UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 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 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 August 14, 1998 -- 349,000 shares
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FUND AMERICA INVESTORS CORPORATION II
FORM 10-Q FOR THE
SIX MONTHS ENDED JUNE 30, 1998
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 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 8
Item 2. Changes in Securities 8
Item 3. Defaults upon Senior Securities 8
Item 4. Submission of Matters to a Vote
of Security Holders 8
Item 5. Other Information 8
Item 6. Exhibits and Reports 8
SIGNATURES 9
Page 2
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<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FUND AMERICA INVESTORS CORPORATION II
BALANCE SHEETS
(Unaudited)
<CAPTION>
June 30, December 31,
1998 1997
--------- -----------
<S> <C> <C>
Assets
Cash $444,105 $110,311
Deferred offering costs 229,379 364,797
Prepaid expenses - 172
-------- --------
Total assets $673,484 $475,280
======== ========
Liabilities -
Accounts payable $ 171 $ 8,801
-------- --------
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 669,823 462,989
-------- --------
Total shareholder's equity 673,313 466,479
-------- --------
Total liabilities and
shareholder's equity $673,484 $475,280
======== ========
See notes to financial statements
Page 3
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<TABLE>
FUND AMERICA INVESTORS CORPORATION II
Statements of Operations
(Unaudited)
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------ ----------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenue
Issuance fee income $360,418 $ - $360,418 $ -
Interest income 1,924 1,544 3,092 3,139
-------- ------- -------- -------
Total revenue 362,342 1,544 363,510 3,139
-------- ------- -------- -------
Expenses
Deferred offering costs 135,418 - 135,418 -
General and administrative 690 654 9,258 8,587
Amortization of organization
costs - 159 - 318
Management fees 6,000 6,000 12,000 12,000
-------- ------- -------- -------
Total expenses 142,108 6,813 156,676 20,905
-------- ------- -------- -------
Net income/(loss) $220,234 $(5,269) $206,834 $(17,766)
======== ======= ======== =======
See notes to financial statements
Page 4
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<TABLE>
FUND AMERICA INVESTORS CORPORATION II
Statements of Cash Flows
(Unaudited)
<CAPTION>
Six months ended
June 30,
--------------------
1998 1997
--------------------
<S> <C> <C>
Net cash flow used in operating
activities:
Net income/(loss) $206,834 $(17,766)
Adjustments to reconcile net
loss to net cash flow from
operating activities:
Amortization deferred
offering costs 135,418 163
Amortization of
organizational costs - 318
Changes in operating assets and
liabilities:
Accounts payable (8,630) 2,010
Prepaid expenses 172 -
-------- --------
Net cash flow provided by/(used in)
operating activities 333,794 (15,275)
-------- --------
Net increase/(decrease) in cash 333,794 (15,275)
Cash at beginning of period 110,311 190,574
-------- --------
Cash at end of period $444,105 $175,299
======== ========
See notes to financial statements
Page 5
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FUND AMERICA INVESTORS CORPORATION II
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Six months ended June 30, 1998 and 1997
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 issued 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 directly by the Company, but
typically the Company forms a separate trust to act as the issuer solely
for the purpose of issuing a series of Securities. A series of
Securities that consist of Bonds will be issued pursuant to an indenture
and will represent indebtedness of the trust or issuer. A series of
Securities that consist of 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 is
produced from the related trust property. The trust property is
generally comprised of mortgage loans and/or mortgage-related assets as
described 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 to;
(1) issue and sell Bonds; (2) purchase, own, hold, pledge or sell
mortgage loans or other mortgage-related assets; (3) invest and maintain
cash balances on an interim basis in high quality short-term securities;
and (4) engage in other activities which are necessary or convenient to
accomplish the foregoing and are incidental thereto.
Issuance of Securities
During the second quarter ended June 30, 1998, the Company issued $348
million of Securities in three series from its combined Registration
Statement No. 333-33823. Each series of Securities was issued pursuant
to a separate prospectus supplement, listed below.
Page 6
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Prospectus Supplement Information:
Amount Type of
Date Issuer/Series of Offering Securities
04-28-98 Fund America Investors
Corporation II/Pass-Through
Certificates, Series 1998-A $ 60,373,853 Certificates
06-24-98 Fund America Investors
Trust 1998-NMC1/
Collateralized Mortgage
obligations,Series 1998-NMC1 $236,526,000 Bonds
06-28-98 Fund America Investors
Corporation II/Pass-Through
Certificates, Series 1998-B $ 50,703,106 Certificates
The Certificates in Series 1998-A and Series 1998-B represent the entire
beneficial ownership in trusts specifically formed for each series. Each
trust holds underlying securities which are the sole source of
distribution payments to the certificateholders. These Certificates do
not represent an interest in or obligation of the Issuer or the Company.
The Bonds in Series 1998-NMC1 represent non-recourse obligations of the
Issuer, Fund America Investors Trust 1998-NMC1 (the "Trust"), and do not
represent interests in or obligations of the Company. The assets that
were pledged to the Trust are the sole source of payments on the Bonds.
The pledged assets consist of adjustable rate, fully amortized mortgage
loans that are secured by residential properties.
The mortgage loans in Series 1998-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 these mortgage loans,
NMC is servicing the mortgage loans and is the holder of the residual
interest that represents all of the beneficial ownership interest in Fund
America Investors Trust 1998-NMC1.
With the issuance of these Securities, the remaining and unissued
Securities on the Company's Registration Statement No. 333-33823
decreased from $933 million at March 31, 1998 to $585 million at the end
of the second quarter, June 30, 1998.
2. Unaudited Financial Statements
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
reporting periods and in accordance with the instructions to Form 10-Q.
In complying to the guidelines, the accompanying financial statements do
not include all of the information and footnotes that are required for
complete annual reporting periods.
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the
financial position of the Company at June 30, 1998, and the results of
its operations and cash flows for the periods ended June 30, 1998 and
1997.
Page 7
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition and Liquidity
The Company's cash position increased by $333,794 from $110,311 at its
fiscal year-end, December 31, 1997, to $444,105 at the second
quarter-end, June 30, 1998. The increase was provided by operating
activities which primarily consisted of net income of $206,834 and a
return of $135,318 for capitalized offering costs that were reported in
prior periods. The Company expects to fund its ongoing operations from
its cash balances and any additional revenue generated from the issuance
of Securities.
In the event that additional capital resources may be required, the
Company maintains an open line of credit for $1,000,000 with its sole
shareholder. The line of credit was established on April 3, 1995, and
the borrowing provisions under the initial agreement have continued for
each subsequent year. As of June 30, 1998, the available balance
remained at $1,000,000. Any balance due will be subordinate and junior
to any issued Securities.
Results of Operations
The Company operates on a relatively fixed general and administrative
costs which have not substantially deviated from comparable periods in
prior years. The periodical fluctuations in net income are directly
related to activity from the issuance of Securities. Periods reporting
net income are the result of issuance fees earned by the Company, and in
periods reporting a net loss, typically, no issuance fees were earned.
For the three months ended June 30, 1998, the Company earned net
issuance fees of $225,000 which resulted in net income for the period of
$220,234. For the three months ended June 30, 1997, the Company did not
earn any issuance fees and reported a net loss of $5,269.
The six month period ended June 30, 1998 as compared to the six months
ended June 30, 1997 had similar results. The Company earned $225,000 in
issuance fees for 1998 and reported a net income of $206,834. For the
comparable six month period in 1997, no issuance fees were earned, and
the Company reported a net loss of $17,766.
Page 8
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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 -
Form 8-K filed on May 12, 1998 submitted the Underwriting
Agreement and the Pooling Agreement for Fund America Investor
Corporation II, Pass-Through Certificates, Series 1998-A.
Form 8-K filed on June 29, 1998 submitted the Consents of
Accountants for Fund America Investors Trust 1998-NMC1,
Collateralized Mortgage Obligations, Series 1998-NMC1.
Form 8-K filed on June 29, 1998 submitted the Form of Indenture,
the Opinion of Legality, the Opinion of Tax Matters and the T-1
Statement of Eligibility for Fund America Investors Trust
1998-NMC1, Collateralized Mortgage Obligations, Series 1998-NMC1.
SIGNATURES
Page 9
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: August 14, 1998 By: /s/ Helen M. Dickens
------------------------ -----------------------------
Helen M. Dickens
Vice President,
Secretary/Treasurer
(Duly authorized and
Principal Financial Officer<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 444105
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 444105
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 673484
<CURRENT-LIABILITIES> 171
<BONDS> 0
0
0
<COMMON> 3490
<OTHER-SE> 669823
<TOTAL-LIABILITY-AND-EQUITY> 673484
<SALES> 0
<TOTAL-REVENUES> 363510
<CGS> 0
<TOTAL-COSTS> 156676
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 206834
<INCOME-TAX> 0
<INCOME-CONTINUING> 206834
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 206834
<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>
