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, 1997 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, 1996 and March 31, 1997 . . . . . . . . . . . . . . . . . . . . . 3
(b) Condensed Statements of Income, three months ended,
March 31, 1997 and 1996. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Condensed Statements of Partners' Capital (Deficit) for the year ended
December 31, 1996 and the three months ended March 31, 1997. . . . . . . . . . . . . . . . . . . . . . . 5
(d) Condensed Statements of Cash Flows, three months ended
March 31, 1997 and 1996. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(e) Notes to condensed financial statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 & 8
Item 2. Management's discussion and analysis of financial condition and
results of operation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 March 31
1996 1997
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Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . $ 15,808 $ 4,413
Short-term investments (market value of $984,005 in 1996
and $730,858 in 1997). . . . . . . . . . . . . . . . . . . . . . . . . . 684,005 730,858
Interest receivable on trust deed notes receivable . . . . . . . . . . . 9,321 8,682
Current portion of trust deed notes receivable (note B). . . . . . . . . 39,732 43,620
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Total current assets . . . . . . . . . . . . . . . . . . . . . . . . 748,866 787,573
Trust deed notes receivable, net (note B) 1,397,966 1,384,718
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$2,146,832 $2,172,291
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LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Accounts payable and other liabilities . . . . . . . . . . . . . . . . . $ 1,295 $ 624
Due general partners . . . . . . . . . . . . . . . . . . . . . . . . . . 259,000 261,500
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Total Current Liabilities. . . . . . . . . . . . . . . . . . 260,295 262,124
Partners' capital:
General Partner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (206,601) (206,365)
Limited Partners - 41,459 units outstanding in 1996 and 1997
respectively. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,093,138 2,116,532
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Net partners' capital. . . . . . . . . . . . . . . . . . . . 1,886,537 1,910,167
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$2,146,832 $2,172,291
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See accompanying notes to financial statements.
* Extracted from audited December 31, 1996 financial statements.
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KEYSTONE MORTGAGE FUND II,
A CALIFORNIA LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended
March 31
1997 1996
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Revenue:
Interest on mortgage loans. . . . . . . . . . . . . . $ 27,099 $29,989
Interest on short-term investments. . . . . . . . . . 11,149 19,497
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38,248 49,486
Expenses:
Servicing related expenses 9,540 13,223
General and administrative expenses 5,078 5,292
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14,618 18,515
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NET INCOME . . . . . . . . . . . . . . . . . . . $ 23,630 $30,971
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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. . . . . . . . . $ .57 $ .75
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4
KEYSTONE MORTGAGE FUND II,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF PARTNER'S CAPITAL (DEFICIT)
General Limited
Partners Partners Total
-------- -------- -----
Balance at December 31, 1996. . . . . . . . . . . $(206,601) $2,093,138 $1,886,537
Net income three months ended March 31, 1997. . . 236 23,394 23,630
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Balance as of March 31, 1997 (unaudited). . . . . $(206,365) $2,116,532 $1,910,167
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KEYSTONE MORTGAGE FUND II,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
Three Months Ended March 31
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1997 1996
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OPERATING ACTIVITIES:
Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,630 $ 30,971
Changes in operating assets and liabilities:
Amortization of net origination fees. . . . . . . . . . . . . . . . . . (425) (425)
Decrease in interest and accounts receivable. . . . . . . . . . . . . . 639 252
Increase in due general partners. . . . . . . . . . . . . . . . . . . . 2,500 2,500
Decrease in accounts payable. . . . . . . . . . . . . . . . . . . . . . (671) (3)
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NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . . . . . . 25,673 33,295
INVESTING ACTIVITIES:
Decrease in notes receivable. . . . . . . . . . . . . . . . . . . . . . . . 9,785 7,391
Increase in short-term investments. . . . . . . . . . . . . . . . . . . . . (46,853) (128,747)
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NET CASH PROVIDED BY
OPERATING ACTIVITIES. . . . . . . . . . . . . . . . . . . . . . . . . . (37,068) (121,356)
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Decrease in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . (11,395) (88,061)
Cash and cash equivalents at beginning year . . . . . . . . . . . . . . . . . 15,808 93,997
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CASH AND CASH EQUIVALENTS
AT END OF PERIOD. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,413 $ 5,936
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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, 1996 filed by the Company
under the Securities Exchange Act of 1934.
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KEYSTONE MORTGAGE FUND II,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(B) TRUST DEED NOTES RECEIVABLE
Monthly
Payment,
including December 31 March 31
interest 1996 1997
--------- ---- ----
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 $1,505,238 $1,495,453
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--------
Less current portion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,732 43,620
Less net deferred loan origination fees . . . . . . . . . . . . . . . . . . . . . . . 3,540 3,115
Less allowance for loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,000 64,000
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Net concurrent trust deed notes receivable. . . . . . . . . . . . . . . . . . . . . $1,397,966 $1,384,718
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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 $11,238 or 22.7% for the three months ended
March 31, 1997 over the same period March 31, 1996. 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 21.1% for the three months ended March 31, 1997
over the same period March 31, 1996. Servicing related expenses decreased
27.9% and G & A expenses decreased 4.1% for the three months ended March 31,
1997 over the same period March 31, 1996.
Net income decreased 21.1 % for the three months ended March 31, 1997 over
the same period March 31, 1996. Net income per limited partnership unit
decreased 24.0% for the three months ended March 31, 1997 over the same 1996
period.
Working capital increased $36,878 for three months ended March 31, 1997.
The Partnership has adequate working capital and cash reserves to carry on
its business.
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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, 1997.
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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
/s/ John P. Sullivan
Date: May 7, 1997 -------------------------------
Keystone Mortgage Company
By: John P. Sullivan,
President
/s/ John P. Sullivan
Date: May 7, 1997 -------------------------------
John P. Sullivan
General Partner
/s/ Christopher E. Turner
Date: May 7, 1997 -------------------------------
Christopher E. Turner
General Partner
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