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 MARCH 31, 2003
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.: 033-73748
FUND AMERICA INVESTORS CORPORATION II
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(Exact name of registrant as specified in its charter)
Delaware 84-1218906
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) identification number)
6400 S. Fiddler's Green Circle, Suite 1200B, Englewood, Colorado 80111
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(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 by check mark whether the registrant is an accelerated filer.
[ ] Yes [X] No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of May 15, 2003- 349,000 shares.
FUND AMERICA INVESTORS CORPORATION II
FORM 10-Q FOR THE
THREE MONTHS ENDED MARCH 31, 2003
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 6
PART II. OTHER INFORMATION
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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
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FUND AMERICA INVESTORS CORPORATION II
Balance Sheets
(Unaudited)
March 31, December 31,
2003 2002
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Assets
Cash and cash equivalents $ 28,122 $ 28,796
Deferred offering costs, net 256,361 256,361
Prepaid expenses - 210
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Total assets $ 284,483 $ 285,367
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Liabilities - accounts payable $ 250 $ -
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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 504,010 504,010
Shareholder distributions (1,874,798) (1,874,798)
Retained earnings 1,651,531 1,652,665
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Total shareholder's equity 284,233 285,367
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Total liabilities and
shareholder's equity $ 284,483 $ 285,367
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See notes to financial statements
Page 3
FUND AMERICA INVESTORS CORPORATION II
Statements of Operations
(Unaudited)
Three months ended
March 31,
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2003 2002
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Revenue
Interest $ 35 $ -
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Total revenue 35 -
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Expenses
General and administrative 1,169 10,074
Management fees - 6,000
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Total expenses 1,169 16,074
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Net loss $ (1,134) $ (16,074)
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See notes to financial statements
Page 4
FUND AMERICA INVESTORS CORPORATION II
Statements of Cash Flows
(Unaudited)
Three months ended
March 31,
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2003 2002
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Operating activities:
Net loss $ (1,134) $ (16,074)
Adjustments to reconcile net loss to net
cash from operating activities:
Changes in operating assets and liabilities:
Accounts payable 250 1,050
Prepaid expenses 210 (1,946)
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Net cash used in operating activities: (674) (16,970)
Financing activities:
Capital contributions - 12,500
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Net decrease in cash and cash equivalents (674) (4,470)
Cash and cash equivalents at beginning of year 28,796 5,071
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Cash and cash equivalents at end of year $ 28,122 $ 601
========== ==========
See notes to financial statements
Page 5
FUND AMERICA INVESTORS CORPORATION II
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Three months ended March 31, 2003 and 2002
1. Basis of Presentation
Organization
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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.
On January 1, 2002, the Company had a total of $561 million registered and
unissued Securities on its Registration Statement No. 333-33823. During
the first quarter of 2003 and the year ending December 31, 2002, 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 March 31, 2003, 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
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the
financial position of the Company at March 31, 2003, and the results
of its operations and cash flows for the periods ended March 31, 2003
and 2002.
Page 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
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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 adequately fund overhead costs over the next twelve months.
Capital funding has and will continue to be provided by the sole
shareholder to cover any additional unanticipated costs on a monthly basis
until the Company generates sufficient revenue. The funding source for
any 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
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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 a net loss for the three months ended March 31, 2003
of $1,134 as compared to a net loss for the three months ended March 31,
2002 of $16,074. The company had no income in the first quarter ended
March 31, 2003 and March 31, 2002. The primary difference in the results
of operations between the two reporting periods is from a reduction in
costs as discussed below.
For the years ended 1993 to 2002, the Company paid facilities management
fees to The Chotin Group Corporation (the "Facilities Manager"), a related
party, under a Management Agreement dated January 1, 1993. Under this
agreement, a fixed monthly fee was paid to the Facilities Manager.
Currently, the Company is in the process of reviewing the fee structure to
determine if an income-based fee is more appropriate to the structure and
nature of its business. Payment of fees under the January 1, 1993
Management Agreement have ceased until such determination. The management
fees paid during the three months ended March 31, 2002 was $6000 as
compared to $0 paid for the three months ended March 31, 2003.
Pursuant to Rule 3-11 of Regulation S-X, if a registrant is an inactive
entity as defined in this rule, the financial statements required by this
regulation for purposes of reports pursuant to the Securities Exchange Act
of 1934 may be unaudited. The Company meets all the conditions as defined
for an inactive entity under this rule and accordingly had elected to file
unaudited financial statements for the year ended, December 31, 2002.
Audit fees in the amount of $9,250 were paid during the first quarter of
2002 and since there was no audit performed for the year ended December
31, 2002 there were no audit fees paid in the first quarter of 2003.
Forward Looking Statements
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The statements contained in this Item 2 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.
Page 7
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 99.1 - CEO and CFO Certification of Quarterly
Financial Statements
B. Form 8-K
None
Page 8
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
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(Registrant)
Date: May 15, 2003 By: /s/ Helen M. Dickens
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Helen M. Dickens
President
(Duly authorized and
Principal Financial Officer)
Page 9