<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED COMMISSION FILE NUMBER
SEPTEMBER 30, 1995 0-14562
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KEYSTONE MORTGAGE FUND
(Exact name of registrant as specified in its charter.)
CALIFORNIA 95-3786580
(State of Incorporation) (I.R.S. Employer Identification No.)
11340 W. OLYMPIC BOULEVARD
SUITE 300
LOS ANGELES, CALIFORNIA 90064-1661
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 479-4121
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Indicated by check mark whether the registrant (1) has filed all report required
to be filed by Section 13 of 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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<PAGE>
KEYSTONE MORTGAGE FUND
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
(a) Condensed Balance Sheets, December 31, 1994 and
September 30, 1995. . . . . . . . . . . . . . . . . . . . . . . .3
(b) Condensed Statements of Income, three and nine months ended,
September 30, 1995 and 1994. . . . . . . . . . . . . . . . . . .4
(c) Condensed Statements of Partners' Capital (Deficit)
for the year ended December 31, 1994 and the nine
months ended September 30, 1995. . . . . . . . . . . . . . . . .5
(d) Condensed Statements of Cash Flows, nine months ended
September 30, 1995 and 1994. . . . . . . . . . . . . . . . . . .6
(e) Notes to condensed financial statements. . . . . . . . . . . .7 & 8
Item 2. Management's discussion and analysis of financial
condition and results of operations. . . . . . . . . . . .9
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K. . . . . . . . . . . 10 & 11
2
<PAGE>
KEYSTONE MORTGAGE FUND,
A CALIFORNIA LIMITED PARTNERSHIP
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30
1994 1995
-------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $ 97,409 $ 10,473
Short-term investments. . . . . . . . . . . . . . . . . . . . . . .2,275,573 2,458,670
Interest receivable on trust deed notes receivable. . . . . . . . . . 18,761 13,534
Current portion of trust deed notes receivable (note B) . . . . . . 580,508 582,244
-----------------------------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . 2,972,251 3,064,921
Investment in real estate, net . . . . . . . . . . . . . . . . . . . . 1,155,504 1,115,804
Trust deed notes receivable, net (note B). . . . . . . . . . . . . . . 1,028,372 998,379
-----------------------------
$5,156,127 $5,179,104
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-----------------------------
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Due general partner . . . . . . . . . . . . . . . . . . . . . . . . . . $ 267,500
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . $ 1,957 661
-----------------------------
TOTAL CURRENT LIABILITIES. . . . . . . . . . . . . . . . . . 1,957 268,161
PARTNERS' CAPITAL
General Partners. . . . . . . . . . . . . . . . . . . . . . . . . . . 23,047 22,159
Limited partners - 20,000 units authorized, 13272 units
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,131,123 4,888,784
-----------------------------
5,154,170 4,910,943
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$5,156,127 $5,179,104
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-----------------------------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
KEYSTONE MORTGAGE FUND,
A CALIFORNIA LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
------------------------------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Interest on mortgage loans . . . . . . . . . . . . . $118,419 $315,766 40,901 77,983
Interest on short-term investments . . . . . . . . . 78,068 23,168 14,274 4,426
Rental and other revenue from investment in
real estate. . . . . . . . . . . . . . . . . . . . . 88,997 67,798 25,420 26,878
--------- -------- ------- -------
285,484 406,732 80,595 109,287
Expenses:
Servicing related expenses . . . . . . . . . . . . . 39,978 51,084 7,900 8,611
Administrative and general expenses. . . . . . . . . .275,661 3,374 5,139 195
Expenses related to real estate acquired in
settlement of loans . . . . . . . . . . . . . . . . 58,676 54,462 19,032 13,001
--------- -------- ------- -------
374,315 108,920 32,071 21,807
--------- -------- ------- -------
NET INCOME (LOSS). . . . . . . . . . . . . . . $(88,831) $297,812 $48,524 $87,480
--------- -------- ------- -------
--------- -------- ------- -------
Weighted average number of limited partnership
units outstanding. . . . . . . . . . . . . . . . . . 13,272 13,272 13,272 13,272
--------- -------- ------- -------
--------- -------- ------- -------
Net income per limited partnership unit. . . . . . . . . $ (6.69) $ 22.44 $ 3.66 $ 6.59
--------- -------- ------- -------
--------- -------- ------- -------
</TABLE>
See notes to financial statements
4
<PAGE>
KEYSTONE MORTGAGE FUND,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF PARTNER'S CAPITAL
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
-------- -------- -----
<S> <C> <C> <C>
Balance at December 31, 1994 . . . . . . . . . . . . . $ 23,047 $5,131,123 $5,154,170
Net income nine months ended September 30, 1995. . . . . (888) (87,943) (88,831)
Distributions. . . . . . . . . . . . . . . . . . . . . . (154,396) (154,396)
---------- ---------- ----------
Balance as of September 30, 1995 . . . . . . . . . . . $ 22,159 $4,888,784 $4,910,943
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
5
<PAGE>
KEYSTONE MORTGAGE FUND,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
------------------------------
1995 1994
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . $ (88,831) $ 297,812
Changes in operating assets & liabilities:
Depreciation expense from investment in real estate. . . . . . 39,700
Amortization of net origination fees . . . . . . . . . . . . . (775) (5,500)
Decrease in interest and account receivable. . . . . . . . . . 5,227 25,619
Decrease in accounts payable . . . . . . . . . . . . . . . . . (1,296) (1,794)
Increase in due general partners . . . . . . . . . . . . . . . 267,500
Decrease in other assets . . . . . . . . . . . . . . . . . . . 43,835
----------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . . 221,525 359,972
INVESTING ACTIVITIES:
Decrease in trust deed receivable . . . . . . . . . . . . . . . . . 29,032 2,844,941
Decrease in short-term investments. . . . . . . . . . . . . . . . . (183,097)
FINANCING ACTIVITIES:
Distributions and withdrawals . . . . . . . . . . . . . . . . . . . (154,396) (754,104)
----------- ----------
Increase (decrease) in cash and cash equivalents. . . . . . . . . . (86,936) 2,450,809
Cash and cash equivalents at beginning of year. . . . . . . . . . . 97,409 1,228,378
----------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD. . . . . . . . $ 10,473 $3,679,187
----------- ----------
----------- ----------
</TABLE>
See notes to financial statements.
6
<PAGE>
KEYSTONE MORTGAGE FUND,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE A - UNAUDITED BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared by Keystone Mortgage Fund in accordance with generally
accepted accounting principles, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements have
been condensed or omitted pursuant to such rules and regulations. In
the opinion of management, the accompanying condensed financial
statements contain all adjustments necessary, which were of normal
recurring nature, for a fair statement of the results for the interim
periods presented. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and
the notes thereto included in Form 10-K for the year ended December
31, 1994 filed by the Company under the Securities Exchange Act of
1934.
7
<PAGE>
KEYSTONE MORTGAGE FUND,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(B) TRUST DEED NOTES RECEIVABLE
<TABLE>
<CAPTION>
MONTHLY
PAYMENT,
INCLUDING DECEMBER 31 SEPTEMBER 30
INTEREST 1994 1995
-------- ---- ----
<S> <C> <C> <C>
Second trust deed on an office/warehouse/light manufacturing
facility, interest rate of 10.0%, due December 1, 1995. . . . . . $6,913 $ 568,716 $ 548,488
First trust deed on an office/warehouse/light industrial
building, interest rate of 10.375%, due November 1, 1997. . . . . $9,965 1,043,284 1,034,480
------ ---------- ---------
------
1,612,000 1,582,968
Less net deferred loan origination fees. . . . . . . . . . . . . 3,120 2,345
Less current portion . . . . . . . . . . . . . . . . . . . . . . 580,508 582,244
---------- ---------
$1,028,372 $ 998,379
---------- ---------
---------- ---------
</TABLE>
8
<PAGE>
KEYSTONE MORTGAGE FUND,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Total revenues for the nine months ended September 30, 1995 decreased
$121,248 or 29.8% over the comparable 1994 period. Total revenues for the three
months ended September 30, 1995 decreased $28,692 or 26.2% compared to the same
period ending September 30, 1994. These decreases were due to the decrease of
income producing assets during the past year. Cash flow from principal payments
have been distributed to the limited partners less required reserves. These
amounts represent return of capital which has caused the decrease in income
producing assets.
Service related expenses decreased 21.7% for the nine months and decreased
8.2% for the three months ended September 30, 1995 over the comparable periods
ended September 30, 1994. General and administrative expenses increased
$272,287 for the nine months and increased $4,944 for the three months ended
September 30, 1995 over the comparable periods ended September 30, 1994.
Expenses related to real estate acquired in settlement of loans increased
7.7% for the nine months ended September 30, 1995 over the same period September
30, 1994 and increased 46.4% for the three months ended September 30, 1995 over
the comparable periods 1994.
Net income for the nine months and the three months ended September 30,
1995 decreased $386,643 or 129.8% for the nine months and decreased $38,956 or
44.5% for the three months ended September 30, 1995 over the same periods
September 30, 1994.
The Partnership working capital decreased by $173,534 during the nine
months ended September 30, 1995. The Partnership has adequate working capital
and cash reserves to carry on its business.
The Partnership continues to distribute to the Limited Partners principal
repayments (less required reserves).
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The Registrant filed no reports on Form 8-K during the quarter ended
September 30, 1995.
10
<PAGE>
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.
KEYSTONE MORTGAGE FUND
a California Limited Partnership
Date: , 1995 /s/ JOHN P. SULLIVAN
--------------------------------
Keystone Mortgage Company
By: John P. Sullivan, President
Date: , 1995 /s/ JOHN P. SULLIVAN
--------------------------------
John P. Sullivan
General Partner
Date: , 1995 /s/ CHRISTOPHER E. TURNER
--------------------------------
Christopher E. Turner
General Partner
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 10,473
<SECURITIES> 2,458,670
<RECEIVABLES> 1,594,157
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,064,921
<PP&E> 1,335,351
<DEPRECIATION> 178,347
<TOTAL-ASSETS> 5,179,104
<CURRENT-LIABILITIES> 268,161
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 4,910,943
<TOTAL-LIABILITY-AND-EQUITY> 5,179,104
<SALES> 0
<TOTAL-REVENUES> 285,484
<CGS> 0
<TOTAL-COSTS> 374,315
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (88,831)
<INCOME-TAX> 0
<INCOME-CONTINUING> (88,831)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (88,831)
<EPS-PRIMARY> (6.69)
<EPS-DILUTED> (6.69)
</TABLE>
