<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                                         0-15537

                           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, 
1996, the Partnership had one loan outstanding in the principal amount of 
$1,505,238.  No loans were made during the year ended December 31, 1996.

    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.

                                       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.

                                    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                    $193,721   $284,771   $438,682   $556,401   $628,686
Net (loss) Income            135,681   (14,177)    318,290    473,843    537,114
Trust Deed Notes
     Receivable, Net       1,437,698  1,469,193  2,950,898  5,356,524  5,438,206
Total Assets               2,146,832  2,656,315  4,183,487  6,465,549  6,465,307

Net (loss) income
attributable to
limited partners
per limited
partnership unit               $3.24     (0.34)       7.60      11.31      12.83

</TABLE>

                                       3


<PAGE>

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

Distributions             1996        1995        1994        1993      1992
-------------             ----        ----        ----        ----      ----
and Withdrawals
---------------

General Partners          None        None        None        None      $1,594

Limited Partners      $655,818  $1,760,784  $2,598,372    $472,883  $1,043,556


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 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 decreased $485,128.  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 mortgage 
loans 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, 1996, the Partnership had one remaining loan 
outstanding in the amount of $1,505,238.  Loan payments are current and the 
Partnership has not experienced any recent problems with delinquent payments 
in connection with this loan.

    Partnership revenue decreased 32.0% in 1996 over 1995 as compared to 
35.1% decrease in 1995 over 1994.  The decrease in revenue for each of these 
two years was primarily due to the decrease of interest income as a result of 
loan payoffs and the subsequent distributions of capital to Limited Partners.

    General and administrative expenses decreased $237,811 or 88.7% in 1996 
over 1995 as compared to an increase of $254,113 in 1995 over 1994.  The 
large increase in 1995 was due to a $249,000 charge for reimbursement of fund 
expenses incurred by the General Partner.

    Servicing related expenses decreased 10.1% in 1996 as compared to 1995, 
and decreased 27.3% in 1995 as compared to 1994.

    Net income increased $149,858 in 1996 over 1995, and decreased $332,467 
in 1995 over 1994.

    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 $3.58 in 1996 
over 1995, and decreased $7.94 in 1995 over 1994.

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, 1996 and 1995

(With Independent Auditors' Report Thereon)


                                       6

<PAGE>

[LOGO] PEAT MARWICK LLP

       725 South Figueroa 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, 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 II, a
California Limited Partnership 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


January 22, 1997

<PAGE>

                           KEYSTONE MORTGAGE FUND II,
                        A CALIFORNIA LIMITED PARTNERSHIP

                                 Balance Sheets

                           December 31, 1996 and 1995

<TABLE>
<CAPTION>
                                   ASSETS                                       1996                               1995
                                                                      ----------------------             ----------------------
<S>                                                                   <C>                                <C>
Current assets:
   Cash and cash equivalents                                          $          15,808                             93,997
   Short-term investments (market value of $684,005 in 1996 and
      $1,085,049 in 1995)                                                       684,005                          1,083,120
   Interest receivable on trust deed note receivable                              9,321                             10,005
   Current portion of trust deed note receivable (note 4)                        39,732                             36,218
                                                                      ----------------------             -----------------------

          Total current assets                                                1,397,966                          1,223,340
                                                                      ----------------------             -----------------------
Trust deed note receivable, net (note 4)                              $       2,146,832                          2,656,315
                                                                      ----------------------             -----------------------
                                                                      ----------------------             -----------------------

                      LIABILITIES AND PARTNERS' CAPITAL

Current liabilities:
   Accounts payable and other liabilities                             $           1,295                                641
   Due to general partner (note 3)                                              250,000                            249,000
                                                                      ----------------------             -----------------------

          Total current liabilities                                             260,295                            249,641
                                                                      ----------------------             -----------------------
Partners' capital:
   General partners                                                            (206,601)                          (207,958)
   Limited partners - authorized 41,459 units; outstanding
     41,459 units)                                                            2,093,138                          2,614,632
                                                                      ----------------------             -----------------------

          Net partners' capital                                               1,886,537                          2,406,674
                                                                      ----------------------             -----------------------

                                                                      $       2,146,832                  $       2,656,315
                                                                      ----------------------             -----------------------
                                                                      ----------------------             -----------------------
</TABLE>

See accompanying notes to financial statements.

<PAGE>

                           KEYSTONE MORTGAGE FUND II,
                        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 notes receivable                     $    117,787                  185,897                  377,649
     Investment income                                                 75,934                   98,874                   61,033
                                                                 ------------------       -----------------       ------------------
                                                                      193,721                  284,771                  438,682
                                                                 ------------------       -----------------       ------------------
Expenses:
     Provision for losses on trust deed note
       receivable (note 4)                                                 --                        --                  64,000
     Servicing-related expenses (note 3)                               27,664                    30,761                  42,318
     General and administrative expenses (note 3)                      30,376                   268,187                  14,074
                                                                 ------------------       -----------------       ------------------
                                                                       58,040                   298,948                 120,392
                                                                 ------------------       -----------------       ------------------

          Net income (loss)                                      $    135,681                   (14,177)                318,290
                                                                 ------------------       -----------------       ------------------
                                                                 ------------------       -----------------       ------------------

Weighted average number of limited
   partnership units outstanding                                       41,459                    41,459                  41,459
                                                                 ------------------       -----------------       ------------------
                                                                 ------------------       -----------------       ------------------

Net income (loss) attributable to limited
   partners per limited partnership unit                         $       3.24                     (0.34)                   7.60
                                                                 ------------------       -----------------       ------------------
                                                                 ------------------       -----------------       ------------------
</TABLE>

See accompanying notes to financial statements.

<PAGE>

                           KEYSTONE MORTGAGE FUND II,
                        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                           $     (210,999)                    6,672,716                6,461,717

Net income for 1994                                             3,183                       315,107                  318,290

Net distributions - $62.67 per limited
   partnership unit                                                --                    (2,598,372)             (2,598,372)
                                                       ----------------               ----------------        ----------------

Balance at December 31, 1994                                 (207,816)                    4,389,451                4,181,635

Net loss for 1995                                                (142)                      (14,035)                 (14,177)

Net distributions - $42.47 per limited
   partnership unit                                                --                    (1,760,784)              (1,760,784)
                                                       ----------------               ----------------        ----------------

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

See accompanying notes to financial statements.

<PAGE>

                           KEYSTONE MORTGAGE FUND II,
                        A CALIFORNIA LIMITED PARTNERSHIP

                            Statements of Cash Flows

                  Years ended December 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>
                                                            GENERAL                       LIMITED
                                                            PARTNERS                      PARTNERS                 TOTAL
                                                       ----------------               ----------------        ----------------
<S>                                                    <C>                            <C>                     <C>
Cash flows from operating activities:
     Net income (loss)                                 $      135,681                       (14,177)                 318,290
     Amortization of net origination fees                      (1,700)                       (1,700)                  (2,310)
     Changes in operating assets and liabilities:
      Interest receivable on trust deeds                          684                        11,435                    17,308
      Accounts payable and other liabilities                      654                        (1,211)                  (1,980)
      Due to general partner                                   10,000                       249,000                        -
      Other assets                                                 --                            --                    1,294
                                                       ----------------               ----------------        ----------------

          Net cash provided by operating
             activities                                       145,319                       243,347                  331,602
                                                       ----------------               ----------------        ----------------

Cash flows from investing activities:
     Collection of trust deed notes receivable                 33,195                     1,483,373                2,407,936
     Purchase of short-term investments                    (1,100,099)                   (4,700,155)              (3,400,965)
     Proceeds from maturities of short-term
      investments                                           1,499,214                     4,621,000                2,397,000
                                                       ----------------               ----------------        ----------------

          Net cash provided by investing
             activities                                       432,310                     1,404,218                1,403,971
                                                       ----------------               ----------------        ----------------

Cash flows used in financing activities -
   distributions to partners                                 (655,818)                   (1,760,784)              (2,598,372)
                                                       ----------------               ----------------        ----------------
          Decrease in cash and cash
             equivalents                                      (78,189)                     (113,219)                (861,799)


Cash and cash equivalents at beginning of year                 93,997                       207,216                1,069,015
                                                       ----------------               ----------------        ----------------

Cash and cash equivalents at end of year               $       15,808                        93,997                  207,216
                                                       ----------------               ----------------        ----------------
                                                       ----------------               ----------------        ----------------
</TABLE>

See accompanying notes to financial statements.

<PAGE>

                           KEYSTONE MORTGAGE FUND II,
                        A CALIFORNIA LIMITED PARTNERSHIP

                          Notes to Financial Statements

                           December 31, 1996 and 1995


(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.

     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 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 distributions to
     the partners on a semiannual basis rather than on a quarterly basis.

(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     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.

     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 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 $1,929, respectively, and there
     were not unrealized losses.

     USES OF ESTIMATES

     Management of Fund II 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.

     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
     Impairments of a Loan - Income Recognition and Disclosures."  Under SFAS
     114, a loan is impaired

                                      12
<PAGE>

     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 and interest rates, the borrower's
     ability to repay and repayment performance, probability of foreclosure and
     estimated collateral values in determining any allowance need.  Management
     has provided a valuation allowance of $64,000 as of December 31, 1996 and
     1995.

     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.  At December 31, 1996 and 1995, there were no
     trust deed notes receivable on nonaccural status.

     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.

     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 Fund II 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 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 Company.  Servicing-related expenses include
     approximately $8,000 in 1996, $10,000 in 1995 and $20,000 in 1994 of
     servicing feeds paid to Keystone Mortgage Company.

                                      13
<PAGE>

                         KEYSTONE MORTGAGE FUND II,
                       A CALIFORNIA LIMITED PARTNERSHIP

                   Notes to Financial Statements, Continued


Prior to 1995, Keystone Mortgage Company did not pass through to Fund II 
expenses that Keystone Mortgage Company incurred related to operation of Fund 
II as allowed by Fund II's partnership agreement. During 1995, Keystone 
Mortgage Company made a decision to charge Fund II for reimbursement of such 
expenses incurred by Keystone Mortgage Company from inception of Fund II and, 
accordingly, requested payment from Fund II. The expense reimbursement totals 
$249,000 and is included in general and administrative expenses for the year 
ended December 31, 1995 in the accompanying statement 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:

                                                MONTHLY
                                                PAYMENT,
                                               INCLUDING
                                               INTEREST      1996      1995
                                              ----------  ----------  ---------
                                  
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                                          $ 12,529   1,505,238   1,538,433
                                              ----------
                                              ----------

Less:
  Current portion                                             39,732      36,218
  Net deferred origination fees                                3,540       5,240
  Allowance for loss                                          64,000      64,000
                                                           ---------   ---------
    Net noncurrent trust deeds note
      receivable                                          $1,397,966   1,432,975
                                                           ---------   ---------
                                                           ---------   ---------

The estimated fair value of the trust deed note receivable at December 31, 1996 
and 1995 is equivalent to the carrying value.

Minimum future payments of principal at December 31, 1996 are as follows:

                   1997                  $   39,732
                   1998                      44,639
                   1999 and thereafter   $1,420,867
                                         ----------
                                         $1,505,238
                                         ----------
                                         ----------



                                      14
<PAGE>


                         KEYSTONE MORTGAGE FUND II,
                       A CALIFORNIA LIMITED PARTNERSHIP

                   Notes to Financial Statements, Continued


(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:

                                    1996       1995        1994
                                   --------   --------   --------
Net income (loss) for financial
  reporting purposes               $135,681    (14,177)   318,290

Interest revenue on mortgage
  loans previously recognized
  for tax purposes                   (1,700)    (1,700)    (2,310)

Provisions for losses on trust
  deed notes receivable                  --         --     64,000

Other, net                               --        (23)       518
                                   --------   --------   --------
    Net income (loss) for 
      Federal income tax purposes  $133,981    (15,900)   380,498
                                   --------   --------   --------
                                   --------   --------   --------

                                      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 ("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, 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 

                                        16
<PAGE>


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 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 


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<PAGE>

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 
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
Name of Individual      or Accrued for                                     Cash
or Group                Service Rendered in      1994     1995     1996    Bonus
--------------------------------------------------------------------------------
<S>                     <C>                    <C>       <C>       <C>     <C>
Keystone Mortgage Co.   Loan Servicing Fees    $20,000   $10,000   $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 cast distributions and allocations of income or loss.  No 
such distributions or allocations were made for fiscal years 1994, 1995 or 
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 

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<PAGE>

Partnership for such expenses from the inception of the Partnership.  The 
expense reimbursement totals $249,000 and such amount was recorded as general 
and administrative expense during 1995.

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.

                                      PART IV

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


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<PAGE>

    (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, 1996 and 1995........................8

    Statements of Operation for the Years Ended
        December 31, 1996, 1995 and 1994...................................9

    Statement of Partners' Capital for the
         Years Ended December 31, 1996, 1995 and 1994.....................10

    Statements of Cash Flows for the Years
         Ended December 31, 1996, 1995 and 1994...........................11

    Notes to Financial Statements.........................................12

         (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.



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<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     , 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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