<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, 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
<PAGE>

                                     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
<PAGE>

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:

<TABLE>
<CAPTION>

                                             Years Ended December 31st
                             1998          1997          1996           1995           1994
                          ---------     ---------      ---------      ---------      ---------
<S>                       <C>           <C>            <C>            <C>            <C>

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

</TABLE>

                                       3
<PAGE>

The following table set forth in tabular form, distributions and withdrawals for
the fiscal years 1998, 1997, 1996, 1995, and 1994:

<TABLE>
<CAPTION>

DISTRIBUTIONS                  1998          1997           1996           1995           1994
AND WITHDRAWALS             -------      --------       --------     ----------     ----------
<S>                         <C>          <C>            <C>          <C>            <C>

General Partners               None          None           None           None           None

Limited Partners            $77,569      $641,078       $655,818     $1,760,784     $2,598,372

</TABLE>

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
<PAGE>

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
<PAGE>

KEYSTONE MORTGAGE FUND II
A CALIFORNIA LIMITED PARTNERSHIP

Financial Statements

December 31, 1998 and 1997

(With Independent Auditors' Report Thereon)

                                       6
<PAGE>

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]
<PAGE>

                           KEYSTONE MORTGAGE FUND II,
                       A CALIFORNIA LIMITED PARTNERSHIP

                                Balance Sheets
                          December 31, 1998 and 1997

<TABLE>
<CAPTION>
                                                                           1998             1997
                                                                       ------------     ------------
<S>                                                                    <C>              <C>
                           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
                                                                       ------------     ------------
                                                                       ------------     ------------
</TABLE>

See accompanying notes to financial statements.


                                       8
<PAGE>

                           KEYSTONE MORTGAGE FUND II,
                       A CALIFORNIA LIMITED PARTNERSHIP

                           Statements of Operations
                  Years ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>
                                                                   1998            1997            1996     
                                                               ------------    ------------    ------------ 
<S>                                                            <C>             <C>             <C>          
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
                                                               ------------    ------------    ------------ 
                                                               ------------    ------------    ------------ 
</TABLE>

See accompanying notes to financial statements.


                                       9
<PAGE>

                           KEYSTONE MORTGAGE FUND II,
                       A CALIFORNIA LIMITED PARTNERSHIP

                         Statements of Partners' Capital
                  Years ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>
                                                                  GENERAL        LIMITED
                                                                  PARTNERS       PARTNERS         TOTAL
                                                               ------------    ------------    ------------ 
<S>                                                            <C>             <C>             <C>          
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
                                                               ------------    ------------    ------------ 
                                                               ------------    ------------    ------------ 
</TABLE>

See accompanying notes to financial statements.


                                       10
<PAGE>

                           KEYSTONE MORTGAGE FUND II,
                       A CALIFORNIA LIMITED PARTNERSHIP

                           Statements of Cash Flows
                  Years ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>
                                                                   1998            1997            1996     
                                                               ------------    ------------    ------------ 
<S>                                                            <C>             <C>             <C>          
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
                                                               ------------    ------------    ------------
                                                               ------------    ------------    ------------
</TABLE>

See accompanying notes to financial statements.


                                       11
<PAGE>

                             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
<PAGE>

                             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
<PAGE>

                             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:

<TABLE>
<CAPTION>

                                                MONTHLY
                                                PAYMENT,
                                               INCLUDING
                                                INTEREST         1998            1997
                                               ---------     ------------     ---------
<S>                                            <C>           <C>              <C>

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
                                                             ------------      --------
                                                             ------------      --------
</TABLE>

The estimated fair value of the trust deed note receivable at December 31, 
1998 and 1997 is equivalent to the carrying value.

                                                                    (Continued)


                                      12
<PAGE>

                             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:

<TABLE>
<CAPTION>

                                                   1998        1997        1998
                                                 --------     ------      -------
<S>                                             <C>           <C>        <C>

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
                                                 --------     ------      -------
                                                 --------     ------      -------
</TABLE>

                                      15
<PAGE>

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:

<TABLE>
<CAPTION>
NAME                     AGE    TITLE                                   DATE OF
                                                                        APPT.
---------------------    ---    -------------------------------------   -------
<S>                      <C>    <C>                                     <C>
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
</TABLE>

     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
<PAGE>

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
<PAGE>

     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:

<TABLE>
<CAPTION>
                         Compensation Paid
Name of Individual       or Accrued for                                         Cash
or Group                 Service Rendered in      1998      1997      1996      Bonus
---------------------    -------------------      ------    ------    ------    -----
<S>                      <C>                      <C>       <C>       <C>       <C>
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
</TABLE>

     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
<PAGE>

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
<PAGE>

                                      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
<PAGE>

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


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