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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1999
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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 charter)
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 of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 515-2000
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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
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date,
November 11, 1999:
COMMON STOCK, $1.00 Par Value - 500 Shares
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CORNERSTONE MORTGAGE INVESTMENT GROUP II, INC.
INDEX
Page
Number
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet 3
Notes to Balance Sheet 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Part II. OTHER INFORMATION 6
SIGNATURES 7
2
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
CORNERSTONE MORTGAGE INVESTMENT GROUP II, INC.
BALANCE SHEET
(Unaudited)
<CAPTION>
September 30, December 31,
1999 1998
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<S> <C> <C>
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 shares issued and outstanding $500 $500
==== ====
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The accompanying notes are an integral part of these financial statements.
</TABLE>
3
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
CORNERSTONE MORTGAGE INVESTMENT GROUP II, INC.
NOTES TO BALANCE SHEET
(Unaudited)
BASIS OF PRESENTATION
The financial information included herein is unaudited. However,
in the opinion of management, such information includes all adjustments
of a normal recurring nature which are necessary for its fair
presentation.
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" or the "Partnership"), 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 "Deposited Securities").
EDJ absorbed all costs related to the organization of Cornerstone
II. In addition, EDJ 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.
4
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Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
CORNERSTONE MORTGAGE INVESTMENT GROUP II, INC.
MANAGEMENT'S FINANCIAL DISCUSSION
No series have been issued since May 29, 1991. During the twelve
months ended December 31, 1998 and the nine months ended September 30,
1999, EDJ and Cornerstone II exercised the option to repurchase
collateral for 3 and 19 of the 29 series, respectively, which had a
current collateral principal balance that was less than 10% of the
original collateral principal balance. Since Cornerstone II had
previously surrendered control of the future economic benefit in the
collateral to EDJ, these transactions have not been accounted for by
Cornerstone II. Accordingly, no income statement is presented.
The outstanding principal balance and remaining collateral value
relating to the remaining seven series issued by Cornerstone II are
$11,637,000 and $11,696,294 as of September 30, 1999.
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's financial
position or on its results of operations.
5
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Part II. OTHER INFORMATION
CORNERSTONE MORTGAGE INVESTMENT GROUP II, INC.
Item 1: Legal Proceedings:
There are no pending legal proceedings.
Item 2. Changes in Securities:
No change.
Item 3. Default upon Senior Securities:
No default.
Item 4. Submission of Matters to a Vote of Security Holders:
Nothing to report.
Item 5. Other Information:
Nothing to report.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description of Exhibit
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4.1 Deposit Agreement dated as of February 20, 1987, between
the Company, as Depositor, and The Bank of New York, as
successor Custodian (incorporated by reference to
Exhibit 2 to the Current Report on Form 8-K filed on
March 6, 1987).
4.2 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).
4.3 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 4
to the Current Report on Form 8-K filed on March 6, 1987).
(b) Reports on Form 8-K
No reports were filed on Form 8-K for the quarter ended September
30, 1999.
6
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SIGNATURES
Pursuant to the requirements 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.
CORNERSTONE MORTGAGE INVESTMENT GROUP II, INC.
(Registrant)
/s/ John C. Heisler Chairman of the Board,
----------------- Chief Financial Officer,
John C. Heisler Chief Accounting Officer November 11, 1999
/s/ Philip R. Schwab President, Chief Executive
----------------- Officer and Director November 11, 1999
Philip R. Schwab
7
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<ARTICLE> 5
<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, 1999 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<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-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
