-----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, DItW7c6btPpRy1eAX5c+HP3o44U3nPa7mZw496p5QBVuQwVWhs4M3dypsN20AOO2 FXFRC3QP4yRCDBNm6Ix1zQ== 0000889123-98-000002.txt : 19980326 0000889123-98-000002.hdr.sgml : 19980326 ACCESSION NUMBER: 0000889123-98-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980325 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 SEC ACT: SEC FILE NUMBER: 000-27816 FILM NUMBER: 98572377 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 1 10K REDWOOD MORTGAGE INVESTORS VIII (a California Limited Partnership) Index to Form 10-K December 31, 1997 Part I Page No. Item 1 - Business 3 Item 2 - Properties 3-5 Item 3 - Legal Proceedings 6 Item 4 - Submission of Matters to a vote of Security Holders (partners) 6 Part II Item 5 - Market for the Registrants Partners Capital and related matters 6 Item 6 - Selected Financial Data 6-8 Item 7 - Managements Discussion and Analysis of Financial Condition and Results of Operations 9-10 Item 8 - Financial Statements and Supplementary Data 11-35 Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 36 Part III Item 10 - Directors and Executive Officers of the Registrant 36 Item 11 - Executive Compensation 37 Item 12 - Security Ownership of Certain Beneficial Owners and management 38 Item 13 - Certain Relationships and Related Transactions 38 Part IV Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K.38-39 Signatures 40 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the year ended December 31, 1997 Commission file number 333-13113 - ------------------------------------------------------------------------------- REDWOOD MORTGAGE INVESTORS VIII - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) California 94-3158788 - -------------------------- ----------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification) incorporation or organization) 650 El Camino Real Suite G, Redwood City, CA 94063 - -------------------------------------------------------------------------------- (address of principal executive offices) (zip code) Registrants telephone No. including area code (650) 365-5341 - -------------------------------------------------------------------------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered - ------------------------------------------------------ ------------------------- Limited Partnership Units None - -------------------------------------------------------------------------------- Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Units Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES XXX NO - ------- ------- As of December 31, 1997, the limited partnership units purchased by non affiliates was 204,896.7655 units computed at $100.00 a unit for $20,489,676.55 Documents incorporated by reference: Portions of the Prospectus dated May 19, 1993, and a new Prospectus came into effect on December 4, 1996, (the Prospectus) are incorporated in Parts II, III, and IV. Exhibits filed as part of Form S-11 Registration Statement #333-13113 are referenced in part IV. Part I Item 1 - Business Redwood Mortgage Investors VIII, a California limited partnership (the Partnership), is organized to engage in business as a mortgage lender, for the primary purpose of making loans secured primarily by first and second deeds of trust on California real estate. Loans are arranged and serviced by Redwood Home Loan Co., (dba Redwood Mortgage) an affiliate of the General Partners. The Partnerships objectives are to make loans that will: (i) yield a high rate of return from mortgage lending; and (ii) preserve and protect the Partnerships capital. Investors should not expect the Partnership to provide tax benefits of the type commonly associated with limited partnership tax shelter investments. The Partnership is intended to serve as an investment alternative for investors seeking current income. However, unlike other investments which are intended to provide current income, an investment in the Partnership will be less liquid, not readily transferable, and not provide a guaranteed return over its investment life. Initially, a minimum of 2,500 Units ($250,000) and a maximum of 150,000 Units $15,000,000) were sold. This initial offering closed on October 31, 1996. Subsequently, the Partnership commenced a second offering of up to 300,000 additional Units ($30,000,000) commencing on December 4, 1996. All units are being offered on a best efforts basis, which means that no one is guaranteeing that any minimum number of Units will be sold, through broker-dealer member firms of the National Association of Securities Dealers, Inc. (See TERMS OF THE OFFERING and PLAN OF DISTRIBUTION). The Partnership began selling Units in February, 1993, and began investing in mortgages in April, 1993. At December 31, 1997, the Partnership has investments in Mortgage Investments with principal balances totalling $25,304,989 with interest rates thereon ranging from 8.00% to 14.00%. Currently First Trust Deeds comprise 67.59% of the Mortgage Investment portfolio with Junior loans (2nd and 3rd Trust Deeds) making up 32.41%. Owner-occupied homes, combined with non-owner occupied Mortgage Investments, total 30.68% of the Mortgage Investment. Loans secured by multi-family properties make up 23.64% of the total Mortgage Investments. Commercial Mortgage Investments, now comprising 45.68% of the portfolio, have decreased 20.82% from last year. 84.04% of the total Mortgage Investments, are in six counties of the San Francisco Bay Area. The County of San Joaquin makes up 4.73% of the Mortgage Investments and the balance of Mortgage Investments are primarily in Northern California. Mortgage Investment size increased this past year, and is now averaging $460,091 per Mortgage Investment, up from $147,231 in 1996. This increase is due to the ability of the Partnership by virtue of its increasing size to invest in larger Mortgage Investments. The average Mortgage Investment as of December 31, 1997, represents 2.20% of Limited Partners capital and 1.82% of outstanding Mortgage Investments. Some of the Mortgage Investments are fractionalized between affiliated partnerships with objectives similar to those of the Partnership to further reduce risk. Average equity per loan transaction stood at 44.17%, an increase of 4.17% from the previous year. This average equity is generally considered very conservative. Generally, the more equity, the more protection for the lender. The General Partners believe the Partnerships Mortgage Investment portfolio is in good condition with only one property in foreclosure as of the end of December, 1997. Item 2 - Properties In 1995, the Partnership chose to allow a senior lender to foreclose out its deed of trust on one of its Mortgage Investments. The Partnership has commenced a legal action to collect this debt. As of December 31, 1997, $15,000 of the amount due has been collected. The remaining balance due has been recorded as an account receivable in the financial statements. Additional payments are expected in years 1998 and 1999. As of December 31, 1997, the Partnership owned a vacant lot acquired through the foreclosure of one of its Mortgage Investments. The vacant lot is valued at $70,138. Additionally, the Partnership wholly owns a limited liability company (LLC), whose sole asset is a partially completed single family residence. This partially completed single family residence was originally foreclosed upon by the Partnership and subsequently transferred to the LLC at a cost of $181,139. Additional expenditures over the $181,139 base, have been primarily for completion of the construction. A summary of the Partnerships Mortgage Investment Portfolio as of December 31, 1997, is set forth below. Mortgage Investments as a Percentage of Total Mortgage Investments First Trust Deeds $17,103,865.29 Appraised Value of Properties 39,159,062.00 Total Investment as a % of Appraisal 43.68% Second Trust Deed Mortgage Investments 8,163,623.62 Third Trust Deed Mortgage Investments 37,500.00 First Trust Deeds due other Lenders 23,704,918.00 Second Trust Deeds due other Lenders 519,648.00 Total Debt $49,529,554.91 Appraised Property Value $88,714,541.00 Total Investments as a % of Appraisal 55.83% Number of Mortgage Investments Outstanding 55 Average Investment $460,090.71 Average Investment as a % of Net Assets 2.20% Largest Investment Outstanding 2,100,000.00 Largest Investment as a % of Net Assets 10.03% Loans as a Percentage of Total Mortgage Investments First Trust Deeds 67.59% Second Trust Deeds 32.26% Third Trust Deeds 0.15% ----------------- Total 100.00% Mortgage Investments by Type of Property Amount Percent Owner Occupied Homes $2,445,423.26 9.66% Non-Owner Occupied Homes 5,318,721.42 21.02% Apartments 5,982,649.06 23.64% Commercial 11,558,195.17 45.68% ------------------ ------------ Total $25,304,988.91 100.00% The following is a distribution of Mortgage Investments outstanding as of December 31, 1997 by Counties. County Total Percent Mortgage Investments Alameda $6,036,017.84 23.85% San Francisco 5,889,597.32 23.27% San Mateo 5,256,978.68 20.78% Marin 1,975,170.49 7.81% Santa Clara 1,540,730.38 6.09% Stanisalus 1,450,000.00 5.73% San Joaquin 1,197,108.71 4.73% Contra Costa 658,880.01 2.60% Solano 480,000.00 1.90% Monterey 395,015.54 1.56% Fresno 128,880.24 0.51% Mendocino 125,000.00 0.49% El Dorado 118,810.72 0.47% Sacramento 52,798.98 0.21% ------------------------ ----------- Total $25,304,988.91 100.00% Statement of Condition of Mortgage Investments Number of Mortgage Investments in Foreclosure 1 Item 3 - Legal Proceedings In the normal course of business, the Partnership may become involved in various types of legal proceedings such as assignment of rents, bankruptcy proceedings, appointment of receivers, unlawful detainers, judicial foreclosure, etc., to enforce the provisions of the deeds of trust, collect the debt owed under the promissory notes, or to protect/ recoup its investment from the real property secured by the deeds of trust. None of these actions would typically be of any material importance. As of the date hereof, the Partnership is not involved in any legal proceedings other than those that would be considered part of the normal course of business. Item 4 - Submission of matters to vote of Security Holders (Partners). No matters have been submitted to a vote of the Partnership. Part II Item 5 - Market for the Registrants Units and Related Partnership Matters. 300,000 units at $100 each (minimum 20 units) are being offered (150,000 units were previously offered and sold) through broker-dealer member firms of the National Association of Securities Dealers on a best efforts basis (as indicated in Part I item 1). Investors have the option of withdrawing earnings on a monthly, quarterly, or annual basis or reinvesting and compounding the earnings. Limited Partners may withdraw from the Partnership in accordance with the terms of the Partnership Agreement subject to possible early withdrawal penalties. There is no established public trading market. A description of the Partnership units, transfer restrictions and withdrawal provisions is more fully described under the section entitled Description of Units and summary of Limited Partnership Agreement, pages 67 through 75 of the Prospectus, a part of the referenced Registration Statement, which is incorporated by reference. Item 6 - Selected Financial Data Redwood Mortgage Investors VIII began operations in April 1993. Financial results for years 1984 through the nine months ended September 30, 1997, for prior partnerships are incorporated by reference to the Prospectus (S-11) dated December 4, 1996, Table III pages 104 through 138, and in Supplement No.3 dated November 26, 1997. Financial condition and results of operation for the Partnership for three years to December 31, 1997 were: Balance Sheet Assets
December 31, ------------------------------------------------------ 1997 1996 1995 -------------- ------------- -------------- Cash $663,159 $664.434 $380,318 Accounts Receivable: Mortgage investments secured by Deeds of Trust 25,304,989 15,642,990 12,047,252 Accrued interest and other fees 341,976 196,530 113,301 Advances on Mortgage Investments 205,804 8,679 8,431 Other receivables - Unsecured 62,844 75,334 71,316 Less allowance for losses (257,500) (117,803) (39,152) Investment in Limited Liability Corporation 251,139 191,139 0 Real estate owned, net 70,138 66,991 0 Organization cost net of amortization 1,875 4,375 6,875 Prepaid Expenses 10,151 20,720 17,718 Due from General Partners/Related Companies 2,999 311 3,049 ============== ============= ============== $26,657,574 $16,753,700 $12,609,108 ============== ============= ============== Liabilities and Partners Capital December 31, ----------------------------------------------------- 1997 1996 1995 ------------- ------------- -------------- Liabilities: Deferred interest $83,066 $217,480 $0 Note payable - Bank 5,640,000 1,500,000 1,910,000 Accounts payable 3,355 20,625 4,010 Subscriptions to partnership in applicant status 0 310,937 0 -------------- ------------- ------------- $5,726,421 $2,049,042 $1,914,010 -------------- ------------- ------------- Partners Capital Limited partners subject to redemption 20,914,721 14,693,293 10,687,031 General Partners 16,432 11,365 8,067 -------------- ------------- ------------- $20,931,153 $14,704,658 $10,695,098 -------------- ------------- ------------- $26,657,574 $16,753,700 $12,609,108 ============== ============= =============
Statement of Income
Gross Revenue $2,629,457 $1,726,635 $1,050,236 Expenses 820,937 493,110 194,495 -------------- ------------ ------------ Income before interest credited to Partners in applicant 1,808,520 1,233,525 855,741 status Interest credited to Partners in applicant status 9,562 2,618 18,908 -------------- ------------ ------------ Net Income $1,798,958 $1,230,907 $836,833 ============== ============ ============ Net income to General Partners (1%) $17,990 $12,309 $8,368 ============== ============ ============ Net Income to Limited Partners (99%) $1,780,968 $1,218,598 $828,465 ============== ============ ============ Net Income per $1,000 invested by Limited Partners for entire period (annualized) - where income is reinvested and compounded $84 $84 $83 ============== ============ ============ - where partner receives income in monthly $81 $81 $80 distributions ============== ============ ============ The financial results for the year ending December 31, 1995, reflects net income of $836,833 which is an annualized yield of approximately 8.33%. Annualized yield for 1996 was 8.39%, and for 1997 was 8.40%. An average annualized yield since inception through December 31, 1997, was 8.36%.
Item II MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS On December 31, 1997, the Partnership was in the offering stage of its second offering, ($30,000,000) and contributed capital totalled $14,932,017 for the first offering and $5,557,659 for the second offering with an aggregate of $20,489,676 (Limited Partners). Of this amount, $0 remained in applicant status. Accordingly, together with initial approved offering of $15,000,000 the Partnership has approval for an aggregate offering of $45,000,000 in Units of $100 each. At December 31, 1997, the Partnerships Mortgage Investments outstanding totalled $25,304,989. The primary reason for an increase in Mortgage Investments Outstanding from $6,484,707 in 1994, to $12,047,252 in 1995, to $15,642,990 in 1996, and to $25,304,989 was the additional capital admitted to the Partnership through sale of Limited Partnership Units. Additional Partners Capital contributions have totalled $4,508,824, $3,834,799, $3,863,536 and $5,565,372 and the reinvestment of earnings by partners who have elected to reinvest earnings have totalled $239,956, $524,988, $800,218 and $1,119,465 for the years ended December 31, 1994, December 31, 1995, December 31, 1996 and December 31, 1997, respectively. To a lesser extent, Mortgage Investments outstanding have also increased through the utilization of the Partnerships line of credit. The effect of more outstanding Mortgage Investments raised the interest earned on Mortgage Investments for the years ended December 31, 1994, 1995, 1996 and 1997, to $480,110, $1,031,029, $1,718,208 and $2,613,008 respectively. Interest rates on Mortgage Investments ranged from 8.00% to 14.00%. The Partnership began funding Mortgage Investments on April 14, 1993 and as of December 31, 1997, distributed earnings at an average annualized yield of 8.36%. Currently, mortgage interest rates have decreased from those prevalent at the inception of the Partnership. New loans will be originated at these lower interest rates which will reduce the average return across the entire Mortgage Investment portfolio held by the Partnership. In the future, interest rates likely will change from their current levels. The General Partners cannot at this time predict at what levels interest rates will be in the future. Although the rates charged by the Partnership are influenced by the level of interest rates in the market, the General Partners do not anticipate that rates charged by the Partnership to its borrowers will change significantly from the beginning of 1997 over the next 12 months. Based upon the rates payable in connection with the existing Mortgage Investments, the current and anticipated interest rates to be charged by the Partnership and the General Partners experience, the General Partners anticipate that the annualized yield will range between eight & nine percent (8% - 9%). During 1994, the Partnership did not have a credit line; therefore Interest on Note Payable-Bank was -0-. In 1995, the Partnership established a line of credit with a commercial bank secured by its Mortgage Investments and has increased the limit from $3,000,000 to $6,000,000. For the years ended 1995, 1996 and December 31, 1997, interest on Note Payable-Bank was $25,889, $188,635 and $340,633 respectively. The primary reason for this increase during 1996, was that the Partnership did not have access to the credit facility until September, 1995. For 1997, the increase in interest on notes payable-Bank has been attributed to a higher overall credit facility utilization. Currently, the Partnership has borrowed $5,640,000 at an interest rate of prime + 1/2%. This facility could increase as the Partnerships capital increases. This added source of funds will help in maximizing the Partnership yield by allowing the Partnership to minimize the amount of funds in lower yield investment accounts when appropriate Mortgage Investments are not currently available. Additionally, the Mortgage Investments made by the Partnership bear interest at a rate in excess of the rate payable to the bank which extended the line of credit, the amount to be retained by the Partnership, after payment of the line of credit cost, will be greater than without the use of the line of credit. As of December 31, 1997, the balance remained at $5,640,000 and in accordance with the line of credit, the Partnership paid all accrued interest as of that date. The Partnerships income and expenses, accruals and delinquencies are within the normal range of the General Partners expectations, based upon their experience in managing similar partnerships over the last twenty years. Borrowers foreclosures, as set forth under Results of Operations, are a normal aspect of Partnership operations and the General Partners anticipate that they will not have a material effect on liquidity. Cash is constantly being generated from interest earnings, late charges, pre-payment penalties, amortization of principal and pay-off on Mortgage Investments. Currently, cash flow exceeds Partnership expenses and earnings payout requirements. As Mortgage Investment opportunities become available, excess cash and available funds are invested in new Mortgage Investments. The General Partners regularly review the Mortgage Investments portfolio, examining the status of delinquencies, the underlying collateral securing these Mortgage Investments, borrowers payment records, etc. Data from the local real estate market and of the national and local economy are reviewed. Based upon this information and other data, loss reserves are increased or decreased. In 1995, 1996, and 1997, the Partnership made provisions for doubtful accounts of $26,032, $55,383, and $139,804, respectively. These provisions for doubtful accounts were made primarily as a prudent action to guard against unidentified collection losses. The provision for doubtful accounts as of December 31, 1997, of $257,500 is considered by the General Partners to be adequate. Because of the number of variables involved, the magnitude of the swings possible and the General Partners inability to control many of these factors actual results may and do sometimes differ significantly from estimates made by the General Partners. Its now clear the Northern California recession reached bottom in 1993. Since then, the California economy has been improving, slowly at first, but now, more vigorously. This improvement is reflected in increasing property values, in job growth, personal income growth, etc., which all translates into more loan activity, which of course, is healthy for lending activity. At the time of subscription to the Partnership, Limited Partners make an irrevocable decision to either take distributions of earnings monthly, quarterly or annually or to compound earnings in their capital account. For the years ended December 31, 1995, December 31, 1996, and December 31, 1997, the Partnership made distributions of earnings to Limited Partners after allocation of syndication costs of, $303,477, $418,380 and $495,480 respectively. Distribution of Earnings to Limited Partners after allocation of syndication costs for the years ended December 31, 1995, December 31, 1996 and December 31, 1997, to Limited Partners capital accounts and not withdrawn was $524,988, $800,218 and $1,119,465 respectively. As of December 31, 1995, December 31, 1996 and December 31, 1997, Limited Partners electing to withdraw earnings represented 40%, 34% and 30% respectively of the Limited Partners outstanding capital accounts. The decreases in percentage of Limited Partners electing to withdraw earnings is due to an increase in percent of new Limited Partners choosing to compound earnings and the dilution effect occurring when compounding Limited Partners capital accounts grow through earnings reinvestment compared to Limited Partners that have chosen to liquidate earnings. The Partnership also allows the Limited Partners to withdraw their capital account subject to certain limitations (see liquidation provisions of Partnership Agreement). Once a Limited Partners initial five year hold period has passed the General Partners expect to see an increase in liquidations due to the ability of Limited Partners to withdraw without penalty. This ability to withdraw five years after a Limited Partners investment has the effect of providing Limited Partner liquidity which the General Partners then expect a portion of the Limited Partners to avail themselves of. This has the anticipated effect of the Partnership growing, primarily through reinvestment of earnings in years one through five. The General Partners expect to see increasing numbers of Limited Partner withdrawals in years five through eleven, at which time the bulk of those Limited Partners who have sought withdrawal have been liquidated. After year eleven, liquidation generally subsides and the Partnership capital again tends to increase through earnings reinvestment. Since the five year hold period has yet to expire, as of December 31, 1997, Limited Partners may not as yet avail themselves of this provision for liquidation. Additionally, Limited Partners may withdraw over a period of one year subject to certain limitations and penalties. For the years ended December 31, 1995, December 31, 1996, and December 31, 1997, $5,640, $146,755 and $132,619 respectively were liquidated subject to the 10% penalty for early withdrawal. These withdrawals are within the normally anticipated range that the General Partners would expect in their experience in this and other partnerships. The General Partners expect that a small percentage of Limited Partners will elect to liquidate their capital accounts over one year with a 10% early withdrawal penalty. In originally conceiving the Partnership, the General Partners wanted to provide Limited Partners needing their capital returned a degree of liquidity. Generally, Limited Partners electing to withdraw over one year need to liquidate investment to raise cash. The trend the Partnership is experiencing in withdrawals by Limited Partners electing a one year liquidation program represents a small percentage of Limited Partner capital as of December 31, 1995, December 31, 1996 and December 31, 1997, respectively and is expected by the General Partners to commonly occur at these levels. Item 8 - Financial Statements and Supplementary Data Redwood Mortgage Investors VIII, a California Limited Partnership's list of Financial Statements and Financial Statement schedules: A-Financial Statements The following financial statements of Redwood Mortgage Investors VIII are included in Item 8: - Independent Auditors Report, - Balance Sheets - December 31, 1997, and December 31, 1996, - Statements of Income for the three years ended December 31, 1997. - Statements of Partners Capital for the three years ended December 31, 1997. - Statements of Cash Flows for the three years ended December 31, 1997. - Notes to Financial Statements - December 31, 1997. B-Financial Statement Schedules The following financial statement schedules of Redwood Mortgage Inventors VIII are included in Item 8. - Schedule II, - Amounts receivable from related parties and underwriters, promoters, and employees other than related parties - Schedule VIII - Valuation of Qualifying Accounts, - Schedule IX - Short Term Borrowings. - Schedule XII - Mortgage Investments on real estate. All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) 6 FINANCIAL STATEMENTS DECEMBER 31, 1997 (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, 1997 and 1996 and the statements of income, changes in partners capital and cash flows for the three years ended December 31, 1997. These financial statements are the responsibility of the Partnerships management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of REDWOOD MORTGAGE INVESTORS VIII as of December 31, 1997 and 1996, and the results of its operations and cash flows for the three years ended December 31, 1997, in conformity with generally accepted accounting principles. Further, it is our opinion that the schedules referred to above present fairly the information set forth therein in compliance with the applicable accounting regulations of the Securities and Exchange Commission. /s/ Parodi & Cropper PARODI & CROPPER Lafayette, California February 27, 1998 REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) BALANCE SHEETS DECEMBER 31, 1997 AND 1996
ASSETS 1997 1996 --------------- --------------- Cash $663,159 $664,434 --------------- --------------- Accounts receivable: Mortgage Investments, secured by deeds of trust 25,304,989 15,642,990 Accrued Interest on Mortgage Investments 341,976 196,530 Advances on Mortgage Investments 205,804 8,679 Accounts receivables, unsecured 62,844 75,334 --------------- --------------- 25,915,613 15,923,533 Less allowance for doubtful accounts 257,500 117,803 --------------- --------------- 25,658,113 15,805,730 --------------- --------------- Real Estate owned, acquired through foreclosure, held for sale 70,138 66,991 Investment in limited liability corporation, at cost which approximates market 251,139 191,139 Organization costs, less accumulated amortization of $10,625 and $8,125, respectively 1,875 4,375 Due from related companies 2,999 311 Prepaid expense-deferred loan fee 10,151 20,720 --------------- --------------- $26,657,574 $16,753,700 =============== =============== See accompanying notes to financial statements
REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) BALANCE SHEETS DECEMBER 31, 1997 AND 1996 LIABILITIES AND PARTNERS CAPITAL
1997 1996 --------------- --------------- Liabilities: Accounts payable and accrued expenses $3,355 $20,625 Note payable - bank line of credit 5,640,000 1,500,000 Deferred interest income 83,066 217,480 Subscriptions to partnership in applicant status 0 310,937 --------------- --------------- 5,726,421 2,049,042 --------------- --------------- Partners Capital: Limited partners capital, subject to redemption (note 4E): Net of unallocated syndication costs of $431,994 and $414,190 for 1997 and 1996, respectively: and formation loan receivable of $1,386,693 and $1,073,706 for 1997 and 1996, respectively 20,914,721 14,693,293 General Partners Capital, net of unallocated syndication costs of $4,364 and $4184for 1997 and 1996, respectively 16,432 11,365 --------------- --------------- Total Partners Capital 20,931,153 14,704,658 --------------- --------------- Total Liabilities and Partners Capital $26,657,574 $16,753,700 =============== =============== See accompanying notes to financial statements.
REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) STATEMENTS OF INCOME FOR THE THREE YEARS ENDED DECEMBER 31, 1997
YEARS ENDED DECEMBER 31, ---------------------------------------------------- 1997 1996 1995 ------------- -------------- -------------- Revenues: Interest on Mortgage Investments $2,613,008 $1,718,208 $1,031,029 Interest on bank deposits 9,487 4,083 13,120 Late charges 6,432 3,847 3,876 Miscellaneous 530 497 2,211 ------------- -------------- -------------- 2,629,457 1,726,635 1,050,236 ------------- -------------- -------------- Expenses: Mortgage servicing fees 189,692 155,912 85,456 Interest on note payable - bank 340,633 188,638 25,889 Amortization of loan origination fees 16,819 11,999 2,531 Provision for doubtful accounts and losses on real estate acquired through foreclosure 139,804 55,383 26,032 Asset management fee - General Partner 24,966 17,053 11,587 Amortization of organization costs 2,500 2,500 2,500 Clerical costs through Redwood Mortgage 54,549 38,799 22,769 Professional services 36,717 17,687 16,178 Printing, supplies and postage 9,584 1,192 92 Other 5,673 3,947 1,461 ------------- -------------- -------------- 820,937 493,110 194,495 ------------- -------------- -------------- Income before interest credited to partners in applicant 1,808,520 1,233,525 855,741 status Interest credited to partners in applicant status 9,562 2,618 18,908 ------------- -------------- -------------- Net Income $1798,958 $1,230,907 $836,833 ============= ============== ============== Net income: To General Partners(1%) $17,990 $12,309 $8,368 To Limited Partners (99%) 1,780,968 1,218,598 828,465 ============= ============== ============== Total - net income $1,798,958 $1,230,907 $836,833 ============= ============== ============== Net income per $1,000 invested by Limited Partners for entire period: - -where income is reinvested and compounded $84 $ 84 $ 83 ============= ============== ============== - -where partner receives income in monthly distributions $81 $ 81 $ 80 ============= ============== ============== 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, 1997 PARTNERS CAPITAL -------------------------------------------------------------- LIMITED PARTNERS CAPITAL -------------------------------------------------------------- Capital Partners In Account Unallocated Formation Applicant Limited Syndication Loan Status Partners Costs Receivable Total -------------- ------------ ------------- ------------ ------------
Balances at December 31, 1994 $189,300 $7,519,424 $(234,303) $(525,256) $6,759,865 Contributions of Application 3,634,264 0 0 (250,373) (250,373) Formation Loan increases 0 0 0 0 0 Interest credited to partners in 18,908 0 0 0 0 applicant status Upon admission to Partnership: Interest withdrawn (7,673) 0 0 0 0 Transfers to Partners capital (3,834,799) 3,831,211 0 0 3,831,211 Net Income 0 828,465 0 0 828,465 Syndication costs incurred 0 0 (173,581) 0 (173,581) Allocation of syndication costs 0 (85,045) 85,045 0 0 Partners withdrawals 0 (308,554) 0 0 (308,554) Early withdrawal penalties 0 (564) 162 400 (2) -------------- ------------ ------------- ------------ ------------ Balances at December 31, 1995 0 11,784,937 (322,677) (775,229) 10,687,031 Contributions on Application 4,172,718 0 0 0 0 Formation Loan increases 0 0 0 (314,996) (314,996) Formation Loan payments 0 0 0 8,961 8,961 Interest credited to partners in 2,618 0 0 0 0 applicant status Upon admission to Partnership: Interest withdrawn (863) 0 0 0 0 Transfers to Partners capital (3,863,536) 3,859,312 0 0 3,859,312 Net Income 0 1,218,598 0 0 1,218,598 Syndication costs incurred 0 0 (212,542) 0 (212,542) Allocation of syndication costs 0 (116,523) 116,523 0 0 Partners withdrawals 0 (553,027) 0 0 (553,027) Early withdrawal penalties 0 (12,108) 4,506 7,558 (44) -------------- ------------ ------------- ------------ ------------ Balances at December 31, 1996 310,937 16,181,189 (414,190) (1,073,706) 14,693,293 Contributions on Application 5,251,969 0 0 0 0 Formation Loan increases 0 0 0 (420,510) (420,510) Formation Loan payments 0 0 0 98,999 98,999 Interest credited to partners in 9,562 0 0 0 0 applicant status Upon admission to Partnership: Interest withdrawn (1,849) 0 0 0 0 Transfers to Partners capital (5,570,619) 5,565,372 0 0 5,565,372 Net Income 0 1,780,968 0 0 1,780,968 Syndication costs incurred 0 0 (188,517) 0 (188,517) Allocation of syndication costs 0 (166,023) 166,023 0 0 Partners withdrawals 0 (614,837) 0 0 (614,837) Early withdrawal penalties 0 (13,261) 4,690 8,524 (47) -------------- ------------ ------------- ------------ ------------ Balances at December 31, 1997 $0 $22,733,408 $(431,994) $(1,386,693) $20,914,721 ============== ============ ============= ============ ============ See accommpanying 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, 1997 PARTNERS CAPITAL ------------------------------------------------------------------------------ GENERAL PARTNERS CAPITAL ---------------------------------------------------------- Capital Unallocated Total Account Syndication Total Partners General Costs Capital Partners ---------------- ----------------- ----------------- ---------------
Balances at December 31, 1994 $7,737 $(2,366) $5,371 $6,765,236 Contributions of Application 0 0 0 0 Formation loan increases 0 0 0 (250,373) Interest credited to partners in 0 0 0 0 applicant status Upon admission to partnership: Interest withdrawn 0 0 0 0 Transfers to Partners capital 3,588 0 3,588 3,834,799 Net Income 8,368 0 8,368 836,833 Syndication costs incurred 0 (1,753) (1,753) (175,334) Allocation of syndication costs (859) 859 0 0 Partners withdrawals (7,509) 0 (7,509) (316,063) Early withdrawal penalties 0 2 2 0 ---------------- ----------------- ----------------- --------------- Balances at December 31, 1995 11,325 (3,258) 8,067 10,695,098 Contributions on Application 0 0 0 0 Formation loan increases 0 0 0 (314,996) Formation loan payments 8,961 Interest credited to partners in 0 0 0 0 applicant status Upon admission to partnership: Interest withdrawn 0 0 0 0 Transfers to Partners capital 4,224 0 4,224 3,863,536 Net Income 12,309 0 12,309 1,230,907 Syndication costs incurred 0 (2,147) (2,147) (214,689) Allocation of syndication costs (1,177) 1,177 0 0 Partners withdrawals (11,132) 0 (11,132) (564,159) Early withdrawal penalties 0 44 44 0 ---------------- ----------------- ----------------- --------------- Balances at December 31, 1996 15,549 (4,184) 11,365 14,704,658 Contributions on Application 0 0 0 0 Formation Loan increases 0 0 0 (420,510) Formation Loan payments 0 0 0 98,999 Interest credited to partners in 0 0 0 0 applicant status Upon admission to partnership: Interest withdrawn 0 0 0 0 Transfers to Partners capital 5,247 0 5,247 5,570,619 Net Income 17,990 0 17,990 1,798,958 Syndication costs incurred 0 (1,904) (1,904) (190,421) Allocation of syndication costs (1,677) 1,677 0 0 Partners withdrawals (16,313) 0 (16,313) (631,150) Early withdrawal penalties 0 47 47 0 ---------------- ----------------- ----------------- --------------- Balances at December 31, 1997 $20,796 $(4,364) $16,432 $20,931,153 ================ ================= ================= =============== 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, 1997
1997 1996 1995 -------------- -------------- ------------- Cash flows from operating activities: Net income $1,798,958 $1,230,907 $836,833 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of organization costs 2,500 2,500 2,500 Provision for doubtful accounts. 139,804 78,651 26,032 Provision for losses (gains) on real estate held for sale 0 (23,268) 0 Increase (decrease) in accounts payable (17,270) 16,615 4,010 (Increase) in accrued interest & advances (342,571) (83,477) (45,334) (Increase) decrease in amount due from related companies (2,688) 2,738 (3,049) (Increase) decrease in deferred loan fee 10,569 (3,002) (17,718) Increase (decrease ) in deferred interest income (134,414) 217,480 0 -------------- -------------- ------------- -------------- Net cash provided by operating activities 1,454,888 1,439,144 803,274 -------------- -------------- ------------- Cash flows from investing activities: Principal collected on Mortgage Investments 10,279,337 9,019,190 1,508,190 Mortgage Investments made (19,941,336) (13,148,944) (7,133,221) Disposition of real estate held for sale 0 299,154 0 Additions to real estate held for sale (3,254) 0 0 Additions to Limited Liability Corporation (60,000) 0 0 Accounts receivables, unsecured - (disbursements) receipts 12,490 (4,018) (8,830) --------------- -------------- ------------- Net cash used in investing activities (9,712,763) (3,834,618) (5,633,861) --------------- -------------- ------------- Cash flows from financing activities Increase (decrease) in note payable-bank 4,140,000 (410,000) 1,910,000 Contributions by partner applicants 5,251,969 4,172,718 3,634,264 Interest credited to partners in applicant status 9,562 2,618 18,908 Interest withdrawn by partners in applicant status (1,849) (863) (7,673) Partners withdrawals (631,150) (564,159) (316,063) Syndication costs incurred (190,421) (214,689) (175,334) Formation Loan increases (420,510) (314,996) (250,373) Formation Loan collections 98,999 8,961 0 --------------- -------------- ------------- Net cash provided by financing activities 8,256,600 2,679,590 4,813,729 --------------- -------------- ------------- Net increase (decrease) in cash and cash equivalents (1,275) 284,116 (16,858) Cash - beginning of period 664,434 380,318 397,176 --------------- -------------- ------------- Cash - end of period $663,159 $664,434 $380,318 =============== ============== ============= See accompanying notes to financial statements.
REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 NOTE 1 - ORGANIZATION AND GENERAL Redwood Mortgage Investors VIII, (the Partnership) is a California Limited Partnership, of which the General Partners are D. Russell Burwell, Michael R. Burwell and Gymno Corporation, a California corporation owned and operated by the individual General Partners. The Partnership was organized to engage in business as a mortgage lender for the primary purpose of making Mortgage Investmenst secured by Deeds of Trust on California real estate. Mortgage Investments are being arranged and serviced by Redwood Home Loan Co. dba Redwood Mortgage, an affiliate of the General Partners. At December 31, 1997, the Partnership was in the offering stage, wherein contributed capital totalled $20,489,676 in limited partner contributions of an approved aggregate offering of $45,000,000, in units of $100 each (204,897). A minimum of 2,500 units ($250,000) and a maximum of 150,000 units ($15,000,000) were initially offered through qualified broker-dealers. This initial offering was closed in October, 1996. In December 1996, the Partnership commenced a second offering of an additional 300,000 Units ($30,000,000) As Mortgage Investments are identified, partners are transferred from applicant status to admitted partners participating in Mortgage Investment operations. Each months income is distributed to partners based upon their proportionate share of partners capital. Some partners have elected to withdraw income on a monthly, quarterly or annual basis. A. Sales Commissions - Formation Loan Sales commissions are not paid directly by the Partnership out of the offering proceeds. Instead, the Partnership loans to Redwood Mortgage, an affiliate of the General Partners, amounts to pay all sales commissions and amounts payable in connection with unsolicited orders. This loan is referred to as the Formation Loan. It is unsecured and non-interest bearing. The Formation Loan relating to the initial $15,000,000 offering totalled $1,074,840, which was 7.2% of limited partners contributions of $14,932,017 (under the limit of 9.1% relative to the initial offering). It is to be repaid, without interest, in ten annual installments of principal, which commenced on January 1, 1997, following the year the initial offering closed, which was in 1996. The Formation Loan relating to the second offering ($30,000,000) totalled $435,895 at December 31, 1997, which was 7.8% of the limited partners contributions of $5,557,659. Sales commissions range from 0% (units sold by General Partners) to 9% of gross proceeds. The Partnership anticipates that the sales commissions will approximate 7.6% based on the assumption that 65% of investors will elect to reinvest earnings, thus generating 9% commissions. The principal balance of the Formation Loan will increase as additional sales of units are made each year. The amount of the annual installment payment to be made by Redwood Mortgage, during the offering stage, will be determined at annual installments of one-tenth of the principal balance of the Formation Loan as of December 31 of each year. Such payment shall be due and payable by December 31 of the following year with the first such payment beginning December 31, 1997. Upon completion of the offering, the balance will be repaid in ten equal annual installments. REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 The following summarizes Formation Loan transactions to December 31, 1997: Initial Subsequent Total Offering of Offering of $15,000,000 $30,000,000 --------------- --------------- ---------------
Limited Partner contributions $14,932,017 $5,557,659 $20,489,676 =============== =============== =============== Formation Loan made $1,074,840 435,895 1,510,735 Payments to date (107,960) 0 (107,960) Early withdrawal penalties applied (16,082) 0 (16,082) --------------- --------------- --------------- Balance December 31, 1996 $950,798 $435,895 $1,386,693 =============== =============== =============== Percent loaned of Partners contributions 7.2% 7.8% 7.4% =============== =============== ===============
The Formation Loan, which is receivable from Redwood Mortgage, an affiliate of the General Partners, has been deducted from Limited Partners Capital in the balance sheet. As amounts are collected from Redwood Mortgage, the deduction from capital will be reduced. B. Other Organizational and Offering Expenses Organizational and offering expenses, other than sales commissions, (including printing costs, attorney and accountant fees, registration and filing fees and other costs), will be paid by the Partnership. Through December 31, 1997, organization costs of $12,500 and syndication costs of $861,031 had been incurred by the Partnership with the following distribution: Syndication Costs -------------------------------------------- Offering ---------------------------- Initial Subsequent Organization 15,000,000 30,000,000 Total Costs Total ----------- ----------- ----------- --------- ----------
Costs incurred $569,865 291,166 861,031 12,500 873,531 Early withdrawal penalties (9,451) 0 (9,451) 0 (9,451) applied Allocated and amortized to (386,296) (28,926) (415,222) (10,625) (425,847) date ----------- ---- ----------- --- ----------- ---- --------- ---- ---------- December 31, 1997 balance $174,118 262,240 436,358 1,875 438,233 =========== ==== =========== === =========== ==== ========= ==== ==========
Organization and syndication costs attributable to the initial offering ($15,000,000) were limited to the lesser of 10% of the gross proceeds or $600,000 with any excess being paid by the General Partners. Applicable gross proceeds were $14,932,017. Related expenditures totalled $582,365 ($569,865 syndication costs plus $12,500 organization expense) or 3.90%. As of December 31, 1997, syndication costs attributable to the subsequent offering ($30,000,000) totalled $291,166, with the costs of the offering document being greater at the initial stages. The syndication costs payable by the Partnership are estimated to be $1,200,000 if the maximum is sold (4% of $30,000,000). The General Partners will pay any syndication expenses (excluding selling commissions) in excess of ten percent of the gross proceeds or $1,200,000. REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A Accrual Basis Revenues and expenses are accounted for on the accrual basis of accounting wherein income is recognized as earned and expenses are recognized as incurred. Once a Mortgage Investment is categorized as impaired, interest is no longer accrued thereon. B. Management Estimates In preparing the financial statements, management is required to make estimates based on the information available that affect the reported amounts of assets and liabilities as of the balance sheet date and revenues and expenses for the related periods. Such estimates relate principally to the determination of the allowance for doubtful accounts, including the valuation of impaired mortgage investments, and the valuation of real estate acquired through foreclosure. Actual results could differ significantly from these estimates. C. Mortgage Investments, Secured by Deeds of Trust The Partnership has both the intent and ability to hold the Mortgage Investments to maturity, i.e., held for long-term investment. They are therefore valued at cost for financial statement purposes with interest thereon being accrued by the simple interest method. Financial Accounting Standards Board Statements (SFAS) 114 and 118 (effective January 1, 1995) provide that if the probable ultimate recovery of the carrying amount of a Mortgage Investment, with due consideration for the fair value of collateral, is less than the recorded investment and related amounts due and the impairment is considered to be other than temporary, the carrying amount of the investment (cost) shall be reduced to the present value of future cash flows. The adoption of these statements did not have a material effect on the financial statements of the Partnership because that was the valuation method previously used on impaired loans. At December 31, 1997, 1996, and 1995, there were no Mortgage Investments categorized as impaired by the Partnership. Had there been a computed amount for the reduction in carrying values of impaired loans, the reduction would have been included in the allowance for doubtful accounts. As presented in Note 10 to the financial statements, the average Mortgage Investment to appraised value of security at the time the losses were consummated was 55.83%. When a loan is valued for impairment purposes, an updating is made in the valuation of collateral security. However, such a low loan to value ratio has the tendency to minimize reductions for impairment. D. Cash and Cash Equivalents For purposes of the statements of cash flows, cash and cash equivalents include interest bearing and non-interest bearing bank deposits. E. Real Estate Owned, Held for Sale Real Estate owned, held for sale, includes real estate acquired through foreclosure and is stated at the lower of the recorded investment in the property, net of any senior indebtedness, or at the propertys estimated fair value, less estimated costs to sell. At December 31, 1997, there was one such piece of property with costs totaling $75,138 less a reduction of $5,000 to arrive at the net fair value of $70,138. REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 Effective January 1, 1996, the Partnership adopted the provisions of Statement No 121 (SFAS 121) of the Financial Accounting Standards Board, Accounting for the Impairment of Long Lived Assets and for Long Lived Assets to be disposed of. The adoption of SFAS 121 did not have a material impact on the Partnerships financial position because the methods indicated were essentially those previously used by the Partnership. F. Investment in Limited Liability Corporation (see Note 7) The Partnership carries its investment in a Limited Liability Corporation as investment in real estate, which is at the lower of costs or fair value, less estimated costs to sell. G. Income Taxes No provision for Federal and State income taxes is made in the financial statements since income taxes are the obligation of the partners if and when income taxes apply. H. Organization and Syndication Costs The Partnership bears its own organization and syndication costs (other than certain sales commissions and fees described above) including legal and accounting expenses, printing costs, selling expenses, and filing fees. Organizational costs have been capitalized and will be amortized over a five year period. Syndication costs are charged against partners capital and are being allocated to individual partners consistent with the partnership agreement. I. Allowance for Doubtful Accounts Mortgage Investments and the related accrued interest, fees, and advances are analyzed on a continuous basis for recoverability. Delinquencies are identified and followed as part of the Mortgage Investment system. A provision is made for doubtful accounts to adjust the allowance for doubtful accounts to an amount considered by management to be adequate, with due consideration to collateral values, to provide for unrecoverable accounts receivable, including impaired Mortgage Investments, unspecified mortgage investments, accrued interest and advances on Mortgage Investments, and other accounts receivable (unsecured). The composition of the allowance for doubtful accounts as of December 31, 1997, and 1996 was as follows: December 31, ----------------------------------------------- 1997 1996 --------------- --------------- Impaired mortgage investments $0 $0 Unspecified mortgage investments 213,500 72,803 Amounts receivable, unsecured 44,000 45,000 ----------- --------------- $257,500 $117,803 =========== =============== REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 J. Net Income Per $1,000 Invested Amounts reflected in the statements of income as net income per $1,000 invested by Limited Partners for the entire period are actual amounts allocated to Limited Partners who have their investment throughout the period and have elected to either leave their earnings to compound or have elected to receive monthly distributions of their net income. Individual income is allocated each month based on the Limited Partners pro rata share of Partners Capital. Because the net income percentage varies from month to month, amounts per $1,000 will vary for those individuals who made or withdrew investments during the period, or select other options. However, the net income per $1,000 average invested has approximated those reflected for those whose investments and options have remained constant. NOTE 3 - GENERAL PARTNERS AND RELATED PARTIES The following are commissions and/or fees which are paid to the General Partners and/or related parties. A. Mortgage Brokerage Commissions For fees in connection with the review, selection, evaluation, negotiation and extension of Partnership Mortgage Investments in an amount up to 12% of the Mortgage Investments until 6 months after the termination date of the offering. Thereafter, Mortgage Investment brokerage commissions will be limited to an amount not to exceed 4% of the total Partnership assets per year. The Mortgage Investment brokerage commissions are paid by the borrowers, and thus, not an expense of the Partnership. In 1997, Mortgage Investment brokerage commissions paid by the borrowers was $837,399. B. Mortgage Servicing Fees Monthly mortgage servicing fees of up to 1/8 of 1% (1.5% annual) of the unpaid principal, is paid to Redwood Mortgage, or such lesser amount as is reasonable and customary in the geographic area where the property securing the mortgage is located. Mortgage servicing fees of $189,692, $155,912and $85,456 were incurred for years 1997, 1996 and 1995 respectively. C. Asset Management Fee The General Partners receive monthly fees for managing the Partnerships Mortgage Investment portfolio and operations up to 1/32 of 1% of the net asset value (3/8 of 1% annual). Management fees of $24,966, $17,053and $11,587 were incurred for years 1997, 1996 and 1995, respectively. REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 D. Other Fees The Partnership Agreement provides for other fees such as reconveyance, mortgage assumption and mortgage extension fees. Such fees are incurred by the borrowers and are paid to parties related to the General Partners. E. Income and Losses All income will be credited or charged to partners in relation to their respective partnership interests. The partnership interest of the General Partners (combined) shall be a total of 1%. F. Operating Expenses The General Partners or their affiliate (Redwood Mortgage) are reimbursed by the Partnership for all operating expenses actually incurred by them on behalf of the Partnership, including without limitation, out-of-pocket general and administration expenses of the Partnership, accounting and audit fees, legal fees and expenses, postage and preparation of reports to Limited Partners. Such reimbursements are reflected as expenses in the Statement of Income. The General Partners collectively or severally were to contribute 1/10 of 1% in cash contributions as proceeds from the offering are admitted to limited Partner capital. As of December 31, 1997 a General Partner, GYMNO Corporation, had contributed $20,488, as capital in accordance with Section 4.02(a) of the Partnership Agreement. NOTE 4 - OTHER PARTNERSHIP PROVISIONS A. Applicant Status Subscription funds received from purchasers of units are not admitted to the Partnership until appropriate lending opportunities are available. During the period prior to the time of admission, which is anticipated to be between 1-120 days in most cases, purchasers subscriptions will remain irrevocable and will earn interest at money market rates, which are lower than the anticipated return on the Partnerships Mortgage Investment portfolio. During the periods ending December 31, 1997, 1996, and 1995, interest totalling $9,562, $2,618 and $18,908 respectively, was credited to partners in applicant status. As Mortgage Investments were made and partners were transferred to regular status to begin sharing in income from Mortgage Investments secured by deeds of trust, the interest credited was either paid to the investors or transferred to partners capital along with the original investment. B. Term of the Partnership The term of the Partnership is approximately 40 years, unless sooner terminated as provided. The provisions provide for no capital withdrawal for the first five years, subject to the penalty provision set forth in (E) below. Thereafter, investors have the right to withdraw over a five-year period, or longer. C. Election to Receive Monthly, Quarterly or Annual Distributions Upon subscriptions, investors elect either to receive monthly, quarterly or annual distributions of earnings allocations, or to allow earnings to compound. Subject to certain limitations, a compounding investor may subsequently change his election, but an investors election to have cash distributions is irrevocable. REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 D. Profits and Losses Profits and losses are allocated among the Limited Partners according to their respective capital accounts after 1% is allocated to the General Partners. E. Liquidity, Capital Withdrawals and Early Withdrawals There are substantial restrictions on transferability of Units and accordingly an investment in the Partnership is illiquid. Limited Partners have no right to withdraw from the Partnership or to obtain the return of their capital account for at least one year from the date of purchase of Units. In order to provide a certain degree of liquidity to the Limited Partners after the one-year period, Limited Partners may withdraw all or part of their Capital Accounts from the Partnership in four quarterly installments beginning on the last day of the calendar quarter following the quarter in which the notice of withdrawal is given, subject to a 10% early withdrawal penalty. The 10% penalty is applicable to the amount withdrawn as stated in the Notice of Withdrawal and will be deducted from the Capital Account and the balance distributed in four quarterly installments. Withdrawal after the one-year holding period and before the five-year holding period will be permitted only upon the terms set forth in the Partnership Agreement. Limited Partners will also have the right after five years from the date of purchase of the Units to withdraw from the Partnership on an installment basis, generally over a five year period in twenty (20) quarterly installments or longer. Once this five year period expires, no penalty will be imposed if withdrawal is made in twenty (20) quarterly installments or longer. Notwithstanding the five-year (or longer) withdrawal period, the General Partners will liquidate all or part of a Limited Partners capital account in four quarterly installments beginning on the last day of the calendar quarter following the quarter in which the notice of withdrawal is given, subject to a 10% early withdrawal penalty applicable to any sums withdrawn prior to the time when such sums could have been withdrawn pursuant to the five-year (or longer) withdrawal period. The Partnership will not establish a reserve from which to fund withdrawals and, accordingly, the Partnerships capacity to return a Limited Partners capital is restricted to the availability of Partnership cash flow. F. Guaranteed Interest Rate For Offering Period During the period commencing with the day a Limited Partner is admitted to the Partnership and ending 3 months after the offering termination date, the General Partners shall guarantee an earnings rate equal to the greater of actual earnings from mortgage operations or 2% above The Weighted Average cost of Funds Index for the Eleventh District Savings Institutions (Savings & Loan & Thrift Institutions) as computed by the Federal Home Loan Bank of San Francisco on a monthly basis, up to a maximum interest rate of 12%. To date, actual realization exceeded the guaranteed amount for each month. NOTE 5- LEGAL PROCEEDINGS The Partnership is not a defendant in any legal actions. NOTE 6 - NOTE PAYABLE - BANK LINE OF CREDIT The Partnership has a bank line of credit expiring September 30, 1999, of up to $6,000,000 at .5% over prime secured by its Mortgage Investment portfolio. The note payable balances were $5,640,000 and $1,500,000 at December 31, 1997, and 1996, respectively, and the interest rate was 9% at December 31, 1997, (8.50% prime plus .50%). REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 NOTE 7 - INVESTMENT IN LIMITED LIABILITY CORPORATION As a result of acquiring real property through foreclosure, the Partnership has contributed its interest (principally land) to a Limited Liability Corporation, which is owned 100% by the Partnership, will complete the construction and sell the property. The Partnership expects to realize a profit from the venture. NOTE 8 - INCOME TAXES The following reflects a reconciliation from net assets (Partners Capital) reflected in the financial statements to the tax basis of those net assets: December 31, ------------------------------------------ 1997 1996 ----------------- ---------------
Net Assets - Partners Capital per financial statements $20,931,153 $14,704,658 Unamortized syndication costs 436,358 418,374 Allowance for doubtful accounts 257,500 117,803 Formation loans receivable 1,386,693 1,073,706 ----------------- --------------- Net assets tax basis $23,011,704 $16,314,541 ================= ===============
In 1997, approximately 61% of taxable income was allocated to tax exempt organizations, i.e., retirement plans. Such plans do not have to file income tax returns unless their unrelated business income exceeds $1,000. Applicable amounts become taxable when distribution is made to participants. NOTE 9 - FAIR VALUE OF FINANCIAL INVESTMENTS The following methods and assumptions were used to estimate the fair value of financial instruments: (a) Cash and Cash Equivalents The carrying amount equals fair value. All amounts, including interest bearing, are subject to immediate withdrawal. (b) The carrying value of mortgage investments (see note 2(c) is $25,304,989. The fair value of these investments of $25,710,340 is estimated based upon projected cash flows discounted at the estimated current interest rates at which similar loans would be made. The applicable amount of the allowance for doubtful accounts along with accrued interest and advances related thereto should also be considered in evaluating the fair value versus the carrying value. REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 NOTE 10- ASSET CONCENTRATIONS AND CHARACTERISTICS The Mortgage Investments are secured by recorded deeds of trust. At December 31, 1997, there were 55 Mortgage Investments outstanding with the following characteristics:
Number of Mortgage Investments outstanding 55 Total Mortgage Investments outstanding $25,304,989 Average Mortgage Investment outstanding $460,091 Average Mortgage Investment as percent of total 1.82% Average Mortgage Investment as percent of Partners Capital 2.20% Largest Mortgage Investment outstanding 2,100,000 Largest Mortgage Investment as percent of total 8.30% Largest Mortgage Investment as percent of Partners Capital 10.03% Number of counties where security is located (all California) 14 Largest percentage of Mortgage Investments in one county 23.85% Average Mortgage Investment to appraised value of security at time loan was consummated 55.83% Number of Mortgage Investments in foreclosure status 1 Amount of Mortgage Investments in foreclosure $118,811
The following categories of mortgage investments are pertinent at December 31, 1997 and 1996: December 31, ------------------------------------------ 1997 1996 ----------------- ---------------
First Trust Deeds $17,103,865 $6,545,779 Second Trust Deeds 8,163,624 8,797,211 Third Trust Deeds 37,500 300,000 ----------------- --------------- Total mortgage investments 25,304,989 15,642,990 Prior liens due other lenders 24,224,566 25,161,374 ----------------- --------------- Total debt $49,529,555 $40,804,364 ================= =============== Appraised property value at time of loan $88,714,541 $70,100,408 ================= =============== Total investments as a percent of appraisals 55.83% 58.21% ================= =============== Investments by Type of Property Owner occupied homes $2,445,423 $1,808,921 Non-Owner occupied homes 5,318,722 2,288,036 Apartments 5,982,649 2,521,515 Commercial 11,558,195 9,024,518 ================= =============== $25,304,989 $15,642,990 ================= =============== The interest rates on the mortgage investments range from 8.00% to 14.00% at December 31, 1997.
REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 Scheduled maturity dates of mortgage investments as of December 31, 1997 are as follows: Year Ending December 31, ------------------- 1998 $3,631,543 1999 7,707,533 2000 5,016,894 2001 1,887,779 2002 1,546,742 Thereafter 5,514,498 =============== $25,304,989 =============== The scheduled maturities for 1998 include approximately $1,123,089 in Mortgage Invesments which are past maturity at December 31, 1997. Interest payment on these loans are current. One Mortgage Investment in the principal amount of $118,811 had interest paid through September 1, 1996, and is in foreclosure. That Mortgage Investment which is the only loan categorized as delinquent, is not considered impaired because the underlying security is sufficient to cover amount due. The cash balance at December 31, 1997 of $663,159 was in one bank with interest bearing balances totalling $597,751. The balances exceeded FDIC insurance limits (up to $100,000 per bank) by $563,159. This bank is the same financial institution that has provided the Partnership with the $6,000,000 limit line of credit. At December 31, 1997, draw down against this facility was $5,640,000. As and when deposits in the Partnerships bank accounts increase significantly beyond the insured limit, the funds are either placed on new Mortgage Investments or used to pay-down on the line of credit balance. SCHEDULE II AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES. Rule 12-03 Column A Column B Column C Column D Column E Name of Debtor Balance Beginning Additions Deductions Balance at end of period of period 12/31/96 (1) (2) (1) (2) Amounts Amounts Current Not Current collected written off 12/31/97
Redwood Mortgage 1st Offering $1,058,322 $0 $99,000 $8,524 $0.00 $950,798 2nd Offering $15,384 $420,511 0 0 0 $435,895 ------------- --------------------- ---------------- ------------- ------------- ----------- Total $1,073,706 $420,511 $99,000 $8,524 0 $1,386,693 ============= ===================== ================ ============= ============= =========== The above schedule represents the Formation Loan borrowed by Redwood Mortgage from the Partnership to pay for the selling commissions on units. It is an unsecured loan and will not bear interest. It will be repaid to the Partnership in ten annual installments as described in Note 1 A to the financial statements. The amount written off in column D (2) represents the proportionate amount of early withdrawal penalties allocated to the Formation Loan as provided in the prospectus.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS REDWOOD MORTGAGE INVESTORS VIII Column A Column B Column C Column D Column E Description Balance Additions Deductions Balance at ------------------------------------ beginning of (1) (2) Describe End of Period of period Charged to Charged (credtited) to Costs & Expenses Other accounts - Describe
Year Ended 12/31/97 Deducted from Asset accounts: Allowance for Doubtful accts $117,803 $139,804 0 $107 $257,500 Cumulative write-down of Real Estate held for sale (REO) $5,000 0 0 0 $5,000 ================= =================== =================== ================ ================ Totals $122,803 $139,804 0 (a)$107 $262,500 ================= =================== =================== ================ ================ (a) represents loss realized
SCHEDULE XII MORTGAGE INVESTMENTS ON REAL ESTATE. RULE 12-29 MORTGAGE LOANS ON REAL ESTATE Col. A Col. B Col. C Col. D Col. E Col. F Col. G Col. H Col. I Col. J Descp. Interest Final Periodic Prior Face Amt. Carrying Principal Type of Geographic Rate Maturity Payment Liens of Mortgage amount of amount of Lien County Date Terms Investments Mortgage Mortgage Location (original Investments Investments amount) subject to Delinq. Principal or Interest ========= ========= ========= ========== ========== ============= ============ ============ ========== ================
Comm. 13.750% 11/01/99 2,044.77 156,750 175,500.00 169,221.02 0.00 2nd Mtg Alameda Comm. 13.750% 10/01/96 458.33 0.00 40,000.00 40,000.00 0.00 1st Mtg Santa Clara Res. 12.000% 07/01/98 1,337.20 37,236 130,000.00 118,810.72 118,810.72 2nd Mtg El Dorado Comm 12.000% 09/01/03 848.61 0.00 82,500.00 80,900.33 0.00 1st Mtg Alameda Comm 11.000% 09/01/05 846.15 846,019 67,500.00 52,799.10 0.00 2nd Mtg Sacramento Comm 12.000% 11/01/98 2,057.23 5,635 200,000.00 53,288.38 0.00 2nd Mtg San Francisco Comm 10.000% 12/01/98 1,689.33 0.00 192,500.00 189,719.45 0.00 1st Mtg Alameda Comm 12.000% 02/01/99 5,131.13 0.00 390,000.00 503,457.45 0.00 1st Mtg Santa Clara Apts 11.500% 11/01/99 1,980.58 713,917 200,000.00 197,177.72 0.00 2nd Mtg San Joaquin Res. 11.000% 12/01/03 3,185.37 1,060,486 325,000.00 316,536.00 0.00 2nd Mtg San Francisco Res 11.000% 04/01/99 4,999.70 775,649 525,000.00 517,441.79 0.00 2nd Mtg Contra Costa Apts 11.500% 04/01/05 330.09 0.00 400,000.00 33,333.33 0.00 1st Mtg San Joaquin Comm 12.500% 07/01/00 1,387.44 0.00 130,000.00 128,880.24 0.00 1st Mtg Fresno Res 11.750% 07/01/10 802.36 74,551 66,000.00 63,356.42 0.00 2nd Mtg Alameda Apts 12.000% 08/01/00 6,951.28 3,033,304 660,000.00 648,713.71 0.00 2nd Mtg San Joaquin Comm 12.000% 10/01/96 600.00 290,711 60,000.00 60,000.00 0.00 2nd Mtg Alameda Apts 11.875% 01/01/01 4,330.76 0.00 425,000.00 421,788.45 0.00 1st Mtg San Mateo Res 11.875% 01/01/01 2,292.76 0.00 225,000.00 223,299.67 0.00 1st Mtg San Mateo Comm 12.500% 01/01/06 3,415.23 0.00 320,000.00 317,883.95 0.00 1st Mtg San Joaquin Comm 11.750% 02/01/99 1,018.34 0.00 104,000.00 103,938.28 0.00 1st Mtg Contra Costa Comm 11.875% 02/01/06 4,541.40 0.00 435,000.00 429,504.95 0.00 1st Mtg San Mateo Comm 12.000% 03/01/01 789.92 0.00 75,000.00 73,975.20 0.00 1st Mtg San Mateo Comm 12.000% 12/31/01 9,792.73 5,492,794 955,000.00 979,272.92 0.00 2nd Mtg Santa Clara Res 11.500% 04/01/06 1,039.81 0.00 105,000.00 104,184.14 0.00 1st Mtg San Francisco Res 12.000% 12/01/97 9,366.28 0.00 910,000.00 906,413.85 0.00 1st Mtg Marin Res 12.000% 08/01/01 1,250.00 0.00 125,000.00 125,000.00 0.00 1st Mtg Mendocino Apts 12.000% 02/01/98 1,538.89 74,597 1,427,500.00 84,241.05 0.00 2nd Mtg San Francisco Comm 12.000% 03/01/01 684.60 74,754 65,000.00 64,443.04 0.00 2nd Mtg San Mateo Comm 12.000% 02/01/99 186.00 20,800 18,000.00 18,000.00 0.00 2nd Mtg Santa Clara Land 12.000% 01/01/00 14,500.00 880,313 1,450,000.00 1,450,000.00 0.00 2nd Mtg Stanisalus Comm 14.000% 04/01/06 6,847.13 0.00 700,000.00 583,813.76 0.00 1st Mtg San Francisco Apts 10.750% 04/01/07 16,125.00 6,714,769 1,800,000.00 1,800,000.00 0.00 2nd Mtg Alameda Res 11.500% 05/01/99 359.38 1,660,639 37,500.00 37,500.00 0.00 3rd Mtg Contra Costa Comm 11.750% 05/01/02 3,828.76 0.00 370,000.00 346,742.31 0.00 1st Mtg San Mateo Res 11.500% 11/01/98 2,012.50 0.00 210,000.00 210,000.00 0.00 1st Mtg San Francisco Comm 11.500% 05/01/99 20,125.00 0.00 2,100,000.00 2,100,000.00 0.00 1st Mtg Alameda Res 12.000% 06/01/99 500.00 262,342 50,000.00 50,000.00 0.00 2nd Mtg Alameda Res 12.000% 12/01/97 1,155.20 910,000 120,000.00 116,674.81 0.00 2nd Mtg Marin Comm 10.500% 06/01/00 5,687..50 0.00 400,000.00 650,000.00 0.00 1st Mtg San Mateo Comm 12.000% 07/01/02 10,500.00 0.00 1,350,000.00 1,050,000.00 0.00 1st Mtg San Francisco Res 11.000% 07/01/00 3,575.00 0.00 390,000.00 390,000.00 0.00 1st Mtg San Francisco Res 12.000% 01/01/99 3,626.03 350,000 700,000.00 395,015.54 0.00 2nd Mtg Monterey Res 10.500% 07/01/00 5,068.88 0.00 579,300.00 579,300.00 0.00 1st Mtg San Francisco Comm 12.500% 10/01/02 1,562.50 0.00 150,000.00 150,000.00 0.00 1st Mtg San Francisco Res 11.500% 04/01/99 8,761.13 579,300 1,320,000.00 922,966.50 0.00 2nd Mtg San Francisco
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 11.500% 10/01/99 9,056.25 0.00 945,000.00 945,000.00 0.00 1st Mtg San Mateo Apts 11.000% 10/01/98 16,669.58 0.00 2,200,000.00 1,852,394.82 0.00 1st Mtg San Mateo Comm 11.000% 10/01/07 6,190.11 0.00 345,000.00 649,534.32 0.00 1st Mtg San Francisco Res 11.500% 04/01/99 9,993.00 210,000 561,750.00 85,665.19 0.00 2nd Mtg San Francisco Land 13.000% 10/01/00 5,200.00 0.00 480,000.00 480,000.00 0.00 1st Mtg Solano Res 8.000% 11/01/27 1,834.42 0.00 250,000.00 249,830.25 0.00 1st Mtg San Mateo Res 12.000% 05/01/99 2,278.15 0.00 2,400,000.00 710,068.11 0.00 1st Mtg San Francisco Res 12.000% 05/01/99 8,898.50 0.00 1,300,000.00 952,081.83 0.00 1st Mtg Marin Comm 12.000% 01/01/03 8,328.21 0.00 1,075,000.00 832,820.75 0.00 1st Mtg Alameda Res 11.500% 01/01/00 6,612.50 0.00 690,000.00 690,000.00 0.00 1st Mtg Alameda ---------- ---------- ------------ ------------ ------------ Total $254,191.02 $24,224,566 $30,807,050.00 $25,304,989.35 $118,810.72 Notes: None of the above Mortgage Investments is considered impaired. Therefore, none of them has been written down. The allowance for doubtful accounts includes $213,500 relating to the above Mortgage Investments and accrued interest receivable and advances related thereto. Amounts reflected in column G (carrying amount of Mortgage Investments) represents both cost and the tax basis of the loans.
Schedule XII Reconciliation of carrying amount (cost) of Mortgage Investments at close of periods Year ended December 31, ---------------------------------------------------------- 1997 1996 1995 --------------- --------------- ---------------
Balance at beginning of year $15,642,990 $12,047,252 $6,484,707 --------------- --------------- --------------- Additions during period: New Mortgage Investments 19,941,336 13,148,944 7,133,221 Other 0 0 0 --------------- --------------- --------------- Total Additions 19,941,336 13,148,944 7,133,221 --------------- --------------- --------------- Deductions during period: Collections of principal 10,279,337 9,019,190 1,508,190 Foreclosures 0 534,016 0 Cost of Mortgage Investments sold 0 0 0 Amortization of Premium 0 0 0 Other 0 0 62,486 --------------- --------------- --------------- Total Deductions 10,279,337 9,553,206 1,570,676 --------------- --------------- --------------- Balance at close of year $25,304,989 $15,642,990 $12,047,252 =============== =============== ===============
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 12/31/97 $5,640,000 9.05% $6,000,000 $3,765,515 9.05%
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, 1997. All such compensation is in compliance with the guidelines and limitations set forth in the Prospectus. Entity Receiving Compensation Description of Compensation and Services Amount Rendered - ---------------------------------------------------- ------------------------- I. Redwood Mortgage. Mortgage Servicing Fee for servicing Mortgage Investments $189,692 General Partners &/or Affiliate Asset Management Fee for managing assets $24,966 General Partners 1% interest in profits $17,990 Less allocation of syndication costs 1,677 $16,313 II. FEES PAID BY BORROWERS ON MORTGAGE LOANS PLACED BY COMPANIES RELATED TO THE GENERAL PARTNERS WITH THE PARTNERSHIP (EXPENSES OF BORROWERS NOT OF THE PARTNERSHIP) Redwood Mortgage Mortgage Brokerage Commissions for services in connection with the review, selection, evaluation, negotiation, and extension of the Mortgage Investments paid by the borrowers and not by the Partnership $837,399 Redwood Mortgage Processing and Escrow Fees for services in connection with notary, document preparation, credit investigation, and escrow fees payable by the borrowers and not by the Partnership $17,240 III. IN ADDITION, THE GENERAL PARTNERS AND/OR RELATED COMPANIES PAY CERTAIN EXPENSES ON BEHALF OF THE PARTNERSHIP FOR WHICH IT IS REIMBURSED AS NOTED IN THE STATEMENT OF INCOME. $54,549 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. 333-13113 and incorporated by reference herein). B. Reports of Form 8-K. No reports on Form 8-K have been filed during the last quarter of the period covered by this report. C. See A (3) above. D. See A (2) above. Additional reference is made to the prospectus (S-11 filed as part of the Registration Statement) to pages 94 through 97, revised Prospectus dated December 4, 1996, and Supplement No. 3 dated November 26, 1997, for financial data related to Gymno Corporation, a General Partner. SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized on the 24th day of March, 1998. REDWOOD MORTGAGE INVESTORS VIII By: /S/ D. Russell Burwell --------------------------------------------- D. Russell Burwell, General Partner By: /S/ Michael R. Burwell --------------------------------------------- Michael R. Burwell, General Partner By: Gymno Corporation, General Partner By: /S/ D. Russell Burwell --------------------------------------------- D. Russell Burwell, President By: /S/ Michael R. Burwell --------------------------------------------- Michael R. Burwell, Secretary/Treasurer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacity indicated on the 24th day of March, 1998. Signature Title Date /S/ D. Russell Burwell - ---------------------- D. Russell Burwell General Partner March 24, 1998 /S/ Michael R. Burwell - ----------------------- Michael R. Burwell General Partner March 24, 1998 /S/ D. Russell Burwell - ----------------------- D. Russell Burwell President of Gymno Corporation, March 24, 1998 (Principal Executive Officer); Director of Gymno Corporation /S/ Michael R. Burwell - ---------------------- Michael R. Burwell Secretary/Treasurer of Gymno March 24, 1998 Corporation (Principal Financial and Accounting Officer); Director of Gymno Corporation EX-27 2
5 12-MOS DEC-31-1997 JAN-01-1997 DEC-31-1997 663159 0 25915613 257500 0 0 0 0 26657574 0 0 5726421 0 0 20931153 26657574 0 2629457 0 350062 0 139804 340633 1798958 0 1798958 0 0 0 1798958 .00 .00
-----END PRIVACY-ENHANCED MESSAGE-----