REDWOOD MORTGAGE INVESTORS VIII
(a California Limited Partnership)
Index to Form 10-K
December 31, 1997
Part I
Page No.
Item 1 - Business 3
Item 2 - Properties 3-5
Item 3 - Legal Proceedings 6
Item 4 - Submission of Matters to a vote of Security Holders (partners) 6
Part II
Item 5 - Market for the Registrants Partners Capital and related matters 6
Item 6 - Selected Financial Data 6-8
Item 7 - Managements Discussion and Analysis of Financial Condition and
Results of Operations 9-10
Item 8 - Financial Statements and Supplementary Data 11-35
Item 9 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 36
Part III
Item 10 - Directors and Executive Officers of the Registrant 36
Item 11 - Executive Compensation 37
Item 12 - Security Ownership of Certain Beneficial Owners and management 38
Item 13 - Certain Relationships and Related Transactions 38
Part IV
Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K.38-39
Signatures 40
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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, 1997 Commission file number 333-13113
- -------------------------------------------------------------------------------
REDWOOD MORTGAGE INVESTORS VIII
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 94-3158788
- -------------------------- -----------------------------------------------------
(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 (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 Units
Indicate by check mark whether the registrant (1) has filed all reports to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES XXX NO
- ------- -------
As of December 31, 1997, the limited partnership units purchased by non
affiliates was 204,896.7655 units computed at $100.00 a unit for $20,489,676.55
Documents incorporated by reference:
Portions of the Prospectus dated May 19, 1993, and a new Prospectus came
into effect on December 4, 1996, (the Prospectus) are incorporated in Parts II,
III, and IV. Exhibits filed as part of Form S-11 Registration Statement
#333-13113 are referenced in part IV.
<PAGE>
Part I
Item 1 - Business
Redwood Mortgage Investors VIII, a California limited partnership (the
Partnership), is organized to engage in business as a mortgage lender, for the
primary purpose of making loans secured primarily by first and second deeds of
trust on California real estate. Loans are arranged and serviced by Redwood Home
Loan Co., (dba Redwood Mortgage) an affiliate of the General Partners. The
Partnerships objectives are to make loans that will: (i) yield a high rate of
return from mortgage lending; and (ii) preserve and protect the Partnerships
capital. Investors should not expect the Partnership to provide tax benefits of
the type commonly associated with limited partnership tax shelter investments.
The Partnership is intended to serve as an investment alternative for investors
seeking current income. However, unlike other investments which are intended to
provide current income, an investment in the Partnership will be less liquid,
not readily transferable, and not provide a guaranteed return over its
investment life.
Initially, a minimum of 2,500 Units ($250,000) and a maximum of 150,000
Units $15,000,000) were sold. This initial offering closed on October 31, 1996.
Subsequently, the Partnership commenced a second offering of up to 300,000
additional Units ($30,000,000) commencing on December 4, 1996. All units are
being offered on a best efforts basis, which means that no one is guaranteeing
that any minimum number of Units will be sold, through broker-dealer member
firms of the National Association of Securities Dealers, Inc. (See TERMS OF THE
OFFERING and PLAN OF DISTRIBUTION).
The Partnership began selling Units in February, 1993, and began investing
in mortgages in April, 1993. At December 31, 1997, the Partnership has
investments in Mortgage Investments with principal balances totalling
$25,304,989 with interest rates thereon ranging from 8.00% to 14.00%. Currently
First Trust Deeds comprise 67.59% of the Mortgage Investment portfolio with
Junior loans (2nd and 3rd Trust Deeds) making up 32.41%. Owner-occupied homes,
combined with non-owner occupied Mortgage Investments, total 30.68% of the
Mortgage Investment. Loans secured by multi-family properties make up 23.64% of
the total Mortgage Investments. Commercial Mortgage Investments, now comprising
45.68% of the portfolio, have decreased 20.82% from last year. 84.04% of the
total Mortgage Investments, are in six counties of the San Francisco Bay Area.
The County of San Joaquin makes up 4.73% of the Mortgage Investments and the
balance of Mortgage Investments are primarily in Northern California. Mortgage
Investment size increased this past year, and is now averaging $460,091 per
Mortgage Investment, up from $147,231 in 1996. This increase is due to the
ability of the Partnership by virtue of its increasing size to invest in larger
Mortgage Investments. The average Mortgage Investment as of December 31, 1997,
represents 2.20% of Limited Partners capital and 1.82% of outstanding Mortgage
Investments. Some of the Mortgage Investments are fractionalized between
affiliated partnerships with objectives similar to those of the Partnership to
further reduce risk. Average equity per loan transaction stood at 44.17%, an
increase of 4.17% from the previous year. This average equity is generally
considered very conservative. Generally, the more equity, the more protection
for the lender. The General Partners believe the Partnerships Mortgage
Investment portfolio is in good condition with only one property in foreclosure
as of the end of December, 1997.
Item 2 - Properties
In 1995, the Partnership chose to allow a senior lender to foreclose out
its deed of trust on one of its Mortgage Investments. The Partnership has
commenced a legal action to collect this debt. As of December 31, 1997, $15,000
of the amount due has been collected. The remaining balance due has been
recorded as an account receivable in the financial statements. Additional
payments are expected in years 1998 and 1999. As of December 31, 1997, the
Partnership owned a vacant lot acquired through the foreclosure of one of its
Mortgage Investments. The vacant lot is valued at $70,138. Additionally, the
Partnership wholly owns a limited liability company (LLC), whose sole asset is a
partially completed single family residence. This partially completed single
family residence was originally foreclosed upon by the Partnership and
subsequently transferred to the LLC at a cost of $181,139. Additional
expenditures over the $181,139 base, have been primarily for completion of the
construction.
<PAGE>
A summary of the Partnerships Mortgage Investment Portfolio as of December
31, 1997, is set forth below.
Mortgage Investments as a Percentage of Total Mortgage Investments
First Trust Deeds $17,103,865.29
Appraised Value of Properties 39,159,062.00
Total Investment as a % of Appraisal 43.68%
Second Trust Deed Mortgage Investments 8,163,623.62
Third Trust Deed Mortgage Investments 37,500.00
First Trust Deeds due other Lenders 23,704,918.00
Second Trust Deeds due other Lenders 519,648.00
Total Debt $49,529,554.91
Appraised Property Value $88,714,541.00
Total Investments as a % of Appraisal 55.83%
Number of Mortgage Investments Outstanding 55
Average Investment $460,090.71
Average Investment as a % of Net Assets 2.20%
Largest Investment Outstanding 2,100,000.00
Largest Investment as a % of Net Assets 10.03%
Loans as a Percentage of Total Mortgage Investments
First Trust Deeds 67.59%
Second Trust Deeds 32.26%
Third Trust Deeds 0.15%
-----------------
Total 100.00%
Mortgage Investments by
Type of Property Amount Percent
Owner Occupied Homes $2,445,423.26 9.66%
Non-Owner Occupied Homes 5,318,721.42 21.02%
Apartments 5,982,649.06 23.64%
Commercial 11,558,195.17 45.68%
------------------ ------------
Total $25,304,988.91 100.00%
<PAGE>
The following is a distribution of Mortgage Investments outstanding as of
December 31, 1997 by Counties.
County Total Percent
Mortgage Investments
Alameda $6,036,017.84 23.85%
San Francisco 5,889,597.32 23.27%
San Mateo 5,256,978.68 20.78%
Marin 1,975,170.49 7.81%
Santa Clara 1,540,730.38 6.09%
Stanisalus 1,450,000.00 5.73%
San Joaquin 1,197,108.71 4.73%
Contra Costa 658,880.01 2.60%
Solano 480,000.00 1.90%
Monterey 395,015.54 1.56%
Fresno 128,880.24 0.51%
Mendocino 125,000.00 0.49%
El Dorado 118,810.72 0.47%
Sacramento 52,798.98 0.21%
------------------------ -----------
Total $25,304,988.91 100.00%
Statement of Condition of Mortgage Investments
Number of Mortgage Investments in Foreclosure 1
<PAGE>
Item 3 - Legal Proceedings
In the normal course of business, the Partnership may become involved in
various types of legal proceedings such as assignment of rents, bankruptcy
proceedings, appointment of receivers, unlawful detainers, judicial foreclosure,
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 of trust. None of these actions would typically be
of any material importance. 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.
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.
300,000 units at $100 each (minimum 20 units) are being offered (150,000
units were previously offered and sold) 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 67
through 75 of the Prospectus, a part of the referenced Registration Statement,
which is incorporated by reference.
Item 6 - Selected Financial Data
Redwood Mortgage Investors VIII began operations in April 1993. Financial
results for years 1984 through the nine months ended September 30, 1997, for
prior partnerships are incorporated by reference to the Prospectus (S-11) dated
December 4, 1996, Table III pages 104 through 138, and in Supplement No.3 dated
November 26, 1997.
<PAGE>
Financial condition and results of operation for the Partnership for three
years to December 31, 1997 were:
<TABLE>
Balance Sheet
Assets
<CAPTION>
December 31,
------------------------------------------------------
1997 1996 1995
-------------- ------------- --------------
<S> <C> <C> <C>
Cash $663,159 $664.434 $380,318
Accounts Receivable:
Mortgage investments secured by Deeds of Trust 25,304,989 15,642,990 12,047,252
Accrued interest and other fees 341,976 196,530 113,301
Advances on Mortgage Investments 205,804 8,679 8,431
Other receivables - Unsecured 62,844 75,334 71,316
Less allowance for losses (257,500) (117,803) (39,152)
Investment in Limited Liability Corporation 251,139 191,139 0
Real estate owned, net 70,138 66,991 0
Organization cost net of amortization 1,875 4,375 6,875
Prepaid Expenses 10,151 20,720 17,718
Due from General Partners/Related Companies 2,999 311 3,049
============== ============= ==============
$26,657,574 $16,753,700 $12,609,108
============== ============= ==============
Liabilities and Partners Capital
December 31,
-----------------------------------------------------
1997 1996 1995
------------- -------------
--------------
Liabilities:
Deferred interest $83,066 $217,480 $0
Note payable - Bank 5,640,000 1,500,000 1,910,000
Accounts payable 3,355 20,625 4,010
Subscriptions to partnership in applicant status 0 310,937 0
-------------- ------------- -------------
$5,726,421 $2,049,042 $1,914,010
-------------- ------------- -------------
Partners Capital
Limited partners subject to redemption 20,914,721 14,693,293 10,687,031
General Partners 16,432 11,365 8,067
-------------- ------------- -------------
$20,931,153 $14,704,658 $10,695,098
-------------- ------------- -------------
$26,657,574 $16,753,700 $12,609,108
============== ============= =============
</TABLE>
<PAGE>
<TABLE>
Statement of Income
<CAPTION>
<S> <C> <C> <C>
Gross Revenue $2,629,457 $1,726,635 $1,050,236
Expenses 820,937 493,110 194,495
-------------- ------------ ------------
Income before interest credited to Partners in applicant 1,808,520 1,233,525 855,741
status
Interest credited to Partners in applicant status 9,562 2,618 18,908
-------------- ------------ ------------
Net Income $1,798,958 $1,230,907 $836,833
============== ============ ============
Net income to General Partners (1%) $17,990 $12,309 $8,368
============== ============ ============
Net Income to Limited Partners (99%) $1,780,968 $1,218,598 $828,465
============== ============ ============
Net Income per $1,000 invested by Limited Partners for
entire period (annualized)
- where income is reinvested and compounded $84 $84 $83
============== ============ ============
- where partner receives income in monthly $81 $81 $80
distributions
============== ============ ============
<FN>
The financial results for the year ending December 31, 1995, reflects net
income of $836,833 which is an annualized yield of approximately 8.33%.
Annualized yield for 1996 was 8.39%, and for 1997 was 8.40%. An average
annualized yield since inception through December 31, 1997, was 8.36%.
</FN>
</TABLE>
<PAGE>
Item II
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
On December 31, 1997, the Partnership was in the offering stage of its
second offering, ($30,000,000) and contributed capital totalled $14,932,017 for
the first offering and $5,557,659 for the second offering with an aggregate of
$20,489,676 (Limited Partners). Of this amount, $0 remained in applicant status.
Accordingly, together with initial approved offering of $15,000,000 the
Partnership has approval for an aggregate offering of $45,000,000 in Units of
$100 each.
At December 31, 1997, the Partnerships Mortgage Investments outstanding
totalled $25,304,989. The primary reason for an increase in Mortgage Investments
Outstanding from $6,484,707 in 1994, to $12,047,252 in 1995, to $15,642,990 in
1996, and to $25,304,989 was the additional capital admitted to the Partnership
through sale of Limited Partnership Units. Additional Partners Capital
contributions have totalled $4,508,824, $3,834,799, $3,863,536 and $5,565,372
and the reinvestment of earnings by partners who have elected to reinvest
earnings have totalled $239,956, $524,988, $800,218 and $1,119,465 for the years
ended December 31, 1994, December 31, 1995, December 31, 1996 and December 31,
1997, respectively. To a lesser extent, Mortgage Investments outstanding have
also increased through the utilization of the Partnerships line of credit. The
effect of more outstanding Mortgage Investments raised the interest earned on
Mortgage Investments for the years ended December 31, 1994, 1995, 1996 and 1997,
to $480,110, $1,031,029, $1,718,208 and $2,613,008 respectively. Interest rates
on Mortgage Investments ranged from 8.00% to 14.00%. The Partnership began
funding Mortgage Investments on April 14, 1993 and as of December 31, 1997,
distributed earnings at an average annualized yield of 8.36%.
Currently, mortgage interest rates have decreased from those prevalent at
the inception of the Partnership. New loans will be originated at these lower
interest rates which will reduce the average return across the entire Mortgage
Investment portfolio held by the Partnership. In the future, interest rates
likely will change from their current levels. The General Partners cannot at
this time predict at what levels interest rates will be in the future. Although
the rates charged by the Partnership are influenced by the level of interest
rates in the market, the General Partners do not anticipate that rates charged
by the Partnership to its borrowers will change significantly from the beginning
of 1997 over the next 12 months. 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 the General Partners experience, the General
Partners anticipate that the annualized yield will range between eight & nine
percent (8% - 9%).
During 1994, the Partnership did not have a credit line; therefore Interest
on Note Payable-Bank was -0-. In 1995, the Partnership established a line of
credit with a commercial bank secured by its Mortgage Investments and has
increased the limit from $3,000,000 to $6,000,000. For the years ended 1995,
1996 and December 31, 1997, interest on Note Payable-Bank was $25,889, $188,635
and $340,633 respectively. The primary reason for this increase during 1996, was
that the Partnership did not have access to the credit facility until September,
1995. For 1997, the increase in interest on notes payable-Bank has been
attributed to a higher overall credit facility utilization. Currently, the
Partnership has borrowed $5,640,000 at an interest rate of prime + 1/2%. This
facility could increase as the Partnerships capital increases. This added
source of funds will help in maximizing the Partnership yield by allowing the
Partnership to minimize the amount of funds in lower yield investment accounts
when appropriate Mortgage Investments are not currently available. Additionally,
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, the
amount to be retained by the Partnership, after payment of the line of credit
cost, will be greater than without the use of the line of credit. As of December
31, 1997, the balance remained at $5,640,000 and in accordance with the line of
credit, the Partnership paid all accrued interest as of that date.
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 twenty years.
Borrowers foreclosures, as set forth under Results of Operations, are a normal
aspect of Partnership operations and the General Partners anticipate that they
will not have a material effect on liquidity. Cash is constantly being generated
from interest earnings, late charges, pre-payment penalties, amortization of
principal and pay-off on Mortgage Investments. 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.
<PAGE>
The General Partners regularly review the Mortgage Investments portfolio,
examining the status of delinquencies, the underlying collateral securing these
Mortgage Investments, borrowers payment records, etc. Data from the local real
estate market and of the national and local economy are reviewed. Based upon
this information and other data, loss reserves are increased or decreased. In
1995, 1996, and 1997, the Partnership made provisions for doubtful accounts of
$26,032, $55,383, and $139,804, respectively. These provisions for doubtful
accounts were made primarily as a prudent action to guard against unidentified
collection losses. The provision for doubtful accounts as of December 31, 1997,
of $257,500 is considered by the General Partners to be adequate. Because of the
number of variables involved, the magnitude of the swings possible 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.
Its now clear the Northern California recession reached bottom in 1993.
Since then, the California economy has been improving, slowly at first, but now,
more vigorously. This improvement is reflected in increasing property values, in
job growth, personal income growth, etc., which all translates into more loan
activity, which of course, is healthy for lending activity.
At the time of subscription to the Partnership, Limited Partners make 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, 1995, December 31, 1996, and December 31, 1997, the
Partnership made distributions of earnings to Limited Partners after allocation
of syndication costs of, $303,477, $418,380 and $495,480 respectively.
Distribution of Earnings to Limited Partners after allocation of syndication
costs for the years ended December 31, 1995, December 31, 1996 and December 31,
1997, to Limited Partners capital accounts and not withdrawn was $524,988,
$800,218 and $1,119,465 respectively. As of December 31, 1995, December 31, 1996
and December 31, 1997, Limited Partners electing to withdraw earnings
represented 40%, 34% and 30% respectively of the Limited Partners outstanding
capital accounts. The decreases in percentage of Limited Partners electing to
withdraw earnings is due to an increase in percent of new Limited Partners
choosing to compound earnings and the dilution effect occurring when compounding
Limited Partners capital accounts grow through earnings reinvestment compared to
Limited Partners that have chosen to liquidate earnings.
The Partnership also allows the Limited Partners to withdraw their capital
account subject to certain limitations (see liquidation provisions of
Partnership Agreement). Once a Limited Partners initial five year hold period
has passed the General Partners expect to see an increase in liquidations due to
the ability of Limited Partners to withdraw without penalty. This ability to
withdraw five years after a Limited Partners investment 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 through earnings reinvestment. Since the five year hold period
has yet to expire, as of December 31, 1997, Limited Partners may not as yet
avail themselves of this provision for liquidation. Additionally, Limited
Partners may withdraw over a period of one year subject to certain limitations
and penalties. For the years ended December 31, 1995, December 31, 1996, and
December 31, 1997, $5,640, $146,755 and $132,619 respectively 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, 1995, December 31, 1996
and December 31, 1997, respectively and is expected by the General Partners to
commonly occur at these levels.
<PAGE>
Item 8 - Financial Statements and Supplementary Data
Redwood Mortgage Investors VIII, a California Limited Partnership's list of
Financial Statements and Financial Statement schedules:
A-Financial Statements
The following financial statements of Redwood Mortgage Investors VIII are
included in Item 8:
- Independent Auditors Report,
- Balance Sheets - December 31, 1997, and December 31, 1996,
- Statements of Income for the three years ended December 31, 1997.
- Statements of Partners Capital for the three years ended December 31, 1997.
- Statements of Cash Flows for the three years ended December 31, 1997.
- Notes to Financial Statements - December 31, 1997.
B-Financial Statement Schedules
The following financial statement schedules of Redwood Mortgage Inventors
VIII are included in Item 8.
- Schedule II, - Amounts receivable from related parties and underwriters,
promoters, and employees other than related parties
- Schedule VIII - Valuation of Qualifying Accounts,
- Schedule IX - Short Term Borrowings.
- Schedule XII - Mortgage Investments on real estate.
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have
been omitted.
<PAGE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
6 FINANCIAL STATEMENTS
DECEMBER 31, 1997
(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 VIII
We have audited the financial statements and related schedules of REDWOOD
MORTGAGE INVESTORS VIII (A California Limited Partnership) listed in Item 8 on
form 10-K including balance sheets as of December 31, 1997 and 1996 and the
statements of income, changes in partners capital and cash flows for the three
years ended December 31, 1997. 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
VIII as of December 31, 1997 and 1996, and the results of its operations and
cash flows for the three years ended December 31, 1997, 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/ Parodi & Cropper
PARODI & CROPPER
Lafayette, California
February 27, 1998
<PAGE>
<TABLE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<CAPTION>
ASSETS
1997 1996
--------------- ---------------
<S> <C> <C>
Cash $663,159 $664,434
--------------- ---------------
Accounts receivable:
Mortgage Investments, secured by deeds of trust 25,304,989 15,642,990
Accrued Interest on Mortgage Investments 341,976 196,530
Advances on Mortgage Investments 205,804 8,679
Accounts receivables, unsecured 62,844 75,334
--------------- ---------------
25,915,613 15,923,533
Less allowance for doubtful accounts 257,500 117,803
--------------- ---------------
25,658,113 15,805,730
--------------- ---------------
Real Estate owned, acquired through foreclosure,
held for sale 70,138 66,991
Investment in limited liability corporation, at cost which
approximates market 251,139 191,139
Organization costs, less accumulated amortization of $10,625
and $8,125, respectively 1,875 4,375
Due from related companies 2,999 311
Prepaid expense-deferred loan fee 10,151 20,720
--------------- ---------------
$26,657,574 $16,753,700
=============== ===============
<FN>
See accompanying notes to financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
LIABILITIES AND PARTNERS CAPITAL
<CAPTION>
1997 1996
--------------- ---------------
Liabilities:
<S> <C> <C>
Accounts payable and accrued expenses $3,355 $20,625
Note payable - bank line of credit 5,640,000 1,500,000
Deferred interest income 83,066 217,480
Subscriptions to partnership in applicant status 0 310,937
--------------- ---------------
5,726,421 2,049,042
--------------- ---------------
Partners Capital:
Limited partners capital, subject to redemption (note 4E):
Net of unallocated syndication costs of $431,994 and
$414,190 for 1997 and 1996, respectively:
and formation loan receivable of $1,386,693 and
$1,073,706 for 1997 and 1996, respectively 20,914,721 14,693,293
General Partners Capital, net of unallocated syndication
costs of $4,364 and $4184for 1997 and 1996, respectively 16,432 11,365
--------------- ---------------
Total Partners Capital 20,931,153 14,704,658
--------------- ---------------
Total Liabilities and Partners Capital $26,657,574 $16,753,700
=============== ===============
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
STATEMENTS OF INCOME
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1997 1996 1995
------------- -------------- --------------
Revenues:
<S> <C> <C> <C>
Interest on Mortgage Investments $2,613,008 $1,718,208 $1,031,029
Interest on bank deposits 9,487 4,083 13,120
Late charges 6,432 3,847 3,876
Miscellaneous 530 497 2,211
------------- -------------- --------------
2,629,457 1,726,635 1,050,236
------------- -------------- --------------
Expenses:
Mortgage servicing fees 189,692 155,912 85,456
Interest on note payable - bank 340,633 188,638 25,889
Amortization of loan origination fees 16,819 11,999 2,531
Provision for doubtful accounts and losses on real estate
acquired through foreclosure 139,804 55,383 26,032
Asset management fee - General Partner 24,966 17,053 11,587
Amortization of organization costs 2,500 2,500 2,500
Clerical costs through Redwood Mortgage 54,549 38,799 22,769
Professional services 36,717 17,687 16,178
Printing, supplies and postage 9,584 1,192 92
Other 5,673 3,947 1,461
------------- -------------- --------------
820,937 493,110 194,495
------------- -------------- --------------
Income before interest credited to partners in applicant 1,808,520 1,233,525 855,741
status
Interest credited to partners in applicant status 9,562 2,618 18,908
------------- -------------- --------------
Net Income $1798,958 $1,230,907 $836,833
============= ============== ==============
Net income: To General Partners(1%) $17,990 $12,309 $8,368
To Limited Partners (99%) 1,780,968 1,218,598 828,465
============= ============== ==============
Total - net income $1,798,958 $1,230,907 $836,833
============= ============== ==============
Net income per $1,000 invested by Limited
Partners for entire period:
- -where income is reinvested and compounded $84 $ 84 $ 83
============= ============== ==============
- -where partner receives income in monthly distributions $81 $ 81 $ 80
============= ============== ==============
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS CAPITAL
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
PARTNERS CAPITAL
--------------------------------------------------------------
LIMITED PARTNERS CAPITAL
--------------------------------------------------------------
Capital
Partners In Account Unallocated Formation
Applicant Limited Syndication Loan
Status Partners Costs Receivable Total
-------------- ------------ ------------- ------------ ------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1994 $189,300 $7,519,424 $(234,303) $(525,256) $6,759,865
Contributions of Application 3,634,264 0 0 (250,373) (250,373)
Formation Loan increases 0 0 0 0 0
Interest credited to partners in 18,908 0 0 0 0
applicant status
Upon admission to Partnership:
Interest withdrawn (7,673) 0 0 0 0
Transfers to Partners capital (3,834,799) 3,831,211 0 0 3,831,211
Net Income 0 828,465 0 0 828,465
Syndication costs incurred 0 0 (173,581) 0 (173,581)
Allocation of syndication costs 0 (85,045) 85,045 0 0
Partners withdrawals 0 (308,554) 0 0 (308,554)
Early withdrawal penalties 0 (564) 162 400 (2)
-------------- ------------ ------------- ------------ ------------
Balances at December 31, 1995 0 11,784,937 (322,677) (775,229) 10,687,031
Contributions on Application 4,172,718 0 0 0 0
Formation Loan increases 0 0 0 (314,996) (314,996)
Formation Loan payments 0 0 0 8,961 8,961
Interest credited to partners in 2,618 0 0 0 0
applicant status
Upon admission to Partnership:
Interest withdrawn (863) 0 0 0 0
Transfers to Partners capital (3,863,536) 3,859,312 0 0 3,859,312
Net Income 0 1,218,598 0 0 1,218,598
Syndication costs incurred 0 0 (212,542) 0 (212,542)
Allocation of syndication costs 0 (116,523) 116,523 0 0
Partners withdrawals 0 (553,027) 0 0 (553,027)
Early withdrawal penalties 0 (12,108) 4,506 7,558 (44)
-------------- ------------ ------------- ------------ ------------
Balances at December 31, 1996 310,937 16,181,189 (414,190) (1,073,706) 14,693,293
Contributions on Application 5,251,969 0 0 0 0
Formation Loan increases 0 0 0 (420,510) (420,510)
Formation Loan payments 0 0 0 98,999 98,999
Interest credited to partners in 9,562 0 0 0 0
applicant status
Upon admission to Partnership:
Interest withdrawn (1,849) 0 0 0 0
Transfers to Partners capital (5,570,619) 5,565,372 0 0 5,565,372
Net Income 0 1,780,968 0 0 1,780,968
Syndication costs incurred 0 0 (188,517) 0 (188,517)
Allocation of syndication costs 0 (166,023) 166,023 0 0
Partners withdrawals 0 (614,837) 0 0 (614,837)
Early withdrawal penalties 0 (13,261) 4,690 8,524 (47)
-------------- ------------ ------------- ------------ ------------
Balances at December 31, 1997 $0 $22,733,408 $(431,994) $(1,386,693) $20,914,721
============== ============ ============= ============ ============
<FN>
See accommpanying notes to financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS CAPITAL
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
PARTNERS CAPITAL
------------------------------------------------------------------------------
GENERAL PARTNERS CAPITAL
----------------------------------------------------------
Capital Unallocated Total
Account Syndication Total Partners
General Costs Capital
Partners
---------------- ----------------- ----------------- ---------------
<CAPTION>
<S> <C> <C> <C> <C>
Balances at December 31, 1994 $7,737 $(2,366) $5,371 $6,765,236
Contributions of Application 0 0 0 0
Formation loan increases 0 0 0 (250,373)
Interest credited to partners in 0 0 0 0
applicant status
Upon admission to partnership:
Interest withdrawn 0 0 0 0
Transfers to Partners capital 3,588 0 3,588 3,834,799
Net Income 8,368 0 8,368 836,833
Syndication costs incurred 0 (1,753) (1,753) (175,334)
Allocation of syndication costs (859) 859 0 0
Partners withdrawals (7,509) 0 (7,509) (316,063)
Early withdrawal penalties 0 2 2 0
---------------- ----------------- ----------------- ---------------
Balances at December 31, 1995 11,325 (3,258) 8,067 10,695,098
Contributions on Application 0 0 0 0
Formation loan increases 0 0 0 (314,996)
Formation loan payments 8,961
Interest credited to partners in 0 0 0 0
applicant status
Upon admission to partnership:
Interest withdrawn 0 0 0 0
Transfers to Partners capital 4,224 0 4,224 3,863,536
Net Income 12,309 0 12,309 1,230,907
Syndication costs incurred 0 (2,147) (2,147) (214,689)
Allocation of syndication costs (1,177) 1,177 0 0
Partners withdrawals (11,132) 0 (11,132) (564,159)
Early withdrawal penalties 0 44 44 0
---------------- ----------------- ----------------- ---------------
Balances at December 31, 1996 15,549 (4,184) 11,365 14,704,658
Contributions on Application 0 0 0 0
Formation Loan increases 0 0 0 (420,510)
Formation Loan payments 0 0 0 98,999
Interest credited to partners in 0 0 0 0
applicant status
Upon admission to partnership:
Interest withdrawn 0 0 0 0
Transfers to Partners capital 5,247 0 5,247 5,570,619
Net Income 17,990 0 17,990 1,798,958
Syndication costs incurred 0 (1,904) (1,904) (190,421)
Allocation of syndication costs (1,677) 1,677 0 0
Partners withdrawals (16,313) 0 (16,313) (631,150)
Early withdrawal penalties 0 47 47 0
---------------- ----------------- ----------------- ---------------
Balances at December 31, 1997 $20,796 $(4,364) $16,432 $20,931,153
================ ================= ================= ===============
<FN>
See accompanying notes to financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
<CAPTION>
1997 1996 1995
-------------- -------------- -------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $1,798,958 $1,230,907 $836,833
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of organization costs 2,500 2,500 2,500
Provision for doubtful accounts. 139,804 78,651 26,032
Provision for losses (gains) on real estate held for sale 0 (23,268) 0
Increase (decrease) in accounts payable (17,270) 16,615 4,010
(Increase) in accrued interest & advances (342,571) (83,477) (45,334)
(Increase) decrease in amount due from related companies (2,688) 2,738 (3,049)
(Increase) decrease in deferred loan fee 10,569 (3,002) (17,718)
Increase (decrease ) in deferred interest income (134,414) 217,480 0
-------------- -------------- -------------
--------------
Net cash provided by operating activities 1,454,888 1,439,144 803,274
-------------- -------------- -------------
Cash flows from investing activities:
Principal collected on Mortgage Investments 10,279,337 9,019,190 1,508,190
Mortgage Investments made (19,941,336) (13,148,944) (7,133,221)
Disposition of real estate held for sale 0 299,154 0
Additions to real estate held for sale (3,254) 0 0
Additions to Limited Liability Corporation (60,000) 0 0
Accounts receivables, unsecured - (disbursements) receipts 12,490 (4,018) (8,830)
--------------- -------------- -------------
Net cash used in investing activities (9,712,763) (3,834,618) (5,633,861)
--------------- -------------- -------------
Cash flows from financing activities
Increase (decrease) in note payable-bank 4,140,000 (410,000) 1,910,000
Contributions by partner applicants 5,251,969 4,172,718 3,634,264
Interest credited to partners in applicant status 9,562 2,618 18,908
Interest withdrawn by partners in applicant status (1,849) (863) (7,673)
Partners withdrawals (631,150) (564,159) (316,063)
Syndication costs incurred (190,421) (214,689) (175,334)
Formation Loan increases (420,510) (314,996) (250,373)
Formation Loan collections 98,999 8,961 0
--------------- -------------- -------------
Net cash provided by financing activities 8,256,600 2,679,590 4,813,729
--------------- -------------- -------------
Net increase (decrease) in cash and cash equivalents (1,275) 284,116 (16,858)
Cash - beginning of period 664,434 380,318 397,176
--------------- -------------- -------------
Cash - end of period $663,159 $664,434 $380,318
=============== ============== =============
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 1 - ORGANIZATION AND GENERAL
Redwood Mortgage Investors VIII, (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
Investmenst 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 December 31, 1997, the
Partnership was in the offering stage, wherein contributed capital totalled
$20,489,676 in limited partner contributions of an approved aggregate offering
of $45,000,000, in units of $100 each (204,897).
A minimum of 2,500 units ($250,000) and a maximum of 150,000 units
($15,000,000) were initially offered through qualified broker-dealers. This
initial offering was closed in October, 1996. In December 1996, the Partnership
commenced a second offering of an additional 300,000 Units ($30,000,000) As
Mortgage Investments are identified, partners are transferred from applicant
status to admitted partners participating in Mortgage Investment operations.
Each months income is distributed to partners based upon their proportionate
share of partners capital. Some partners have elected to withdraw income on a
monthly, quarterly or annual basis.
A. Sales Commissions - Formation Loan Sales commissions are not paid
directly by the Partnership out of the offering proceeds. Instead, the
Partnership loans to Redwood Mortgage, an affiliate of the General Partners,
amounts to pay all sales commissions and amounts payable in connection with
unsolicited orders. This loan is referred to as the Formation Loan. It is
unsecured and non-interest bearing.
The Formation Loan relating to the initial $15,000,000 offering totalled
$1,074,840, which was 7.2% of limited partners contributions of $14,932,017
(under the limit of 9.1% relative to the initial offering). It is to be repaid,
without interest, in ten annual installments of principal, which commenced on
January 1, 1997, following the year the initial offering closed, which was in
1996.
The Formation Loan relating to the second offering ($30,000,000) totalled
$435,895 at December 31, 1997, which was 7.8% of the limited partners
contributions of $5,557,659. Sales commissions range from 0% (units sold by
General Partners) to 9% of gross proceeds. The Partnership anticipates that the
sales commissions will approximate 7.6% based on the assumption that 65% of
investors will elect to reinvest earnings, thus generating 9% commissions. The
principal balance of the Formation Loan will increase as additional sales of
units are made each year. The amount of the annual installment payment to be
made by Redwood Mortgage, during the offering stage, will be determined at
annual installments of one-tenth of the principal balance of the Formation Loan
as of December 31 of each year. Such payment shall be due and payable by
December 31 of the following year with the first such payment beginning December
31, 1997. Upon completion of the offering, the balance will be repaid in ten
equal annual installments.
<PAGE>
<TABLE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
The following summarizes Formation Loan transactions to December 31, 1997:
Initial Subsequent Total
Offering of Offering of
$15,000,000 $30,000,000
--------------- --------------- ---------------
<CAPTION>
<S> <C> <C> <C>
Limited Partner contributions $14,932,017 $5,557,659 $20,489,676
=============== =============== ===============
Formation Loan made $1,074,840 435,895 1,510,735
Payments to date (107,960) 0 (107,960)
Early withdrawal penalties applied (16,082) 0 (16,082)
--------------- --------------- ---------------
Balance December 31, 1996 $950,798 $435,895 $1,386,693
=============== =============== ===============
Percent loaned of Partners contributions 7.2% 7.8% 7.4%
=============== =============== ===============
</TABLE>
The Formation Loan, which is receivable from Redwood Mortgage, an affiliate
of the General Partners, has been deducted from Limited Partners Capital in the
balance sheet. As amounts are collected from Redwood Mortgage, 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, registration and filing fees and other costs), will be paid by
the Partnership.
Through December 31, 1997, organization costs of $12,500 and syndication
costs of $861,031 had been incurred by the Partnership with the following
distribution:
<TABLE>
Syndication Costs
--------------------------------------------
Offering
----------------------------
Initial Subsequent Organization
15,000,000 30,000,000 Total Costs Total
----------- ----------- ----------- --------- ----------
<CAPTION>
<S> <C> <C> <C> <C> <C>
Costs incurred $569,865 291,166 861,031 12,500 873,531
Early withdrawal penalties (9,451) 0 (9,451) 0 (9,451)
applied
Allocated and amortized to (386,296) (28,926) (415,222) (10,625) (425,847)
date
----------- ---- ----------- --- ----------- ---- --------- ---- ----------
December 31, 1997 balance $174,118 262,240 436,358 1,875 438,233
=========== ==== =========== === =========== ==== ========= ==== ==========
</TABLE>
Organization and syndication costs attributable to the initial offering
($15,000,000) were limited to the lesser of 10% of the gross proceeds or
$600,000 with any excess being paid by the General Partners. Applicable gross
proceeds were $14,932,017. Related expenditures totalled $582,365 ($569,865
syndication costs plus $12,500 organization expense) or 3.90%.
As of December 31, 1997, syndication costs attributable to the subsequent
offering ($30,000,000) totalled $291,166, with the costs of the offering
document being greater at the initial stages. The syndication costs payable by
the Partnership are estimated to be $1,200,000 if the maximum is sold (4% of
$30,000,000). The General Partners will pay any syndication expenses (excluding
selling commissions) in excess of ten percent of the gross proceeds or
$1,200,000.
<PAGE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A Accrual Basis
Revenues and expenses are accounted for on the accrual basis of accounting
wherein income is recognized as earned and expenses are recognized as incurred.
Once a Mortgage Investment is categorized as impaired, interest is no longer
accrued thereon.
B. Management Estimates
In preparing the financial statements, management is required to make
estimates based on the information available that affect the reported amounts of
assets and liabilities as of the balance sheet date and revenues and expenses
for the related periods. Such estimates relate principally to the determination
of the allowance for doubtful accounts, including the valuation of impaired
mortgage investments, and the valuation of real estate acquired through
foreclosure. Actual results could differ significantly from these estimates.
C. Mortgage Investments, Secured by Deeds of Trust
The Partnership has both the intent and ability to hold the Mortgage
Investments to maturity, i.e., held for long-term investment. They are therefore
valued at cost for financial statement purposes with interest thereon being
accrued by the simple interest method.
Financial Accounting Standards Board Statements (SFAS) 114 and 118
(effective January 1, 1995) provide that if the probable ultimate recovery of
the carrying amount of a Mortgage Investment, with due consideration for the
fair value of collateral, is less than the recorded investment and related
amounts due and the impairment is considered to be other than temporary, the
carrying amount of the investment (cost) shall be reduced to the present value
of future cash flows. The adoption of these statements did not have a material
effect on the financial statements of the Partnership because that was the
valuation method previously used on impaired loans.
At December 31, 1997, 1996, and 1995, there were no Mortgage Investments
categorized as impaired by the Partnership. Had there been a computed amount for
the reduction in carrying values of impaired loans, the reduction would have
been included in the allowance for doubtful accounts.
As presented in Note 10 to the financial statements, the average Mortgage
Investment to appraised value of security at the time the losses were
consummated was 55.83%. 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 has the tendency to minimize reductions for impairment.
D. Cash and Cash Equivalents
For purposes of the statements of cash flows, cash and cash equivalents
include interest bearing and non-interest bearing bank deposits.
E. Real Estate Owned, Held for Sale
Real Estate owned, held for sale, includes real estate acquired through
foreclosure and is stated at the lower of the recorded investment in the
property, net of any senior indebtedness, or at the propertys estimated fair
value, less estimated costs to sell. At December 31, 1997, there was one such
piece of property with costs totaling $75,138 less a reduction of $5,000 to
arrive at the net fair value of $70,138.
<PAGE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
Effective January 1, 1996, the Partnership adopted the provisions of
Statement No 121 (SFAS 121) of the Financial Accounting Standards Board,
Accounting for the Impairment of Long Lived Assets and for Long Lived Assets to
be disposed of. The adoption of SFAS 121 did not have a material impact on the
Partnerships financial position because the methods indicated were essentially
those previously used by the Partnership.
F. Investment in Limited Liability Corporation (see Note 7)
The Partnership carries its investment in a Limited Liability Corporation
as investment in real estate, which is at the lower of costs or fair value, less
estimated costs to sell.
G. Income Taxes
No provision for Federal and State income taxes is made in the financial
statements since income taxes are the obligation of the partners if and when
income taxes apply.
H. Organization and Syndication Costs
The Partnership bears its own organization and syndication costs (other
than certain sales commissions and fees described above) including legal and
accounting expenses, printing costs, selling expenses, and filing fees.
Organizational costs have been capitalized and will be amortized over a five
year period. Syndication costs are charged against partners capital and are
being allocated to individual partners consistent with the partnership
agreement.
I. Allowance for Doubtful Accounts
Mortgage Investments and the related accrued interest, fees, and advances
are analyzed on a continuous basis for recoverability. Delinquencies are
identified and followed as part of the Mortgage Investment system. A provision
is made for doubtful accounts to adjust the allowance for doubtful accounts to
an amount considered by management to be adequate, with due consideration to
collateral values, to provide for unrecoverable accounts receivable, including
impaired Mortgage Investments, unspecified mortgage investments, accrued
interest and advances on Mortgage Investments, and other accounts receivable
(unsecured). The composition of the allowance for doubtful accounts as of
December 31, 1997, and 1996 was as follows:
December 31,
-----------------------------------------------
1997 1996
--------------- ---------------
Impaired mortgage investments $0 $0
Unspecified mortgage investments 213,500 72,803
Amounts receivable, unsecured 44,000 45,000
----------- ---------------
$257,500 $117,803
=========== ===============
<PAGE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
J. Net Income Per $1,000 Invested
Amounts reflected in the statements of income as net income per $1,000
invested by Limited Partners for the entire period are actual amounts allocated
to Limited Partners who have their investment throughout the period and have
elected to either leave their earnings to compound or have elected to receive
monthly distributions of their net income. Individual income is allocated each
month based on the Limited Partners pro rata share of Partners Capital. Because
the net income percentage varies from month to month, amounts per $1,000 will
vary for those individuals who made or withdrew investments during the period,
or select other options. However, the net income per $1,000 average invested has
approximated those reflected for those whose investments and options have
remained constant.
NOTE 3 - GENERAL PARTNERS AND RELATED PARTIES
The following are commissions and/or fees which are paid to the General
Partners and/or related parties.
A. Mortgage Brokerage Commissions
For fees in connection with the review, selection, evaluation, negotiation
and extension of Partnership Mortgage Investments in an amount up to 12% of the
Mortgage Investments until 6 months after the termination date of the offering.
Thereafter, Mortgage Investment brokerage commissions will be limited to an
amount not to exceed 4% of the total Partnership assets per year. The Mortgage
Investment brokerage commissions are paid by the borrowers, and thus, not an
expense of the Partnership. In 1997, Mortgage Investment brokerage commissions
paid by the borrowers was $837,399.
B. Mortgage Servicing Fees
Monthly mortgage servicing fees of up to 1/8 of 1% (1.5% annual) of the
unpaid principal, is paid to Redwood Mortgage, or such lesser amount as is
reasonable and customary in the geographic area where the property securing the
mortgage is located. Mortgage servicing fees of $189,692, $155,912and $85,456
were incurred for years 1997, 1996 and 1995 respectively.
C. Asset Management Fee
The General Partners receive monthly fees for managing the Partnerships
Mortgage Investment portfolio and operations up to 1/32 of 1% of the net asset
value (3/8 of 1% annual). Management fees of $24,966, $17,053and $11,587 were
incurred for years 1997, 1996 and 1995, respectively.
<PAGE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 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 will be credited or charged to partners in relation to their
respective partnership interests. The partnership interest of the General
Partners (combined) shall be 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. Such
reimbursements are reflected as expenses in the Statement of Income.
The General Partners collectively or severally were to contribute 1/10 of
1% in cash contributions as proceeds from the offering are admitted to limited
Partner capital. As of December 31, 1997 a General Partner, GYMNO Corporation,
had contributed $20,488, as capital 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 are not admitted to
the Partnership until appropriate lending opportunities are available. During
the period prior to the time of admission, which is anticipated to be between
1-120 days in most cases, purchasers subscriptions will remain irrevocable and
will earn interest at money market rates, which are lower than the anticipated
return on the Partnerships Mortgage Investment portfolio.
During the periods ending December 31, 1997, 1996, and 1995, interest
totalling $9,562, $2,618 and $18,908 respectively, 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.
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 elect either to receive monthly, quarterly or
annual distributions of earnings allocations, or to allow earnings to compound.
Subject to certain limitations, a compounding investor may subsequently change
his election, but an investors election to have cash distributions is
irrevocable.
<PAGE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
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 in
the Partnership Agreement.
Limited Partners will 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 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 is admitted to
the Partnership and ending 3 months after the offering termination date, the
General Partners shall guarantee an earnings 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 on a
monthly basis, up to a maximum interest rate of 12%. To date, actual realization
exceeded the guaranteed amount for each month.
NOTE 5- LEGAL PROCEEDINGS
The Partnership is not a defendant in any legal actions.
NOTE 6 - NOTE PAYABLE - BANK LINE OF CREDIT
The Partnership has a bank line of credit expiring September 30, 1999, of
up to $6,000,000 at .5% over prime secured by its Mortgage Investment portfolio.
The note payable balances were $5,640,000 and $1,500,000 at December 31, 1997,
and 1996, respectively, and the interest rate was 9% at December 31, 1997,
(8.50% prime plus .50%).
<PAGE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 7 - INVESTMENT IN LIMITED LIABILITY CORPORATION
As a result of acquiring real property through foreclosure, the Partnership
has contributed its interest (principally land) to a Limited Liability
Corporation, which is owned 100% by the Partnership, will complete the
construction and sell the property. The Partnership expects to realize a profit
from the venture.
NOTE 8 - INCOME TAXES
The following reflects a reconciliation from net assets (Partners Capital)
reflected in the financial statements to the tax basis of those net assets:
<TABLE>
December 31,
------------------------------------------
1997 1996
----------------- ---------------
<CAPTION>
<S> <C> <C>
Net Assets - Partners Capital per financial statements $20,931,153 $14,704,658
Unamortized syndication costs 436,358 418,374
Allowance for doubtful accounts 257,500 117,803
Formation loans receivable 1,386,693 1,073,706
----------------- ---------------
Net assets tax basis $23,011,704 $16,314,541
================= ===============
</TABLE>
In 1997, approximately 61% of taxable income was allocated to tax exempt
organizations, i.e., retirement plans. Such plans do not have to file income tax
returns unless their unrelated business income exceeds $1,000. Applicable
amounts become taxable when distribution is made to participants.
NOTE 9 - FAIR VALUE OF FINANCIAL INVESTMENTS
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
$25,304,989. The fair value of these investments of $25,710,340 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>
<TABLE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 10- ASSET CONCENTRATIONS AND CHARACTERISTICS
The Mortgage Investments are secured by recorded deeds of trust. At
December 31, 1997, there were 55 Mortgage Investments outstanding with the
following characteristics:
<CAPTION>
<S> <C>
Number of Mortgage Investments outstanding 55
Total Mortgage Investments outstanding $25,304,989
Average Mortgage Investment outstanding $460,091
Average Mortgage Investment as percent of total 1.82%
Average Mortgage Investment as percent of Partners Capital 2.20%
Largest Mortgage Investment outstanding 2,100,000
Largest Mortgage Investment as percent of total 8.30%
Largest Mortgage Investment as percent of Partners Capital 10.03%
Number of counties where security is located (all California) 14
Largest percentage of Mortgage Investments in one county 23.85%
Average Mortgage Investment to appraised value of security at time loan was consummated 55.83%
Number of Mortgage Investments in foreclosure status 1
Amount of Mortgage Investments in foreclosure $118,811
</TABLE>
<TABLE>
The following categories of mortgage investments are pertinent at December 31, 1997 and 1996:
December 31,
------------------------------------------
1997 1996
----------------- ---------------
<CAPTION>
<S> <C> <C>
First Trust Deeds $17,103,865 $6,545,779
Second Trust Deeds 8,163,624 8,797,211
Third Trust Deeds 37,500 300,000
----------------- ---------------
Total mortgage investments 25,304,989 15,642,990
Prior liens due other lenders 24,224,566 25,161,374
----------------- ---------------
Total debt $49,529,555 $40,804,364
================= ===============
Appraised property value at time of loan $88,714,541 $70,100,408
================= ===============
Total investments as a percent of appraisals 55.83% 58.21%
================= ===============
Investments by Type of Property
Owner occupied homes $2,445,423 $1,808,921
Non-Owner occupied homes 5,318,722 2,288,036
Apartments 5,982,649 2,521,515
Commercial 11,558,195 9,024,518
================= ===============
$25,304,989 $15,642,990
================= ===============
<FN>
The interest rates on the mortgage investments range from 8.00% to 14.00% at December 31, 1997.
</FN>
</TABLE>
<PAGE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
Scheduled maturity dates of mortgage investments as of December 31, 1997
are as follows:
Year Ending
December 31,
-------------------
1998 $3,631,543
1999 7,707,533
2000 5,016,894
2001 1,887,779
2002 1,546,742
Thereafter 5,514,498
===============
$25,304,989
===============
The scheduled maturities for 1998 include approximately $1,123,089 in
Mortgage Invesments which are past maturity at December 31, 1997. Interest
payment on these loans are current.
One Mortgage Investment in the principal amount of $118,811 had interest
paid through September 1, 1996, and is in foreclosure. That Mortgage Investment
which is the only loan categorized as delinquent, is not considered impaired
because the underlying security is sufficient to cover amount due.
The cash balance at December 31, 1997 of $663,159 was in one bank with
interest bearing balances totalling $597,751. The balances exceeded FDIC
insurance limits (up to $100,000 per bank) by $563,159. This bank is the same
financial institution that has provided the Partnership with the $6,000,000
limit line of credit. At December 31, 1997, draw down against this facility was
$5,640,000. As and when deposits in the Partnerships bank accounts increase
significantly beyond the insured limit, the funds are either placed on 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
Column A Column B Column C Column D Column E
Name of Debtor Balance Beginning Additions Deductions Balance at end of period
of period 12/31/96 (1) (2) (1) (2)
Amounts Amounts Current Not Current
collected written off 12/31/97
<CAPTION>
Redwood Mortgage
<S> <C> <C> <C> <C> <C> <C>
1st Offering $1,058,322 $0 $99,000 $8,524 $0.00 $950,798
2nd Offering $15,384 $420,511 0 0 0 $435,895
------------- --------------------- ---------------- ------------- ------------- -----------
Total $1,073,706 $420,511 $99,000 $8,524 0 $1,386,693
============= ===================== ================ ============= ============= ===========
<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 as described in Note 1 A to the financial
statements. The amount written off in column D (2) represents the proportionate
amount of early withdrawal penalties allocated to the Formation Loan as provided
in the prospectus.
</FN>
</TABLE>
<PAGE>
<TABLE>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
REDWOOD MORTGAGE INVESTORS VIII
Column A Column B Column C Column D Column E
Description Balance Additions Deductions Balance at
------------------------------------
beginning of (1) (2) Describe End of Period
of period Charged to Charged
(credtited) to
Costs & Expenses Other accounts -
Describe
<CAPTION>
Year Ended
12/31/97
Deducted from
Asset accounts:
Allowance for
<S> <C> <C> <C> <C> <C>
Doubtful accts $117,803 $139,804 0 $107 $257,500
Cumulative
write-down of
Real Estate
held for sale
(REO) $5,000 0 0 0 $5,000
================= =================== =================== ================ ================
Totals $122,803 $139,804 0 (a)$107 $262,500
================= =================== =================== ================ ================
<FN>
(a) represents loss realized
</FN>
</TABLE>
<PAGE>
<TABLE>
SCHEDULE XII
MORTGAGE INVESTMENTS ON REAL ESTATE.
RULE 12-29 MORTGAGE LOANS ON REAL ESTATE
Col. A Col. B Col. C Col. D Col. E Col. F Col. G Col. H Col. I Col. J
Descp. Interest Final Periodic Prior Face Amt. Carrying Principal Type of Geographic
Rate Maturity Payment Liens of Mortgage amount of amount of Lien County
Date Terms Investments Mortgage Mortgage Location
(original Investments Investments
amount) subject to
Delinq.
Principal
or Interest
========= ========= ========= ========== ========== ============= ============ ============ ========== ================
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Comm. 13.750% 11/01/99 2,044.77 156,750 175,500.00 169,221.02 0.00 2nd Mtg Alameda
Comm. 13.750% 10/01/96 458.33 0.00 40,000.00 40,000.00 0.00 1st Mtg Santa Clara
Res. 12.000% 07/01/98 1,337.20 37,236 130,000.00 118,810.72 118,810.72 2nd Mtg El Dorado
Comm 12.000% 09/01/03 848.61 0.00 82,500.00 80,900.33 0.00 1st Mtg Alameda
Comm 11.000% 09/01/05 846.15 846,019 67,500.00 52,799.10 0.00 2nd Mtg Sacramento
Comm 12.000% 11/01/98 2,057.23 5,635 200,000.00 53,288.38 0.00 2nd Mtg San Francisco
Comm 10.000% 12/01/98 1,689.33 0.00 192,500.00 189,719.45 0.00 1st Mtg Alameda
Comm 12.000% 02/01/99 5,131.13 0.00 390,000.00 503,457.45 0.00 1st Mtg Santa Clara
Apts 11.500% 11/01/99 1,980.58 713,917 200,000.00 197,177.72 0.00 2nd Mtg San Joaquin
Res. 11.000% 12/01/03 3,185.37 1,060,486 325,000.00 316,536.00 0.00 2nd Mtg San Francisco
Res 11.000% 04/01/99 4,999.70 775,649 525,000.00 517,441.79 0.00 2nd Mtg Contra Costa
Apts 11.500% 04/01/05 330.09 0.00 400,000.00 33,333.33 0.00 1st Mtg San Joaquin
Comm 12.500% 07/01/00 1,387.44 0.00 130,000.00 128,880.24 0.00 1st Mtg Fresno
Res 11.750% 07/01/10 802.36 74,551 66,000.00 63,356.42 0.00 2nd Mtg Alameda
Apts 12.000% 08/01/00 6,951.28 3,033,304 660,000.00 648,713.71 0.00 2nd Mtg San Joaquin
Comm 12.000% 10/01/96 600.00 290,711 60,000.00 60,000.00 0.00 2nd Mtg Alameda
Apts 11.875% 01/01/01 4,330.76 0.00 425,000.00 421,788.45 0.00 1st Mtg San Mateo
Res 11.875% 01/01/01 2,292.76 0.00 225,000.00 223,299.67 0.00 1st Mtg San Mateo
Comm 12.500% 01/01/06 3,415.23 0.00 320,000.00 317,883.95 0.00 1st Mtg San Joaquin
Comm 11.750% 02/01/99 1,018.34 0.00 104,000.00 103,938.28 0.00 1st Mtg Contra Costa
Comm 11.875% 02/01/06 4,541.40 0.00 435,000.00 429,504.95 0.00 1st Mtg San Mateo
Comm 12.000% 03/01/01 789.92 0.00 75,000.00 73,975.20 0.00 1st Mtg San Mateo
Comm 12.000% 12/31/01 9,792.73 5,492,794 955,000.00 979,272.92 0.00 2nd Mtg Santa Clara
Res 11.500% 04/01/06 1,039.81 0.00 105,000.00 104,184.14 0.00 1st Mtg San Francisco
Res 12.000% 12/01/97 9,366.28 0.00 910,000.00 906,413.85 0.00 1st Mtg Marin
Res 12.000% 08/01/01 1,250.00 0.00 125,000.00 125,000.00 0.00 1st Mtg Mendocino
Apts 12.000% 02/01/98 1,538.89 74,597 1,427,500.00 84,241.05 0.00 2nd Mtg San Francisco
Comm 12.000% 03/01/01 684.60 74,754 65,000.00 64,443.04 0.00 2nd Mtg San Mateo
Comm 12.000% 02/01/99 186.00 20,800 18,000.00 18,000.00 0.00 2nd Mtg Santa Clara
Land 12.000% 01/01/00 14,500.00 880,313 1,450,000.00 1,450,000.00 0.00 2nd Mtg Stanisalus
Comm 14.000% 04/01/06 6,847.13 0.00 700,000.00 583,813.76 0.00 1st Mtg San Francisco
Apts 10.750% 04/01/07 16,125.00 6,714,769 1,800,000.00 1,800,000.00 0.00 2nd Mtg Alameda
Res 11.500% 05/01/99 359.38 1,660,639 37,500.00 37,500.00 0.00 3rd Mtg Contra Costa
Comm 11.750% 05/01/02 3,828.76 0.00 370,000.00 346,742.31 0.00 1st Mtg San Mateo
Res 11.500% 11/01/98 2,012.50 0.00 210,000.00 210,000.00 0.00 1st Mtg San Francisco
Comm 11.500% 05/01/99 20,125.00 0.00 2,100,000.00 2,100,000.00 0.00 1st Mtg Alameda
Res 12.000% 06/01/99 500.00 262,342 50,000.00 50,000.00 0.00 2nd Mtg Alameda
Res 12.000% 12/01/97 1,155.20 910,000 120,000.00 116,674.81 0.00 2nd Mtg Marin
Comm 10.500% 06/01/00 5,687..50 0.00 400,000.00 650,000.00 0.00 1st Mtg San Mateo
Comm 12.000% 07/01/02 10,500.00 0.00 1,350,000.00 1,050,000.00 0.00 1st Mtg San Francisco
Res 11.000% 07/01/00 3,575.00 0.00 390,000.00 390,000.00 0.00 1st Mtg San Francisco
Res 12.000% 01/01/99 3,626.03 350,000 700,000.00 395,015.54 0.00 2nd Mtg Monterey
Res 10.500% 07/01/00 5,068.88 0.00 579,300.00 579,300.00 0.00 1st Mtg San Francisco
Comm 12.500% 10/01/02 1,562.50 0.00 150,000.00 150,000.00 0.00 1st Mtg San Francisco
Res 11.500% 04/01/99 8,761.13 579,300 1,320,000.00 922,966.50 0.00 2nd Mtg San Francisco
</TABLE>
<PAGE>
<TABLE>
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
========= ========== ========= ========== ========== ============ ============ ============ ========== ===============
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Apts 11.500% 10/01/99 9,056.25 0.00 945,000.00 945,000.00 0.00 1st Mtg San Mateo
Apts 11.000% 10/01/98 16,669.58 0.00 2,200,000.00 1,852,394.82 0.00 1st Mtg San Mateo
Comm 11.000% 10/01/07 6,190.11 0.00 345,000.00 649,534.32 0.00 1st Mtg San Francisco
Res 11.500% 04/01/99 9,993.00 210,000 561,750.00 85,665.19 0.00 2nd Mtg San Francisco
Land 13.000% 10/01/00 5,200.00 0.00 480,000.00 480,000.00 0.00 1st Mtg Solano
Res 8.000% 11/01/27 1,834.42 0.00 250,000.00 249,830.25 0.00 1st Mtg San Mateo
Res 12.000% 05/01/99 2,278.15 0.00 2,400,000.00 710,068.11 0.00 1st Mtg San Francisco
Res 12.000% 05/01/99 8,898.50 0.00 1,300,000.00 952,081.83 0.00 1st Mtg Marin
Comm 12.000% 01/01/03 8,328.21 0.00 1,075,000.00 832,820.75 0.00 1st Mtg Alameda
Res 11.500% 01/01/00 6,612.50 0.00 690,000.00 690,000.00 0.00 1st Mtg Alameda
---------- ---------- ------------ ------------ ------------
Total $254,191.02 $24,224,566 $30,807,050.00 $25,304,989.35 $118,810.72
<FN>
Notes:
None of the above Mortgage Investments is considered impaired. Therefore,
none of them has been written down. The allowance for doubtful accounts includes
$213,500 relating to the above Mortgage Investments and accrued interest
receivable and advances related thereto.
Amounts reflected in column G (carrying amount of Mortgage Investments)
represents both cost and the tax basis of the loans.
</FN>
</TABLE>
<PAGE>
<TABLE>
Schedule XII
Reconciliation of carrying amount (cost) of Mortgage Investments at close of periods
Year ended December 31,
----------------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
<CAPTION>
<S> <C> <C> <C>
Balance at beginning of year $15,642,990 $12,047,252 $6,484,707
--------------- --------------- ---------------
Additions during period:
New Mortgage Investments 19,941,336 13,148,944 7,133,221
Other 0 0 0
--------------- --------------- ---------------
Total Additions 19,941,336 13,148,944 7,133,221
--------------- --------------- ---------------
Deductions during period:
Collections of principal 10,279,337 9,019,190 1,508,190
Foreclosures 0 534,016 0
Cost of Mortgage Investments sold 0 0 0
Amortization of Premium 0 0 0
Other 0 0 62,486
--------------- --------------- ---------------
Total Deductions 10,279,337 9,553,206 1,570,676
--------------- --------------- ---------------
Balance at close of year $25,304,989 $15,642,990 $12,047,252
=============== =============== ===============
</TABLE>
<PAGE>
<TABLE>
SCHEDULE IX
SHORT TERM BORROWINGS
REDWOOD MORTGAGE INVESTORS VIII - 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
======================= ================ =================== ===================== =================== ===================
<CAPTION>
<S> <C> <C> <C> <C> <C>
Year-Ended 12/31/97 $5,640,000 9.05% $6,000,000 $3,765,515 9.05%
</TABLE>
<PAGE>
Item 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
The Partnership has neither changed its accountants nor does it have any
disagreement on any matter of accounting principles, practices or 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 6-7, 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, 1997. All
such compensation is in compliance with the guidelines and limitations set forth
in the Prospectus.
Entity Receiving Compensation Description of Compensation and Services Amount
Rendered
- ---------------------------------------------------- -------------------------
I. Redwood Mortgage. Mortgage Servicing Fee for servicing
Mortgage Investments $189,692
General Partners &/or Affiliate Asset Management Fee for
managing assets $24,966
General Partners 1% interest in profits $17,990
Less allocation of syndication costs 1,677
$16,313
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 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 $837,399
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 $17,240
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. $54,549
<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 December 4, 1996, (incorporated herein
by reference) on pages 4-5 Compensation of General Partners and Affiliates and
page 5 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 for Construction
Loans which provides for principal and interest payments.
(b) Form of Note secured by Deed of Trust for Commercial and
Multi-Family loans which provides for principal and interest
payments
(c) Form of Note secured by Deed of Trust for Commercial and
Multi-Family loans which provides for interest only payments
(d) Form of Note secured by Deed of Trust for Single Family
Residential Loans which provides for interest and principal
payments.
(e) Form of Note secured by Deed of Trust for Single Family
Residential loans which provides for interest only payments.
10.4 (a) Deed of Trust, Assignment of Leases and Rents, Security
Agreement and Fixture Filing to accompany Exhibits 10.3 (a),
and (c).
(b) Deed of Trust, Assignment of Leases and Rents, Security
Agreement and Fixture Filing to accompany Exhibit 10.3 (b).
(c) Deed of Trust, Assignment of Leases and Rents, Security
Agreement and Fixture Filing to accompany Exhibit 10.3 (c).
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. 333-13113 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) to pages 94 through 97,
revised Prospectus dated December 4, 1996, and Supplement No. 3 dated
November 26, 1997, 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 24th day of March,
1998.
REDWOOD MORTGAGE INVESTORS VIII
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 persons on behalf of the
registrant and in the capacity indicated on the 24th day of March, 1998.
Signature Title Date
/S/ D. Russell Burwell
- ----------------------
D. Russell Burwell General Partner March 24, 1998
/S/ Michael R. Burwell
- -----------------------
Michael R. Burwell General Partner March 24, 1998
/S/ D. Russell Burwell
- -----------------------
D. Russell Burwell President of Gymno Corporation, March 24, 1998
(Principal Executive Officer);
Director of Gymno Corporation
/S/ Michael R. Burwell
- ----------------------
Michael R. Burwell Secretary/Treasurer of Gymno March 24, 1998
Corporation (Principal Financial
and Accounting Officer);
Director of Gymno Corporation
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 663159
<SECURITIES> 0
<RECEIVABLES> 25915613
<ALLOWANCES> 257500
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 26657574
<CURRENT-LIABILITIES> 0
<BONDS> 0
5726421
0
<COMMON> 0
<OTHER-SE> 20931153
<TOTAL-LIABILITY-AND-EQUITY> 26657574
<SALES> 0
<TOTAL-REVENUES> 2629457
<CGS> 0
<TOTAL-COSTS> 350062
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 139804
<INTEREST-EXPENSE> 340633
<INCOME-PRETAX> 1798958
<INCOME-TAX> 0
<INCOME-CONTINUING> 1798958
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1798958
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
