-----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, BiVVQa8LaNqEp8PiCmb47CTQmWuWfkEilcI6I4aFrOYQvNtPotElqj5gqaWdpZvp eWdxpWzHFUaolI4QlGgw+w== 0000889123-00-000032.txt : 20000516 0000889123-00-000032.hdr.sgml : 20000516 ACCESSION NUMBER: 0000889123-00-000032 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REDWOOD MORTGAGE INVESTORS VIII CENTRAL INDEX KEY: 0000889123 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 943158788 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-27816 FILM NUMBER: 636210 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-Q 1 10-Q FORM 10-Q SECURITIES & EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act of 1934 For Period Ended March 31, 2000 - -------------------------------------------------------------------------------- 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 incorporation or organization) Identification No. 650 El Camino Real, Suite G, Redwood City, CA 94063 - -------------------------------------------------------------------------------- (address of principal executive office) (650) 365-5341 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) NOT APPLICABLE - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days. YES XX NO ----------------- -------------------- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15 (d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. YES NO NOT APPLICABLE XX ---------- ------------ ---------- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's class of common stock, as of the latest date. NOT APPLICABLE REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) BALANCE SHEETS MARCH 31, 2000 (unaudited) AND DECEMBER 31, 1999 (audited) ASSETS March 31, December 31, 2000 1999 (unaudited) (audited) ---------------- --------------- Cash $646,503 $1,602,568 ---------------- --------------- Accounts receivable: Mortgage Investments, secured by deeds of trust 45,252,163 35,693,148 Accrued Interest on Mortgage Investments 1,018,334 711,521 Advances on Mortgage Investments 36,104 33,251 Accounts receivables, unsecured 51,598 49,090 ---------------- --------------- 46,358,199 36,487,010 Less allowance for doubtful accounts 836,206 834,359 ---------------- --------------- 45,521,993 35,652,651 ---------------- --------------- Investment in limited liability corporation, at cost which approximates market 0 373,358 Prepaid expense-deferred loan fee 3,937 6,332 ---------------- --------------- $46,172,433 $37,634,909 ================ =============== See accompanying notes to financial statements
REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) BALANCE SHEETS MARCH 31, 2000 (unaudited) AND DECEMBER 31, 1999 (audited) LIABILITIES AND PARTNERS' CAPITAL March 31, December 31 2000 1999 (unaudited) (audited) -------------- ------------------- Liabilities: Accounts payable and accrued expenses $29,463 $29,413 Note payable - bank line of credit 4,200,000 0 Deferred interest income 213,529 213,529 Investors in applicant status 31,000 330,000 -------------- ------------------- 4,473,992 572,942 -------------- ------------------- Partners' Capital: Limited partners' capital, subject to redemption (note 4E): Net of unallocated syndication costs of $311,128 and $342,334 for 2000 and 1999, respectively: and formation loan receivable of $2,451,039 and $2,158,674 for 2000 and 1999, respectively 41,666,176 37,030,017 General Partners' Capital, net of unallocated syndication costs of $3,143 and $3,458 for 2000 and 1999, respectively 32,265 31,950 -------------- ------------------- Total Partners' Capital 41,698,441 37,061,967 -------------- ------------------- Total Liabilities and Partners' Capital $46,172,433 $37,634,909 ============== =================== See accompanying notes to financial statements.
REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) STATEMENTS OF INCOME FOR THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (unaudited) Three Months Three Months Ended March 31, Ended March 31, 2000 1999 ------------------ ----------------- Revenues: Interest on Mortgage Investments $1,082,236 $958,465 Interest on bank deposits 7,318 1,279 Late charges 3,642 3,325 Miscellaneous 550 506 ------------------ ----------------- 1,093,746 963,575 ------------------ ----------------- Expenses: Mortgage servicing fees 71,294 83,142 Interest on note payable - bank 13,530 131,220 Amortization of loan origination fees 2,396 2,209 Provision for doubtful accounts and losses on real estate acquired through foreclosure 1,847 61,562 Asset management fee - General Partner 12,930 9,159 Clerical costs through Redwood Mortgage Corp. 25,827 19,186 Professional services 21,788 11,562 Printing, supplies and postage 2,683 592 Other 7,278 5,290 ----------------- ------------------ 159,573 323,922 ------------------ ----------------- Income before interest credited to partners in applicant status 934,173 639,653 Interest credited to partners in applicant status 4,460 463 ------------------ ----------------- Net Income $929,713 $639,190 ================== ================= Net income: To General Partners(1%) $9,297 $6,392 To Limited Partners (99%) 920,416 632,798 ------------------ ----------------- Total - net income $929,713 $639,190 ================== ================= Net income per $1,000 invested by Limited Partners for entire period: - -where income is reinvested and compounded $20.61 $20.38 ================== ================= - -where partner receives income in monthly distributions $20.47 $20.24 ================== ================= 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, 1999 (audited) AND THREE MONTHS ENDED MARCH 31, 2000 (unaudited) PARTNERS' CAPITAL ----------------------------------------------------------------------- LIMITED PARTNERS' CAPITAL ----------------------------------------------------------------- Capital Partners In Account Unallocated Formation Applicant Limited Syndication Loan Status Partners Costs Receivable Total --------------- ------------ ------------- ------------- ------------- 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 applicant status 9,562 0 0 0 0 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 Contributions on Application 5,105,559 0 0 0 0 Formation Loan increases 0 0 0 (403,518) (403,518) Formation Loan payments 0 0 0 133,580 133,580 Interest credited to partners in applicant status 4,454 0 0 0 0 Upon admission to Partnership: Interest withdrawn (1,553) 0 0 0 0 Transfers to Partners' capital (5,108,460) 5,103,359 0 0 5,103,359 Net Income 0 2,251,387 0 0 2,251,387 Syndication costs incurred 0 0 (126,453) 0 (126,453) Allocation of syndication costs 0 (196,317) 196,317 0 0 Partners' withdrawals 0 (847,661) 0 0 (847,661) Early withdrawal penalties 0 (24,066) 8,255 15,727 (84) --------------- ------------ ------------- ------------- ------------- Balances at December 31, 1998 $0 $29,020,110 $(353,875) $(1,640,904) $27,025,331 (continued on next page)
REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) STATEMENTS OF CHANGES IN PARTNERS' CAPITAL FOR THE THREE YEARS ENDED DECEMBER 31, 1999 (audited) AND THREE MONTHS ENDED MARCH 31, 2000 (unaudited) PARTNERS' CAPITAL --------------------------------------------------------------------------- LIMITED PARTNERS' CAPITAL ----------------------------------------------------- Capital Partners In Account Unallocated Formation Applicant Limited Syndication Loan Status Partners Costs Receivable Total --------------- ------------ ------------- ------------- ------------- (balance forward from previous page) Balances at December 31, 1998 $0 $29,020,110 $(353,875) $(1,640,904) $27,025,331 Contributions on Application 9,530,318 0 0 0 0 Formation Loan increases 0 0 0 (708,461) (708,461) Formation Loan payments 0 0 0 164,731 164,731 Interest credited to partners in applicant status 1,914 0 0 0 0 Upon admission to Partnership: Interest withdrawn (1,002) 0 0 0 0 Transfers to Partners' capital (9,201,230) 9,191,719 0 0 9,191,719 Net Income 0 2,912,857 0 0 2,912,857 Syndication costs incurred 0 0 (177,099) 0 (177,099) Allocation of syndication costs 0 (175,012) 175,012 0 0 Partners' withdrawals 0 (1,378,924) 0 0 (1,378,924) Early withdrawal penalties 0 (39,725) 13,628 25,960 (137) --------------- ------------ ------------- ------------- -- ------------- Balances at December 31, 1999 $330,000 $39,531,025 $(342,334) $(2,158,674) $37,030,017 Contributions on Application 4,199,536 0 0 0 0 Formation Loan increases 0 0 0 (360,965) (360,965) Formation Loan payments 0 0 0 62,306 62,306 Interest credited to partners in applicant status 4,460 0 0 0 0 Upon admission to Partnership: Interest withdrawn (662) 0 0 0 0 Transfers to Partners' capital (4,502,334) 4,502,334 0 0 4,502,334 Net Income 0 920,416 0 0 920,416 Syndication costs incurred 0 0 (43,538) 0 (43,538) Allocation of syndication costs 0 (71,440) 71,440 0 0 Partners' withdrawals 0 (444,361) 0 0 (444,361) Early withdrawal penalties 0 (9,631) 3,304 6,294 (33) --------------- ------------ ------------- ------------- ------------- Balances at March 31, 2000 $31,000 $44,428,343 $(311,128) $(2,451,039) $41,666,176 =============== ============ ============= ============= ============= 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, 1999 (audited) AND THREE MONTHS ENDED MARCH 31, 2000 (unaudited) PARTNERS' CAPITAL ------------------------------------------------------------------------------ GENERAL PARTNERS' CAPITAL ---------------------------------------------------------- Capital Unallocated Total Total Account Syndication General Partners Partners' General Costs Capital Partners ---------------- ----------------- ------------------ ---------------- 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 applicant status 0 0 0 0 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 Contributions on Application 0 0 0 0 Formation Loan increases 0 0 0 (403,518) Formation Loan payments 0 0 0 133,580 Interest credited to partners in applicant status 0 0 0 0 Upon admission to partnership: Interest withdrawn 0 0 0 0 Transfers to Partners' capital 5,101 0 5,101 5,108,460 Net Income 22,741 0 22,741 2,274,128 Syndication costs incurred 0 (1,277) (1,277) (127,730) Allocation of syndication costs (1,983) 1,983 0 0 Partners' withdrawals (20,758) 0 (20,758) (868,419) Early withdrawal penalties 0 84 84 0 ---------------- ----------------- ------------------ ---------------- Balances at December 31, 1998 $25,897 $(3,574) $22,323 $27,047,654 (continued on next page)
REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) STATEMENTS OF CHANGES IN PARTNERS' CAPITAL FOR THE THREE YEARS ENDED DECEMBER 31, 1999 (audited) AND THREE MONTHS ENDED MARCH 31. 2000 (unaudited) PARTNERS' CAPITAL ------------------------------------------------------------------------------- GENERAL PARTNERS' CAPITAL ----------------------------------------------------------- Capital Account Unallocated Total Total Partners' General Syndication General Partners Capital Partners Costs ---------------- ----------------- ------------------ ---------------- (balance forward from previous page) Balances at December 31, 1998 $25,897 $(3,574) $22,323 $27,047,654 Contributions on Application 0 0 0 0 Formation Loan increases 0 0 0 (708,461) Formation Loan payments 0 0 0 164,731 Interest credited to partners in applicant status 0 0 0 0 Upon admission to partnership: Interest withdrawn 0 0 0 0 Transfers to Partners' capital 9,511 0 9,511 9,201,230 Net Income 29,423 0 29,423 2,942,280 Syndication costs incurred 0 (1,789) (1,789) (178,888) Allocation of syndication costs (1,768) 1,768 0 0 Partners' withdrawals (27,655) 0 (27,655) (1,406,579) Early withdrawal penalties 0 137 137 0 ---------------- ----------------- ------------------ ---------------- Balances at December 31, 1999 $35,408 $(3,458) $31,950 $37,061,967 Contributions on Application 0 0 0 0 Formation Loan increases 0 0 0 (360,965) Formation Loan payments 0 0 0 62,306 Interest credited to partners in applicant status 0 0 0 0 Upon admission to partnership: Interest withdrawn 0 0 0 0 Transfers to Partners' capital 0 0 0 4,502,334 Net Income 9,297 0 9,297 929,713 Syndication costs incurred 0 (440) (440) (43,978) Allocation of syndication costs (722) 722 0 0 Partners' withdrawals (8,575) 0 (8,575) (452,936) Early withdrawal penalties 0 33 33 0 ---------------- ----------------- ------------------ ---------------- Balances at March 31, 2000 $35,408 $(3,143) $32,265 $41,698,441 ================ ================= ================== ================ See accompanying notes to financial statements
REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (unaudited) March 31, March 31, 2000 1999 (unaudited) (unaudited) --------------- --------------- Cash flows from operating activities: Net income $929,713 $639,190 Adjustments to reconcile net income to net cash provided by operating activities: Provision for doubtful accounts. 1,847 61,562 Provision for losses (gains) on real estate held for sale 0 0 Increase (decrease) in accounts payable 50 10,900 (Increase) in accrued interest & advances (309,666) 124,015 (Increase) decrease in amount due from related companies 0 0 (Increase) decrease in deferred loan fee 2,395 2,209 Increase (decrease ) in deferred interest income 0 (124,805) --------------- --------------- Net cash provided by operating activities 624,339 713,071 --------------- --------------- Cash flows from investing activities: Principal collected on Mortgage Investments 1,522,077 2,403,829 Mortgage Investments made (11,081,092) (6,316,974) Additions to real estate held for sale 0 (1,880) Disposition of Limited Liability Corporation 373,358 (25,000) Accounts receivables, unsecured - (disbursements) receipts (2,508) (192) --------------- --------------- Net cash used in investing activities (9,188,165) (3,940,217) --------------- --------------- Cash flows from financing activities Increase (decrease) in note payable-bank 4,200,000 2,053,000 Contributions by partner applicants 4,199,536 1,363,155 Interest credited to partners in applicant status 4,460 463 Interest withdrawn by partners in applicant status (662) (245) Partners withdrawals (452,936) (248,573) Syndication costs incurred (43,978) (44,678) Formation Loan increases (360,965) (95,186) Formation Loan collections 62,306 31,054 --------------- --------------- Net cash provided by financing activities 7,607,761 3,058,990 --------------- --------------- Net increase (decrease) in cash and cash equivalents (956,065) (168,156) Cash - beginning of period 1,602,568 528,688 --------------- --------------- Cash - end of period $646,503 $360,532 =============== =============== See accompanying notes to financial statements.
REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS MARCH 31, 2000 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, Gymno Corporation, a California corporation owned and operated by the individual General Partners, and Redwood Mortgage Corp. The Partnership was organized to engage in business as a mortgage lender for the primary purpose of making Mortgage Investments secured by Deeds of Trust on California real estate. Mortgage Investments are being arranged and serviced by Redwood Mortgage Corp. At March 31, 2000, the Partnership was in the offering stage, wherein contributed capital totalled $39,310,477 in limited partner contributions of an approved aggregate offering of $45,000,000, in units of $1 each (39,310,477). As of March 31, 2000, $31,000 remained in applicant status. A minimum of 250,000 units ($250,000) and a maximum of 15,000,000 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 30,000,000 Units ($30,000,000) As Mortgage Investments are identified, partners are transferred from applicant status to admitted partners participating in Mortgage Investment operations. Each month's 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 Corp., 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 $1,908,840 at March 31, 2000, which was 7.83% of the limited partners contributions of $24,378,460. 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 Corp., 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 MARCH 31, 2000 The following summarizes Formation Loan transactions to March 31, 2000: Initial Subsequent Offering of Offering of $15,000,000 $30,000,000 Total -------------- --------------- ---------------- Limited Partner contributions $14,932,017 $24,378,460 $39,310,477 ============== =============== ================ Formation Loan made $1,074,840 1,908,840 2,983,680 Payments to date (308,582) (159,994) (468,576) Early withdrawal penalties applied (64,065) 0 (64,065) -------------- --------------- ---------------- Balance March 31, 2000 $702,193 $1,748,846 $2,451,039 ============== =============== ================ Percent loaned of Partners' contributions 7.2% 7.8% 7.6% ============== =============== ================ The Formation Loan, which is receivable from Redwood Mortgage Corp., an affiliate of the General Partners, has been deducted from Limited Partners' Capital in the balance sheet. As amounts are collected from Redwood Mortgage Corp., the deduction from capital will be reduced. B. Other Organizational and Offering Expenses Organizational and offering expenses, other than sales commissions, (including printing costs, attorney and accountant fees, registration and filing fees and other costs), will be paid by the Partnership. Through March 31, 2000, organization costs of $12,500 and syndication costs of $1,211,627 had been incurred by the Partnership with the following distribution: Syndication Organization Costs Costs Total ----------------- -------------- ------------ Costs incurred $1,211,627 $12,500 $1,224,127 Early withdrawal penalties applied (34,892) 0 (34,892) Allocated and amortized to date (862,464) (12,500) (874,964) -- ----------------- --- -------------- -- ------------ March 31, 2000 balance $314,271 0 $314,271 == ================= === ============== == ============ 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 March 31, 2000 syndication costs attributable to the subsequent offering ($30,000,000) totalled $641,762, (3.0% of contributions), with the costs of the offering being greater at the initial stages due to professional and filing fees related to formulating the offering documents. 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 MARCH 31, 2000 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. Therefore they are 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 March 31, 2000 and at December 31, 1999, and 1998, 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 61.08%. 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 property's estimated fair value, less estimated costs to sell. At March 31, 2000, there were no properties acquired by the Partnership as real estate owned (REO). REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS MARCH 31, 2000 Effective January 1, 1996, the Partnership adopted the provisions of Statement No 121 (SFAS 121) of the Financial Accounting Standards Board, "Accounting for the Impairment of Long Lived Assets and for Long Lived Assets to be disposed of". The adoption of SFAS 121 did not have a material impact on the Partnership's financial position because the methods indicated were essentially those previously used by the Partnership. F. 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. In February, 2000, the Corporation sold it's real estate and returned all advances made by the Partnership. 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 were 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, other Mortgage Investments, accrued interest and advances on Mortgage Investments, and other accounts receivable (unsecured). The composition of the allowance for doubtful accounts as of March 31, 2000 and December 31, 1999, was as follows: March 31, December 31, 2000 1999 --------------- ---------------- Impaired mortgage investments $0 $0 Unspecified mortgage investments 797,115 795,268 Amounts receivable, unsecured 39,091 39,091 --------------- ---------------- $836,206 $834,359 =============== ================ REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS MARCH 31, 2000 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 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, are not an expense of the Partnership. For three months through March 31, 2000 and for the year ended December 31, 1999, mortgage broker commissions paid by the borrowers were $367,205 and $682,118, respectively. 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 Corp., 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 $71,294, $359,464 and $295,052, were incurred for three months through March 31, 2000 and for years 1999 and 1998, respectively. C. Asset Management Fee The General Partners receive monthly fees for managing the Partnership's Mortgage Investment portfolio and operations up to 1/32 of 1% of the "net asset value" (3/8 of 1% annual). Management fees of $12,930, $42,215 and $31,651 were incurred for the three months through March 31, 2000 and for years 1999 and 1998, respectively. 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%. REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS MARCH 31, 2000 F. Operating Expenses The General Partners or their affiliate (Redwood Mortgage Corp.) are reimbursed by the Partnership for all operating expenses actually incurred by them on behalf of the Partnership, including without limitation, out-of-pocket general and administration expenses of the Partnership, accounting and audit fees, legal fees and expenses, postage and preparation of reports to Limited Partners. Such reimbursements are reflected as expenses in the 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, 1999 a General Partner, GYMNO Corporation, had contributed $35,100, 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 Partnership's Mortgage Investment portfolio. During the periods ending March 31, 2000, December 31, 1999 and 1998, interest totaling $4,460, $1,914 and $4,454, 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 At subscription, 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 investor's election to have cash distributions is irrevocable. 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 MARCH 31, 2000 E. Liquidity, Capital Withdrawals and Early Withdrawals There are substantial restrictions on transferability of Units and accordingly an investment in the Partnership is non-liquid. 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. After five years from the date of purchase of the Units, Limited Partners have the right to withdraw from the Partnership on an installment basis. Generally this is done over a five year period in twenty (20) quarterly installments. Once a Limited Partner has been in the Partnership for the minimum five year period, no penalty will be imposed if withdrawal is made in twenty (20) quarterly installments or longer. Notwithstanding the five-year (or longer) withdrawal period, the General Partners may liquidate all or part of a Limited Partner's capital account in four quarterly installments beginning on the last day of the calendar quarter following the quarter in which the notice of withdrawal is given. This withdrawal is subject to a 10% early withdrawal penalty applicable to any sums withdrawn prior to the time when such sums could have been withdrawn without penalty. The Partnership will not establish a reserve from which to fund withdrawals and, accordingly, the Partnership's capacity to return a Limited Partner's capital 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, 2000, of up to $9,000,000 at .25% over prime secured by its Mortgage Investment portfolio. The note payable balances were $4,200,000 and $0 at March 31, 2000 and December 31, 1999, respectively. The interest rate was 9.00% at March 31, 2000, (8.75% prime plus .25%). NOTE 7 - INVESTMENT IN LIMITED LIABILITY CORPORATION As a result of acquiring real property through foreclosure, the Partnership contributed its interest (principally land) to a Limited Liability Corporation, which is owned 100% by the Partnership, and which has completed the construction and sold the property. REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS MARCH 31, 2000 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: March 31, December 31, 2000 1999 ------------------ ---------------- Net Assets - Partners' Capital per financial statements $41,698,441 $37,061,967 Non-amortized syndication costs 314,271 345,792 Allowance for doubtful accounts 836,206 834,359 Formation loans receivable 2,451,039 2,158,674 ------------------ ---------------- Net assets tax basis $45,299,957 $40,400,792 ------------------ ---------------- In 1999 and 1998, approximately 58% and 61% of taxable income was allocated to tax exempt organizations, i.e., retirement plans, respectively. 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 $45,252,163. The fair value of these investments of $43,963,217 is estimated based upon projected cash flows discounted at the estimated current interest rates at which similar Mortgage Investments 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 MARCH 31, 2000 NOTE 10- ASSET CONCENTRATIONS AND CHARACTERISTICS The Mortgage Investments are secured by recorded deeds of trust. At March 31, 2000, there were 57 Mortgage Investments outstanding with the following characteristics: Number of Mortgage Investments outstanding 57 Total Mortgage Investments outstanding $45,252,163 Average Mortgage Investment outstanding $793,898 Average Mortgage Investment as percent of total 1.75% Average Mortgage Investment as percent of Partners' Capital 1.90% Largest Mortgage Investment outstanding 2,900,000 Largest Mortgage Investment as percent of total 6.41% Largest Mortgage Investment as percent of Partners' Capital 6.95% Number of counties where security is located (all California) 13 Largest percentage of Mortgage Investments in one county 37.47% Average Mortgage Investment to appraised value of security at time loan was consummated 61.08% Number of Mortgage Investments in foreclosure status 1 Amount of Mortgage Investments in foreclosure $2,600,000 The following categories of Mortgage Investments are pertinent at March 31, 2000 and December 31, 1999: March 31, December 31, 2000 1999 --------------- --------------- First Trust Deeds $25,450,046 $19,388,394 Second Trust Deeds 19,611,873 16,082,803 Third Trust Deeds 190,244 221,951 --------------- --------------- Total Mortgage Investments 45,252,163 35,693,148 Prior liens due other lenders 32,828,947 23,719,420 --------------- --------------- Total debt $78,081,110 $59,412,568 =============== =============== Appraised property value at time of loan $127,842,437 $97,556,330 =============== =============== Total investments as a percent of appraisals 61.08% 60.90% =============== =============== Investments by Type of Property Owner occupied homes $7,118,852 $7,336,276 Non-Owner occupied homes 12,965,237 10,957,622 Apartments 266,003 302,797 Commercial 24,902,071 17,096,453 ---------------- --------------- $45,252,163 $35,693,148 ================ =============== The interest rates on the Mortgage Investments range from 8.00% to 14.50% at March 31, 2000. REDWOOD MORTGAGE INVESTORS VIII (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS MARCH 31, 2000 Scheduled maturity dates of mortgage investments as of March 31, 2000 are as follows: Year Ending December 31, ------------------- 2000 $15,496,465 2001 17,962,408 2002 7,936,020 2003 0 2004 950,000 Thereafter 2,907,270 ---------------- $45,252,163 ================ The scheduled maturities for 2000 include approximately $4,762,888 in Mortgage Investments which are past maturity at March 31, 2000. Interest payment on only four of these loans was delinquent. The cash balance at March 31, 2000 of $646,503 was in one bank with interest bearing balances totalling $125,865. The balances exceeded FDIC insurance limits (up to $100,000 per bank) by $546,503. This bank is the same financial institution that has provided the Partnership with the $9,000,000 limit line of credit. At March 31, 2000, draw down against this facility was $4,200,000. As and when deposits in the Partnership's 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. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS On March 31, 2000, the Partnership was in the offering stage of its second offering, ($30,000,000). Contributed capital totalled $14,932,017 for the first offering and $24,378,460 for the second offering an aggregate of $39,310,477 (Limited Partners) as of March 31, 2000. Of this amount, $31,000 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 $1 each. At March 31, 2000, the Partnership's Mortgage Investments outstanding totalled $45,252,163. The primary reason for an increase in Mortgage Investments Outstanding from $25,304,989 in 1997, to $31,905,958 in 1998 to $35,693,147 to December 31, 1999 and to $45,252,163 as of March 31, 2000, was the additional capital admitted to the Partnership through sale of Limited Partnership Units and reinvestment of Limited Partners earnings. Additional Limited Partners' Capital contributions have totalled $5,565,372, $5,100,458, $9,520,806 and $4,199,536 and the reinvestment of earnings by Limited Partners who have elected to reinvest earnings, have totalled $1,119,465, $1,440,687, $1,911,554 and $588,985, for the years ended December 31, 1997, December 31, 1998, December 31, 1999 and three months through March 31, 2000, respectively. To a lesser extent, Mortgage Investments outstanding have also increased through the utilization of the Partnership's line of credit. The effect of more outstanding Mortgage Investments raised the interest earned on Mortgage Investments for the years ended December 31, 1997, 1998, 1999 and three months through March 31, 2000, to $2,613,008, $3,376,293, $4,337,427 and $1,082,236, respectively. Interest rates on Mortgage Investments ranged from 8.00% to 14.50%. The Partnership began funding Mortgage Investments on April 14, 1993 and as of March 31, 2000, distributed earnings at an average annualized yield of 8.36%. Since the Fall of 1999, mortgage interest rates have been rising due primarily to economic forces and by the Federal Reserve raising its core interest rates. New Mortgage Investments will be originated at higher interest rates which could increase the average return across the entire Mortgage Investment portfolio held by the Partnership. In the future, interest rates likely will change from their current levels. The General Partners cannot at this time predict at what levels interest rates will be in the future. Although the rates charged by the Partnership are influenced by the level of interest rates in the market, the General Partners do not anticipate that rates charged by the Partnership to its borrowers will change significantly from the beginning of 2000 over the next 12 months. 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%). In 1995, the Partnership established a line of credit with a commercial bank secured by its Mortgage Investments and since its inception has increased the limit from $3,000,000 to $9,000,000. For the years ended December 31, 1997, 1998, 1999 and three months through March 31, 2000, interest on Note Payable-Bank was $340,633, $513,566, $526,697 and $13,530, respectively. For 1997, 1998, and 1999, and three months ended March 31, 2000, the increase in interest on notes payable-Bank has been attributed to a higher overall credit facility utilization. During 1999, the Partnership's highest borrowing was $8,600,000 at an interest rate of prime + 1/4%. This facility could again increase as the Partnership's 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 March 31, 2000, the balance was $4,200,000 and in accordance with the line of credit, the Partnership paid all accrued interest as of that date. The zero balance, as of December 31, 1999, was primarily due to a combination of significant loan repayments and strong Partnership unit sales in the fourth quarter. The Partnership used these strong cash flows to pay down its line of credit from $4,452,000, as of September 30, 1999, to $0 on December 31, 1999. The Partnership's income and expenses, accruals and delinquencies are within the normal range of the General Partners' expectations, based upon their experience in managing similar partnerships over the last twenty-three years. Mortgage servicing fees increased from $189,692, to $295,052 to $359,464 and to $71,294 for the years ended December 31, 1997, 1998, 1999 and three months through March 31, 2000. The mortgage servicing fees increased primarily due to increase in the outstanding Mortgage Investment portfolio. Asset Management fees increased from $24,966, to $31,651, to $42,215 and to $12,930 for the years ended December 31, 1997, 1998 , 1999 and three months through March 31, 2000, respectively. The Asset Management fee increase was due primarily to the increased Partner's capital which the General Partners are managing. All other Partnership expenses fluctuated within a narrow range commonly expected to occur, except for interest on note payable - bank which is discussed earlier in the Management Discussion and Analysis of Financial Condition and Results of Operations. Borrower's 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. Excess cash flow will be invested in new Mortgage Investment opportunities when available, used to reduce the Partnership credit line or in other Partnership business. 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 1997, 1998, 1999 and three months through March 31, 2000, the Partnership made provisions for doubtful accounts of $139,804, $162,969, $408,890 and $1,847, 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 March 31, 2000, of $836,206 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. The February 18, 2000 issue of the "Alert" publication, published by the California Chamber of Commerce, said the following about California's thriving economy: "Job gains grew in the fourth quarter of 1999, as the California economy accelerated. For the year as a whole, employment grew by 2.9 percent, considerably stronger than in the nation. This gain likely will be revised upward to 3.3 percent, or so, in the benchmark revisions to be released in late February. State unemployment, at 4.9 percent in the last four months, is lower than in more than 30 years. Tax revenues are flooding into Sacramento, in part because of the strong economy, but also because of exercised stock options, strong bonuses and huge realized stock market gains. The state economy's strength has been widespread across major industries, but concern about residential real estate is growing. Housing permits were issued at an annual rate of 139,000 units through November 1999, well below almost everyone's expectations and the 220,000 units averaged annually in the 1980s. Clearly, not enough housing is being built in the state. High land prices, restrictive local land use policies, the re-emergence of the slow growth/no growth movement, and federal environmental regulations are constraining home building. As a result, affordability is declining at an alarming rate. The affordability of existing homes is low in San Diego and Orange counties and extremely low almost everywhere in the San Francisco Bay Area. In what seems like a paradox, an oversupply of expensive new homes is developing. This also happened under similar circumstances in the late 1980s. In areas of particularly high land prices and long permitting and other building delays, building entry and mid-level housing becomes more difficult to "pencil out". As developers turn increasingly to expensive housing, the supply of expensive housing can quickly outstrip demand. Also, the affordability of new homes can dip considerably below that of existing homes. In Orange County, for example, a relatively low 32 percent of households could afford to buy the median-priced existing home sold in November; only 19 percent could afford to buy the median-priced new home." To the Partnership, the above evaluation of the California economy means an increase in property values, job growth, personal income growth, etc., which all translates into more loan activity, which of course, is healthy for the Partnership's lending activity. 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, 1997, December 31, 1998, December 31, 1999 and three months through March 31, 2000, the Partnership made distributions of earnings to Limited Partners after allocation of syndication costs of $495,480, $614,383, $826,291 and $259,991, respectively. Distribution of Earnings to Limited Partners after allocation of syndication costs for the years ended December 31, 1997, December 31, 1998, December 31, 1999 and three months through March 31, 2000, to Limited Partners' capital accounts and not withdrawn was $1,119,465, $1,440,687, $1,911,554 and $588,985, respectively. As of December 31, 1997, December 31, 1998, December 31, 1999 and three months through March 31, 2000, Limited Partners electing to withdraw earnings represented 30%, 30%, 31% and 30% respectively of the Limited Partners outstanding capital accounts. These percentages are remaining relatively stable as new Partnership unit sales continue to mirror previous sales of compounding and non-compounding unit sales. Liquidations are not occurring disproportionately to compounding or non-compounding accounts. 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 Partner's 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 Partner's 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 for most of the investors has yet to expire, as of March 31, 2000, many Limited Partners may not as yet avail themselves of this provision for liquidation. Earnings and capital liquidations including early withdrawals since inception, 1993 through March 31, 2000 were: three months through 1993 1994 1995 1996 1997 1998 1999 03/31/2000 ---------- ---------- ----------- ----------- ----------- ----------- ------------- --------------- Earnings Liquidation $46,855 $165,814 $303,477 $418,380 $495,480 $614,383 $826,291 $259,991 Capital Liquidation 0 0 $5,640 $146,755 $132,619 $257,344 $592,357 $194,001 ---------- ---------- ----------- ----------- ----------- ----------- ------------- --------------- Total $46,855 $165,814 $309,117 $565,135 $628,099 $871,727 $1,418,648 $453,992 ========== ========== =========== =========== =========== =========== ============= ===============
Additionally, Limited Partners may withdraw over a period of one year subject to certain limitations and penalties. For the years ended December 31, 1997, December 31, 1998, December 31, 1999 and three months through March 31, 2000, $132,619, $244,213, $411,838 and $104,361, respectively were liquidated subject to the 10% penalty for early withdrawal. This represents only 0.63%, 0.90%, 1.11% and 0.23% of the Limited Partners ending capital for the years ended December 31, 1997, 1998, 1999 and three months through March 31, 2000, respectively. These withdrawals are within the normally anticipated range that the General Partners would expect in their experience in this and other Partnerships. The General Partners expect that a small percentage of Limited Partners will elect to liquidate their capital accounts over one year with a 10% early withdrawal penalty. In originally conceiving the Partnership, the General Partners wanted to provide Limited Partners needing their capital returned a degree of liquidity. Generally, Limited Partners electing to withdraw over one year need to liquidate investment to raise cash. The trend the Partnership is experiencing in withdrawals by Limited Partners electing a one year liquidation program represents a small percentage of Limited Partner capital as of December 31, 1997, December 31, 1998, December 31, 1999 and March 31, 2000, respectively, and is expected by the General Partners to commonly occur at these levels. The Year 2000 was considered by most to be a challenge for the entire world with respect to the conversion of existing computerized operations. The Partnership relies on Redwood Mortgage Corp., third parties and various software vendors for its hardware and software needs. Since year 2000 has come, we have not experienced any computer hardware breakdowns. We assume that our testing and upgrading of computer hardware prior to year 2000 identified all hardware areas of concern. Computer software programs are all operational with only minor problems being experienced with some programs. These problems are being addressed by the appropriate software vendors or software programmers. All quarterly, and annual computerized functions have not yet been run, however, testing of the operations has taken place. We do not expect any significant problems. The costs of updating our computer systems were substantially borne by the non affiliated software vendors and the in house system conversion costs to the partnership were marginal. Year 2000 issues do not appear to have affected, in any significant manner, any industries or businesses in the marketplace in which the Partnership places its loans. We believe that year 2000 issues are a non-event and will have little if any future effect on the Partnership, its affiliates or the people and businesses with which it associates. The foregoing analysis of year 2000 issues includes forward-looking statements and predictions about possible or future events, results of operations, and financial condition. As such, this analysis may prove to be inaccurate because of assumptions made by the general partners or the actual development of future events. No assurance can be given that any of these statements or predictions will ultimately prove to be correct or substantially correct. On February 7, 2000, the General Partners, pursuant to Section 12.4(d) of the Partnership Agreement, admitted Redwood Mortgage Corp., a California corporation, as a General Partner of the Partnership. Redwood Mortgage Corp. is an affiliate of the General Partners. Redwood Mortgage Corp. was incorporated in 1978. Its principal stockholder is the Redwood Group, Ltd., whose principal stockholder is D. Russell Burwell, a General Partner of the Partnership. Redwood Mortgage Corp. is a licensed real estate broker and has been engaged primarily in the business of arranging and servicing the Partnership's loans since its inception. The General Partners believe that the addition of Redwood Mortgage Corp as a General Partner will strengthen the Partnership's management team. On February 17, 2000 the Partnership filed Post-Effective Amendment No. 9 to it's initial Registration Statement dated December 4, 1996 (the "Amendment"). The Amendment was declared effective by the Securities and Exchange Commission (the "Commission") on February 28, 2000. The Amendment contained a revised Prospectus for the Partnership intended to meet the plain English requirements of the Commission. The Prospectus also includes updated financials for the Partnership and the General Partners and incorporates the disclosure items previously included in Supplement No. 5 dated April 26, 1999. The Prospectus additionally includes disclosure with respect to the fact that (1) Redwood Mortgage Corp. has been admitted as an additional General Partner (see Part III, item 10 below); (2) the offering price of units has been changed to $1 (see Part II, item 5 above); and (3) that in order to provide greater flexibility to its investors, the General Partners intend to file a Dividend Reinvestment Plan with the Commission in the first half of 2000. A. Bruce Cropper, a partner in the accounting firm of Parodi & Cropper has been providing audit and accounting services to the Partnership since its inception in 1993. Mr. Cropper also has been performing audit and accounting services to the General Partners of the Partnership and their affiliates for over 15 years. In 1999, Mr. Cropper's partner sold his portion of their practice. Mr. Cropper decided to merge his portion of the practice into an existing CPA firm known as "Caporicci & Larson" with offices in Irvine and Walnut Creek, California. Upon the merging, the firm of Parodi & Cropper was dissolved, and Caporicci & Larson became Caporicci, Cropper and Larson, LLP. As a result, the Partnership has retained the firm of Caporicci, Cropper and Larson, LLP, to provide its audit and financial services. Thus, although there has been a change in accounting firms, there has not been a change in accountants and there has not been any disagreement on any matter of accounting principles, practices or financial status disclosures. COMPENSATION OF THE GENERAL PARTNERS AND AFFILIATES BY PARTNERSHIP 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 three months ended March 31, 2000. All such compensation is in compliance with the guidelines and limitations set forth in the Prospectus. Entity Receiving Description of Compensation Compensation and Services Rendered Amount - -------------------------------------------------------------------------------- I. Redwood Mortgage Mortgage Servicing Fee for Corp. servicing Mortgage Investments....... $71,294 General Partners Asset Management Fee for &/or Affiliates managing assets...................... $12,930 General Partners 1% interest in profits............... $9,297 Less allocation of syndication costs... 722 ------------ $8,575 General Partners Portion of early withdrawal penalties &/or Affiliates applied to reduce Formation Loan..... $6,294 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 Corp. connection with the review, selection, evaluation, negotiation, and extension of the Mortgage Investments paid by the borrowers and not by the Partnership .............. $367,205 Redwood Mortgage Processing and Escrow Fees for services in Corp. connection with notary, document preparation, investigation, and escrow fees payable by the borrowers and not by the Partnership.. $7,961 Gymno Corporation, Reconveyance Fee...................... $271 Inc. 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. $25,827 MORTGAGE INVESTMENT PORTFOLIO SUMMARY AS OF March 31, 2000 Partnership Highlights First Trust Deeds $25,450,045.92 Appraised Value of Properties* 43,575,622.00 Total Investment as a % of Appraised Value 58.40% First Trust Deed Mortgage Investments 25,450,045.92 Second Trust Deed Mortgage Investments 19,611,872.95 Third Trust Deed Mortgage Investments 190,243.90 -------------------- 45,252,162.77 First Trust Deeds due other Lenders 30,228,947.33 Second Trust Deeds due other Lenders 2,600,000.00 -------------------- Total Debt $78,081,110.10 Appraised Property Value* 127,842,437.00 Total Investment as a % of Appraised Value 61.08% Number of Mortgage Investments Outstanding 57 Average Investment $793,897.59 Average Investment as a % of Net Partners Capital 1.90% Largest Investment Outstanding 2,900,000.00 Largest Investment as a % of Net Partners Capital 6.95% First Trust Deed Mortgage Investments 56.24% Second Trust Deed Mortgage Investments 43.34% Third Trust Deed Mortgage Investments 0.42% --------------- Total 100.00% Mortgage Investments by Type of Amount Percent Property Owner Occupied Homes $7,118,852.40 15.73% Non Owner Occupied Homes 12,965,236.77 28.65% Apartments 266,002.45 0.59% Commercial 24,902,071.15 55.03% ------------------ --------------- Total $45,252,162.77 100.00% Statement of Conditions of Mortgage Investments. Number of Mortgage Investments in Foreclosure 1 *Values used are the appraised values utilized at the time the mortgage investment was consummated. Diversification by County Total Percent Mortgage Investments San Francisco $16,955,411.81 37.47% San Mateo 9,208,138.43 20.35% Stanislaus 5,989,780.82 13.24% Santa Clara 5,313,272.59 11.74% Placer 2,364,421.07 5.22% Marin 2,091,055.58 4.62% Contra Costa 1,773,318.47 3.92% Lake 737,500.00 1.63% Alameda 405,615.35 0.90% San Joaquin 194,350.65 0.43% Fresno 127,491.67 0.28% Riverside 50,000.00 0.11% Sacramento 41,806.33 0.09% --------------------- ------------ Total $45,252,162.77 100.00% PART 2 OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in the Securities Not Applicable Item 3. Defaults upon Senior Securities Not Applicable Item 4. Submission of Matters to a Vote of Security Holders Not Applicable Item 5. Other Information Not Applicable Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Not Applicable (b) Form 8-K The registrant has not filed any reports on Form 8-K during the quarter ended March 31, 2000. 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 12th day of May, 2000. 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 12th day of May, 2000. Signature Title Date /S/ D. Russell Burwell - ------------------------------ D. Russell Burwell General Partner May 12, 2000 /S/ Michael R. Burwell - ------------------------------ Michael R. Burwell General Partner May 12, 2000 /S/ D. Russell Burwell - ----------------------------- D. Russell Burwell President of Gymno Corporation, May 12, 2000 (Principal Executive Officer); Director of Gymno Corporation /S/ Michael R. Burwell - ----------------------------- Michael R. Burwell Secretary/Treasurer of Gymno May 12, 2000 Corporation (Principal Financial and Accounting Officer); Director of Gymno Corporation EX-27 2 FDS --
5 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 646,503 0 46,358,199 836,206 0 0 0 0 46,172,433 0 0 4,473,992 0 0 41,698,441 46,172,433 0 1,093,746 0 144,196 0 1,847 17,990 929,713 0 929,713 0 0 0 929,713 .00 .00
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