<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
MARCH 31, 1996 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, 1995
and March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Condensed Statements of Income, three months ended,
March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . 4
(c) Condensed Statements of Partners' Capital (Deficit)
for the year ended December 31, 1995 and the three
months ended March 31, 1996 . . . . . . . . . . . . . . . . . . 5
(d) Condensed Statements of Cash Flows, three months ended
March 31, 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
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KEYSTONE MORTGAGE FUND,
A CALIFORNIA LIMITED PARTNERSHIP
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
(UNAUDITED)
*DECEMBER 31 MARCH 31
1995 1996
---------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 157,848 $ 26,405
Short-term investments (market value of $1,775,183 in 1995
and $2,006,074 in 1996) . . . . . . . . . . . . . . . . . . . . . . . 1,772,598 1,973,918
Interest receivable on trust deed notes receivable. . . . . . . . . . . 8,917 8,889
Other receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000 35,000
Current portion of trust deed notes receivable (note B) . . . . . . . . 11,894 11,983
---------------------------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . 1,986,257 2,056,195
Investment in real estate, net . . . . . . . . . . . . . . . . . . . . . . 1,102,804 1,089,804
Trust deed notes receivable, net (note B). . . . . . . . . . . . . . . . . 1,017,476 1,014,492
---------------------------
$4,106,537 $4,160,491
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LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Accounts payable and other liabilities. . . . . . . . . . . . . . . . . $ 429 $ 427
Due general partner . . . . . . . . . . . . . . . . . . . . . . . . . . 270,000 272,500
---------------------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . 270,429 272,927
Partners' capital:
General Partners. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,031 23,546
Limited partners - authorized 20,000 units, outstanding
13,272 units. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,813,077 3,864,018
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3,836,108 3,887,564
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$4,106,537 $4,160,491
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---------------------------
</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>
Three Months Ended
March 31
1996 1995
----------------------------
<S> <C> <C>
Revenue:
Interest on mortgage loans . . . . . . . . . . . $ 26,971 $ 34,383
Interest on short-term investments . . . . . . . 30,319 27,419
Rental and other revenue from investment in
real estate . . . . . . . . . . . . . . . . . . 50,913 50,622
----------------------------
108,203 112,424
Expenses:
Servicing related expenses . . . . . . . . . . . 24,441 13,875
Administrative and general expenses. . . . . . . 3,770 265,357
Expenses related to real estate acquired in
settlement of loans . . . . . . . . . . . . . . 28,536 30,368
----------------------------
56,747 309,600
NET INCOME (LOSS). . . . . . . . . . . . $ 51,456 $ (197,176)
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Weighted average number of
limited partnership
units outstanding . . . . . . . . . . . . . . . . 13,272 13,272
----------------------------
----------------------------
Net income per limited
partnership unit. . . . . . . . . . . . . . . . . . $ 3.88 $ (14.86)
----------------------------
----------------------------
</TABLE>
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 March 31, 1996. . . . . . . . . 515 50,941 51,456
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Balance as of March 31, 1996 . . . . . $ 23,546 $3,864,018 $3,887,564
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----------------------------------------
</TABLE>
5
<PAGE>
KEYSTONE MORTGAGE FUND,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
1996 1995
---------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income (loss). . . . . . . . . . . . . . . . . . $ 51,456 $(197,176)
Amortization of net origination fees . . . . . . . (275) (275)
Depreciation expense from investment
in real estate. . . . . . . . . . . . . . . . . . 13,000 13,700
Decrease in interest receivable. . . . . . . . . . 28 5,082
Increase in accounts payable and
other liabilities . . . . . . . . . . . . . . . . 2,498 261,811
---------------------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES. . . . . . . . . . . . 66,707 83,142
INVESTING ACTIVITIES:
Decrease in trust deed receivable. . . . . . . . . . 3,170 9,434
Purchase of short-term investments . . . . . . . . . (201,320) (145,974)
---------------------------
NET CASH USED IN
INVESTING ACTIVITIES. . . . . . . . . . . . (131,443) (136,540)
---------------------------
Decrease in cash and
cash equivalents. . . . . . . . . . . . . . . . . . (131,443) (53,398)
Cash and cash equivalents
at beginning of year. . . . . . . . . . . . . . . . 157,848 97,409
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CASH AND CASH EQUIVALENTS
AT END OF PERIOD . . . . . . . . . . . . . $ 26,405 $ 44,011
---------------------------
---------------------------
</TABLE>
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)
(B) TRUST DEED NOTES RECEIVABLE
<TABLE>
<CAPTION>
MONTHLY
PAYMENT,
INCLUDING DECEMBER 31 MARCH 31
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 $1,028,220
-------
-------
Less net deferred loan origination fees . . . . . . . . . . . . . . . 2,020 1,745
Less Current portion. . . . . . . . . . . . . . . . . . . . . . . . . 11,894 11,983
--------------------------
$1,017,476 $1,014,492
--------------------------
--------------------------
</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 three months ended March 31, 1996 decreased $4,221
or 3.7% over the comparable 1995 period. 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 the past few years.
Total expenses decreased $252,853 for the three months ended March 31, 1996
over the same period March 31, 1995. Servicing related expenses increased 76.2%
and general and administrative expenses decreased $261,587 for the three months
ended March 31, 1996 over the same period March 31, 1995. Expenses related to
real estate acquired in settlement of loans decreased 6.0% for the three months
ended March 31, 1996 as compared to the same period March 31, 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 $270,000.
Net income per limited partnership unit increased from $14.86 loss per unit
for the three months ended March 31, 1995 to a profit of $3.88 per unit for the
three months ended March 31, 1996. This increase in unit income resulted mainly
from the reduction in general and administrative expenses.
The Partnership working capital increased by $67,440 during the three
months ended March 31, 1996. The Partnership has adequate working capital and
cash reserves to carry on its business.
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
March 31, 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: May , 1996 /s/ JOHN P. SULLIVAN
-----------------------------------
Keystone Mortgage Company
By: John P. Sullivan, President
Date: May , 1996 /s/ JOHN P. SULLIVAN
-----------------------------------
John P. Sullivan
General Partner
Date: May , 1996 /s/ CHRISTOPHER E. TURNER
-----------------------------------
Christopher E. Turner
General Partner
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 26,405
<SECURITIES> 1,973,918
<RECEIVABLES> 1,070,364
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,056,195
<PP&E> 1,300,000
<DEPRECIATION> 210,196
<TOTAL-ASSETS> 4,160,491
<CURRENT-LIABILITIES> 272,927
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,887,564
<TOTAL-LIABILITY-AND-EQUITY> 4,160,491
<SALES> 0
<TOTAL-REVENUES> 108,203
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 56,747
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 51,456
<INCOME-TAX> 0
<INCOME-CONTINUING> 51,456
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,456
<EPS-PRIMARY> 3.88
<EPS-DILUTED> 3.88
</TABLE>
