Item 1 - Business Ziegler Mortgage Securities, Inc. II (the "Company") is a limited purpose finance company which is owned equally by The Ziegler Companies, Inc. and Mr. James G. Pouros. The Company was organized to facilitate the financing of mortgage loans and does not intend to engage in any other business activities at this time. The Company issues bonds from time to time in series, each of which will be secured by a separate security package consisting of GNMA Certificates (the "GNMA Certificates") issued by the Government National Mortgage Association ("GNMA") and/or Guaranteed Mortgage Pass-Through Certificates (the "FNMA Certificates") issued by the Federal National Mortgage Association ("FNMA") (collectively the "Mortgage Certificates"). The Company does not have, nor is it expected in the future to have, any significant assets other than the assets pledged as security for specific series of securities issued by it. The full and timely payment of the principal of and interest on the GNMA Certificates is guaranteed by GNMA. The GNMA guaranty is backed by the full faith and credit of the United States. FNMA guarantees the payment of principal and interest on the FNMA Certificates issued by it, but the FNMA guaranty is not backed by the full faith and credit of the United States. B. C. Ziegler and Company, which acts as the underwriter for the bonds, is a wholly-owned subsidiary of The Ziegler Companies, Inc., owner of 50% of the outstanding common stock of the Company. B. C. Ziegler and Company provides management and administrative services to the Company for which, pursuant to a management agreement with the Company, it is entitled to receive a semiannual management fee not to exceed .375% of the aggregate outstanding principal amount of bonds on the last day of the month preceding each semiannual payment date. As of December 31, 1999, the Company has issued eighty-three series of bonds totaling $343,329,000 and acquired one series of bonds totaling approximately $1,961,000 in a 1994 merger, of which $33,475,000 still are outstanding. There are no paid employees of the Company. Item 2
Item 2 - Properties The Company owns no real estate and leases no office space. Item 3
Item 3 - Legal Proceedings The Company is not a party to any material pending legal proceedings. Item 4
Item 4 - Submission of Matters to a Vote of Security Holders None
PART II Item 5
Item 5 - Market for the Company's Common Stock and Related Security Holder Matters There is no market for the common stock of the Company. The Ziegler Companies, Inc. and Mr. James G. Pouros each own 50% of the issued and outstanding shares of the Company. Item 6
Item 6 - Selected Financial Data 1999 1998 1997 Total Revenues $ 2,855,633 $ 5,340,233 $ 8,771,002 Net Income $ - $ - $ - Earnings Per Share of Common Stock $ - $ - $ - Cash Dividends Per Share Declared $ - $ - $ - Total Assets $35,908,506 $45,195,864 $99,289,905 Long-term Obligations $33,475,000 $42,584,000 $94,940,000 Stockholders' Equity at Year End $ 1,520,000 $ 1,520,000 $ 1,520,000
Item 7
Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations - Comparison of Years 1999, 1998 and 1997 During 1999 and 1998, the Company did not issue any additional series of Mortgage Certificate-Backed Bonds (the "Bonds"). During 1997, the Company issued one series of Bonds totaling $3,152,000. Unfavorable spreads between the interest yields on the Mortgage Certificates and the Bonds have kept the Company from issuing additional series in 1999 and 1998. Total revenues, consisting mostly of interest income, for 1999, 1998 and 1997 totaled approximately $2,856,000, $5,340,000 and $8,771,000, respectively. Revenues decreased in 1999 and 1998 primarily due to the sale of Mortgage Certificates as explained in Note 5 of the Notes to Financial Statements. Paydowns on the Mortgage Certificates contributed to the decreases in each of the three years. Total bonds redeemed in 1999, 1998 and 1997 were $9,109,000, $52,356,000 and $9,241,000, respectively. These redemptions occurred as the result of Mortgage Certificate sales and liquidations totaling $6,165,000, $51,489,000 and $13,091,000 in 1999, 1998 and 1997, respectively. Revenues decreased in 1999 and 1998 primarily due to the sale of Mortgage Certificates as explained in Note 5 of the Notes to Financial Statements. Paydowns on the Mortgage Certificates contributed to the decreases in each of the three years. These Mortgage Certificate sales and liquidations and subsequent bond redemptions result in gains on sale of mortgage certificates and offsetting increases in amortization of bond issue costs in the Statements of Operations. In accordance with a written management agreement, management fees of the Company were limited to the amount which prevents the Company from incurring a loss. It is anticipated that the Company will continue to operate at close to a breakeven level in future years.
Liquidity and Capital Resources The Company has no fixed assets nor any commitments outstanding to purchase or lease any fixed assets. Each series of bonds is structured in a manner such that funds received from the related Mortgage Certificates are sufficient to fund all interest and principal payments on the bonds, and all other expenses of the Company. This can be seen in the Statements of Cash Flows. For 1999, there was a net increase in cash and cash equivalents totaling approximately $37,000. Net income was zero because of the management fee paid to B. C. Ziegler and Company. The primary net cash receipt from investing activities totaled $6,165,000 which resulted from the sale and redemption of Mortgage Certificates during the period. The primary net disbursement from financing activities totaled $9,109,000 and arose from cash disbursed to redeem outstanding Bonds from previous series during the period. The Company has 15,000 shares of $9.00 non-cumulative, non-voting preferred stock outstanding. No dividends were declared or paid in 1999, 1998 or 1997. The Company may redeem any or all of the preferred stock at any time, at a redemption price of $100 per share. Item 7a