<PAGE>

     
                         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, 1996                0-14562

                              KEYSTONE MORTGAGE FUND
              (Exact name of registrant as specified in its charter.)



             CALIFORNIA                                 95-3786580
    (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

<PAGE>

                                  PART I

Item 1.  BUSINESS

GENERAL DEVELOPMENT OF BUSINESS

    The business of Keystone Mortgage Fund (the "Partnership") was to make
loans secured by deeds of trust on improved commercial and industrial real
properties.  As of December 31, 1996, the Partnership had no loans outstanding
as compared to $1,031,390 outstanding at December 31, 1995.

    During 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 for operating expenses.  The limited partners
were also informed that the Fund will no longer repurchase units.


                                      2

<PAGE>

EMPLOYEES

    The Partnership does not have any employees.  Services are performed for
the Partnership by Keystone, for which it receives compensation as set forth in
the Partnership Agreement.

Item 2.  PROPERTIES.

    The fund occupies space leased by Keystone Mortgage Company, and pays no
rent.

Item 3.  LEGAL PROCEEDINGS.

    None.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

    None.





                                       3
<PAGE>

                                       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 1996, 1995, 1994, 1993, and 1992:

<TABLE>
<CAPTION>
                                         Years Ended December 31st
                           1996        1995        1994       1993       1992
                           ----        ----        ----       ----       ----
<S>                   <C>         <C>         <C>        <C>        <C>
Revenues               $564,193    $496,762    $604,547   $664,578   $699,899
Net (loss) Income       362,444      (1,565)    385,502    414,914    516,032
Trust Deed Notes   
     Receivable, Net          0   1,029,370   1,608,880  4,457,222  4,614,328
Total Assets          3,255,816   4,106,537   5,156,127  6,938,939  7,000,427

Net (loss) income
attributable to 
limited partners
per limited
partnership unit         $27.04      ($0.12)     $28.76     $30.95     $38.52
</TABLE>

    The following table set forth in tabular form, distributions and
withdrawals for the fiscal years 1996, 1995, 1994, 1993, and 1992:

<TABLE>
<CAPTION>
DISTRIBUTIONS              1996        1995        1994       1993          1992
-------------              ----        ----        ----       ----          ----
AND WITHDRAWALS
---------------
<S>                  <C>         <C>         <C>          <C>        <C>
General Partners           None        None        None       None       $1,519

Limited Partners     $1,223,944  $1,316,497  $2,166,682   $474,877   $2,008,730

</TABLE>

Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

LIQUIDITY AND CAPITAL RESOURCES:

                                        4
<PAGE>

    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 those
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 schedule of
maturities of  Partnership loans and the extent of liquidity can therefore be
projected with reasonable accuracy.  During 1996, the Partnership's working
capital increased $446,002.  Management believes the Partnership has adequate
working capital and cash reserves to carry on its business.

    In 1990 the decision was made to liquidate the Fund by distributing all
proceeds of loan repayments to the Limited Partners as the loans mature through
1997.  The investment in real estate will be held for the production of income
until 1997.

    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 payments on mortgage loans and,
furthermore, as liquidity needs arise the partnership may change the frequency
of cash distributions to Limited Partners.

FINANCIAL CONDITION AND
RESULTS OF OPERATIONS:

    Partnership revenue increased 13.6% in 1996 over 1995 as compared to a
decrease of 17.8% in 1995 as compared to 1994.  The 1996 increase was due mainly
to the gain on disposition of investment in real estate.  Interest earned on
trust deed notes receivable continues to decrease due to the continued loan
payoffs.  Revenue from rental property decreased 21.5% in 1996 over 1995
primarily because of the disposition of some properties.  Rental revenue
increased 17.2% in 1995 as compared to 1994.

    General and administrative expenses decreased 84.4% in 1996 over 1995 and
increased substantially, $274,547, in 1995 over 1994.  In 1995 there was a
$270,000 charge to General & Administrative expenses for the reimbursement of
fund expenses to the General Partners.

    Servicing related expenses increased 11.0% in 1996 over 1995 and decreased
34.3% in 1995 as compared to 1994.  Expenses related to investment in real
estate decreased 28.0% in 1996 over 1995 compared to an increase of 14.1% in
1995 over 1994.



                                        5

<PAGE>

    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.  The partnership had an increase of $27.16 per limited partnership unit in
1996 over 1995 as compared to a decrease of $28.88 in 1995 over 1994.


Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

    The Index to the financial statements of Keystone Mortgage Fund is included
in Item 14.

Item 9.  CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
         DISCLOSURE.

    None.


                                        6
<PAGE>

KEYSTONE MORTGAGE FUND
(A California Limited Partnership)

Financial Statements

December 31, 1996 and 1995

(With Independent Auditors' Report Thereon)


                                        7
<PAGE>

PEAT MARWICK LLP
725 South Figueroa Street
Los Angeles, CA 90017

                        INDEPENDENT AUDITORS' REPORT

The General Partners
Keystone Mortgage Fund:

We have audited the accompanying balance sheets of Keystone Mortgage Fund (a 
California limited partnership) as of December 31, 1996 and 1995 and the 
related statements of operations, partners' capital and cash flows for each 
of the years in the three-year period ended December 31, 1996. 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 as of 
December 31, 1996 and 1995 and the results of its operations and its cash 
flows for each of the years in the three-year period ended December 31, 1996 
in conformity with generally accepted accounting principles.


                                       KPMG PEAT MARWICK LLP (Signature)


January 22, 1997, except
   for note 7, which is as of
   February 28, 1997


                                       8


<PAGE>

                             KEYSTONE MORTGAGE FUND
                       (A California Limited Partnership)

                                Balance Sheets
                           December 31, 1996 and 1995

<TABLE>
<CAPTION>

                                                                              1996             1995
                                                                          ------------     -----------
<S>                                                                        <C>             <C>
                     ASSETS
Current assets:
  Cash and cash equivalents                                                $   25,526      $   157,848
  Short-term investments (market value of $2,417,512 in 1996
     and $1,775,183 in 1995)                                                2,417,512        1,772,598
  Interest receivable on trust deed note receivable                                --            8,917
  Other receivable                                                                 --           35,000
  Current portion of trust deed note receivable (note 4)                           --           11,894
                                                                           ----------      -----------
        Total current assets                                                2,443,038        1,986,257
Investment in real estate, net (note 5)                                       812,778        1,102,804
Trust deed note receivable, net (note 4)                                           --        1,017,476
                                                                           ----------      -----------
                                                                           $3,225,816       $4,106,537
                                                                           ----------      -----------
                                                                           ----------      -----------

                 LIABILITIES AND PARTNERS' CAPITAL

Current liabilities:
  Accounts payable and other liabilities                                   $    1,208              429
  Due to general partner (note 3)                                             280,000          270,000
                                                                           ----------      -----------
          Total current liabilities                                           281,208          270,429
                                                                           ----------      -----------
Partners' capital:
  General partners                                                             26,655           23,031
  Limited partners - authorized 20,000 units; outstanding 13,272
    units                                                                   2,974,953        3,813,077
                                                                           ----------      -----------
                                                                            2,974,608        3,836,108
                                                                           ----------      -----------
                                                                           $3,255,816       $4,106,537
                                                                           ----------      -----------
                                                                           ----------      -----------
</TABLE>

See accompanying notes to financial statements.


                                     9



<PAGE>
                                       
                             KEYSTONE MORTGAGE FUND
                       (A California Limited Partnership)

                            Statements of Operations
                   Years ended December 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>
                                                                    1996                1995               1994
                                                               -------------        ------------       ------------
<S>                                                            <C>                  <C>                <C>
Revenue:
  Interest on trust deed on notes receivable                     $  90,975             $147,940             $346,013
  Investment income                                                143,598              118,183               61,689
  Rental and other revenue from investment in
    real estate                                                    181,165              230,639              196,845
  Gain on disposition of investment in real
    estate                                                         148,455                   --                   --
                                                                 ---------             --------              --------
                                                                   564,193              496,762               604,547
                                                                 ---------             --------              --------
Expenses:
  Servicing-related expenses (note 3)                               34,026               30,657                46,656
  General and administrative expenses (note 3)                      46,689              299,636                25,089
  Expenses related to investment in real estate                    121,034              168,034               147,300
                                                                 ---------             --------              --------
                                                                   201,749              498,327               219,045
                                                                 ---------             --------              --------
            Net income (loss)                                     $362,444             $ (1,565)             $385,502
                                                                 ---------             --------              --------
                                                                 ---------             --------              --------
Weighted average number of limited partnership
  units outstanding                                                 13,272               13,272                13,272
                                                                 ---------             --------              --------
                                                                 ---------             --------              --------
Net income (loss) attributable to limited
  partners per limited partnership unit                           $  27.04             $  (0.12)                28.76
                                                                 ---------             --------              --------
                                                                 ---------             --------              --------
</TABLE>

See accompanying notes to financial statements.


                                       10


<PAGE>
                                       
                             KEYSTONE MORTGAGE FUND
                       (A California Limited Partnership)

                          Statements of Partners' Capital
                   Years ended December 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>
                                                                 GENERAL              LIMITED
                                                                 PARTNERS             PARTNERS             TOTAL
                                                               -------------        ------------       ------------
<S>                                                            <C>                  <C>                <C>
Balance at December 31, 1993                                    $   19,192           $ 6,916,158         $ 6,935,350
Net income for 1994                                                  3,855               381,647             385,502
Net distributions - $163.25 per limited
  partnership unit                                                      --            (2,166,682)         (2,166,682)
                                                                 ---------           -----------         -----------
Balance at December 31, 1994                                        23,047             5,131,123           5,154,170
Net loss for 1995                                                      (16)               (1,549)             (1,565)
Net distributions - $99.19 per limited
  partnership unit                                                      --            (1,316,497)         (1,316,497)
                                                                 ---------           -----------         -----------
Balance at December 31, 1995                                        23,031             3,813,077           3,836,108
Net income for 1996                                                  3,624               358,820             362,444
Net distributions - $92.22 per limited
  partnership unit                                                      --            (1,223,944)         (1,223,944)
                                                                 ---------           -----------         -----------
Balance at December 31, 1996                                     $  26,655           $ 2,947,953          $2,947,608
                                                                 ---------           -----------         -----------
                                                                 ---------           -----------         -----------
</TABLE>

See accompanying notes to financial statements.


                                       11


<PAGE>
                                       
                             KEYSTONE MORTGAGE FUND
                       (A California Limited Partnership)

                            Statements of Cash Flows
                   Years ended December 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>
                                                                    1996                1995               1994
                                                               -------------        ------------       ------------
<S>                                                            <C>                  <C>                <C>
Cash flows from operating activities:
  Net income (loss)                                             $   362,444          $   (1,565)        $   385,502
  Depreciation expense for investment in real
    estate                                                               --              52,700              58,000
  Amortization of net loan origination fees                          (2,020)             (1,100)             (5,800)
  Gain on sale of investment in real estate                        (148,455)                 --                  --
  Changes in operating assets and liabilities:
    Interest receivable on trust deed notes
      receivable                                                      8,917                9,946              20,695
    Accounts payable and other liabilities                              779               (1,528)             (1,632)
    Due to general partner                                           10,000              270,000                  --
    Other                                                            35,000              (35,000)                379
                                                                -----------           ----------         -----------
               Net cash provided by operating
                 activities                                         266,665              293,453             457,144
                                                                -----------           ----------         -----------
Cash flows from investing activities:
  Collection of trust deed notes receivable                       1,031,390              580,508           2,854,142
  Proceeds from sale of investment in real
    estate                                                          438,481                   --                  --
  Purchases of short-term investments                            (2,367,190)          (5,419,781)         (4,662,573)
  Proceeds from maturities of short-term
    investments                                                   1,722,276            5,922,756           2,387,000
                                                                -----------           ----------         -----------
               Net cash provided by investing
                 activities                                         824,957            1,083,483             578,569
                                                                -----------           ----------         -----------
Cash flows from financing activities -
  distributions to partners                                      (1,223,944)          (1,316,497)         (2,166,682)
                                                                -----------           ----------         -----------
               Increase (decrease) in cash and
                 cash equivalents                                  (132,322)              60,439          (1,130,969)
Cash and cash equivalents at beginning of year                      157,848               97,409           1,228,378
                                                                -----------           ----------         -----------
Cash and cash equivalents at end of year                        $    25,526           $  157,848          $   97,409
                                                                -----------           ----------         -----------
                                                                -----------           ----------         -----------
</TABLE>

See accompanying notes to financial statements.


                                    12

<PAGE>
                                       
                             KEYSTONE MORTGAGE FUND
                       (A California Limited Partnership)

                          Notes to Financial Statements
                            December 31, 1996 and 1995


(1)  ORGANIZATION AND PARTNERSHIP AGREEMENT

     Keystone Mortgage Fund (the Fund), a California limited partnership, was 
     formed on April 19, 1984 for the purpose of investing in short- to 
     intermediate-term loans secured by deeds of trust on commercial 
     industrial real property.

     Profits and losses are generally allocated 1% to the general partners 
     and 99% to the limited partners. To the extent property is obtained in 
     settlement of a 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 notes 
     receivable are made 100% to the limited partners. Effective January 1, 
     1992, the partnership agreement was amended to allow for distribution to 
     the partners on a semiannual basis rather than on a quarterly basis.

(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     CASH AND CASH EQUIVALENTS

     The Fund considers all highly liquid investments with a maturity of 
     three months or less when purchased to be cash equivalents.

     SHORT-TERM INVESTMENTS

     The Fund invests in various bank notes and U.S. Government securities 
     with original maturities between three months and six months. The Fund 
     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, the Fund 
     classifies its investment in debt securities as held-to-maturity 
     securities and such short-term investments are stated at cost as the 
     Fund intends to hold these securities to maturity. At December 31, 1996 
     and 1995, short-term investments consisted of U.S. Government agency 
     notes with remaining maturities of less than five months. At December 31, 
     1996 and 1995, these securities had an unrealized gain of $0 and $2,585, 
     respectively, and there were no unrealized loses.

     USES OF ESTIMATES

     Management of the Fund has made a number of estimates and assumptions 
     relating to the reporting of assets and liabilities and the disclosure 
     of contingent assets and liabilities to prepare these financial 
     statements in conformity with generally accepted accounting principles. 
     Actual results could differ from these estimates.


                                      13


<PAGE>
                                       
                             KEYSTONE MORTGAGE FUND
                       (A California Limited Partnership)

                     Notes to Financial Statements, Continued

    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 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.

     ALLOWANCE FOR LOSSES ON TRUST DEED NOTE RECEIVABLE

     An analysis of the collectibility of the trust deed note receivable is 
     performed by management on a regular basis. Management considers such 
     factors as current economic conditions, the borrower's ability to repay 
     and repayment performance, probability of foreclosure and estimated 
     collateral values in determining any allowance need. Management has 
     determined that no allowance is necessary as of December 31, 1996 and 
     1995.

     INVESTMENT IN REAL ESTATE

     The investment in real estate was acquired in settlement of loans. It 
     was initially recorded at estimated fair value, less selling costs. At 
     the time of foreclosure, any excess of cost over the estimated net fair 
     value was accounted for as a loan charge-off and deducted from the 
     allowance for loan losses. As of December 31, 1995, such real estate was 
     carried at the lower of cost or net realizable value as the Fund is 
     holding the real estate for the production of income. Depreciation was 
     recorded based on the straight-line method and an estimated life of 20 
     years. As of December 31, 1996, the real estate is held for sale and is 
     carried at the lower of cost or fair value, less estimated costs to 
     sell, and depreciation is no longer provided in accordance with 
     Statement of Financial Accounting Standards No. 121, "Accounting for the 
     Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed 
     Of" (SFAS 121). The provisions of SFAS 121 were implemented on January 
     1, 1996. There was no impact to the carrying value of the real estate as 
     a result of implementing SFAS 121 as the fair value, less estimated 
     costs to sell exceeds the cost of the real estate.

     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.

     INTEREST INCOME ON TRUST DEED NOTES 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. There are no notes on 
     nonaccrual status at December 31, 1996 and 1995.

                                      14

<PAGE>
                                       
                             KEYSTONE MORTGAGE FUND
                       (A California Limited Partnership)

                     Notes to Financial Statements, Continued

     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 the Fund is the responsibility of the partners.

     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 partnership units outstanding 
     during each period.

(3)  RELATED PARTY TRANSACTIONS

     The general partners of the Fund are Keystone Mortgage Company (managing 
     general partner), John P. Sullivan and Christopher E. Turner. Messrs. 
     Sullivan and Turner are officers/directors of Keystone Mortgage Company. 
     As compensation for servicing loans, the Fund pays an annual fee of 1/2 
     of 1% of the average outstanding loan principal balances, computed as of 
     the end of each month, to Keystone Mortgage Company. Servicing-related 
     expenses include approximately $4,000 in 1996, $7,000 in 1995 and 
     $16,000 in 1994 of servicing fees paid to Keystone Mortgage Company.

     Prior to 1995, Keystone Mortgage Company did not pass through to the 
     Fund expenses that Keystone Mortgage Company incurred related to 
     operation of the Fund as allowed by the Fund's partnership agreement. 
     During 1995, Keystone Mortgage Company made a decision to charge the Fund 
     for reimbursement of such expenses incurred by Keystone Mortgage Company 
     from inception of the Fund and, accordingly, requested payment from the 
     Fund. The expense reimbursement totals $270,000 and is included in 
     general and administrative expenses for the year ended December 31, 1995 
     in the accompanying statements of operations and in due to general 
     partner in the accompanying balance sheets as of December 31, 1996 
     and 1995. Expense reimbursements totaling $10,000 relating to 1996 
     are included in general and administrative expenses for the year ended
     December 31, 1996 in the accompanying statement of operations and in 
     due to general partner in the accompanying balance sheet as of 
     December 31, 1996.

(4)  TRUST DEED NOTE RECEIVABLE

     Trust deed note receivable consists of the following at December 31, 1995:

     First trust deed on an office/warehouse/light industrial 
       billing located in Hawthorne, California, interest rate 
       of 10.375%, originally due November 1, 1997, repaid 
       during 1996                                                 $1,031,390
     Less:
       Net deferred loan origination fees                               2,020
       Less current portion                                            11,894
                                                                   ----------
                                                                   $1,017,476
                                                                   ----------
                                                                   ----------

     The estimated fair value of the trust deed note receivable at December 
     31, 1995 is equivalent to the carrying value.


                                      15

<PAGE>
                                       
                             KEYSTONE MORTGAGE FUND
                       (A California Limited Partnership)

                     Notes to Financial Statements, Continued


(5)  INVESTMENT IN REAL ESTATE

     Investment in real estate consists of industrial condominium units 
     located in Arizona. At December 31, 1996, the investment is held for 
     sale and is carried at the lower of cost or fair value, less estimated 
     costs to sell. The investment is composed of the following at December 
     31, 1995:

             Land                               $  260,000
             Buildings and improvements          1,040,000
                                                ----------
                                                 1,300,000
             Less:
               Accumulated depreciation            162,696
               Net realizable value allowance       34,500
                                                ----------
                                                $1,102,804
                                                ----------
                                                ----------

     Future minimum rental payments to be received under operating leases are 
     as follows:

                      1997                      $ 92,405
                      1998                        18,410
                      Thereafter                      --
                                                --------
                                                $110,815
                                                --------
                                                --------

(6)  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:

<TABLE>
<CAPTION>
                                                        1996            1995           1994
                                                    ------------     ----------      ----------
<S>                                                  <C>              <C>             <C>
Net income (loss) for financial reporting
  purposes                                             $362,444       $ (1,565)        $385,502
Interest revenue on mortgage loans recognized
  for financial reporting - previously
  recognized for tax purposes                            (2,020)        (3,118)          (5,800)
Difference between book and tax depreciation,
  gain on sale and net realizable value
  adjustment for investment in real estate               14,117         18,980           18,823
                                                       --------       --------         --------
      Net income for Federal income tax
        purposes                                       $374,541       $ 14,297         $398,525
                                                       --------       --------         --------
                                                       --------       --------         --------
</TABLE>


                                      16

<PAGE>
                                       
                             KEYSTONE MORTGAGE FUND
                       (A California Limited Partnership)

                     Notes to Financial Statements, Continued


(7)  SUBSEQUENT EVENTS

     On February 28, 1997, the investment in real estate was sold to an 
     unrelated third party for approximately $1.2 million, net of selling 
     costs. The Fund recognized a gain of approximately $400,000 in the sale 
     transaction during 1997. Management plans to distribute the total net 
     assets of the Fund to the general partners and limited partners during 
     the second quarter of 1997. Cash flows from the final distribution in 
     liquidation of the Fund shall be distributed in accordance with capital 
     accounts.

                                       17

<PAGE>

                                       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 ("Keystone"), 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. 
Keystone Mortgage Company is also the Managing General Partner of Keystone
Mortgage Fund II, a California limited partnership.

DIRECTORS AND OFFICERS

    The directors and executive officers of Keystone Mortgage Company are:

NAME                   AGE   TITLE                                 DATE OF
                                                                     APPT.

John P. Sullivan        71   President and Chairman of the Board     1957
Christopher E. Turner   63   Executive Vice President and Director   1972
Ron N. Buchanan         50   Vice President                          1978
Sandra B. Coopersmith   58   Vice President                          1975
Melinda F. Love         42   Vice President                          1984
Norma Foster            57   Vice President                          1986
John G. Sullivan        35   Vice President                          1992
Mark G. Sullivan        40   Secretary                               1984

    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 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


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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.

    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


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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.

    MARK G. SULLIVAN has been the secretary of Keystone since early 1984.  Mr.
Sullivan has experience in the analysis and development of commercial real
estate projects.  He holds a bachelor degree in science and geology from the
University of California at Santa Barbara.  He is the son of John P. Sullivan.

    No director of 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 1994, 1995 and 1996 is as follows:

<TABLE>
<CAPTION>
                        Compensation Paid or
Name of Individual      Accrued for Service                             Cash
or Group                Rendered in            1994     1995    1996    Bonus
-----------------------------------------------------------------------------
<S>                     <C>                   <C>      <C>      <C>     <C>
Keystone Mortgage Co.   Loan Servicing Fees   $16,000  $7,000   $4,000   None
John P. Sullivan        Management Fees       None     None     None     None
Christopher E. Turner   Management Fees       None     None     None     None
</TABLE>

    In addition, the General Partners of the Partnership are entitled to
receive certain cast distributions and allocations of income or loss.  No cash
distributions and allocations were made for fiscal years 1994, 1995 and 1996.

    Prior to 1995, Keystone did not pass expenses that Keystone Mortgage
Company incurred relating to the operation of the Partnership as allowed by the
Partnership agreement.  During 1995 Keystone made a decision to charge the
Partnership for such expenses from the inception of the Partnership.  The
expense reimbursement totals $270,000 and such amount was recorded as general
and administrative expense during 1995.


Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

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    (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.

    (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.



                                     PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K.

    (a) (1)   The following financial statements of Keystone Mortgage Fund are
              in Item 8:

    Report of Independent Auditors........................................8

    Balance Sheets as of December 31, 1996 and 1995.......................9


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    Statements of Operation for the Years Ended
        December 31, 1996, 1995, and 1994................................10

    Statement of Partners' Capital for the
         Years Ended December 31, 1996, 1995, and 1994...................11

    Statements of Cash Flows for the Years
         Ended December 31, 1996, 1995, and 1994.........................12

    Notes to Financial Statements........................................13

         (a)  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.

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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



Date:               March    , 1997             /s/
                                           ---------------------------------
                                           Keystone Mortgage Company
                                           By: John P. Sullivan, President



Date:               March    , 1997            /s/
                                           ---------------------------------
                                           John P. Sullivan
                                           General Partner



Date:               March    , 1997           /s/
                                           --------------------------------
                                           Christopher E. Turner
                                           General Partner

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