REDWOOD MORTGAGE INVESTORS VII
(a California Limited Partnership)
Index to Form 10-K
December 31, 1999
Part I
Page No.
Item 1 - Business 3
Item 2 - Properties 4-5
Item 3 - Legal Proceedings 6
Item 4 - Submission of Matters to a vote of Security
Holders (partners) 6
Part II
Item 5 - Market for the Registrant's Partners' Capital and related
matters 6
Item 6 - Selected Financial Data 6-8
Item 7 - Management's Discussion and Analysis of Financial condition
and Results of Operations 9-13
Item 8 - Financial Statements and Supplementary Data 14-37
Item 9 - Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 38
Part III
Item 10 - Directors and Executive Officers of the Registrant 38
Item 11 - Executive Compensation 39
Item 12 - Security Ownership of Certain Beneficial Owners and management 40
Item 13 - Certain Relationships and Related Transactions 40
Part IV
Item 14 - Exhibits, Financial Statement Schedules, and Reports
on Form 8- K. 40-41
Signatures 42
<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, 1999 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)
Registrant's telephone No. including area code (650) 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 Partnership and 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 Mortgage Corp., an
affiliate of the General Partners. The Partnership's objectives are to make
investments, as referred to above, which will: (i) provide the maximum possible
cash returns which Limited Partners may elect to (a) receive as monthly,
quarterly or annual cash distributions or (b) have credited to their capital
accounts and applied to Partnership activities; and (ii) preserve and protect
the Partnership's capital. The Partnership's 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 September 30, 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, 1999, the Partnership had a balance
in its Mortgage Investments portfolio totalling $11,011,660 with interest rates
thereon ranging from 6.50% to 18.00%.
Currently, Mortgage Investments secured by First Trust Deeds comprise 55.19% of
the amount of funds in the Mortgage Investment portfolio followed by Second
Trust Deeds of 38.80% and Third Trust Deeds of 6.01%. Owner-occupied homes,
combined with non-owner occupied homes total 24.41% of the Mortgage Investments.
Commercial Mortgage Investments origination decreased from last year, now
comprising 73.93% of the portfolio, a decrease of 1.78%. Loans to apartments
totaled 1.66%. The past year brought many outstanding low loan to value lending
opportunities in the commercial segment of the market. 63.32% of the total
Mortgage Investments, are in six counties of the Bay Area. The County of
Stanislaus makes up 25.66% of the Mortgage Investments. Stanislaus County is an
adjacent county to the San Francisco Bay Area, located approximately 65 miles
from San Francisco. The balance of Mortgage Investments are primarily in
Northern California. Mortgage Investment size increased this past year, and is
now averaging $262,182 per Mortgage Investment, an increase of $12,952. 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 37.58%. A 40% equity average on loan origination is
generally considered very conservative. Generally, the more equity, the more
protection for the lender. The Partnership's Mortgage Investment portfolio is in
good condition with only one property in foreclosure as of December, 1999.
<PAGE>
Item 2 - Properties
A summary of the Partnership's Mortgage Investment Portfolio as of December 31,
1999 is set forth below.
Mortgage Investments as a Percentage of Total Mortgage Investments
First Trust Deeds $6,077,532.10
Appraised Value of Properties 10,228,718.00
Total Investment as a % of Appraisal 59.42%
First Trust Deeds $6,077,532.10
Second Trust Deed Mortgage Investments 4,272,714.56
Third Trust Deed Mortgage Investments 661,413.71
-------------------
-------------------
11,011,660.37
First Trust Deeds due other Lenders 8,620,674.00
Second Trust Deeds due other Lenders 1,768,559.00
Total Debt $21,400,893.37
Appraised Property Value $34,223,193.00
Total Investments as a % of Appraisal 62.53%
Number of Mortgage Investments Outstanding 42
Average Investment 262,182.39
Average Investment as a % of Net Assets 2.38%
Largest Investment Outstanding 1,500,000.00
Largest Investment as a % of Net Assets 13.62%
Mortgage Investments as a Percentage of Total Mortgage Investments
First Trust Deeds 55.19%
Second Trust Deeds 38.80%
Third Trust Deeds 6.01%
-------------------
-------------------
Total 100.00%
Mortgage Investments by Amount Percent
Type of Property
Owner Occupied Homes $340,863.95 3.09%
Non-Owner Occupied Homes 2,347,394.44 21.32%
Apartments 182.674.45 1.66%
Commercial 8,140,727.53 73.93%
----------------- -----------
Total $11,011,660.37 100.00%
<PAGE>
The following is a distribution of Mortgage Investments outstanding as of
December 31, 1999 by Counties.
County Total Mortgage Percent
Investments
San Mateo $2,950,790.20 26.80%
Stanislaus 2,825,822.45 25.66%
San Francisco 1,359,061.49 12.34%
Contra Costa 1,325,498.54 12.04%
Alameda 720,782.04 6.54%
Santa Clara 616,969.92 5.60%
Santa Cruz 522,217.74 4.74%
Placer 328,881.51 2.99%
Sonoma 158,672.03 1.44%
Sacramento 96,716.11 0.88%
Shasta 80,248.34 0.73%
Ventura 26,000.00 0.24%
------------------ ------------
------------------ ------------
Total $11,011,660.37 100.00%
Statement of Condition of Mortgage Investments
Number of Mortgage Investments in Foreclosure -1-
Scheduled maturity dates of mortgage investments as of December 31, 1999 are as
follows:
Year Ending
December 31,
-------------------
2000 $4,734,685
2001 5,013,881
2002 263,535
2003 63,983
2004 146,616
Thereafter 788,960
----------------
$11,011,660
================
The scheduled maturities for 2000 include approximately $1,481,528 in nine
mortgage investments which are past maturity at December 31, 1999. Interest
payments on most of these loans are current. $912,875 of these Mortgage
Investments were categorized as delinquent over 90 days.
Six Mortgage Investments with principals outstanding of $964,224 had interest
payments overdue in excess of 90 days.
Six Mortgage Investments with principals outstanding of $1,099,474 were
considered impaired at December 31, 1999. That is interest accruals are no
longer recorded thereon.
<PAGE>
Item 3 - Legal Proceedings
In the normal course of business the Partnership may become involved in various
types of legal proceedings such as assignments of rents, bankruptcy proceedings,
appointments of receivers, unlawful detainers, judicial foreclosures, etc., to
enforce the provisions of the deeds 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. Also refer to a more precise discussion under
Note 6 of the Financial Statements on Page 27 of this report.
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 Registrant's 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.
<PAGE>
Financial condition and results of operation for the Partnership for three years
to December 31, 1999 were:
<TABLE>
Balance Sheet
Assets
December 31,
------------------------------------------------------
<S> <C> <C> <C>
1999 1998 1997
--------------- --------------- --------------
Cash $388,770 $461,544 $520,837
Accounts Receivable:
Mortgage Investments secured by Deeds of Trust 11,011,660 13,209,186 13,449,741
Accrued interest and other fees 357,177 442,350 427,952
Advances on Mortgage Investments 31,669 39,733 33,154
Other receivables - Unsecured 163,085 242,493 252,422
Less allowance for losses (828,563) (787,042) (424,738)
Real Estate Owned acquired through foreclosure at
estimated net realizable value 307,931 397,396 687,139
Partnership Interest 0 0 346,017
Real Estate Owned in Process 525,510 0 0
--------------- --------------- --------------
$11,957,239 $14,005,660 $15,292,524
--------------- --------------- --------------
</TABLE>
<PAGE>
<TABLE>
Liabilities and Partners Capital
December 31,
------------------------------------------------------
<S> <C> <C> <C>
1999 1998 1997
--------------- -------------- ---------------
Liabilities:
Note payable - Bank $800,000 $1,912,663 $2,341,816
Accounts payable and accrued expenses 32,234 12,547 1,845
Deferred Interest 115,709 131,743 69,316
--------------- --------------- --------------
947,943 2,056,953 2,412,977
Partners' Capital:
General Partners 11,978 11,978 11,978
Limited Partners subject to redemption 10,997,318 11,936,729 12,867,569
--------------- --------------- --------------
Total Partners Capital 11,009,296 11,948,707 12,879,547
--------------- --------------- --------------
$11,957,239 $14,005,660 $2,341,816
--------------- --------------- --------------
Statement of Income
Gross revenue $1,663,245 $1,657,728 $1,623,863
Expenses 753,664 811,157 796,984
--------------- --------------- --------------
Net Income 909,581 846,571 $826,879
--------------- --------------- --------------
Net income to General Partners (1%) 9,096 8,466 $8,269
=============== =============== ==============
Net Income to Limited Partners (99%) 900,485 838,105 $818,610
=============== =============== ==============
Net Income per $1,000 invested by Limited Partners for entire period:
- where income is reinvested and compounded $79 $67 $61
=============== =============== ==============
- where partner receives income in monthly
distributions $76 $65 $59
=============== =============== ==============
</TABLE>
Net income in 1997 averaged at an annualized yield of 6.10%. In 1998, the
annualized yield was 6.69% and in 1999 the annualized yield was 7.86%. Average
annualized yield since inception through December 31, 1999, was 7.75%.
<PAGE>
ITEM 7 - 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, 1999, Partners' Capital totaled $11,009,296.
At December 31, 1999, the Partnership Mortgage Investments outstanding totalled
$11,011,660. This represents a decline of $2,197,526 from the December 31, 1998
Mortgage Investments balance. This reduction in Mortgage Investments outstanding
as of December 31, 1999 was chiefly due to cash proceeds from Mortgage
Investment repayments being used to fund withdrawals to the Limited Partners of
$1,927,783, and a decrease in Note Payable-Bank of $1,112,663, offset by
reinvestment of earnings of $409,644, funds generated from a reduction of real
estate owned ($89,465), reduction in accrued interest, other receivables and
investment of cash. To a certain extent, the reduction was also due to
significant loan pay-offs towards the latter part of 1999. The ability of the
Partnership to invest in new Mortgage Investments during 1999 was partially
offset by withdrawals of income and capital by the Partners in the amount of
$1,927,783 including early withdrawal penalties. Mortgage investments decreased
from $13,449,741 from 1997 to $13,209,186 in 1998, a decrease of $240,555
chiefly due to the ability of the General Partners to reduce amounts of real
estate owned by $289,743, convert it's partnership interest to cash of $346,017,
reinvestment of earnings of $390,213. offset by payments to withdrawing Limited
Partners $1,856,833, a reduction of outstanding Note Payable - Bank of
$1,112,663 and investment of cash. The Partnership began funding Mortgage
Investments on December 27, 1989, and as of December 31, 1999, had credited the
Partners accounts with income at an average annualized (compounded) yield of
7.75%.
Since the Fall of 1999, mortgage interest rates have been rising due primarily
to economic forces and by the Federal Reserve raising its core interest rates.
New Mortgage Investments will be originated at higher interest rates which could
increase the average return across the entire Mortgage Investment portfolio held
by the Partnership. In the future, interest rates likely will change from their
current levels. The General Partners cannot at this time predict at what levels
interest rates will be in the future. Although the rates charged by the
Partnership are influenced by the level of interest rates in the market, the
General Partners do not anticipate that rates charged by the Partnership to its
borrowers will change significantly from the beginning of 2000 over the next 12
months. As of December 31, 1999 the Partnership Real Estate Owned account and
the investment in Partnership account have been reduced to a combined balance of
$307,931. These accounts had combined balances of $1,033,156 and $397,396 for
the years ended December 31, 1997 and 1998, respectively. The conversion of
these non-earning assets to income producing assets will generate increased
income. The overall effect of these developments will allow the Partnership to
increase the annualized yields paid by the Partnership in future quarters. The
General Partners anticipate that the annualized yield for the coming new year,
2000, will be higher than the previous year.
The Partnership has a line of credit with a commercial bank secured by its
Mortgage Investments to a limit of $3,500,000, at a variable interest rate set
at one half percent above the prime rate. As of December 31, 1999, December 31,
1998 and December 31, 1997, the balances were $800,000, $1,912,663 and
$2,341,816, respectively. This line of credit expires on May 01, 2003. 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. 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, 1999, the Partnership is current
with its interest payments on the line of credit. For the years ended December
31, 1997, 1998 and 1999, interest paid was $198,316, $170,867 and $182,350,
respectively, reflecting an overall average utilization of the credit line of
approximately $2,200,000, with an average variance of $325,000.
The Partnership's 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 twenty-two years. Mortgage
Servicing Fees increased in 1998 to $128,493, and in 1999 to $127,440, from
$83,559 in 1997 chiefly due to an increase during the 1998 year of the monthly
loan service fee to 1/12% (1% per year). Asset Management Fees increased in 1999
from $0 in 1997 to $16,141 in 1998, and to $44,524 in 1999. In 1997, the General
Partners waived or partially waived this fee to the Partnership. All other
expenses flucuated in a very close range except for Interest on Note Payable -
bank and Provision for Doubtful Accounts and losses on Real Estate acquired
through foreclosure each discussed elsewhere in this Management Discussion and
Analysis of Financial Condition and Results of Operations. 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. As of December 31, 1999, there was only one
property in foreclosure. 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, earnings and capital payout requirements. Excess cash flow will be
invested in new Mortgage Investment opportunities when available, used to reduce
the Partnership credit line or other Partnership business.
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. Management provided $434,495,
$423,054 and $329,057 as provision for doubtful accounts for the years ended
December 31, 1997, 1998 and 1999, respectively. The provision for doubtful
accounts was decreased $11,441 to $423,054 in 1998 and by $93,997 to $329,057 in
1999. These decreases reflect reduced expected REO anticipated losses and
improved collections of secured and unsecured receivables.
The February 18, 2000 issue of the "Alert" publication, published by the
California Chamber of Commerce, said the following about California's thriving
economy:
"Job gains grew in the fourth quarter of 1999, as the California economy
accelerated. For the year as a whole, employment grew by 2.9 percent,
considerably stronger than in the nation. This gain likely will be revised
upward to 3.3 percent, or so, in the benchmark revisions to be released in late
February.
State unemployment, at 4.9 percent in the last four months, is lower than in
more than 30 years. Tax revenues are flooding into Sacramento, in part because
of the strong economy, but also because of exercised stock options, strong
bonuses and huge realized stock market gains.
<PAGE>
The state economy's strength has been widespread across major industries, but
concern about residential real estate is growing.
Housing permits were issued at an annual rate of 139,000 units through November
1999, well below almost everyone's expectations and the 220,000 units averaged
annually in the 1980s. Clearly, not enough housing is being built in the state.
High land prices, restrictive local land use policies, the re-emergence of the
slow growth/no growth movement, and federal environmental regulations are
constraining home building. As a result, affordability is declining at an
alarming rate.
The affordability of existing homes is low in San Diego and Orange counties and
extremely low almost everywhere in the San Francisco Bay Area. In what seems
like a paradox, an oversupply of expensive new homes is developing. This also
happened under similar circumstances in the late 1980s.
In areas of particularly high land prices and long permitting and other building
delays, building entry and mid-level housing becomes more difficult to "pencil
out". As developers turn increasingly to expensive housing, the supply of
expensive housing can quickly outstrip demand. Also, the affordability of new
homes can dip considerably below that of existing homes.
In Orange County, for example, a relatively low 32 percent of households could
afford to buy the median-priced existing home sold in November; only 19 percent
could afford to buy the median-priced new home."
To the Partnership, the above evaluation of the California economy means an
increase in property values, job growth, personal income growth, etc., which all
translates into more loan activity, which of course, is healthy for the
Partnership's lending activity.
The Partnership's interest in land located in East Palo Alto, Ca, was acquired
through foreclosure. The investment was previously classified as Investment in
Partnership in the Financial Statements and has been reclassified into Real
Estate Owned. The Partnership's basis of $9,039, $ 0, and $346,017 for the years
ended December 31, 1999, 1998 and 1997, respectively, has been invested with
that of two other Partnerships. The Partnership had been attempting to develop
property into an approximately 63 units residential subdivision, (the
"Development"). The proposed Development had gained significant public awareness
as a result of certain environmental, fish and wildlife, density, and other
concerns. Incorporated into the proposed Development were various mitigation
measures which included remediation of hazardous material existing on the
property, and protection of potentially affected species due to the proximity of
the property to the San Francisco Baylands. These issues and others sparked
significant public controversy. Opposition against and support for the proposed
Development existed. Among those in opposition to the project was Rhone Poulanc,
Inc. which is responsible for a nearby hazardous waste site. Rhone Poulanc, Inc.
has been identified as the Responsible Party for the Arsenic Contamination which
affected a portion of the property. On May 8, 1998, the Partnership, in order to
resolve disputes which arose during the course of the attempts to obtain
entitlements for this Development, entered into agreements with Rhone-Poulanc,
Inc which among other things, restricted the property to non residential uses,
provided for appropriate indemnification and included other considerations
including a cash payment to the Partnership. The Partnership has retained
ownership of the property, which is subject to various deed restrictions,
options and or first rights of refusal. The General Partners are pleased with
this outcome to the residential development attempt. The General Partners may
now explore other available options with respect to alternative uses for the
property. In order to pursue these options, rezoning of the property's existing
residential zoning classification will be required. The Partnership is
continuing to explore remediation options available to mitigate the pesticide
contamination, which affects the property.
<PAGE>
This pesticide contamination appears to be the result of agricultural operations
by prior owners, and is unrelated to the Arsenic Contamination for which
Rhone-Poulanc, Inc. remains responsible. The General Partners do not believe at
this time that remediation of the pesticide contaminants will have a material
adverse effect on the financial condition of the Partnership.
At the time of subscription to the Partnership, Limited Partners made an
irrevocable decision to either take distributions of earnings monthly, quarterly
or annually or to compound earnings in their capital account. For the years
ended December 31, 1997, 1998 and 1999, the Partnership made distributions of
earnings to Limited Partners after allocation of syndication costs of, $399,379,
$456,358 and $490,841, respectively. Distribution of Earnings to Limited
Partners after allocation of syndication costs for the years ended December 31,
1997, 1998 and 1999 to Limited Partners' capital accounts and not withdrawn was
$419,231, $381,747 and $409,644, respectively. As of December 31, 1997, December
31 1998 and December 31, 1999, Limited Partners electing to withdraw earnings
represented 53%, 54% and 53% of the Limited Partners capital.
The Partnership also allows the Limited Partners to withdraw their capital
account subject to certain limitations (see liquidation provisions of
Partnership Agreement). For the years ended December 31, 1997, 1998 and 1999,
$475,348, $381,458 and $231,025, were liquidated subject to the 10% penalty for
early withdrawal. These withdrawals are within the normally anticipated range
that the General Partners would expect in their experience in this and other
partnerships. The General Partners expect that a small percentage of Limited
Partners will elect to liquidate their capital accounts over one year with a 10%
early withdrawal penalty. In originally conceiving the Partnership, the General
Partners wanted to provide Limited Partners needing their capital returned a
degree of liquidity. Generally, Limited Partners electing to withdraw over one
year need to liquidate investment to raise cash. The trend the Partnership is
experiencing in withdrawals by Limited Partners electing a one year liquidation
program represents a small percentage of Limited Partner capital as of December
31, 1997, December 31, 1998 and December 31, 1999, respectively and is expected
by the General Partners to commonly occur at these levels.
Additionally, for the years ended December 31, 1997, December 31, 1998 and
December 31, 1999, $737,568, $1,019,017 and $1,205,917 respectively, were
liquidated by Limited Partners who have elected a liquidation program over a
period of five years or longer. This ability to withdraw after five years by
Limited Partners has the effect of providing Limited Partner liquidity which the
General Partners then expect a portion of the Limited Partners to avail
themselves of. This has the anticipated effect of the Partnership growing,
primarily through reinvestment of earnings in years one through five. The
General Partners expect to see increasing numbers of Limited Partner withdrawals
in years five through eleven, at which time the bulk of those Limited Partners
who have sought withdrawal have been liquidated. After year eleven, liquidation
generally subsides and the Partnership capital again tends to increase.
Actual liquidation of both capital and earnings from year five (1994)
through year ten (1999) is shown hereunder:
Years ended December 31,
1994 1995 1996
--------------- -------------- --------------
Earnings $263,206 $270,760 $336,341
Capital *$340,011 *$184,157 *$722,536
--------------- -------------- --------------
Total $603,217 $454,917 $1,058,877
=============== ============== ==============
1997 1998 1999
--------------- -------------- --------------
Earnings $399,379 $456,358 $490,841
Capital *$1,212,916 *$1,400,475 *$1,436,942
--------------- -------------- --------------
Total $1,612,295 $1,856,833 $1,927,783
=============== ============== ==============
* These amounts represent gross of early withdrawal penalties.
<PAGE>
The Year 2000 was considered by most to be a challenge for the entire
world with respect to the conversion of existing computerized operations. The
Partnership relies on Redwood Mortgage Corp., third parties and various software
vendors for its hardware and software needs. Since year 2000 has come, we have
not experienced any computer hardware breakdowns. We assume that our testing and
upgrading of computer hardware prior to year 2000 identified all hardware areas
of concern. Computer software programs are all operational with only minor
problems being experienced with some programs. These problems are being
addressed by the appropriate software vendors or software programmers. All
quarterly and annual computerized functions have not yet been run, however
testing of the operations has taken place. We do not expect any significant
problems.
The costs of updating our computer systems were substantially borne by
the non affiliated software vendors and the in house system conversion costs to
the partnership were marginal.
Year 2000 issues do not appear to have affected, in any significant
manner, any industries or businesses in the marketplace in which the Partnership
places its loans. We believe that year 2000 issues are a non-event and will have
little if any future effect on the Partnership, its affiliates or the people and
businesses with which it associates.
The foregoing analysis of year 2000 issues includes forward-looking
statements and predictions about possible or future events, results of
operations, and financial condition. As such, this analysis may prove to be
inaccurate because of assumptions made by the general partners or the actual
development of future events. No assurance can be given that any of these
statements or predictions will ultimately prove to be correct or substantially
correct.
<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:
o Independent Auditor's Report,
o Balance Sheets - December 31, 1999, and December 31, 1998, o Statements of
Income for the three years ended December 31, 1999, o Statements of Changes in
Partners' Capital for the three years ended December 31, 1999, o Statements of
Cash Flows for the three years ended December 31, 1999, o Notes to Financial
Statements - December 31, 1999.
B-Financial Statement Schedules
The following financial statement schedules of Redwood Mortgage Inventors VII
are included in Item 8.
o Schedule II Amounts receivable from related parties and
underwriters, promoters, and employees other than
related parties
o Schedule VIII Valuation of Qualifying Accounts
o Schedule IX Short Term Borrowings
o 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, 1999
(With Auditor's Report Thereon)
<PAGE>
Caporicci, Cropper & Larson, LLP
CERTIFIED PUBLIC ACCOUNTANTS
1575 Treat Blvd. Ste. 208
Walnut Creek, CA 94598
(925) 932-3860
INDEPENDENT AUDITOR'S 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, 1999 and 1998 and the
statements of income, changes in partners' capital and cash flows for the three
years ended December 31, 1999. These financial statements are the responsibility
of the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of REDWOOD MORTGAGE INVESTORS VII
as of December 31, 1999 and 1998, and the results of its operations and cash
flows for the three years ended December 31, 1999 in conformity with generally
accepted accounting principles. Further, it is our opinion that the schedules
referred to above present fairly the information set forth therein in compliance
with the applicable accounting regulations of the Securities and Exchange
Commission.
/s/ Bruce Cropper
Caporicci, Cropper & Larson, LLP
Walnut Creek, California
March 15, 2000
<PAGE>
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
ASSETS
1999 1998
---------------- --------------
$388,770 $461,544
---------------- --------------
Accounts receivable:
Mortgage Investments, secured by deeds of trust 11,011,660 13,209,186
Accrued Interest on Mortgage Investments 357,177 442,350
Advances on Mortgage Investments 31,669 39,733
Accounts receivables, unsecured 163,085 242,493
---------------- --------------
11,563,591 13,933,762
Less allowance for doubtful accounts 828,563 787,042
---------------- --------------
10,735,028 13,146,720
---------------- --------------
Real estate in process of acquisition, to be sold 525,510 0
Real estate owned, acquired through foreclosure,
held for sale 307,931 397,396
---------------- --------------
$11,957,239 $15,292,524
================ ==============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Notes payable - bank line of credit $800,000 $1,912,663
Accounts payable and accrued expenses 32,234 12,547
Deferred Interest 115,709 131,743
--------------- --------------
947,943 2,056,953
--------------- --------------
Partners' Capital
Limited partners' capital, subject to redemption (Note 4E):
Net of Formation Loan receivable of $165,499 and $253,387 for
1999 and 1998, respectively
10,997,318 11,936,729
General partners' capital, 11,978 11,978
--------------- --------------
Total Partners' Capital 11,009,296 11,948,707
--------------- --------------
Total Liabilities and Partners' Capital $11,957,239 $14,005,660
=============== ==============
See accompanying notes to financial statements.
<PAGE>
<TABLE>
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
STATEMENTS OF INCOME
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
YEARS ENDED DECEMBER 31,
----------------------------------------------------
<S> <C> <C> <C>
1999 1998 1997
------------- ------------- -------------
Revenues:
Interest on Mortgage Investments $1,634,416 $1,625,573 $1,593,335
Interest on bank deposits 6,813 7,465 7,882
Late charges 14,367 13,632 8,598
Other 7,649 11,058 14,048
------------- ------------- -------------
------------- ------------- -------------
1,663,245 1,657,728 1,623,863
------------- ------------- -------------
Expenses:
Mortgage servicing fees 127,440 128,493 83,559
Interest on note payable - bank 182,350 170,867 198,316
Clerical costs through Redwood Mortgage 30,367 34,173 37,760
Asset management fee 44,524 16,141 0
Provision for doubtful accounts and losses
on real estate acquired through foreclosure 329,057 423,054 434,495
Professional services 21,521 19,983 25,107
Printing, supplies and postage 12,554 12,326 11,997
Other 5,851 6,120 5,750
------------- ------------- -------------
753,664 811,157 796,984
------------- ------------- -------------
Net Income $909,581 $846,571 $826,879
============= ============= =============
Net income: To General Partners(1%) $9,096 $8,466 $8,269
To Limited Partners (99%) 900,485 838,105 818,610
------------- ------------- -------------
$909,581 $846,571 $826,879
============= ============= =============
Net income per $1,000 invested by Limited Partners for entire period:
-where income is reinvested and compounded $79 $67 $61
============= ============= =============
-where partner receives income in monthly distributions $76 $65 $59
============= ============= =============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
PARTNERS' CAPITAL
-----------------------------------------------------
LIMITED PARTNERS' CAPITAL
-----------------------------------------------------
Capital
Account- Formation
Limited Loan
Partners Receivable Total
--------------- --------------- --------------
<S> <C> <C> <C>
Balances at December 31, 1996 $14,002,529 $(429,163) $13,573,366
Formation Loan collections 0 60,223 60,223
Net income 818,610 0 818,610
Early withdrawal penalties (40,258) 27,665 (12,593)
Partners' withdrawals (1,572,037) 0 (1,572,037)
--------------- --------------- --------------
Balances at December 31, 1997 $13,208,844 $(341,275 $12,867,569
Formation Loan collections 0 66,908 66,908
Net Income 838,105 0 838,105
Early withdrawal penalties (30,529) 20,980 (9,549)
Partners' withdrawals (1,826,304) 0 (1,826,304)
--------------- --------------- --------------
Balances at December 31, 1998 $12,190,116 $(253,387) $11,936,729
Formation Loan collections 0 75,138 75,138
Net Income 900,485 0 900,485
Early withdrawal penalties (18,553) 12.750 (5,803)
Partners' withdrawals (1,909,231) 0 (1,909,231)
--------------- --------------- --------------
Balances at December 31, 1999 $11,162,817 $(165,499) $10,997,318
=============== =============== ==============
See accompanying notes to financial statements
</TABLE>
<PAGE>
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
PARTNERS' CAPITAL
-------------------------------------------------
GENERAL PARTNERS' CAPITAL
-------------------------------------------------
Capital Account
General Partners Total Partners'
Capital
------------------ -------------------
Balances at December 31, 1996 $11,978 $13,585,344
Formation Loan collections 0 60,223
Net income 8,269 826,879
Early withdrawal penalties 0 (12,593)
Partners' withdrawals (8,269) (1,580,306)
------------------ -------------------
Balances at December 31, 1997 $11,978 $12,879,547
Formation Loan collections 0 66,908
Net income 8,466 846,571
Early withdrawal penalties 0 (9,549)
Partners' withdrawals (8,466) (1,834,770)
------------------ -------------------
Balances at December 31, 1998 $11,978 $11,948,707
Formation Loan collections 0 75,138
Net income 9,096 909,581
Early withdrawal penalties 0 (5,803)
Partners' withdrawals (9,096) (1,918,327)
------------------ -------------------
Balances at December 31, 1999 $11,978 $11,009,296
================== ===================
See accompanying notes to financial statements
<PAGE>
<TABLE>
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
YEARS ENDED DECEMBER 31,
---------------------------------------------------
<S> <C> <C> <C>
1999 1998 1997
-------------- --------------- --------------
Cash flows from operating activities:
Net income $909,581 $846,571 $826,879
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for doubtful accounts 332,013 362,304 374,499
Provision for losses on real estate held for sale (2,956) 60,750 59,996
Early withdrawal penalty credited to income (5,803) (9,549) (12,593)
(Increase) decrease in accrued interest & advances (62,310) (20,977) (155,408)
Increase (decrease) in accounts payable and accrued expenses 19,687 10,702 373
Increase (decrease) in deferred interest on Mortgage Investments (16,034) 62,427 (85,282)
-------------- --------------- --------------
Net cash provided by operating activities 1,174,178 1,312,228 1,008,464
-------------- --------------- --------------
Cash flows from investing activities:
Principal collected on mortgage investments 9,314,140 6,529,324 6,278,832
Mortgage Investments made (7,716,617) (6,398,769) (7,841,128)
Additions to Real Estate held for sale (14,111) 323,720 (202,645)
Dispositions of Real Estate held for sale 106,532 (55,532) 979,115
Proceeds from Partnership 0 522,212 0
Investment in Partnership 0 (105,390) (103,623)
Proceeds from unsecured Accounts Receivable 18,956 9,929 0
-------------- --------------- --------------
Net cash provided by (used in) investing activities 1,708,900 825,494 (889,449)
-------------- --------------- --------------
Cash flows from financing activities:
Net increase (decrease) in note payable-bank (1,112,663) (429,153) 1,166,816
Formation loan collections 75,138 66,908 60,223
Partners withdrawals (1,918,327) (1,834,770) (1,580,306)
-------------- --------------- --------------
Net cash provided by (used in) financing activities (2,955,852) (2,197,015) (353,267)
-------------- --------------- --------------
Net increase (decrease) in cash (72,774) (59,293) (234,252)
Cash - beginning of period 461,544 520,837 755,089
-------------- --------------- --------------
Cash - end of period $388,770 $461,544 $520,837
============== =============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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 Mortgage Corp., an
affiliate of the General Partners. At September 30, 1992, the offering had been
closed with contributed capital totalling $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 month's 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 Corp., 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
Corp. 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 Corp. had
borrowed $914,369 from the Partnership to cover sales commissions relating to
$11,998,359 limited partner contributions (7.62%). Through December 31, 1999,
$748,870 including $136,873 in early withdrawal penalties, had been repaid
leaving a balance of $165,499. The Formation Loan, which is due from an
affiliate of the General Partners', has been deducted from Limited Partners'
capital in the balance sheet. As amounts are collected from Redwood Mortgage
Corp., the deduction from capital will be reduced.
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.
<PAGE>
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Accrual Basis
Revenues and expenses are accounted for on the accrual basis of accounting
wherein income is recognized as earned and expenses are recognized as incurred.
Once a loan is categorized as impaired, interest is no longer accrued thereon.
B. Management Estimates
In preparing the financial statements, management is required to make estimates
based on the information available that affect the reported amounts of assets
and liabilities as of the balance sheet date and revenues and expenses for the
related periods. Such estimates relate principally to the determination of the
allowance for doubtful accounts, including the valuation of impaired mortgage
investments, and the valuation of real estate acquired through foreclosure.
Actual results could differ significantly from these estimates.
C. Mortgage Investments, Secured by Deeds of Trust
The Partnership has both the intent and ability to hold the Mortgage Investments
to maturity, i.e., held for long-term investment. They are therefore valued at
cost for financial statement purposes with interest thereon being accrued by the
simple interest method.
Financial Accounting Standards Board Statements (SFAS) 114 and 118 (effective
January 1, 1995) provide that if the probable ultimate recovery of the carrying
amount of a mortgage investment, with due consideration for the fair value of
collateral, is less than the recorded investment, and related amount due and the
impairment is considered to be other than temporary, the carrying amount of the
investment (cost) shall be reduced to the present value of future cash flows.
The adoption of these statements did not have a material effect on the financial
statements of the Partnership because that was substantially the valuation
method previously used on impaired Mortgage Investments..
At December 31, 1999, 1998 and 1997, reductions in the cost of Mortgage
Investments categorized as impaired by the Partnership totalled $152,231,
$38,634, and $0, respectively. The reduction in stated value was accomplished by
increasing the allowance for doubtful accounts.
As presented in Note 10 to the financial statements as of December 31, 1999, the
average mortgage investment to appraised value of security at the time the loans
were consummated was 62.42%. When a loan is valued for impairment purposes, an
updating is made in the valuation of collateral security. However, such a low
loan to value ratio tends to minimize reductions for impairment.
D. Cash and Cash Equivalents
For purposes of the statements of cash flows, cash and cash equivalents include
interest bearing and non-interest bearing bank deposits.
E. Real Estate Owned, Held for Sale
Real estate owned, held for sale, includes real estate acquired through
foreclosure, and is stated at the lower of the recorded investment in the
property, net of any senior indebtedness, or at the property's estimated fair
value, less estimated costs to sell. At December 31, 1999, one property was in
the process of becoming Real Estate owned. It was valued at fair value of
$525,510 based on a current appraisal. The $525,510 is net of a reduction in
value of $230,040.
<PAGE>
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
The following schedule reflects the costs of real estate acquired through
foreclosure and the recorded reductions to estimated fair values, less estimated
costs to sell as of December 31, 1999 and 1998, not including the aforementioned
real estate in process of acquisition:
December 31,
-----------------------------------------------
1999 1998
-------------- ----------------
Costs of properties $427,151 $765,986
Reduction in value (119,220) (348,590)
REO prior lien 0 (20,000)
-------------- ----------------
Fair value reflected in financial
statements $307,931 $397,396
============== ================
Effective January 1, 1996, the Partnership adopted the provisions of statement
No 121 (SFAS 121) of the Financial Accounting Standards Board, "Accounting for
the Impairment of Long Lived Assets and for Long Lived Assets to be disposed
of". The adoption of SFAS 121 did not have a material impact on the
Partnership's financial position because the methods indicated were essentially
those previously used by the Partnership.
F. Income Taxes
No provision for Federal and State income taxes is made in the financial
statements since income taxes are the obligation of the partners if and when
income taxes apply.
G. Organization and Syndication Costs
The Partnership bears its own organization and syndication costs (other than
certain sales commissions and fees described above) including legal and
accounting expenses, printing costs, selling expenses, a 1% wholesale brokerage
fee and filing fees. Organizational costs of $10,102 were capitalized and were
amortized over a five year period. Syndication costs of $415,692 were charged
against partners' capital and were allocated to individual partners consistent
with the Partnership Agreement.
H. Allowance for Doubtful Accounts
Mortgage Investments and the related accrued interest, fees and advances are
analyzed on a continuous basis for recoverability. Delinquencies are identified
and followed as part of the Mortgage Investment system. A provision is made for
doubtful accounts to an amount considered by management to be adequate, with due
consideration to collateral value, to provide for unrecoverable accounts
receivable, including impaired mortgage investments, other mortgage investments,
accrued interest and advances on mortgage investments, and other accounts
receivable (unsecured). The composition of the allowance for doubtful accounts
as of December 31, 1999 and 1998 was as follows:
<PAGE>
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
December 31,
-----------------------------------------
1999 1998
--------------- ----------------
Impaired mortgage investments $152,231 $38,634
Unspecified mortgage investments 598,803 606,299
Accounts receivable, unsecured 77,529 142,109
--------------- ----------------
$828,563 $787,042
=============== ================
I. Net Income Per $1,000 Invested
Amounts reflected in the statements of income as net income per $1,000 invested
by Limited Partners for the entire period are actual amounts allocated to
Limited Partners who have their investment throughout the period and have
elected to either leave their earnings to compound or have elected to receive
monthly distributions of their net income. Individual income is allocated each
month based on the Limited partners' pro rata share of Partners' Capital.
Because the net income percentage varies from month to month, amounts per $1,000
will vary for those individuals who made or withdrew investments during the
period, or select other options. However, the net income per $1,000 average
invested has approximated those reflected for those whose investments and
options have remained constant.
<PAGE>
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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
Redwood Mortgage Corp. receives 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 amount of the
Mortgage Investments through the period ending 6 months after the termination
date of the offering. Thereafter, commissions are limited to an amount not to
exceed 4% of the total Partnership assets per year. Such commissions are paid by
the borrowers, and are not an expense to the Partnership. Loan brokerage fees
for 1999, 1998, and 1997, totaled $207,739, $166,752 and $83,559, respectively.
B. Mortgage Servicing Fees
Redwood Mortgage Corp. also receives monthly mortgage 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. Mortgage servicing fees of $127,440, $128,493
and $83,559 were incurred for years 1999, 1998 and 1997, respectively.
C. Asset Management Fee
The General Partners receive a monthly fee for managing the Partnership's
Mortgage Investment portfolio and operations of up to 1/32 of 1% of the "net
asset value" (3/8 of 1% annual). Asset management fees were $44,524 and $16,141
during 1999 and 1998, respectively. No management fees were incurred for 1997 .
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%.
<PAGE>
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
F. Operating Expenses
The General Partners or their affiliate (Redwood Mortgage Corp.) 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. Such
reimbursements are reflected as expenses in the Statements of Income.
G. General Partners Contributions
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 Partnership's Mortgage
Investment portfolio.
Interest earned prior to admission was credited to partners in applicant status.
As Mortgage Investments were made, applicant subscriptions were transferred to
Limited Partner status to begin sharing in income from Mortgage Investments
secured by deeds of trust. The interest earned prior to admission was either
paid to the investors or transferred to Partners' Capital along with the
original investment.
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.
<PAGE>
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
E. Liquidity, Capital Withdrawals and Early Withdrawals
There are substantial restrictions on transferability of Units and accordingly
an investment in the Partnership is not liquid. Limited Partners had 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 which in all instances
had occurred as of December 31, 1999. 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 early and will be deducted from the Capital Account. Withdrawal after
the one-year holding period and before the five-year holding period was
permitted only upon the terms set forth above.
After five years from the date of purchase of the Units. Limited Partners have
the right to withdraw from the Partnership, on an installment basis, generally
this is done over a five year period in twenty (20) quarterly installments. Once
a Limited Partner has been in the Partnership for the minimum five year period,
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 may liquidate all or part of a Limited Partner's
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. This withdrawal is subject to a 10% early withdrawal penalty applicable
to any sums withdrawn prior to the time when such sums could have been withdrawn
without penalty.
The Partnership will not establish a reserve from which to fund withdrawals and,
accordingly, the Partnership's capacity to return a Limited Partner's capital
account is restricted to the availability of Partnership cash flow. Furthermore,
no more than 20% of the total Limited Partners' capital accounts outstanding at
the beginning of any year, shall be liquidated during any calendar year.
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. Beginning with fiscal years after
1993, the guarantee no longer applies.
NOTE 5 - LEGAL PROCEEDINGS
Legal actions against borrowers and other involved parties have been initiated
by the Partnership to help assure payments against unsecured accounts receivable
totalling $163,085 at December 31, 1999. The Partnership is a defendant, along
with numerous defendants including a developer, contractor and other lenders, in
a lawsuit involving the Partnership's attempt to recover it's investment in Real
Estate acquired through foreclosure.
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.
<PAGE>
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 6 - NOTE PAYABLE BANK - LINE OF CREDIT
The Partnership has a bank line of credit secured by its Mortgage Investment
portfolio of up to $3,500,000 at .25% over prime. The balances outstanding as of
December 31, 1999 and 1998 were $800,000, and $1,912,663, respectively, and the
interest rate was 8.75% (8.50% prime + .25%). This line of credit expires May 1,
2003.
NOTE 7 - INCOME TAXES
The following reflects a reconciliation from net assets (Partners' Capital)
reflected in the financial statements to the tax basis of those net assets:
December 31,
------------------------------------------
1999 1998
--------------- ----------------
Net assets - Partners' Capital per
financial statements $11,009,296 $11,948,707
Formation loan receivable 165,499 253,387
Allowance for doubtful accounts 828,563 787,042
--------------- ----------------
Net assets tax basis $12,003,358 $12,989,136
=============== ================
In 1999, approximately 69% of taxable income was allocated to tax exempt
organizations i.e., retirement plans. Such plans do not have to file income tax
returns unless their "unrelated business income" exceeds $1,000. Applicable
amounts become taxable when distribution is made to participants.
NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
financial instruments:
(a) Cash and Cash Equivalents - The carrying amount equals fair value. All
amounts, including interest bearing, are subject to immediate withdrawal.
(b) The Carrying Value of Mortgage Investments - (see note 2 (c) is $11,011,660.
The December 31, 1999 fair value of these investments of $10,929,711 is
estimated based upon projected cash flows discounted at the estimated current
interest rates at which similar loans would be made. The applicable amount of
the allowance for doubtful accounts along with accrued interest and advances
related thereto should also be considered in evaluating the fair value versus
the carrying value.
<PAGE>
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership) NOTES TO
FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 9 - ASSET CONCENTRATIONS AND CHARACTERISTICS
The Mortgage Investments are secured by recorded deeds of trust. At December 31,
1999, there were 42 Mortgage Investments outstanding with the following
characteristics:
Number of Mortgage Investments outstanding 42
Total Mortgage Investments outstanding $11,011,660
Average Mortgage Investment outstanding $262,182
Average Mortgage Investment as percent of total 2.38%
Average Mortgage Investment as percent of Partners' Capital 2.38%
Largest Mortgage Investment outstanding $1,500,000
Largest Mortgage Investment as percent of total 13.62%
Largest Mortgage Investment as percent of Partners' Capital 13.62%
Number of counties where security is located(all California) 12
Largest percentage of Mortgage Investments in one county 26.80%
Average Mortgage Investment to appraised value of security at
time loan was consummated 62.53%
Number of Mortgage Investments in foreclosure 1
The following categories of mortgage investments are pertinent at December 31,
1999 and 1998:
December 31,
---------------------------------------
1999 1998
----------------- ----------------
First Trust Deeds $6,077,532 $8,638,976
Second Trust Deeds 4,272,714 4,188,401
Third Trust Deeds 661,414 181,808
Fourth Trust Deeds 0 200,001
------------------ ----------------
Total mortgage investments 11,011,660 13,209,186
Prior liens due other lenders 10,389,233 12,728,867
------------------ ----------------
Total debt $21,400,893 $25,938,053
================== ================
Appraised property value at time of loan $34,223,193 $42,393,561
================== ================
Total investments as a percent of appraisals 62.53% 61.18%
================== ================
Investments by Type of Property
Owner occupied homes $340,864 $746,334
Non-Owner occupied ho 2,347,394 1,691,016
Apartments 182,675 897,292
Commercial 8,140,727 9,874,544
------------------ ----------------
$11,011,660 $13,209,186
================== ================
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
Scheduled maturity dates of mortgage investments as of December 31, 1999 are as
follows:
Year Ending
December 31,
--------------------
2000 $4,734,685
2001 5,013,881
2002 263,535
2003 63,983
2004 146,616
Thereafter 788,960
------------------
$11,011,660
==================
The scheduled maturities for 2000 include approximately $1,481,528 in nine
mortgage investments which are past maturity at December 31, 1999. Interest
payments on most of these loans are current. $912,875 of these Mortgage
Investments were categorized as delinquent over 90 days.
Six mortgage investments with principal outstanding of $964,224 had interest
payments overdue in excess of 90 days. Six Mortgage Investments with principal
outstanding of $1,099,474 were considered impaired at December 31, 1999. That is
interest accruals are no longer recorded thereon.
The cash balance at December 31, 1999 of $388,770 was in three banks with an
interest bearing balances totalling $332,971. The balances exceeded FDIC
insurance limits (up to $100,000 per bank) by $188,618. The Partnership's main
bank is the same financial institution that has provided the Partnership with
the $3,500,000 limit line of credit. At December 31, 1999, draw down against
this facility was $800,000. As and when deposits in the Partnership's bank
accounts increase significantly beyond the insured limit, the funds are either
placed in new Mortgage Investments or used to pay-down on the line of credit
balance.
<PAGE>
<TABLE>
SCHEDULE II AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES. Rule 12-03
<S> <C> <C> <C> <C> <C> <C>
Column A Column B Column C Column D Column E
Name of Debtor Balance Beginning Additions Deductions Balance at end of period
of period 12/31/98 (1) (2) (1) (2)
Amounts Amounts Current Not Current
collected written off 12/31/99
Redwood Mortgage Corp. $253,387 $0.00 $75,138 $12,750 $0.00 $165,499
</TABLE>
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 is being repaid to the Partnership
in ten annual installments of principal only which began January 1, 1992.
* The amount written off represents the proportionate amount of early withdrawal
penalties allocated to the Formation Loan as provided for in the Prospectus.
<PAGE>
<TABLE>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
REDWOOD MORTGAGE INVESTORS VII
<S> <C> <C> <C> <C> <C>
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 -
Year Ended
12/31/99
Deducted from
Asset accounts:
Allowance for
Doubtful accts $787,042 $332,013 $0 $(290,492) $828,563
Cumulative
write-down of
Real Estate held
for sale (REO) $348,590 $(2,956) $0 $(226,414) $119,220
-------------- ------------------- ------------------ ---------------- ----------------
Total $1,135,632 $329,057 $0 $(516,906) $947,783
============== =================== ================== ================ ================
(*) represents net loss or net (gain) on Mortgage Investments and real estate held for sale.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE IX
SHORT TERM BORROWINGS
REDWOOD MORTGAGE INVESTORS VII
RULE 12-10
<S> <C> <C> <C> <C> <C>
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 the Period During the Period the period
Year-Ended 12/31/99 $800,000 8.35% $3,500,000 $2,184,526 8.35%
</TABLE>
<PAGE>
<TABLE>
SCHEDULE XII
MORTGAGE INVESTMENTS ON REAL ESTATE.
RULE 12-29 MORTGAGE LOANS ON REAL ESTATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Col. A Col. B Col. C Col. D Col. E Col. F Col. G Col. H Col. I Col. J
- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Descp. Interest Final Periodic Prior Liens Face Amt. of Carrying Principal amt Type of Geographic
Rate Maturity Payment Mortgage amount of of Mortgage Lien County
Date Terms Investments Mortgage Investments Location
(original Investments subject to
amount) Delinq. Prin.
or Interest
========== ======== ========= ============ ============== =============== =============== =============== ========= =============
Res 13.75 10/01/96 916.67 369,163.00 80,000.00 80,000.00 0.00 2nd Mtg San Mateo
Res 13.75 10/01/96 988.28 0.00 86,250.00 33,950.16 0.00 1st Mtg Santa Clara
Res 12.50 02/01/07 369.76 0.00 30,000.00 20,890.66 0.00 1st Mtg Santa Cruz
Comm 10.00 08/06/02 400.63 17,382.00 46,803.50 42,788.08 0.00 2nd Mtg Alameda
Res 12.00 01/10/04 150.00 208,000.00 15,000.00 2,270.65 0.00 2nd Mtg San Mateo
Apts 6.50 05/01/06 540.83 89,904.00 75,000.00 96,716.11 13,520.15 2nd Mtg Sacramento
Res 12.75 07/01/08 370.90 236,164.00 29,700.00 23,175.92 0.00 2nd Mtg San Mateo
Res 8.00 05/01/09 753.50 0.00 81,825.00 60,891.46 0.00 lst Mtg Alameda
Comm 10.00 12/01/98 647.21 0.00 73,750.00 72,766.69 72,766.69 lst Mtg Stanislaus
Comm 10.00 12/01/98 3,619.98 0.00 412,500.00 406,541.72 406,541.72 lst Mtg Alameda
Comm 7.00 12/01/03 575.74 281,250.00 49,586.38 40,560.78 8,636.10 2nd Mtg Alameda
Comm 12.00 02/01/99 3,420.76 0.00 335,638.30 335,638.30 335,638.30 1st Mtg Santa Clara
Land 12.00 07/01/96 1,352.50 679,258.00 135,250.00 135,250.00 0.00 3rd Mtg Sonoma
Apts 7.00 02/10/05 234.06 80,250.00 40,125.00 40,125.00 0.00 2nd Mtg San
Apts 11.50 04/01/05 453.88 0.00 550,000.00 45,833.34 0.00 1st Mtg San
Comm 9.00 05/10/02 670.52 0.00 83,333.33 80,248.34 0.00 lst Mtg Shasta
Land 14.00 02/01/97 3,822.50 0.00 382,250.00 235,381.46 0.00 lst Mtg Santa Clara
Res 8.00 09/18/03 87.56 0.00 11,932.83 11,560.14 0.00 1st Mtg Sonoma
Res 8.00 09/30/03 89.71 0.00 12,225.92 11,861.89 0.00 lst Mtg Sonoma
Comm 12.00 02/01/99 124.00 312,000.00 12,000.00 12,000.00 12,000.00 2nd Mtg Santa Clara
Res 13.00 12/01/99 140.83 0.00 65,000.00 13,000.00 0.00 lst Mtg Ventura
Res 13.00 12/01/99 140.83 0.00 65,000.00 13,000.00 0.00 lst Mtg Ventura
Res 14.00 01/01/98 1,983.34 0.00 340,000.00 170,000.00 0.00 lst Mtg Alameda
Land 12.00 05/01/99 2,354.00 0.00 235,400.00 235,400.00 0.00 lst Mtg San Mateo
Comm 7.00 07/01/02 1,131.11 0.00 146,666.66 140,498.54 0.00 lst Mtg Contra Costa
Land 12.00 05/01/99 460.00 235,400.00 46,000.00 46,000.00 0.00 2nd Mtg San Mateo
Res 12.00 05/01/99 5,773.22 0.00 1,225,000.00 1,053,447.98 0.00 lst Mtg San
Land 11.50 09/01/99 3,833.33 0.00 400,000.00 400,000.00 0.00 lst Mtg Stanislaus
Land 12.00 03/01/00 4,788.00 0.00 478,800.00 478,800.00 0.00 lst Mtg San Mateo
Land 11.50 02/01/00 4,791.67 0.00 500,000.00 267,689.91 0.00 lst Mtg Stanislaus
Res 12.00 04/01/14 306.04 22,191.00 25,500.00 25,077.08 0.00 2nd Mtg Santa Cruz
Comm 10.50 04/01/99 14,000.00 2,929,579.00 1,600,000.00 1,500,000.00 0.00 2nd Mtg San Mateo
Land 11.00 01/01/00 4,039.95 1,365,400.00 445,000.00 440,797.86 0.00 3rd Mtg San Mateo
Res 12.00 05/01/00 2,196.55 1,225,000.00 219,655.17 219,655.17 0.00 2nd Mtg San
Land 11.00 01/01/01 9,166.67 201,686.00 1,000,000.00 1,000,000.00 0.00 2nd Mtg Stanislaus
Land 11.00 07/01/01 9,166.67 137,737.00 1,000,000.00 1,000,000.00 0.00 2nd Mtg Stanislaus
Res 9.50 08/01/04 320.20 304,000.00 15,246.42 14,438.90 0.00 2nd Mtg San Mateo
Res 12.00 05/01/01 2,782.54 0.00 800,000.00 328,881.51 0.00 lst Mtg Placer
Land 11.00 11/01/00 782.52 1,141,690.00 85,365.85 85,365.85 0.00 3rd Mtg Stanislaus
Res 11.00 11/01/04 1,238.02 553,179.00 130,000.00 129,906.87 0.00 2nd Mtg San Mateo
Comm 10.25 12/01/01 10,121.87 0.00 1,185,000.00 1,185,000.00 0.00 lst Mtg Contra Costa
Res 11.00 01/01/05 4,535.44 0.00 476,250.00 476,250.00 0.00 lst Mtg Santa Cruz
------------ -------------- --------------- --------------- ---------------
------------ -------------- --------------- --------------- ---------------
$103,641.79 $10,389,233.00 $13,027,054.36 $11,011,660.37 $849,102.96
</TABLE>
<PAGE>
Notes:
Mortgage Investments classified as `impaired Mortgage Investments' had
principal balances totalling $1,099,474 at December 31, 1999. Impaired
Mortgage Investments are defined as Mortgage Investments where the
costs of related balances exceeds the anticipated fair value less costs
to collect. Accrued interest is no longer recorded thereon.
Amounts reflected in column G (carrying amount of Mortgage Investments)
represents both costs and the tax basis of the Mortgage Investments.
<PAGE>
Schedule XII
Reconciliation of carrying amount (cost) of Mortgage Investments at close
of periods
Year ended December 31,
----------------------------------------------------
1999 1998 1997
---------------- -------------- -------------
Balance at beginning of year $13,209,186 $13,449,741 $12,036,293
---------------- -------------- -------------
Additions during period:
New Mortgage Investments 7,716,617 6,398,769 7,841,128
Other 0 0 0
---------------- -------------- -------------
Total Additions 7,716,617 6,398,769 7,841,128
---------------- -------------- -------------
Deduction during period:
Collections of principal 9,314,140 6,529,324 6,278,832
Foreclosures 400,002 110,000 148,848
Cost of Mortgage Investments sold 0 0 0
Amortization of Premium 0 0 0
Other 200,001 0 0
---------------- -------------- -----------
Total Deductions 9,914,143 6,639,324 6,427,680
---------------- -------------- -----------
Balance at close of year $11,011,660 $13,209,186 $13,449,741
================ ============== ===========
<PAGE>
Item 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
A. Bruce Cropper, a partner in the accounting firm of Parodi & Cropper has been
providing audit and accounting services to the Partnership since its inception
in 1993. Mr. Cropper also has been performing audit and accounting services to
the General Partners of the Partnership and their affiliates for over 15 years.
In 1999, Mr. Cropper's partner sold his portion of their practice. Mr. Cropper
decided to merge his portion of the practice into an existing CPA firm known as
"Caporicci & Larson" with offices in Irvine and Walnut Creek, California. Upon
the merging, the firm of Parodi & Cropper was dissolved, and Caporicci & Larson
became Caporicci, Cropper and Larson, LLP. As a result, the Partnership has
retained the firm of Caporicci, Cropper and Larson, LLP, to provide its audit
and financial services. Thus, although there has been a change in accounting
firms, there has not been a change in accountants and there has not been any
disagreement on any matter of accounting principles, practices or financial
status 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, 1999. All such
compensation is in compliance with the guidelines and limitations set forth in
the Prospectus.
Entity Receiving
<TABLE>
<S> <C> <C>
Compensation Description of Compensation and Services Rendered Amount
- -------------------------------------------------------------------------------------------------------
I. Redwood Mortgage Mortgage Servicing Fee for servicing Mortgage Investments $127,440
Corp.
General Partners &/or
Affiliates Asset Management Fee for managing assets.................. $44,524
General Partners 1% interest in profits.................................... $9,096
General Partners &/or Portion of early withdrawal penalties applied to reduce
Affiliates Formation Loan............................................ $12,750
II. FEES PAID BY BORROWERS ON MORTGAGE INVESTMENTS PLACED BY COMPANIES
RELATED TO THE GENERAL PARTNERS WITH THE PARTNERSHIP (EXPENSES OF BORROWERS NOT
OF THE PARTNERSHIP)
Redwood Mortgage Corp. Mortgage Brokerage Commissions for services in connection with
the review, selection, evaluation, negotiation, and extension
of the Mortgage Investments paid by the borrowers and not by
the Partnership ............................................ $207,739
Redwood Mortgage Corp. 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.... $5,397
Gymno Corporation Inc. Reconveyance Fee............................................ $7,075
</TABLE>
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. $30,367
<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 Caporicci, Cropper & Larson, LLP
24.3 Consent of Landels, Ripley & Diamond
All of these exhibits were previously filed as the exhibits to Registrant's
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 23rd day of March,
2000.
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 23rd day of March, 2000.
Signature Title Date
/S/ D. Russell Burwell
- -----------------------------------
D. Russell Burwell General Partner March 23, 2000
/S/ Michael R. Burwell
- -----------------------------------
Michael R. Burwell General Partner March 23, 2000
/S/ D. Russell Burwell
- -----------------------------------
D. Russell Burwell President of Gymno Corporation, March 23, 2000
(Principal Executive Officer);
Director of Gymno Corporation
/S/ Michael R. Burwell
- -----------------------------------
Michael R. Burwell Secretary/Treasurer of Gymno March 23, 2000
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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 388,770
<SECURITIES> 0
<RECEIVABLES> 11,563,591
<ALLOWANCES> 828,563
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,957,239
<CURRENT-LIABILITIES> 0
<BONDS> 0
947,943
0
<COMMON> 0
<OTHER-SE> 11,009,296
<TOTAL-LIABILITY-AND-EQUITY> 11,957,239
<SALES> 0
<TOTAL-REVENUES> 1,663,245
<CGS> 0
<TOTAL-COSTS> 242,257
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 329,057
<INTEREST-EXPENSE> 182,350
<INCOME-PRETAX> 909,581
<INCOME-TAX> 0
<INCOME-CONTINUING> 909,581
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 909,581
<EPS-BASIC> .00
<EPS-DILUTED> .00
</TABLE>
