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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FINAL
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, 1999 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 PARTNERSHIP
INDEX
PART I.FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
Item 1. Financial Statements.
<S> <C>
(a) Condensed Balance Sheets, December 31, 1998 and March 31, 1999 . . . . . . . . . . . . . . . . . . . 3
(b) Condensed Statements of Income, three months ended,
March 31, 1999 and 1998. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Condensed Statements of Partners' Capital (Deficit) for the year ended
December 31, 1998 and the three months ended March 31, 1999. . . . . . . . . . . . . . . . . . . . 5
(d) Condensed Statements of Cash Flows, three months ended
March 31, 1999 and 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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>
December 31 March 31
1998 1999
---------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . $ 437,768 $ 1,889,764
Interest receivable on trust deed notes receivable . . . . 8,990 -
Trust deed notes receivable (note B) . . . . . . . . . . . 1,437,055 -
----------- -----------
Total current assets . . . . . . . . . . . . . . $ 1,883,813 $1,889,764
----------- -----------
----------- -----------
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Accounts payable and other liabilities . . . . . . . . . . $ 14,160 $ 67,500
Due to general partner . . . . . . . . . . . . . . . . . . 279,000 281,500
----------- -----------
Total Current Liabilities. . . . . . . . . . . . 293,160 349,000
----------- -----------
Partners' capital:
General Partners . . . . . . . . . . . . . . . . . . . . . 1,928 1,928
Limited Partners - authorized 41,459 units;
outstanding 41,459 units. . . . . . . . . . . . . . . . 1,588,725 1,538,836
----------- -----------
Total Partners' capital. . . . . . . . . . . . . 1,590,653 1,540,764
----------- -----------
$ 1,883,813 $1,889,764
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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>
Three Months Ended
March 31
1999 1998
----------------------------
<S> <C> <C>
Revenue:
Interest on mortgage loans . . . . . . . . . . . . . . $ 17,523 $ 28,074
Interest on short-term investments . . . . . . . . . . 10,304 4,724
---------- --------
27,827 32,798
Expenses:
Servicing related expenses . . . . . . . . . . . . . . 5,888 8,283
General and administrative expenses. . . . . . . . . . 4,328 5,029
Dissolution expenses . . . . . . . . . . . . . . . . . 67,500 -
---------- --------
77,716 13,312
NET INCOME . . . . . . . . . . . . . . . . . . $ (49,889) $ 19,486
---------- --------
---------- --------
Weighted average number of
limited partnership units outstanding. . . . . . . . . . 41,459 41,459
---------- --------
---------- --------
Net income per limited
partnership unit . . . . . . . . . . . . . . . . . . . . $ (1.20) $ .47
---------- --------
---------- --------
</TABLE>
5
<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, 1998. . . . . . . . . . . . . . . . $1,928 1,588,725 1,590,653
Net income three months ended March 31, 1999. . . . . . . . - (49,889) (49,889)
------ --------- ---------
Balance as of March 31, 1999 (unaudited). . . . . . . . . . $1,928 $1,538,836 $1,540,764
------ ---------- ----------
------ ---------- ----------
</TABLE>
5
<PAGE>
KEYSTONE MORTGAGE FUND II,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31
----------------------------
1999 1998
--------- ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . $ (49,889) $ 19,486
Changes in operating assets and liabilities:
Amortization of net origination fees . . . . . . . . . . . . . (140) (425)
Decrease (increase) in interest and accounts receivable. . . . 8,990 (82)
Increase in due general partners . . . . . . . . . . . . . . . 2,500 2,500
Increase (decrease) in accounts payable. . . . . . . . . . . . 53,340 (10,509)
---------- ------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES. . . . . . . . . . . . . . . . . . . 14,801 10,970
INVESTING ACTIVITIES:
Decrease in notes receivable. . . . . . . . . . . . . . . . . . . . 1,437,195 8,387
Increase in short-term investments. . . . . . . . . . . . . . . . . - (27,579)
---------- ------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES. . . . . . . . . . . . . . . . . . . 1,437,195 (19,192)
---------- ------------
Increase (decrease) in cash and cash equivalents. . . . . . . . . . 1,451,996 (8,222)
Cash and cash equivalents at beginning year . . . . . . . . . . . . 437,768 12,484
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CASH AND CASH EQUIVALENTS
AT END OF PERIOD. . . . . . . . . . . . . . . . . . . . . $1,889,764 $ 4,262
---------- ------------
---------- ------------
</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, 1998 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
interest 1998
--------- ----
<S> <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 $1,437,195
-------
-------
Less net deferred loan origination fees . . . . . . . . . . . . . . . . . . . . . . . . 140
----------
Net trust deed notes receivable. . . . . . . . . . . . . . . . . . . . . . . . . . $1,437,055
----------
----------
</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 $4,971 or 17.9% for the three months ended March
31, 1999 over the same period March 31, 1998. 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.
During the past quarter the last trust deed receivable was paid off. As a
result, the partnership was dissolved as of March 31, 1999 and a provision for
dissolution expenses established
Total expenses increased $64,404 for the three months ended March 31, 1999
over the same period March 31, 1998, due to the provision of dissolution
expenses of $67,500. Servicing related expenses decreased 28.9% and G & A
expenses decreased 13.9% for the three months ended March 31, 1999 over the same
period March 31, 1998.
Net income decreased $69,375 for the three months ended March 31, 1999 over
the same period March 31, 1998. Net income per limited partnership unit
decreased $1.67 for the three months ended March 31, 1999 over the same 1998
period.
Working capital decreased $49,889 for the three months ended March 31,
1999. The Partnership had adequate working capital and cash reserves to
liquidate the partnership as of March 31, 1999.
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, 1999.
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: April , 1999 /s/ JOHN P. SULLIVAN
---------------------------------
Keystone Mortgage Company
By: John P. Sullivan, President
Date: April , 1999 /s/ JOHN P. SULLIVAN
---------------------------------
John P. Sullivan
General Partner
Date: April , 1999 /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-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,889,764
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,889,764
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,889,764
<CURRENT-LIABILITIES> 349,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,540,764
<TOTAL-LIABILITY-AND-EQUITY> 1,540,764
<SALES> 0
<TOTAL-REVENUES> 27,827
<CGS> 0
<TOTAL-COSTS> 77,716
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> (49,889)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (49,889)
<EPS-PRIMARY> (1.20)
<EPS-DILUTED> 0
</TABLE>