REDWOOD MORTGAGE INVESTORS VII
(a California Limited Partnership)
Index to Form 10-K
December 31, 1995
Part I
Page No.
Item 1 - Business 3
Item 2 - Properties 3-5
Item 3 - Legal Proceedings 5
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 6-7
Item 7 - Managements Discussion and Analysis of Financial condition and
Results of Operations 8
Item 8 - Financial Statements and Supplementary Data 9-26
Item 9 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 26
Part III
Item 10 - Directors and Executive Officers of the Registrant 26
Item 11 - Executive Compensation 27
Item 12 - Security Ownership of Certain Beneficial Owners and management 28
Item 13 - Certain Relationships and Related Transactions 28
Part IV
Item 14 - Exhibits, Financial Statement Schedules, and Reports on
Form 8-K. 28-29
Signatures
<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, 1995 Commission file number 33-30427
- - -----------------------------------------------------------------------------
REDWOOD MORTGAGE INVESTORS VII
(Exact name of registrant as specified in its charter)
California 94-3094928
- - ------------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification)
incorporation or organization)
650 El Camino Real Suite G, Redwood City, CA 94063
- - --------------------------------------------- ------------------------------
(address of principal executive offices) (zip code)
Registrants telephone No. including area code (415) 365-5341
- - ---------------------------------------------- -----------------------------
Securities registered pursuant to Section 12(b) of the Act:
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: NONE
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 XXXX NO
- - -------------- ----------------------------------
Through December 31, 1992, the limited partnership units purchased by non
affiliates was 119,983.59 units computed at $100.00 a unit for $11,998,359. The
offering was closed on September 30, 1992.
Documents incorporated by reference:
Portions of the Prospectus dated October 20, 1989, and Supplement #5 dated
February 14, 1992, filed on form S-11, are incorporated in Parts II, III, and
IV. Exhibits filed as part of Form S-11 Registration Statement #33-30427 are
referenced in part IV.
<PAGE>
Part I
Item 1 - Business
Redwood Mortgage Investors VII, a California limited partnership (the
Partnership), was organized in 1989 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 Partnership is organized to engage in
business as a mortgage lender, for the primary purpose of making loans secured
by deeds of trust on California real estate. Partnership loans are arranged and
serviced by Redwood Home Loan Co., an affiliate of the General Partners. The
Partnerships 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 credited to their capital accounts and applied to 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 26-31 of the Prospectus which is incorporated by
reference.
Originally, 60,000 Units were offered on a best efforts basis through
broker/dealer member firms of the National Association of Security Dealers, Inc.
In accordance with the terms of the Prospectus, the General Partners increased
the number of units for sale from 60,000 to 120,000 and elected to continue the
offering until October 19, 1992. The offering closed on September 30, 1992, and
the Limited Partners contributed capital totalled $11,998,359 of an approved
$12,000,000 issue, in units of $100 each. At that date all the applicants had
been admitted into the Partnership with none left in the applicant status. The
final SR report (Report of Sales of Securities and use of proceeds therefrom),
was filed on September 21, 1992.
The Partnership began selling units in October, 1989 and began investing in
mortgages in December, 1989. At December 31, 1995, the Partnership had a balance
in its mortgage loans totalling $12,382,641 with interest rates thereon ranging
from 5% to 15.25%.
Currently First Trust Deeds comprise 31.67% of the loan portfolio with
Junior loans making up the balance. Bay Area owner-occupied homes, combined with
non-owner loans, total 26.43 % of the loans. Commercial loan origination
increased from last year, now comprising 58.80% of the portfolio, an increase of
6.46%. The past year brought us many outstanding low loan to value lending
opportunities in this segment of the market. Loan investment size increased this
past year, and is now averaging $167,333 per loan investment. Some of the larger
loans are fractionalized between affiliated partnerships with objectives similar
to those of the Partnership to further reduce risk. Average equity per loan
transaction stood at 37.64%. A 40% equity average on loan origination is
generally considered very conservative. Generally, the more equity, the more
protection for the lender. The Partnerships loan portfolio is in good condition
with three properties in foreclosure.
Item 2 - Properties
A summary of the Partnerships loan Portfolio as of December 31, 1995, is
set forth below.
<PAGE>
Loans as a Percentage of Total Loans
First Trust Deeds $ 3,922,119.66
Appraised Value of Properties 8,251,696.00
Total Investment as a % of Appraisal 47.53%
Second Trust Deed Loans 7,377,188.90
Third Trust Deed Loans 896,188.46
Fourth Trust Deed Loans * 187,143.98
First Trust Deeds due other Lenders 29,340,831.00
Second Trust Deeds due other Lenders 1,092,161.00
Third Trust Deeds due other Lenders 142,858.00
Total Debt $42,958,491.00
Appraised Property Value 68,888,224.00
Total Investments as a % of Appraisal 62.36%
Number of Loans Outstanding 74
Average Investment 167,332.99
Average Investment as a % of Net Asset 1.18%
Largest Investment Outstanding 1,176,744.19
Largest Investment as a % of Net Asset 8.28%
Loans as a Percentage of Total Loans
First Trust Deeds 31.67%
Second Trust Deeds 59.58%
Third Trust Deeds 7.24%
Fourth Trust Deeds 1.51%
------
Total 100.00%
Loans by Type of Property Amount Percent
Owner Occupied Homes $ 2,621,799.60 21.17%
Non-Owner Occupied Homes 651,528.21 5.26%
Apartments 1,828,876.57 14.77%
Commercial 7,280,436.62 58.80%
----------------- -----
Total $12,382,641.00 100.00%
<PAGE>
The following is a distribution of loans outstanding as of December 31, 1995
by Counties.
County Total Loans Percent
San Mateo $ 2,530,658.90 20.44%
Contra Costa 2,317,301.14 18.71%
Santa Clara 1,880,866.99 15.19%
San Francisco 1,583,398.35 12.79%
Alameda 1,178,889.46 9.52%
Stanislaus 830,070.88 6.70%
Sonoma 377,747.88 3.05%
Mendocino 300,000.00 2.42%
El Dorado 276,493.42 2.23%
Monterey 270,847.90 2.19%
Marin 212,074.89 1.71%
Sacramento 182,957.30 1.48%
Santa Barbara 123,616.04 1.00%
Solano 104,993.82 0.85%
Shasta 83,007.41 0.67%
Tuolumne 68,118.70 0.55%
Santa Cruz 61,597.92 0.50%
------------------ -----------
Total $ 12,382,641.00 100.00%
* Redwood Mortgage Investors VII, together with other Redwood Partnership,
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%. Besides the
borrower paying an interest rate of 12.25%, the partnership and other lenders
will also participate in profits. We 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 Loans
Number of Loans in Foreclosure 3
Item 3 - Legal Proceedings
The Partnership is not a defendant in any legal actions. However, the
Partnership is proceeding in a Judicial foreclosure against four borrowers with
a recorded receivable balance of $378,200. Management anticipates that the
ultimate result of these cases 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.
<PAGE>
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 Units and Related Partnership 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). Investors have the
option of withdrawing earnings on a monthly, quarterly, or annual basis or
reinvesting and compounding the earnings. Limited Partners may withdraw from the
Partnership in accordance with the terms of the Partnership Agreement subject to
possible early withdrawal penalties. There is no established public trading
market.
A description of the Partnership units, transfer restrictions and
withdrawal provisions is more fully described under the section entitled
Description of Units and summary of Limited Partnership Agreement, pages 47 to
50 of the Prospectus, a part of the referenced Registration Statement, which is
incorporated by reference.
<PAGE>
<TABLE>
Item 6 - Selected Financial Data
Redwood Mortgage Investors VII began operations in December 1989. Financial
results for years 1984 to 1989 for prior partnerships are incorporated by
reference to the Prospectus (S-11) dated October 20, 1989, Table III pages 7
through 11 and Supplement No. 3 dated October 2, 1990 to Prospectus dated
October 20, 1989, Table III pages 27 through 33.
Financial condition and results of operation for the Partnership for three
years to December 31, 1995 were:
<CAPTION>
Balance Sheet
Assets
December 31,
------------------------------------------------------
1995 1994 1993
-------------- -------------- -------------
<S> <C> <C> <C>
Cash .............................................. $ 514,840 $ 462,681 $ 487,310
Accounts Receivable:
Mortgage loans secured by Deeds of Trust ....... 12,382,641 11,345,566 11,766,189
Accrued interest and other fees, net ........... 940,541 738,142 570,283
Advances on Real Estate Loans, net ............. 110,874 28,767 55,969
Other receivables - Unsecured .................. 378,200 359,072 270,783
Less allowance for losses ................. ( 200,000) ( 201,608) ( 94,858)
Real Estate Owned acquired through foreclosure at
estimated net realizable value ................ 1,347,997 2,352,221 647,062
Formation loan due from Redwood Home Loan Co. ..... 517,051 604,939 693,471
Partnership Interest .............................. 223,245 -0- -0-
Organization cost net of amortization ............. 368 2,384 4,400
------------ ----------- -----------
$ 16,215,757 $15,692,164 $14,400,609
------------ ----------- -----------
</TABLE>
<PAGE>
<TABLE>
Liabilities and Partners Capital
<CAPTION>
December 31,
----------------------------------------
1995 1994 1993
-------------- ----------- -----------
<S> <C> <C> <C>
Liabilities:
Note payable - Bank ................................ $ 2,000,000 $ 1,929,630 $ 930,493
Accounts payable and accrued expenses .............. 1,472 2,973 40,522
Discount of Mortgage Loans ......................... -0- -0- 8,548
Due to Related Companies ........................... -0- 5,663 1,857
----------- ----------- -----------
$ 2,001,472 $ 1,938,266 $ 981,420
Partners Capital ................................... 14,214,285 13,753,898 13,419,189
----------- ----------- -----------
$16,215,757 $15,692,164 $14,400,609
----------- ----------- -----------
Statement of Income
Gross revenue ...................................... $ 1,450,487 $ 1,489,882 $ 1,652,290
Expenses ........................................... 538,527 562,591 526,307
----------- ----------- -----------
Net Income ........................................ $ 911,960 $ 927,291 $ 1,125,983
----------- ----------- -----------
Net income to General Partners (1%) ............... $ 9,120 $ 9,273 $ 11,260
=========== =========== ===========
Net Income to Limited Partners (99%) ............... $ 902,840 $ 918,018 $ 1,114,723
=========== =========== ===========
Net Income per $1,000 invested by Limited
Partners for entire period:
- where income is reinvested and compounded ..... $ 60 $ 63 $ 80
=========== =========== ===========
- where partner receives income in monthly
distributions ................................ $ 58 $ 61 $ 77
=========== =========== ===========
<FN>
Net income in 1993 averaged at an annualized yield of 8.01%. In 1994, the annualized yield was
6.28% and in 1995 the annualized yield was 6.00%.
</FN>
</TABLE>
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
On September 30, 1992, the Partnership had sold 119,983.59 units and its
contributed capital totalled $11,998,359 of the approved $12,000,000 issue, in
units of $100 each. As of that date, the offering was formally closed. At
December 31, 1995, Partners Capital totalled $14,214,285.
The Partnership began funding mortgage investments on December 27, 1989 and
as of December 31, 1995 had credited the Partners accounts with income at an
annualized (compounded) yield of 8.49%.
Currently, mortgage interest rates are lower than those prevalent at the
inception of the Partnership. New loans are being originated at these lower
interest rates. The result is a reduction of the average return across the
entire 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. The General
Partners believe the rates charged by the Partnership to its borrowers will not
change significantly in the immediate future. Based upon the rates payable in
connection with the existing loans, the current and anticipated interest rates
to be charged by the Partnerships, and current reserve requirements, the General
Partners anticipate that the annualized yield next year will range only slightly
from its current rate.
The Partnership has a line of credit with a commercial bank secured by its
mortgage loans to a limit of $2,000,000, at a variable interest rate set at one
percent above the prime rate. This added source of funds helped in maximizing
the Partnership yield because most of the loans made by the Partnership bear
interest at a rate in excess of the rate payable to the bank which extended the
line of credit. As a result, once the required principal and interest payments
on the line of credit are paid to the bank, the loans funded using the line of
credit generate revenue for the Partnership. As of December 31, 1995, the
Partnership is current with its interest payments on the line of credit.
Considering Northern Californias recent economic slump, 5 of the last 6
years, wherein business activity slumped principally in aerospace,
communications, banking, retail trade and the federal government sector causing
employment losses which was and still is reflective in property prices to a
greater or lesser degree depending on location. The Partnerships income and
expenses, accruals and delinquencies are within the normal range of the General
partners expectations, based upon their experience in managing similar
Partnerships over the last eighteen years. Borrowers foreclosures, as set forth
under Results of Operations, are a normal aspect of partnership operations and
the General Partners anticipate that they will not have a material effect on
liquidity. Cash is constantly being generated from interest earnings, late
charges, pre-payment penalties, amortization of Notes and pay-off on Notes.
Currently, cash flow exceeds Partnership expenses and earnings payout
requirements. As loan opportunities become available, excess cash and available
funds are invested in new loans.
The General Partners are continually reviewing the loan portfolio,
examining the status of delinquencies, the underlying collateral securing these
properties, the REO expenses and sales activities, borrowers payment records,
etc. Data on the local real estate market and on the national and local economy
are studied. Based upon this information and other data, loss reserves are
increased or decreased. Because of the number of variables involved, the
magnitude of the 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.
<PAGE>
Item 8 - Financial Statements and Supplementary Data
Redwood Mortgage Investors VII, a California Limited Partnership's list of
Financial Statements and Financial Statement schedules:
A-Financial Statements
The following financial statements of Redwood Mortgage Investors VII are
included in Item 8
Independent Auditors Report,
Balance Sheets - December 31, 1995, and December 31, 1994,
Statements of Income for the three years ended December 31, 1995,
Statements of Changes in Partners Capital for the three years ended
December 31, 1995,
Statements of Cash Flows for the three years ended December 31, 1995,
Notes to Financial Statements - December 31, 1995.
B-Financial Statement Schedules
The following financial statement schedules of Redwood Mortgage Inventors
VII 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 loans 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 VII
(A California Limited Partnership)
FINANCIAL STATEMENTS
DECEMBER 31, 1995
(With Auditors Report Thereon)
<PAGE>
PARODI & CROPPER
CERTIFIED PUBLIC ACCOUNTANTS
3658 Mount Diablo Blvd., Suite #205
Lafayette CA 94549
(510) 284-3590
INDEPENDENT AUDITORS REPORT
THE PARTNERS
REDWOOD MORTGAGE INVESTORS VII
We have audited the financial statements and related schedules of REDWOOD
MORTGAGE INVESTORS VII (A California Limited Partnership) listed in Item 8 on
form 10-K including balance sheets as of December 31, 1995 and 1994 and the
statements of income, changes in partners capital and cash flows for the three
years ended December 31, 1995. 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. As 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
VII as of December 31, 1995 and 1994, and the results of its operations and cash
flows for the three years ended December 31, 1995 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.
PARODI & CROPPER
Lafayette, California
February 28, 1996
<PAGE>
<TABLE>
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<CAPTION>
ASSETS
1995 1994
-------------- ----------
<S> <C> <C>
Cash ....................................... $ 514,840 $ 462,681
----------- -----------
Accounts receivable:
Mortgage loans, secured by deeds of trust .... 12,382,641 11,345,566
Accrued Interest on mortgage loans ............ 940,541 738,142
Advances on mortgage loans .................... 110,874 28,767
Accounts receivables, unsecured ............... 378,200 359,072
----------- ----------
13,812,256 12,471,547
Less allowance for doubtful accounts ......... 200,000 201,608
----------- -----------
13,612,256 12,269,939
----------- -----------
Real estate owned, acquired through foreclosure,
at net realizable value .................. 1,347,997 2,352,221
Investment in partnership ..................... 223,245 -0-
Formation loan due from Redwood Home
Loan Co. .................................... 517,051 604,939
Organization costs, less accumulated amortization
of $9,734 and $7,718, respectively .......... 368 2,384
----------- -----------
$16,215,757 $15,692,164
=========== ===========
LIABILITIES AND PARTNERS CAPITAL
Liabilities:
Notes payable - bank line of credit ..........$ 2,000,000 $ 1,929,630
Accounts payable and accrued expenses ........ 1,472 2,973
Due to related companies ..................... -0- 5,663
----------- -----------
2,001,472 1,938,266
Partners Capital ............ 14,214,285 13,753,898
----------- -----------
$16,215,757 $15,692,164
=========== ===========
<FN>
See accompanying notes to financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
STATEMENTS OF INCOME
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
---------- ---------- ----------
Revenues:
Interest on mortgage loans ........................................ $1,430,742 $1,453,969 $1,617,308
Interest on bank deposits ......................................... 8,407 13,843 11,341
Late charges, and prepayment fees ................................ 9,038 20,232 23,641
Other ............................................................. 2,300 1,838 -0-
---------- ---------- ----------
---------- ---------- ----------
1,450,487 1,489,882 1,652,290
---------- ---------- ----------
Expenses:
Interest on note payable - bank ................................... 163,361 135,790 119,351
Clerical costs through Redwood Home Loan Co ....................... 27,762 -0- 33,641
Amortization of organization costs ................................ 2,016 2,016 2,016
General partners asset management fee ............................. -0- 10,008 16,735
Provision for doubtful accounts and losses
on real estate acquired through foreclosure ...................... 306,779 335,955 235,423
Professional services ............................................. 19,557 53,250 94,188
Printing, supplies and postage .................................... 14,703 17,282 14,530
Other ............................................................. 4,349 8,290 10,423
---------- ---------- ----------
538,527 562,591 526,307
---------- ---------- ----------
Net Income .......................................................... $ 911,960 $ 927,291 $1,125,983
========== ========== ==========
Net income: To General Partners(1%) ................................ $ 9,120 $ 9,273 $ 11,260
To Limited Partners (99%) ...................... 902,840 918,018 1,114,723
========== ========== ==========
$ 911,960 927,291 1,125,983
========== ========== ==========
Net income per $1,000 invested by Limited
Partners for entire period:
-where income is reinvested and
compounded ................................................ $ 60 $ 63 $ 80
========== ========== ==========
-where partner receives income in
monthly distributions .................................... $ 58 $ 61 $ 77
========== ========== ==========
<FN>
See accompanying notes to financial statements ......................
</FN>
</TABLE>
<PAGE>
<TABLE>
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS CAPITAL
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
<CAPTION>
PARTNERS CAPITAL
UNALLOCATED
GENERAL LIMITED SYNDICATION
PARTNERS PARTNERS COSTS TOTAL
-------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Balances at December 31, 1992 ................ $ 11,987 13,121,673 ( 277,899) 12,855.761
Net income ................................... 11,260 1,114,723 -0- 1,125,983
Allocation of syndication costs .............. ( 810) ( 80,190) 81,000 -0-
Early withdrawal penalties ................... -0- ( 23,000) 7,195 ( 15,805)
Partners withdrawals. ........................ ( 10,459) ( 536,291) -0- ( 546,750)
----------- ----------- ------------ ----------
Balances at December 31, 1993 ................ 11,978 13,596,915 ( 189,704) 13,419,189
Net income ................................... 9,273 918,018 -0- 927,291
Allocation of syndication costs .............. ( 810) ( 80,190) 81,000 -0-
Early withdrawal penalties ................... -0- ( 34,001) 10,635 ( 23,366)
Partners withdrawals ........................ ( 8,463) ( 560,753) -0- ( 569,216)
----------- ------------ ------------ ----------
Balances at December 31, 1994 ................ 11,978 13,839,989 ( 98,069) 13,753,898
Net income ................................... 9,120 902,840 -0- 911,960
Allocation of syndication costs .............. ( 810) ( 80,190) 81,000 -0-
Early withdrawal penalties ................... -0- ( 10,690) 3,344 ( 7,346)
Partners withdrawals ........................ ( 8,310) ( 435,917) -0- ( 444,227)
----------- ----------- ----------- ----------
Balances at December 31, 1995 ................ $ 11,978 14,216,032 ( 13,725) 14,214,285
=========== ========== =========== ===========
<FN>
See accompanying notes to financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
REDWOOD MORTGAGE INVESTORS VII
(A Califonira Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
<S> <C> <C> <C>
-------- ---------- ----------
Cash flows from operating activities:
Net income ................................... $ 911,960 $ 927,291 $1,125,983
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of organization costs ......... 2,016 2,016 2,016
Increase in allowance for doubtful accounts ( 1,608) 106,750 84,858
Increase in accrued interest & advances .... ( 284,506) ( 140,657) ( 111,963)
Increase (decrease) in accounts payable
and accrued expenses ...................... ( 1,501) ( 37,549) 40,022
(Increase) decrease in amount due from or
to Redwood Home Loan Co., net ........... ( 5,663) 3,806 ( 5,132)
Increase (decrease) in discount on
Mortgage Loans ......................... -0- ( 8,548) 8,548
---------- --------- ---------
Net cash provided by operating activities 620,698 853,109 1,144,332
---------- --------- ---------
Cash flows from investing activities:
Net (increase) decrease in:
Mortgage loans .......................... (1,037,075) 420,623 1,131,459
Formation loan .......................... 87,888 88,532 101,101
Real Estate owned ....................... 1,004,224 (1,705,159) ( 268,915)
Other receivables - unsecured ........... ( 19,128) ( 88,289) ( 61,885)
Investment in partnership ............... ( 223,245) -0- -0-
---------- ---------- ---------
Net cash provided by (used in) investing
activities ............................ ( 187,336) (1,284,293) 901,760
----------- ---------- ---------
Cash flows from financing activities:
Net increase (decrease) in note payable-bank .. 70,370 999,137 (1,069,507)
Partners withdrawals .......................... ( 444,227) ( 569,216) ( 546,750)
Early withdrawal penalties, net of credit to
syndication costs ........................... ( 7,346) ( 23,366) ( 15,805)
---------- ---------- ---------
Net cash provided by (used in) financing
activities ........................... ( 381,203) 406,555 (1,632,062)
---------- ---------- ---------
Net increase (decrease) in cash ................ 52,159 ( 24,629) 414,030
Cash - beginning of period ..................... 462,681 487,310 73,280
---------- ---------- ---------
Cash - end of period ........................... $ 514,840 $ 462,681 $ 487,310
========== ========== =========
<FN>
See accompanying notes to financial statements .
</FN>
</TABLE>
<PAGE>
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 - ORGANIZATION AND GENERAL
Redwood Mortgage Investors VII, (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 loans secured by
Deeds of Trust on California real estate. Partnership loans are being arranged
and serviced by Redwood Home Loan Co. (RHL C0.), dba Redwood Mortgage, an
affiliate of the General Partners. At December 31, 1992, the offering had been
closed with contributed capital totaling $11,998,359 for limited partners with
none left in applicant status.
A minimum of 2,500 units ($250,000) and a maximum of 120,000 units
($12,000,000) were offered through qualified broker-dealers. As mortgage loans
were identified, partners were transferred from applicant status to admitted
partners participating in mortgage loan operations. Each months income is
allocated 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 Commission - Formation Loan
Sales commissions ranging from 0% (units sold by General Partners) to 10%
of the gross proceeds were paid by RHL Co., an affiliate of the General Partners
that arranges and services the mortgage loans. To finance the sales commissions,
the Partnership was authorized to loan to RHL Co. an amount not to exceed 8.3%
of the gross proceeds provided that the Formation Loan for the minimum offering
period could be 10% of the gross proceeds for that period. The Formation Loan is
unsecured and is being repaid, without interest, in ten installments of
principal, over a ten year period commencing January 1, 1992. At December 31,
1992, RHL Co. has borrowed $914,369 from the Partnership to cover sales
commissions relating to $11,998,359 limited partner contributions (7.62%).
Through December 31, 1995, $397,318 including $49,814 in early withdrawal
penalties, had been repaid leaving a balance of $ 517,051.
B. Other Organizational and Offering Expenses Organizational and offering
expenses, other than sales commissions, (including printing costs, attorney and
accountant fees, and other costs), were paid by the Partnership. Such costs were
limited to 10% of the gross proceeds of the offering or $500,000 whichever was
less. The General Partners were to pay any amount of such expenses in excess of
10% of the gross proceeds or $500,000.
Organization costs of $10,102 and syndication costs of $415,692 were
incurred by the Partnership. The sum of organization and syndication costs,
$425,794, approximated 3.55% of the gross proceeds contributed by the Partners.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenues and expenses are accounted for on the accrual basis of accounting.
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 were capitalized and are being
amortized over a five year period. Syndication costs were charged against
partners capital and are being allocated to individual partners consistent with
the partnership agreement over a five year period.
<PAGE>
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
Property acquired through foreclosure will be held for prompt sale to
return the funds to the loan portfolio. Such property is recorded at cost which
includes the principal balance of the former loan made by the Partnership plus
accrued interest, payments made to keep the senior loans current, costs of
obtaining title and possession, less rental income or at estimated net
realizable value, if less. The difference between such costs and estimated net
realizable value is deducted from cost in the Balance Sheet to arrive at the
carrying value of such property.
Mortgage loans 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 loan system. A provision is made for
doubtful account to adjust the allowance for doubtful accounts to an amount
considered by management to be adequate to provide for unrecoverable accounts
receivable.
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 and the valuation of real estate acquired
through foreclosure. Actual results could differ significantly from these
estimates.
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.
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 will be paid to the General
Partners and/or related parties.
A. Loan Brokerage Commissions
For services in connection with the review, selection, evaluation,
negotiation and extension of Partnership loans in an amount up to 12% of the
principal through the period ending 6 months after the termination date of the
offering. Thereafter, loan brokerage commissions will be limited to an amount
not to exceed 4% of the total Partnership assets per year. The loan brokerage
commissions are paid by the borrowers, and thus, not an expense of the
partnership.
<PAGE>
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
B. Loan Servicing Fees
Monthly loan servicing fees of 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 loan is located. Amounts
remitted to the Company and recorded as interest on mortgage loans is net of
such fees. In 1993, $57,825 of the total loan servicing fees of $116,627 were
waived by Redwood Home Loan Co. In 1994, all $124,049 in loan servicing fees
were waived. In 1995, $66,888 of the total loan servicing fees of $100,282 were
waived.
C. Asset Management Fee
The General Partners receive a monthly fee for managing the Partnerships
loan portfolio and operations equal to 1/32 of 1% of the net asset value (3/8
of 1% annual). In 1995, 1994 and 1993, the asset management fees charged were
$-0-, $10,008, and $16,735, respectively. The computed management fees were $
52,801, $51,519, $50,360 and respectively, with the difference being waived by
the General Partners.
D. Other Fees
The Partnership Agreement provides for other fees such as reconveyance,
loan assumption and loan extension fees. Such fees are incurred by the borrowers
and are paid 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 Home Loan Co.) 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 1994, all such expenses were absorbed by Redwood Home Loan Co. In
1995 and 1993, reimbursed expenses totalled $27,762 and $33,641, respectively.
The General Partners collectively or severally were to contribute 1/10 of
1% in cash contributions as proceeds from the offering were admitted to limited
Partner capital. As of December 31, 1992 a General Partner, GYMNO Corporation,
had contributed $11,998, 1/10 of 1% of limited partner contributions in
accordance with Section 4.02(a) of the Partnership Agreement.
NOTE 4 - OTHER PARTNERSHIP PROVISIONS
A. Applicant Status
Subscription funds received from purchasers of units were not admitted to
the Partnership until appropriate lending opportunities were available. During
the period prior to the time of admission, which ranged between 1-120 days,
purchasers subscriptions remained irrevocable and earned interest at money
market rates, which were lower than the return on the Partnerships loan
portfolio.
Interest earned prior to admission was credited to partners in applicant
status. As loans were made and partners were transferred to regular status to
begin sharing in income from loans secured by deeds of trust, the interest
credited was either paid to the investors or transferred to Partners Capital
along with the original investment.
<PAGE>
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
B. Term of the Partnership
The term of the Partnership is approximately 40 years, unless sooner
terminated as provided. The provisions provide for no capital withdrawal for the
first five years, subject to the penalty provision set forth in (E) below.
Thereafter, investors have the right to withdraw over a five-year period, or
longer.
C. 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.
D. Profits and Losses
Profits and losses are allocated among the Limited Partners according to
their respective capital accounts after 1% is allocated to the General Partners.
E. Liquidity, Capital Withdrawals and Early Withdrawals
There are substantial restrictions on transferability of Units and
accordingly an investment in the Partnership is illiquid. Limited Partners have
no right to withdraw from the partnership or to obtain the return of their
capital account for at least one year from the date of purchase of Units. In
order to provide a certain degree of liquidity to the Limited Partners after the
one-year period. Limited Partners may withdraw all or part of their Capital
Accounts from the Partnership in four quarterly installments beginning on the
last day of the calendar quarter following the quarter in which the notice of
withdrawal is given, subject to a 10% early withdrawal penalty. The 10% penalty
is applicable to the amount withdrawn as stated in the Notice of Withdrawal and
will be deducted from the Capital Account and the balance distributed in four
quarterly installments. Withdrawal after the one-year holding period and before
the five-year holding period will be permitted only upon the terms set forth
above.
The Partnership will not establish a reserve from which to fund withdrawals
and, accordingly, the Partnerships capacity to return a Limited Partners
capital account is restricted to the availability of Partnership cash flow.
F. Guaranteed Interest Rate For Offering Period
During the period commencing with the day a Limited Partner was admitted to
the Partnership and ending 3 months after the offering termination date, the
General partners guaranteed an interest rate equal to the greater of actual
earnings from mortgage operations or 2% above The Weighted Average cost of Funds
Index for the Eleventh District Savings Institutions (Savings & Loan & Thrift
Institutions) as computed by the Federal Home Loan Bank of San Francisco, up to
a maximum interest rate of 12%. The guarantee amounted to $12,855 and $5,195 in
1990 and 1991, respectively. In 1992 and 1993, actual realization exceeded the
guaranteed amount each month. None of 1994 or 1995 was subject to the guarantee.
<PAGE>
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 5 - INVESTMENT IN PARTNERSHIP
The Partnerships interest in land, acquired through foreclosure, located
in East Palo Alto with costs totalling $223,245 has bee invested with that of
two other Partnerships (total cost of $941,050) in a partnership which is in the
process of constructing approximately 72 single family homes for sale. Redwood
Mortgage Investors V, VI and VII have first priority on return of investment
plus interest thereon, in addition to a share of profits realized.
NOTE 6 - LEGAL PROCEEDINGS
The Partnership is not a defendant in any legal actions. However, legal
actions against borrowers and other involved parties have been initiated by the
Partnership to help assure payments against unsecured accounts receivable
totalling $378,200 at December 31, 1995.
Management anticipates that the ultimate results of these cases 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 7 - NOTES PAYABLE BANK - LINE OF CREDIT
The Partnership has a bank line of credit secured by its mortgage loan
portfolio up to $2,000,000 at .75% over prime. The balances outstanding as of
December 31, 1994 and 1995 were $1,929,630,and $2,000,000 respectively, and the
interest rate at December 31, 1995 was 9.5% (8.75% prime + .75%).
NOTE 8 - ASSET CONCENTRATIONS AND CHARACTERISTICS
Number of loans outstanding 74
Total loans outstanding $12,382,641
Average loan outstanding $ 167,333
Average loan as percent of total 1.35%
Average loan as percent of Partners Capital 1.18%
Largest loan outstanding $1,176,744
Largest loan as percent of total 9.50%
Largest loan as percent of Partners Capital 8.28%
Number of counties where security is located
(all California) 17
Largest percentage of loans in one county 20.44%
Average loan to appraised value of security
at time loan was consummated 62.36%
Number of loans in foreclosure 3
The cash balance at December 31, 1995 of $514,840 was in three banks with
interest bearing balances totalling $314,308. The balances exceeded FDIC
insurance limits (up to $100,000 per bank) by $314,092.
<PAGE>
<TABLE>
SCHEDULE II AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES. Rule 12-03
<CAPTION>
Column A Column B Column C Column D Column E
Name of Debtor Balance Beginning Additions Deductions Balance at end of period
of period 12/31/94 (1) (2) (1) (2)
Amounts Amounts Current Not Current
collected written off 12/31/95
<S> <C> <C> <C> <C> <C> <C>
Redwood Home Loan Co. .. $604,939 $-0- $ 80,542 $ 7,346* $ -0- $517,051
<FN>
The above schedule represents the formation loan borrowed by Redwood Home Loan Co. from the Partnership to pay
for the selling commissions on units. It is an unsecured loan and will not bear interest. It will be repaid to the
Partnership in ten annual installments of principal only commencing January 1, 1992.
* The amount written off is comprised of the applications of the applicable portions of early withdrawal penalty as provided for
in the prospectus.
</FN>
</TABLE>
<PAGE>
<TABLE>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
REDWOOD MORTGAGE INVESTORS VII
<CAPTION>
Column A Column B Column C Column D Column E
Description Balance at Additions Deductions Balance at
------------------------------------
beginning of (1) (2) Describe End of Period
of period Charged to Charged to
Costs & Expenses Other accounts -
Describe
Year Ended
12/31/95
Deducted from
Asset accounts:
<S> <C> <C> <C> <C> <C>
Allowance for
Doubtful accts $ 201,608 $ 29,365 -0- $ 30,973 * $ 200,000
<FN>
*In addition to the provision noted above, REO loans were recognized of $277,414 for a total provision for
losses of $306,779.
</FN>
</TABLE>
<PAGE>
<TABLE>
SCHEDULE IX
SHORT TERM BORROWINGS
REDWOOD MORTGAGE INVESTORS VII
RULE 12-10
<CAPTION>
Column A Column B Column C Column D Column E Column F
Category of Aggregate Balance at End Weighted Average Maximum Amount Average Amount Weighted Average
Short-Term Borrowings of Period Interest Rate Outstanding Outstanding Interest Rate
during
During the Period During the Period the period
- - ----------------------- ---------------- ------------------- --------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
Year-Ended 12/31/95 $ 2,000,000 9.800% $ 2,000,000 $ 1,659,638 9.800%
</TABLE>
<PAGE>
<TABLE>
SCHEDULE XII
MORTGAGE LOANS ON REAL ESTATE.
RULE 12-29 MORTGAGE LOANS ON REAL ESTATE
<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 Face Amt. Carrying Principal Type of Geographic
Rate Maturity Payment Liens of amount of amount Lien County
Date Terms Mortgages mortgages of loans Location
(original subject
amount) to
Delinq.
Principal
or
Interest
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Res. 14.500% 10/01/95 $2,142.98 $ -0- $175,000.00 $173,116.99 $ 196,090 1st Mtg Santa Clara
Comm. 14.500% 12/01/95 2.755.25 -0- 225,000.00 221,340.10 -0- 1st Mtg Alameda
Res. 14.500% 12/01/95 1,114.35 336,591 91,000.00 89.363.25 -0- 2nd Mtg San Mateo
Res. 14.000% 09/01/94 175.00 67,583 15,000.00 15,000.00 -0- 2nd Mtg San Mateo
Res. 14.000% 05/01/93 350.00 442,500 30,000.00 30,000.00 -0- 2nd Mtg Sonoma
Res. 14.500% 06/01/01 782.62 84,303 63,910.49 63,116.66 783 2nd Mtg Marin
Res. 13.750% 08/01/96 1,258.32 -0- 108,000.00 106,179.84 -0- 1st Mtg San Francisco
Res. 15.000% 09/01/96 1,251.80 319,721 99,000.00 91,807.25 -0- 2nd Mtg San Mateo
Res. 12.000% 08/01/04 710.00 70,729 66,000.00 65,078.50 -0- 2nd Mtg Alameda
Res. 13.750% 10/01/96 916.67 369,163 80,000.00 80,000.00 -0- 2nd Mtg San Mateo
Res. 13.750% 10/01/96 988.28 -0- 86,250.00 86,250.00 -0- 1st Mtg Santa Clara
Comm. 13.500% 12/01/95 572.71 299,431 50,000.00 49,333.14 -0- 2nd Mtg Alameda
Res. 12.500% 02/01/07 369.76 -0- 30,000.00 26,521.97 -0- 1st Mtg Santa Cruz
Res. 10.000% 12/24/01 308.28 -0- 37,984.50 35,337.21 -0- 1st Mtg Alameda
Comm. 13.875% 08/01/96 3,757.82 -0- 325,000.00 325,000.00 -0- 1st Mtg Santa Clara
Res. 10.000% 04/17/97 132.08 126,800 15,850.00 15,793.32 -0- 2nd Mtg Sonoma
Comm. 13.500% 06/01/93 1,375.00 210,000 110,000.00 110,000.00 -0- 3rd Mtg Sacramento
Res. 13.000% 07/01/97 1603.99 254,505 145,000.00 143,291.24 -0- 2nd Mtg San Mateo
Res. 12.500% 07/01/97 453.58 129,491 42,500.00 41,930.85 -0- 2nd Mtg San Mateo
Res. 12.750% 07/01/97 880.22 592,878 81,000.00 79,566.51 -0- 2nd Mtg San Mateo
Apts. 13.000% 08/01/97 1,935.85 853,242 175,000.00 171,092.92 -0- 3rd Mtg San Mateo
Comm. 13.000% 07/15/94 1,453.13 -0- 112,500.00 112,500.00 -0- 1st Mtg San Mateo
Comm. 7.000% 08/06/02 311.38 17,382 46, 803.50 45,080.73 -0- 2nd Mtg Alameda
Comm. 12.000% 10/01/97 4,517.38 796,163 438,000.00 433,214.71 -0- 3rd Mtg Contra Costa
Res. 13.000% 03/29/95 2,267.03 308,267 209,500.00 209,500.00 -0- 2nd Mtg Santa Clara
Res. 10.000% 11/06/07 65.91 48,829 6,133.33 5,474.95 -0- 2nd Mtg San Francisco
Comm. 12.500% 01/01/98 587.00 -0- 55,000.00 54,388.67 -0- 1st Mtg San Mateo
Comm. 12.250% 01/01/98 4,083.36 354,077 400,002.42 400,002.42 -0- 2nd Mtg Contra Costa
Res. 12.000% 03/01/95 203.13 208,000 15,000.00 15,000.00 -0- 2nd Mtg San Mateo
Comm. 12.000% 04/01/98 1,298.00 387,920 129,800.00 129,800.00 -0- 2nd Mtg San Francisco
Comm. 12.500% 04/05/08 921.02 -0- 175,000.00 68,118.70 -0- 1st Mtg Tuoloume
Res. 12.000% 05/01/98 514.31 -0- 50,000.00 49,483.04 -0- 1st Mtg San Francisco
Comm. 12.000% 06/01/98 2,038.01 -0- 239,850.00 196,704.56 -0- 1st Mtg Sonoma
Apts. 12.500% 08/01/97 467.67 89,904 75,000.00 72,957.30 -0- 2nd Mtg Sacramento
Res. 12.000% 07/01/98 3,085.84 85,930 300,000.00 276,493.42 -0- 2nd Mtg El Dorado
Res. 12.750% 07/01/08 370.90 236,164 29,700.00 27,832.02 -0- 2nd Mtg San Mateo
Res. 11.250% 09/01/95 3,875.00 350,000 300,000.00 300,000.00 300,000 2nd Mtg Mendocino
Res. 13.500% 09/01/08 1,647.07 106,044 126,861.90 120,195.84 -0- 2nd Mtg Contra Costa
Comm. 12.000% 09/01/03 848.61 -0- 82,500.00 81,741.52 -0- 1st Mtg Alameda
Comm. 5.000% 09/01/03 797.50 -0- 133,000.00 127,425.32 -0- 1st Mtg San Mateo
Comm. 12.000% 11/01/98 2,057.23 5,635 200,000.00 85,670.56 -0- 2nd Mtg San Francisco
Res. 8.000% 05/01/09 753.50 -0- 81,825.00 75,128.04 -0- 1st Mtg Alameda
Comm. 10.000% 12/01/98 647.21 -0- 73,750.00 72,926.63 -0- 1st Mtg Stanislaus
Comm. 12.250% 01/01/98 1,947.07 891,453 200,001.20 187,143.98 -0- 4th Mtg Contra Costa
Comm. 10.000% 12/01/98 3,619.98 -0- 412,500.00 407,673.94 -0- 1st Mtg Alameda
Comm. 7.000% 12/01/03 575.74 281,250 49,586.38 42,227.19 -0- 2nd Mtg Alameda
Apts. 11.750% 05/01/96 11,767.44 7,812,510 1,176,744.19 1,176,744.19 -0- 2nd Mtg Contra Costa
<PAGE>
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 Face Amt. Carrying Principal Type of Geographic
Rate Maturity Payment Liens of amount of amount Lien County
Date Terms Mortgages mortgages of loans Location
(original subject
amount) to
Delinq.
Principal
or
Interest
Comm 12.000% 02/01/99 2,790.57 -0- 312,000.00 312,000.00 -0- 1st Mtg Santa Clara
Comm 12.000% 06/01/04 1,316.53 -0- 125,000.00 123,616.04 -0- 1st Mtg Santa Barbara
Res 11.000% 06/01/99 1,428.50 -0- 150,000.00 148,958.23 -0- 1st Mtg Marin
Comm. 12.000% 07/01/96 1,352.50 679,258 135,250.00 135,250.00 -0- 3rd Mtg Sonoma
Comm. 11.000% 10/01/96 5,958.33 5,504,000 650,000.00 650,000.00 -0- 2nd Mtg San Mateo
Res. 11.000% 10/01/99 571.39 478,120 60,000.00 59,681.60 -0- 2nd Mtg San Mateo
Comm. 12.000% 10/01/95 1270.83 510,979 100,000.00 35,075.95 -0- 2nd Mtg Santa Cruz
Comm. 11.000% 11/01/97 2,520.83 61,953 275,000.00 275,000.00 -0- 2nd Mtg Santa Clara
Comm. 11.500% 12/20/96 7,255.96 907,480 757,144.25 757,144.25 -0- 2nd Mtg Stanislaus
Res. 12.000% 05/01/96 1,719.28 346,880 215,000.00 182,620.90 -0- 2nd Mtg San Mateo
Apts 7.000% 01/10/05 234.06 80,250 40,125.00 40,125.00 -0- 2nd Mtg San Francisco
Res 12.000% 03/01/98 1,275.15 -0- 280,000.00 130,606.09 -0- 1st Mtg Alameda
Res 12.500% 09/01/96 1,862.70 -0- 245,000.00 191,228.85 -0- 1st Mtg Monterey
Apts 11.500% 04/01/05 3,840.14 -0- 550,000.00 342,614.16 -0- 1st Mtg San Francisco
Apts 12.500% 04/01/00 633.69 667,333 28,166.67 25,343.00 -0- 2nd Mtg Alameda
Comm 11.875% 05/01/05 2,088.00 -0- 200,000.00 198,980.79 -0- 1st Mtg San Francisco
Comm 9.000% 05/10/02 670.52 -0- 83,333.33 83,007.41 -0- 1st Mtg Shasta
Comm 12.000% 11/30/98 3,750.00 1,500,000 375,000.00 375,000.00 -0- 2nd Mtg San Mateo
Comm 12.000% 12/31/99 5,000.00 2,684,430 500,000.00 500,000.00 -0- 2nd Mtg Santa Clara
Res 8.000% 09/27/00 530.79 106,333 79,619.05 79,619.05 -0- 2nd Mtg Monterey
Comm. 8.000% 12/01/97 400.00 -0- 60,000.00 60,000.00 -0- 1st Mtg Solano
Comm. 11.500% 04/30/96 12,188.87 575,496 625,070.01 625,070.01 -0- 2nd Mtg San Francisco
Res. 13.000% 01/01/03 999.54 15,400 79,000.00 56,255.98 -0- 2nd Mtg San Mateo
Res. 14.000% 07/01/99 593.10 -0- 50,056.30 48,929.20 -0- 1st Mtg San Mateo
Res. 10.000% 08/01/97 388.67 309,872 45,000.00 46,630.83 -0- 3rd Mtg San Mateo
Res. 13.500% 04/01/95 732.61 -0- 63,960.00 62,342.36 -0- 1st Mtg San Mateo
Res. 15.250% 04/01/95 588.29 11,601 45,800.00 44,993.82 -0- 2nd Mtg Solano
---------- ---------- ------------ ------------ ----------
Totals $136,515.83 30,575,850 13,300,077.52 12,382,641 496,873
</TABLE>
<PAGE>
Schedule XII
Reconciliation of carrying amount of mortgages at close of period (12/31/95)
Balance at beginning of period 1/01/95 $ 11,345,566
Additions during period:
New mortgage loans $ 3,592,507
Other -0- $ 3,592,507
- - -------------------------------------------------------------------------------
$ 14,938,073
Deduction during period:
Collections of principal $ 1,980,879
Foreclosures 485,322
Cost of mortgage sold -0-
Amortization of Premium -0-
Other 89,231 $ 2,555,432
- - -------------------------------------------------------------------------------
Balance at close of period (12/31/95) $ 12,382,641
-------------------
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 of 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 Gymno Corporation, a California corporation, on an equal
(50-50) basis.
<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 12-13, 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, 1995. All
such compensation is in compliance with the guidelines and limitations set forth
in the Prospectus.
Entity Receiving Description of Compensation Amount
Compensation and Services Rendered
- - -------------------------------------------------------------------------------
I. RHL Co. Loan Servicing Fee for servicing Loans $ 33,394
($66,888 waived by RHL Co.)
General Partners Asset Management Fee for managing assets $ -0-
&/or Affiliate ($52,801 waived by the General Partners)
General Partners 1% interest in profits $ 9,120
Less allowance for syndication costs 810
-------------
$ 8,310
II. FEES PAID BY BORROWERS ON MORTGAGE LOANS PLACED BY COMPANIES RELATED TO
THE GENERAL PARTNERS WITH THE PARTNERSHIP (EXPENSES OF BORROWERS NOT OF THE
PARTNERSHIP)
RHL Co. Loan Brokerage Commissions for services
in connection with the review, selection,
evaluation, negotiation, and extension of
the Partnership Loans paid by the borrowers
and not by the Partnership $ 82,708
RHL Co. 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 $ 1,572
III. IN ADDITION, THE GENERAL PARTNERS AND/OR RELATED COMPANIES PAY CERTAIN
EXPENSES ON BEHALF OF THE PARTNERSHIP FOR WHICH IT IS REIMBURSED AS NOTED
IN THE STATEMENT OF INCOME. $ 27,762
<PAGE>
Item 12 - Security Ownership of Certain Beneficial Owners and Management
The General Partners are to own a combined total of 1% of the Partnership
including a 1% portion of income and losses.
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 the Prospectus dated October 20, 1989 (incorporated herein by
reference) on page 12 Compensation of General Partners and Affiliates and page
14 Conflicts of Interest.
Part IV
Item 14 - Exhibits, Financial Statements and Schedules, and Reports on Form 8-K.
A. Documents filed as part of this report are incorporated:
1. 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
10.2 Servicing Agreement
10.3 (a) Form of Note secured by Deed of Trust which provides
for principal and interest payments.
(b) Form of Note secured by Deed of Trust which provides
principal and interest payments and right of assumption
(c) Form of Note secured by Deed of Trust which provides
for interest only payments
(d) Form of Note
10.4 (a) Deed of Trust and Assignment of Rents to accompany
Exhibits 10.3 (a), and (c)
(b) Deed of Trust and Assignment of Rents to accompany
Exhibit 10.3 (b)
(c) Deed of Trust to accompany Exhibit 10.3 (d)
10.5 Promissory Note for Formation Loan
10.6 Agreement to Seek a Lender
24.1 consent of Parodi & Cropper
24.2 Consent of Wilson, Ryan & Campilongo.
All of these exhibits were previously filed as the exhibits to Registrants
Statement on Form S-11 (Registration No. 33-30427 and incorporated by reference
herein).
B. Reports of 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 the prospectus
(S-11 filed as part of the Registration Statement)dated
October 20, 1989 to pages 65 through 67 and Supplement #5 dated
February 14, 1992 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,
1996.
REDWOOD MORTGAGE INVESTORS VII
By:
---------------------------------------------
D. Russell Burwell, General Partner
By:
---------------------------------------------
Michael R. Burwell, General Partner
By: Gymno Corporation, General Partner
By:
---------------------------------------------
D. Russell Burwell, President
By:
---------------------------------------------
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, 1996.
Signature Title Date
- - ---------------------
D. Russell Burwell General Partner March 25, 1996
- - ---------------------
Michael R. Burwell General Partner March 25, 1996
- - ---------------------
D. Russell Burwell President of Gymno Corporation, March 25, 1996
(Principal Executive Officer);
Director of Gymno Corporation
- - ---------------------
Michael R. Burwell Secretary/Treasurer of Gymno March 25, 1996
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-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 514840
<SECURITIES> 0
<RECEIVABLES> 13812256
<ALLOWANCES> 200000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 16215757
<CURRENT-LIABILITIES> 0
<BONDS> 0
2001472
0
<COMMON> 0
<OTHER-SE> 14214285
<TOTAL-LIABILITY-AND-EQUITY> 16215757
<SALES> 0
<TOTAL-REVENUES> 1450487
<CGS> 0
<TOTAL-COSTS> 68387
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 306779
<INTEREST-EXPENSE> 163361
<INCOME-PRETAX> 911960
<INCOME-TAX> 0
<INCOME-CONTINUING> 911960
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 911960
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
