<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 0-15537
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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 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 II
A CALIFORNIA LIMITED PARTENERSHIP
INDEX
PAGE
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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 II,
A CALIFORNIA LIMITED PARTNERSHIP
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30
1994 1995
-------------------------
-------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . $ 207,216 $ 4,075
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . 1,003,965 2,714,812
Interest receivable on trust deed notes receivable . . . . . . . . . . . 21,408 10,050
Current portion of trust deed notes receivable (note B). . . . . . . . . 1,483,373 36,220
---------- ----------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . 2,715,962 2,765,157
Trust deed notes receivable, net (note B). . . . . . . . . . . . . . . . . 1,467,525 1,439,465
---------------------------
$4,183,487 $4,204,622
---------------------------
---------------------------
<CAPTION>
LIABILITIES AND PARTNERS' CAPITAL
<S> <C> <C>
CURRENT LIABILITIES
Due general partners . . . . . . . . . . . . . . . . . . . . . . . . . . $ 246,500
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,852 645
---------------------------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . 1,852 247,145
PARTNERS' CAPITAL
General Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . (207,816) (208,651)
Limited partners - 41,454 units outstanding 1994 and 1995,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,389,451 4,166,128
---------------------------
NET PARTNERS' CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 4,181,635 3,957,477
---------------------------
$4,183,487 $4,204,622
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---------------------------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
KEYSTONE MORTGAGE FUND II,
A CALIFORNIA LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
---------------------------------------
1994 1995 1994 1995
----- ----- ----- ----
<S> <C> <C> <C> <C>
Revenue:
Interest on mortgage loans. . . . . . . . . . . . . . . . . $317,705 $155,419 $78,919 $29,863
Interest on short-term investments. . . . . . . . . . . . . 21,810 47,454 5,354 12,792
-------- ------- ------- -------
339,515 202,873 84,273 42,655
Expenses:
Servicing related expenses. . . . . . . . . . . . . . . . . 43,292 33,941 11,072 6,710
General and administrative expenses . . . . . . . . . . . . 3,033 252,473 741 4,747
-------- ------- ------- -------
46,325 286,414 11,813 11,457
-------- ------- ------- -------
NET INCOME. . . . . . . . . . . . . . . . . . . . . . . $293,190 ($ 83,541) $72,460 $31,198
-------- -------- ------- -------
-------- -------- ------- -------
Weighted average number of limited partnership
units outstanding. . . . . . . . . . . . . . . . . . . . . . 41,469 41,459 41,469 41,454
-------- ------- ------- -------
-------- ------- ------- -------
Net income (loss) per limited partnership unit . . . . . . . . $7.07 $ (2.02) $ 1.75 $ .75
-------- --------- ------- -------
-------- --------- ------- -------
</TABLE>
See notes to financial statements
4
<PAGE>
KEYSTONE MORTGAGE FUND II,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF PARTNER'S 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 nine months ended September 30, 1995. . . . . . . (835) (82,706) (83,541)
Distributions. . . . . . . . . . . . . . . . . . . . . . . . (140,617) (140,617)
--------- ---------- ----------
Balance as of September 30, 1995 (unaudited) . . . . . . . . . ($208,651) $4,166,128 $3,957,477
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
See notes to financial statements.
5
<PAGE>
KEYSTONE MORTGAGE FUND II,
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) . . . . . . . . . . . . . . . . . . . . . . $ (83,541) $ 293,190
Changes in operating assets and liabilities:
Amortization of net origination fees . . . . . . . . . . . (1,281) (1,800)
Decrease in interest and accounts receivable . . . . . . . 11,358 16,998
Increase in due general partners . . . . . . . . . . . . . 246,500
Decrease in accounts payable . . . . . . . . . . . . . . . (1,207) (1,714)
Decrease in other assets . . . . . . . . . . . . . . . . . 972
----------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES. . . . . . . 171,829 307,646
INVESTING ACTIVITIES:
Decrease in notes receivable. . . . . . . . . . . . . . . . . 1,476,493 2,305,025
Increase in short-term investments. . . . . . . . . . . . . . (1,710,846)
FINANCING ACTIVITIES:
Distributions and withdrawals . . . . . . . . . . . . . . . . (140,617) (731,501)
----------- ----------
Increase (decrease) in cash and cash equivalents. . . . . . . (203,141) 1,881,170
Cash and cash equivalents at beginning of year. . . . . . . . 207,216 1,069,015
----------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . $ 4,075 $2,950,185
----------- ----------
----------- ----------
</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,
INCLUDING DECEMBER 31 SEPTEMBER 30
INTEREST 1994 1995
--------- ---- ----
<S> <C> <C> <C>
First trust deed on an 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, 199 . . . . . . . . $16,797 1,572,584 1,545,345
-------- ---------- ----------
--------
3,021,838 1,545,345
Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,483,373 36,220
Less allowance for loss. . . . . . . . . . . . . . . . . . . . . . . . . . 6,940 5,660
Less net deferred loan origination fees. . . . . . . . . . . . . . . . . . 64,000 64,000
---------- ----------
Net concurrent trust deed notes receivable. . . . . . . . . . . . . . $1,467,525 $1,439,465
---------- ----------
---------- ----------
</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 nine months ended September 30, 1995 decreased $136,642 or
40.2% over the same period September 30, 1994. Revenue for the three months
ended September 30, 1995 decreased $41,618 or 49.4% for the same period ending
September 30, 1994. This decrease was due to a decrease in interest income as a
result of distribution of loan payoff to Limited Partners.
Servicing related expenses decreased 21.5% and general and administrative
expenses increased $249,440 for the nine months ended September 30, 1995 over
the same period ended September 30, 1994. Servicing related expenses decreased
39.4% and general and administrative expesnes increased $4,006 for the three
months ended September 30, 1995 over the same period 1994.
Net income decreased $376,731, or 128.4% for the nine months ended
September 30, 1995 over the same period September 30, 1994. Net income
decreased $41,262 or 56.9% for the three months ended September 30, 1995 over
the same period September 30, 1994.
Working capital decreased $196,098 for nine months ended September 30, 1995
because of distributions 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
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 II
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> 4,075
<SECURITIES> 2,714,812
<RECEIVABLES> 1,475,685
<ALLOWANCES> 64,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,765,157
<PP&E> 12,760
<DEPRECIATION> 12,760
<TOTAL-ASSETS> 4,204,622
<CURRENT-LIABILITIES> 247,145
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 3,957,477
<TOTAL-LIABILITY-AND-EQUITY> 4,204,622
<SALES> 0
<TOTAL-REVENUES> 202,873
<CGS> 0
<TOTAL-COSTS> 286,414
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (83,541)
<INCOME-TAX> 0
<INCOME-CONTINUING> (83,541)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (83,541)
<EPS-PRIMARY> (2.02)
<EPS-DILUTED> (2.02)
</TABLE>
