<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC 20549

                                _____________


                                 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                                            0-14562


                                _____________


                         Keystone Mortgage Fund 
         (Exact name of registrant as specified in its charter.) 


       California                                         95-3786580 
 (State of Incorporation)                  (I.R.S. Employer Identification No.) 

      11340 W. Olympic Boulevard                               90064-1661
            Suite 300                                          (Zip Code)
      Los Angeles, California
(Address of principal executive offices) 


    Registrant's telephone number, including area code: (310) 479-4121

                                _____________


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 / /


<PAGE>
                             KEYSTONE MORTGAGE FUND
 
                                     INDEX
 
<TABLE>
<CAPTION>
                                                                                                           Page
                                                                                                         ---------
<C>         <S>                                                                                          <C>
 
   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 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
 
   Item 2.      Management's discussion and analysis of financial condition and results of operations..          8
 

  PART II.  OTHER INFORMATION
 
   Item 6.  Exhibits and reports on Form 8-K...........................................................     9 & 10
</TABLE>
 
                                       2
<PAGE>
                            KEYSTONE MORTGAGE FUND,
                        A California Limited Partnership
 
                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                                      Assets
 
<S>                                                                                    <C>            <C>
                                                                                                      (Unaudited)
                                                                                       *December 31     March 31
                                                                                           1996           1997
                                                                                       -------------  ------------
 
Current assets:
 
  Cash and cash equivalents..........................................................   $    25,526   $     13,200
 
  Short-term investments (market value of $2,417,512 in 1996 and $3,691,366 in
    1997)............................................................................     2,417,512      3,691,366
                                                                                       -------------  ------------
 
      Total current assets...........................................................     2,443,038      3,704,566
 
Investment in real estate, net.......................................................       812,778            -0-
                                                                                       -------------  ------------
 
                                                                                        $ 3,255,816   $  3,704,566
                                                                                       -------------  ------------
                                                                                       -------------  ------------
 
                                        Liabilities and Partners' Capital

Current liabilities:
 
  Accounts payable and other liabilities.............................................   $     1,208   $      1,005
 
  Due general partner................................................................       280,000        282,500
                                                                                       -------------  ------------
 
      Total current liabilities......................................................       281,208        283,505
                                                                                       -------------  ------------
 
Partners' capital:
 
  General Partners...................................................................        26,655         31,120
 
  Limited partners--authorized 20,000 units, outstanding 13,272 units................     2,947,953      3,389,941
                                                                                       -------------  ------------
 
                                                                                          2,974,608      3,421,061
                                                                                       -------------  ------------
 
                                                                                        $ 3,255,816   $  3,704,566
                                                                                       -------------  ------------
                                                                                       -------------  ------------
</TABLE>
 
                See accompanying notes to financial statements.
        *Extracted from audited December 31, 1996 financial statements.
 
                                       3
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                            KEYSTONE MORTGAGE FUND,
                        A California Limited Partnership
 
                   CONDENSED STATEMENTS OF INCOME (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                                              Three Months Ended
                                                                                                   March 31
 
<S>                                                                                         <C>         <C>
                                                                                               1997        1996
                                                                                            ----------  ----------
 
Revenue:
 
  Interest on mortgage loans..............................................................  $      -0-  $   26,971
 
  Interest on short-term investments......................................................      42,736      30,319
 
  Rental and other revenue from investment in real estate.................................      33,227      50,913
 
  Gain on disposition of investment in real estate........................................     409,361
                                                                                            ----------  ----------
 
                                                                                               485,324     108,203
 
Expenses:
 
  Servicing related expenses..............................................................      11,654      24,441
 
  Administrative and general expenses.....................................................       5,150       3,770
 
  Expenses related to real estate acquired in settlement of loans.........................      22,067      28,536
                                                                                            ----------  ----------
 
                                                                                                38,871      56,747
 
      NET INCOME (LOSS)...................................................................  $  446,453  $   51,456
                                                                                            ----------  ----------
                                                                                            ----------  ----------
 
Weighted average number of limited partnership units outstanding..........................      13,272      13,272
                                                                                            ----------  ----------
                                                                                            ----------  ----------
 
Net income per limited partnership unit...................................................  $    33.64  $     3.88
                                                                                            ----------  ----------
                                                                                            ----------  ----------
</TABLE>
 
                                       4
<PAGE>
                            KEYSTONE MORTGAGE FUND,
                        A California Limited Partnership
 
                        STATEMENTS OF PARTNER'S CAPITAL
 
<TABLE>
<CAPTION>
                                                                              General     Limited
                                                                             Partners     Partners       Total
                                                                             ---------  ------------  ------------
<S>                                                                          <C>        <C>           <C>
 
Balance at December 31, 1996...............................................  $  26,655  $  2,947,953  $  2,974,608
 
Net income three months ended March 31, 1997...............................      4,465       441,988       446,453
                                                                             ---------  ------------  ------------
 
Balance as of March 31, 1997...............................................  $  31,120  $  3,389,941  $  3,421,061
                                                                             ---------  ------------  ------------
                                                                             ---------  ------------  ------------
</TABLE>
 
                                       5
<PAGE>
                            KEYSTONE MORTGAGE FUND,
                        A California Limited Partnership
 
                            STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                                      Nine Months Ended March 31
 
<S>                                                                                   <C>           <C>
                                                                                         1997         1996
                                                                                     ------------  ----------
 
OPERATING ACTIVITIES:
 
  Net Income...........................................................................  $    446,453  $   51,456
 
    Amortization of net origination fees...............................................                      (275)
 
    Depreciation expense from investment in real estate................................                    13,000
 
    Decrease in interest receivable....................................................                        28
 
    Increase in accounts payable and other liabilities.................................         2,297       2,498
                                                                                         ------------  ----------
 
      NET CASH PROVIDED BY OPERATING ACTIVITIES........................................       448,750      66,707
 
INVESTING ACTIVITIES:
 
  Decrease in trust deed receivable....................................................                     3,170
 
  Proceeds from sale of investment in real estate......................................       812,778
 
  Purchase of short-term investments...................................................    (1,273,854)    (201,320)
                                                                                         ------------   ----------
 
      NET CASH USED IN INVESTING ACTIVITIES............................................      (461,076)    (198,150)
                                                                                         ------------  ----------
 
  Decrease in cash and cash equivalents................................................       (12,326)    (131,443)
 
  Cash and cash equivalents at beginning of year.......................................        25,526     157,848
                                                                                         ------------  ----------
 
      CASH AND CASH EQUIVALENTS AT END OF PERIOD.......................................  $     13,200  $   26,405
                                                                                         ------------  ----------
                                                                                         ------------  ----------
</TABLE>
 
                                       6
<PAGE>
                            KEYSTONE MORTGAGE FUND,
                        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 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.
 
                                       7
<PAGE>
                            KEYSTONE MORTGAGE FUND,
                        A California Limited Partnership

              NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
 

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations
------------------------------------------------------------------------------- 

    Total revenues for the three months ended March 31, 1997 increased $377,121,
or 348.5%, over the comparable 1996 period. This increase was due to the gain on
disposition of investment in real estate.
 
    Total expenses decreased 33.3% for the three months ended March 31, 1997
over the same period March 31, 1996. Servicing related expenses decreased 52.3%
and general and administrative expenses increased 36.6% for the three months
ended March 31, 1997 over the same period March 31, 1995. Expenses related to
real estate acquired in settlement of loans decreased 22.7% for the three months
ended March 31, 1997 as compared to the same period March 31, 1996.
 
    Net income increased $394,997, or 767.6% and net income per limited unit
increased $29.76 for the three months ended March 31, 1997 as compared to the
three months ended March 31, 1996.
 
    The Partnership working capital increased $1,259,231 during the three months
ended March 31, 1997. The Partnership has adequate working capital and cash
reserves to carry on its business.
 
    THE PARTNERSHIP IS IN DISSOLUTION PENDING FINAL DISPOSITION OF REMAINING
ASSETS. IT IS ANTICIPATED THAT FINAL DISTRIBUTIONS WILL BE MADE ON OR ABOUT
APRIL 30, 1997.
 
                                       8
<PAGE>

                           PART II. OTHER INFORMATION
 
Item 6. Exhibits and Reports on Form 8-K
 
(a) The Registrant filed no reports on Form 8-K during the quarter ended 
    March 31, 1997.




















 
                                       9
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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.
 
<TABLE>
<S>                                            <C>
                                               KEYSTONE MORTGAGE FUND
                                               a California Limited Partnership
 
Date: May 7, 1997
                                               /s/ John P. Sullivan
                                               --------------------------------------------
                                               Keystone Mortgage Company
                                               By: John P. Sullivan, President
 
Date: May 7, 1997
                                               /s/ John P. Sullivan
                                               --------------------------------------------
                                               John P. Sullivan
                                               General Partner
 
Date: May 7, 1997
                                               /s/ Christopher E. Turner
                                               --------------------------------------------
                                               Christopher E. Turner
                                               General Partner
</TABLE>
 
                                       10