REDWOOD MORTGAGE INVESTORS VII
(a California Limited Partnership)
Index to Form 10-K
December 31, 1996
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 27
Part III
Item 10 - Directors and Executive Officers of the Registrant 27
Item 11 - Executive Compensation 28
Item 12 - Security Ownership of Certain Beneficial Owners and management 29
Item 13 - Certain Relationships and Related Transactions 29
Part IV
Item 14 - Exhibits,Financial Statement Schedules, and Reports on Form 8-K. 9-30
Signatures 31
<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, 1996 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: Limited Partnership Interests
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 Mortgage
Investments secured by deeds of trust on California real estate. Mortgage
Investments are arranged and serviced by Redwood Home Loan Co., dba Redwood
Mortgage, 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, 1996, the Partnership had a balance
in its Mortgage Investments portfolio totalling $12,036,293 with interest rates
thereon ranging from 4% to 15.50%.
Currently, Mortgage Investments secured by First Trust Deeds comprise
34.89% of the Mortgage Investment portfolio followed by Second Trust Deeds of
57.44%, and Third Trust Deeds of 6.01%. A Fourth Trust Deed makes up the
balance. Owner-occupied homes, combined with non-owner occupied homes total
23.72 % of the Mortgage Investments. Commercial Mortgage Investments origination
increased from last year, now comprising 65.26% of the portfolio, an increase of
10.99%. The past year brought us many outstanding low loan to value lending
opportunities in this segment of the market. Mortgage Investment size increased
this past year, and is now averaging $169,525 per Mortgage Investment, an
increase of $2,192. Some of the larger Mortgage Investments invested in by the
Partnership are fractionalized between other affiliated partnerships with
objectives similar to those of the Partnership to further reduce risk. Average
equity per loan transaction stood at 34.24%. 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 five properties in foreclosure.
Item 2 - Properties
A summary of the Partnerships Mortgage Investment Portfolio as of December
31, 1996, is set forth below.
<PAGE>
Mortgage Investments as a Percentage of Total Mortgage Investments
First Trust Deeds $4,199,551.40
Appraised Value of Properties 8,799,746.00
Total Investment as a % of Appraisal 47.72%
Second Trust Deed Mortgage Investments 6,913,852.90
Third Trust Deed Mortgage Investments 722,887.23
Fourth Trust Deed Mortgage Investments * 200,001.20
First Trust Deeds due other Lenders 20,947,294.00
Second Trust Deeds due other Lenders 979,402.00
Third Trust Deeds due other Lenders 142,858.00
Total Debt $34,105,846.73
Appraised Property Value 51,863,991.00
Total Investments as a % of Appraisal 65.76%
Number of Mortgage Investments Outstanding 71
Average Investment 169,525.25
Average Investment as a % of Net Assets 1.21%
Largest Investment Outstanding 979,272.93
Largest Investment as a % of Net Assets 6.99%
Mortgage Investments as a Percentage of Total Mortgage Investments
First Trust Deeds 34.89%
Second Trust Deeds 57.44%
Third Trust Deeds 6.01%
Fourth Trust Deeds 1.66%
-----------
Total 100.00%
Mortgage Investments by Amount Percent
Type of Property
Owner Occupied Homes $1,742,767.10 14.48%
Non-Owner Occupied Homes 1,112,274.08 9.24%
Apartments 1,325,871.63 11.02%
Commercial 7,855,379.92 65.26%
------------------ -----------
Total $12,036,292.73 100.00%
* Footnotes on following page
<PAGE>
The following is a distribution of Mortgage Investments outstanding as of
December 31, 1996 by Counties.
County Total Mortgage Percent
Investments
Santa Clara $2,888,907.85 24.00%
San Francisco 1,950,728.50 16.21%
Stanislaus 1,665,745.47 13.84%
San Mateo 1,536,899.28 12.77%
Alameda 1,233,138.15 10.25%
Contra Costa 1,147,497.77 9.53%
Sonoma 370,953.22 3.08%
El Dorado 274,178.59 2.28%
Sacramento 206,893.59 1.72%
Ventura 195,000.00 1.62%
Santa Barbara 122,596.76 1.02%
Solano 104,713.29 0.87%
Shasta 82,407.46 0.68%
Monterey 79,619.05 0.66%
Tuoloume 65,213.37 0.54%
Marin 62,836.42 0.52%
Santa Cruz 48,963.96 0.41%
------------------ -----------
Total $12,036,292.73 100.00%
* Redwood Mortgage Investors VII, 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 5
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 of trust, collect the
debt owed under the promissory notes or to protect/recoup its investment from
the real property secured by the deeds. As of the date hereof, the Partnership
is not involved in any legal proceedings other than those that would be
considered part of the normal course of business. 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.
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, 1996 were:
<TABLE>
Balance Sheet
Assets
<CAPTION>
December 31,
------------------------------------------------------
1996 1995 1994
-------------- -------------- -------------
<S> <C> <C> <C>
Cash ............................................................. $ 755,089 $ 514,840 $ 462,681
Accounts Receivable:
Mortgage Investments secured by Deeds of Trust ................ 12,036,293 12,382,641 11,345,566
Accrued interest and other fees ............................... 264,495 940,541 738,142
Advances on Mortgage Investments .............................. 41,203 110,874 28,767
Other receivables - Unsecured ................................. 337,242 378,200 359,072
Less allowance for losses ..................................... (228,647) (200,000) (201,608)
Real Estate Owned acquired through foreclosure at
estimated net realizable value ............................... 1,468,345 1,347,997 2,352,221
Formation loan due from Redwood Mortgage ......................... 429,163 517,051 604,939
Partnership Interest ............................................. 242,394 223,245 0
Organization cost net of amortization ............................ 0 368 2,384
------------ ------------ ------------
$ 15,345,577 $ 16,215,757 $ 15,692,164
------------ ------------ ------------
</TABLE>
<PAGE>
<TABLE>
Liabilities and Partners Capital
<CAPTION>
December 31,
-------------------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Liabilities:
Note payable - Bank ................................................................ $ 1,175,000 $ 2,000,000 $ 1,929,630
Accounts payable and accrued expenses .............................................. 1,472 1,472 2,973
Discount of Mortgage Investments ................................................... 154,598 0 0
Due to Related Companies ........................................................... 0 0 5,663
----------- ----------- -----------
$ 1,331,070 $ 2,001,472 $ 1,938,266
Partners Capital ................................................................... 14,014,507 14,214,285 13,753,898
----------- ----------- -----------
$15,345,577 $16,215,757 $15,692,164
----------- ----------- -----------
Statement of Income
Gross revenue ...................................................................... $ 1,483,233 $ 1,450,487 $ 1,489,882
Expenses ........................................................................... 624,134 538,527 562,591
----------- ----------- -----------
Net Income ......................................................................... $ 859,099 $ 911,960 $ 927,291
----------- ----------- -----------
Net income to General Partners (1%) ................................................ $ 8,591 $ 9,120 $ 9,273
=========== =========== ===========
Net Income to Limited Partners (99%) ............................................... $ 850,508 $ 902,840 $ 918,018
=========== =========== ===========
Net Income per $1,000 invested by Limited
Partners for entire period:
- where income is reinvested and compounded ..................................... $ 60 $ 60 $ 63
=========== =========== ===========
- where partner receives income in monthly
distributions ............................................................... $ 59 $ 58 $ 61
=========== =========== ===========
<FN>
Net income in 1994 averaged at an annualized yield of 6.28%. In 1995, the
annualized yield was 6.00% and in 1996 the annualized yield was 6.02%.
</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 totaled $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, 1996, Partners Capital totaled $14,014,507.
The Partnership began funding Mortgage Investments on December 27, 1989 and
as of December 31, 1996 had credited the Partners accounts with income at an
average annualized (compounded) yield of 8.14%.
Currently, mortgage interest rates are lower than those prevalent at the
inception of the Partnership. New Mortgage Investments 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 Mortgage Investments, the current and
anticipated interest rates to be charged by the Partnership, and current reserve
requirements, the General Partners anticipate that the annualized yield next
year will range only slightly higher from its current rate of 6.02%.
The Partnership has a line of credit with a commercial bank secured by its
Mortgage Investments to a limit of $3,000,000, at a variable interest rate set
at one half percent above the prime rate. Currently, it has borrowed $1,175,000.
This facility could increase as the Partnership capital increases. This added
source of funds helped 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 since most
of the Mortgage Investments made by the Partnership bear interest at a rate in
excess of the rate payable to the bank which extended the line of credit. Once
the required principal and interest payments on the line of credit are paid to
the bank, the Mortgage Investments funded using the line of credit generate
revenue for the Partnership. As of December 31, 1996, the Partnership is current
with its interest payments on the line of credit.
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 nineteen years.
Borrower 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
Mortgage Investments and pay-off on notes. Currently, cash flow exceeds
Partnership expenses and earnings payout requirements. As Mortgage Investment
opportunities become available, excess cash and available funds are invested in
new Mortgage Investments.
The General Partners regularly review the Mortgage Investment 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.
The Northern California recession reached bottom in 1993. Since then, the
California economy has been improving, slowly at first, but now, more
vigorously. A wide variety of indicators suggest that the economy in California
was strong in 1996, and the State is well - positioned for fast growth. This
improvement is reflective in increasing property values, in job growth, personal
income growth, etc., which all translates into more loan activity, which of
course, is healthy for the Partnerships lending activity.
<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, 1996, and December 31, 1995,
Statements of Income for the three years ended December 31, 1996,
Statements of Changes in Partner Capital for the three years ended
December 31, 1996,
Statements of Cash Flows for the three years ended December 31, 1996,
Notes to Financial Statements - December 31, 1996.
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, 1996
(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, 1996 and 1995 and the
statements of income, changes in partners capital and cash flows for the three
years ended December 31, 1996. 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
VII as of December 31, 1996 and 1995, and the results of its operations and cash
flows for the three years ended December 31, 1996 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/ A. Bruce Cropper
PARODI & CROPPER
Lafayette, California
February 28, 1997
<PAGE>
<TABLE>
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<CAPTION>
ASSETS
1996 1995
-------------- --------------
<S> <C> <C>
Cash $755,089 $514,840
------------- --------------
Accounts receivable:
Mortgage Investments, secured by deeds of trust .......................................... 12,036,293 12,382,641
Accrued Interest on Mortgage Investments ................................................. 264,495 940,541
Advances on Mortgage Investments ......................................................... 41,203 110,874
Accounts receivables, unsecured .......................................................... 337,242 378,200
----------- -----------
12,679,233 13,812,256
Less allowance for doubtful accounts ..................................................... 228,647 200,000
----------- -----------
12,450,586 13,612,256
----------- -----------
Real estate owned, acquired through foreclosure, at net realizable value ................... 1,468,345 1,347,997
Investment in partnership .................................................................. 242,394 223,245
Formation loan due from Redwood Mortgage ................................................... 429,163 517,051
Organization costs, less accumulated amortization of $10,102 and
$9,734, respectively .................................................................... 0 368
----------- -----------
$15,345,577 $16,215,757
=========== ===========
LIABILITIES AND PARTNERS CAPITAL
Liabilities:
Notes payable - bank line of credit ...................................................... $ 1,175,000 $ 2,000,000
Accounts payable and accrued expenses .................................................... 1,472 1,472
Deferred Interest ........................................................................ 154,598 0
----------- -----------
1,331,070 2,001,472
Partners Capital ........................................................................... 14,014,507 14,214,285
----------- -----------
$15,345,577 $16,215,757
=========== ===========
<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, 1996
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1996 1995 1994
------------- ------------- --------------
<S> <C> <C> <C>
Revenues:
Interest on Mortgage Investments ........................................ $1,430,183 $1,430,742 $1,453,969
Interest on bank deposits ............................................... 10,228 8,407 13,843
Late charges ............................................................ 17,266 9,038 20,232
Other ................................................................... 25,556 2,300 1,838
---------- ---------- ----------
1,483,233 1,450,487 1,489,882
---------- ---------- ----------
Expenses:
Interest on note payable - bank ......................................... 127,454 163,361 135,790
Clerical costs through Redwood Mortgage ................................. 40,874 27,762 0
Amortization of organization costs ...................................... 368 2,016 2,016
General partners asset management fee ................................... 0 0 10,008
Provision for doubtful accounts and losses
on real estate acquired through foreclosure ............................ 419,437 306,779 335,955
Professional services ................................................... 18,802 19,557 53,250
Printing, supplies and postage .......................................... 12,466 14,703 17,282
Other ................................................................... 4,733 4,349 8,290
---------- ---------- ----------
624,134 538,527 562,591
---------- ---------- ----------
Net Income ................................................................ $ 859,099 $ 911,960 $ 927,291
========== ========== ==========
Net income: To General Partners(1%) ...................................... $ 8,591 $ 9,120 $ 9,273
To Limited Partners (99%) ............................ 850,508 902,840 918,018
---------- ---------- ----------
$ 859,099 $ 911,960 $ 927,291
========== ========== ==========
Net income per $1,000 invested by Limited
Partners for entire period:
-where income is reinvested and compounded .......................... $ 60 $ 60 $ 63
========== ========== ==========
-where partner receives income in monthly distributions .............. $ 59 $ 58 $ 61
========== ========== ==========
<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, 1996
<CAPTION>
PARTNERS CAPITAL
UNALLOCATED
GENERAL LIMITED SYNDICATION
PARTNERS PARTNERS COSTS TOTAL
--------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
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
Net income ..................................... 8,591 850,508 0 859,099
Allocation of syndication costs ................ (137) (13,588) 13,725 0
Early withdrawal penalties ..................... 0 (37,345) 0 (37,345)
Partners withdrawals ........................... (8,454) (1,013,078) 0 (1,021,532)
----------- ----------- ----------- -----------
Balances at December 31, 1996 .................. $ 11,978 14,002,529 0 14,014,507
=========== =========== =========== ===========
<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, 1996
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ................................................................. $ 859,099 $ 911,960 $ 927,291
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of organization costs ....................................... 368 2,016 2,016
Increase in allowance for doubtful accounts .............................. 28,647 (1,608) 106,750
(Increase) decrease in accrued interest & advances ....................... 745,717 (284,506) (140,657)
Increase (decrease) in accounts payable and accrued expenses ............. 0 (1,501) (37,549)
(Increase) decrease in amount due from or to Redwood Mortgage ............ 0 (5,663) 3,806
Increase (decrease) in deferred interest on Mortgage Investments ......... 154,598 0 (8,548)
----------- ----------- -----------
Net cash provided by operating activities .............................. 1,788,429 620,698 853,109
----------- ----------- -----------
Cash flows from investing activities:
Net (increase) decrease in:
Mortgage Investments .................................................. 346,348 (1,037,075) 420,623
Formation loan ........................................................ 87,888 87,888 88,532
Real Estate owned ..................................................... (120,348) 1,004,224 (1,705,159)
Other receivables - unsecured ......................................... 40,958 (19,128) (88,289)
Investment in partnership ............................................. (19,149) (223,245) 0
----------- ----------- -----------
Net cash provided by (used in) investing activities .................... 335,697 (187,336) (1,284,293)
----------- ----------- -----------
Cash flows from financing activities:
Net increase (decrease) in note payable-bank ................................ (825,000) 70,370 999,137
Early withdrawal penalties, net of credit to syndication costs ............... (37,345) (444,227) (569,216)
Partners withdrawals ......................................................... (1,021,532) (7,346) (23,366)
----------- ----------- -----------
Net cash provided by (used in) financing activities .................... (1,883,877) (381,203) 406,555
----------- ----------- -----------
Net increase (decrease) in cash .............................................. 240,249 52,159 (24,629)
Cash - beginning of period ................................................... 514,840 462,681 487,310
----------- ----------- -----------
Cash - end of period ......................................................... $ 755,089 $ 514,840 $ 462,681
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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 Mortgage
Investments secured by Deeds of Trust on California real estate. Mortgage
Investments are being arranged and serviced by Redwood Home Loan Co., dba
Redwood Mortgage, an affiliate of the General Partners. At September 30, 1992,
the offering had been closed with contributed capital totaling $11,998,359 for
limited partners.
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
Investments were identified, partners were transferred from applicant status to
admitted partners participating in Mortgage Investment 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 Commissions - Formation Loan Sales commissions ranging from 0%
(Units sold by General Partners) to 10% of the 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 was authorized to loan to Redwood Mortgage 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, Redwood Mortgage has borrowed $914,369 from the Partnership
to cover sales commissions relating to $11,998,359 limited partner contributions
(7.62%). Through December 31, 1996, $485,206 including $75,478 in early
withdrawal penalties, had been repaid leaving a balance of $429,163.
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.
Both the Organization and Syndication Costs have been fully amortized and
allocated to 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 were amortized
over a five year period. Syndication costs were charged against partners
capital and were allocated to individual partners consistent with the
Partnership Agreement.
<PAGE>
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
Property acquired through foreclosure will be held for prompt sale to
return the funds to the Mortgage Investment portfolio. Such property is recorded
at cost which includes the principal balance of the former Mortgage Investment
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 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 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. Mortgage Brokerage Commissions For services in connection with the
review, selection, evaluation, negotiation and extension of Mortgage Investments
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 are
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, 1996
B. Mortgage 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 Mortgage
Investment is located. Amounts remitted to Redwood Mortgage and recorded as
interest on Mortgage Investments is net of such fees. In 1994, all $124,049 in
loan servicing fees were waived by Redwood Mortgage. In 1995, $66,888 of the
total loan servicing fees of $100,282 were waived. In 1996, $92,249 of the total
loan servicing fees of $189,516 were waived by Redwood Mortgage.
C. Asset Management Fee The General Partners receive a monthly fee for
managing the Partnerships Mortgage Investment portfolio and operations equal to
1/32 of 1% of the net asset value(3/8 of 1% annual). In 1996, 1995 and 1994,
the asset management fees charged were $10,008, $16,735, and $0.00 respectively.
The computed management fees were $51,519, $50,360, and $53,537 respectively,
with the difference being waived by the General Partners.
D. Other Fees The Partnership Agreement provides for other fees such as
reconveyance, Mortgage assumption and Mortgage 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
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 1994, all such expenses were absorbed by Redwood Mortgage.
In 1996 and 1995, reimbursed expenses totalled $40,874 and $27,762,
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 Mortgage Investments were made and partners were transferred to
regular status to begin sharing in income from Mortgage Investments 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, 1996
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.
Limited Partners also have the right after five years from the date of
purchase of the Units to withdraw from the partnership on an installment basis,
generally over a five year period in twenty (20) quarterly installments or
longer. Once this five year period expires, no penalty will be imposed if
withdrawal is made in twenty (20) quarterly installments or longer.
Notwithstanding the five-year (or longer) withdrawal period, the General
Partners will liquidate all or part of a Limited Partners 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, subject to a
10% early withdrawal penalty applicable to any sums withdrawn prior to the time
when such sums could have been withdrawn pursuant to the five-year (or longer)
withdrawal period.
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 monthly, 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, 1995, or 1996, was subject to the guarantee.
This guarantee is now no longer applicable.
<PAGE>
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 5 - INVESTMENT IN PARTNERSHIP
The Partnerships interest in land, acquired through foreclosure, located in
East Palo Alto with costs totalling $242,394 has been invested with that of two
other Partnerships (total cost to date, primarily land, of $1,021,798) in a
partnership which is in the process of obtaining approval for 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 $337,242 at December 31, 1996.
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 - NOTE PAYABLE BANK - LINE OF CREDIT The Partnership has a bank line
of credit secured by its Mortgage Investment portfolio of up to $3,000,000 at
.50% over prime. The balances outstanding as of December 31, 1995 and 1996 were
$2,000,000, and $1,175,000 respectively, and the interest rate at December 31,
1996 was 8.75% (8.25% prime + .50%).
NOTE 8 - ASSET CONCENTRATIONS AND CHARACTERISTICS
The Mortgage Investments are secured by recorded deeds of trust. At
December 31, 1996, there were 71 Mortgage Investments outstanding with the
following characteristics:
Number of Mortgage Investments outstanding 71
Total Mortgage Investments outstanding $12,036,293
Average Mortgage Investment outstanding $169,525
Average Mortgage Investment as percent of total 1.41%
Average Mortgage Investment as percent of Partners Capital 1.21%
Largest Mortgage Investment outstanding $979,273
Largest Mortgage Investment as percent of total 8.14%
Largest Mortgage Investment as percent of Partners Capital 6.99%
Number of counties where security is located(all California) 17
Largest percentage of Mortgage Investments in one county 24.00%
Average Mortgage Investment to appraised value of security at time
loan was consummated 65.76%
Number of Mortgage Investments in foreclosure 5
The cash balance at December 31, 1996 of $755,089 was in one bank with
interest bearing balance totalling $179,572. The balances exceeded FDIC
insurance limits (up to $100,000 per bank) by $655,089.
<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 12/31/95 (1) (2) (1) (2)
Amounts Amounts Current Not Current
collected written off 12/31/96
<S> <C> <C> <C> <C> <C> <C>
Redwood Mortgage .................. $517,051 $ 0.00 $ 62,225 $ 25,663* $ 0.00 $429,163
<FN>
The above schedule represents the formation loan borrowed by Redwood
Mortgage 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 (1) (2) Describe End of Period
of period Charged to Charged to
Costs & Expenses Other accounts -
Describe
Year Ended
12/31/96
Deducted from
Asset accounts:
<S> <C> <C> <C> <C> <C>
Allowance for
Doubtful accts .................... $200,000 $419,437 $ 0.00 $390,790 $228,647
<FN>
*The provision noted above, includes amounts written off on real estate
acquired through foreclosure.
</FN>
</TABLE>
<PAGE>
<TABLE>
SCHEDULE IX
SHORT TERM BORROWINGS
REDWOOD MORTGAGE INVESTORS VII
<CAPTION>
RULE 12-10
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 12/31/96 .................. $1,175,000 9.300% $2,000,000 $1,370,413 9.300%
</TABLE>
<PAGE>
<TABLE>
SCHEDULE XII
MORTGAGE INVESTMENTS 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 of Lien County
Date Terms Mortgage Mortgage Mortgage Location
Investments Investments Investments
(original subject to
amount) Delinq.
Principal
or Interest
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Res. 14.500% 12/01/95 $1,114.35 $336,591 $91,000.00 $89,074.94 $89,074.94 2nd Mtg San Mateo
Res 14.000% 09/01/94 175.00 67,583 15,000.00 14,708.39 0.00 2nd Mtg San Mateo
Res 14.500% 06/01/01 782.62 84,303 63,910.49 62,836.42 62,836.42 2nd Mtg Marin
Res 13.750% 08/01/96 1,258.32 0.00 108,000.00 105,694.70 0.00 1st Mtg San Francisco
Res 15.000% 09/01/96 1,251.80 319,721 99,000.00 90,740.78 90,740.78 2nd Mtg San Mateo
Res 12.000% 08/01/04 710.00 70,729 62,000.00 64,393.56 0.00 2nd Mtg Alameda
Res 13.750% 10/01/96 916.67 369,163 80,000.00 80,000.00 0.00 2nd Mtg San Mateo
Res 13.750% 10/01/96 988.28 0.00 86,250.00 86,250.00 0.00 1st Mtg Santa Clara
Res 12.500% 02/01/07 369.76 0.00 30,000.00 25,438.43 0.00 1st Mtg Santa Cruz
Res 10.000% 12/24/01 308.28 0.00 37,984.50 34,884.05 0.00 1st Mtg Alameda
Res 10.000% 04/17/97 132.08 126,800 15,850.00 15,788.90 0.00 2nd Mtg Sonoma
Land 15.000% 06/01/93 1,375.00 210,000 110,000.00 110,000.00 0.00 3rd Mtg Sacramento
Res 13.000% 07/01/97 1,603.99 254,505 145,000.00 142,127.61 0.00 2nd Mtg San Mateo
Res 12.500% 07/01/97 453.58 129,491 42,500.00 41,717.30 0.00 2nd Mtg San Mateo
Res 12.750% 07/01/97 880.22 592,878 81,000.00 79,123.10 0.00 2nd Mtg San Mateo
Land 15.500% 07/15/94 1,453.13 0.00 112,500.00 112,500.00 0.00 1st Mtg San Mateo
Comm 7.000% 08/06/02 311.38 17,382 46,803.50 44,532.37 0.00 2nd Mtg Alameda
Comm 12.000% 10/01/97 4,517.38 796,163 439,172.47 431,064.13 0.00 3rd Mtg Contra Costa
Res 10.000% 11/06/07 65.91 48,829 6,133.33 5,242.28 0.00 2nd Mtg San Francisco
Comm 12.500% 01/01/98 587.00 0.00 55,000.00 54,128.70 0.00 1st Mtg San Mateo
Comm 12.250% 01/01/98 4,083.36 354,077 400,002.42 400,002.42 0.00 2nd Mtg Contra Costa
Res 12.000% 02/01/98 150.00 208,000 15,000.00 8,528.06 0.00 2nd Mtg San Mateo
Comm 12.500% 04/05/08 921.02 0.00 175,000.00 65,213.37 0.00 1st Mtg Tuoloume
Res 12.000% 05/01/98 514.31 0.00 50,000.00 49,257.75 0.00 1st Mtg San Francisco
Comm 12.000% 06/01/98 2,038.01 0.00 239,850.00 195,804.52 0.00 1st Mtg Sonoma
Apts 4.000% 05/01/06 540.83 89,904 100,000.00 96,893.59 0.00 2nd Mtg Sacramento
Res 12.000% 07/01/98 3,085.84 85,930 300,000.00 274,178.59 274,178.59 2nd Mtg El Dorado
Res 12.750% 07/01/08 370.90 236,164 29,700.00 26,875.11 0.00 2nd Mtg San Mateo
Res 13.500% 09/01/08 1,647.07 106,044 126,861.90 116,430.02 0.00 2nd Mtg Contra Costa
Comm 12.000% 09/01/03 848.61 0.00 82,500.00 81,345.94 0.00 1st Mtg Alameda
Comm 6.000% 09/01/03 885.00 0.00 133,000.00 125,200.12 0.00 1st Mtg San Mateo
Comm 12.000% 11/01/98 2,057.23 5,635 200,000.00 74,423.44 0.00 2nd Mtg San Francisco
Res 8.000% 05/01/09 753.50 0.00 81,825.00 71,982.62 0.00 1st Mtg Alameda
Comm 10.000% 12/01/98 647.21 0.00 73,750.00 72,887.14 0.00 1st Mtg Stanislaus
Comm 12.250% 01/01/98 2,080.84 891,453 200,001.20 200,001.20 0.00 4th Mtg Contra Costa
Comm 10.000% 12/01/98 3,619.98 0.00 412,500.00 407,226.68 0.00 1st Mtg Alameda
Comm 7.000% 12/01/03 575.74 281,250 49,586.38 41,566.43 0.00 2nd Mtg Alameda
Comm 12.000% 02/01/99 3,420.75 0.00 312,000.00 335,638.30 0.00 1st Mtg Santa Clara
Comm 12.000% 06/01/04 1,316.53 0.00 125,000.00 122,596.76 0.00 1st Mtg Santa Barbara
Land 12.000% 07/01/96 1,352.50 679,258 135,250.00 135,250.00 135,250.00 3rd Mtg Sonoma
Res 11.000% 10/01/99 571.39 478,120 60,000.00 59,375.29 0.00 2nd Mtg San Mateo
Comm 15.250% 10/01/95 1,270.83 510,979 100,000.00 23,525.53 0.00 2nd Mtg Santa Cruz
Land 11.500% 12/20/96 6,160.73 907,480 757,144.25 642,858.33 0.00 2nd Mtg Stanislaus
Apts 7.000% 02/10/05 234.06 80,250 40,125.00 40,125.00 0.00 2nd Mtg San Francisco
Res 12.000% 03/01/98 1,500.29 0.00 280,000.00 147,206.50 0.00 1st Mtg Alameda
Apts 11.500% 04/01/05 2,651.89 0.00 550,000.00 267,792.71 0.00 1st Mtg San Francisco
Comm 11.875% 05/01/05 2,088.00 0.00 200,000.00 197,605.96 0.00 1st Mtg San Francisco
<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 of Lien County
Date Terms Mortgage Mortgage Mortgage Location
Investments Investments Investments
(original subject to
amount) Delinq.
Principal
or Interest
Comm 9.000% 05/10/02 670.52 0.00 83,333.33 82,407.46 0.00 1st Mtg Shasta
Comm 12.000% 10/31/99 7,000.00 2,684,430 700,000.00 700,000.00 0.00 2nd Mtg Santa Clara
Res 8.000% 09/27/00 530.79 106,333 79,619.05 79,619.05 0.00 2nd Mtg Monterey
Land 8.000% 12/01/97 400.00 0.00 60,000.00 60,000.00 0.00 1st Mtg Solano
Comm. 11.875% 02/01/06 4,437.00 0.00 425,000.00 422,581.57 0.00 1st Mtg San Mateo
Comm. 12.000% 12/31/01 9,792.73 5,492,794 955,000.00 979,272.93 0.00 2nd Mtg Santa Clara
Comm 12.000% 03/15/98 4,000.00 3,000,000 400,000.00 400,000.00 0.00 2nd Mtg Santa Clara
Land 12.000% 02/01/97 3,822.50 0.00 382,250.00 382,250.00 0.00 1st Mtg Santa Clara
Apts 12.000% 02/01/98 9,106.84 883,750 1,427,500.00 921,060.33 0.00 2nd Mtg San Francisco
Res 12.000% 02/01/98 2,107.47 825,000 320,000.00 246,903.83 0.00 2nd Mtg San Francisco
Res 8.000% 09/18/03 87.56 0.00 11,932.83 11,908.65 0.00 1st Mtg Sonoma
Res 12.000% 05/01/98 235.43 0.00 238,000.00 42,622.50 0.00 1st Mtg San Francisco
Res 8.000% 09/30/03 89.71 0.00 12,225.92 12,201.15 0.00 1st Mtg Sonoma
Res 8.000% 04/10/97 199.63 0.00 29,944.39 29,944.39 0.00 1st Mtg San Mateo
Comm 12.000% 02/01/99 56.65 312,000 12,000.00 5,496.62 0.00 2nd Mtg Santa Clara
Res 13.000% 12/01/99 704.17 0.00 65,000.00 65,000.00 0.00 1st Mtg Ventura
Res 13.000% 12/01/99 704.17 0.00 65,000.00 65,000.00 0.00 1st Mtg Ventura
Res 13.000% 12/01/99 704.17 0.00 65,000.00 65,000.00 0.00 1st Mtg Ventura
Res 12.000% 01/01/98 3,400.00 0.00 340,000.00 340,000.00 0.00 1st Mtg Alameda
Land 12.000% 01/01/00 9,500.00 89,692 950,000.00 950,000.00 0.00 2nd Mtg Stanislaus
Res 13.000% 01/01/03 999.54 15,400 79,000.00 51,719.39 0.00 2nd Mtg San Mateo
Res 10.000% 08/01/97 388.67 309,872 45,000.00 46,573.10 0.00 3rd Mtg San Mateo
Res 13.500% 04/01/95 732.61 0.00 63,960.00 61,981.43 0.00 1st Mtg San Mateo
Res 15.250% 04/01/95 588.29 11,601 45,800.00 44,713.29 0.00 2nd Mtg Solano
----------- ---------- ------------ ------------ ------------
Totals $124,899.62 $22,069,554 $13,811,765.96 $12,036,292.73 $652,080.73
</TABLE>
<PAGE>
Schedule XII
Reconciliation of carrying amount of Mortgage Investments at close of
period (12/31/96)
Balance at beginning of period 1/01/96 $12,382,641
Additions during period:
New Mortgage Investments $9,099,688
Other 0 $9,099,688
- -------------------------------------------------------------------------------
$21,482,329
Deduction during period:
Collections of principal $8,923,339
Foreclosures 492,697
Cost of Mortgage Investment sold 0
Amortization of Premium 0
Other 30,000 $9,446,036
- --------------------------------------------------------------------------------
Balance at close of period (12/31/96) $12,036,293
-----------
<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 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, 1996. All
such compensation is in compliance with the guidelines and limitations set forth
in the Prospectus.
Entity Receiving Description of Compensation and Amount
Compensation Services Rendered
- -------------------------------------------------------------------------------
I. Redwood Mortgage Mortgage Servicing Fee for servicing $97,267
Mortgage Investments ($92,249 waived
by Redwood Mortgage)
General Partners &/or Asset Management Fee for managing
Affiliate assets........................... $0
($53,537 waived by the General Partners)
General Partners 1% interest in profits.......... $8,591
Less allowance for syndication costs 137
$8,454
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)
Redwood Mortgage. Loan 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...................... $236,310
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...... $5,609
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. $40,874
<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 Stephen C. Ryan & Associates.
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 18th day of March,
1997.
REDWOOD MORTGAGE INVESTORS VII
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 18th day of March, 1997.
Signature Title Date
/S/ D. Russell Burwell
- ----------------------
D. Russell Burwell General Partner March 18, 1997
/S/ Michael R. Burwell
- ----------------------
Michael R. Burwell General Partner March 18, 1997
/S/ D. Russell Burwell
- ----------------------
D. Russell Burwell President of Gymno Corporation, March 18, 1997
(Principal Executive Officer);
Director of Gymno Corporation
/S/ Michael R. Burwell
- ----------------------
Michael R. Burwell Secretary/Treasurer of Gymno March 18, 1997
Corporation (Principal Financial
and Accounting Officer);
Director of Gymno Corporation
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