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, 2000
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 require-
ments 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 10, 2000 -- 349,000 shares
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FUND AMERICA INVESTORS CORPORATION II
FORM 10-Q FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2000
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 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
<TABLE>
FUND AMERICA INVESTORS CORPORATION II
BALANCE SHEETS
<CAPTION>
(Unadudited)
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 2,739 $ 15,513
Deferred offering costs 256,361 254,826
Prepaid expenses - 187
------------- ------------
Total assets $ 259,100 $ 270,526
============= ============
Liabilities - accounts payable $ - $ -
------------- ------------
Shareholder's equity
Common stock, par value $.01 per
share;10,000 shares authorized;
349,000 shares issued and
outstanding 3,490 3,490
Additional paid-in capital 445,510 445,510
Shareholder distributions (1,849,798) (1,779,798)
Retained earnings 1,659,898 1,601,324
------------- -----------
Total shareholder's equity 259,100 270,526
------------- -----------
Total liabilities and
shareholder's equity $ 259,100 $ 270,526
============= ===========
</TABLE>
See notes to financial statements
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<TABLE>
FUND AMERICA INVESTORS CORPORATION II
Statement of Operations
(Unaudited)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
---------------------- ---------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue
Issuance fee income $ - $ - $ 76,253 $ -
Call option income - 195,006 18,000 195,006
Interest income 34 1,536 701 5,853
---------- ---------- --------- ----------
Total revenue 34 196,542 94,954 200,859
---------- ---------- --------- ----------
Expenses
Deferred offering costs - - 6,358 -
General and administrative 2,255 1,324 12,023 11,036
Management fees 6,000 6,000 18,000 18,000
---------- ---------- --------- ----------
Total expenses (8,255) 7,324 36,381 29,036
---------- ---------- --------- ----------
Net income/(loss) $ (8,221) $ 189,218 $ 58,573 $ 171,823
========== ========== ========= ==========
</TABLE>
See notes to financial statements
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<TABLE>
FUND AMERICA INVESTORS CORPORATION II
Statement of Cash Flows
(Unaudited)
<CAPTION>
Nine months ended
September 30,
-----------------------
2000 1999
---------- ----------
<S> <C> <C>
Net cash flow from operating activities:
Net income $ 58,573 $ 171,823
Adjustments to reconcile net income to net
cash flow from operating activities:
Deferred offering costs 1,253 -
Changes in operating assets and liabilities:
Prepaid expenses 187 (1,821)
Accounts payable - (215)
---------- ----------
Net cash flow provided by
operating activities 60,013 169,787
Net cash flow used in investing activities:
Increase in deferred offering costs (2,788) (1,500)
Net cash flow used in financing activities:
Shareholder distributions (70,000) (50,000)
---------- ---------
Net increase in cash (12,774) (187,713)
Cash at beginning of period 15,513 226,446
---------- ---------
Cash at end of period $ 2,739 $ 44,733
========== =========
</TABLE>
See notes to financial statements
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FUND AMERICA INVESTORS CORPORATION II
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Nine months ended September 30, 2000 and 1999
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 descri-
bed 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 Securities; (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.
On January 1, 2000, the Company had a total of $564 million registered and
unissued Securities on its Registration Statement No. 333-33823. During the
first quarter ended March 31, 2000, the Company issued one series of Securities
for 3.2 million. This series, Fund America Investors Corporation II, Issuer
Trust 2000-1, was issued pursuant to a separate prospectus supplement filed on
January 21, 2000. No Securities were issued during the second and third
quarters of 2000. After the first quarter issuance, the balance of unissued
Securities on Registration Statement No. 333-33823 remains at $561 million as
of September 30, 2000. From inception to date, the Company has issued
nineteen series of Securities which aggregate $2.7 billion in original issued
principal. The Company does not have any further obligations in connection
with the issuance of these Securities. Under generally accepted accounting
principles, these issuances are considered to be a direct sale of the
collateral.
The Company's fifth Registration Statement on Form S-3 was filed on
September 30, 1998 with the Securities and Exchange Commission. The
purpose of this filing was to register an additional amount of Securities and to
merge the Company's Effective Registration Statement No. 333-33823, thereby
increasing the total amount of Securities that can be issued by the Company. As
of September 30, 2000, this Registration Statement was not effective and was
subject to completion or amendment. The Company intends to file one or more
further amendments to complete this Registration Statement and to bring it
effective.
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 a
complete annual reporting period.
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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, 2000, and the results of its operations
and cash flows for the periods ended September 30, 2000 and 1999.
3. New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133). SFAS No. 133
establishes accounting and reporting standards requiring that all derivative
instruments be recorded in the balance sheet as either an asset or liability
measured at fair value. SFAS No. 133 requires that changes in the derivative's
fair value be recognized currently in earnings unless specific hedge accounting
criteria are met. The accounting provisions for qualifying fair value and
cash flow hedges (such as interest rate swaps) allow unrealized gains and losses
recognized related to derivatives to be included in comprehensive income, to
the extent they are effective, and requires the Company to formally document,
designate, and assess the effectiveness of transactions that qualify for hedge
accounting. During 1999, the implementation of SFAS No. 133 was deferred
until January 1, 2001 by the issuance of SFAS No. 137 "Accounting for
Derivative Instruments and Hedging Activities-Deferral of the Effective Date
of FASB Statement No. 133." The Company has determined that SFAS No. 133
will not have an impact on its financial statements as the Company does not
transact in derivative financial instruments either explicitly or embedded
within existing contracts such as lease agreements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Company expects to fund ongoing operations from its cash balances,
revenues derived from the issuance of Securities, and if necessary, from loans
or capital contributions from its sole shareholder. The current cash position
will not adequately fund overhead costs over the next twelve months without
additional revenues generated during this period. Capital funding will be
provided by the sole shareholder to cover anticipated costs on a monthly basis
or until the Company generates sufficient revenue. The funding source for
additional capital costs relating to the registration of securities will be
determined when the funding is required and will depend on the cash position at
that time.
Results of Operations
The Company operates on relatively fixed general and administrative costs
which have not substantially changed from comparable periods in prior years.
Typically, periodical fluctuations in net income are directly related to acti-
vity from the issuance of Securities. Under normal circumstances, periods
reporting net income are the direct result of issuance fees earned by the Comp-
any, and in periods reporting a net loss, no issuance fees were earned.
For the three-months ended September 30, 2000, the Company reported a net
loss of $8,221, as compared to net income of $189,218 for the three-months
ended September 30, 1999. Net income for the three-months ended September
30, 1999 was the result of call option fees received in the amount of $195,006
when the bonds in Fund America Investors corporation II, Series 1993-F were
called by the servicer. Call option income is an unusual event and the Company
does not expect to receive call option fees during the normal course of busi-
ness. Other items of net income show a decrease in interest earned and a slight
increase in general and administrative expenses for the three-months ended
September 30, 2000 when compared to the three-months ended September 30, 1999.
The nine-month period ended September 30, 2000 reported net income of
$58,573 as compared to net income of $171,823 from the nine-months ended
September 30, 1999. The income reported for September 30, 2000 was the
result of net issuance fees earned of $69,894 and call option income of $18,000,
compared to September 30, 1999, where net income was generated by call
option income of $195,006. Other items of net income show a decrease of
$5,152 in interest income and a slight increase of $987 in general and
administrative expenses for the nine-months ended September 30, 2000 when
compared to the nine-months ended September 30, 1999. The decrease in
interest income for 2000 was the result of lower cash balances maintained
during the year.
Forward Looking Statements
The statements contained in this Item 2 that are not historical facts, includ-
ing, 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
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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 market for mortgage-backed securities, competi-
tion, government regulation and possible future litigation.
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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 - None
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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 10, 2000 By: /s/ Helen M. Dickens
--------------------------- -------------------------------
Helen M. Dickens
Vice President, Secretary/Treasurer
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