UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1998,
or
[ ] Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period from
________________ to ________________
Commission File No.: 33-60662
FUND AMERICA INVESTORS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 84-1070310
(State or other jurisdiction of (I.R.S. Employer
incorporation or organizaiton identification number)
6400 S. Fiddlers Green Circle, Suite 1200A, Englewood, Colorado 80111
(Address of principal executive offices)
Registrant's telephone number including area code: (303) 290-6024
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.
[X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. X
State the aggregate market value of the voting stock held by
non-affiliates of the registrant: As of December 31, 1998: $0.00.
The number of shares outstanding of the Registrant's $0.01 par
value common stock, as of March 30, 1999, was 1,000 shares.
DOCUMENTS INCORPORATED BY REFERENCE
None.
</PAGE>
<PAGE>
PART I
ITEM 1. BUSINESS
------ --------
Fund America Investors Corporation (the "Company") was incorporated
in the State of Delaware on October 19, 1987 as a limited purpose finance
corporation. The Company was established to engage in activities relating
to mortgage loans or mortgage loan certificates including other securities
which are backed by mortgage loans (the "Collateral"). The Collateral is
issued and/or guaranteed by agencies which include Government National
Mortgage Association securities ("GNMA Certificates"), Federal National
Mortgage Association securities ("FNMA Certificates") and Federal Home Loan
Mortgage Corporation securities ("FHLMC Certificates") collectively referred
to as ("Agency Certificates") or other entities ("Private Mortgage-Backed
Securities"). Among the Company's authorized business purposes, its primary
activity is the issuance of bonds in one or more series of collateralized
mortgage obligations ("CMO's") which are secured by the Collateral. To issue
such bonds, the Company may acquire, hold, sell or pledge the Collateral, but
typically these activities are transacted through trusts beneficially owned
and created by the Company.
The Company may not, either directly or indirectly through a beneficially
owned trust, engage in any business or investment activity other than (1)
issuing and selling bonds; (2) investing cash balances on an interim basis
in high quality short-term securities; (3) purchasing, owning, holding,
pledging or selling the Collateral or other mortgage-related assets; and
(4) engaging in other activities which are necessary or convenient to accomp-
lish the foregoing and are incidental thereto.
To date, the Company or certain trusts established by the Company
have issued nine bond offerings totaling $1,508,989,338 (the "Bonds").
The Bonds that are issued directly by the Company are direct obligations
of the Company, (see Note 2 of Notes to Financial Statements for a further
discussion). Payments to the bondholders are payable from the principal and
interest payments received on the Collateral payments. For the benefit of
the bondholders, all Collateral related to the Bonds has been pledged to a
trustee. The Bonds are considered CMO's under generally accepted accounting
principles.
At December 31, 1997, the Company had $141 million of registered and
unissued CMOs remaining on its Registration Statement No. 33-60662. It was
determined in 1997 that the Registration Statement required some updating in
order to be utilized and that management anticipated the issuance of the
remaining unissued CMOs after the update was completed. During 1998, the
Company proceeded with its plans to update the Registration Statement by
filing an amendment to it on September 22, 1998.
After filing the amendment, the Company received many comments from the
Securities and Exchange Commission ("SEC"). To respond to all the SEC
comments, it was estimated that the Company will have to spend an additional
$50,000 to $100,000 above the costs already incurred of $26,368 for filing
the amendment. As of December 31, 1998, management has determined that it
is not economically feasible to follow through on updating the Registration
Statement. In accordance with SFAS No. 121 "Impairment of Long-Lived Assets
to be Disposed Of," the deferred offering costs remaining from 1997 plus the
additional offering costs incurred in 1998, a total of $65,271, have been
charged to operations in 1998. The remaining unissued securities, however,
will not be deregistered at this time. Management believes that it may be
economically feasible to finish the update at some point in the future.
</PAGE>
<PAGE>
ITEM 2. PROPERTIES
------ ----------
The Company has no material physical properties.
ITEM 3. LEGAL PROCEEDINGS
------ -----------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------ ---------------------------------------------------
No matters were submitted to the security holders during the
fourth quarter of the fiscal year ended December 31, 1998.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
------ -----------------------------------------------------
STOCKHOLDER MATTERS
-------------------
There is no established public trading market for the Company's
common stock and no dividends have been declared or paid. All of the
Company's common stock is owned by a sole shareholder.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
------ -----------------------
<CAPTION>
Year Ended December 31,
----------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Revenue $ 4,565 $ 4,533 $ 9,653 $ 11,791 $ 13,230
Net income(loss) (95,023) (102,682) (25,191) (65,830) (74,658)
Net income(loss) per
share of common stock (1) (1) (1) (1) (1)
Balance Sheet Data:
Total assets 63,258 156,172 258,749 329,033 555,769
Shareholder's
equity 61,043 156,066 258,749 283,939 549,769
(1) Not presented, as all shares of common stock are held by a sole
shareholder.
</TABLE>
</PAGE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
------ -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
1. General
-------
As more fully described below, the Company or certain established
trusts have issued nine series of registered CMO's aggregating $1,508,989,338
in initial issuance amount. As of December 31, 1998, six series of CMO's
remain outstanding. The following list consists of only those outstanding
series shown with the initial issuance amounts.
Initial
Trust Series Amount Collateral
----- ------ ------------ ---------------------------------
n/a 1991-1 $350,000,000 GNMA Certificates
n/a 1991-2 $150,000,000 GNMA Certificates
n/a 1993-1 $ 66,040,000 GNMA Certificates and FNMA
Certificates
I 1993-2 $117,350,000 FNMA Certificates and FHLMC
securities; Private Mortgage-Backed
securities; cash, other mortgage-
backed securities or certain United
States Treasury securities
IV 1993-5 $ 20,249,338 FNMA Stripped Mortgage-Backed
Security ("FNMA SMBS") held in the
form of a FNMA Guaranteed MBS
Pass-Through Certificate and
included in FNMA SMBS Trust
000240-CL
IV 1993-6 $ 50,350,000 FNMA and FHLMC securities; certain
CMO's issued by Trust IV, Series
1993-5; cash, other mortgage-backed
securities or certain United States
Treasury securities
To date, the Company has issued four CMO offerings totaling $966,040,000
("the FAIC Bonds"). The FAIC Bonds are a direct obligation of the Company
and have been structured to be payable from the principal of and interest
on the collateral pledged to the Trustee for the benefit of the Bondholders.
In addition, the Company established four trusts which issued five CMO offer-
ings totaling $542,949,338 (the "FAIT Bonds"). The FAIT Bonds are a direct
obligation of each related trust which have been structured to be payable
from the principal of and interest on the collateral pledged to the Indenture
Trustee for the benefit of the Bondholders. The FAIC Bonds and the FAIT Bonds
constitute Collateralized Mortgage Obligations ("CMO's) as defined b Finan-
cial Accounting Standards Board Technical Bulletin 85-2 ("TB 85-2"). In gen-
eral, TB 85-2 provides that CMO's are presumed to be borrowing transactions
and should be recorded as liabilities in the financial statements of the
issuer. However, a CMO is not accounted for as a borrowing transaction if,
(a) all but a nominal portion of the future economic benefits inherent in the
associated collateral has been passed to the Bondholders and (b) no affiliate
of the issuer can be required to make any future payments with respect to the
obligation. The FAIC Bonds and the FAIT Bonds meet the exceptions set forth
above and therefore, the borrowings and the related collateral were eliminated
from the financial statements, and all other costs associated with the of-
fering transactions were charged to expense during the issuance period.
2. The Year 2000 Issue
-------------------
With the year 2000 approaching, potential computer failures and errors
may occur due to problems with the computerized recognition of date codes.
The Year 2000 ("Y2K") issue addresses potential problems that may be encoun-
tered with date-related transactions on systems that have historically recog-
nized years using two digits versus four digits. For example, these systems
may recognize "00" as the year 1900 instead of 2000. This could potentially
affect computerized operations that rely on date calculations or are date
sensitive.
</PAGE>
<PAGE>
All operations of the Company are essentially driven by the issuance of
CMO's. In order to assess and determine potential Y2K issues within the oper-
ations, the Company has separated operations into three sections, the regis-
tration of CMO's, the issuance of CMO's, and the administrative operations.
The preparation, filing, and follow-up of the registration and issuance
processes are typically out-sourced to third-party service providers that
specialize in these services. The Company is requesting confirmation from
its third-party service providers that their systems are Y2K compliant. The
Company has received assurance of Y2K compliance from some of its third-party
service providers. In addition, the Company is still continuing its efforts
to receive assurance from its other third-party service providers.
The Company, in conjunction with its facilities provider, The Chotin
Group Corporation ("TCG"), a related party, has assessed the third area of
the Company's operations, administrative systems. TCG provides the Company
with office facilities and administrative functions. TCG has assessed its
internal systems and has developed a Y2K Compliance Plan. Currently, TCG is
in the process of implementing the plan, which involves updating and upgrading
all of TCG's internal systems that were determined to not be Y2K compliant.
The Company will closely monitor TCG's progress.
Due to the fact that all operational systems are hired out, the Company
does not expect to incur any direct costs for Y2K compliance or remediation
that would materially affect its financial condition. The potential risk to
the Company, however, would be a delay in its operations of registering CMO's
and issuing CMO's. Delays may be caused by the Company's reliance on third-
party service providers who handles out-sourced operations and who are not
Y2K compliant. To resolve this issue, the Company will consider out-sourcing
operations to other third-party service providers who confirm their Y2K
compliance.
If the necessary updates to TCG's systems are not made on a timely
basis, or if third-party service providers are not Y2K ready, Y2K problems
could have a material adverse effect on the Company's operations. Without
a reasonably complete upgrade and testing of systems that may be vulnerable
to problems, the Company does not have a reasonable basis to conclude that
the Year 2000 compliance issue will not likely have an operational impact
on the Company. In addition, without a reasonable conclusive basis, reported
financial information will not necessarily be indicative of future operating
results or future financial condition.
3. Liquidity and Capital Resources
-------------------------------
Over the next 12 months, the Company expects to fund ongoing overhead
from working capital reserves and any potential updates to the Registration
Statement from working capital reserves and borrowings from its sole share-
holder. As of December 31, 1998, $500,000 was available under a line of
credit provided by the Company's sole shareholder.
4. Results of Operations
---------------------
The Company does not have any significant assets other than cash held
for operations. Major operating activity is initiated from the issuance of
CMO's or the preparation in registering CMO's to be issued. Costs incurred
with registering CMO's are capitalized until such time the CMO's are issued
in an offering or evaluated for impairment.
Net income may fluctuate from period to period based on the use the
Company's registered and unissued CMO's. The Company generally charges the
issuer of a series of CMO's a flat fee and a proportionate share of deferred
costs associated with its registration statement.
Typically, periods reporting net income are the result of issuance fees
earned by the Company for the use of its shelf registration. Conversely, in
periods reflecting net losses, no issuance fees were earned and the loss was
the result of fixed general and administrative expenses and impairments, if
any.
</PAGE>
<PAGE>
An evaluation of long-lived assets at December 31, 1998 and December 31,
1997 resulted in an impairment of the Company's deferred offering costs. As
described in Item 1, the Company charged the remaining deferred offering costs
of $65,271 to operations in 1998. Deferred offering costs of $72,769 in 1997
were charged to operations because the costs were determined to be in excess
of accepted market pass-through costs.
The Company reported a net loss for the year ended December 31, 1998 of
$95,023 as compared to a net loss of $102,682 for the year ended December 31,
1997 and net loss of $25,191 for the year ended December 31, 1996. The Comp-
any did not issue any bonds during these three reporting periods. In 1998,
the net loss reported included an operating loss of $29,752 and an asset im-
pairment charge of $65,271. In 1997, the net loss reported included an oper-
ating loss of $29,913 and an asset impairment charge of $72,769.
5. Forward Looking Statements
--------------------------
The statements contained in this Item 7 and Item 7A that are not
historical facts, including, but not limited to, statements that can be
identified by the use of forward-looking terminology such as "may," "will,"
"expect," "anticipate," "estimate" or "continue" or the negative thereof
or other variations thereon or comparable terminology, are forward-looking
statements within the meaning of the Private Securities Litigation Reform
Act of 1995, and involve a number of risks and uncertainties. The actual
results of the future events described in such forward-looking statements
could differ materially from those stated in such forward-looking statements.
Among the factors that could cause actual results to differ materially are:
the Y2K preparedness of the Company's third-party service providers, the
market for mortgage-backed securities, competition, government regulation
and possible future litigation.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
------- ----------------------------------------------------------
CMO's that are issued either by the Company or a trust formed by the
Company constitute debt obligations of the Company or the applicable trust
and do not represent an ownership interest in the Company or such trust.
As described in Item 7, assets or Collateral securing payments to Bondholders
are not treated as assets of the Company.
Disclosures required in this Item 7A are intended to clarify a regis-
trant's exposures to market risk associated with activities in derivative
financial instruments, other financial instruments, and derivative commodity
instruments. The purpose of this section is to disclose the material effects
on earnings, fair values, and cash flows that are inherent to potential mar-
ket risk exposure. Potential market risk associated with CMO's issued under
the Company's registration statement will not have a material effect on the
Company's earnings or cash flow since the CMO's do not represent an interest
in the Company. In addition, the Company has no public common equity; all
common stock in the Company is held by one shareholder. Therefore, material
effects of potential market risk exposure on CMO's issued from the Company
will not have any significant impact on the Company.
</PAGE>
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
------ -------------------------------------------
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholder
Fund America Investors Corporation
Englewood, Colorado
We have audited the accompanying balance sheets of Fund America Investors
Corporation as of December 31, 1998 and 1997, and the related statements of
operations, shareholder's equity, and cash flows for each of the three years
in the period ended December 31, 1998. 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 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 signifi-
cant 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, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1998 and
1997, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
March 15, 1999
</PAGE>
<PAGE>
<TABLE>
FUND AMERICA INVESTORS CORPORATION
Balance Sheets
<CAPTION>
December 31,
-----------------------
1998 1997
-------- --------
<S> <C> <C>
Assets
Cash and cash equivalents (Note 2) $ 63,258 $117,269
Deferred offering costs (Note 2) - 38,903
-------- --------
Total assets $ 63,258 $156,172
======== ========
Liabilities - Accounts payable $ 2,215 $ 106
-------- --------
Shareholder's equity
Common stock, par value $.01 per share;
10,000 shares authorized; 1,000 shares
issued and outstanding 10 10
Additional paid-in capital 369,990 369,990
Accumulated deficit (308,957) (213,934)
-------- --------
Shareholder's equity - net 61,043 156,066
-------- --------
Total liabilities and
shareholder's equity $ 63,258 $156,172
======== ========
See notes to financial statements
</TABLE>
</PAGE>
<PAGE>
<TABLE>
FUND AMERICA INVESTORS CORPORATION
Statements of Operations
<CAPTION>
Year Ended December 31,
---------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Revenue
Interest income $ 4,565 $ 4,533 $ 6,053
Miscellaneous Income - - 3,600
-------- -------- --------
Total revenue 4,565 4,533 9,653
-------- -------- --------
Expenses
General and administrative 10,317 10,446 10,844
Management fees (Note 5) 24,000 24,000 24,000
Impairment of long-lived
assets (Note 2) 65,271 72,769 -
-------- -------- --------
Total expenses 99,588 107,215 34,844
-------- -------- --------
Net loss $(95,023) $(102,682) $(25,191)
======== ========= ========
See notes to financial statements
</TABLE>
</PAGE>
<PAGE>
<TABLE>
FUND AMERICA INVESTORS CORPORATION
Statements of Shareholder's Equity
Years ended December 31, 1998, 1997 and 1996
<CAPTION>
Common Stock
------------------- Additional
Number of Par Paid-in Accumulated Shareholder's
Shares Value Capital Deficit Equity-Net
--------- ------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at
January 1, 1996 1,000 $ 10 $ 369,990 $ (86,061) $ 283,939
Net loss - - - (25,191) (25,191)
------- ------ --------- --------- ---------
Balance at
December 31, 1996 1,000 10 369,990 (111,252) 258,748
Net loss - - - (102,682) (102,682)
------- ------ --------- --------- ---------
Balance at
December 31, 1997 1,000 10 369,990 (213,934) 156,066
Net loss - - - (95,023) (95,023)
------- ------ --------- --------- ---------
Balance at
December 31, 1998 1,000 $ 10 $ 369,990 $(308,957) $ 61,043
======= ====== ========= ========= =========
See notes to financial statements
</TABLE>
</PAGE>
<PAGE>
<TABLE>
FUND AMERICA INVESTORS CORPORATION
Statements of Cash Flows
<CAPTION>
Year Ended December 31,
-----------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net cash flows from operating
activities:
Net loss $ (95,023) $(102,682) $ (25,191)
Adjustments:
Impairment of deferred
offering costs 65,271 72,769 -
Changes in asset and liabilities:
Accounts payable 2,109 106 (40,094)
--------- --------- ---------
Net cash used in operating
activities (27,643) (29,807) (65,285)
Cash flows used in investing
activities-
Deferred offering costs (26,368) - -
--------- --------- ---------
Net decrease in cash
and cash equivalents (54,011) (29,807) (65,825)
Cash and cash equivalents
at beginning of year 117,269 147,076 212,361
--------- --------- ---------
Cash and cash equivalents
at end of year $ 63,258 $ 117,269 $ 147,076
========= ========= =========
See notes to financial statements
</TABLE>
</PAGE>
<PAGE>
FUND AMERICA INVESTORS CORPORATION
Notes to Financial Statements
Note 1. The Company
Fund America Investors Corporation (the "Company") was incorporated
in the State of Delaware on October 19, 1987 as a limited purpose finance
corporation. The Company was established to engage in activities relating
to mortgage loans or mortgage loan certificates including other securities,
which are backed by mortgage loans (the "Collateral"). The Collateral is
issued and/or guaranteed by agencies which include Government National
Mortgage Association securities ("GNMA Certificates"), Federal National
Mortgage Association securities ("FNMA Certificates") and Federal Home Loan
Mortgage Corporation securities ("FHLMC Certificates") collectively referred
to as ("Agency Certificates") or other entities ("Private Mortgage-Backed
Securities"). Among the authorized business activities, the main focus is
the issuance of bonds in one or more series of collateralized mortgage
obligations ("CMO's") which are secured by the Collateral. To issue these
bonds, the Company may acquire, hold, sell or pledge the Collateral, but
typically these activities are transacted by beneficially owned trusts
created by the Company.
The Company will not, either directly or indirectly through a benefici-
ally owned trust, engage in any business or investment activity other than
(1) issuing and selling bonds; (2) investing cash balances on an interim
basis in high quality short-term securities; (3) purchasing, owning, holding,
pledging or selling the Collateral or other mortgage-related assets; and (4)
engaging in other activities which are necessary or convenient to accomplish
the foregoing and are incidental thereto.
Note 2. Summary of Significant Accounting Policies
In general, CMO's are presumed to be borrowing transactions and are to
be recorded as liabilities in the financial statements of the issuer. How-
ever, a CMO is not accounted for as a borrowing transaction if (a) all but
a nominal portion of the future economic benefits inherent in the associated
collateral has been passed to the Bondholders and (b) no affiliate of the
issuer can be required to make any future payments with respect to the oblig-
ation. The Company meets these conditions and therefore, the borrowings and
the related collateral were eliminated from the financial statements, and all
other costs associated with the offering transaction were charged to expense
during the reporting period.
Costs of registering securities are deferred. As the Bonds are issued
from the registered securities, costs are charged to operations. The charge
is based on the ratio of bonds to securities registered but previously
unissued.
Fees from the bond transactions are recognized as revenue when the
transactions close. All expenses of the transaction, including a portion
of deferred offering costs, are charged to operations.
For purposes of reporting cash flows, cash and cash equivalents include
demand deposit accounts.
Net income (loss) per share is not presented, as all shares of common
stock are held by a sole shareholder.
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 at
the date of the financial statements, and the reported amount of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
</PAGE>
<PAGE>
Note 2. Continued
SFAS No. 107 "Disclosure About Fair Value of Financial Instruments,"
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet. The Company's financial
instruments include: cash and cash equivalents, and accounts payable. The
carrying amount of these assets and liabilities approximates their fair value.
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed Of" requires companies to evaluate long-
lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. If
a long-lived asset is identified as impaired, the value of the asset must
be reduced to its fair value. The Company's deferred offering costs are
considered long-lived assets under this pronouncement. An evaluation of
the Company's deferred offering costs was performed to determine the fair
value as of December 31, 1998. The fair value of the Company's deferred
offering cost was determined to be zero, as discussed below.
During 1998, the Company proceeded with its plans to update the
registration statement and paid for additional deferred offering costs in]
the amount of $26,368 to file an amendment with the SEC. After taking addi-
tional estimated costs of $50,000 to $100,000 into account in order to address
the SEC comments, management has determined that it is not economically feas-
ible to follow through on updating the Registration Statement. Therefore, in
accordance with SFAS No. 121, the Company is charging the remaining deferred
offering costs including the additional costs incurred in 1998, a total of
$65,271, to operations at December 31, 1998. For the year ended December 31,
1997, the Company charged $72,769 to operations as an impairment after evalu-
ating deferred offering costs.
SFAS No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities", requires certain accounting
and reporting for securitizations of mortgage loans, mortgage backed secur-
ities and other mortgage collateral. There was no effect on the financial
position or results of operations of the Company as a result of SFAS No. 125.
The Company does not expect SFAS No. 125 to change the accounting of issuances
for future securizations, to the extent such issuances are structured similar-
ly to past transactions.
Note 3. Income Taxes
Under the S Corporation guidelines of the Internal Revenue Code as
amended, the Company has elected to be treated substantially as a partnership
for income tax purposes. As a result, the sole shareholder reports any tax-
able income or loss of the Company on his individual tax return. Accordingly,
no provision for federal income taxes has been recorded in the financial
statements.
Note 4. Line Of Credit
The Company has a $500,000 revolving line of credit with its sole
shareholder. The credit line is unsecured, bears interest at 2% above the
base rate used for lending established by a bank (7.75% at December 31, 1998),
is payable on demand and is subordinate and junior to the Bonds. As of
December 31, 1998, $500,000 was available under the line of credit.
Note 5. Related Party Transactions
The Company has engaged in various related party transactions as
discussed below. Accordingly, the accompanying financial statements are
not necessarily indicative of the financial position that would exist or
the results of operations that would have occurred if the transactions had
been with unaffiliated entities.
</PAGE>
<PAGE>
Note 5. Continued
The sole shareholder of the Company is also President and a Director
of The Chotin Group Corporation and Fund America Management Corporation
("FAMC"). In April 1989, the Company entered into a management agreement
with The Chotin Group Corporation (the "Facilities Manager") through the
period ended December 31, 1998. This agreement has been subsequently renewed
and modified by the parties. Under the terms of the new agreement, the Fac-
ilities Manager is required to provide facilities use and other services
necessary for the Company to manage its business affairs. The management
fees paid as a result of this arrangement amounted to $24,000 for each of
the three years in the period ended December 31, 1998.
As of December 31, 1998, services under three remaining management
agreements continue to be administered by FAMC for the Company. The terms
of each management agreement provide for the performance of certain adminis-
trative functions under separate bond indentures related to each of these
three remaining CMO issuances. All annual fees for these services performed
by FAMC are paid by each series' Trustee directly to FAMC.
Note 6. CMO Information
At December 31, 1998 and 1997, the outstanding principal balance of the
Bonds were as follows:
Trust Series 1998 1997
----- ------------- ------------ ------------
N/A Series 91-1 $ 26,992,447 $ 40,214,936
N/A Series 91-2 7,777,836 11,505,594
N/A Series 93-1 17,135,253 26,365,338
Trust I Series 93-2 56,499,262 70,335,977
Trust IV Series 93-5 12,360,073 15,039,373
Trust IV Series 93-6 23,939,323 31,228,433
------------ ------------
Totals $144,704,194 $194,689,651
============ ============
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
------ -----------------------------------------------------------
AND FINANCIAL DISCLOSURE
------------------------
None.
</PAGE>
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------- --------------------------------------------------
Name Position Age
---------------- -------------------------------------- ---
Steven B. Chotin Director, Chairman, Chief Executive
Officer and President 51
Howard J. Glicksman Director, Vice President and Assistant
Secretary 53
M. Garrett Smith Director 37
Helen M. Dickens Director, Vice President, and Secretary 45
Kenneth S. Birnbaum Vice President 54
Annel Henderson Principal Accounting Officer, and Controller 37
Steven B. Chotin, 51, has been a Director and the Chairman, Chief
Executive Officer and President of the Company since its inception.
Mr. Chotin has been President of The Chotin Group Corporation, a
financial service firm, since July 1984. Mr. Chotin was a director of
American Southwest Financial Corporation and of American Southwest
Finance Co., Inc. from 1982 to 1994. Mr. Chotin may be deemed to be a
"promoter" within the meaning of Rule 405 under the Securities Act of
1933, as amended (the "Act").
Howard J. Glicksman, 53, has been a Director of the Company since
1995, Vice President since 1993 and Assistant Secretary since 1989.
Mr. Glicksman has been Vice President since 1993, Assistant Secretary
and General Counsel since 1989 of The Chotin Group Corporation. Prior
to joining The Chotin Group Corporation, Mr. Glicksman was a partner in
the Denver, Colorado law firm of Glicksman, Woodrow & Shaner. He
currently holds bar and association memberships in Colorado and New York.
M. Garrett Smith, 37, is currently Executive Vice President and
Chief Financial Officer of Pioneer Natural Resources Company, a
Dallas-based company. Mr. Smith has been associated with Pioneer's
top financial group for eight years, most recently serving as Senior
Vice President - Corporate Acquisitions. Previously Mr. Smith was a
partner with BTC Partners, a financial consultant to MESA, Inc.
Helen M. Dickens, 45, has been a Director of the Company since
1995, Vice President and Secretary of the Company since 1989. Ms.
Dickens is also Vice President and Chief Operations Officer of The
Chotin Group Corporation, positions she has held since 1989. Prior to
joining The Chotin Group Corporation, Ms. Dickens served as Assistant
Corporate Secretary and Assistant to the Chairman of the Board and
President of Uniwest Financial Corp., a non-diversified savings and
loan holding company.
Kenneth S. Birnbaum, 54, has been Vice President of the Company since
1993. Mr. Birnbaum is Vice President of The Chotin Group Corporation,
a position he has held since 1990. He is also the Manager of The Chotin
Group Corporation's Washington, D.C., office. Prior to joining The
Chotin Group Corporation, Mr. Birnbaum was General Counsel of Bracy
Williams & Company, a government affairs firm specializing in advising
corporations on federal, financial, energy and transportation-related
legislative and administrative matters. He is currently a member of
the bar of the District of Columbia.
Annel Henderson, 37, has been the Controller of the Company since 1992
and the Principal Accounting Officer since 1995. Mrs. Henderson has been
the Controller of The Chotin Group Corporation since 1992. Prior to 1992,
she was Accounting Manager of Community Holdings Corporation.
Directors and Executive Officers are elected annually for a one-year
term.
</PAGE>
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
------- ----------------------
As of December 31, 1998, no executive officer had received any compensa-
tion exceeding $100,000.
The Company has not paid any compensation pursuant to plans or any other
compensation arrangement. The Company pays its outside director a monthly fee
of $150.00. No other officers or directors receive any compensation for their
services.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------- --------------------------------------------------------------
Amount and
Nature Of
Title Name and Address Beneficial Percent of
of Class of Beneficail Owner Ownership(1) Class
-------- ------------------------------ ------------ ----------
Common Steven B. Chotin 1,000 100%
6400 S. Fiddler's Green Circle
Suite 1200
Englewood, CO 80111
(1) Amount of such shares with respect to which persons indicated have the
right to acquire beneficial ownership as specified in Rule 13d-3(d)(1)
under the Securities Exchange Act of 1934: Zero.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
------- ----------------------------------------------
The information relating to this Item is incorporated herein by refer-
ence to Item 8, "Financial Statements and Supplementary Data" under Note 5
"Related Party Transactions."
</PAGE>
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORT ON FORM 8-K
------- -----------------------------------------------------------------
( a ) (1) Financial Statements
- Independent Auditors' Report
- Balance Sheets at December 31, 1998 and 1997
- Statements of Operations for the Years Ended December
31, 1998, 1997 and 1996
- Statements of Shareholder's Equity for the Years Ended
December 31, 1998, 1997 and 1996
- Statements of Cash Flows for the Years Ended December
31, 1998, 1997 and 1996
- Notes to Financial Statements
( a ) (2) Financial Statement Schedules
The financial statement schedules have been omitted because
they are inapplicable.
( b ) Reports on Form 8-K
None.
( c ) Exhibits
Exhibit 27. Financial Data Schedule
</PAGE>
<PAGE>
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.
FUND AMERICA INVESTORS CORPORATION
(Registrant)
Date: March 30, 1999 By: /s/ Helen M. Dickens
-------------- ---------------------
Helen M. Dickens
Vice 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 on the date above.
/s/ Steven B. Chotin Director, Chairman, March 30, 1999
Steven B. Chotin Chief Executive
Officer and President
(Principal Executive Officer)
/s/ Helen M. Dickens Director, Vice President and March 30, 1999
Helen M. Dickens Treasurer (Principal
Financial Officer)
/s/ Howard J. Glicksman Director, Vice President March 30, 1999
Howard J. Glicksman And Assistant Secretary
/s/ Garrett Smith Director March 30, 1999
Garrett Smith
/s/ Kenneth S. Birnbaum Vice President March 30, 1999
Kenneth S. Birnbaum
/s/ Annel Henderson Principal Accounting March 30, 1999
Annel Henderson Officer
</PAGE>
<PAGE>
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.
Since the Company has a sole shareholder, the Company has not sent and
will not send an annual report or proxy material to its shareholder.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 63258
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 63258
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 63258
<CURRENT-LIABILITIES> 2215
<BONDS> 0
0
0
<COMMON> 10
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 63258
<SALES> 0
<TOTAL-REVENUES> 4565
<CGS> 0
<TOTAL-COSTS> 99588
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (95023)
<INCOME-TAX> 0
<INCOME-CONTINUING> (95023)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (95023)
<EPS-PRIMARY> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1> Not presented since all shares of common stock are held by a sole
shareholder.
</FN>
</TABLE>
