REDWOOD MORTGAGE INVESTORS VI
(a California Limited Partnership)
Index to Form 10-K
December 31, 1998
Part I
Page No.
Item 1 - Business 3
Item 2 - Properties 4-5
Item 3 - Legal Proceedings 6
Item 4 - Submission of Matters to a vote of Security Holders (partners) 6
Part II
Item 5 - Market for the Registrants Partners Capital and related
matters. 6
Item 6 - Selected Financial Data 7-8
Item 7 - Managements Discussion and Analysis of Financial Condition
and Results of Operations 9-13
Item 8 - Financial Statements and Supplementary Data 14-35
Item 9 - Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 36
Part III
Item 10 - Directors and Executive Officers of the Registrant 36
Item 11 - Executive Compensation 37
Item 12 - Security Ownership of certain Beneficial Owners and Management 38
Item 13 - Certain Relationships and Related Transactions 38
Part IV
Item 14 -Exhibits, Financial Statement Schedules, and Reports of Form 8-K 38-39
Signatures 40
<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 year ended December 31, 1998 Commission File number 33-12519
-----------------------------------------------------------------------------
REDWOOD MORTGAGE INVESTORS VI
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 94-3031211
- ---------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer Identification)
incorporation or organization)
650 El Camino Real #G, Redwood City, CA 94063
- ---------------------------------------- ---------------------
(address of principal executive offices) (zip code)
Registrants telephone No. Including area code (650) 365-5341
- ----------------------------------------------- -------------------------
Securities registered pursuant to Section 12 (b) of the Act: None
Title of each class Name of each exchange on which registered
- --------------------------- ------------------------------------------
Limited Partnership Units None
- --------------------------- ------------------------------------------
Securities registered pursuant to
Section 12 (g) of the Act: Limited Partnership Units
Indicate by check mark whether the registrant (1) has filed all reports to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES XX NO
------------- ----------------
At the close of the sale of units in 1989, the limited partnership units
purchased by non-affiliates was 97,725.94 units computed at $100.00 a unit for
$9,772,594, excluding General Partners Contribution of $9,772.
Documents incorporated by reference:
Portions of the Prospectus for Redwood Mortgage Investors VI, included as
part of the form S-11 Registration Statement, SEC File No. 33-12519 dated
September 3, 1987 and Supplement No. 6 dated May 16, 1989, incorporated in Parts
II, III, and IV.
<PAGE>
Part I
Item 1 - Business
Redwood Mortgage Investors VI is a California limited partnership (the
Partnership), of which D. Russell Burwell, Michael R. Burwell and Gymno
Corporation, a California corporation, are the General Partners. The address of
the General Partners is 650 El Camino Real, Suite G, Redwood City, California
94063. The PartnershiPs primary purpose is to invest its capital in Mortgage
Investments secured by Northern California properties. Mortgage Investments are
arranged and serviced by Redwood Home Loan Co, dba Redwood Mortgage, an
affiliate of the General Partners. The Partnership's objectives are to make
investments, as referred to above, which will: (i) provide the maximum possible
cash returns which Limited Partners may elect to (a) receive as monthly,
quarterly or annual cash distributions or (b) have earnings credited to their
capital accounts and used to invest in Partnership activities; and (ii) preserve
and protect the Partnerships capital. The Partnerships general business is
more fully described under the section entitled Investment Objectives and
Criteria, pages 23-26 of the Prospectus, a part of the above-referenced
Registration Statement, which is incorporated by reference.
The Partnership was formed in September, 1987, with an approved 120,000
Units of $100 each ($12,000,000). The Units were offered on a best efforts
basis through broker/dealer member firms of the National Association of
Securities Dealers, Inc. It immediately began issuing Units and began investing
in Mortgage Investments in October, 1987. The offering terminated in September,
1989, and as of that date 97,725.94 Units were sold realizing proceeds of
$9,772,594. At December 31, 1998, the Partnership had a balance of Mortgage
Investments totalling $7,969,735 with interest rates thereon ranging from 4.00%
to 17.25%.
Currently First Trust Deeds comprise 55.61% of the total amount of Mortgage
Investment portfolio. Second Mortgage Trust Deeds comprise 36.30% of Mortgage
Investment portfolio, third Mortgage Trust Deeds have 4.95% and 4th Mortgage
Trust Deeds have 3.14% of the Mortgage Investment portfolio. Owner-occupied
homes, combined with non-owner occupied homes, total 16.55% of the Mortgage
Investments. Mortgage Investments to apartments make up 10.26% of the total
Mortgage Investments portfolio. Commercial Mortgage Investment origination
increased from last year, now comprising 73.19% of the portfolio, an increase of
0.95% from 1997. The past year brought many outstanding low loan to value
lending opportunities in the commercial segment of the market. The major
concentration of Mortgage Investments, comprising of 74.71% of the total loans,
are in six counties of the San Francisco Bay Area. The County of Stanislaus
makes up 10.93% of the Mortgage Investment portfolio. Stanislaus County is a
fringe county to the San Francisco Bay Area. In 1998 the Partnership received
many good lending opportunities from this county. The balance, as stated on page
five of this report, are primarily in Northern California. Currently Mortgage
Investment size is averaging $142,317 per Mortgage Investment. Some of the
Mortgage Investments are fractionalized between affiliated partnerships with
objectives similar to those of the Partnership to further reduce risk. Average
equity per loan transaction stood at 34.73%. A 40% equity average on loan
origination is generally considered very conservative. Generally, the more
equity, the more protection for the lender. The Partnerships Mortgage
Investment portfolio is in good condition with no properties in foreclosure as
of the end of December, 1998.
<PAGE>
Item 2 - Properties
As of December 31, 1998, a summary of the Partnerships Mortgage Investment
portfolio is set forth below.
Mortgage Investments as a Percentage of Total Mortgage Investments
First Trust Deeds $4,432,245.77
Appraised Value of Properties 6,301,807.00
Total Investment as a % of Appraisal 70.33%
First Trust Deeds 4,432,245.77
Second Trust Deed Mortgage Investments 2,892,870.54
Third Trust Deed Mortgage Investments 394,619.60
Fourth Trust Deed Mortgage Investments* 249,999.40
--------------------
7,969,735.31
First Trust Deeds due other Lenders 11,180,298.00
Second Trust Deeds due other Lenders 990,064.00
Third Trust Deeds due other Lenders 178,571.00
Total Debt $20,318,668.31
Appraised Property Value $31,128,892.00
Total Investments as a % of Appraisal 65.27%
Number of Mortgage Investments Outstanding 56
Average Investment 142,316.70
Average Investment as a % of Net Assets 1.63%
Largest Investment Outstanding 1,376,117.03
Largest Investment as a % of Net Assets 15.80%
Mortgage Investments as a Percentage of Total Mortgage Investments
First Trust Deeds 55.61%
Second Trust Deeds 36.30%
Third Trust Deeds 4.95%
Fourth Trust Deeds 3.14%
--------------------
100.00%
Total
Mortgage Investments by Type Amount Percent
of Property
Owner Occupied Homes $944,491.33 11.85%
Non-Owner Occupied Homes 374,408.39 4.70%
Apartments 817,818.78 10.26%
Commercial 5,833,016.81 73.19%
----------------- -----------
Total $7,969,735.31 100.00%
*Footnote on following page.
<PAGE>
The following is a distribution of loans outstanding as of December 31, 1998
by Counties.
Santa Clara $2,289,006.95 28.72%
Alameda 1,173,232.37 14.72%
San Mateo 969,458.58 12.16%
Stanislaus 871,569.71 10.93%
Contra Costa 768,318.32 9.64%
San Francisco 676,147.60 8.48%
Sacramento 595,505.84 7.47%
Sonoma 253,096.02 3.18%
Ventura 91,000.00 1.14%
Shasta 81,033.44 1.02%
Marin 78,854.34 0.99%
Monterey 70,617.58 0.89%
Santa Cruz 33,897.62 0.43%
Solano 17,996.94 0.23%
------------------- -----------
Total $7,969,735.31 100.00%
*Redwood Mortgage Investors VI, together with other Redwood partnerships
hold a second and a fourth trust deed against the secured property. In addition,
the principals behind the borrower corporation have given personal guarantees as
collateral. The overall loan to value ratio on this loan is 76.52%. In addition
to the borrower paying an interest rate of 12.25%, the Partnership and other
lenders will also participate in profits. The General Partners have had previous
loan activity with this borrower which had been concluded successfully, with
extra earnings earned for the other partnerships involved.
Statement of Condition of Mortgage Investments:
Number of Mortgage Investments in Foreclosure -0-
Scheduled maturity dates of mortgage investments as of December 31, 1998
are as follows:
Year Ending
December 31,
1999 $4,470,166
2000 1,021,816
2001 1,004,686
2002 422,896
2003 437,684
Thereafter 612,487
================
$7,969,735
================
The scheduled maturities for 1999 include $2,080,024 in Mortgage Investments
which are past maturity at December 31, 1998. $816,898 of those Mortgage
Investments were categorized as delinquent over 90 days.
Seven Mortgage Investments with principal outstanding of $994,735 had
interest payments overdue in excess of 90 days.
<PAGE>
Item 3 - Legal Proceedings
In the normal course of business, the Partnership may become involved in
various types of legal proceedings such as assignments of rents, bankruptcy
proceedings, appointments of receivers, unlawful detainers, judicial
foreclosures, etc., to enforce the provisions of the deeds. Management
anticipates that the ultimate outcome of these legal matters will not have a
material adverse effect on the net assets of the Partnership in light of the
Partnership's allowance for doubtful accounts. As of the date hereof, legal
actions against borrowers and other involved parties have been initiated by the
Partnership to help assure payments against unsecured accounts receivable
totaling $23,775. The Partnership is a defendant along with numerous defendants,
including a developer, contractor, and other lenders, in a lawsuit involving the
Partnerships attempt to recover its investment in real estate acquired through
foreclosure.
Item 4 - Submission of matters to vote of Security Holders (Partners).
No matters have been submitted to a vote of the Partnership.
Part II
Item 5 - Market for the Registrants Partners Capital and Related Matters.
120,000 Units at $100 each (minimum 20 units) were offered through
broker-dealer member firms of the National Association of Securities Dealers on
a best efforts basis (as indicated in Part I item 1). All Units have been sold
only in California. Investors have the option of withdrawing earnings on a
monthly, quarterly or annual basis or reinvesting and compounding earnings.
Limited Partners may withdraw from the Partnership in accordance with the terms
of the Partnership Agreement subject to early withdrawal penalties. There is no
established public trading market for the Units.
A description of the Partnership's Units, transfer restrictions, and
withdrawal provisions is more fully described under the section entitled
Description of Units and Summary of the Limited Partnership Agreement, pages
38-42 of the Prospectus, a part of the above-referenced Registration statement,
which is incorporated by reference.
As of December 31, 1998, there were 715 holders of record of the
Partnerships Units. A decrease of 27 from 1997.
<PAGE>
<TABLE>
<CAPTION>
Item 6 - Selected Financial Data
Redwood Mortgage Investors VI began operations in October 1987. Its
financial condition and results of operation for three years to December 31,
1998 were:
Balance Sheets
Assets
December 31,
------------------------------------------------------
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Cash 299,775 $331,143 $180,597
-------------- -------------- --------------
Accounts Receivable:
Mortgage Investments, secured by Deeds of Trust 7,969,735 8,104,984 9,313,924
Accrued Interest on Mortgage Investments 717,719 617,456 405,783
Advances on Mortgage Investments 162,083 127,519 108,019
Accounts receivables, unsecured 23,775 161,414 251,531
-------------- -------------- --------------
$8,873,312 $9,011,373 $10,079,257
Less allowance for doubtful accounts 202,344 28,614 252,850
-------------- -------------- --------------
$8,670,968 8,982,759 $ 9,826,407
-------------- -------------- --------------
Real estate owned, held for sale, acquired through
Foreclosure 169,922 309,319 1,441,007
Investment in Partnership 0 708,141 496,040
-------------- -------------- --------------
$9,140,665 $10,331,362 $11,944,051
============== ============== ==============
Liabilities and Partners Capital
Liabilities:
Notes Payable - Bank Line of Credit 390,000 $899,011 $1,530,511
Accounts Payable 22,668 0 0
Deferred interest on Mortgage Investments 20,463 898 18,522
-------------- -------------- --------------
Total Liabilities 433,131 899,909 1,549,033
-------------- -------------- --------------
Partners Capital:
Limited Partners capital, subject to 8,697,768 9,421,687 10,385,252
redemption
General Partners capital 9,766 9,766 9,766
-------------- -------------- --------------
Total Partners Capital 8,707,534 9,431,453 10,395,018
-------------- -------------- --------------
Total Liabilities and Partners Capital $9,140,665 $10,331,362 $11,944,051
============== ============== ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of Income
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Gross Revenue $871,861 $1,036,596 $1,167,859
Expenses 359,356 507,409 579,697
============== ============== ==============
Net Income 512,505 529,187 588,162
============== ============== ==============
Net Income: to General Partners (1%) 5,125 $5,292 $5,882
to Limited Partners (99%) 507,380 523,895 582,280
-------------- -------------- --------------
$512,505 $529,187 $588,162
============== ============== ==============
Net Income per $1,000 invested by Limited
Partners for entire period:
- where income is reinvested and compounded $56 $53 $54
============== ============== ==============
-where partner receives income in monthly
distributions $55 $52 $52
============== ============== ==============
<FN>
In 1995 the annualized yield was 5.30%. In 1996, the annualized yield was
5.35%, in 1997 the annualized yield was 5.29% and in 1998 the annualized yield
was 5.63%. The annualized yield since inception through December 31, 1998, was
7.52%.
</FN>
</TABLE>
<PAGE>
Item 7 - Managements Discussion and Analysis of Financial Condition
and Results of Operations
On September 2, 1989, the Partnership had sold 97,725.94 Units and its
contributed capital totalled $9,772,594 of the approved $12,000,000 issue, in
Units of $100 each. As of that date the offering was formally closed. On
December 31, 1998, the Partnerships net capital totalled $8,707,534.
The Partnership began funding Mortgage Investments in October 1987. The
Partnerships Mortgage Investments outstanding for the years ended December 31,
1996, 1997 and 1998, were $9,313,924, $8,104,984, and $7,969,735 respectively.
The decrease in Mortgage Investments outstanding of $1,344,189 from December 31,
1996 to December 31, 1998, was again due primarily to the Partnership utilizing
Mortgage Investment payoffs to meet Limited Partner capital liquidations and
line of credit pay-down to save interest expense on the note. During the years
1996, 1997, and 1998, Mortgage Investment principal collections exceeded Limited
Partner liquidations.
Currently, general mortgage interest rates are lower than those prevalent
at the inception of the Partnership. New Mortgage Investments will be originated
at these lower interest rates. The result is to reduce the average return across
the entire Mortgage Investment portfolio held by the Partnership. In the future,
interest rates likely will change from their current levels. The General
Partners cannot at this time predict at what levels interest rates will be in
the future. Although the rates charged by the Partnership are influenced by the
level of interest rates in the market, the General Partners do not anticipate
that rates charged by the Partnership to its borrowers will change significantly
from the beginning of 1999 over the next 12 months. As of December 31, 1998 the
Partnerships Real Estate Owned account and the Investment in Partnership
account have been reduced to a combined $169,922 balance. These accounts had
combined balances of $1,017,460 and $ 1,937,047 as of December 31, 1997 and
1996, respectively. The conversion of these non-earning assets will allow the
Partnership to produce current income from previously non earning assets. The
overall effect of these developments will allow the Partnerships yield to rise.
The General Partners anticipate that the annualized yield for the forthcoming
year 1999, will be higher than the current years performance level.
Each year, the Partnership negotiates a line of credit with a commercial
bank which is secured by its Mortgage Investment portfolio. The outstanding
balance of the bank line of credit was $1,530,511, $899,011 and $390,000 for the
years ended December 1996, 1997 and 1998, respectively. The interest rate on the
bank line of credit has remained at Prime plus one percent for the preceding
three years. For the years ended December 31, 1998, 1997and 1996 , interest on
Note Payable-Bank was $43,170, $133,577and $158,175 respectively. The primary
reason for this decrease was that the Partnership had a lower overall credit
facility utilization from 1995 to 1996 and from 1996 to December 31, 1998. As of
December 31, 1998, the Partnership has borrowed $390,000 at an interest rate of
Prime plus one percent. This added source of funds will help in maximizing the
Partnership yield by allowing the Partnership to minimize the amount of funds in
lower yield investment accounts when appropriate Mortgage Investments are not
currently available and because the Mortgage Investments made by the Partnership
usually bear interest at a rate in excess of the rate payable to the bank which
extended the line of credit, the amount to be retained by the Partnership, after
payment of the line of credit cost, will be greater than without the use of the
line of credit.
The Partnerships operating results and delinquencies are within the normal
range of the General Partners expectations, based upon their experience in
managing similar Partnerships over the last twenty- one years. Foreclosures are
a normal aspect of partnership operations and the General Partners anticipate
that they will not have a material effect on liquidity. As of December 31, 1998,
there were no properties in foreclosure. Cash is continually being generated
from interest earnings, late charges, prepayment penalties, amortization of
notes and pay-off of notes. Currently, this amount exceeds Partnership expenses
and earnings and principal payout requirements. As Mortgage Investment
opportunities become available, excess cash and available funds are invested in
new Mortgage Investments.
<PAGE>
The General Partners regularly review the Mortgage Investment portfolio,
examining the status of delinquencies, the underlying collateral securing these
Mortgage Investments, REO expenses, sales activities, and borrowers payment
records and other data relating to the Mortgage Investment portfolio. Data on
the local real estate market, and on the national and local economy are studied.
Based upon this information and more, Mortgage Investment loss reserves and
allowance for doubtful accounts are increased or decreased. Because of the
number of variables involved, the magnitude of possible swings and the General
Partners inability to control many of these factors, actual results may and do
sometimes differ significantly from estimates made by the General Partners.
Management provided $312,684, $268,101 and $180,054 as provision for doubtful
accounts for the years ended December 31, 1996, December 31, 1997, and December
31, 1998, respectively. The decrease in the provision reflects the decrease in
the amount of REO, unsecured receivables and the decreasing levels of
delinquency within the portfolio. Additionally, the General Partners felt that
the bottom of the real estate cycle had been reached, reflecting a decreasing
need to set aside reserves for the continuously declining real estate values as
had been the case in the early 1990s in the California real estate market. As
of December 31, 1998, the Partnership reduced the REO balance from $1,501,712 as
of December 31, 1995, to $169,922 through December 31, 1998. This reduction
assisted the Partnership in increasing yields in 1998, as assets previously
lying idle, now produced current income.
The December 1998 issue of Western Economic Developments, published by the
Federal Reserve Bank of San Francisco, said the following about the California
economy:
The pace of economic growth in California was solid in recent months,
despite continued contraction in some major industries. Total payroll employment
rose 3.2 percent on an annual basis in October and November. This is above the
average growth rate for the first eleven months of 1998, but it is below the 3.8
percent pace from last year. Faced by declining export demand and rising import
competition, durable goods manufacturers cut employment in November.
Manufacturers of computers and electronic components have been particularly hard
hit this year, and aerospace employment has contracted. However, the pace of job
creation has remained strong in sectors other than manufacturing, and this has
helped to lower the state unemployment rate to 5.7 percent in November.
Californias state and local governments have created new jobs at about a
2.5 percent annual pace this year, a pickup from prior years that is due in part
to improved fiscal capacity. About 21,000 of the 29,000 jobs created this year
were for educators at local schools.
To the Partnership, the above evaluation of the California economy means an
increase in property values, job growth, personal income growth, etc., which all
translates into more loan activity, which of course, is healthy for the
Partnerships lending activity.
The Partnerships interest in land located in East Palo Alto, Ca, was
acquired through foreclosure. The Partnerships interest is invested with that
of two other Partnerships. The Partnerships basis of $0, $708,141 and $496,040
for the years ended December 31, 1998, December 31, 1997 and 1996 respectively,
has been invested with that of two other Partnerships. The Partnership had been
attempting to develop property into an approximately 63 units residential
subdivision, (the Development). The proposed Development had gained
significant public awareness as a result of certain environmental, fish and
wildlife density, and other concerns. Incorporated into the proposed Development
were various mitigation measures included remediation of hazardous material
existing on the property and protection of potentially affected species due to
the proximity to the San Francisco Baylands. These issues and others sparked
significant public controversy. Opposition against and support for the proposed
Development existed. Among those in opposition to the project was Rhone Poulanc,
Inc., which is responsible for a nearby hazardous waste site. Rhone Poulanc,
Inc. has been identified as the Responsible Party for the Arsenic
Contamination which affected a portion of the property. On May 8, 1998, the
Partnership, in order to resolve disputes which arose during the course of
attempts to obtain entitlements for this
<PAGE>
Development, entered into agreements with Rhone-Poulanc, Inc., which among
other things, restricted the property to non residential uses, provided for
appropriate indemnification and included other consideration including a cash
payment to the Partnership. The Partnership has retained ownership of the
property, which is subject to various deed restrictions, options and or first
rights of refusal. The General Partners are pleased with this outcome to the
residential development attempt. The General Partners may now explore other
available options with respect to alternative uses for the property. In order to
pursue these options, rezoning of the propertys existing residential zoning
classification will be required. The Partnership is continuing to explore
remediation options available to mitigate the pesticide contamination, which
affects the property. This pesticide contamination appears to be the result of
agricultural operations by prior owners, and is unrelated to the Arsenic
Contamination for which Rhone Poulanc, Inc. remains responsible. The General
Partners do not believe at this time that remediation of the pesticide
contaminants will have a material adverse effect on the financial condition of
the Partnership.
At the time of subscription to the Partnership, Limited Partners made an
irrevocable decision to either take distributions of earnings monthly, quarterly
or annually or to compound earnings in their capital account. For the years
ended December 31, 1996, 1997, and 1998, the Partnership made distributions of
earnings to Limited Partners after allocation of syndication costs of, $288,796,
$252,378 and $230,712 respectively. Distribution of Earnings to Limited Partners
after allocation of syndication costs for the years ended December 31, 1996,
December 31, 1997, and December 31, 1998 to Limited Partners capital accounts
and not withdrawn was $293,484, $271,517 and $276,668 respectively. As of
December 31, 1996, December 31, 1997, and December 31, 1998, Limited Partners
electing to withdraw earnings represented 49 %, 46% and 43% respectively of the
Limited Partners outstanding capital accounts.
The Partnership also allows the Limited Partners to withdraw their capital
account subject to certain limitations (see liquidation provisions of
Partnership Agreement). For the years ended December 31, 1996, December 31,
1997, and December 31, 1998, $96,362, $159,732 and $122,069 respectively, were
liquidated subject to the 10% and/or 8% penalty for early withdrawal. These
withdrawals are within the normally anticipated range that the General Partners
would expect in their experience in this and other Partnerships. The General
Partners expect that a small percentage of Limited Partners will elect to
liquidate their capital accounts over one year with a 10% and/or 8% early
withdrawal penalty. In originally conceiving the Partnership, the General
Partners wanted to provide Limited Partners needing their capital returned a
degree of liquidity. Generally, Limited Partners electing to withdraw over one
year need to liquidate investments to raise cash. The trend the Partnership is
experiencing in withdrawals by Limited Partners electing a one year liquidation
program represents a small percentage of Limited Partner capital as of December
31, 1996, December 31, 1997, and December 31, 1998, respectively and is expected
by the General Partners to commonly occur at these levels.
Additionally, for the years ended December 31, 1996, December 31, 1997, and
December 31, 1998, $1,086,737, $1,137,677 and $938,040 respectively, were
liquidated by Limited Partners who have elected a liquidation program over a
period of five years or longer. Once the initial five year hold period has
passed, the General Partners expect to see an increase in liquidations due to
the ability of Limited Partners to withdraw without penalty. This ability to
withdraw after five years by Limited Partners has the effect of providing
Limited Partner liquidity which the General Partners then expect a portion of
the Limited Partners to avail themselves of. This has the anticipated effect of
the partnership growing, primarily through reinvestment of earnings in years one
through five. The General Partners expect to see increasing numbers of Limited
Partner withdrawals in years five through eleven, at which time the bulk of
those Limited Partners who have sought withdrawal will have been liquidated.
After year eleven, liquidation generally subsides and the Partnership capital
again tends to increase.
<PAGE>
<TABLE>
<CAPTION>
Actual liquidation of both capital and earnings from year five (1992)
through year eleven (1998) is shown hereunder:
Years ended December 31,
1992 1993 1994 1995 1996 1997 1998
----------- ---------- ----------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings $323,037 377,712 303,014 303,098 294,678 257,670 235,837
Capital *$232,370 528,737 729,449 892,953 1,183,099 1,297,410 1,060,109
=========== ========== =========== =========== =========== =========== ==============
Total $555,407 $906,449 $1,032,463 $1,196,051 $1,477,777 $1,555,080 $1,295,946
=========== ========== =========== =========== =========== =========== ==============
*These amounts represent gross of early withdrawal penalties.
The Year 2000 will be a challenge for the entire world, with respect to the
conversion of existing computerized operations. The Partnership is completing an
assessment of Year 2000 hardware and software issues. This assessment is not yet
fully complete. The Partnership relies on Redwood Mortgage Corp., an affiliate
of the Partnership, and third parties to provide loan and investor services and
other computerized functions, effected by Year 2000 computerized operations.
Major services provided to the Partnership by these companies are loan
servicing, accounting and investor services. The vendors that supply the
software for loan servicing have already confirmed compliance with Year 2000
issues. Installation of accounting software that is Year 2000 compliant will
begin after the 1998-year ends. The investor servicing software Year 2000
compliance is still under assessment. Existing investor servicing software
maintenance agreements provide for conversion to Year 2000 compliance to be
provided by the vendor. Additionally, the Partnership has contacted several
vendors that provide investor services as a possible alternative to continuing
to provide investors services in house. It would appear that these service
providers would be more expensive than the current in house systems but they do
provide a back-up alternative in the event of our own failure to fully convert.
Hardware utilized by Redwood Mortgage Corp., is currently being tested to insure
that modifications necessary to be made prior to Year 2000 can be accomplished.
At this juncture, existing hardware appears to be substantially compliant with
Year 2000 issues.
The costs of updating the various software systems will be borne by the
various companies that supply the Partnership with services. Therefore, no
significant capital outlays are anticipated and the Partnership expects only
incidental costs of conversion for Year 2000 issues.
The Partnership is in the business of making Mortgage Investments secured
by real estate. The most important factor in making the Mortgage Investments is
the value of the real estate security. Year 2000 issues have some potential to
effect industries and businesses located in the marketplaces in which the
Partnership places its Mortgage Investments. This would only have an affect on
the Partnership if Year 2000 issues cause a significant downturn in the northern
California economy. In fact, Silicon Valley is located in our marketplace. There
may be significant increased demand for Silicon Valley type services and goods
as companies make ready for the Year 2000 conversion.
Although not fully developed, if all or any accounting, loan servicing and
investor services conversions should fail, the size and scope of the
Partnerships activities are such that they could be handled at an equal or
higher cost on a manual basis or outsourced to other servicers existing in the
industry, while correcting the systems problems and are likely to be temporarily
in nature. While this would entail some initial set up costs, these costs would
likely not be so significant as to have a material effect upon the Partnership,
shifting portions of daily operations to manual or outsourced systems may result
in time delays. Time delays in providing accurate and pertinent information
could negatively affect customer relations and lead to the potential loss of new
loans and Limited Partner investments.
The foregoing analysis of Year 2000 issues includes forward-looking
statements and predictions about possible or future events, results of
operations and financial condition. As such, this analysis may prove to
</TABLE>
<PAGE>
be inaccurate because of the assumptions made by the General Partner or the
actual development of future events. No assurance can be given that any of these
forward-looking statements and predictions will ultimately prove to be correct
or even substantially correct. Various other risks and uncertainties could also
affect the Year 2000 analysis causing the effect on the Partnership to be more
severe than discussed above. The General Partners Year 2000 compliance testing
cannot guarantee that all computer systems will function without error beyond
the Year 2000. Risks also exist with respect to Year 2000 compliance by external
parties who may have no relationship to the Partnership or the General Partner,
but who have a significant relationship with one or more third parties, and may
have a system failure that adversely affects the Partnerships ability to
conduct business. While the General Partner is attempting to identify such
external parties, no assurance can be given that it will be able to do so.
Furthermore, third parties with direct relationships with the Partnership, whose
systems have been identified as likely to be Year 2000 compliant, may suffer a
breakdown due to unforeseen circumstances. It is also possible that the
information collected by the General Partner for these third parties regarding
their compliance with Year 2000 issues may be incorrect. Finally, it should be
noted that the foregoing discussion of Year 2000 issues assumes that to the
extent the General Partners systems fail, whether because of unforeseen
complications or because of third parties failure, switching to manual
operations will allow the Partnership to continue to conduct its business. While
the General Partner believes this assumption to be reasonable, if it is
incorrect, the Partnerships results of operations would likely be adversely
affected.
<PAGE>
Item 8 - Financial Statements and Supplementary Data
Redwood Mortgage Investors VI, a California Limited Partnerships list of
Financial Statements and Financial Statement schedules:
A- Financial Statements
Independent Auditors Report,
Balance Sheets - December 31, 1998, and December 31, 1997,
Statements of Income for the three years ended December 31, 1998,
Statements of Changes in Partners Capital for the three years
ended December 31, 1998,
Statements of Cash Flows for the three years ended December 31, 1998,
Notes to Financial Statements - December 31, 1998.
B. - Financial Statement Schedules
The following financial statement schedules of Redwood Mortgage Investors VI
are included in Item 8.
Schedule II Amounts receivable from related parties and underwriters,
promoters, and employees other than related parties
Schedule VIII Valuation of Qualifying Accounts
Schedule IX Short Term Borrowings
Schedule XII Mortgage Investments on real estate
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have
been omitted.
<PAGE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
FINANCIAL STATEMENTS
DECEMBER 31, 1998
(with Auditors Report Thereon)
<PAGE>
PARODI & CROPPER
CERTIFIED PUBLIC ACCOUNTANTS
3658 Mount Diablo Blvd., Suite #205
Lafayette California 94549
(925) 284-3590
INDEPENDENT AUDITORS REPORT
THE PARTNERS
REDWOOD MORTGAGE INVESTORS VI
We have audited the financial statements and related schedules of REDWOOD
MORTGAGE INVESTORS VI (A California Limited Partnership) listed in Item 8 on
form 10-K including balance sheets as of December 31, 1998 and 1997 and the
statements of income, changes in partners capital and cash flows for the three
years ended December 31, 1998. These financial statements are the responsibility
of the Partnerships 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 REDWOOD MORTGAGE INVESTORS
VI as of December 31, 1998 and 1997, and the results of its operations and cash
flows for the three years ended December 31, 1998 in conformity with generally
accepted accounting principles. Further, it is our opinion that the schedules
referred to above present fairly the information set forth therein in compliance
with the applicable accounting regulations of the Securities and Exchange
Commission.
/S/ Bruce Cropper
PARODI & CROPPER
Lafayette, California
March 3, 1999
<PAGE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C> <C>
Cash $299,775 $331,143
--------------- ---------------
Accounts receivable:
Mortgage Investments, secured by deeds of trust 7,969,735 8,104,984
Accrued Interest on Mortgage Investments 717,719 617,456
Advances on Mortgage Investments 162,083 127,519
Accounts receivables, unsecured 23,775 161,414
--------------- ---------------
8,873,312 9,011,373
Less allowance for doubtful accounts 202,344 28,614
--------------- ---------------
8,670,968 8,982,759
--------------- ---------------
Real estate owned, held for sale, acquired through foreclosure 169,922 309,319
Investment in Partnership 0 708,141
--------------- ---------------
Total Assets $9,140,665 $10,331,362
=============== ===============
LIABILITIES AND PARTNERS CAPITAL
Liabilities:
Accounts Payable $22,668 $0
Deferred Interest 20,463 898
Note payable - bank line of credit 390,000 899,011
--------------- ---------------
Total Liabilities 433,131 899,909
--------------- ---------------
Partners Capital:
Limited Partners capital, subject to redemption, (note 4D):
net of Formation Loan receivable of $0 and $59,521,
for 1998 and 1997, respectively 8,697,768 9,421,687
General Partners Capital: 9,766 9,766
--------------- ---------------
Total Partners capital 8,707,534 9,431,453
--------------- ---------------
Total Liabilities and Partners capital $9,140,665 $10,331,362
=============== ===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
STATEMENTS OF INCOME
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------
1998 1997 1996
------------- -------------- -------------
Revenues:
<S> <C> <C> <C>
Interest on Mortgage Investments $847,960 $1,011,621 $1,135,218
Interest on bank deposits 8,487 6,563 4,750
Late charges, prepayment penalties, and fees 15,414 18,412 27,891
------------- -------------- -------------
871,861 1,036,596 1,167,859
------------- -------------- -------------
Expenses:
Mortgage servicing fees 70,630 39,918 44,565
Asset management fee 6,640 0 0
Clerical costs through Redwood Mortgage 24,440 27,786 31,838
Interest and line of credit costs 43,170 133,577 158,175
Provision for doubtful accounts and losses
on real estate acquired through foreclosure 180,054 268,101 312,684
Professional services 18,831 23,517 17,825
Other 15,591 14,510 14,610
------------- -------------- -------------
359,356 507,409 579,697
------------- -------------- -------------
Net Income $512,505 $529,187 $588,162
============= ============== =============
Net income: To General Partners(1%) $5,125 $5,292 $5,882
To Limited Partners (99%) $507,380 $523,895 $582,280
============= ============== =============
$512,505 $529,187 $588,162
============= ============== =============
Net income per $1,000 invested by Limited
Partners for entire period:
-where income is reinvested and compounded $56 $53 $54
============= ============== =============
-where partner receives income in monthly distributions $55 $52 $52
============= ============== =============
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS CAPITAL
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
PARTNERS CAPITAL
------------------------------------------------------------------------------------
LIMITED PARTNERS CAPITAL
--------------------------------------------------
Capital
Account Formation General
Limited Loan Partners
Partners Receivable Total Capital Total
-------------- ------------- --------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1995 11,396,716 (184,177) 11,212,539 $9,766 11,222,305
Formation Loan collections 0 56,803 56,803 0 56,803
Net income 582,280 0 582,280 5,882 588,162
Early withdrawal penalties (8,721) 5,525 (3,196) 0 (3,196)
Partners withdrawals (1,463,174) 0 (1,463,174) (5,882) (1,469,056)
-------------- ------------- --------------- ------------ -------------
Balances at December 31, 1996 10,507,101 (121,849) 10,385,252 9,766 10,395,018
Formation Loan collections 0 53,833 53,833 0 53,833
Net Income 523,895 0 523,895 5,292 529,187
Early withdrawal penalties (13,409) 8,495 (4,914) 0 (4,914)
Partners withdrawals (1,536,379) 0 (1,536,379) (5,292) (1,541,671)
-------------- ------------- -------------- ------------ --------------
Balances at December 31, 1997 $9,481,208 ($59,521) $9,421,687 $9,766 $9,431,453
Formation Loan collections 0 53,291 53,291 0 53,291
Net Income 507,380 0 507,380 5,125 512,505
Early withdrawal penalties (9,834) 6,230 (3,604) 0 (3,604)
Partners withdrawals (1,280,986) 0 (1,280,986) (5,125) (1,286,111)
-------------- ------------- -------------- ------------ --------------
Balances at December 31, 1998 $8,697,768 0 $8,697,768 $9,766 $8,707,534
============== ============= ============== ============ ==============
<FN>
See accompanying notes to financial statements
</FN>
</TABLE>
<PAGE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1998 1997 1996
-------------- ------------- -------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $512,505 $529,187 $588,162
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for doubtful accounts 268,764 264,484 65,804
Provision for Losses (recovery) on real estate held
for sale (88,710) 3,617 246,880
Early withdrawal penalty credited to income (3,604) (4,914) (3,196)
(Increase) decrease in assets:
Accrued interest & advances (134,827) (231,173) 63,950
Prepaid expenses and other assets 0 0 935
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 22,668 0 0
Deferred Interest on Mortgage Investments 19,565 (17,624) 18,522
-------------- ------------- -------------
Net cash provided by operating activities 596,361 543,577 981,057
-------------- ------------- -------------
Cash flows from investing activities:
Principal collected on Mortgage Investments 1,934,071 1,634,128 3,295,834
Mortgage Investments made (1,798,822) (557,796) (2,474,843)
Additions to real estate held for sale (2,785) (47,415) (242,869)
Dispositions of real estate held for sale 85,449 909,491 299,414
Investment in Partnership (215,281) (212,101) (39,219)
Proceeds from Partnership 1,068,865 0 0
Proceeds from unsecured accounts receivable 42,605 0 0
-------------- ------------- -------------
Net cash provided by (used in) investing activities 1,114,102 1,726,307 838,317
-------------- ------------- -------------
Cash flows from financing activities:
Net increase (decrease) in note payable-bank (509,011) (631,500) (510,500)
Partners withdrawals (1,286,111) (1,541,671) (1,469,056)
Formation Loan collections 53,291 53,833 56,803
-------------- ------------- -------------
Net cash provided by (used in) financing activities (1,741,831) (2,119,338) (1,922,753)
-------------- ------------- -------------
Net increase (decrease) in cash (31,368) 150,546 (103,379)
Cash - beginning of period 331,143 180,597 283,976
-------------- ------------- -------------
Cash - end of period $299,775 $331,143 $180,597
============== ============= =============
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1 - ORGANIZATION AND GENERAL Redwood Mortgage Investors VI, (the
Partnership) is a California Limited Partnership, of which the General
Partners are D. Russell Burwell, Michael R. Burwell and Gymno Corporation, a
California corporation owned and operated by the individual General Partners.
The partnership was organized to engage in business as a mortgage lender for the
primary purpose of making Mortgage Investments secured by Deeds of Trust on
California real estate. Mortgage Investments are being arranged and serviced by
Redwood Mortgage Corp., (Redwood Mortgage), an affiliate of the General
Partners. The offering was closed with contributed capital totaling $9,781,366.
Each months income is distributed to partners based upon their
proportionate share of partners capital. Some partners have elected to withdraw
income on a monthly, quarterly or annual basis.
A. Sales Commissions - Formation Loan Sales commissions ranging from 0%
(units sold by General Partners) to 10% of gross proceeds were paid by Redwood
Mortgage., an affiliate of the General Partners that arranges and services the
Mortgage Investments. To finance the sales commissions, the Partnership loaned
to Redwood Mortgage $623,255 (the Formation Loan) relating to contributed
capital of $9,781,366. The Formation Loan is unsecured, and was repaid without
interest, in ten annual installments of principal, commencing December 31, 1989.
The last payment was made during 1998. The following reflects transactions in
the Formation Loan account through December 31, 1998:
Amount loaned during 1987,1988 and 1989 $623,255
Less:
Cash repayments $566,586
Allocation of early withdrawal penalties 56,669 623,255
============ ---------
Balance December 31, 1998 $0
=========
The Formation Loan, which is receivable from Redwood Mortgage, an affiliate
of the General Partners, was deducted from Limited Partners capital in the
balance sheet. As amounts were collected from Redwood Mortgage, the deduction
from capital was reduced. As of December 31, 1998 there was no longer a
deduction.
B. Other Organizational and Offering Expenses Organizational and offering
expenses, other than sales commissions, (including printing costs, attorney and
accountant fees, and other costs), paid by the Partnership from the offering
proceeds totaled $360,885 or 3.69% of the gross proceeds contributed by the
Partners. Such costs have been fully amortized and allocated to the Partners.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Accrual Basis
Revenues and expenses are accounted for on the accrual basis of accounting
wherein income is recognized as earned and expenses are recognized as incurred.
Once a Mortgage Investment is categorized as impaired, interest is no longer
accrued thereon.
<PAGE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
B. Management Estimates
In preparing the financial statements, management is required to make
estimates based on the information available that affect the reported amounts of
assets and liabilities as of the balance sheet date and revenues and expenses
for the related periods. Such estimates relate principally to the determination
of the allowance for doubtful accounts, including the valuation of impaired
mortgage investments, and the valuation of real estate acquired through
foreclosure. Actual results could differ significantly from these estimates.
C. Mortgage Investments, Secured by Deeds of Trust
The Partnership has both the intent and ability to hold the Mortgage
Investments to maturity, i.e., held for long-term investment. They are therefore
valued at cost for financial statement purposes with interest thereon being
accrued by the simple interest method.
Financial Accounting Standards Board Statements (SFAS) 114 and 118
(effective January 1, 1995) provide that if the probable ultimate recovery of
the carrying amount of a Mortgage Investment, with due consideration for the
fair value of collateral, is less than the recorded investment and related
amounts due and the impairment is considered to be other than temporary, the
carrying amount of the investment (cost) shall be reduced to the present value
of future cash flows. The adoption of these statements did not have a material
effect on the financial statements of the Partnership because that was the
valuation method previously used on impaired loans.
At December 31, 1998, 1997 and 1996, reductions in the cost of Mortgage
Investments categorized as impaired by the Partnership totalled $84,736, $0 and
$13,006, respectively. The reduction in stated value was accomplished by
increasing the allowances for doubtful accounts.
As presented in Note 10 to the financial statements as of December 31,
1998, the average mortgage investment to appraised value of security at the time
the loans were consummated was 65.27%. When a loan is valued for impairment
purposes, an updating is made in the valuation of collateral security. However,
a low loan to value ratio tends to minimize reductions for impairment.
D. Cash and Cash Equivalents
For purposes of the statements of cash flows, cash and cash equivalents
include interest bearing and non-interest bearing bank deposits.
E. Real Estate Owned, Held for Sale
Real estate owned, held for sale, includes real estate acquired through
foreclosure and is stated at the lower of the recorded investment in the
property, net of any senior indebtedness, or at the propertys estimated fair
value, less estimated costs to sell.
<PAGE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
The following schedule reflects the costs of real estate acquired through
foreclosure and the recorded reductions to estimated fair values, less estimated
costs to sell as of December 31, 1998 and 1997:
December 31,
-----------------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
Costs of properties $366,655 $449,319
Reduction in value 196,733 140,000
--------------- ---------------
Fair value reflected in financial statements $169,922 $309,319
=============== ===============
Effective January 1, 1996, the Partnership adopted the provisions of
statement No 121 (SFAS 121) of the Financial Accounting Standards Board,
Accounting for the Impairment of Long Lived Assets and for Long Lived Assets to
be disposed of. The adoption of SFAS 121 did not have a material impact on the
Partnerships financial position because the methods indicated were essentially
those previously used by the Partnership.
F. Investment in Partnership (see note 5)
G. Income Taxes
No provision for Federal and State income taxes is made in the financial
statements since income taxes are the obligation of the partners if and when
income taxes apply.
H. Organization and Syndication Costs
The Partnership bears its own organization and syndication costs (other
than certain sales commissions and fees described above) including legal and
accounting expenses, printing costs, selling expenses, a 1% wholesale brokerage
fee and filing fees. Organizational costs of $14,750 were capitalized and were
amortized over a five year period. Syndication costs of $346,135 were charged
against partners capital and were allocated to individual partners consistent
with the Partnership Agreement.
I. Allowance for Doubtful Accounts
Mortgage Investments and the related accrued interest, fees and advances
are analyzed on a continuous basis for recoverability. Delinquencies are
identified and followed as part of the Mortgage Investment system. A provision
is made for doubtful accounts to adjust the allowance for doubtful accounts to
an amount considered by management to be adequate with due consideration to
collateral value to provide for unrecoverable accounts receivable, including
impaired Mortgage Investments, unspecified mortgage investments, accrued
interest and advances on Mortgage Investments, and other accounts receivable
(unsecured). The composition of the allowance for doubtful accounts as of
December 31, 1998 and 1997 was as follows:
</TABLE>
<PAGE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
Impaired Mortgage Investments $84,736 $0
Unspecified Mortgage Investments 93,732 13,432
Accounts receivable, unsecured 23,776 15,182
---------------
===============
$202,244 $28,614
=============== ===============
J. Net Income Per $1,000 Invested
Amounts reflected in the statements of income as net income per $1,000
invested by Limited Partners for the entire period are actual amounts allocated
to Limited Partners who have their investment throughout the period and have
elected to either leave their earnings to compound or have elected to receive
monthly distributions of their net income. Individual income is allocated each
month based on the Limited Partners pro rata share of Partners Capital.
Because the net income percentage varies from month to month, amounts per $1,000
will vary for those individuals who made or withdrew investments during the
period, or select other options. However, the net income per $1,000 average
invested has approximated those reflected for those whose investments and
options have remained constant.
NOTE 3 - GENERAL PARTNERS AND RELATED PARTIES
The following are commissions and/or fees which are paid to the General
Partners and/or related parties.
A. Mortgage Brokerage Commissions
Mortgage brokerage commissions for services in connection with the review,
selection, evaluation, negotiation and extension of the Mortgage Investments
were limited up to 12% of the principal amount of the loans through the period
ending 6 months after the termination date of the offering. Thereafter,
commissions are limited to an amount not to exceed 4% of the total Partnership
assets per year. Such commissions are paid by the borrowers, thus, not an
expense of the Partnership. Such commissions totalled $36,700 and $10,000 for
the years ended December 31, 1998 and 1997, respectively.
B. Mortgage Servicing Fees
Monthly mortgage servicing fees are paid to Redwood Mortgage up to 1/8 of
1% (1.5% annual) of the unpaid principal, or such lesser amount as is reasonable
and customary in the geographic area where the property securing the Mortgage
Investment is located. Mortgage servicing fees of $70,630, $39,918, and $44,565
were incurred for years 1998, 1997 and 1996, respectively.
</TABLE>
<PAGE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
C. Asset Management Fee
The General Partners are authorized to receive monthly fees for managing
the Partnerships Mortgage Investment portfolio and operations of up to 1/32 of
1% (3/8 of 1% annual). There were no management fees incurred for years 1997 and
1996, respectively. Management fees totalled $6,640 for 1998.
D. Other Fees
The Partnership Agreement provides for other fees such as reconveyance,
mortgage assumption and mortgage extension fees. These fees are paid by the
borrowers to parties related to the General Partners.
E. Income and Losses
All income is credited or charged to partners in relation to their
respective partnership interests. The partnership interest of the General
Partners (combined) is a total of 1%.
F. Operating Expenses
The General Partners or their affiliate (Redwood Mortgage) are reimbursed
by the Partnership for all operating expenses actually incurred by them on
behalf of the Partnership, including without limitation, out-of-pocket general
and administration expenses of the Partnership, accounting and audit fees, legal
fees and expenses, postage and preparation of reports to Limited Partners. In
1998, 1997, and 1996, clerical costs totaling $24,440, $27,786 and $31,838
respectively, were reimbursed to Redwood Mortgage and are included in expenses
in the Statements of Income.
NOTE 4 OTHER PARTNERSHIP PROVISIONS
A. Term of the Partnership
The term of the Partnership is approximately 40 years, unless sooner
terminated as provided. The provisions provided for no capital withdrawal for
the first five years, subject to the penalty provision set forth in (D) below.
Thereafter, investors have the right to withdraw over a five-year period, or
longer.
B. Election to Receive Monthly, Quarterly or Annual Distributions
Upon subscriptions, investors elected either to receive monthly, quarterly
or annual distributions of earnings allocations, or to allow earnings to
compound for at least a period of 5 years.
C. Profits and Losses
Profits and losses are allocated monthly among the Limited Partners
according to their respective capital accounts after 1% is allocated to the
General Partners.
D. Withdrawal From Partnership
A Limited Partner had no right to withdraw from the Partnership or to
obtain the return of his capital account for at least five years after such
units are purchased which in all instances had occurred by December 31, 1998.
After that time, at the election of the Partner, capital accounts can be
returned over a five year period in 20 equal quarterly installments or such
longer period as is requested.
<PAGE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
Notwithstanding the above, in order to provide a certain degree of
liquidity to the Limited Partners, the General Partners will liquidate a Limited
Partners entire capital account in four quarterly installments beginning on the
last day of the calendar quarter following the quarter in which the notice of
withdrawal is given. Such liquidations shall, however, be subject to a 10% early
withdrawal penalty applicable to any sums withdrawn prior to the time when such
sums otherwise could have been withdrawn pursuant to the liquidation procedure
set forth above. The 10% early withdrawal penalty will be received by the
Partnership, and a portion of the sums collected as such penalty will be applied
toward the next installment(s) of principal under the Formation Loan owed to the
Partnership by Redwood Mortgage. Such portion shall be determined by the ratio
between the initial amount of Formation Loan and the total amount of other
organization and syndication costs incurred by the Partnership in this offering.
The balance of any such early withdrawal penalties shall be retained by the
Partnership for its own account and applied against syndication costs. Since the
syndication costs have been fully amortized as of December 31, 1993, and the
formation loan was paid in 1998, the early withdrawal penalties gained in the
future will be credited to income for the period received.
The Partnership will not establish a reserve from which to fund withdrawals
and, accordingly, the Partnership's capacity to return a Limited Partners
capital account is restricted to the availability of Partnership cash flow.
Furthermore, no more than 20% of the total Limited Partners capital accounts
outstanding at the beginning of any year shall be liquidated during any calendar
year.
NOTE 5 - INVESTMENT IN PARTNERSHIP
The Partnerships interest in land located in East Palo Alto, CA., was
acquired through foreclosure. The Partnership interest is invested with that of
two other Partnerships. The Partnerships had been attempting to develop the
property into single family residences. Significant community resistance, as
well as environmental, and fish and wildlife concerns affected efforts to obtain
the required approvals. The Partnership, in resolving disputes which arose
during the course of the Partnerships attempt to obtain entitlements to develop
the property, entered into agreements on May 8, 1998 with Rhone-Poulanc, Inc.
These agreements, among other things, restrict the property to non-residential
uses, provide for appropriate indemnifications, and include other consideration
including the payment of cash. The Partnership still retains liability for the
remediation of pesticide contamination affecting the property. Investigation of
remediation options are ongoing. At this time management does not believe that
remediation of the pesticide contaminants will have a material adverse effect on
the financial condition of the Partnership. As of December 31, 1998, the
Partnership has received $145,443 in excess of its cost.
NOTE 6 - NOTE PAYABLE BANK - LINE OF CREDIT
The Partnership had a bank line of credit secured by its Mortgage
Investment portfolio up to $2,000,000 at 1% over prime. The balances were
$390,000 and $899,011 at December 31, 1998 and 1997, respectively, and the
interest rate at December 31, 1998 was 8.75% (7.75% prime + 1%). The line of
credit expired December 31, 1998 and was replaced by a line of credit of
$1,000,000 at 8.75% which will expire December 31, 1999.
<PAGE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 7 - LEGAL PROCEEDINGS
Legal actions against borrowers and other involved parties have been
initiated by the Partnership to help assure payments against unsecured accounts
receivable totaling $23,775. The Partnership is a defendant along with numerous
defendants, including a developer, contractor, and other lenders, in a lawsuit
involving the Partnerships attempt to recover its investment in real estate
acquired through foreclosure.
Management anticipates that the ultimate outcome of the legal matters will
not have a material adverse effect on the net assets of the Partnership, with
due consideration having been given in arriving at the allowance for doubtful
accounts.
NOTE 8 - INCOME TAXES
The following reflects a reconciliation from net assets (Partners Capital)
reflected in the financial statements to the tax basis of those net assets:
December 31,
-----------------------------------------------
1998 1997
---------------- ---------------
Net assets - Partners Capital
per financial statements $8,707,534 $9,431,453
Formation Loan receivable 0 59,521
Allowance for doubtful accounts 202,344 28,614
================ ===============
Net assets tax basis $8,909,878 $9,519,588
================ ===============
In 1998 and 1997, approximately 71% and 72%, respectively, of taxable
income was allocated to tax exempt organizations i.e., retirement plans. Such
plans do not have to file income tax returns unless their unrelated business
income exceeds $1,000. Applicable amounts become taxable when distribution is
made to participants.
NOTE 9 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of financial instruments:
(a) Cash and Cash Equivalents - The carrying amount equals fair value. All
amounts, including interest bearing, are subject to immediate withdrawal.
(b) The Carrying Value of Mortgage Investments - (see note 2 (c)) was
$7,969,735 at December 31, 1998. The fair value of these investments of
$7,945,380 was estimated based upon projected cash flows discounted at the
estimated current interest rates at which similar loans would be made. The
applicable amount of the allowance for doubtful accounts along with accrued
interest and advances related thereto should also be considered in evaluating
the fair value versus the carrying value.
<PAGE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 10- ASSET CONCENTRATIONS AND CHARACTERISTICS
<TABLE>
<CAPTION>
The Mortgage Investments are secured by recorded deeds of trust. At December 31, 1998, there were 56
Mortgage Investments outstanding with the following characteristics:
<S> <C>
Number of Mortgage Investments outstanding 56
Total Mortgage Investments outstanding $7,969,735
Average Mortgage Investment outstanding $142,317
Average Mortgage Investment as percent of total 1.79%
Average Mortgage Investment as percent of Partners Capital 1.63%
Largest Mortgage Investment outstanding $1,376,117
Largest Mortgage Investment as percent of total 17.27%
Largest Mortgage Investment as percent of Partners Capital 15.80%
Number of counties where security is located (all California) 14
Largest percentage of Mortgage Investments in one county 28.72%
Average Mortgage Investment to appraised value of security at time
Mortgage Investment was consummated 65.27%
Number of Mortgage Investments in foreclosure 0
The following categories of mortgage investments are pertinent at December 31, 1998 and 1997:
December 31,
------------------------------------------
1998 1997
----------------- ---------------
First Trust Deeds 4,432,246 $4,588,169
Second Trust Deeds 2,892,870 2,869,543
Third Trust Deeds 394,620 397,273
Fourth Trust Deeds 249,999 249,999
----------------- ---------------
Total mortgage investments 7,969,735 8,104,984
Prior liens due other lenders 12,348,933 11,075,429
----------------- ---------------
Total debt $20,318,668 $19,180,413
================= ===============
Appraised property value at time of loan $31,128,892 $28,422,684
================= ===============
Total investments as a percent of appraisals 65.27% 67.48%
================= ===============
Investments by Type of Property
Owner occupied homes 944,491 $1,057,067
Non-Owner occupied homes 374,408 380,142
Apartments 817,819 791,755
Commercial 5,833,017 5,876,020
================= ===============
$7,969,735 $8,104,984
================= ===============
</TABLE>
<PAGE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
Scheduled maturity dates of mortgage investments as of December 31, 1998
are as follows:
Year Ending
December 31,
-------------------
1999 $4,470,166
2000 1,021,816
2001 1,004,686
2002 422,896
2003 437,684
Thereafter 612,487
================
$7,969,735
================
The scheduled maturities for 1999 include $2,080,024 in Mortgage
Investments which are past maturity at December 31, 1998. $816,898 of those
Mortgage Investments were categorized as delinquent over 90 days.
Seven Mortgage Investments with principal outstanding of $994,735 had
interest payments overdue in excess of 90 days.
The cash balance at December 31, 1998 of $299,775 were in two banks with
interest bearing balances totalling $296,563. The balances exceeded FDIC
insurance limits (up to $100,000 per bank) by $99,775. As and when deposits in
the Partnerships bank accounts increase significantly beyond the insured limit,
the funds are generally either placed in new Mortgage Investments or used to pay
down on the line of credit balance.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES. RULE 12-03
Column A Column B Column C Column D Column E
Name of Debtor Balance Beg. Additions Deductions Balance at end of period
of period
12/31/97
(1) (2) (1) (2)
Amounts Amounts Current Not Current
collected written 12/31/98 12/31/98
off *
<S> <C> <C> <C> <C> <C> <C>
Redwood Mortgage $59,521 $0.00 $53,291 $6,230 $0.00 $0.00
The above schedule represents the Formation Loan borrowed by Redwood
Mortgage from the Partnership to pay for the selling commissions on units. It
was an unsecured loan and bore no interest. It was repaid to the Partnership in
ten equal annual installments of principal only which began December 31, 1989.
As of December 31, 1998, it was fully repaid.
<FN>
* The amount written off represents the proportionate amount of early
withdrawal penalties allocated to the Formation Loan, as provided for in the
Prospectus.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
REDWOOD MORTGAGE INVESTORS VI
Col. A Col. B Col. C Col. D Col. E
Description Balance Additions Deductions Balance at
--------------------------------
Beginning Describe End of Period
of Period (1) (2)
Charged to Charged to
Costs Other
& Expenses Accounts -
Describe
Year Ended
12/31/98
Deducted from
Asset Accounts:
Allowance for
<S> <C> <C> <C> <C> <C>
Doubtful Accounts $28,614 $268,764 $0 $95,034 $202,344
Cumulative
write-down of
Real Estate held
for sale (REO) $140,000 ($88,710) $0 $196,733
($145,443)
---------- ----------- ------------ -------------- -----------------
Total $168,614 $180,054 $0 (a) $399,077
($50,409)
========== =========== ============ ============== =================
<FN>
(a) represents net loss (or gain) on Mortgage Investments and Real Estate held for sale.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE IX
SHORT-TERM BORROWINGS
REDWOOD MORTGAGE INVESTORS VI - RULE 12-10
Col. A Col. B Col. C Col. D Col. E Col. F
Category of Balance at end Weighted Maximum Amount Average Amount Weighted
Aggregate of Period Average Outstanding Outstanding Average
Short-Term Interest Rate During the During the Interest Rate
Borrowings Period Period During the
Period
================== ================= ================= ================= ================= =================
Year-Ended
<S> <C> <C> <C> <C> <C>
12/31/98 $390,000 9.45% $1,068,000 $456,874 9.45%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE XII
MORTGAGE LOANS ON REAL ESTATE.
RULE 12-29 MORTGAGE INVESTMENTS ON REAL ESTATE
Col. A Col. B Col. C Col. D Col. E Col. F Col. G Col. H Col. I Col. J
Descp. Interest Final Periodic Prior Liens Face Amt. of Carrying Prin. amt. Type of Geographic
Rate Maturity Payment Mortgage amount of of Lien County
Date Terms Investment Mortgage Mortgage Location
(original Investment Investments
amt) subject to
Delinq.
Prin. or
Interest
- -------- --------- --------- ---------- ------------ -------------- ------------ ------------ --------- -------------
<S> <C> <C> <C> <C> <C>
Comm 14.75% 09/01/95 2,241.96 250,000.00 185,000.00 180,618.12 2nd Mtg San Mateo
Res 13.75% 10/01/96 275.00 55,374.00 24,000.00 24,000.00 2nd Mtg San Mateo
Comm 13.75% 10/01/96 644.53 0.00 56,250.00 56,250.00 1st Mtg San Mateo
Res 12.50% 02/01/07 554.63 0.00 45,000.00 33,897.62 lst Mtg Santa Cruz
Res 6.00% 04/01/96 106.81 10,470.00 20,000.00 19,738.80 4,913.26 2nd Mtg Sacramento
Res 4.00% 04/01/97 113.30 0.00 22,500.00 23,130.86 5,325.10 1st Mtg Sacramento
Res 4.00% 04/01/97 120.00 0.00 24,000.00 22,646.50 lst Mtg Sacramento
Comm 10.00% 08/06/02 709.38 30,802.00 82,873.25 76,863.12 2nd Mtg Alameda
Comm 12.50% 01/01/08 1,343.45 64,620.00 109,000.00 90,605.96 2nd Mtg Santa Clara
Comm 14.50% 01/01/00 6,157.52 442,592.00 499,998.80 499,998.81 2nd Mtg Contra Costa
Apts 7.00% 08/01/03 1,022.35 0.00 153,660.00 153,151.57 lst Mtg Sacramento
Apts 6.50% 05/01/06 540.83 89,904.00 100,000.00 96,716.11 8,112.45 2nd Mtg Sacramento
Res 13.50% 09/01/08 280.90 18,085.00 21,635.32 18,320.11 2nd Mtg Contra Costa
Comm 12.00% 11/01/98 2,057.23 11,864.00 200,000.00 35,656.54 2nd Mtg San Francisco
Comm 10.00% 12/01/98 1,755.14 0.00 200,000.00 197,333.47 10,530.84 1st Mtg Stanislaus
Comm 14.00% 01/01/00 3,450.33 1,126,508.00 249,999.40 249,999.40 4th Mtg Contra Costa
Comm 10.00% 12/01/98 5,046.04 0.00 575,000.00 566,694.43 25,230.20 lst Mtg Alameda
Comm 7.00% 12/01/03 1,151.48 562,500.00 99,172.75 81,121.58 5,757.40 2nd Mtg Alameda
Comm 12.00% 02/01/99 14,025.12 0.00 1,376,117.03 1,376,117.03 lst Mtg Santa Clara
Land 12.00% 07/01/96 1,352.50 494,979.00 135,250.00 135,250.00 3rd Mtg Sonoma
Comm 8.50% 11/07/99 515.73 0.00 72,809.59 72,809.59 1st Mtg Sonoma
Land 13.75% 12/20/98 5,524.55 54,724.00 567,856.74 174,236.24 11,049.10 2nd Mtg Stanislaus
Res 8.00% 12/01/00 500.00 148,004.00 52,500.00 44,094.59 2nd Mtg Santa Clara
Apts 7.00% 02/10/05 234.06 80,250.00 40,125.00 40,125.00 2nd Mtg San Francisco
Res 12.00% 06/25/94 100.00 0.00 10,000.00 10,000.00 4,500.00 lst Mtg Sacramento
Apts 11.50% 04/01/05 123.79 0.00 150,000.00 12,499.99 lst Mtg San Francisco
Comm 9.00% 05/10/02 670.52 0.00 83,333.33 81,033.44 1st Mtg Shasta
Res 8.00% 09/27/00 482.54 96,429.00 72,380.95 70,617.58 2nd Mtg Monterey
Comm 12.00% 02/01/11 756.11 0.00 63,000.00 58,595.01 lst Mtg Alameda
Comm 12.00% 12/31/01 3,598.27 1,955,550.00 340,000.00 359,827.21 2nd Mtg Santa Clara
Res 7.00% 05/15/01 850.00 0.00 145,000.00 144,858.86 lst Mtg San Mateo
Land 14.00% 02/01/97 3,822.50 0.00 382,250.00 235,381.46 1st Mtg Santa Clara
Res 8.00% 09/18/03 166.58 0.00 22,701.51 22,237.39 lst Mtg Sonoma
Res 8.00% 09/30/03 170.67 0.00 23,259.09 22,799.04 lst Mtg Sonoma
Comm 12.00% 02/01/99 508.40 1,279,200.00 49,200.00 49,200.00 2nd Mtg Santa Clara
Res 13.00% 12/01/99 704.17 0.00 65,000.00 65,000.00 1,408.34 lst Mtg Ventura
Res 13.00% 12/01/99 140.83 0.00 65,000.00 13,000.00 281.66 lst Mtg Ventura
Res 13.00% 12/01/99 140.83 0.00 65,000.00 13,000.00 281.66 1st Mtg Ventura
Apts 7.00% 08/01/02 1,545.83 0.00 265,000.00 265,000.00 lst Mtg Sacramento
Land 11.00% 07/01/99 3,879.29 1,452,282.00 700,000.00 409,543.57 2nd Mtg San Francisco
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F Col. G Col. H Col. I Col. J
Descp. Interest Final Periodic Prior Liens Face Amt. Carrying Principal Type Geographic
Rate Maturity Payment of Mortgage amount of amount of of Lien County
Date Terms Investment Mortgage Mortgage Location
(original Investment Investments
amount) subject to
Delinq.
Principal
or Interest
- -------- --------- --------- ---------- ------------ ------------- ------------ ------------- -------- --------------
<S> <C> <C> <C> <C> <C>
Apts 12.00% 08/01/99 773.59 0.00 80,000.00 78,854.34 1st Mtg Marin
Res 11.00% 10/01/01 4,583.33 0.00 500,000.00 500,000.00 lst Mtg Stanislaus
Res 13.50% 03/01/03 467.39 0.00 36,000.00 17,996.94 lst Mtg Solano
Res 10.00% 08/01/03 576.96 262,720.00 49,000.00 25,345.46 2nd Mtg San Mateo
Apts 13.00% 11/01/03 759.15 341,094.00 60,000.00 32,569.07 2nd Mtg San Francisco
Res 13.75% 11/01/03 2,202.61 0.00 167,500.00 82,462.54 1st Mtg Alameda
Apts 14.00% 03/01/92 1,184.87 960,000.00 100,000.00 95,498.69 2nd Mtg Santa Clara
Comm 14.50% 05/01/04 4,233.05 532,392.00 310,000.00 187,893.17 2nd Mtg San Mateo
Comm 11.50% 05/01/99 3,113.39 0.00 314,000.00 307,495.69 1st Mtg Alameda
Comm 17.25% 11/20/95 2,533.19 185,351.00 200,000.00 193,387.36 3rd Mtg San Mateo
Apts 14.00% 06/01/92 473.95 1,060,000.00 40,000.00 38,282.01 3rd Mtg Santa Clara
Res 14.25% 07/01/04 984.46 78,672.00 73,000.00 46,134.38 2nd Mtg San Francisco
Res 14.50% 04/01/05 546.20 150,804.00 40,000.00 27,700.23 3rd Mtg San Francisco
Res 14.50% 07/01/92 2,416.67 340,827.00 200,000.00 71,918.82 2nd Mtg San Francisco
Comm 10.00% 08/01/00 1,428.14 59,402.00 160,000.00 157,105.61 2nd Mtg San Mateo
Apts 9.00% 02/01/99 38.42 153,534.00 5,122.00 5,122.00 2nd Mtg Sacramento
Total $93,698.54 $12,348,933.0$9,748,494.76 $7,969,735.31 $77,390.01
<FN>
Notes:
Mortgage Investments classified as impaired had principal balances
totalling $614,978. Impaired Mortgage Investments are defined as Mortgage Investments where the costs of related balances
exceeds the anticipated fair value less costs to collect. Interest is no longer accrued thereon.
Amounts reflected in column G (carrying amount of Mortgage Investments) represents both costs and the
tax basis of the Mortgage Investments.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule XII
Reconciliation of carrying amount (cost) of Mortgage Investments at close of periods
Year ended December 31,
----------------------------------------------------------
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Balance at beginning of year 8,104,984 $9,313,924 $10,402,491
--------------- --------------- ---------------
Additions during period:
New Mortgage Investments 1,798,822 557,796 2,474,843
Other 0 0 0
--------------- --------------- ---------------
Total Additions $1,798,822 $557,796 $2,474,843
--------------- --------------- ---------------
Deductions during period:
Collections of principal 1,934,071 1,634,128 3,295,834
Foreclosures 0 0 267,576
Cost of Mortgage Investments sold 0 0 0
Amortization of Premium 0 0 0
Other 0 132,608 0
--------------- --------------- ---------------
Total Deductions 1,934,071 1,766,736 3,563,410
--------------- --------------- ---------------
Balance at close of year $7,969,735 $8,104,984 $9,313,924
=============== =============== ===============
</TABLE>
<PAGE>
Item 9 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
The Partnership has neither changed its accountants nor does it have any
disagreement on any matter of accounting principles or practices and financial
statement disclosures.
Part III
Item 10 - Directors and Executive Officers of the Registrant.
The Partnership has no officers or directors. Rather, the activities of the
Partnership are managed by the three General Partners of which two individuals
are D. Russell Burwell and Michael R. Burwell. The third General Partner is
Gymno Corporation, a California corporation, formed in 1986. The Burwells are
the two shareholders of this corporation on an equal (50-50) basis. A
description of the General Partners is set forth on page 22 of the Prospectus
under the section Management.
<PAGE>
Item 11 - Executive Compensation
COMPENSATION OF THE GENERAL PARTNERS AND AFFILIATES BY PARTNERSHIP
As indicated above in item 10, the Partnership has no officers or
directors. The Partnership is managed by the General Partners. There are certain
fees and other items paid to management and related parties. A more complete
description of management compensation is found in the Prospectus, pages 11-12,
under the section Compensation of the General Partners and the Affiliates, which
is incorporated by reference. Such compensation is summarized below.
The following compensation has been paid to the General Partners and
affiliates for services rendered during the year ended December 31, 1998. All
such compensation is in compliance with the guidelines and limitations set forth
in the Prospectus.
Entity Receiving Description of Compensation
Compensation and Services Rendered Amount
- ---------------------- ------------------------------- ----------
I.
Redwood Mortgage Mortgage Servicing Fee for servicing Mortgage
Investments $70,630
General Partners
&/or Affiliates Asset Management Fee for managing assets $6,640
General Partners 1% interest in profits $5,125
II. FEES PAID BY BORROWERS ON MORTGAGE INVESTMENTS PLACED BY COMPANIES
RELATED TO THE GENERAL PARTNERS WITH THE PARTNERSHIP (EXPENSES OF BORROWERS NOT
OF THE PARTNERSHIP):
Redwood Mortgage Mortgage Brokerage Commissions for services in connection
with the review, selection, evaluation, negotiation, and
extension of the Mortgage Investments paid by the borrowers
and not by the Partnership $36,700
Redwood Mortgage Processing and Escrow Fees for services in
connection with notary, document preparation,
credit investigation, and escrow fees payable by
the borrowers and not by the Partnership $749
III. IN ADDITION, THE GENERAL PARTNER AND/OR RELATED COMPANIES PAY CERTAIN
EXPENSES ON BEHALF OF THE PARTNERSHIP FOR WHICH IT IS REIMBURSED AS NOTED IN THE
STATEMENT OF INCOME....................................................$24,440
<PAGE>
Item 12 - Security Ownership of Certain Beneficial Owners and Management
The General Partners receive a combined total of a 1% interest in
Partnership income and losses and distributions of cash available for
distribution.
Item 13 - Certain Relationships and Related Transactions
Refer to footnote 3 of the notes to financial statements in Part II item 8
which describes related party fees and data.
Also refer to sections of the Prospectus Compensation of General Partners
and Affiliates, page 11, and Conflicts of Interest, page 13, as part of the
above-referenced Registration Statement which is incorporated by reference.
Part IV
Item 14 - Exhibits,Financial Statements and Schedules, and Reports on Form 8-K
(A) Documents filed as part of this report:
1. The financial statements are listed in Part II Item 8 under A-Financial
Statements.
2. The Financial Statement Schedules are listed in Part II Item 8 under
B-Financial Statement Schedules.
<PAGE>
3. Exhibits.
Exhibit No. Description of Exhibits
3.1 Limited Partnership Agreement
3.2 Form of Certificate of Limited Partnership Interest
3.3 Certificate of Limited Partnership
10.1 Escrow Agreement (1)
10.2 Servicing Agreement (1)
10.3 (a) Form of Note secured by Deed of Trust which provides for
principal and interest payments (1)
(b) Form of Note secured by Deed of Trust which provides
principal and interest payments and right of assumption (1)
(c) Form of Note secured by Deed of Trust which provides for
interest only payments (1)
(d) Form of Note (1)
10.4 (a) Deed of Trust and Assignment of Rents to accompany
Exhibits 10.3 (a) and (c) (1)
(b) Deed of Trust and Assignment of Rents to accompany
Exhibits 10.3 (b) (1)
(c) Deed of Trust to accompany Exhibit 10.3 (d) (1)
10.5 Promissory Note for Formation Loan (1)
10.6 Agreement to Seek a Lender (1)
24.1 Consent of Parodi & Cropper (1)
24.2 Consent of Wilson, Ryan & Campilongo(1)
All of these exhibits were previously filed as the exhibits to Registrants
Statement on Form S-11 (Registration No. 33-12519) and incorporated by reference
herein.
(B) Reports on form 8-K
No reports on Form 8-K have been filed during the last quarter of the
period covered by this report.
(C) See (A) 3 above
(D) See (A) 2 above. Additional reference is made to prospectus (S-11)
dated September 3, 1987 to pages 56 through 59 and supplement #6 dated May 16,
1989 pages 16-18, for financial data related to Gymno corporation, a General
Partner.
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934 the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereto duly authorized on the 25th day of
March, 1999.
REDWOOD MORTGAGE INVESTORS VI
By: /S/ D. Russell Burwell
---------------------------------------------
D. Russell Burwell, General Partner
By: /S/ Michael R. Burwell
---------------------------------------------
Michael R. Burwell, General Partner
By: Gymno Corporation, General Partner
By: /S/ D. Russell Burwell
---------------------------------------------
D. Russell Burwell, President
By: /S/ Michael R. Burwell
---------------------------------------------
Michael R. Burwell, Secretary/Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person on behalf of the registrant
and in the capacity indicated on the 25th day of March, 1999.
Signature Title Date
/S/ D. Russell Burwell
- -----------------------
D. Russell Burwell General Partner March 25, 1999
/S/ Michael R. Burwell
- -----------------------
Michael R. Burwell General Partner March 25, 1999
/S/ D. Russell Burwell
- -----------------------
D. Russell Burwell President of Gymno Corporation, March 25, 1999
(Principal Executive Officer);
Director of Gymno Corporation
/S/ Michael R. Burwell
- -----------------------
Michael R. Burwell Secretary/Treasurer of Gymno March 25, 1999
Corporation (Principal Financial
and Accounting Officer);
Director of Gymno Corporation
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 299775
<SECURITIES> 0
<RECEIVABLES> 8873312
<ALLOWANCES> 202344
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 9140665
<CURRENT-LIABILITIES> 0
<BONDS> 0
433131
0
<COMMON> 0
<OTHER-SE> 8707534
<TOTAL-LIABILITY-AND-EQUITY> 9140665
<SALES> 0
<TOTAL-REVENUES> 871861
<CGS> 0
<TOTAL-COSTS> 136132
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 180054
<INTEREST-EXPENSE> 43170
<INCOME-PRETAX> 512505
<INCOME-TAX> 0
<INCOME-CONTINUING> 512505
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 512505
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
