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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, 1998 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
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
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Item 1. Financial Statements.
<S> <C>
(a) Condensed Balance Sheets, December 31, 1997 and March 31, 1998. . . . . . . . . . . . . . . . . . . . . 3
(b) Condensed Statements of Income, three months ended,
March 31, 1998 and 1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Condensed Statements of Partners' Capital (Deficit) for the year ended
December 31, 1997 and the three months ended March 31, 1998 . . . . . . . . . . . . . . . . . . . . . . 5
(d) Condensed Statements of Cash Flows, three months ended
March 31, 1998 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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
</TABLE>
2
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KEYSTONE MORTGAGE FUND II,
A CALIFORNIA LIMITED PARTNERSHIP
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(Unaudited)
*December 31 March 31
1997 1998
-------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 12,484 $ 4,262
Short-term investments (market value of $392,695 in 1997
and $684,00 in 1996) . . . . . . . . . . . . . . . . . . . . . . 392,695 420,274
Interest receivable on trust deed notes receivable. . . . . . . . . 9,162 9,244
Current portion of trust deed notes receivable (note 4) . . . . . . 35,727 1,396,483
---------- ----------
Total current assets. . . . . . . . . . . . . . . . . . . . . . 450,068 1,830,263
Trust deed notes receivable, net (note 4). . . . . . . . . . . . . . . 1,368,718 - 0 -
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$1,818,786 $1,830,263
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LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Accounts payable and other liabilities. . . . . . . . . . . . . . . $ 11,120 $ 611
Due general partners (note 3) . . . . . . . . . . . . . . . . . . . 269,000 271,500
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Total Current Liabilities . . . . . . . . . . . . . . . . . . . 280,120 272,111
Partners' capital:
General Partners. . . . . . . . . . . . . . . . . . . . . . . . . . 632 827
Limited Partners - authorized 41,459 units;
outstanding 41,459 units . . . . . . . . . . . . . . . . . . . . 1,538,034 1,557,325
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Total Partners' capital . . . . . . . . . . . . . . . . . . . . 1,538,666 1,558,152
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$1,818,786 $1,830,263
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---------- ----------
</TABLE>
See accompanying notes to financial statements.
* Extracted from audited December 31, 1997 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
1998 1997
------------------
<S> <C> <C>
Revenue:
Interest on mortgage loans. . . . . . . $28,074 $27,099
Interest on short-term investments. . . 4,724 11,149
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32,798 38,248
Expenses:
Servicing related expenses. . . . . . . 8,283 9,540
General and administrative expenses . . 5,029 5,078
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13,312 14,618
NET INCOME. . . . . . . . . . . . . . 19,486 $23,630
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Weighted average number of
limited partnership units outstanding . . 41,459 41,459
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------- -------
Net income per limited
partnership unit. . . . . . . . . . . . . $ .47 $ .57
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</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, 1997 . . . . . . . . . . . . . . . . . . $ 632 $1,538,034 $1,538,666
Net income three months ended March 31, 1998 . . . . . . . . . . 195 19,291 19,486
------ ---------- ----------
Balance as of March 31, 1998 (unaudited) . . . . . . . . . . . . $ 827 $1,557,325 $1,558,152
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------ ---------- ----------
</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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1998 1997
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<S> <C> <C>
OPERATING ACTIVITIES
Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,486 $ 23,630
Changes in operating assets and liabilities:
Amortization of net origination fees. . . . . . . . . . . . . (425) (425)
Decrease (increase) in interest and accounts receivable . . . (82) 639
Increase in due general partners. . . . . . . . . . . . . . . 2,500 2,500
Increase in accounts payable. . . . . . . . . . . . . . . . . (10,509) (671)
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NET CASH PROVIDED BY
OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . 10,970 25,673
INVESTING ACTIVITIES:
Decrease in notes receivable. . . . . . . . . . . . . . . . . . . 8,387 9,785
Increase in short-term investments. . . . . . . . . . . . . . . . (27,579) (46,853)
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NET CASH PROVIDED BY
OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . (19,192) (37,068)
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Decrease in cash and cash equivalents . . . . . . . . . . . . . . (8,222) (11,395)
Cash and cash equivalents at beginning year . . . . . . . . . . . 12,484 15,808
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CASH AND CASH EQUIVALENTS
AT END OF PERIOD . . . . . . . . . . . . . . . . . . . . $ 4,262 $ 4,413
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-------- --------
</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, 1997 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 1997 1998
-------- ---- ----
<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 . . . $11,426 $1,470,285 $1,461,898
-------
-------
Less current portion . . . . . . . . . . . . . . . . . . . . . . 35,727 1,396,483
Less net deferred loan origination fees. . . . . . . . . . . . . 1,840 1,415
Less allowance for loss. . . . . . . . . . . . . . . . . . . . . 64,000 64,000
-------- --------
Net concurrent trust deed notes receivable. . . . . . . . . $1,368,718 $- 0 -
---------- ------
---------- ------
</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 $5,450 or 14.2% for the three months ended March
31, 1998 over the same period March 31, 1997. This decrease was due to a
decrease in interest income as a result of loan payoffs and distribution of
capital to Limited partners, less required reserves.
Total expenses decreased 8.9% for the three months ended March 31, 1998
over the same period March 31, 1997. Servicing related expenses decreased 13.7%
and G & A expenses decreased 0.1% for the three months ended March 31, 1998 over
the same period March 31, 1997.
Net income decreased 15.5% for the three months ended March 31, 1998 over
the same period March 31, 1997. Net income per limited partnership unit
decreased 17.5% for the three months ended March 31, 1998 over the same 1997
period.
Working capital increased $1,388,204 for the three months ended March 31,
1998. 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, 1998.
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: May 14, 1998 /s/ JOHN P. SULLIVAN
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Keystone Mortgage Company
By: John P. Sullivan, President
Date: May 14, 1998 /s/ JOHN P. SULLIVAN
-----------------------------------
John P. Sullivan
General Partner
Date: May 14, 1998 /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-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,262
<SECURITIES> 420,274
<RECEIVABLES> 1,405,727
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,830,263
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,830,263
<CURRENT-LIABILITIES> 272,111
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,558,152
<TOTAL-LIABILITY-AND-EQUITY> 1,830,263
<SALES> 0
<TOTAL-REVENUES> 32,798
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,486
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
