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, 2004
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
(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 14, 2004- 349,000 shares
FUND AMERICA INVESTORS CORPORATION II
FORM 10-Q FOR THE
THREE MONTHS ENDED MARCH 31, 2004
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
Item 3. Quantitative and Qualitative
Disclosures about Market Risk 8
Item 4. Controls and Procedures 8
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
FUND AMERICA INVESTORS CORPORATION II
Balance Sheets
(Unaudited)
March 31, December 31,
2004 2003
------------ ------------
Assets
Cash and cash equivalents $ 184 $ 466
Deferred offering costs, net 246,861 256,361
Prepaid expenses - 219
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Total assets $ 247,045 $ 257,046
Liabilities - accounts payable $ 250 $ 1,110
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 505,010 504,010
Shareholder distributions (1,918,298) (1,904,229)
Retained earnings 1,656,593 1,652,665
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Total shareholder's equity 246,795 255,936
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Total liabilities and
shareholder's equity $ 247,045 $ 257,046
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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
March 31,
--------------------------
2004 2003
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Revenue
Interest $ - $ 35
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Total revenue - 35
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Expenses
Impairment - deferred offering costs 9,500 -
General and administrative 641 1,169
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Total expenses 10,141 1,169
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Net loss $ (10,141) $ (1,134)
========= ==========
See notes to financial statements
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FUND AMERICA INVESTORS CORPORATION II
Statements of Cash Flows
(Unaudited)
Three months ended
March 31,
--------------------------
2004 2003
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Operating activities:
Net loss $ (10,141) $ (1,134)
Adjustments to reconcile net loss to
net cash from operating activities:
Impairment-deferred offering costs 9,500 -
Changes in operating assets and liabilities:
Accounts payable (860) 250
Prepaid expenses 219 210
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Net cash used in operating activities: (1,282) (674)
Financing activities:
Capital contributions 1,000 -
---------- ----------
Net decrease in cash
and cash equivalents (282) (674)
Cash and cash equivalents
at beginning of year 466 28,796
---------- ----------
Cash and cash equivalents
at end of year $ 184 $ 28,122
========== ==========
See notes to financial statements
Page 5
FUND AMERICA INVESTORS CORPORATION II
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Three months ended March 31, 2004 and 2003
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, 2004, the Company had a total of $561 million
registered and unissued Securities on its Registration Statement No. 333-
33823. During the first quarter of 2004 and the year ending December 31,
2003, 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, 2004, 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, 2004, and the results of
its operations and cash flows for the periods ended March 31, 2004 and
2003.
Page 6
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 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.
The Company reported a net loss for the three months ended March 31,
2004 of $10,141 as compared to a net loss for the three months ended March
31, 2003 of $1,134. The company had no income in the first quarter ended
March 31, 2004 and March 31, 2003. The primary difference in the results
of operations between the two reporting periods is due from the write-off
of deferred offering costs related to securities backed by Title One
Certificates, which the Company no longer deals in.
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 reviewed the fee
structure and determined that an income-based fee is more appropriate
to the structure and nature of its business. There were no fees paid
during the three months ended March 31, 2004 or 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, 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
Item 3. 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
issued by a trust formed by the Company do not represent an ownership
interest in or an obligation of the Company.
Disclosures required in this Item 3 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.
Item 4. Controls and Procedures
Pursuant to the Securities and Exchange Commission in regards to the
Sarbanes-Oxley Act Section 404, the Company is considered a "non-
accelerated filer" and does not have to comply with the management report
on internal controls until its first fiscal year ending on or after July
15, 2005.
Page 8
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 31.1 - Certification by the Chief Executive
Officer pursuant to Rule 13a-14(a) and 15d-14(a) under
the Exchange Act
Exhibit 31.2 - Certification by the Chief Financial
Officer pursuant to Rule 13a-14(a) and 15d-14(a) under
the Exchange Act
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
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(Registrant)
Date: May 14, 2004 By: /s/ Helen M. Dickens
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Helen M. Dickens
President
(Duly authorized and Principal
Financial Officer
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