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, 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
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
(a) Condensed Balance Sheets, December 31, 1995 and September 30, 1996 . . . . . . . . . . . . 3
(b) Condensed Statements of Income, three and nine months ended,
September 30, 1996 and 1995. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Condensed Statements of Partners' Capital (Deficit) for the year ended
December 31, 1995 and the nine months ended September 30, 1996.. . . . . . . . . . . . . 5
(d) Condensed Statements of Cash Flows, nine months ended
September 30, 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 & 11
2
KEYSTONE MORTGAGE FUND II,
A CALIFORNIA LIMITED PARTNERSHIP
BALANCE SHEETS
ASSETS
(Unaudited)
*December 31 September 30
1995 1996
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Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . $ 93,997 $ 23,118
Short-term investments (market value of $1,085,049 in 1995
and $1,174,680 in 1996). . . . . . . . . . . . . . . . . 1,083,120 1,157,238
Interest receivable on trust deed notes receivable. . . . . 10,005 9,380
Current portion of trust deed notes receivable (note B) . . 36,218 36,428
-------------- -------------
Total current assets. . . . . . . . . . . . . . . . . . . . 1,223,340 1,226,164
Trust deed notes receivable, net (note B) . . . . . . . . . 1,432,975 1,410,350
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$2,656,315 $2,636,514
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-------------- -------------
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Accounts payable and other liabilities . . . . . . . . $ 641 $ 632
Due general partners . . . . . . . . . . . . . . . . . 249,000 256,500
-------------- -------------
Total Current Liabilities. . . . . . . . . 249,641 257,132
Partners' capital:
General Partners . . . . . . . . . . . . . . . . . . . (207,958) (207,183)
Limited Partners - 41,459 units outstanding in 1996 and 1995
respectively . . . . . . . . . . . . . . . . . . . . . 2,614,632 2,586,565
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Net partners' capital. . . . . . . . . . . 2,406,674 2,379,382
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$2,656,315 $2,636,514
-------------- -------------
-------------- -------------
See accompanying notes to financial statements.
* Extracted from audited December 31, 1995 financial statements.
3
KEYSTONE MORTGAGE FUND II,
A CALIFORNIA LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
Nine Months Ended Three Months Ended
September 30 September 30
1996 1995 1996 1995
---- ---- ---- ----
Revenue:
Interest on mortgage loans . . . . . . . . . . . . . . . . . $ 89,341 $155,419 $ 29,570 $ 29,863
Interest on short-term investments . . . . . . . . . . . . . 33,027 47,454 895 12,792
-------- -------- -------- ---------
122,368 202,873 30,465 42,655
Expenses:
Servicing related expenses . . . . . . . . . . . . . . . . . 29,791 33,941 5,795 6,710
General and administrative expenses. . . . . . . . . . . . . 15,087 252,473 4,889 4,747
-------- -------- -------- ---------
44,878 286,414 10,684 11,457
-------- -------- -------- ---------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . $ 77,490 $(83,541) $ 19,781 $ 31,198
-------- -------- -------- ---------
-------- -------- -------- ---------
Weighted average number of
limited partnership units outstanding . . . . . . . . . . . . 41,459 41,459 41,459 41,459
-------- -------- -------- ---------
-------- -------- -------- ---------
Net income (loss) per limited partnership unit . . . . . . . . . $ 1.87 $ (2.02) $ .48 $ .75
-------- -------- -------- ---------
-------- -------- -------- ---------
See notes to financial statements
4
KEYSTONE MORTGAGE FUND II,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF PARTNER'S CAPITAL (DEFICIT)
General Limited
Partners Partners Total
-------- -------- -----
Balance at December 31, 1995. . . . . . . . . . . $(207,958) $2,614,632 $2,406,674
Net income six months ended September 30, 1996. . 775 76,715 77,490
Distributions . . . . . . . . . . . . . . . . . . (104,782) (104,782)
----------- ------------ -----------
Balance as of September 30, 1996 (unaudited). . . $(207,183) $2,586,565 $2,379,382
----------- ------------ -----------
----------- ------------ -----------
5
KEYSTONE MORTGAGE FUND II,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
Nine Months Ended September 30
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1996 1995
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OPERATING ACTIVITIES:
Net Income (loss) . . . . . . . . . . . . . . . . . . . $ 77,490 $(83,541)
Changes in operating assets and liabilities:
Amortization of net origination fees. . . . . . . . (1,275) (1,281)
Decrease in interest and accounts receivable. . . . 625 11,358
Increase in due general partners. . . . . . . . . . 7,500 246,500
Decrease in accounts payable. . . . . . . . . . . . (10) (1,207)
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NET CASH PROVIDED BY OPERATING ACTIVITIES. . . . 84,330 171,829
INVESTING ACTIVITIES:
Decrease in notes receivable. . . . . . . . . . . . . . 23,690 1,476,493
Increase in short-term investments. . . . . . . . . . . (74,118) (1,710,846)
FINANCING ACTIVITIES:
Distribution and withdrawals. . . . . . . . . . . . . . (104,782) (140,617)
--------- --------
Decrease in cash and cash equivalents . . . . . . . . . (70,880) (203,141)
Cash and cash equivalents at beginning year . . . . . . 93,997 207,216
--------- --------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD . . . . . . . . . . . . . . . . $ 23,117 $ 4,075
--------- --------
--------- --------
See notes to financial statements
6
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
KEYSTONE MORTGAGE FUND II,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(B) TRUST DEED NOTES RECEIVABLE
Monthly
Payment,
including December 31 September 30
interest 1995 1996
-------- ---- ----
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. . . . . . . . . $12,529 $1,538,433 $1,514,743
-------
-------
Less current portion . . . . . . . . . . . . . . 36,218 36,428
Less net deferred loan origination fees. . . . . 5,240 3,965
Less allowance for loss. . . . . . . . . . . . . 64,000 64,000
---------- ----------
Net concurrent trust deed notes receivable . $1,432,975 $1,410,350
---------- ----------
---------- ----------
8
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, 1996 decreased $80,505 or
39.6% over the same period September 30, 1995. Revenue for the three months
ended September 30, 1996 decreased $12,190 or 28.6% for the same period ending
Sept. 30, 1995.
This decrease was due to a decrease in interest income as a result of
distribution of loan payoff to limited partners.
Servicing expenses decreased 12.2% and general and administrative expenses
decreased $237,386 for the nine months ended September 30, 1996 over the same
period ended September 30, 1995. Servicing expenses decreased 13.6% and general
and administrative expenses increased 2.9% for the three months ended September
30, 1996 over the same period 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 at
June 30, 1995.
Net income increased $161,031 for the nine months ended September 30, 1996
over the same period September 30, 1995. Net income decreased $ 11,417 or 36.5%
for the three moths ended September 30, 1996 over the same period September 30,
1995.
Working capital decreased $4,667 for nine months ended September 30, 1996
because of distributions to limited partners during the period. The Partnership
has adequate working capital and cash reserved 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
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, 1996.
10
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: November 12, 1996 /s/ JOHN P. SULLIVAN
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Keystone Mortgage Company
By: John P. Sullivan, President
Date: November 12, 1996 /s/ JOHN P. SULLIVAN
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John P. Sullivan
General Partner
Date: November 12, 1996 /s/ CHRISTOPHER E. TURNER
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Christopher E. Turner
General Partner
11