subsidiary of Edward D. Jones & Co., L.P. ("EDJ"), a
Missouri limited partnership.
The Company was organized for the purpose of investing in
collateral to be purchased with the proceeds of Mortgage-Backed Securities
collateralized by such collateral. EDJ organized the Company and currently
owns all the issued and outstanding capital stock of the Company. The
Company does not intend to engage in any business or investment activities
other than issuing and selling Mortgage-Backed Securities and acquiring,
owning, holding and assigning collateral and investing cash balances on an
interim basis in high quality, short-term securities some or all of which may
be purchased from or through EDJ. Article 3 of the Company's Certificate of
Incorporation limits the Company's business and investment activities to the
above purposes and to any activities incidental and necessary or convenient
for such purposes. Article 7 of the Company's Certificate of Incorporation
prohibits the Company, without the consent of the trustee under any indenture
pursuant to which Mortgage-Backed Securities are issued, from (1) dissolving
or liquidating, in whole or in part; (2) merging or consolidating with
another corporation other than a corporation wholly owned, directly or
indirectly, by EDJ or (3) amending Articles 3 or 7 of the Company's
Certificate of Incorporation.
Item 2. PROPERTIES
The Company has no physical properties appropriate for
description herein.
Item 3. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal
proceedings.
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. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
As of filing date, all outstanding shares of the Company's
common stock are owned by EDJ and are not traded on any stock
exchange or in the over-the-counter market.
Item 6. SELECTED FINANCIAL DATA
Omitted pursuant to General Instruction J(2)(c) of Form 10-K.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Cornerstone II has not issued Mortgage-Backed Securities
since 1991. Cornerstone II's operations are directed toward
maintenance of outstanding issues.
Year 2000 Issues
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In 1997, the Partnership began the process of identifying
the software applications expected to be impacted by the Year
2000 system issue. The Partnership does not believe the costs of
addressing these issues will have a material impact on the
partnership financial position or on its results of operations.
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements and Supplementary Financial Data
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Report of Independent Public Accountants 6
Balance Sheet as of December 31, 1997 and 1996. 7
Notes to Balance Sheet 8
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All schedules are omitted because they are not required, inapplicable or the
information is included in the balance sheet or notes thereto.
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (CONTINUED)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
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To Cornerstone Mortgage Investment Group II, Inc.:
We have audited the accompanying balance sheet of Cornerstone Mortgage
Investment Group II, Inc. (a Delaware corporation and wholly owned subsidiary
of Edward D. Jones & Co., L.P.) as of December 31, 1997 and 1996. This
financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement 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 balance sheet is free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the balance sheet. 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 balance sheet referred to above presents fairly, in all
material respects, the financial position of Cornerstone Mortgage Investment
Group II, Inc. as of December 31, 1997 and 1996, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
St. Louis, Missouri,
February 20, 1998
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (CONTINUED)
CORNERSTONE MORTGAGE INVESTMENT GROUP II, INC.
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BALANCE SHEET
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AS OF DECEMBER 31, 1997 AND 1996
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1997 1996
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ASSETS
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CASH $500 $500
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STOCKHOLDER'S EQUITY
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COMMON STOCK - $1.00 par value, 150,000 shares authorized,
500 issued and outstanding $500 $500
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The accompanying notes are an integral
part of this balance sheet.
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (CONTINUED)
CORNERSTONE MORTGAGE INVESTMENT GROUP II, INC.
NOTES TO BALANCE SHEET
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DECEMBER 31, 1997 AND 1996
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1. GENERAL
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Cornerstone Mortgage Investment Group II, Inc. ("Cornerstone II") is a
Delaware corporation and a wholly owned subsidiary of Edward D. Jones & Co.,
L.P. ("EDJ"), a Missouri limited partnership. Cornerstone II was
incorporated on December 22, 1986, for the limited purpose of structuring and
selling mortgage-backed securities (the "Certificates"), which are backed by
Government National Mortgage Association (GNMA), Federal Home Loan Mortgage
Corporation (FHLMC) and Federal National Mortgage Association (FNMA)
Securities (collectively the "Collateral").
All costs related to the organization of Cornerstone II have been absorbed by
EDJ. In addition, EDJ has paid all offering expenses and assumed all future
revenues and expenses in connection with prior security transactions. Due to
the absence of revenue or expense generating transactions, no income
statement is presented. The balance of stockholder's equity consists solely
of common stock issued on December 30, 1986; therefore, no statement of
stockholder's equity is presented. All funds were obtained from capital
transactions. Therefore, no statement of cash flows is presented.
2. SECURITY TRANSACTIONS
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Cornerstone II last offered mortgage-backed securities in 1991; no securities
were issued during 1997, 1996 or 1995.
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (CONTINUED)
Since Cornerstone II has surrendered control of the future economic benefit
in the collateral, these transactions have been accounted for as sales and
both the Certificates and the Collateral have been eliminated from
Cornerstone II's balance sheet.
The outstanding principal balance and remaining collateral value relating to
series issued by Cornerstone Mortgage Investment Group II, Inc. are
$79,828,000 and $80,221,819 as of December 31, 1997.
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Item 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There was no change of accountants or disagreement with
accountants on any matter of accounting principles or financial
disclosure.
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PART III
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Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Omitted pursuant to General Instruction J(2)(c) of Form 10-K.
Item 11. EXECUTIVE COMPENSATION
Omitted pursuant to General Instruction J(2)(c) of Form 10-K.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Omitted pursuant to General Instruction J(2)(c) of Form 10-K.
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. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a. The following documents are filed as part of this report:
1. Financial Statements:
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Report of Independent Public Accountants
Balance Sheet as of December 31, 1997 and 1996
Notes to Balance Sheet
2. Financial Statement Schedules:
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All schedules are omitted because they are not
required, inapplicable, or the information is included in
the balance sheet or notes thereto.
3. Exhibits:
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Certificate of Incorporation of the Company, as
amended (incorporated by reference to Exhibit 3(a) to
Registration Statement on Form S-11, as amended, File No.
33-11459).
Bylaws of the Company as amended (incorporated by
reference to Exhibit 3(b) to Registration Statement on
Form S-11, as amended, File No. 33-11459).
Deposit Agreement dated as of February 20, 1987,
between the Company, as Depositor, and The Bank of New
York, as Custodian (incorporated by reference to Exhibit 2
to the Current Report on Form 8-K filed on March 6, 1987).
Trust Agreement dated as of February 20, 1987,
between the Company, as Depositor, and The Bank of New
York, as Successor Trustee (incorporated by reference to
Exhibit 3 to the Current Report on Form 8-K filed on March
6, 1987).
Trust Agreement dated as of February 20, 1987,
between the Company, as Depositor, Bank of NewYork
as SuccessorTrustee (incorporated by reference to
Exhibit 4 to the Current Report on Form 8-K filed on
March 6, 1987).
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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, on this 18th day
of February, 1998.
CORNERSTONE MORTGAGE INVESTMENT GROUP II, INC.
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(Registrant)
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.
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/s/ John C. Heisler Chairman of the Board,
- ------------------------ Chief Financial Officer,
John C. Heisler Chief Accounting
Officer and Director February 18, 1998
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/s/ Philip R. Schwab President, Chief
- ------------------------ Executive Officer
Philip R. Schwab and Director February 18, 1998
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/s/ John Beuerlein Secretary and Director February 18, 1998
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John Beuerlein
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<TABLE>
INDEX TO EXHIBITS
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Exhibit
Number Description of Exhibit Page
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3.1 Certificate of Incorporation of the Company, as amended
(incorporated by reference to Exhibit 3(a) to Registration
Statement on Form S-11, as amended, File No.
33-11459 <F*>
3.2 Bylaws of the Company as amended (incorporated by
reference to Exhibit 3(b) to Registration Statement on
Form S-11, as amended, File No. 33-11459 <F*>
4.1 Deposit Agreement dated as of February 20, 1987,
between the Company, as Depositor, and Bank of New York,
(incorporated by reference to Exhibit 2 to the Current Report
on Form, 8-K filed on March 6, 1987 <F*>
4.2 Trust Agreement dated as of February 20, 1987, between
the Company, as Depositor, and Bank of New York
as Trustee (incorporated by reference to
Exhibit 3 to the Current Report on Form 8-K filed on
March 6, 1987) <F*>
4.3 Trust Agreement dated as of February 20, 1987, between
the Company, as Depositor, and Bank of New York,
as Successor Trustee (incorporated by reference to
Exhibit 4 to the Current Report on Form 8-K filed
on March 6, 1987 <F*>
<FN>
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<F*> Incorporated by reference
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<LEGEND>
This schedule contains summary financial information extracted
from the financial statements of Cornerstone Mortgage Investment
Group II, Inc. for the quarter ended September 30, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 500
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 500
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 500
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 500
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 500
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
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