UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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, 2001, 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.: 33-73748
--------
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
----------------
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, 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, 2001: $0.00.
The number of shares outstanding of the Registrant's $0.01 par value common
stock, as of March 29, 2002 was 349,000 shares.
DOCUMENTS INCORPORATED BY REFERENCE
None.
PART I
ITEM 1. BUSINESS
- ------- --------
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 as described 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 a series. A series of Securities that include Bonds will be issued
pursuant to an indenture and will represent indebtedness of the trust or issuer.
A series of Securities that 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 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 Securities; (2) purchase, own, hold, pledge or sell collateral or
other mortgage-related assets; (3) invest and maintain cash balances on an
interim basis in high quality short-term investments; and (4) engage in other
activities which are necessary or convenient to accomplish the foregoing and are
incidental thereto.
On January 1, 2001, the Company had a total of $561 million registered and
unissued Securities on its Registration Statement No. 333-33823. During the
year ended December 31, 2001, no Securities were issued. From inception to date,
the Company has issued nineteen series of Securities which aggregate $2.4
billion in original issued principal. The Company does not have any further
obligations in connection with the issuance of these Securities. Under
accounting principles generally accepted in the United States of America, 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 December
31, 2001, 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.
ITEM 2. PROPERTIES The Company has no material physical
- ------ ---------- properties.
ITEM 3. LEGAL PROCEEDINGS None.
- ------ -----------------
Page 2
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, 2001.
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.
ITEM 6. SELECTED FINANCIAL DATA
- ------ -----------------------
Year Ended December 31,
----------------------------------------------------------
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
Income Statement Data:
Revenue $ 30,008 $ 94,956 $201,155 $370,890 $132,196
Net (loss)income $ (8,072) $ 51,682 $160,561 $196,084 $ 24,035
Net (loss)income
per share of
common stock (1) (1) (1) (1) (1)
Balance Sheet Data:
Total assets $261,636 $257,353 $270,526 $475,180 $475,280
Shareholder's
Equity $261,636 $257,208 $270,526 $474,965 $442,444
(1) Not presented, as all shares of common stock are held by a sole
shareholder.
Page 3
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- ------ -----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
1. General
As of December 31, 2001, the Company has issued nineteen series of
registered Pass-Through Securities aggregating $2,439,812,829 in initial amount
for all the issuances. Ten series of Bonds remain outstanding on December 31,
2001. The following list consists of the outstanding series shown with the
initial issuance amounts.
Series Amount Collateral
- ------ ------------ -------------------------------------------------
1993-A $262,435,000 Trust consisting primarily of adjustable rate one-
to four-family, first lien mortgage loans
1993-B $ 77,409,000 Trust consisting primarily of adjustable rate one-
to four-family, first lien mortgage loans
1993-C $319,000,000 Trust consisting primarily of Federal National
Mortgage Association and Federal Home Loan
Mortgage Corporation Securities; private
Mortgage backed securities including certain
Residual interest securities; principal compo-
nent of bonds issued by the Resolution Funding
Corporation
1993-J $150,069,158 Trust consisting primarily of adjustable rate one-
to four-family, first lien mortgage loans
1994-A $ 44,599,100 Trust consisting primarily of adjustable rate one-
to four-family, first lien mortgage loans
1997-NMC1 $121,765,000 Trust assets consisting primarily of adjustable
rate mortgage loans that are secured by first lien
mortgages on one- to four-family residential
property
1998-A $ 60,373,853 Trust consisting primarily of one Pooled Fannie Mae
Certificate, two Pooled Freddie Mac Certificates
and one Pooled Non-Agency Certificate
1998-B $ 50,703,106 Trust consisting primarily of three Pooled Fannie
Mae Certificates, one Pooled Ginnie Mae
Certificate, two Pooled Freddie Mac Certificates
and one Pooled Non-Agency Certificate
1998-NMC1 $236,526,000 Trust assets consisting primarily of adjustable
rate mortgage loans that are secured by first lien
mortgages on one- to four-family residential
properties
2000-1 $ 3,216,000 Trust consisting primarily of Federal National
Mortgage Association and Federal Home Loan Mortgage
Corporation Securities
Page 4
2. 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 has and will
continue to be provided by the sole shareholder to cover anticipated costs on a
monthly basis 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.
3. 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 as 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.
The Company reported net loss for the year ended December 31, 2001 of
$8,072 compared to net income of $51,682 for the year ended December 31, 2000
and net income of $160,561 for the year ended December 31, 1999. The Company
incurred a net loss for the year ended December 31, 2001 because no issuance
fees were earned and normal operating expenses exceeded the call option income
received on the sale of Fund America Investors Corporation II, Series 1993-E
call rights. The income reported for December 31, 2000 was the result of net
issuance fees earned of $69,895 and call option income of $18,000 received
when the call rights on Fund America Investors Corporation II, Series 1993-H
were sold. In 1999, the Company earned income of $195,006 from call option
fees received when Fund America Investors Corporation II, Series 1993-F
certificates were called by the servicer. Other variables affecting comp-
arable results of operations are typically the number of securitizations
completed and/or impairments of assets.
Results of Operations - Other Matters: Recently Issued Accounting
- ------------------------------------------------------------------
Pronouncements
- --------------
On June 29, 2001, Statement of Financial Accounting Standards ("SFAS")
No.141, "Business Combinations" ("SFAS No. 141") was approved by the Financial
Accounting Standards Board ("FASB"). SFAS No. 141 requires that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001. The Company implemented SFAS No. 141 on July 1, 2001. Adoption of
the Statement did not have a material impact on the Company's financial position
or results of operations.
On June 29, 2001, SFAS No. 142, "Goodwill and Other Intangible Assets"
("SFAS No. 142") was approved by the FASB. SFAS No. 142 changes the accounting
for goodwill and certain other indefinite life intangibles from an amortization
method to an impairment-only approach. Amortization of goodwill, including
goodwill recorded in past business combinations, and indefinite life
intangibles, will cease upon adoption of this statement. SFAS No. 142 was
adopted beginning January 1, 2002 without a material impact on the Company's
financial position or results of operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"). SFAS No. 144
supercedes current accounting guidance relating to impairment of long-lived
assets and provides a single accounting methodology for long-lived assets to be
disposed of, and also supercedes existing guidance with respect to reporting the
effects of the disposal of a business. SFAS No. 144 was adopted beginning
January 1, 2002, without a material impact on the Company's financial position
or results of operations.
Page 5
4. 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 market for mortgage-backed
securities, competition, government regulation and possible future litigation.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ------- ----------------------------------------------------------
Securities issued by the Company are either debt securities or securities
which evidence beneficial ownership interest in designated trusts established to
facilitate the transfer of trust asset payments to the Bondholders who hold such
debt securities or to the Certificateholders who hold such beneficial ownership
interests. Assets securing payments to Bondholders or Certificateholders are
pledged or sold to designated trusts and are not assets of the Company.
Additionally, Bonds and Certificates that are issued either by the Company or a
trust formed by the Company do not represent an ownership interest in or an
obligation of the Company.
Disclosures required in this Item 7A are intended to clarify a registrant'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 market risk exposure.
Potential market risk associated with Securities issued under the Company's
registration statement will not have a material effect on the Company's earnings
or cash flow since the Securities do not represent an interest in or an
obligation of the Company. In addition, the Company has no public common
equity; all common stock of the Company is held by one shareholder. Therefore,
material effects of potential market risk exposure on Securities issued from the
Company will not have any significant impact on the Company.
Page 6
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------ -------------------------------------------
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors and Shareholder
Fund America Investors Corporation II
Englewood, Colorado
We have audited the accompanying balance sheets of Fund America Investors
Corporation II as of December 31, 2001 and 2000, and the related statements of
operations, shareholder's equity, and cash flows for each of the three years in
the period ended December 31, 2001. 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 auditing standards generally
accepted in the United States of America. 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
significant 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 Fund America Investors Corporation II as of
December 31, 2001 and 2000, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2001 in conformity
with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
March 22, 2002
Page 7
FUND AMERICA INVESTORS CORPORATION II
Balance Sheets
December 31,
----------------------------
2001 2000
---------- ----------
Assets
Cash and cash equivalents $ 5,071 $ 797
Deferred offering costs, net 256,361 256,361
Prepaid expenses 204 195
---------- ----------
Total assets $ 261,636 $ 257,353
========== ==========
Liabilities - accounts payable $ - $ 145
---------- ----------
Commitments and Contingencies
Shareholder's equity
Common stock, par value $.01
per share; 1,000,000 shares
authorized; 349,000 shares
issued and outstanding 3,490 3,490
Additional paid-in capital 488,010 450,510
Shareholder distributions (1,874,798) (1,849,798)
Retained earnings 1,644,934 1,653,006
---------- ----------
Total shareholder's equity 261,636 257,208
---------- ----------
Total liabilities and
shareholder's equity $ 261,636 $ 257,353
========== ==========
See notes to financial statements
Page 8
FUND AMERICA INVESTORS CORPORATION II
Statements of Operations
Year Ended December 31,
------------------------------------------
2001 2000 1999
---------- ---------- ----------
Revenue
Other bond income $ 30,000 $ 18,000 $ 195,006
Issuance fees - 76,253 -
Interest 8 703 6,149
---------- ---------- ----------
Total revenue 30,008 94,956 201,155
---------- ---------- ----------
Expenses
Amortization of deferred
offering costs - 1,253 -
General and administrative 14,080 18,021 16,594
Management fees 24,000 24,000 24,000
---------- ---------- ----------
Total expenses 38,080 43,274 40,594
---------- ---------- ----------
Net (loss)income $ (8,072) $ 51,682 $ 160,561
========== ========== ==========
See notes to financial statements
Page 9
FUND AMERICA INVESTORS CORPORATION II
Statements of Shareholder's Equity
Years Ended December 31, 2001, 2000 and 1999
Common Stock Addi- Share-
---------------- tional holder
Number of Par Paid-in Distri- Retained
Shares Value Capital butions Earnings Totals
--------- ------ -------- ------------ ----------- --------
Balances at
January 1, 1999 349,000 $3,490 $445,510 $(1,414,798) $1,440,763 $474,965
Shareholder
distributions - - - (365,000) - (365,000)
Net income - - - - 160,561 160,561
-------- ------ -------- ----------- ---------- --------
Balances at
December 31,1999 349,000 3,490 445,510 (1,779,798) 1,601,324 270,526
Shareholder
distributions - - - (70,000) - (70,000)
Capital
contributions - - 5,000 - - 5,000
Net income - - - - 51,682 51,682
-------- ------ -------- ----------- ---------- --------
Balances at
December 31,2000 349,000 3,490 450,510 (1,849,798) 1,653,006 257,208
Shareholder
distributions - - - (25,000) - (25,000)
Capital
contribution - - 37,500 - - 37,500
Net loss - - - - (8,072) (8,072)
-------- ------ -------- ----------- ---------- --------
Balances at
December 31,2001 349,000 $3,490 $488,010 $(1,874,798) $1,644,934 $261,636
======== ====== ======== =========== ========== ========
See notes to financial statements
Page 10
FUND AMERICA INVESTORS CORPORATION II
Statements of Cash Flows
Year Ended December 31,
----------------------------------
2001 2000 1999
--------- ---------- ---------
Net cash flows from operating activities:
Net (loss)income $ (8,072) $ 51,682 $ 160,561
Adjustments to reconcile net (loss)income
to net cash (used in)provided by
operating activities:
Amortization of deferred offering costs - 1,253 -
Changes in operating assets and
liabilities:
Accounts payable (145) 145 (215)
Prepaid expenses (9) (8) (8)
--------- ---------- ---------
Net cash (used in) provided by
operating activities: (8,226) 53,072 160,338
Investing activities:
Additions to deferred offering costs - (2,788) (6,271)
Financing activities:
Capital contributions 37,500 5,000 -
Shareholder distributions (25,000) (70,000) (365,000)
--------- --------- ---------
Net cash provided by(used in)
financing activities: 12,500 (65,000) (365,000)
--------- --------- ---------
Net increase(decrease) in cash and
cash equivalents 4,274 (14,716) (210,933)
Cash and cash equivalents at
beginning of year 797 15,513 226,446
--------- --------- ---------
Cash and cash equivalents
at end of year $ 5,071 $ 797 $ 15,513
========= ========= =========
See notes to financial statements
Page 11
FUND AMERICA INVESTORS CORPORATION II
Notes to Financial Statements
For the Years Ended December 31, 2001, 2000 and 1999
Note 1. The Company
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-
acked 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 by the Company, but typically
the Company forms a separate trust to act as the issuer solely for the purpose
of issuing a series. A series of Securities that include Bonds will be issued
pursuant to an indenture and will represent indebtedness of the trust or issuer.
A series of Securities that 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 is 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 will 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) invest cash balances on an interim basis in high
quality short-term investments; (3) purchase, own, hold, pledge or sell
collateral or other mortgage-related assets; (4) engage in other activities
which are necessary or convenient to accomplish the foregoing and are incidental
thereto.
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 has and will
continue to be provided by the sole shareholder to cover anticipated costs on a
monthly basis 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.
Note 2. Summary of Significant Accounting Policies
In connection with the issuance of Securities, the Company generally will
enter into a purchase agreement with the seller of the mortgage assets or the
collateral. Simultaneously, the collateral is conveyed, by the Company, to the
trust who issues the Securities, pursuant to a pooling and servicing agreement.
Correspondingly, the purchase price for the Collateral payable to the seller is
netted out from the proceeds realized from the sale of the Securities.
Therefore, the Company's financial statements reflect the net result of the
issuance and not the gross amounts attributable to the purchase price of the
collateral and the sales proceeds from the issuance of the Securities.
Costs of registering securities are deferred. As the Securities are issued
from the registered securities, costs are charged to operations. The charge is
based on the ratio of bonds issued to securities registered but previously
unissued.
Fees from the Security issuance 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.
Page 12
Note 2. Summary of Significant Accounting Policies (continued)
Other bond income represents fees received upon the sale of call options on
CMO issuances. Such income is recognized at closing when call option rights are
transferred.
For purposes of reporting cash flows, cash and cash equivalents include
demand deposit accounts.
Net income 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 accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent 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.
Certain reclassifications have been made in the 2000 and 1999 financial
statements to conform to the classifications used in 2001. These
reclassifications had no effect on the Company's financial position or net
income.
Statement of Financial Accounting Standards ("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.
The Company evaluates 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. As of December 31, 2001 and 2000,
management determined that there was no impairment of the Company's long-lived
assets.
SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information," requires the disclosure of operating segments and the geographic
location of the Company. Management considers the Company's business to
presently comprise of a single operating segment, and all of the Company's
operations were concentrated in Englewood, Colorado.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended, establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts and for hedging activities. Under SFAS No. 133, certain
contracts that were not formerly considered derivatives may now meet the
definition of a derivative. The Company adopted SFAS No. 133 effective January
1, 2001. The adoption of SFAS No. 133 did not have a significant impact on the
financial position, results of operations, or cash flows of the Company.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
No. 101"). SAB No. 101 clarifies existing accounting principles related to
revenue recognition in financial statements. The Company adopted SAB No. 101
during the fourth quarter of 2000. The adoption of SAB No.101 did not affect
the Company's financial statements for the years ended December 31, 2001 or
2000.
Page 13
Recently Issued Accounting Standards
- ------------------------------------
SFAS No. 141, "Business Combinations" requires that the purchase
method of accounting be used for all business combinations initiated
after June 30, 2001. The Company implemented SFAS No. 141 on July 1,
2001. Adoption of the Statement did not have a material impact on the
Company's financial position or results of operations.
On June 29, 2001, SFAS No. 142, "Goodwill and Other Intangible Assets"
("SFAS No. 142") was approved by the FASB. SFAS No. 142 changes the
accounting for goodwill and certain other indefinite life intangibles from
an amortization method to an impairment-only approach. Amortization of
goodwill, including goodwill recorded in past business combinations, and
indefinite life intangibles, will cease upon adoption of this statement.
SFAS No. 142 was adopted beginning January 1, 2002 without a material
impact on the Company's financial position or results of operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"). SFAS No.
144 supercedes current accounting guidance relating to impairment of
long-lived assets and provides a single accounting methodology for long-
lived assets to be disposed of, and also supercedes existing guidance
with respect to reporting the effects of the disposal of a business.
SFAS No. 144 was adopted beginning January 1, 2002, without a material
impact on the Company's financial position or results of operations.
Note 3. Income Taxes
Under S Corporation guidelines of the Internal Revenue Code, the Company
has elected to be treated substantially as a partnership for income tax
purposes. As a result, the sole shareholder reports any taxable 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. Related Party Transactions
The Company has engaged in 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.
The sole shareholder of the Company is also the sole shareholder, Chief
Executive Officer and Director of The Chotin Group Corporation. On January 1,
1993, the Company entered into a Management Agreement with The Chotin Group
Corporation (the "Facilities Manager"). This agreement remains in force until
written termination of the agreement is presented by either party. As of
December 31, 2001, no such notice of termination has been given or received by
the Company. Under the terms of the agreement, the Facilities Manager is
required to provide facilities use and other services necessary for the Company
to manage its business affairs. The management fees paid during each of the
three years ended December 31, 2001 were $24,000.
Page 14
Note 5. CMO Information
At December 31, 2001 and 2000, the outstanding principal balance of the
issued Securities and the amount of publicly and privately issued securities
were as follows:
2001
- -------------------------------------------------------------------
Total Publicly Privately
Series Certificates Issued Issued
- ------ ------------- ------------ -----------
1993-A $ 42,451,771 $ 39,428,564 $ 3,023,207
1993-B 7,899,830 4,986,472 2,913,358
1993-C 121,024,878 121,024,878 -
1993-J 6,012,789 5,683,621 329,168
1994-A 2,396,262 2,091,653 304,609
1997-NMC1 6,925,270 6,925,270 -
1998-A 6,238,859 6,238,859 -
1998-B 34,174,347 34,174,347 -
1998-NMC1 18,578,864 18,578,864 -
2000-1 2,876,320 2,726,720 149,600
------------ ------------ -----------
Total $248,579,190 $241,859,248 $ 6,719,942
============ ============ ===========
2000
- -------------------------------------------------------------------
Total Publicly Privately
Series Certificates Issued Issued
- ------ ------------- ------------ -----------
1993-A $ 57,486,997 $ 54,457,257 $ 3,029,740
1993-B 10,009,582 6,600,244 3,409,338
1993-C 139,299,724 139,299,724 -
1993-E 17,393,581 14,491,962 2,901,619
1993-H 4,144,862 4,144,862 -
1993-J 12,120,924 11,522,661 598,263
1994-A 3,290,964 2,874,174 416,790
1997-NMC1 13,327,473 13,327,473 -
1998-A 10,331,855 37,578,296 -
1998-NMC1 44,459,845 44,459,845 -
2000-1 2,882,890 2,733,290 149,600
------------ ------------ -----------
Total $352,326,993 $341,821,643 $10,505,350
============ ============ ===========
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
Page 15
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------- --------------------------------------------------
Name Position Age
- ---------------- ------------------------------------------------- -----
Steven B. Chotin Director, Chairman, Chief Executive Officer and
President 54
M. Garrett Smith Director 40
Helen M. Dickens Director, Vice President, and Secretary 48
Annel Henderson Treasurer 40
M. Sean Rowland Vice President and Assistant Secretary 35
Steven B. Chotin, 54, has been a Director and the Chairman, Chief Executive
Officer and President of the Company since its inception. Mr. Chotin has been
Chief Executive Officer and sole shareholder 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").
M. Garrett Smith, 40, joined Pitkin Fuel Corporation out of Dallas, Texas
in January 2001 as it's Chief Financial Officer. Previously, Mr. Smith was
Chief Financial Officer at Stonebridge Technologies. Prior to Stonebridge, Mr.
Smith was Executive Vice President and Chief Financial Officer of Pioneer
Natural Resources Company. He also served as a Senior Vice President of
Corporate Acquisitions at Pioneer. Prior to joining Pioneer, Mr. Smith was a
partner with BTC Partners, a financial consultant to MESA, Inc.
Helen M. Dickens, 48, has been a Director of the Company since 1995, Vice
President and Secretary of the Company since 1989. Ms. Dickens is also
President and Chief Operations Officer of The Chotin Group Corporation.
Previously, Ms. Dickens held the position of Vice President along with Chief
Operations Officer at 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. Ms. Dickens received a Bachelor of Science degree from Metropolitan
State College with a Major in Accounting.
Annel Henderson, 40, has been the Treasurer of the Company since 2001 and
the Principal Accounting Officer since 1995, and previously held the position of
Controller since 1992. Mrs. Henderson has been the Treasurer of The Chotin
Group Corporation since 2001 and had previously been the Controller, a position
held since 1992. Prior to 1992, she was Accounting Manager of Community
Holdings Corporation. Mrs. Henderson received a Bachelor of Science degree from
the University of Phoenix with a Major in Accounting.
M. Sean Rowland, 35, joined the Company as Vice President and Assistant
Secretary in January 2002. Mr. Rowland is also Vice President of Structured
Finance for The Chotin Group Corporation, a position taken in January 2002.
Prior to joining The Chotin Group, Mr. Rowland was with Stifel Nicholas & Co.
and has worked in the fixed income trading market for over ten years, primarily
focusing on mortgage-backed securities. He holds a Bachelor of Science degree
in Economics from San Jose State University.
Directors and Executive Officers are elected annually for a one-year term.
Page 16
ITEM 11. EXECUTIVE COMPENSATION
- ------- ----------------------
As of December 31, 2001, no executive officer had received any compensation
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 of Name and address of Beneficial Percent of
Class Beneficial Owner Ownership (1) Class
- -------- ----------------------------- ------------ ----------
Common Steven B. Chotin 349,000 100%
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 reference
to Item 8, "Financial Statements and Supplementary Data" under Note 4 "Related
Party Transactions."
Page 17
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- ------- ---------------------------------------------------------------
(a)(1) Financial Statements
- Independent Auditors' Report
- Balance Sheets at December 31, 2001 and 2000
- Statements of Operations for the Years Ended December 31, 2001,
2000 and 1999
- Statements of Shareholder's Equity for the Years Ended December
31, 2001, 2000 and 1999
- Statements of Cash Flows for the Years Ended December 31, 2001,
2000 and 1999
- Notes to Financial Statements for the Years Ended December 31,
2001, 2000 and 1999
(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
None
Page 18
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 II
(Registrant)
Date March 29, 2002 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 and on the dates indicated.
/s/ Steven B. Chotin Director, Chairman, Chief Executive March 29, 2002
- -------------------- Officer and President
Steven B. Chotin (Principal Executive Officer
/s/ Helen M. Dickens Director, Vice President and March 29, 2002
- -------------------- Secretary (Principal Financial Officer)
Helen M. Dickens
/s/ Garrett Smith Director March 29, 2002
- -------------------
Garrett Smith
/s/ Annel Henderson Treasurer (Principal Accounting Officer) March 29, 2002
- -------------------
Annel Henderson
/s/ M. Sean Rowland Vice President and Assistant Secretary March 29, 2002
- -------------------
M. Sean Rowland
Page 19
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.
Page 20
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 II
(Registrant)
Date March 29, 2002 By:
---------------- ----------------------------------
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 and on the dates indicated.
- ---------------------- Director, Chairman, Chief Executive March 29, 2002
Steven B. Chotin Officer and President (Principal
Executive Officer)
- ---------------------- Director, Vice President and March 29, 2002
Helen M. Dickens Treasurer (Principal Financial Officer)
- ---------------------- Director March 29, 2002
Garrett Smith
- ---------------------- Treasurer (Principal Accounting March 29, 2002
Annel Henderson Officer)
- ---------------------- Vice President and Assistant March 29, 2002
M. Sean Rowland Secretary
Page 21