-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SwjZSTg11pikdI4uvhfr2k3KIqzbmnlj2e+ACY01RbT5nySs1ZoiooHGuMetbzkx bSIKiKEF6qH1rU2lphUsGw== 0001047469-99-009054.txt : 19990310 0001047469-99-009054.hdr.sgml : 19990310 ACCESSION NUMBER: 0001047469-99-009054 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990309 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KEYSTONE MORTGAGE FUND II CENTRAL INDEX KEY: 0000812084 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 954061580 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-15537 FILM NUMBER: 99560752 BUSINESS ADDRESS: STREET 1: 11340 W OLYMPIC BLVD STE 300 CITY: LOS ANGELES STATE: CA ZIP: 90064 BUSINESS PHONE: 2134794121 MAIL ADDRESS: STREET 1: 11340 W OLYMPIC BLVD STREET 2: SUITE 300 CITY: LOS ANGELES STATE: CA ZIP: 90064 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED COMMISSION FILE NUMBER DECEMBER 31, 1998 0-15537 KEYSTONE MORTGAGE FUND II, A CALIFORNIA LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter.) CALIFORNIA 95-4061580 (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 11340 W. OLYMPIC BOULEVARD, STE. 300 LOS ANGELES, CALIFORNIA 90064 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (310) 479-4121 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: UNITS OF LIMITED PARTNERSHIP INTEREST (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports 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 periods 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 ----- ----- 1 PART I Item 1. BUSINESS GENERAL DEVELOPMENT OF BUSINESS The business of Keystone Mortgage Fund II, A California Limited Partnership (the "Partnership") was to make loans secured by deeds of trust on improved commercial and industrial real properties. As of December 31, 1998, the Partnership had one loan outstanding in the principal amount of $1,437,195. No loans were made during the year ended December 31, 1998. In 1990, the general partners informed the limited partners that all principal repayments received by the Fund will be distributed to the limited partners less required reserves. The limited partners were also informed that the Fund will no longer repurchase units or make new loans. The remaining loan is due to be paid off during the first quarter of 1999 with final distributions scheduled to be made at some date thereafter. 2 EMPLOYEES The Partnership does not have any employees. Services are performed for the Partnership by Keystone Mortage Company, a California Corporation, for which it receives compensation as set forth in the Partnership Agreement. Item 2. PROPERTIES. The fund occupies space leased by Keystone, and pays no rent. Item 3. LEGAL PROCEEDINGS. None. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. None. Item 6. FINANCIAL INFORMATION. SELECTED FINANCIAL DATA The following table sets forth in tabular form, selected financial data for the fiscal years 1998, 1997, 1996, 1995, and 1994:
Years Ended December 31st 1998 1997 1996 1995 1994 --------- --------- --------- --------- --------- Revenues $ 196,526 $ 151,251 $ 193,721 $ 284,771 $ 438,682 Net (loss) Income 129,556 86,842 135,681 (14,177) 318,290 Trust Deed Notes Receivable, Net 1,437,055 1,404,445 1,437,698 1,469,193 2,950,898 Total Assets 1,883,813 1,818,786 2,146,832 2,656,315 4,183,487 Net (loss) income attributable to limited partners per limited partnership unit $3.09 $2.07 $3.24 ($0.34) $7.60
3 The following table set forth in tabular form, distributions and withdrawals for the fiscal years 1998, 1997, 1996, 1995, and 1994:
DISTRIBUTIONS 1998 1997 1996 1995 1994 AND WITHDRAWALS ------- -------- -------- ---------- ---------- General Partners None None None None None Limited Partners $77,569 $641,078 $655,818 $1,760,784 $2,598,372
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. LIQUIDITY AND CAPITAL RESOURCES: The portion of Partnership cash flow consisting of principal repayments is being distributed to the limited partners less required reserves for operating expenses. Excess cash flow is used to purchase short-term investments and these investments have maturities consistent with the timing of Partnership distributions. The Fund will no longer repurchase units. Interest income, net of Partnership expenses, is distributed to the Partners on a semi-annual basis. However, the General Partners have the right to retain up to 10% of Partnership cash flow for the purpose of maintaining an adequate liquidity. The Partnership's liquidity is primarily subject to the scheduled maturity of the Partnership's loan and the extent of liquidity can therefore be projected with reasonable accuracy. During 1998, the Partnership's working capital increased $1,420,705. Management believes the Partnership has adequate working capital and cash reserves to carry on its business. On a short term basis, the Partnership is able to generate adequate amounts of cash to meet the Partnership's need for cash and contingencies through its receipt of monthly principal and interest payment on its mortgage loan and, furthermore, as liquidity needs arise the Partnership may change the frequency of cash distributions to Limited Partners. 4 FINANCIAL CONDITION AND RESULTS OF OPERATIONS: As of December 31, 1998, the Partnership had one remaining loan of $1,437,195. Loan payments are current and the Partnership has not experienced any recent problems with delinquent payments in connection with this loan. Partnership revenue increased 29.9% in 1998 over 1997 as compared to 21.9% decrease in 1997 over 1996. The increase in revenue for 1998 was due to the reduction of allowance for loss on trust deed note receivable. The decrease in revenue for 1997 resulted from lower interest due to trust deed notes receivable payoffs. General and administrative expenses in 1998 increased 25.9% compared to 1997 primarily as a result of computer updating, accounting and SEC report filing. Such expenses were compatable for 1997 and 1996. Servicing related expenses decreased 15.4% in 1998 as compared to 1997 and increased 23.7% in 1997 as compared to 1996. As a result of factors discussed above, net income increased $42,714 (49.2%) in 1998 over 1997 and decreased $48,839 (36.0%) in 1997 over 1996. The net income per Limited Partnership unit was determined by using a weighted average of the number of units outstanding during the applicable fiscal year. Net income per limited Partnership unit increased 49.3% in 1998 over 1997 and decreased 36.1% in 1997 over 1996. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The Index to the financial statements of Keystone Mortgage Fund II is included in Item 14. 5 KEYSTONE MORTGAGE FUND II A CALIFORNIA LIMITED PARTNERSHIP Financial Statements December 31, 1998 and 1997 (With Independent Auditors' Report Thereon) 6 KPMG 726 South Ferguson Street Los Angeles, CA 90017 INDEPENDENT AUDITORS' REPORT The General Partners Keystone Mortgage Fund II, a California Limited Partnership We have audited the accompanying balance sheets of Keystone Mortgage Fund II, a California Limited Partnership as of December 31, 1998 and 1997 and the related statements of operations, partners' capital and cash flows for each of the years in the three-year period ended December 31, 1998. These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Keystone Mortgage Fund II, a California Limited Partnership as of December 31, 1998 and 1997 and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1998 in conformity with generally accepted accounting principles. /s/ KPMG LLP January 15, 1999 7 [LETTERHEAD FOOTER] KEYSTONE MORTGAGE FUND II, A CALIFORNIA LIMITED PARTNERSHIP Balance Sheets December 31, 1998 and 1997
1998 1997 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 437,768 12,484 Short-term investments (market value of $392,695 in 1997) -- 392,695 Interest receivable on trust deed note receivable 8,990 9,162 Current portion of trust deed note receivable (note 4) 1,437,055 35,727 ------------ ------------ Total current assets 1,883,813 450,068 Trust deed note receivable, net (note 4) -- 1,368,718 ------------ ------------ $ 1,883,813 1,818,786 ------------ ------------ ------------ ------------ LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Accounts payable and other liabilities $ 14,160 11,120 Due to general partner (note 3) 279,000 269,000 ------------ ------------ Total current liabilities 293,160 280,120 ------------ ------------ Partners' capital: General partners 1,928 632 Limited partners -- authorized 41,459 units; outstanding 41,459 units 1,588,725 1,538,034 ------------ ------------ Total partners' capital 1,590,653 1,538,066 ------------ ------------ $ 1,883,813 1,818,786 ------------ ------------ ------------ ------------
See accompanying notes to financial statements. 8 KEYSTONE MORTGAGE FUND II, A CALIFORNIA LIMITED PARTNERSHIP Statements of Operations Years ended December 31, 1998, 1997 and 1996
1998 1997 1996 ------------ ------------ ------------ Revenue: Interest on trust deed note receivable $ 111,285 112,036 117,787 Investment income 21,241 39,215 75,934 Reduction of allowance for loss on trust deed note receivable 64,000 -- -- ------------ ------------ ------------ 196,526 151,251 193,721 ------------ ------------ ------------ Expenses: Servicing-related expenses (note 3) 28,962 34,220 27,664 General and administrative expenses (note 3) 38,008 30,189 30,376 ------------ ------------ ------------ 66,970 64,409 58,040 ------------ ------------ ------------ Net income $ 129,556 86,842 135,681 ------------ ------------ ------------ ------------ ------------ ------------ Weighted average number of limited partnership units outstanding 41,459 41,459 41,459 ------------ ------------ ------------ ------------ ------------ ------------ Net income attributable to limited partners per limited partnership unit $ 3.09 2.07 3.24 ------------ ------------ ------------ ------------ ------------ ------------
See accompanying notes to financial statements. 9 KEYSTONE MORTGAGE FUND II, A CALIFORNIA LIMITED PARTNERSHIP Statements of Partners' Capital Years ended December 31, 1998, 1997 and 1996
GENERAL LIMITED PARTNERS PARTNERS TOTAL ------------ ------------ ------------ Balance at December 31, 1995 $ (207,958) 2,614,632 2,406,674 Net income for 1996 1,357 134,324 135,681 Net distributions -- $15.82 per limited partnership unit -- (655,818) (655,818) ------------ ------------ ------------ Balance at December 31, 1996 $ (206,601) 2,093,138 1,886,537 Net income for 1997 868 85,974 86,842 Contributions 206,365 -- 206,365 Net distributions -- $15.46 per limited partnership unit -- (641,078) (641,078) ------------ ------------ ------------ Balance at December 31, 1997 $ 632 1,538,034 1,538,666 Net income for 1998 1,296 128,260 129,556 Net distributions -- $1.87 per limited partnership unit -- (77,569) (77,569) ------------ ------------ ------------ Balance at December 31, 1998 $ 1,928 1,588,725 1,590,653 ------------ ------------ ------------ ------------ ------------ ------------
See accompanying notes to financial statements. 10 KEYSTONE MORTGAGE FUND II, A CALIFORNIA LIMITED PARTNERSHIP Statements of Cash Flows Years ended December 31, 1998, 1997 and 1996
1998 1997 1996 ------------ ------------ ------------ Cash flows from operating activities: Net income $ 129,556 86,842 135,681 Reduction of allowance for loss on trust deed note receivable (64,000) -- -- Amortization of net origination fees (1,700) (1,700) (1,700) Changes in operating assets and liabilities: Interest receivable on trust deed note receivable 172 159 684 Accounts payable and other liabilities 3,040 9,825 654 Due to general partner 10,000 10,000 10,000 ------------ ------------ ------------ Net cash provided by operating activities 77,068 105,126 145,319 ------------ ------------ ------------ Cash flows from investing activities: Collection of trust deed note receivable 33,090 34,953 33,195 Purchase of short-term investments -- -- (1,100,099) Proceeds from maturities of short-term investments 392,695 291,310 1,499,214 ------------ ------------ ------------ Net cash provided by investing activities 425,785 326,263 432,310 ------------ ------------ ------------ Cash flows from financing activities: Distributions to partners (77,569) (641,078) (655,818) Contributions from partners -- 206,365 -- ------------ ------------ ------------ Net cash used in financing activities (77,569) (434,713) (655,818) ------------ ------------ ------------ Increase (decrease) in cash and cash equivalents 425,284 (3,324) (78,189) Cash and cash equivalents at beginning of year 12,484 15,808 93,997 ------------ ------------ ------------ Cash and cash equivalents at end of year $ 437,768 12,484 15,808 ------------ ------------ ------------ ------------ ------------ ------------
See accompanying notes to financial statements. 11 KEYSTONE MORTGAGE II, A CALIFORNIA LIMITED PARTNERSHIP Notes to Financial Statements December 31, 1998 and 1997 (1) ORGANIZATION AND PARTNERSHIP AGREEMENT Keystone Mortgage Fund II, a California Limited Partnership (Fund II) was formed on May 7, 1986 for the purpose of investing in short- to intermediate-term loans secured by deeds of trust on commercial and industrial real property. Fund II intends to liquidate after its remaining trust deed loan is collected, which is expected to occur in 1999. Profits and losses are generally allocated 1% to the general partners and 99% to the limited partners. To the extent property is obtained as satisfaction of the loan obligation, any net gain resulting from the sale of such property, determined using cost before any previous write-downs, would be allocated 24% to the general partners and 76% to the limited partners. Distributions are allocated in the same manner as profits and losses except that any distribution of principal repayments of trust deed notees receivable is made 100% to the limited partners. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (A) CASH AND CASH EQUIVALENTS Fund II considers all highly liquid investments with a maturity of three months or less when purchased to be equivalent to cash. (B) SHORT-TERM INVESTMENTS Fund II invests in various bank notes and U.S. Government securities with original maturities between three months and six months. Fund II accounts for short-term investments under Statement of Financial Accounting Standards No. 115. "Accounting for Certain Investments in Debt and Equity Securities" (SFAS 115). In accordance with SFAS 115, Fund II classifies its investment in debt securities as held-to-maturity securities and such short-term investments are stated at cost as Fund II intends to hold these securities to maturity. At Deccember 31, 1997, short-term investments consisted of U.S. Government agency notes with remaining maturities of less than five months. (C) MANAGEMENT'S ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (D) TRUST DEED NOTE RECEIVABLE The trust deed note receivable is accounted for under the provisions of Statement of Financial Accounting Standards No. 114 (SFAS 114), "Accounting by Creditors for Impairment of a Loan," and Statement of Financial Accounting Standards No. 118 (SFAS 118), "Accounting by Creditors for Impairment of a Loan -- Income Recognition and Disclosures." Under SFAS 114, a loan is impaired when it is "probable" that a creditor will be unable to collect all amounts due (i.e., both principal and (Continued) 12 KEYSTONE MORTGAGE II, A CALIFORNIA LIMITED PARTNERSHIP Notes to Financial Statements December 31, 1998 and 1997 interest) according to the contractual terms of the loan agreement. The measurement of impairment may be based on (1) the present value of the expected future cash flows of the impaired loan discounted at the loan's original effective interest rate, (2) the observable market price of the impaired loan or (3) the fair value of the collateral of a collateral-dependent loan. The amount by which the recorded investment of the loan exceeds the measure of the impaired loan is recognized by recording a valuation allowance with a corresponding charge to provision for loan losses. (E) ALLOWANCE FOR LOSSES ON TRUST DEED NOTE RECEIVABLE An analysis of the collectibility of the trust deed note receivalbe is performed by management on a regular basis. Management considers such factors as current economic conditions and interest rates, the borrower's ability to repay and repayment performance, probability of foreclosure and estimated collateral values in determining any allowance needed. (F) ORIGINATION FEES Fees from the origination of trust deed notes receivable and certain direct origination costs are recognized over the contractual life of such trust deed notes receivable using methods which generally produce a level-yield on the unpaid loan balance. (G) INTEREST INCOME ON TRUST DEED NOTE RECEIVABLE Interest income on trust deed notes receivable is accrued as it is earned. Interest receivable which is deemed uncollectible is excluded from interest income. Trust deed notes receivable are placed on nonaccrual status after being delinquent 90 days. At December 31, 1998 and 1997, there were no trust deed notes receivable on nonaccrual status. (H) INCOME TAXES No provision has been made for income taxes in the accompanying financial statements, inasmuch as the liability for taxes arising from the transactions of Fund II is the responsibility of the partners. (I) INCOME AND DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT Net income and distributions per limited partnership unit are based on the net income and distributions attributable to the limited partners and the weighted average number of limited partnerhip units outstanding during each period. (3) RELATED PARTY TRANSACTIONS The general partners of Fund II are Keystone Mortgage Company (managing general partner). John P. Sullivan and Chistopher E. Turner. Messrs. Sullivan and Turner are officers/directors of Keystone Mortgage Company. As compensation for servicing trust deed notes receivable, Fund II pays an annual fee equal to 1/2 of 1% of the average outstanding trust deed notes receivable principal balances, computed as of the end of each month, to Keystone Mortgage Comnpany. Servicing-related expenses include approximately $7,000 in 1998, $7,000 in 1997 and $8,000 in 1996 of servicing fees paid to Keystone Mortgage Company. (Continued) 13 KEYSTONE MORTGAGE II, A CALIFORNIA LIMITED PARTNERSHIP Notes to Financial Statements December 31, 1998 and 1997 Expense reimbursements to Keystone Mortgage Company related to operations of Fund II totaling $10,000 are included in general and administrative expenses for each of the years in the three-year period ended December 31, 1998 in the accompanying statements of operations. The amounts due to general partners included in the accompanying balance sheets consist of unpaid expense reimbursements to Keystone Mortgage Company. (4) TRUST DEED NOTE RECEIVABLE Trust deed note receivable consists of the following at December 31:
MONTHLY PAYMENT, INCLUDING INTEREST 1998 1997 --------- ------------ --------- First trust deed on industrial building located in Van Nuys, California, 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 1,470,285 --------- --------- Less: Net deferred origination fees 140 1,840 Allowance for loss -- 64,000 ------------ -------- Net trust deed note receivable $ 1,437,055 1,404,445 ------------ -------- ------------ --------
The estimated fair value of the trust deed note receivable at December 31, 1998 and 1997 is equivalent to the carrying value. (Continued) 12 KEYSTONE MORTGAGE II, A CALIFORNIA LIMITED PARTNERSHIP Notes to Financial Statements December 31, 1998 and 1997 (5) RECONCILIATION OF NET INCOME BETWEEN FINANCIAL STATEMENTS AND PARTNERSHIP TAX RETURN (UNAUDITED) The difference between the net income for financial reporting purposes and the net income for Federal income tax purposes per the partnership tax return is summarized as follows:
1998 1997 1998 -------- ------ ------- Net income for financial reporting purposes $ 129,556 86,842 135,681 Reduction of allowance for loss on trust deed note receivable (64,000) -- -- Interest revenue on mortgage loans previously recognized for tax purposes (1,700) (1,700) (1,700) -------- ------ ------- Net income for Federal income tax purposes $ 63,856 85,142 122,981 -------- ------ ------- -------- ------ -------
15 Item 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVES OFFICERS. The affairs of the Partnership are managed by the Managing General Partner, Keystone Mortgage Company, and the Individual General Partners, John P. Sullivan and Christopher E. Turner. KEYSTONE MORTGAGE COMPANY Keystone Mortgage Company, A California Corporation, has been engaged in the mortgage banking business since 1957. Keystone is a member of the Mortgage Bankers Association of America, the California Mortgage Bankers Association and the Southern California Mortgage Bankers Association. Keystone originates and services real estate loans on behalf of more than ten national life insurance companies, a savings bank, a commercial bank and various trust funds. In addition, Keystone and certain officers have been, and continue to be joint venture partners in the development of real estate with several of the life insurance companies for which Keystone acts as a mortgage loan correspondent. Keystone currently services a portfolio of loans in principal amount in excess of $350,000,000 and has originated loans in original principal amount in excess of $1,000,000,000 since its inception in 1957. Other activities of Keystone include property management and the sale and leasing real estate. Keystone is a licensed real estate broker in the State of California. DIRECTORS AND OFFICERS The directors and executive officers of Keystone Mortgage Company are:
NAME AGE TITLE DATE OF APPT. - --------------------- --- ------------------------------------- ------- John P. Sullivan 73 President and Chairman of the Board 1957 Christopher E. Turner 65 Executive Vice President and Director 1972 Ron N. Buchanan 52 Vice President 1978 Sandra B. Coopersmith 60 Vice President 1975 Melinda F. Love 44 Vice President 1984 Norma Foster 59 Vice President 1986 John G. Sullivan 37 Vice President 1992
JOHN P. SULLIVAN has been in mortgage banking in California since 1953, and since 1957, he has served as president of Keystone. He was a founding member of American Real Estate Association, and has been a director of the Southern California Mortgage Bankers Association, a member of the 16 International Council of Shopping Centers, and a member of the Executive Committee of the Southern California Economic and Job Development Council of the Los Angeles Chamber of Commerce. He has served as a director of a savings and loan association, a lecturer at Stanford University and the School of Mortgage Banking at Michigan State, and a lecturer on the subject of shopping center financing at the University of California at Los Angeles. CHRISTOPHER E. TURNER has been active in mortgage banking in California since 1963, and since 1972, he has served as executive vice president of Keystone. Prior to joining Keystone, Mr. Turner was employed at the University of California at Los Angeles in the real estate research program where he worked for three years as a graduate research economist after receiving his MBA degree. He lectured on the subject of real estate appraising and investments at the University of Southern California from 1967 to 1974 and lectured on the subject of industrial real estate at the University of California at Los Angeles in 1974 and 1975 in the real estate extension program. Mr. Turner has also lectured at the Schools of Mortgage Banking at Stanford University and Houston University. He is a member of the American Industrial Real Estate Association and the Urban Land Institute, the National Mortgage Bankers Association and the American Society of Real Estate Counselors. He has also served on the research committee of the National Mortgage Bankers Association and on the Board of Governors of the American Industrial Real Estate Association. RON N. BUCHANAN joined Keystone in 1972 and currently serves as vice president. Prior to his association with Keystone, he was employed by Security Pacific National Bank in the construction loan department. He is an active member in the American Industrial Real Estate Association and has served on its Board of Directors. Mr. Buchanan has been a lecturer in real estate finance in the University of California at Los Angeles extension program since 1976. SANDRA B. COOPERSMITH has been with Keystone since 1967. Her present responsibilities include management of the loan closing and loan servicing departments. For a year prior to her employment at Keystone, she was the corporate treasurer of a Los Angeles-based mortgage banking company. She has also been a manager of the real estate division of a Los Angeles-based financial institution, overseeing field inspectors, loan officers, credit checkers and loan processors. She is a past president and life member of the Los Angeles Escrow Association. MELINDA F. LOVE has been with Keystone since 1978 and was appointed vice president in 1984. Prior to joining Keystone, she was a mortgage analyst in the real estate department of Farmers New World Life Insurance Company. She is an active member in the American Industrial Real Estate Association, of which she has served as affiliate representative on the Board of Directors; she is also a member of the Southern California Mortgage Bankers Association of which she was the 1988 co-chairman of the Income Property Roundtable Committee, the 1989 assistant treasurer, 1990 treasurer and serves as a Director for 1991. 17 NORMA FOSTER joined Keystone in 1980 and was appointed vice president in late 1986. Ms. Foster currently serves as Business Manager for Keystone and in addition to her administrative and management responsibilities handles limited partnership accounting. Since 1962, Ms. Foster has been involved in international banking, accounting and corporate administration. Ms. Foster holds an MBA in management from University of California at Los Angeles. JOHN G. SULLIVAN has been with Keystone since 1984 and was appointed assistant vice president in 1987. He is an active member of the International Council of Shopping Centers, American Industrial Real Estate Association, and the Ventura county Economic Development Association. He holds a bachelors degree in business economics from the University of California at Santa Barbara. John G. Sullivan is not related to either John P. Sullivan, an Individual General Partner, or Mark G. Sullivan. No director or executive officer of Keystone, within the preceding five year period, has filed a petition under Federal Bankruptcy laws, or has been convicted in a criminal proceeding or is named subject of a pending criminal proceeding. Item 11. EXECUTIVE COMPENSATION. Compensation for services rendered by the General Partners on behalf of the Partnership for the fiscal years 1998, 1997, and 1996 is as follows:
Compensation Paid Name of Individual or Accrued for Cash or Group Service Rendered in 1998 1997 1996 Bonus - --------------------- ------------------- ------ ------ ------ ----- Keystone Mortgage Co. Loan Servicing Fees $7,000 $7,000 $8,000 None John P. Sullivan Management Fees None None None None Christopher E. Turner Management Fees None None None None
In addition, the General Partners of the Partnership are entitled to receive certain cash distributions and allocations of income or loss. No such distributions or allocations were made for fiscal years 1998, 1997, and 1996. 18 Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. (a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS. No one holder of Units owns more than five percent of the total Units. (b) SECURITY OWNERSHIP OF MANAGEMENT. The Individual General Partners are also officers or directors of Keystone. None of the General Partners hold Units in the Partnership. (c) CHANGES IN CONTROL. A majority in interest of the Limited Partners may at any time, by vote or written consent, remove any General Partner, with or without cause. Upon such removal, the General Partner so removed shall have no further liability as a General Partner of the Partnership and the Partnership Agreement shall be amended to state that the General Partner so removed is no longer a General Partner of the Partnership. After said removal, the interest of the General Partner in the Partnership shall automatically convert to a limited partnership interest and the General Partner shall have, with respect thereto, all rights and powers of a Limited Partner. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The Partnership is strictly prohibited from making any loan or participating in any other transaction involving the General Partners, or any of them, their affiliates, or any officer or director or employee of any those entities under any circumstances. 19 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K. (a) (1) The following financial statements of Keystone Mortgage Fund II are in Item 8: Report of Independent Auditors. . . . . . . . . . . . . . . . . 7 Balance Sheets as of December 31, 1998 and 1997 . . . . . . . . 8 Statements of Operations for the Years Ended December 31, 1998, 1997, and 1996 . . . . . . . . . . . . . 9 Statements of Partners' Capital for the Years Ended December 31, 1998, 1997, and 1996. . . . . . .10 Statements of Cash Flows for the Years Ended December 31, 1998, 1997, and 1996. . . . . . . . . .11 Notes to Financial Statements . . . . . . . . . . . 12 through 15 (a) All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instruction or are inapplicable, and therefore have been omitted. (b) No reports on Form 8-K were filed by the registrant during the last quarter of the period covered by this report. 20 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: March 9, 1999 /s/ JOHN P. SULLIVAN --------------------------------- Keystone Mortgage Company By: John P. Sullivan, President Date: March 9, 1999 /s/ JOHN P. SULLIVAN --------------------------------- John P. Sullivan General Partner Date: March 9, 1999 /s/ CHRISTOPHER E. TURNER --------------------------------- Christopher E. Turner General Partner 21 EX-27 2 EXHIBIT-27
5 YEAR DEC-31-1998 DEC-31-1998 437,768 0 1,466,045 0 0 1,883,813 0 0 1,883,813 293,160 0 0 0 0 1,590,653 1,883,813 0 196,526 0 66,970 0 0 0 129,556 0 129,556 0 0 0 129,556 3.09 3.09
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