<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED COMMISSION FILE NUMBER
MARCH 31, 1996 0-15537
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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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KEYSTONE MORTGAGE FUND II
A CALIFORNIA LIMITED PARTNERSHIP
INDEX
PAGE
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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
2
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KEYSTONE MORTGAGE FUND II,
A CALIFORNIA LIMITED PARTNERSHIP
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(Unaudited)
*December 31 March 31
1995 1996
-------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents ........................................ $ 93,997 $ 5,936
Short-term investments (market value of $1,085,049 in 1995
and $1,226,292 in 1996)......................................... 1,083,120 1,211,867
Interest receivable on trust deed notes receivable ............... 10,005 9,753
Current portion of trust deed notes receivable (note B) .......... 36,218 36,220
-------------------------
Total current assets ........................................... 1,223,340 1,263,776
Trust deed notes receivable, net (note B)........................... 1,432,975 1,426,007
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$2,656,315 $2,689,783
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LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Accounts payable and other liabilities............................ $ 641 $ 638
Due general partners.............................................. 249,000 251,500
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Total Current Liabilities................................... 249,641 252,138
Partners' capital:
General Partners.................................................. (207,958) (207,648)
Limited Partners - 41,459 units outstanding in 1996 and 1995
respectively .................................................. 2,614,632 2,645,293
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Net partners' capital....................................... 2,406,674 2,437,645
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$2,656,315 $2,689,783
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-------------------------
</TABLE>
See accompanying notes to financial statements.
*Extracted from audited December 31, 1995 financial statements.
3
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KEYSTONE MORTGAGE FUND II,
A CALIFORNIA LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1996 1995
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<S> <C> <C>
Revenue:
Interest on mortgage loans .................... $ 29,989 $ 66,066
Interest on short-term investments ............ 19,497 15,511
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......................................... 49,486 81,577
Expenses:
Servicing related expenses .................... 13,223 13,816
General and administrative expenses............ .5,292 243,903
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18,515 257,719
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NET INCOME (Loss)........................ $30,971 $(176,142)
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--------------------
Weighted average number of limited
partnership units outstanding................... 41,459 41,459
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--------------------
Net income (loss) per limited
partnership unit ............................... $ .75 $ (4.25)
--------------------
--------------------
</TABLE>
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, 1995 ....................... ($207,958) $2,614,632 $2,406,674
Net income three months ended March 31, 1996 310 30,661 30,971
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Balance as of March 31, 1996 (unaudited) ........... ($207,648) $2,645,293 $2,437,645
------------------------------------
------------------------------------
</TABLE>
5
<PAGE>
KEYSTONE MORTGAGE FUND II,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31
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1996 1995
--------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income (loss) ........................................ $ 30,971 $(176,142)
Changes in operating assets and liabilities:
Amortization of net origination fees .................. (425) (427)
Decrease (Increase) in interest receivable ............ 252 (707)
Increase in due general partners ...................... 2,500 241,500
Decrease in accounts payable .......................... (3) (283)
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NET CASH PROVIDED BY
OPERATING ACTIVITIES .............................. 33,295 63,941
INVESTING ACTIVITIES:
Decrease in notes receivable.............................. 7,391 39,182
Increase in short-term investments........................ (128,747) (249,657)
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NET CASH PROVIDED BY INVESTING
ACTIVITIES:........................................ (121,356) (210,475)
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Decrease in cash and cash equivalents .................... (88,061) (146,534)
Cash and cash equivalents at beginning of year ........... 93,997 207,216
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CASH AND CASH EQUIVALENTS
AT END OF PERIOD .................................. $ 5,936 $ 60,682
--------- ---------
--------- ---------
</TABLE>
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, 1995 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 March 31
interest 1995 1996
--------- ----------- ----------
<S> <C> <C> <C>
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 $1,538,433 $1,531,042
-------
-------
Less current portion ................................................ 36,218 36,220
Less net deferred loan origination fees.............................. 5,240 4,815
Less allowance for loss.............................................. 64,000 64,000
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Net concurrent trust deed notes receivable ...................... $1,432,975 $1,426,007
---------- ----------
---------- ----------
</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
Total revenue decreased $32,091 or 39.3% for the three months ended March
31, 1996 over the same period March 31, 1995. This decrease was due to a
decrease in interest income from mortgage loans as a result of loan payoffs
and distribution of capital to Limited partners, less required reserves.
Total expenses decreased $239,204 for the three months ended March 31,
1996 over the same period March 31, 1995. Servicing related expenses
decreased 4.3% and G & A expenses decreased $238,611 for the three months
ended March 31, 1996 over 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 $241,500.
Net income increased $207,713 for the three months ended March 31, 1996
over the same period March 31, 1995. Net income per limited partnership unit
increased $5.00 for the three months ended March 31, 1996 over the same 1995
period.
Working capital increased $37,939 for three months ended March 31, 1996.
The Partnership has adequate working capital and cash reserves to carry on
its business.
9
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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
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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: May , 1996 /s/ JOHN P. SULLIVAN
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Keystone Mortgage Company
By: John P. Sullivan, President
Date: May , 1996 /s/ JOHN P. SULLIVAN
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John P. Sullivan
General Partner
Date: May , 1996 /s/ CHRISTOPHER E. TURNER
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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> 5,936
<SECURITIES> 1,211,867
<RECEIVABLES> 1,526,227
<ALLOWANCES> 64,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,263,776
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,689,783
<CURRENT-LIABILITIES> 252,138
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,437,645
<TOTAL-LIABILITY-AND-EQUITY> 2,689,783
<SALES> 0
<TOTAL-REVENUES> 49,486
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 18,515
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 30,971
<INCOME-TAX> 0
<INCOME-CONTINUING> 30,971
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,971
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
