-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MkcIlb4ZNuWQIXlQw6ZgGuJTWf6SfThm5XVZFYYQhQohTI6aFEz2OGF7aQmz7R02 bSxXq94Ac6R7tMUP1vDBHQ== 0000889123-97-000027.txt : 19971017 0000889123-97-000027.hdr.sgml : 19971017 ACCESSION NUMBER: 0000889123-97-000027 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19971016 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: REDWOOD MORTGAGE INVESTORS VIII CENTRAL INDEX KEY: 0000889123 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 943158788 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 000-27816 FILM NUMBER: 97696510 BUSINESS ADDRESS: STREET 1: 650 EL CAMINO REAL STE G CITY: REDWOOD CITY STATE: CA ZIP: 94063 BUSINESS PHONE: 4153655341 MAIL ADDRESS: STREET 1: 650 EL CAMINO REAL STE K CITY: REDWOOD CITY STATE: CA ZIP: 94063 10-K/A 1 REVISED 10K REDWOOD MORTGAGE INVESTORS VIII (a California Limited Partnership) Index to Form 10-K December 31, 1996 Part I Page No. Item 1 - Business 4 Item 2 - Properties 4-6 Item 3 - Legal Proceedings 7 Item 4 - Submission of Matters to a vote of Security Holders (partners) 7 Part II Item 5 - Market for the Registrants Partners Capital and related matters 7 Item 6 - Selected Financial Data 7-9 Item 7 - Managements Discussion and Analysis of Financial Condition and Results of Operations 10-11 Item 8 - Financial Statements and Supplementary Data 12-39 Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 40 Part III Item 10 - Directors and Executive Officers of the Registrant 40 Item 11 - Executive Compensation 41 Item 12 - Security Ownership of Certain Beneficial Owners and management 42 Item 13 - Certain Relationships and Related Transactions 42 Part IV Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K. 42-43 Signatures 44 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, 1996 Commission file number 33-49946 - -------------------------------------------------------------------------------- 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 (415) 365-5341 - -------------------------------------------------------------------------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered - ------------------------------------------------------------------------------- Limited Partnership Units None - ------------------------------------------------------------------------------- Securities registered pursuant to Section 12(g) of the Act: Limited Partnership 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, 1996, the limited partnership units purchased by non affiliates was 152,415.1480 units computed at $100.00 a unit for $15,241,514.80 Documents incorporated by reference: Portions of the Prospectus dated May 19, 1993, and a revised Prospectus came into effect on December 4, 1996, are incorporated in Parts II, III, and IV. Exhibits filed as part of Form S-11 Registration Statement #33-49946 are referenced in part IV. 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, 1996, the Partnership has investments in Mortgage Investments with principal balances totalling $15,642,990 with interest rates thereon ranging from 10.00% to 14.50%. Currently First Trust Deeds comprise 41.84% of the Mortgage Investment portfolio with Junior loans (2nd and 3rd Trust Deeds) making up 58.16%. Owner-occupied homes, combined with non-owner occupied Mortgage Investments, total 26.19 % of the Mortgage Investment. Loans secured by apartments make up 16.12% of the total Mortgage Investments. Commercial Mortgage Investments, now comprising 57.69% of the portfolio, have increased 14.22% from last year. 74.49% of the total Mortgage Investments, are in six counties of the Bay Area, County of San Joaquin makes up 7.49% 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 $312,860 per Mortgage Investment, up from $231,678 in 1995. 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 41.79%. A 40% equity average on loan origination is generally considered very conservative. Generally, the more equity, the more protection for the lender. The Partnerships Mortgage Investment portfolio is in good condition with only one property in foreclosure as of the end of December, 1996. Item 2 - Properties At December 31, 1996, the Partnership owned one piece of property, a vacant lot, through foreclosure valued at $66,991. Additionally, the Partnership wholly owns a limited liability company (LLC), whose 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). In 1995, the Partnership chose to allow a senior lender to foreclose out its deed of trust on one of its secured investments. The Partnership has commenced a legal action to collect its debt and has recorded the sum involved as Other Receivables on the financial statements. Mortgage Investments as a Percentage of Total Mortgage Investments First Trust Deeds $6,545,779.70 Appraised Value of Properties 14,694,294.00 Total Investment as a % of Appraisal 44.55% Second Trust Deed Mortgage Investments 8,797,210.57 Third Trust Deed Mortgage Investments 300,000.00 First Trust Deeds due other Lenders 24,801,374.00 Second Trust Deeds due other Lenders 360,000.00 Total Debt $40,804,364.27 Appraised Property Value $70,100,408.00 Total Investments as a % of Appraisal 58.21% Number of Mortgage Investments Outstanding 50 Average Investment $312,859.81 Average Investment as a % of Net Assets 1.98% Average Investment as a % of Net Assets 2.13% Largest Investment Outstanding 1,450,000.00 Largest Investment as a % of Net Assets 9.19% Largest Investment as a % of Net Assets 9.86% Loans as a Percentage of Total Mortgage Investments First Trust Deeds 41.84% Second Trust Deeds 56.24% Third Trust Deeds 1.92% ----------------- Total 100.00% Mortgage Investments by Type of Property Amount Percent Owner Occupied Homes $1,808,920.97 11.56% Non-Owner Occupied Homes 2,288,035.93 14.63% Apartments 2,521,515.06 16.12% Commercial 9,024,518.31 57.69% ------------------ ------------ Total $15,642,990.27 100.00% The following is a distribution of Mortgage Investments outstanding as of December 31, 1996 by Counties. County Total Percent Mortgage Investments San Mateo $3,259,389.91 20.84% San Francisco 3,218,843.55 20.58% Santa Clara 3,024,309.66 19.33% Stanislaus 1,496,312.75 9.56% San Joaquin 1,171,192.57 7.49% Marin 1,128,849.46 7.22% Contra Costa 624,343.77 3.99% Santa Barbara 416,828.99 2.66% Alameda 396,587.00 2.53% San Luis Obispo 300,000.00 1.92% Fresno 129,384.67 0.83% Mendocino 125,000.00 0.80% El Dorado 118,810.72 0.76% Sonoma 88,732.76 0.57% Tuoloume 87,507.78 0.56% Sacramento 56,896.68 0.36% ------------------------ ----------- Total $15,642,990.27 100.00% Statement of Condition of Mortgage Investments Number of Mortgage Investments in Foreclosure 1 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 abest 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 to 1995 for prior partnerships are incorporated by reference to the Prospectus (S-11) dated December 4, 1996, Table III pages 104 through 138. Financial condition and results of operation for the Partnership for three years to December 31, 1996 were: Balance Sheet Assets
December 31, ------------------------------------------------------ 1996 1995 1994 -------------- ------------- -------------- Cash $664.434 $380,318 $397,176 Accounts Receivable: Mortgage investments secured by Deeds of Trust 15,642,990 12,047,252 6,484,707 Accrued interest and other fees 196,530 113,301 75,345 Advances on Mortgage Investments 8,679 8,431 1,053 Other receivables - Unsecured 75,334 71,316 0 Less allowance for losses (117,803) (39,152) (13,120) Investment in Limited Liability Corporation 191,139 0 0 Real estate owned, net 66,991 0 0 Formation loan due from Redwood Mortgage 1,073,706 775,229 525,256 Organization cost net of amortization 4,375 6,875 9,375 Prepaid Expenses 20,720 17,718 0 Due from General Partners/Related Companies 311 3,049 0 -------------- ------------- -------------- $17,827,406 $13,384,337 $7,479,792 -------------- ------------- -------------- -------------- ------------- -------------- $16,753,700 $12,609,108 $6,954,536 -------------- ------------- -------------- Liabilities and Partners Capital December 31, ----------------------------------------------------- 1996 1995 1994 ------------- ------------- ------------- Liabilities: Deferred interest $217,480 $0 $0 Note payable - Bank 1,500,000 1,910,000 0 Accounts payable 20,625 4,010 0 Subscriptions to partnership in applicant status 310,937 0 189,300 -------------- ------------- ------------- $2,049,042 $1,914,010 $189,300 -------------- ------------- ------------- Partners Capital 15,778,364 11,470,327 7,290,492 Limited partners subject to redemption 14,693,293 10,687,031 6,759,865 General Partners 11,365 8,067 5,371 -------------- ------------- ------------- $14,704,658 $10,695,098 $6,765,236 -------------- ------------- ------------- $17,827,406 $13,384,337 $7,479,792 ============== ============= ============= $16,753,700 $12,609,108 $6,954,536 ============== ============= =============
Statement of Income
Gross revenue $1,570,723 $964,780 $468,546 Gross revenue $1,726,635 $1,050,236 $497,673 Expenses 337,198 109,039 44,234 --------------- ------------ ----------- Expenses 493,110 194,495 73,361 --------------- ------------ ----------- Income before interest credited to Partners in applicant 1,233,525 855,741 424,312 status Interest credited to Partners in applicant status 2,618 18,908 14,443 --------------- ------------ --- ----------- Net Income $1,230,907 $836,833 $409,869 =============== ============ =========== Net income to General Partners (1%) $12,309 $8,368 $4,099 =============== ============ =========== Net Income to Limited Partners (99%) $1,218,598 $828,465 $405,770 =============== ============ =========== Net Income per $1,000 invested by Limited Partners for entire period (annualized) - where income is reinvested and compounded $84 $83 $81 =============== ============ =========== - where partner receives income in monthly $81 $80 $79 distributions =============== ============ =========== The financial results for the year ending December 31, 1994, reflects net income of $409,869 which is an annualized yield of approximately 8.16% based on the average amount invested during the year. Annualized yield for 1995 was 8.33%, and for 1996 was 8.39%. An average annualized yield since inception through December 31, 1996, was 8.36%.
Item II MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS On December 31, 1996, the Partnership was in the offering stage of its second offering, and contributed capital totalled $15,242,954 (Limited Partners). Of this amount, $310,937 remained in applicant status. The Partnership has sought and received approval of an additional offering of $30,000,000 from the Securities and Exchange Commission, the State of California and the NASD, effective on December 4, 1996. Accordingly, the Partnership had approval of an aggregate offering of $45,000,000 in Units of $100 each. At December 31, 1996, the Partnerships Mortgage Investments outstanding totalled $15,642,990. The primary reason for an increase in Mortgage Investments Outstanding to $6,484,707, $12,047,252 and $15,642,990 was the additional capital admitted to the Partnership through sale of Limited Partnership Units and subsequent admittance of Partners Capital of $4,508,824, $3,834,799 and $3,863,536, and through the reinvestment of earnings by partners who have elected to reinvest earnings of $205,607, $439,492 and $683,695 for the years ended December 31, 1994, December 31, 1995 and December 31, 1996 respectively and to a lesser extent, from the line of credit. The effect of more outstanding Mortgage Investments raised the interest on Mortgage Investments for the years ended 1994, 1995 and 1996 to $480,110, $1,031,029 and $1,718,208 respectively. Interest rates on Mortgage Investments ranged from 10.00% to 14.50%. The Partnership began funding Mortgage Investments on April 14, 1993 and as of December 31, 1996, distributed earnings at an average annualized yield of 8.36%. Currently, mortgage interest rates have decreased a little from those prevalent at the inception of the Partnership. New loans will be originated at these lower interest rates. The result is to reduce the average return across the entire Mortgage Investment portfolio held by the Partnership. In the future, interest rates likely will change from their current levels. The General Partners cannot at this time predict at what levels interest rates will be in the future. Although the rates charged by the Partnership are influenced by the level of interest rates in the market, the General Partners do not anticipate that rates charged by the Partnership to its borrowers will change significantly from the beginning of 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-. 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 $5,000,000. For the years ended 1995 and 1996 Interest on Note Payable-Bank was $25,889 and $188,635 respectively. The primary reason for this increase was that the Partnership did not have access to the credit facility until September, 1995. Therefore, the usage of the credit line in 1995 was limited to the last quarter of the calendar year. Currently, it has borrowed $1,500,000 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 because 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. As a result, once the principal and interest is paid to the bank, the amount to be retained by the Partnership will be greater than without the use of the line of credit. As of December 31, 1996, the balance remained at $1,500,000 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 nineteen 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. The General Partners are regularly reviewing the Mortgage Investments portfolio, examining the status of delinquencies, the underlying collateral securing these properties, 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. Currently loss reserves are $117,803 which the General Partners consider 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 reflective in increasing property values, in job growth, personal income growth, etc., which all translates into more loan activity. Which of course, is healthy for our 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 and December 31, 1996 the Partnership made distributions of earnings to Limited Partners after allocation of syndication costs of, $303,477 and $418,380 respectively. Distribution of Earnings to Limited Partners after allocation of syndication costs for the years ended December 31, 1995 and December 31, 1996 to Limited Partners capital accounts and not withdrawn was $439,942 and $683,695 respectively. As of December 31, 1995 and December 31, 1996 Limited Partners electing to withdraw earnings represented 40% and 34% of the Limited Partners outstanding capital accounts. The Partnership also allows the Limited Partners to withdraw their capital account subject to certain limitations (see liquidation provisions of Partnership Agreement). For the years ended December 31, 1995 and December 31, 1996, $5,640 and $146,755 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 would expect in their experience in this and other Partnership. 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 we are 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 and December 31, 1996 respectively and is expected by the General Partners to commonly occur at these levels. Additionally, for the years ended December 31, 1995 and December 31,1996 $0 and $0 were liquidated by Limited Partners who have elected a liquidation program over a period of five years or longer. Once the initial five year hold period has passed the General Partners expect to see an increase in liquidations due to the ability of Limited Partners to withdraw without penalty. This ability to withdraw after five years by Limited Partners has the effect of providing Limited Partner liquidity which the General Partners then expect a portion of the Limited Partners to avail themselves of. This has the anticipated effect of the partnership growing, primarily through reinvestment of earnings in years one through five. The General Partners expect to see increasing numbers of Limited Partner withdrawals in years five through eleven, at which time the bulk of those Limited Partners who have sought withdrawal have been liquidated. After year eleven, the gross figures generally should subside and the Partnership capital again tends to increase. 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, 1996, and December 31, 1995, - Statements of Income for the three years ended December 31, 1996. - Statements of Partners Capital for the three years ended December 31, 1996 - Statements of Cash Flows for the three years ended December 31, 1996. - Notes to Financial Statements - December 31, 1996. B-Financial Statement Schedules The following financial statement schedules of Redwood Mortgage Inventors VIII are included in Item 8. - Schedule VIII - Valuation of Qualifying Accounts, - Schedule II, - Amounts receivable from related parties and underwriters, promoters, and employees other than related parties - Schedule XII - Mortgage Investments on real estate. - Schedule IX - Short Term Borrowings. 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. REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) FINANCIAL STATEMENTS DECEMBER 31, 1996 (With Auditors Report Thereon) 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, 1996 and 1995 and the statements of income, changes in partners capital and cash flows for the three years ended December 31, 1996. These financial statements are the responsibility of the Partnerships management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of REDWOOD MORTGAGE INVESTORS VIII as of December 31, 1996 and 1995, and the results of its operations and cash flows for the three years ended December 31, 1996, in conformity with generally accepted accounting principles. Further, it is our opinion that the schedules referred to above present fairly the information set forth therein in compliance with the applicable accounting regulations of the Securities and Exchange Commission. As explained in notes 2 (k) and 11 to the financial statements, the formation loan receivable from Redwood Mortgage has been reclassified as a reduction in Partners Capital until collections are received. There was no effect on net income. /S/ A. Bruce Cropper PARODI & CROPPER Lafayette, California February 28, 1997 REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) BALANCE SHEETS DECEMBER 31, 1996 AND 1995 ASSETS
1996 1995 --------------- --------------- Cash $664,434 $380,318 --------------- --------------- Accounts receivable: Mortgage Investments, secured by deeds of trust 15,642,990 12,047,252 Accrued Interest on Mortgage Investments 196,530 113,301 Advances on Mortgage Investments 8,679 8,431 Accounts receivables, unsecured 75,334 71,316 --------------- --------------- 15,923,533 12,240,300 Less allowance for doubtful accounts 117,803 39,152 --------------- --------------- 15,805,730 12,201,148 --------------- --------------- Real Estate owned, acquired through foreclosure, at estimated net realizable value held for sale 66,991 0 Investment in limited liability corporation, at cost which approximates market 191,139 0 Formation loan due from Redwood Mortgage 1,073,706 775,229 Organization costs, less accumulated amortization of $8,125 and $5,625, respectively 4,375 6,875 Due from related companies 311 3,049 Prepaid expense-deferred loan fee 20,720 17,718 --------------- --------------- $17,827,406 $13,384,337 =============== =============== $16,753,700 $12,609,108
REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) BALANCE SHEETS DECEMBER 31, 1996 AND 1995 LIABILITIES AND PARTNERS CAPITAL
Liabilities: Accounts payable and accrued expenses $20,625 $4,010 Note payable - bank line of credit 1,500,000 1,910,000 Deferred interest income 217,480 0 Subscriptions to partnership in applicant status 310,937 0 --------------- --------------- 2,049,042 1,914,010 Partners Capital 15,778,364 11,470,327 --------------- --------------- $17,827,406 $13,384,337 =============== =============== Partners Capital: Limited partners capital, subject to redemption (note 4E): Net of unallocated syndication costs of $414,190 and $322,677 for 1996 and 1995, respectively: and formation loan receivable of $1,073,706 and $775,229 for 1996 and 1995, respectively 14,693,293 10,687,031 General Partners Capital, net of unallocated syndication costs of $4184 and $3,258 for 1996 and 1995 respectively 11,365 8,067 --------------- --------------- Total Partners Capital 14,704,658 10,695,098 --------------- --------------- Total Liabilities and Partners Capital $16,753,700 $12,609,108 =============== =============== See accompanying notes to financial statements.
REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) STATEMENTS OF INCOME FOR THE THREE YEARS ENDED DECEMBER 31, 1996
YEARS ENDED DECEMBER 31, ---------------------------------------------------- 1996 1995 1994 ------------- -------------- -------------- Revenues: Interest on Mortgage Investments $1,562,296 $945,573 $450,983 Interest on Mortgage Investments $1,718,208 $1,031,029 $480,110 Interest on bank deposits 4,083 13,120 15,739 Late charges 3,847 3,876 1,704 Miscellaneous 497 2,211 120 ------------- -------------- -------------- ------------- -------------- -------------- 1,570,723 964,780 468,546 ------------- -------------- -------------- 1,726,635 1,050,236 497,673 Expenses: Mortgage servicing fees 155,912 85,456 29,127 Interest on note payable - bank 188,638 25,889 0 Amortization of loan origination fees 11,999 2,531 0 Provision for doubtful accounts and losses on real estate acquired through foreclosure 55,383 26,032 13,120 Asset management fee - General Partner 17,053 11,587 5,906 Amortization of organization costs 2,500 2,500 2,500 Clerical costs through Redwood Mortgage 38,799 22,769 10,664 Professional services 17,687 16,178 10,244 Printing, supplies and postage 1,192 92 917 Other 3,947 1,461 883 ------------- -------------- -------------- 337,198 109,039 44,234 ------------- -------------- -------------- 493,110 194,495 73,361 Income before interest credited to partners in applicant 1,233,525 855,741 424,312 status Interest credited to partners in applicant status 2,618 18,908 14,443 ------------- -------------- -------------- Net Income $1,230,907 $836,833 $409,869 ============= ============== ============== Net income: To General Partners(1%) $12,309 $8,368 $4,099 To Limited Partners (99%) 1,218,598 828,465 405,770 ============= ============== ============== Total - net income $1,230,907 $836,833 $409,869 ============= ============== ============== Net income per $1,000 invested by Limited Partners for entire period: - -where income is reinvested and compounded $ 84 $ 83 $ 81 ============= ============== ============== - -where partner receives income in monthly distributions $ 81 $ 80 $ 79 ============= ============== ============== See accompanying notes to financial statements.
REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) STATEMENTS OF CHANGES IN PARTNERS CAPITAL FOR THE THREE YEARS ENDED DECEMBER 31, 1996
PARTNERS CAPITAL -------------------------------------------------------------- PARTNERS IN UNALLOCATED APPLICANT GENERAL LIMITED SYNDICATION STATUS PARTNERS PARTNERS COSTS TOTAL -------------- ------------- ----------- ---------------- -------- Balances at December 31, 1993 128,772 2,887 2,809,535 (190,342) 2,622,080 Contributions on application 4,560,683 0 0 0 0 Interest credited to partners in 14,443 0 0 0 0 applicant status Upon admission to partnership: Interest withdrawn (5,774) 0 0 0 0 Transfers to Partners capital (4,508,824) 4,542 4,504,282 0 4,508,824 Net income 0 4,099 405,770 0 409,869 Syndication costs incurred 0 0 0.00 (81,023) (81,023) Allocation of syndication costs 0 (347) (34,349) 34,696 0 Partners withdrawals 0 (3,444) (165,814) 0 (169,258) ----------- ---------- ----------- ----------- ------------ Balances at December 31, 1994 189,300 7,737 7,519,424 (236,669) 7,290,492 Contributions on application 3,634,264 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) 3,588 3,831,211 0 3,834,799 Net income 0 8,368 828,465 0 836,833 Syndication costs incurred 0 0 0 (175,334) (175,334) Allocation of syndication costs 0 (859) (85,045) 85,904 0 Partners withdrawals 0 (7,509) (308,554) 0 (316,063) Early withdrawal penalties 0 0 (564) 164 (400) ----------- ---------- ----------- ----------- ------------ Balances at December 31, 1995 $0 11,325 11,784,937 (325,935) 11,470,327 Contributions on application 4,172,718 0 0 0 0 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) 4,224 3,859,312 0 3,863,536 Net income 0 12,309 1,218,598 0 1,230,907 Syndication costs incurred 0 0.00 0.00 (214,689) (214,689) Allocation of syndication costs 0 (1,177) (116,523) 117,700 0 Partners withdrawals 0 (11,132) (553,027) 0 (564,159) Early withdrawal penalties 0 0.00 (12,108) 4,550 (7,558) ----------- ---------- ----------- ----------- ------------ Balances at December 31, 1996 310,937 15,549 16,181,189 (418,374) 15,778,364 =========== ========== =========== =========== ============ See accompanying notes to financial statements
REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) STATEMENTS OF CHANGES IN PARTNERS CAPITAL FOR THE THREE YEARS ENDED DECEMBER 31, 1996
PARTNERS CAPITAL -------------------------------------------------------------- LIMITED PARTNERS CAPITAL -------------------------------------------------------------- Capital Partners In Account Unallocated Formation Applicant Limited Syndication Loan Status Partners Costs Receivable Total -------------- ------------ ------------- ------------ ------------ Balances at December 31, 1993 $128,772 $2,809,535 $(188,439) $(205,954) $2,415,142 Contributions of Application 4,560,683 0 0 0 0 Formation loan increases 0 0 0 (319,302) (319,302) Interest credited to partners in 14,443 0 0 0 0 applicant status Upon admission to partnership: Interest withdrawn (5,774) 0 0 0 0 Transfers to Partners capital (4,508,824) 4,504,282 0 0 4,504,282 Net Income 0 405,770 0 0 405,770 Syndication costs incurred 0 0 (80,213) 0 (80,213) Allocation of syndication costs 0 (34,349) 34,349 0 0 Partners withdrawals 0 (165,814) 0 0 (165,814) -------------- ------------ ------------- ------------ ------------ 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 ============== ============ ============= ============ ============ See accompanying notes to financial statements
REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) STATEMENTS OF CHANGES IN PARTNERS CAPITAL FOR THE THREE YEARS ENDED DECEMBER 31, 1996
PARTNERS CAPITAL ------------------------------------------------------------------------------ GENERAL PARTNERS CAPITAL ---------------------------------------------------------- Capital Unallocated Total Account Syndication Total Partners General Costs Capital Partners ---------------- ----------------- ----------------- --------------- Balances at December 31, 1993 $2,887 $(1,903) $984 $2,416,126 Contributions of Application 0 0 0 0 Formation loan increases 0 0 0 (319,302) 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 4,542 0 4,542 4,508,824 Net Income 4,099 0 4,099 409,869 Syndication costs incurred 0 (810) (810) (81,023) Allocation of syndication costs (347) 347 0 0 Partners withdrawals (3,444) 0 (3,444) (169,258) ---------------- ----------------- ----------------- --------------- 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 ================ ================= ================= =============== See accompanying notes to financial statements
REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) STATEMENTS OF CASH FLOWS FOR THE THREE YEARS ENDED DECEMBER 31, 1996
YEARS ENDED DECEMBER 31, --------------------------------------------------- 1996 1995 1994 -------------- ------------- ------------- Cash flows from operating activities: Net income $1,230,907 $836,833 $409,869 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of organization costs 2,500 2,500 2,500 Provision Increase in allowance for doubtful accounts. 78,651 26,032 13,120 Provision for losses (gains) on real estate held for sale (23,268) 0 0 Increase in accounts payable 16,615 4,010 0 (Increase) in accrued interest & advances (83,477) (45,334) (63,008) (Increase) decrease in amount due from related companies 2,738 (3,049) 2,493 (Increase) in deferred loan fee (3,002) (17,718) 0 (Increase) in deferred interest income 217,480 0 0 -------------- ------------- ------------- Net cash provided by operating activities 1,462,412 803,274 364,974 -------------- ------------- ------------- Net cash provided by operating activities 1,439,144 803,274 364,974 Cash flows from investing activities: Net (increase) decrease in: Mortgage Investments (3,595,738) (5,562,545) (4,148,033) Formation loan (298,477) (249,973) (319,302) Accounts receivables, unsecured (4,018) (71,316) 0 Real estate acquired through foreclosure (66,991) 0 0 Investment in limited liability corporation (191,139) 0 0 -------------- ------------- ------------- Net cash used in investing activities (4,156,363) (5,883,834) (4,467,335) -------------- ------------- ------------- Principal collected on Mortgage Investments 9,019,190 1,508,190 1,641,847 Mortgage Investments made (13,148,944) (7,133,221) (5,789,880) Disposition of real estate held for sale 299,154 0 0 Accounts receivables, unsecured (4,018) (8,830 0 --------------- ------------- ------------- Net cash used in investing activities (3,834,618) (5,633,861) (4,148,033) --------------- ------------- ------------- (continued on next page) (continued from previous page) REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) STATEMENTS OF CASH FLOWS FOR THE THREE YEARS ENDED DECEMBER 31, 1996 1996 1995 1994 --------------- ------------- ------------- Cash flows from financing activities Increase (decrease) in note payable-bank (410,000) 1,910,000 0 Contributions by partner applicants 4,172,718 3,634,264 4,560,683 Interest credited to partners in applicant status 2,618 18,908 14,443 Interest withdrawn by partners in applicant status (863) (7,673) (5,774) Partners withdrawals (564,159) (316,063) (169,258) Early withdrawal penalties, net (7,558) (400) 0 Syndication costs incurred (214,689) (175,334) (81,023) Formation loan increases (314,996) (250,373) (319,302) Formation loan collections 8,961 0 0 --------------- ------------- ------------- Net cash provided by financing activities 2,978,067 5,063,702 4,319,071 Net cash provided by financing activities 2,679,590 4,813,729 3,999,769 --------------- ------------- ------------- Net increase (decrease) in cash and cash equivalents 284,116 (16,858) 216,710 Cash - beginning of period 380,318 397,176 180,466 --------------- ------------- ------------- Cash - end of period $664,434 $380,318 $397,176 =============== ============= ============= See accompanying notes to financial statements.
REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 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 loans 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, 1996, the Partnership was in the offering stage, wherein contributed capital totalled $15,242,954 in limited partner contributions of an approved aggregate offering of $45,000,000, in units of $100 each (152,429). Of this amount, $310,937 remained in applicant status. 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) of which the total of $310,937 was in applicant status at December 31, 1996. 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 will loan 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 must commence on January 1, following the year the initial offering closes, which was in 1996. The Formation Loan relating to the second offering ($30,000,000) totalled $15,384 at December 31, 1996, which was 4.9% of the limited partners contributions of $310,937. 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 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 to be made by December 31, 1997. Upon completion of the offering, the balance will be repaid in ten equal annual installments. The following summarizes Formation Loan transactions to December 31, 1996: Initial Subsequent Total Offering of Offering of $15,000,000 $30,000,000 --------------- --------------- ---------------
Limited Partner contributions $14,932,017 $310,937 $15,242,954 =============== =============== =============== Formation Loan made $1,074,840 15,384 1,090,224 Payments to date (8,960) 0 (8,960) Early withdrawal penalties applied (7,558) 0 (7,558) --------------- --------------- --------------- Balance December 31, 1996 $1,058,322 $15,384 $1,073,706 =============== =============== =============== Percent loaned of Partners contributions 7.2% 4.9% 7.2% =============== =============== ===============
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 (see note 11). 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, 1996, organization costs of $12,500 and syndication costs of $670,610 had been incurred by the Partnership with the following distribution: Syndication Costs -------------------------------------------- Offering ---------------------------- Initial Subsequent Organization 15,000,000 30,000,000 Total Costs Total ----------- ----------- ----------- --------- ----------
Costs incurred $569,865 100,745 670,610 12,500 683,110 Early withdrawal penalties (4,714) 0 (4,714) 0 (4,714) applied Allocated and amortized to (247,522) 0 (247,522) (8,125) (255,647) date ----------- ---- ----------- --- ----------- ---- --------- ---- ---------- December 31, 1996 balance $317,629 100,745 418,374 4,375 422,749 =========== ==== =========== === =========== ==== ========= ==== ==========
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, 1996, syndication costs attributable to the subsequent offering ($30,000,000) totalled $100,745, 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. REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Revenues and expenses are accounted for on the accrual basis of accounting. The Partnership bears its own organization and syndication costs (other than certain sales commissions and fees described above) including legal and accounting expenses, printing costs, selling expenses, 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. When property is acquired through foreclosure, it is held for sale to return the funds to the Mortgage Investment portfolio. Such property is recorded at cost which includes the principal balance of the former Mortgage Investment made by the Partnership, plus accrued interest, payments made to keep the senior loans current, costs of obtaining title and possession, less rental income, or at estimated net realizable value, if less. The difference between such costs and estimated net realizable value is included in an allowance for losses and deducted from cost in the Balance Sheet to arrive at the carrying value of such property. ($66,991 at December 31, 1996). Mortgage Investments and the related accrued interest, fees and advances are analyzed on a continuous basis for recoverability. Delinquencies are identified and followed as part of the Mortgage Investment system. A provision is made for doubtful account to adjust the allowance for doubtful accounts to an amount considered by management to be adequate to provide for unrecoverable accounts receivable. In preparing the financial statements, management is required to make estimates based on the information available that affect the reported amounts of assets and liabilities as of the balance sheet date and revenues and expenses for the related periods. Such estimates relate principally to the determination of the allowance for doubtful accounts and the valuation of real estate acquired through foreclosure. Actual results could differ significantly from these estimates. No provision for Federal and State income taxes will be made in the financial statements since income taxes are the obligation of the partners if and when income taxes apply. Amounts reflected in the statements of income as net income per $1,000 invested by Limited Partners for the entire period are actual amounts allocated to Limited Partners who have their investment throughout the period and have elected to either leave their earnings to compound or have elected to receive monthly distributions of their net income. Individual income is allocated each month based on the Limited partners pro rata share of Partners Capital. Because the net income percentage varies from month to month, amounts per $1,000 will vary for those individuals who made or withdrew investments during the period, or select other options. However, the net income per $1,000 average invested has approximated those reflected for those whose investments and options have remained constant. NOTE 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 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, 1996, 1995, and 1994, 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 58.21%. 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, 1996, there was one such piece of property with costs totaling $71,991 less a reduction of $5,000 to arrive at the net fair value of $66,991. REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 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 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, 1996, and 1995 was as follows: December 31, ---------------------------------- 1996 1995 ---- ----- Impaired mortgage investments $0 $0 Unspecified mortgage investments 72,803 9,152 Amounts receivable, unsecured 45,000 30,000 ---------- ----------- $117,803 $39,152 =============== ===============
REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 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. K. Reclassifications and Changes in Presentation Certain reclassifications not affecting net income have been made to prior year amounts to conform to the current year presentation. In addition, the formation loan previously categorized as an asset has been deducted from Limited Partners Capital until collected from Redwood Mortgage, an affiliate of the General Partners (see note 11). 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 brokerage commissions will be limited to an amount not to exceed 4% of the total Partnership assets per year. The mortgage brokerage commissions are paid by the borrowers, and thus, not an expense of the partnership. 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. Currently, such servicing fees are at 1/12 of 1% per month (1% annually). Amounts remitted to the Partnership and recorded as interest on Mortgage Investments is net of such fees. In 1994, $15,278 of the total mortgage servicing fees of $44,405 were waived by Redwood Mortgage. In 1995, and 1996, Redwood Mortgage received the total mortgage servicing fees earned of $85,456 and $155,912 respectively. Mortgage servicing fees of $155,912, $85,456 and $29,127 were incurred for years 1996, 1995 and 1994 respectively. C. Asset Management Fee The General Partners will receive a monthly fees for managing the Partnerships Mortgage Investment portfolio and operations equal to 1/32 of 1% of the net asset value (3/8 of 1% annual). Fees were reduced by the General Partners from $17,718 to $5,906 in 1994, with the difference being waived. In 1995, and 1996, fees were reduced from $34,773 to $11,587 and from $51,158 to $17,053 respectively, with the differences being waived by the General Partners. Management fees of $17,053, $11,587 and $5,906 were incurred for years 1996, 1995 and 1994, respectively. REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 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, 1996 a General Partner, GYMNO Corporation, had contributed $15,241, 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, 1996, 1995, and 1994, interest totalling $2,618, $18,908 and $14,443 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, an investor may subsequently change his election. 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. REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 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 of up to $5,000,000 at .5% over prime secured by its Mortgage Investment portfolio. The note payable balances were $1,500,000 and $1,910,000 at December 31, 1996, and 1995, respectively, and the interest rate was 8.75% at December 31, 1996, (8.25% prime plus .50%). 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 will complete the construction and sell the property. The Partnership expects to realize a profit from the venture. REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 NOTE 8 - INCOME TAXES The following reflects a reconciliation from net assets (Partners Capital) reflected in the financial statements to the tax basis of those net assets: December 31, ------------------------------------------ 1996 1995 ----------------- --------------- Net Assets - Partners Capital per financial statements $14,704,658 $10,695,098 Unamortized syndication costs 418,374 325,935 Allowance for doubtful accounts 117,803 39,152 ----------------- --------------- Formation loans receivable 1,073,706 775,229 ----------------- --------------- Net assets tax basis $16,314,541 $11,835,414 ================= ===============
In 1996, approximately 55% 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 $15,642,990. The fair value of these investments of $16,451,970 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. NOTE 8 10- ASSET CONCENTRATIONS AND CHARACTERISTICS The Mortgage Investments are secured by recorded deeds of trust. At December 31, 1996, there were 50 Mortgage Investments outstanding with the following characteristics: Number of Mortgage Investments outstanding 50 Total Mortgage Investments outstanding $15,642,990 Average Mortgage Investment outstanding $312,860 Average Mortgage Investment as percent of total 2.00% Average Mortgage Investment as percent of Partners Capital 1.98% Average Mortgage Investment as percent of Partners Capital 2.13% Largest Mortgage Investment outstanding $1,450,000 Largest Mortgage Investment as percent of total 9.27% Largest Mortgage Investment as percent of Partners Capital 9.19% Largest Mortgage Investment as percent of Partners Capital 9.86% Number of counties where security is located (all California) 16 Largest percentage of Mortgage Investments in one county 20.84% Average Mortgage Investment to appraised value of security at time loan was consummated 58.21% Number of Mortgage Investments in foreclosure status 1 Amount of Mortgage Investments in foreclosure $118,811 The following categories of mortgage investments are pertinent at December 31, 1996 and 1995: December 31, ------------------------------------------ 1996 1995 ----------------- --------------- First Trust Deeds $6,545,779 $4,996,887 Second Trust Deeds 8,797,211 7,050,365 Third Trust Deeds 300,000 0 ----------------- --------------- Total mortgage investments 15,642,990 12,047,252 Prior liens due other lenders 25,161,374 26,965,234 ----------------- --------------- Total debt $40,804,364 $39,012,486 ================= =============== Appraised property value at time of loan $70,100,408 $61,347,449 ================= =============== Total investments as a percent of appraisals 58.21% 63.59% ================= =============== Investments by Type of Property Owner occupied homes $1,808,921 $2,300,576 Non-Owner occupied homes 2,288,036 1,844,507 Apartments 2,521,515 2,664,963 Commercial 9,024,518 5,237,206 ================= =============== $15,642,990 $12,047,252 ================= =============== The interest rates on the mortgage investments range from 10.00% to 14.50% at December 31, 1996.
Scheduled maturity dates of mortgage investments as of December 31, 1996 are as follows: Scheduled maturity dates of mortgage investments as of December 31, 1996 are as follows: Year Ending December 31, ------------------- 1997 $2,381,155 1998 3,268,418 1999 2,427,585 2000 2,377,963 2001 2,865,997 Thereafter 2,321,872 =============== $15,642,990 =============== The scheduled maturities for 1997 include approximately $468,000 in loans which are past maturity at December 31, 1996. Interest payment on these loans are current.. One loan in the principal amount of $118,811 had interest paid through September 1, 1996, and is in foreclosure. That loan 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, 1996 of $664,434 was in one bank with interest bearing balances totalling $605,871. The balances exceeded FDIC insurance limits (up to $100,000 per bank) by $564,434. NOTE 11 - CHANGE IN PRESENTATION The formation loan receivable from Redwood Mortgage, an affiliate of the General Partners, has been categorized as a reduction in Limited Partners Capital, the source of the funds. It was previously reflected as an asset. As payments are received, or early withdrawal penalties realized, the formation loan balance will be reduced and restored to Limited Partners Capital. The total of the formation loan outstanding was $1,073,706 and $775,229 at December 31, 1996 and 1995, respectively. In addition, Limited Partners Capital and General Partners Capital are reflected separately in the Balance Sheet, whereas they were previously reflected separately in the Statement of Changes in Partners Capital. 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 12/31/95 (1) (2) (1) (2) Amounts Amounts Current Not Current collected written off 12/31/96 Redwood Mortgage $775,229 $314,996 $8,960 $7,559 $0.00 $1,073,706 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 represents the proportionate amount of early withdrawal penalties allocated to the formation loan as provided in the prospectus.
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 (credited) Costs & Expenses to Other accounts - Describe
Year Ended 12/31/96 Deducted from Asset accounts: Allowance for Doubtful accts $39,152 $78,651 $0 0.00 $117,803 Cumulative write-down of Real Estate held for sale (REO) $0 (23,268) (28,268) 0 5,000 - ------------------ ----------------- ------------------- ------------------- ---------------- ---------------- Totals $39,152 $55,383 $(28,268)(a) $0 $122,803 (a) represents gain on disposition of REO
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 amount of amount of Lien County Date Terms Mortgage Mortgage Mortgage Location Investments Investments Investments (original subject to amount) Delinq. Principal or Interest ========= ========= ========== ========== ========== ============ ============ ============ ========== ================
Apts 14.500% 01/01/94 1,570.84 164,805 130,000.00 130,000.0 0.00 2nd Mtg San Mateo Comm. 13.750% 10/01/96 458.33 0.00 40,000.00 40,000.00 0.00 1st Mtg Santa Clara Comm 12.500% 04/05/08 1,235.89 0.00 100,273.36 87,507.78 0.00 1st Mtg Tuolume Res. 12.000% 05/01/98 721.32 0.00 70,125.00 69,084.03 0.00 1st Mtg San Francisco 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 81,345.94 0.00 1st Mtg Alameda Comm 11.000% 09/01/05 846.15 846,019 67,500.00 56,896.68 0.00 2nd Mtg Sacramento Comm 12.000% 11/01/98 2,057.23 5,635 200,000.00 74,423.44 0.00 2nd Mtg San Francisco Comm 10.000% 12/01/98 1,689.33 0.00 192,500.00 190,039.09 0.00 1st Mtg Alameda Comm 12.000% 02/01/99 5,131.13 0.00 468,000.00 503,457.45 0.00 1st Mtg Santa Clara Res. 10.500% 03/01/99 402.49 0.00 44,000.00 43,334.36 0.00 1st Mtg Santa Clara Res 10.250% 04/01/97 797.79 63,244 93,400.00 88,732.76 0.00 2nd Mtg Sonoma Comm 12.000% 06/01/04 4,476.20 0.00 425,000.00 416,828.99 0.00 1st Mtg Santa Barbara Comm 10.750% 06/01/97 2,508.33 0.00 280,000.00 280,000.00 0.00 1st Mtg San Mateo Apts 11.500% 11/01/99 1,980.58 713,917 200,000.00 198,204.19 0.00 2nd Mtg San Joaquin Res. 11.000% 12/01/03 3,185.37 1,060,486 325,000.00 319,746.90 0.00 2nd Mtg San Francisco Res 11.000% 04/01/99 4,999.70 775,649 525,000.00 520,343.77 0.00 2nd Mtg Contra Costa Apts 11.500% 04/01/05 1,928.65 0.00 400,000.00 194,758.33 0.00 1st Mtg San Francisco Res. 11.500% 04/01/00 792.24 259,886 80,000.00 79,439.15 0.00 2nd Mtg San Mateo Comm 11.875% 05/01/05 2,088.00 0.00 200,000.00 197,605.96 0.00 1st Mtg San Francisco Comm 12.500% 07/01/00 1,387.44 0.00 130,000.00 129,384.67 0.00 1st Mtg Fresno Res 11.750% 07/01/00 802.36 74,551 66,000.00 65,201.97 0.00 2nd Mtg Alameda Apts 12.000% 08/01/00 6,951.28 3,033,304 660,000.00 653,937.66 0.00 2nd Mtg San Joaquin Res 11.000% 09/01/05 688.76 0.00 50,000.00 46,312.75 0.00 1st Mtg Stanislaus Comm 12.000% 11/30/98 7,500.00 3,000,000 750,000.00 750,000.00 0.00 2nd Mtg San Mateo Comm 12.000% 10/01/96 600.00 290,711 60,000.00 60,000.00 0.00 2nd Mtg Alameda Res 12.250% 10/01/96 2,476.18 395,597 250,000.00 238,000.00 0.00 2nd Mtg San Francisco Comm. 12.000% 12/31/99 10,500.00 5,691,116 1,050,000.00 1,050,000.00 0.00 2nd Mtg Santa Clara Res. 12.000% 04/30/97 7,078.21 0.00 770,000.00 687,851.60 0.00 1st Mtg Marin Apts 11.875% 01/01/01 4,330.76 0.00 425,000.00 423,554.55 0.00 1st Mtg San Mateo Res 11.875% 01/01/01 2,292.76 0.00 225,000.00 224,234.71 0.00 1st Mtg San Mateo Comm 12.500% 01/01/06 3,415.23 0.00 320,000.00 319,050.72 0.00 1st Mtg San Joaquin Comm 11.750% 02/01/99 1,018.34 0.00 104,000.00 104,000.00 0.00 1st Mtg Contra Costa Comm 11.875% 02/01/06 4,541.40 0.00 435,000.00 432,524.66 0.00 1st Mtg San Mateo Comm 12.000% 03/01/01 789.92 0.00 75,000.00 74,582.34 0.00 1st Mtg San Mateo Comm 12.000% 12/31/01 9,792.73 5,492,794 955,000.00 979,272.93 0.00 2nd Mtg Santa Clara Land 12.500% 04/01/98 3,125.00 574,089 300,000.00 300,000.00 0.00 3rd Mtg San Luis Obispo Comm 12.000% 03/15/98 4,000.00 300,000 400,000.00 400,000.00 0.00 2nd Mtg Santa Clara Res 11.500% 04/01/06 1,039.81 0.00 105,000.00 104,706.97 0.00 1st Mtg San Francisco Res 11.500% 02/27/97 1,197.92 150,301 125,000.00 125,000.00 0.00 2nd Mtg San Francisco Res 11.750% 11/01/97 2,904.47 0.00 325,000.00 290,572.52 0.00 1st Mtg San Mateo Res 12.000% 12/01/97 4,552.97 0.00 910,000.00 440,997.86 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 9,106.84 883,750 1,427,500.00 921,060.33 0.00 2nd Mtg San Francisco Res 11.500% 09/01/11 759.33 0.00 65,000.00 64,586.83 0.00 1st Mtg San Mateo Res 11.000% 08/30/98 4,079.17 372,417 445,000.00 445,000.00 0.00 2nd Mtg San Mateo Comm 12.000% 03/01/01 684.60 74,754 65,000.00 64,895.15 0.00 2nd Mtg San Mateo
Col. A Col. B Col. C Col. D Col. E Col. F Col. G Col. H Col. I Col. J Descp. Interest Final Periodic Prior Face Amt. Carrying Principal Type of Geographic Rate Maturity Payment Liens of amount of amount of Lien County Date Terms Mortgage Mortgage Mortgage Location Investments Investments Investments (original subject to amount) Delinq. Principal or Interest ========= ========== ========= ========== ========== ============ ============ ============ ========== ===============
Comm 11.750% 11/01/01 10,089.29 0.00 975,000.00 974,457.59 0.00 1st Mtg San Francisco Comm 12.000% 02/01/99 84.98 20,800 18,000.00 8,244.92 0.00 2nd Mtg Santa Clara Land 12.000% 01/01/00 14,500 880,313 1,450,000.00 1,450,000.00 0.00 2nd Mtg Stanislaus ---------- ---------- ------------ ------------ ------------ Total $160,595.13 $25,161,374.00 $17,113,798.36 $15,642,990.27 $118,810.72 Notes: None of the above loans is considered impaired. Therefore, none of them has been written down, although the allowance for doubtful accounts includes $72,803 relating to the above loans 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.
Schedule XII Reconciliation of carrying amount of Mortgage Investments at close of period (12/31/96)
Balance at beginning of period 1/01/96 $12,047,252 Additions during period: New Mortgage Investments $13,148,944 Other 0 $13,148,944 - ------------------------------------------------------------------- -------------------- ------------------- $25,196,196 Deduction during period: Collections of principal $9,019,190 Foreclosures 534,016 Cost of Mortgage Investments sold 0 Amortization of Premium 0 Other 0 $9,553,206 - ------------------------------------------------------------------- -------------------- ------------------- Balance at close of period (12/31/96) $15,642,990
Schedule XII Reconciliation of carrying amount (cost) of Mortgage Investments at close of periods
Year ended December 31, ---------------------------------------------------------- 1996 1995 1994 --------------- --------------- --------------- Balance at beginning of year $12,047,252 $6,484,707 $2,336,674 --------------- --------------- --------------- Additions during period: New Mortgage Investments 13,148,944 7,133,221 5,789,880 Other 0 0 0 --------------- --------------- --------------- Total Additions 13,148,944 7,133,221 5,789,880 --------------- --------------- --------------- Deductions during period: Collections of principal 9,019,190 1,508,190 1,641,847 Foreclosures 534,016 0 0 Cost of Mortgage Investments sold 0 0 0 Amortization of Premium 0 0 0 Other 0 62,486 0 --------------- --------------- --------------- Total Deductions 9,553,206 1,570,676 1,641,847 --------------- --------------- --------------- Balance at close of year $15,642,990 $12,047,252 $6,484,707 =============== =============== ===============
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 ======================= ================ =================== ===================== =================== =================== Year-Ended 12/31/96 $1,500,000 9.15% $3,000,000 $2,071,270 9.15%
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. 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, 1996. All such compensation is in compliance with the guidelines and limitations set forth in the Prospectus. Entity Receiving Compensation Description of Compensation Amount and Services Rendered - ------------------------------------- ------------------------------------------ I. Redwood Mortgage. Mortgage Servicing Fee for servicing Mortgage Investments...............$155,912 General Partners &/or Affiliate Asset Management Fee for managing assets................... $17,053 General Partners 1% interest in profits............ $12,309 Less allowance for syndication costs 1,177 ------ $11,132 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 $389,043 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 $10,333 II. 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. $38,799 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. 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. 33-49946 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 and revised Prospectus dated December 4, 1996, for financial data related to Gymno Corporation, a General Partner. 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 19th day of March, 1997. 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 19th day of March, 1997. Signature Title Date /S/ D. Russell Burwell - ---------------------- D. Russell Burwell General Partner March 19, 1997 /S/ Michael R. Burwell - ---------------------- Michael R. Burwell General Partner March 19, 1997 /S/ D. Russell Burwell - ----------------------- D. Russell Burwell President of Gymno Corporation, March 19, 1997 (Principal Executive Officer); Director of Gymno Corporation /S/ Michael R. Burwell - ----------------------- Michael R. Burwell Secretary/Treasurer of Gymno March 19, 1997 Corporation (Principal Financial and Accounting Officer); Director of Gymno Corporation EX-27 2 FDS --
5 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 664434 0 15923533 117803 0 0 0 0 16753700 0 0 2049042 0 0 14704658 16753700 0 1726635 0 249089 0 55383 191256 1230907 0 1230907 0 0 0 1230907 .00 .00
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