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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 2003 Commission file number 33-11459
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CORNERSTONE MORTGAGE INVESTMENT GROUP II, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 43-1432378
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
201 Progress Parkway
Maryland Heights, Missouri 63043
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 515-2000
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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
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date, May 12, 2003:
COMMON STOCK, $1.00 Par Value - 500 Shares
CORNERSTONE MORTGAGE INVESTMENT GROUP II, INC.
INDEX
Page
Number
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet...................................................3
Notes to Balance Sheet..........................................4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................5
Part II. OTHER INFORMATION...............................................6
SIGNATURES.................................................................7
2
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
CORNERSTONE MORTGAGE INVESTMENT GROUP II, INC.
BALANCE SHEET
(Unaudited)
March 31, December 31,
2003 2002
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ASSETS
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CASH $ 500 $ 500
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STOCKHOLDER'S EQUITY
--------------------
COMMON STOCK - $1.00 par value, 150,000
shares authorized, 500 shares issued and outstanding $ 500 $ 500
=========== ===========
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The accompanying notes are an integral part of these financial statements.
3
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
CORNERSTONE MORTGAGE INVESTMENT GROUP II, INC.
NOTES TO BALANCE SHEET
(Unaudited)
BASIS OF PRESENTATION
The financial information included herein is unaudited. However, in the
opinion of management, such information includes all adjustments of a normal
recurring nature which are necessary for its fair presentation.
Cornerstone Mortgage Investment Group II, Inc. ("Cornerstone II") is a
Delaware corporation and a wholly-owned subsidiary of Edward D. Jones & Co.,
L.P. ("EDJ"), a Missouri limited partnership. Cornerstone II was
incorporated on December 22, 1986 for the limited purpose of structuring and
selling mortgage-backed securities (the "Certificates"), which are backed by
Government National Mortgage Association (GNMA), Federal Home Loan Mortgage
Corporation (FHLMC) and Federal National Mortgage Association (FNMA)
Securities (collectively, the "Collateral").
All costs related to the organization of Cornerstone II were absorbed
by EDJ. In addition, EDJ paid all offering expenses and assumed all future
revenues and expenses in connection with prior securities transactions. Due
to the absence of revenue or expense generating transactions, no income
statement is presented. The balance of stockholder's equity consists solely
of common stock issued on December 30, 1986; therefore, no statement of
stockholder's equity is presented. All funds were obtained from capital
transactions; therefore, no statement of cash flows is presented.
4
Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
CORNERSTONE MORTGAGE INVESTMENT GROUP II, INC.
MANAGEMENT'S FINANCIAL DISCUSSION
Cornerstone II last offered mortgage-backed securities in 1991. Since
Cornerstone II has surrendered control of the future economic benefit in the
collateral, the underlying certificates and the associated collateral are
not recorded on Cornerstone II's balance sheet. In addition any transactions
relating to selling of certificates does not impact Cornerstone II's income
statement.
The outstanding principal balance and remaining collateral value
relating to series 5 issued by Cornerstone II are $1,288,000 and $1,365,368,
respectively, as of March 31, 2003.
5
Part II. OTHER INFORMATION
CORNERSTONE MORTGAGE INVESTMENT GROUP II, INC.
Item 1. Legal Proceedings:
There are no pending legal proceedings.
Item 2. Changes in Securities:
No change.
Item 3. Default upon Senior Securities:
No default.
Item 4. Submission of Matters to a Vote of Security Holders:
None.
Item 5. Other Information:
Nothing to report.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit number 99
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
6
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.
CORNERSTONE MORTGAGE INVESTMENT GROUP II, INC.
(Registrant)
/s/ John C. Heisler Chairman of the Board,
----------------------- Chief Financial Officer,
John C. Heisler Chief Accounting Officer May 12, 2003
and Director
/s/ Philip R. Schwab President, Chief Executive
----------------------- Officer and Director May 12, 2003
Philip R. Schwab
7
Chief Executive Officer Certification
I, Philip R. Schwab, certify that:
1. I have reviewed this quarterly report on Form 10-Q of the Cornerstone
Mortgage Investment Group II, Inc.
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary in order to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this report.
3. Based on my knowledge, the financial statements, and other financial
information included in the report, fairly present in all material respects
the financial condition and results of operations of the Company as of, and
for, the periods presented in this quarterly report.
4. The Company's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the Company and have;
a) designed such disclosure controls and procedures to ensure that
material information relating to the Company is made known to us by others
within the Company, particularly during the period in which this report is
prepared;
b) evaluated the effectiveness of the Company's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of our disclosure controls and procedures based on our
evaluation as of the Evaluation Date.
5. The Company's other certifying officer and I have disclosed, based on our
most recent evaluation, to the Company's auditors and the Executive
Committee:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Company's ability to
record, process, summarize, and report financial data and have identified
for the Company's auditors any material weakness in internal controls; and
b) any fraud, whether or not material, that involves management or
other associates who have a significant roll in the Company's internal
controls.
6. The Company's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
/s/ Philip R. Schwab
--------------------
Philip R. Schwab
Chief Executive Officer
May 12, 2003
8
Chief Financial Officer Certification
I, John C. Heisler, certify that:
1. I have reviewed this quarterly report on Form 10-Q of the Cornerstone
Mortgage Investment Group II, Inc.
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary in order to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this report.
3. Based on my knowledge, the financial statements, and other financial
information included in the report, fairly present in all material respects
the financial condition and results of operations of the Company as of, and
for, the periods presented in this quarterly report.
4. The Company's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the Company and have;
a) designed such disclosure controls and procedures to ensure that
material information relating to the Company is made known to us by others
within the Company, particularly during the period in which this report is
prepared;
b) evaluated the effectiveness of the Company's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of our disclosure controls and procedures based on our
evaluation as of the Evaluation Date.
5. The Company's other certifying officer and I have disclosed, based on our
most recent evaluation, to the Company's auditors and the Executive
Committee:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Company's ability to
record, process, summarize, and report financial data and have identified
for the Company's auditors any material weakness in internal controls; and
b) any fraud, whether or not material, that involves management or
other associates who have a significant roll in the Company's internal
controls.
6. The Company's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
/s/ John C. Heisler
-------------------
John C. Heisler
Chief Financial Officer
May 12, 2003
9