<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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, 1995 0-15537
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KEYSTONE MORTGAGE FUND II,
A CALIFORNIA LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter.)
CALIFORNIA 95-4061580
(State of Incorporation) (I.R.S. Employer
Identification No.)
11340 W. OLYMPIC
BOULEVARD
SUITE 300
LOS ANGELES, CALIFORNIA 90064-1661
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (310) 479-4121
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
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 II,
A CALIFORNIA LIMITED PARTNERSHIP
INDEX
PAGE
---------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
(a) Condensed Balance Sheets, December
31, 1994 and June 30, 1995........ 3
(b) Condensed Statements of Income,
three and six months ended,
June 30, 1995 and 1994............. 4
(c) Condensed Statements of Partners'
Capital (Deficit) for the year
ended December 31, 1994 and for
the six months ended June 30,
1995.............................. 5
(d) Condensed Statements of Cash
Flows, six months ended
June 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
2
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KEYSTONE MORTGAGE FUND II,
A CALIFORNIA LIMITED PARTNERSHIP
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER
31 JUNE 30
1994 1995
---------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents............. $ 207,216 $ 10,755
Short-term investments................ 1,003,965 2,667,283
Interest receivable on trust deed
notes receivable..................... 21,408 9,340
Current portion of trust deed notes
receivable (note B).................. 1,483,373 35,760
---------- -----------
TOTAL CURRENT ASSETS................ 2,715,962 2,723,138
Trust deed notes receivable, net (note
B)..................................... 1,467,525 1,447,789
---------- -----------
$4,183,487 $ 4,170,927
---------- -----------
---------- -----------
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Due General Partners.................. $ 244,000
Accounts Payable...................... $ 1,852 648
---------- -----------
TOTAL CURRENT LIABILITIES........... 1,852 244,648
PARTNERS' CAPITAL
General Partners...................... (207,816) (208,963)
Limited Partners -- 41,454 units
outstanding 1994 and 1995,
respectively......................... 4,389,451 4,135,242
---------- -----------
NET PARTNERS' CAPITAL............... 4,181,635 3,926,279
---------- -----------
$4,183,487 $ 4,170,927
---------- -----------
---------- -----------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
KEYSTONE MORTGAGE FUND II,
A CALIFORNIA LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
----------------- -------------------
1995 1994 1995 1994
------- -------- --------- --------
<S> <C> <C> <C> <C>
Revenue:
Interest on mortgage loans............ $59,490 $108,837 $ 125,556 $238,786
Interest on short-term investments.... 19,151 7,242 34,662 16,456
------- -------- --------- --------
78,641 116,079 160,218 255,242
Expenses:
Servicing related expenses............ 13,415 11,798 27,231 32,220
General and administrative expenses... 3,823 758 247,726 2,292
------- -------- --------- --------
17,238 12,556 274,957 34,512
------- -------- --------- --------
NET INCOME.......................... $61,403 $103,523 $(114,739) $220,730
------- -------- --------- --------
------- -------- --------- --------
Weighted average number of limited
partnership units outstanding.......... 41,454 41,454 41,454 41,454
------- -------- --------- --------
------- -------- --------- --------
Net income (loss) per limited
partnership unit....................... $ 1.48 $ 2.50 $ (2.77) $ 5.33
------- -------- --------- --------
------- -------- --------- --------
</TABLE>
See notes to financial statements.
4
<PAGE>
KEYSTONE MORTGAGE FUND II,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
--------- ---------- ----------
<S> <C> <C> <C>
Balance at December 31, 1994............ $(207,816) $4,389,451 $4,181,635
Net income (loss) six months ended June
30, 1995............................... (1,147) (113,592) (114,739)
Distributions........................... (140,617) (140,617)
--------- ---------- ----------
Balance at June 30, 1995 (unaudited).... $(208,963) $4,135,242 $3,926,279
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
See notes to financial statements.
5
<PAGE>
KEYSTONE MORTGAGE FUND II,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30
-----------------------
1995 1994
----------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)..................... $ (114,739) $ 220,730
Changes in operating assets and
liabilities:
Amortization of net origination
fees............................... (854) (1,200)
Decrease in interest receivable..... 12,068 13,958
Decrease in accounts payable........ (1,204) (1,628)
Increase in due general partners.... 244,000
Decrease in other assets............ 648
----------- ----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES....................... 139,271 232,508
INVESTING ACTIVITIES:
Decrease in notes receivable.......... 1,468,203 1,950,710
Increase in short term investments.... (1,663,318)
FINANCING ACTIVITIES:
Distribution and withdrawals.......... (140,617) (731,501)
----------- ----------
Increase (decrease) in cash and cash
equivalents.......................... (196,461) 1,451,717
Cash and cash equivalents at beginning
year................................. 207,216 1,069,015
----------- ----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD........................ $ 10,755 $2,520,732
----------- ----------
----------- ----------
</TABLE>
See notes to financial statements.
6
<PAGE>
KEYSTONE MORTGAGE FUND II,
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 II 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 II,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(B) TRUST DEED NOTES RECEIVABLE
<TABLE>
<CAPTION>
MONTHLY
PAYMENT, DECEMBER
INCLUDING 31 JUNE 30
INTEREST 1994 1995
--------- --------- ------------
<S> <C> <C> <C>
First trust deed on industrial building,
rate of 10.75%, due October 1, 1995.... $ 16,592 $1,449,254 $
First trust deed on industrial building,
interest rate, adjusted every six
months at 2.65% plus 11th District
monthly weighted average cost of funds,
due February 1, 1999................... $ 16,797 1,572,584 1,553,635
--------- --------- ------------
---------
3,021,838 1,553,635
Less current portion.................... 1,483,373 35,760
Less net deferred origination fees...... 6,940 6,086
Les allowance for loss.................. 64,000 64,000
--------- ------------
Net concurrent trust deed notes
receivable........................... $1,467,525 $ 1,447,789
--------- ------------
--------- ------------
</TABLE>
8
<PAGE>
KEYSTONE MORTGAGE FUND II,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Revenue for the six months ended June 30, 1995 decreased $95,024 or 37.2%
over the same period June 30, 1994. Revenue for the three months ended June 30,
1995 decreased $37,438 or 32.2% for the same period ending June 30, 1994.
This decrease was due to a decrease in interest income as a result of
distribution of loan payoff to limited partners.
Servicing expenses decreased 15.5% and general and administrative expenses
increased $245,434 for the six months ended June 30, 1995 over the same period
ended June 30, 1994. Servicing expenses increased 13.7% and general and
administrative expenses increased $3,065 for the three months ended June 30,
1995 over the same period 1994.
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 $244,000 at
June 30, 1995.
Net income decreased $335,469 for the six months ended June 30, 1995 over
the same period June 30, 1994. Net income decreased $42,120 or 40.6% for the
three months ended June 30, 1995 over the same period June 30, 1994.
Working capital decreased $235,620 for six months ended June 30, 1995
because of distributions to limited partners during the period. 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. Revenues and net income continue to decrease
as the Partnership liquidates its assets.
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, 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 II
a California Limited Partnership
<TABLE>
<S> <C>
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
</TABLE>
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 10,755
<SECURITIES> 2,667,283
<RECEIVABLES> 1,562,975
<ALLOWANCES> 64,000
<INVENTORY> 0
<CURRENT-ASSETS> 45,100
<PP&E> 12,760
<DEPRECIATION> 12,760
<TOTAL-ASSETS> 4,170,927
<CURRENT-LIABILITIES> 244,648
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 3,926,279
<TOTAL-LIABILITY-AND-EQUITY> 4,170,927
<SALES> 0
<TOTAL-REVENUES> 160,218
<CGS> 0
<TOTAL-COSTS> 274,957
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (114,739)
<INCOME-TAX> 0
<INCOME-CONTINUING> (114,739)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (114,739)
<EPS-PRIMARY> (2.77)
<EPS-DILUTED> (2.77)
</TABLE>
