<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
JUNE 30, 1996 0-14562
----------------------------
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, 1995 and June 30, 1996 . . .3
(b) Condensed Statements of Income, six and three months ended,
June 30, 1996 and 1995. . . . . . . . . . . . . . . . . . . . . .4
(c) Condensed Statements of Partners' Capital (Deficit) for the
year ended December 31, 1995 and the six months
ended June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . .5
(d) Condensed Statements of Cash Flows, six months ended
June 30, 1996 and 1995. . . . . . . . . . . . . . . . . . . . . . .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>
(UNAUDITED)
*DECEMBER 31 JUNE 30
1995 1996
--------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . $ 157,848 $ 10,896
Short-term investments (market value of $1,775,183 in 1995
and $1,938,848 in 1996). . . . . . . . . . . . . . . . . . . 1,772,598 1,903,052
Interest receivable on trust deed notes receivable . . . . . . . 8,917 8,861
Other receivable . . . . . . . . . . . . . . . . . . . . . . . . 35,000 35,000
Current portion of trust deed notes receivable (note B). . . . . 11,894 11,993
-------------------------
Total current assets. . . . . . . . . . . . . . . . . . . . 1,986,257 1,969,802
Investment in real estate, net . . . . . . . . . . . . . . . . . . . 1,102,804 1,076,804
Trust deed notes receivable, net (note B). . . . . . . . . . . . . . 1,017,476 1,011,503
-------------------------
$4,106,537 $4,058,109
-------------------------
-------------------------
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Accounts payable and other liabilities . . . . . . . . . . . . . $ 429 $ 428
Due general partner. . . . . . . . . . . . . . . . . . . . . . . 270,000 275,000
-------------------------
Total current liabilities . . . . . . . . . . . . . . . . . 270,429 275,428
Partners' capital:
General Partners . . . . . . . . . . . . . . . . . . . . . . . . 23,031 23,882
Limited partners - authorized 20,000 units, outstanding
13,272 units . . . . . . . . . . . . . . . . . . . . . . . . 3,813,077 3,758,799
-------------------------
3,836,108 3,782,681
-------------------------
$4,106,537 $4,058,109
-------------------------
-------------------------
</TABLE>
See accompanying notes to financial statements.
*Extracted from audited December 31, 1995 financial statements.
3
<PAGE>
KEYSTONE MORTGAGE FUND,
A CALIFORNIA LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30 June 30
1996 1995 1996 1995
------------------------ -------------------------
<S> <C> <C> <C> <C>
Revenue:
Interest on mortgage loans . . . . . . . . . . $ 53,860 $ 77,518 $ 26,889 $ 43,135
Interest on short-term investments . . . . . . 52,279 63,794 21,960 36,375
Rental and other revenue from investment in
real estate. . . . . . . . . . . . . . . . . . 113,170 93,577 62,257 45,323
--------- --------- --------- ---------
219,309 234,889 111,106 124,833
Expenses:
Servicing related expenses . . . . . . . . . . 43,484 45,722 19,043 31,847
Administrative and general expenses. . . . . . 6,380 270,522 2,610 5,165
Expenses related to real estate acquired in
settlement of loans . . . . . . . . . . . . . 84,338 56,000 55,802 28,000
--------- --------- --------- ---------
134,202 372,244 77,455 65,012
NET INCOME (LOSS). . . . . . . . . . . $ 85,107 $(137,355) $ 33,651 $ 59,821
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average number of
limited partnership units outstanding . . . . . 13,272 13,272 13,272 13,272
--------- --------- --------- ---------
--------- --------- --------- ---------
Net income (loss) per limited
partnership unit. . . . . . . . . . . . . . . . $ 6.41 $ (10.35) $ 2.53 $ 4.51
--------- --------- --------- ---------
--------- --------- --------- ---------
</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, 1995 . . . . . . . . $ 23,031 $3,813,077 $3,836,108
Net income three months
ended June 30, 1996 . . . . . . . . . . . 851 84,256 85,107
Distributions. . . . . . . . . . . . . . . . (138,534) (138,534)
----------------------------------
Balance as of June 30, 1996. . . . . . . . . $ 23,882 $3,758,799 $3,782,681
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
5
<PAGE>
KEYSTONE MORTGAGE FUND,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30
1996 1995
------------------------
OPERATING ACTIVITIES:
Net Income (loss). . . . . . . . . . . . . . . . . . $ 85,107 $(137,355)
Changes in operating assets & liabilities:
Decrease in interest receivable. . . . . . . . . . 56 5,191
Depreciation expense for investment
in real estate. . . . . . . . . . . . . . . . . 26,000 26,000
Decrease in accounts payable . . . . . . . . . . . (1) (1,296)
Increase in due general partners . . . . . . . . . 5,000 265,000
--------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES. . . . . . . . . . . . . . 116,162 157,540
INVESTING ACTIVITIES:
Decrease in trust deed receivable. . . . . . . . . . 5,874 19,260
Increase in short-term investments . . . . . . . . . (130,454) (105,830)
FINANCING ACTIVITIES:
Distributions and withdrawals. . . . . . . . . . . . (138,534) (154,396)
--------- ---------
Increase (decrease) in cash and cash equivalents . . (146,952) (83,426)
Cash and cash equivalents at beginning of year . . . 157,848 97,409
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD . . . . . . . . . . . . . . . $ 10,896 $ 13,983
--------- ---------
--------- ---------
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, 1995 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)
<TABLE>
<CAPTION>
(B) TRUST DEED NOTES RECEIVABLE
MONTHLY
PAYMENT,
INCLUDING DECEMBER 31 JUNE 30
INTEREST 1995 1996
-------- ---- ----
<S> <C> <C> <C>
First trust deed on an office/warehouse/light industrial
building, interest rate of 10.375%, due November 1, 1997 . . . $9,965 $1,031,390 $1,024,966
--------
--------
Less net deferred loan origination fees. . . . . . . . . . . . . 2,020 1,470
Less Current portion . . . . . . . . . . . . . . . . . . . . . . 11,894 11,993
---------- ----------
$1,017,476 $1,011,503
---------- ----------
---------- ----------
</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 six months ended June 30, 1996 increased $14,420 or
7.1% over the comparable 1995 period. Total revenues for the three months ended
June 30, 1996 increased 1.2% compared to the same period ending June 30, 1995.
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 over the past few years.
Servicing related expenses decreased 4.9% for the six months and decreased
40.2% for the three months ended June 30, 1996 over the comparable periods ended
June 30, 1995. General and administrative expenses decreased $264,142 for the
six months and decreased $2,655 for the three months ended June 30, 1996 over
the comparable periods ended June 30, 1995.
During the first quarter of 1995, a determination was made by the general
partners to seek reimbursement for which they were otherwise entitled. The
amount of general and administrative expenses were determined to be $265,000 at
June 30, 1995.
Expenses related to real estate acquired in settlement of loans increased
50.6% for the six months ended June 30, 1996 and increased 99.3% for the three
months ended June 30, 1996 over the comparable periods June 30, 1995.
Net income for the six months and the three months ended June 30, 1996
increased $222,462 for the six months and decreased $26,170 for the three months
over the same periods June 30, 1995.
The Partnership's working capital decreased by $21,454 during the six
months ended June 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
June 30, 1996.
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: July 22, 1996 /s/ JOHN P. SULLIVAN
-----------------------------------
Keystone Mortgage Company
By: John P. Sullivan, President
Date: July 22, 1996 /s/ JOHN P. SULLIVAN
-----------------------------------
John P. Sullivan
General Partner
Date: July 22, 1996 /s/ CHRISTOPHER E. TURNER
-----------------------------------
Christopher E. Turner
General Partner
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 10,896
<SECURITIES> 1,903,052
<RECEIVABLES> 1,946,913
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,969,802
<PP&E> 1,300,000
<DEPRECIATION> 223,196
<TOTAL-ASSETS> 4,058,109
<CURRENT-LIABILITIES> 275,428
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,782,681
<TOTAL-LIABILITY-AND-EQUITY> 4,058,109
<SALES> 0
<TOTAL-REVENUES> 219,309
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 134,202
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 85,107
<INCOME-TAX> 0
<INCOME-CONTINUING> 85,107
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 85,107
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
