UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,
1997
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 Nos.: 33-73748
FUND AMERICA INVESTORS CORPORATION II
(Exact name of registrant as specified in its charter)
Delaware 84-1218906
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification number)
6400 S. Fiddler's Green Circle, Suite 1200B, Englewood, Colorado 80111
(Address of principal executive offices)
Registrant's telephone number including area code: (303) 290-6025
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 issuer's classes
of common stock as of November 14, 1997 -- 349,000 shares
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FUND AMERICA INVESTORS CORPORATION II
FORM 10-Q FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1997
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements 3
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults upon Senior Securities 9
Item 4. Submission of Matters to a Vote
of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports 9
SIGNATURES 10
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FUND AMERICA INVESTORS CORPORATION II
BALANCE SHEETS
(Unaudited)
<CAPTION>
September 30, December 31,
1997 1996
____________ ____________
<S> <C> <C>
Assets
Cash $292,937 $190,574
Deferred offering costs 200,433 251,124
Organizational costs, net 106 583
Prepaid expenses - 163
________ ________
Total assets $493,476 $442,444
======== ========
Liabilities - accounts payable $ 10 $ -
________ ________
Shareholder's equity
Common stock, par value $.01 per share;
10,000 shares authorized; 349,000
shares issued and outstanding 3,490 3,490
Retained earnings 489,976 438,954
________ ________
Total shareholder's equity 493,466 442,444
________ ________
Total liabilities and
shareholder's equity $493,476 $442,444
======== ========
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FUND AMERICA INVESTORS CORPORATION II
Statements of Operations
(Unaudited)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
__________________ _________________
1997 1996 1997 1996
________ _______ ________ ________
<S> <C> <C> <C> <C>
Revenue
Issuance fee income $125,995 $ - $125,995 $193,335
Interest income 1,490 2,137 4,629 4,121
________ ______ ________ ________
Total revenue 127,485 2,137 130,624 197,456
________ ______ ________ ________
Expenses
Deferred offering costs 50,995 - 50,995 119,900
General and administrative 1,543 459 10,130 9,917
Amortization of organization
costs 159 159 477 477
Management fees 6,000 6,000 18,000 18,000
_______ _______ ________ _______
Total expenses 58,697 6,618 79,602 148,294
_______ ________ _______ _______
Net income/(loss) $68,788 $(4,481) $51,022 $49,162
======= ======= ======= =======
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<TABLE>
FUND AMERICA INVESTORS CORPORATION II
Statement of Cash Flows
(Unaudited)
Nine months ended
September 30,
_____________________________
1997 1996
________ ________
<S> <C> <C>
Net cash flow from
operating activities:
Net income $ 51,022 $ 49,162
Adjustments to reconcile net
income to net cash flow
from operating activities:
Amortization of organizational
costs 477 477
Deferred offering costs 50,995 119,900
Changes in operating assets
and liabilities:
Prepaid expenses 163 -
Accounts payable 10 56
_______ _______
Net cash flow provided by
operating activities 102,667 169,595
_______ _______
Net cash provided by/(used in)
investing activities:
Reimbursements of deferred
offering costs - 41,866
Increase in deferred
offering costs ( 303) ( 13,360)
_______ _______
Net cash flow provided by/
(used in) investing activities ( 303) 28,506
_______ _______
Net increase in cash 102,364 198,101
Cash at beginning of period 190,574 40,450
________ ________
Cash at end of period $292,938 $238,551
======== ========
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FUND AMERICA INVESTORS CORPORATION II
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Nine months ended September 30, 1997 and 1996
1. Basis of Presentation
Organization
Fund America Investors Corporation II (the "Company") was incorporated in
the State of Delaware on December 14, 1992 as a limited purpose finance
corporation. The Company was established to engage in the issuance and
administration of Collateralized Mortgage Obligations (the "Bonds") and
Asset-Backed Certificates (the "Certificates", and together with the
Bonds, the "Securities"). The Securities are issuable in one or more
series, from time to time, by the Company in accordance with the
provisions in the prospectus and series-related prospectus supplement of
the Company's latest effective registration statement.
The Securities of each series can be issued by the Company, but typically
the Company forms a separate trust to act as the issuer solely for the
purpose of issuing one series. Series of Securities which include Bonds
will be issued pursuant to an indenture and will represent indebtedness
of the trust or issuer. Series of Securities which include Certificates
will represent beneficial ownership in the related trust or issuer. The
sole source of payments to Bondholders or Certificateholders within
each series of Securities are produced from the related trust property.
The property or assets within each trust are comprised of
mortgage-related assets as defined in each of the series' related
prospectus supplements.
The Company may not, either directly or indirectly through a
beneficially owned trust, engage in any business or investment activity
other than (i) issuing and selling the Securities; (ii) purchasing,
owning, holding, pledging or selling the Collateral or other
mortgage-related assets; (iii) investing and maintaining cash balances on
an interim basis in high quality short-term securities; and (iv) engaging
in other activities which are necessary or convenient to accomplish the
foregoing and are incidental thereto.
Issuance of Securities
At the beginning of the third quarter ended September 30, 1997, the
Company has $533 million registered and unissued Securities remaining on
its Registration Statement No. 33-73748. During the third quarter, the
Company issued $122 of these Securities through Fund America Investors
Trust 1997-NMC1. This owner trust was established by the Company on
September 1, 1997, specifically for the purpose of issuing these
Securities.
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As described in the Prospectus Supplement dated September 17, 1997, the
Securities issued by Fund America Investors Trust 1997-NMC1 are
Collateralized Mortgage Obligations, Series 1997-NMC1 Bonds. The Bonds
represent non-recourse obligations of the trust. The trust property
consisting of a pool of adjustable rate mortgage loans has been pledged
to secure the Bonds.
The mortgage loans in Series 1997-NMC1 were originated or acquired by
National Mortgage Corporation ("NMC"), an affiliate of the Company. In
addition to NMC's participation as the seller of the mortgage loans in
this series, NMC is servicing the mortgage loans and is the holder,
through a wholly-owned subsidiary, of the residual interest that
represents all of the beneficial ownership interest in Fund America
Investors Trust 1997-NMC1.
The Company and National Mortgage Corporation are affiliated through
common control.
Activity on Registration Statements
At the end of the third quarter, $411 million registered and unissued
Securities remain on the Company's Registration Statement No. 33-73748.
The Company filed its fourth Registration Statement No. 333-33823 on
Form S-3 with the Securities and Exchange Commission. The filing,
submitted on August 15, 1997, registered $1 million in Securities to be
offered on a delayed or continuous basis.
As of September 30, 1997, Registration Statement No. 333-33823 was
subject to completion or amendment. At such time when the registration
statement is completed, the Company will file an amendment which
specifically states that this Registration Statement will become
effective in accordance with Section 8(a) of the Securities Act of 1933,
as amended (the "Act") or as determined by the Commission.
Subsequent to the third quarter ended September 30, 1997, Amendment
No. 1 to Form S-3, Registration Statement No.333-33823 was filed on
October 28, 1997. This amendment increased the amount of Securities
being registered by $500 million.
Registration Statement No. 333-33823 was declared effective by the
Commission on October 30, 1997, and pursuant to rule 429 of the Act, the
prospectus included therein is a combined prospectus relating also to
Registration Statement No. 33-73748.
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2. Unaudited Financial Statements
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the
financial position of the Company at September 30, 1997, and the results
of its operations and cash flows for the periods ended September 30,
1997 and 1996.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Company expects to fund its ongoing operations from its cash
balances, revenue derived from the issuance of Securities, and, if
necessary, with borrowings from its sole shareholder. As of September
30, 1997, $1,000,000 was available to be borrowed from the Company's
shareholder under a Line of Credit dated April 3, 1995. Any borrowings
will be subordinate and junior to any issued Securities.
Results of Operations
The Company does not have any significant assets other than cash held for
operations and capitalized deferred offering costs. Major operating
activity is initiated from the issuance of Securities or the preparation
in registering Securities to be issued. Costs incurred with registering
Securities are capitalized until such time the Securities are issued in
an offering.
Net income may fluctuate from period to period based on the use of the
Company's registered and unissued Securities. The Company generally
charges the issuer of a series of Securities 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 is the result of fixed general and administrative expenses.
For the three months ended September 30, 1997, the Company reported net
income of $68,788 compared to a net loss of $4,481 for the three months
ended September 30, 1996. The issuance fees that were earned during
third quarter in 1997 is the primary difference between the two reporting
periods.
For the nine months ended September 30, 1997, net income of $51,022 is
comparable to net income of $49,162 reported for the nine months ended
September 30, 1996. Both of these periods reflected issuance fees earned
from the issuance of one series of Securities.
PAGE 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27. Financial Data Schedule
(b) Form 8-K
- Filing dated September 18, 1997 attaching computational
materials for Fund America Investors Trust 1997-NMC1
Collateralized Mortgage Obligations, Series 1997-NMC1
and other exhibits.
- Filing dated September 24, 1997 attaching as an exhibit,
Form of Indenture and Form T-1 Statement of Eligibility.
- Filing dated September 29, 1997 attaching as an exhibit,
consent of Deloitte & Touche LLP (regarding financial
statements).
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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.
FUND AMERICA INVESTORS CORPORATION II
(Registrant)
Date: November 14, 1997 By: /s/ Helen M. Dickens
Helen M. Dickens
Vice President,Secretary/Treasurer
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> $292,937
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 292,937
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 493,476
<CURRENT-LIABILITIES> 10
<BONDS> 0
0
0
<COMMON> 3,490
<OTHER-SE> 489,976
<TOTAL-LIABILITY-AND-EQUITY> 493,476
<SALES> 0
<TOTAL-REVENUES> 130,624
<CGS> 0
<TOTAL-COSTS> 79,602
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 51,022
<INCOME-TAX> 0
<INCOME-CONTINUING> 51,022
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,022
<EPS-PRIMARY> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1>Not presented, as all shares of common stock are held
by a sole shareholder.
</FN>
</TABLE>
