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 JUNE 30, 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 of (I.R.S. Employer
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 August 14, 2003- 349,000 shares
FUND AMERICA INVESTORS CORPORATION II
FORM 10-Q FOR THE
SIX MONTHS ENDED JUNE 30, 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 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
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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FUND AMERICA INVESTORS CORPORATION II
Balance Sheets
(Unaudited)
June 30, December 31,
2003 2002
------------ -------------
Assets
Cash and cash equivalents $ 27,131 $ 28,796
Deferred offering costs, net 256,361 256,361
Prepaid expenses 500 210
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Total assets $ 283,992 $ 285,367
Liabilities - accounts payable $ 451 $ -
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 1,650,839 1,652,665
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Total shareholder's equity 283,541 285,367
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Total liabilities and
shareholder's equity $ 283,992 $ 285,367
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See notes to financial statements
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FUND AMERICA INVESTORS CORPORATION II
Statements of Operations
(Unaudited)
Three months ended Six months ended
June 30, June 30,
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2003 2002 2003 2002
------------ ------------ ------------ -----------
Revenue
Interest $ 33 $ - $ 68 $ -
Other bond income - 44,166 - 44,166
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Total revenue 33 44,166 68 44,166
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Expenses
General and
Administrative 726 786 1,894 10,860
Management fees - 6,000 - 12,000
-------- --------- -------- --------
Total expenses 726 6,786 1,894 22,860
-------- --------- -------- --------
Net income $ (693) $ 37,380 $ (1,826) $ 21,306
======== ========= ======== ========
See notes to financial statements
Page 4
FUND AMERICA INVESTORS CORPORATION II
Statements of Cash Flows
(Unaudited)
Six months ended
June 30,
--------------------------
2003 2002
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Operating activities:
Net income $ (1,826) $ 21,306
Adjustments to reconcile net income to
net cash from operating activities:
Changes in operating
assets and liabilities:
Accounts payable 451 -
Prepaid expenses (290) (1,946)
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Net cash (used in)/provided by
operating activities: (1,665) 19,360
Financing activities:
Capital contributions - 16,000
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Net cash provided by
financing activities: - 16,000
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Net (decrease)/increase in cash
and cash equivalents: (1,665) 19,360
Cash and cash equivalents
at beginning of year: 28,796 5,071
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Cash and cash equivalents
at end of year: $ 27,131 $ 24,431
========== ==========
See notes to financial statements
Page 5
FUND AMERICA INVESTORS CORPORATION II
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Three months ended June 30, 2003 and 2002
1. Basis of Presentation
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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 June
30,2003, 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 June 30, 2003 and December 31, 2002, and the results
of its operations and cash flows for the periods ended June 30, 2003 and 2002.
Page 6
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations
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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 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 operating 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
- ---------------------
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.
For the three-months ended June 30, 2003, the Company reported net loss of
$693 and a net income of $37,380 for the three months ended June 30, 2002. The
difference in the two reporting periods was a result of call option fees
received in the amount of $44,166 when the call rights to Fund America
Investors Corporation II, Series 1993-J were sold during the three months ended
June 30, 2003. The remaining difference was because of a drop in expenses
during the first two quarters of 2003 discussed below.
The six-month period ended June 30, 2003 reported net loss of $1,826 as
compared to the six-months ended June 30, 2002, which reported a net income of
$21,306. In the first six months of 2002 there were no issuance fees nor call
option income earned, as compared to the same six months in 2002 where call
option income was $44,166.
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. The Company
has adopted a new income-based fee structure that is more appropriate to the
structure and nature of its business. Payment of fees under the January 1,
1993 Management Agreement ceased on December 31, 2002. The management fees
paid during the six months ended June 30, 2002 was $12,000 as compared to $0
paid for the six months ended June 30, 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
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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
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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: August 14, 2003 By: /s/ Helen M. Dickens
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Helen M. Dickens
President
(Duly authorized and
Principal Financial Officer)
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