UNITED STATES
SECURITIES & EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarterly Period Ended March 31, 2003
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Commission file number 33-12519
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REDWOOD MORTGAGE INVESTORS VI, a California Limited Partnership
(exact name of registrant as specified in its charter)
California 94-3031211
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(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.
900 Veterans Blvd., Suite 500, Redwood City, CA 94063
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(address of principal executive office)
(650) 365-5341
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(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
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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
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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
1
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
BALANCE SHEETS
MARCH 31, 2003 and DECEMBER 31, 2002 (unaudited)
ASSETS
March 31, December 31,
2003 2002
--------------- ---------------
Cash $ 443,661 $ 341,127
--------------- ---------------
Loans
Loans, secured by deeds of trust 4,993,686 5,183,100
Loans, unsecured, net discount of $131,352 223,697 223,697
--------------- ---------------
5,217,383 5,406,797
Less allowance for loan losses (275,861) (275,294)
--------------- ---------------
Net loans 4,941,522 5,131,503
--------------- ---------------
Interest and other receivables
Accrued interest and late fees 67,091 61,384
Advances on loans 32,391 31,007
--------------- ---------------
Total interest and other receivables 99,482 92,391
--------------- ---------------
Real estate held for sale, net 1,280,702 1,234,541
--------------- ---------------
Total assets $ 6,765,367 $ 6,799,562
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable $ 13,068 $ 11,953
Payable to affiliate 14,774 14,643
--------------- ---------------
Total liabilities 27,842 26,596
--------------- ---------------
Partners' capital
Limited partners' capital, subject to redemption 6,727,843 6,763,200
General partners' capital 9,682 9,766
--------------- ---------------
Total partners' capital 6,737,525 6,772,966
--------------- ---------------
Total liabilities and partners' capital $ 6,765,367 $ 6,799,562
=============== ===============
The accompanying notes are an integral part of these financial statements.
2
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
STATEMENTS OF INCOME
FOR THREE MONTHS ENDED MARCH 31, 2003 and 2002 (unaudited)
THREE MONTHS ENDED
MARCH 31,
----------------------------------
2003 2002
-------------- ---------------
Revenues
Interest on loans $ 107,645 $ 187,892
Interest interest bearing accounts 980 1,157
Late charges, prepayment penalties, and fees 1,828 25,472
-------------- ---------------
110,453 214,521
-------------- ---------------
Expenses
Loan servicing fees 12,258 87,078
Asset management fees 2,121 2,196
Clerical costs through Redwood Mortgage Corp. 4,846 5,954
Provisions for losses on loans and real estate 566 7,156
Professional services 13,388 12,508
Other 1,862 1,836
-------------- ---------------
35,041 116,728
-------------- ---------------
Net income $ 75,412 $ 97,793
============== ===============
Net income
General partners (1%) 754 978
Limited partners (99%) 74,658 96,815
-------------- ---------------
$ 75,412 $ 97,793
============== ===============
Net income per $1,000 invested by limited
partners for entire period:
-where income is reinvested and compounded $ 12 $ 14
============== ===============
-where partner receives income in monthly
distributions $ 12 $ 14
============== ===============
The accompanying notes are an integral part of these financial statements.
3
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 and 2002 (unaudited)
THREE MONTHS ENDED MARCH 31,
----------------------------------------------
2003 2002
---------------- ---------------
Cash flows from operating activities
Net income $ 75,412 $ 97,793
Adjustments to reconcile net income to net cash provided
by operating activities
Provision for loan losses 566 67,811
Early withdrawal penalties credited to income (684) (2,273)
Change in operating assets and liabilities
Accrued interest and advances on loans (7,091) 684,364
Accounts payable and payable to affiliate 1,246 13,592
Deferred interest - 3,996
---------------- ---------------
Net cash provided by operating activities 69,449 865,283
---------------- ---------------
Cash flows from investing activities
Principal collected on loans 235,994 553,497
Loans originated (46,578) (896,911)
Payments for real estate (46,162) (3,479)
Proceeds from disposition of real estate - 5,191
---------------- ---------------
Net cash provided by (used in) investing activities 143,254 (341,702)
---------------- ---------------
Cash flows from financing activities
Partners' withdrawals (110,169) (152,123)
---------------- ---------------
Net cash used in financing activities (110,169) (152,123)
---------------- ---------------
Net increase in cash 102,534 371,458
Cash - beginning of year 341,127 190,414
---------------- ---------------
Cash - end of period $ 443,661 $ 561,872
================ ===============
The accompanying notes are an integral part of these financial statements.
4
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
Notes to Financial Statements
MARCH 31, 2003 (unaudited)
Note 1 - General
In the opinion of the management of the Partnership, the accompanying
unaudited financial statements contain all adjustments, consisting of normal,
recurring adjustments, necessary to present fairly the financial information
included therein. These financial statements should be read in conjunction with
the audited financial statements included in the Partnership's Form 10-K for the
fiscal year ended December 31, 2002 filed with the Securities and Exchange
Commission. The results of operations for the three month period ended March 31,
2003 are not necessarily indicative of the operating results to be expected for
the full year.
Note 2 - Summary of Significant Accounting Policies
Loans, secured by deeds of trust
At March 31, 2003 and December 31, 2002, loans categorized as impaired by
the Partnership were $96,716 and $96,716, respectively, with a reduction in the
carrying value of the impaired loans of $6,620, and $6,620, respectively. The
reduction in the carrying value of the impaired loans is included in the
allowance for loan losses. The impaired loans have accrued interest, late
charges and advances totaling $10,973 and $10,973 at March 31, 2003 and December
31, 2002. The average recorded investment in the impaired loans was $96,716 for
the three months ended March 31, 2003 and $1,282,304 for the year ended December
31, 2002, respectively.
At March 31, 2003 and December 31, 2002, the Partnership had two loans past
due 90 days or more totaling $320,005 and $207,648 (6.41% and 4.01% of the
secured loan portfolio), respectively. The Partnership does not consider these
loans to be impaired because there is sufficient collateral to cover the amount
outstanding to the Partnership, and is still accruing interest on these loans.
Allowance for loan losses
The composition of the allowance for loan losses as of March 31, 2003 and
December 31, 2002 was as follows:
March 31, December 31,
2003 2002
---------------- ----------------
Impaired loans $ 6,620 $ 6,620
Specified loans 44,977 44,977
General 567 -
Unsecured loans 223,697 223,697
---------------- ----------------
$ 275,861 $ 275,294
================ ================
Activity in the allowance for loan losses is as follows for the three
months ended March 31, 2003 and 2002:
March 31, December 31,
2003 2002
---------------- ----------------
Beginning balance $ 275,294 $ 370,612
Provision for loan losses 567 3,083
Recoveries - (8,947)
Restructures - (48,009)
Write-offs - (41,445)
---------------- ----------------
$ 275,861 $ 275,294
================ ================
5
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
Notes to Financial Statements
MARCH 31, 2003 (unaudited)
Note 2 - Summary of Significant Accounting Policies (continued)
Income taxes
No provision for federal and state income taxes, except for a minimum state
tax of $800, is made in the financial statements since income taxes are the
obligation of the partners if and when income taxes apply.
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 amounts allocated to
limited partners who held their investment throughout the period and have
elected to either leave their earnings to compound or have elected to receive
periodic 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.
Reclassifications
Certain reclassifications, not affecting previously reported net income or
total partners' capital, have been made to the previously issued financial
statements to conform to the current year classification.
Profits and losses
Profits and losses are allocated among the limited partners according to
their respective capital accounts monthly after 1% of the profits and losses are
allocated to the general partners.
Note 3 - General Partners and Related Parties
The following are commissions and fees that are paid to the general
partners and affiliates.
Mortgage brokerage commissions
For fees in connection with the review, selection, evaluation, negotiation
and extension of loans, the Partnership may collect an amount equivalent to 12%
of the loaned amount until 6 months after the termination date of the offering.
Thereafter, loan brokerage commissions (points) will be limited to an amount not
to exceed 4% of the total Partnership assets per year. The loan brokerage
commissions are paid by the borrowers, and thus, are not an expense of the
Partnership. During the three months through March 31, 2003 and 2002, loan
brokerage commissions paid by the borrowers were $1,164 and $0, respectively.
Mortgage servicing fees
Monthly mortgage servicing fees of up to 1/8 of 1% (1.5% annual) of the
unpaid principal are paid to Redwood Mortgage Corp., based on the unpaid
principal balance of the loan portfolio, or such lesser amount as is reasonable
and customary in the geographic area where the property securing the mortgage is
located. Once a loan is categorized as impaired, mortgage servicing fees are no
longer accrued. Additional service fees are recorded upon the receipt of any
subsequent payments on impaired loans. Mortgage servicing fees of $12,258 and
$87,078, were incurred for the three months through March 31, 2003 and 2002,
respectively. The Partnership has a payable to Redwood Mortgage Corp. for
servicing fees of $14,774 and $14,643 at March 31, 2003 and December 31, 2002,
respectively.
6
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
Notes to Financial Statements
MARCH 31, 2003 (unaudited)
Note 3 - General Partners and Related Parties (continued)
Asset management fee
The general partners receive monthly fees for managing the Partnership's
loan portfolio and operations of up to 1/32 of 1% of the "net asset value" (3/8
of 1% annually). Asset management fees of $2,121 and $2,196 were incurred for
the three months through March 31, 2003 and 2002, respectively.
Other fees
The partnership agreement provides for other fees such as reconveyance,
mortgage assumption and mortgage extension fees. These fees are incurred by the
borrowers and paid to the general partners.
Operating expenses
The general partners or their affiliate, Redwood Mortgage Corp., are
reimbursed by the Partnership for all operating expenses 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.
During the three months through March 31, 2003 and 2002, operating expenses
totaling $4,846 and $5,954, respectively, were reimbursed to Redwood Mortgage
Corp.
Note 4 - Real Estate Held for Sale
The following schedule reflects the costs of real estate acquired through
foreclosure and the recorded reductions to estimated fair values, including
estimated costs to sell, as of March 31, 2003 and December 31, 2002:
March 31, December 31,
2003 2002
--------------- ----------------
Costs of properties $ 2,064,893 $ 2,018,732
Reduction in value (784,191) (784,191)
--------------- ----------------
Real estate held for sale $ 1,280,702 $ 1,234,541
=============== ================
Note 5 - Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of financial instruments:
Secured loans carrying value was $4,993,686 and $5,183,100 at March 31,
2003 and December 31, 2002, respectively. The fair value of these loans of
$4,694,536 and $4,862,646, respectively, was 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 loan losses along with
accrued interest and advances related thereto should also be considered in
evaluating the fair value versus the carrying value.
7
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
Notes to Financial Statements
MARCH 31, 2003 (unaudited)
Note 6 - Asset Concentrations and Characteristics
Most loans are secured by recorded deeds of trust. At March 31, 2003 and
December 31, 2002, there were 20 and 22 secured loans outstanding respectively,
with the following characteristics:
March 31, December 31,
2003 2002
-------------- ----------------
Number of secured loans outstanding 20 22
Total secured loans outstanding $4,993,686 $ 5,183,100
Average secured loan outstanding $ 249,684 $ 235,595
Average secured loan as percent of total 5.00% 4.55%
Average secured loan as percent of partners' capital 3.70% 3.48%
Largest secured loan outstanding $2,103,300 $ 2,103,300
Largest secured loan as percent of total 42.12% 40.58%
Largest secured loan as percent of partners' capital 31.18% 31.05%
Number of counties where security is located (all California) 10 10
Largest percentage of secured loans in one county 44.28% 42.67%
Average secured loan to appraised value of security at time
loan was consummated 82.75% 79.68%
Number of secured loans in foreclosure 1 -
Amounts of secured loans in foreclosure $ 175,656 $ -
The following categories of secured loans were held at March 31, 2003 and
December 31, 2002:
March 31, December 31,
2003 2002
--------------- ---------------
First trust deeds $ 4,189,766 $ 4,392,120
Second trust deeds 803,920 790,980
Third trust deeds - -
--------------- ---------------
Total loans 4,993,686 5,183,100
Prior liens due other lenders 2,416,997 2,779,170
--------------- ---------------
Total debt $ 7,410,683 $ 7,962,270
=============== ===============
Appraised property value at time of loan $ 8,955,286 $ 9,992,743
=============== ===============
Total investments as a percent of appraisals 82.75% 79.68%
=============== ===============
Investments by type of property
Owner occupied homes $ 718,607 $ 749,707
Non-owner occupied homes 74,470 74,674
Apartments 363,696 566,600
Commercial 3,836,913 3,792,119
--------------- ---------------
$ 4,993,686 $ 5,183,100
=============== ===============
8
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
Notes to Financial Statements
MARCH 31, 2003 (unaudited)
Note 6 - Asset Concentrations and Characteristics (continued)
Scheduled maturity dates of secured loans as of March 31, 2003 are as
follows:
Year Ending December 31,
-------------------------------------
2003 $ 677,900
2004 613,607
2005 145,125
2006 96,716
2007 3,259,473
Thereafter 200,865
-------------------
$ 4,993,686
===================
The remaining scheduled maturities for 2003 include one loan totaling
$175,656 (3.52%), which was past maturity at March 31, 2003. This loan was
categorized as delinquent over 90 days.
Cash deposits at March 31, 2003 of $553,541, before clearing deposits in
transit and outstanding checks, were in one bank. The balances exceeded FDIC
insurance limits (up to $100,000 per bank) by $453,541.
The Partnership has a substantial amount of its loan receivable balance
from one borrower at March 31, 2003 and December 31, 2002. This borrower
accounted for approximately 61% and 62% of the loan balances at such dates. This
borrower accounted for approximately 48% and 31% of interest revenue for the
three months ended March 31, 2003 and year ended December 31, 2002,
respectively.
Note 7 - Commitments and Contingencies
Workout agreements
The Partnership has negotiated various contractual workout agreements with
borrowers. The Partnership is not obligated to fund additional money as of March
31, 2003 and December 31, 2002. There are approximately two loans totaling
$176,268 in workout agreements as of these dates.
Legal proceedings
The Partnership is involved in various legal actions arising in the normal
course of business. In the opinion of management, such matters will not have a
material effect upon the financial position of the Partnership.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OF THE PARTNERSHIP
Critical Accounting Policies.
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. Such estimates relate
principally to the determination of (1) the allowance for loan losses (i.e. the
amount of allowance established against loans receivable as an estimate of
potential loan losses) including the accrued interest and advances that are
estimated to be unrecoverable based on estimates of amounts to be collected plus
estimates of the value of the property as collateral and (2) the valuation of
real estate acquired through foreclosure. At March 31, 2003, there were three
Real Estate Owned properties all acquired through foreclosure, one in 2002 and
the other two in prior years.
Loans and the related accrued interest, late fees and advances are analyzed
on a continuous basis for recoverability. Delinquencies are identified and
followed as part of the loan system. Delinquencies are determined based upon
contractual terms. A provision is made for loan losses to adjust the allowance
for loan losses to an amount considered by management to be adequate, with due
consideration to collateral values, to provide for unrecoverable loans and
receivables, including impaired loans, other loans, accrued interest, late fees
and advances on loans and other accounts receivable (unsecured). The Partnership
charges off uncollectible loans and related receivables directly to the
allowance account once it is determined that the full amount is not collectible.
Statement of Financial Accounting Standards Nos. 114 and 118 provide that
if the probable ultimate recovery of the carrying amount of a loan, with due
consideration for the fair value of collateral, is less than amounts due
according to the contractual terms of the loan agreement and the shortfall in
the amounts due are not insignificant, the carrying amount of the investment
shall be reduced to the present value of future cash flows discounted at the
loan's effective interest rate. If a loan is collateral dependent, it is valued
at the estimated fair value of the related collateral.
If events and or changes in circumstances cause management to have serious
doubts about the collectibility of the contractual payments, a loan may be
categorized as impaired and interest is no longer accrued. Any subsequent
payments on impaired loans are applied to reduce the outstanding loan balances,
including accrued interest and advances.
Recent trends in the economy have been taken into consideration in the
aforementioned process of arriving at the allowance for loan losses. Actual
results could vary from the aforementioned provisions for losses.
Forward Looking Statements.
Some of the information in the Form 10-K may contain forward looking
statements. Uses of words such as "will", "may", "anticipate", "estimate",
"continue" or other forward looking words, discuss future expectations or
predictions. The foregoing analysis of 2003 includes forward looking statements
and predictions about the possibility of 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
the future events. No assurance can be given that any of these statements or
predictions will ultimately prove to be correct or substantially correct.
Related Parties.
The general partners of the Partnership are Gymno Corporation and Michael
R. Burwell. Most Partnership business is conducted through Redwood Mortgage
Corp., an affiliate of the general partner, which arranges, services and
maintains the loan portfolio for the benefit of the Partnership. The fees
received by the affiliate are paid pursuant to the partnership agreement and are
determined at the sole discretion of the affiliate. In the past the affiliate
has elected not to take the maximum compensation. The following is a list of
various Partnership activities for which related parties are compensated.
10
o Mortgage Brokerage Commissions For fees in connection with the review,
selection, evaluation, negotiation and extension of loans, the Partnership may
collect an amount equivalent to 12% of the loaned amount until 6 months after
the termination date of the offering. Thereafter, the loan brokerage commissions
(points) will be limited to an amount not to exceed 4% of the total Partnership
assets per year. The loan brokerage commissions are paid by the borrowers, and
thus, are not an expense of the Partnership. For the three months ended March
31, 2003 and 2002, loan brokerage commissions paid by the borrowers were $1,164
and $0, respectively.
o Mortgage Servicing Fees Monthly mortgage servicing fees of up to 1/8 of
1% (1.5% on an annual basis) of the unpaid principal of the Partnership's loans
are 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 $12,258 and $87,078 were incurred for the
three months ended March 31, 2003 and 2002, respectively.
o Asset Management Fees The general partners receive monthly fees for
managing the Partnership's portfolio and operations up to 1/32 of 1% of the `net
asset value' (3/8 of 1% on an annual basis). Management fees to the general
partners of $2,121 and $2,196 were incurred by the Partnership for the three
months ended March 31, 2003 and 2002, respectively.
o Other Fees The Partnership agreement provides that the general partners
may receive other fees such as reconveyance, mortgage assumption and mortgage
extension fees. Such fees are incurred by the borrowers and are paid to the
general partners.
o Income and Losses All income and losses are credited or charged to
partners in relation to their respective Partnership interests. The allocation
to the general partners (combined) shall be a total of 1%.
o Operating Expenses An affiliate of the Partnership, Redwood Mortgage
Corp. is reimbursed by the Partnership for all operating expenses actually
incurred by it 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.
o Contributed Capital The general partners jointly and severally were to
contribute 1/10 of 1% in cash contributions as proceeds from the offerings are
received from the limited partners. As of March 31, 2003 and December 31, 2002,
a general partner, Gymno Corporation, had contributed $9,772 and $9,772
respectively, as capital in accordance with Section 4.02(a) of the partnership
agreement.
Results of Operations - For the three months ended March 31, 2003 and 2002
The net income decrease of $22,378 (23%) for the three months ended March
31, 2003 versus March 31, 2002 was due primarily to a decrease in interest
earned on loans of $80,247, a decrease in late charges and other fees of
$23,644; offset by significant expense decreases for the three months ended
March 31, 2003 including a decrease in loan servicing fees of $74,820, and
decreases in the provision for losses on loans and real estate acquired through
foreclosure of $6,590, and clerical costs of $1,108.
The decrease in interest on loans of $80,247 for the three months ended
March 31, 2003 was due to lower average loan portfolio and a lower average loan
portfolio interest rate.
The decrease in late charge revenue and other fees of $23,644 for the three
months ended March 31, 2003 versus 2002 is reflective of more loans being
current.
The increase in professional fees of $880 for the three months ended March
31, 2003 versus 2002 relates mainly to the increased costs and timing of
services for audits, financial report writing and tax filing.
11
The decrease in loan servicing fees of $74,820 for the three months ended
March 31, 2003 versus March 31, 2002 is primarily attributable to the lower
average loan portfolio balances during 2003. Loan servicing fees of $87,078
during the three months through March 31, 2002 was due to the collection of
previously past due payments on impaired loans, which were collected in that
quarter. The Partnership does not accrue servicing fees to Redwood Mortgage
Corp. on impaired loans. Rather, servicing fees on impaired loans are incurred
as borrower payments are received.
The decrease of $6,590 in provision for losses on loans and real estate
acquired through foreclosure for the three months ended March 31, 2003 versus
2002 reflects the general partners' estimate that the existing reserves are
adequate as contemplated by a guarantee received from Redwood Mortgage Corp.
relating to the collectibility of certain Partnership loans.
As of September 2, 1989, the Partnership had sold 97,725.94 Units and its
contributed capital totaled $9,772,594 of the approved $12,000,000 issue, in
Units of $100 each. As of that date the offering was formally closed. On March
31, 2003, the Partnership's net capital totaled $6,737,525.
The Partnership began funding loans in October 1987. The Partnership's
secured loans outstanding as of March 31, 2003 and 2002 were $4,993,686 and
$5,763,508, respectively. The overall decrease in loans outstanding to March 31,
2003 from December 31, 2002, was due primarily to the Partnership utilizing loan
payoffs to meet limited partner capital liquidations, and an increase in real
estate held for sale or in process. During this period, loan principal
collections exceeded limited partner liquidations.
Since January 2001, the Federal Reserve has been dramatically cutting its
core interest rates with eleven successive cuts, ranging from .25% to .50%. The
latest cut of .50% was made on November 7, 2002, which reduced the Federal Funds
Rate to 1.25% and the prime rate to 4.25%. The effect of the cuts has greatly
reduced short-term interest rates and to a lesser extent reduced long-term
interest rates. New loans will be originated at then existing interest rates. In
the future, the general partners anticipate that 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. The general
partners anticipate that new loans will be placed at rates approximately 1%
lower than similar loans during 2002. The lowering of interest rates has
encouraged those borrowers that hold higher interest rate loans than those
currently available to seek refinancing of their existing obligations to take
advantage of these lower rates. The Partnership may face prepayments in the
existing portfolio from borrowers taking advantage of these lower rates.
However, demand for loans from qualified borrowers continues to be strong and as
prepayments occur, we expect to replace these loans with loans at somewhat lower
interest rates. At this time, the general partners believe that the average loan
portfolio interest rate will decline approximately .25% to .50% over the year
2003. Nevertheless, based upon the rates expected in connection with the
existing loans, and anticipated interest rates to be charged by the Partnership
and the general partners' experience, the general partners anticipate that the
annualized yield for compounding limited partners will range between 4.75% and
5.00% for the year 2003.
The Partnership's operating results and delinquencies are within the normal
range of the general partners' expectations, based upon their experience in
managing similar partnerships over the last twenty-four years. Foreclosures are
a normal aspect of Partnership operations and the general partners anticipate
that they will not have a material effect on liquidity. As of March 31, 2003,
there was one property in foreclosure. As of March 31, 2003 and 2002, the
Partnership's real estate owned account balance was $1,280,702 and $841,791,
respectively. The increase was due to the acquisition of security on delinquent
loans. The Partnership intends to sell these properties.
Cash is continually being generated from interest earnings, late charges,
prepayment penalties and amortization of principal and loan pay-offs. Currently,
this amount exceeds Partnership expenses and earnings and partner liquidation
requirements. As loan opportunities become available, excess cash and available
funds are invested in new loans.
12
Allowance for Losses.
The general partners regularly review the loan portfolio, examining the
status of delinquencies, the underlying collateral securing these loans, REO
expenses, sales activities and borrower's payment records and other data
relating to the loan portfolio. Data on the local real estate market, and on the
national and local economy are studied. Based upon this information and more,
loan loss reserves are increased or decreased. Borrower foreclosures are a
normal aspect of Partnership operations. The Partnership is not a credit based
lender and hence while it reviews the credit history and income of borrowers,
and if applicable, the income from income producing properties, the general
partners expect that we will on occasion take back real estate security. During
2001, and continuing in 2002 and 2003, the Northern California real estate
market slowed and the national and local economies have slipped into recession.
As of March 31, 2003, one notice of default was filed. The Partnership also
entered into workout agreements with borrowers who are past maturity or
delinquent in their regular payments. The Partnership had workout agreements on
approximately 2 loans totaling $176,268 (3.53% of the secured loan portfolio) as
of March 31, 2003. Typically, a workout agreement allows the borrower to extend
the maturity date of the balloon payment and allows the borrower to make current
monthly payments while deferring for periods of time, past due payments or
allows time to pay the loan in full. These workout agreements and foreclosures
generally exist within our loan portfolio to greater or lesser degrees,
depending primarily on the health of the economy. The number of foreclosures and
workout agreements will rise during difficult times and conversely fall during
good economic times. The number and amount of foreclosures existing at March 31,
2003, in management's opinion, does not have a material effect on our results of
operations or liquidity. These workouts have been considered when management
arrived at appropriate loan loss reserves and based on our experience, are
reflective of our loan marketplace segment. Because of the number of variables
involved, the magnitude of possible swings and the general partners inability to
control many of these factors, actual results may and do sometimes differ
significantly from estimates made by the general partners. Management provided
$566 and $7,156as provision for loan losses for the three months through March
31, 2003 and 2002, respectively. During 2002, the Partnership restructured four
previously impaired loans into two new loans with a lower interest rate. The
amount restructured was $3,060,100. Had the loans been current in accordance
with their original terms and had they been outstanding throughout the entire
year, the Partnership would have recognized gross interest income of $267,946
for 2002. The Partnership recognized $172,131 of interest income on the
restructured loans for 2002. As of March 31, 2003, there is a collateral
shortfall on the restructured loans ranging from approximately $194,000 to
$337,000 that has not been reserved for. Redwood Mortgage Corp. has guaranteed
to cover any losses sustained by the Partnership related to these restructured
loans. Management believes that reserves previously set aside are adequate.
PORTFOLIO REVIEW - For the three months ended March 31, 2003 and 2002.
Loan Portfolio
The Partnership's loan portfolio consists primarily of short-term (one to
five years), fixed rate loans secured by real estate. As of March 31, 2003 and
2002 the Partnership's loans secured by real property collateral in the five San
Francisco Bay Area counties (San Francisco, San Mateo, Santa Clara, Alameda, and
Marin) represented $4,399,817 (88.11%) and $4,821,253 (83.65%) of the
outstanding loan portfolio. The remainder of the portfolio represented loans
secured by real estate located primarily in Northern California.
As of March 31, 2003, approximately 15.88% ($793,077), was invested in
loans secured by single family homes (1-4 units), approximately 7.28%
($363,696), was invested in loans secured by multifamily dwellings (apartments
over 4 units), approximately 76.84% ($3,836,913), was invested in loans secured
by commercial properties. As of March 31, 2002, approximately 12.28% ($707,849),
was invested in loans secured by single family homes (1-4 units), approximately
9.68% ($558,076) was invested in loans secured by multifamily dwellings
(apartments over 4 units), approximately 78.04% ($4,497,583) was invested in
loans secured by commercial properties.
13
As of March 31, 2003, the Partnership held 20 loans secured by deeds of trust.
The following table sets forth the priorities, asset concentrations and
maturities of the loans held by the Partnership as of March 31, 2003:
PRIORITIES, ASSET CONCENTRATIONS AND MATURITIES OF LOANS
As of March 31, 2003
# of Loans Amount Percent
----------- ------------ -----------
1st Mortgages 11 $4,189,766 84%
2nd Mortgages 9 803,920 16%
=========== ============ ===========
Total 20 $4,993,686 100%
Maturing 12/31/03 and prior 8 $ 677,900 14%
Maturing prior to 12/31/04 2 613,607 12%
Maturing prior to 12/31/05 2 145,125 3%
Maturing after 12/31/05 8 3,557,054 71%
=========== ============ ===========
Total 20 $4,993,686 100%
Average Loan $ 249,684 5%
Largest Loan 2,103,300 42%
Smallest Loan 5,091 0.10%
Average Loan-to-Value 83%
Borrower Liquidity and Capital Resources.
At the time of subscription to the Partnership, limited partners made an
irrevocable decision to either take distributions of earnings monthly, quarterly
or annually or to compound earnings in their capital account. For the three
months ended March 31, 2003 and 2002, the Partnership made distributions of
earnings to limited partners of $27,780 and $33,661, respectively. Distribution
of earnings to limited partners for the quarters ended March 31, 2003 and 2002,
to limited partners' capital accounts and not withdrawn, was $55,210and $63,154,
respectively. As of March 31, 2003 and 2002, limited partners electing to
withdraw earnings represented 35% and 36%, respectively, of the limited partners
outstanding capital accounts.
The Partnership also allows the limited partners to withdraw their capital
account subject to certain limitations (see liquidation provisions of
Partnership Agreement). For the three months ended March 31, 2003 and 2002,
$8,548 and $28,422, respectively, were liquidated subject to the 10% and/or 8%
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% and/or 8% 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 investments to raise cash.
The demand 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 March 31, 2003 and 2002, respectively, and is expected by
the general partners to commonly occur at these levels.
14
Additionally, for the three months ended March 31, 2003 and 2002, $73,684
and $91,336, respectively, were liquidated by limited partners who have elected
a liquidation program over a period of five years or longer. Once the initial
five-year hold period has passed, the general partners expect to see an increase
in liquidations due to the ability of limited partners to withdraw without
penalty. This ability to withdraw after five years by limited partners has the
effect of providing limited partner liquidity. The general partners expect a
portion of the limited partners to take advantage of this provision. 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 will have been liquidated. After year eleven, liquidation generally
subsides and the Partnership capital again tends to increase.
In some cases in order to satisfy broker dealers and other reporting
requirements, the general partners have valued the limited partners' interest in
the Partnership on a basis which utilizes a per Unit system of calculation,
rather than based upon the investors' capital account. This information has been
reported in this manner in order to allow the Partnership to integrate with
certain software used by the broker dealers and other reporting entities. In
those cases, the Partnership will report to broker dealers, Trust Companies and
others a "reporting" number of Units based upon a $1.00 per Unit calculation.
The number of reporting Units provided will be calculated based upon the limited
partner's capital account value divided by $1.00. Each investor's capital
account balance is set forth periodically on the Partnership account statement
provided to investors. The reporting Units are solely for broker dealers
requiring such information for their software programs and do not reflect actual
Units owned by a limited partner or the limited partners' right or interest in
cash flow or any other economic benefit in the Partnership. Each investor's
capital account balance is set forth periodically on the Partnership account
statement provided to investors. The amount of Partnership earnings each
investor is entitled to receive is determined by the ratio that each investor's
capital account bears to the total amount of all investor capital accounts then
outstanding. The capital account balance of each investor should be included on
any NASD member client account statement in providing a per Unit estimated value
of the client's investment in the Partnership in accordance with NASD Rule 2340.
While the general partners have set an estimated value for the Partnership
Units, such determination may not be representative of the ultimate price
realized by an investor for such Units upon sale. No public trading market
exists for the Partnership's Units and none is likely to develop. Thus, there is
no certainty that the Units can be sold at a price equal to the stated value of
the capital account. Furthermore, the ability of an investor to liquidate his or
her investment is limited subject to certain liquidation rights provided by the
Partnership, which may include early withdrawal penalties (See the section of
the Prospectus entitled "Risk Factors - Purchase of Units is a Long Term
Investment").
Current Economic Conditions.
The Partnership makes loans primarily in Northern California. As of March
31, 2003, approximately 88.11%, ($4,399,817) of the loans held by the
Partnership were in five San Francisco Bay Area Counties. The remainder of the
loans held were secured primarily by Northern California real estate outside the
San Francisco Bay Area. Like the rest of the nation, the San Francisco Bay Area
has also felt the recession and accompanying slow down in economic growth and
increasing unemployment. The technology companies of Silicon Valley, the airline
industry, the tourism industry and other industries are feeling the effects of
the overall United States recession, which includes lower earnings, losses and
layoffs.
As contained in a collection of real estate statistics listed in the San
Francisco Chronicle dated February 21, 2003, Bay Area home sales slowed in
January but prices rose. The article stated, "The torrid pace of home sales in
the Bay Area cooled slightly in January, but the median price year-over-year
rose nearly 9 %, a real estate information firm said Thursday. The median price
of a house in the nine-county Bay Area was $404,000 in January, up 8.9% from the
year-ago median of $371,000, but down 2.9% from the December median of $416,000.
Last summer, the Bay Area median reached an all-time high of $417,000. The
median is the midpoint; half of the sales prices in the month were below and
half were above $404,000. A total of 6,944 houses and condos sold last month in
the nine counties, down 0.7% from the 6,990 sold in January 2002. Sales dropped
19% in Napa, 2.1% in San Francisco and 7.6% in Santa Clara.
15
Researchers at DataQuick in La Jolla (San Diego County) said the drop
reflects stronger-than-expected sales in January 2002, when buyers who had fled
the market after September 11 terrorist attacks returned, prompted largely by
falling interest rates. The January 2002 sales figure was the highest for that
month in a decade. `Everyone put things on hold (after Sept. 11), and several
months later, people jumped back in,' said John Karevoll, DataQuick researcher.
Although sales fell 19% in Napa County, the median price there jumped 31.1% to
$405,000 - though Karevoll pointed out the county routinely has the fewest sales
per month. In San Francisco, the median price rose 8.5% to $539,000. Santa
Clara, hit hard by the dot-com bust, saw the smallest rise in median home price
- - up 4.9% to $447,000. Economists are keeping a close eye on the housing market,
one of the few bright sectors in an otherwise stormy economy. To some pundits,
the Bay Area market, in particular, has raised red flags because home prices
have continued to rise despite widespread layoffs and a beleaguered technology
sector."
January Home Sales
- ----------------------------------------------------------------------------------------------------------------
Sold* Sold* Pct. Median Median Pct.
Jan. 02 Jan. 03 Change Jan. 02 Jan. 03 Change
---------- ---------- ----------- ------------- ------------- ----------
Alameda 1,478 1,471 -0.5% $358,000 $392,000 9.5%
Contra Costa 1,319 1,392 5.5 309,000 355,000 14.9
Marin 259 269 3.9 502,000 535,000 6.6
Napa 163 132 -19.0 309,000 405,000 31.1
San Francisco 375 367 -2.1 497,000 539,000 8.5
San Mateo 581 541 -6.9 478,000 507,000 6.1
Santa Clara 1,635 1,510 -7.6 426,000 447,000 4.9
Solano 601 658 9.5 238,000 276,000 16.0
Sonoma 579 604 4.3 297,000 343,000 15.5
Bay Area 6,990 6,944 -0.7 371,000 404,000 8.9
*Sales include new and existing houses and condos.
Source: DataQuick Information Systems, www.dqnews.com
For the Partnership, these statistics imply that the values of homes
secured by mortgages should remain firm and assist in reducing losses if the
take back of collateral through the foreclosure process should eventuate.
In spite of the slowing economy, commercial lending opportunities exist
which the Partnership may advantage itself of.
According to the San Francisco Business Times of the week of January 3,
2003, the real estate market took its first steps on the long road back. The
article states, "After back-to-back terrible years, the mere fact that 2003 is
not likely to be worse counts as good news. The market seems to be at the bottom
of the bottom and it may see a slight improvement in 2003. None of real estate's
highly paid crystal ballers, including University of California, Berkeley's Ken
Rosen, is predicting major improvement in 2003 because they don't see
significant job creation. The uncertainty of war in the Middle East and
continuing problems in high tech and travel, meanwhile, conspire to keep the lid
on chances for a major recovery in 2003. That doesn't mean that there won't be
major lease deals. Orrick Herrington & Sutcliffe will likely sign a
150,000-square-foot lease in San Francisco at either Foundry Square or 400
Sansome Street that will have more value than any lease signed throughout 2002
anywhere in the region.
Commercial vacancy in San Francisco hovers around 20% while down on the
harder hit Peninsula it is closer to 25%. Nobody dares calculate shadow space -
those canyons of empty cubicles that corporations aren't using or subleasing.
That space has to fill before companies absorb new space, a factor likely to
further delay any recovery. New office building, which tends to lag a recovery
in the leasing market, is still several years away, barring some plans by
government agencies. `It will be another lean year with some pockets of activity
in non-cyclical areas such as the nonprofits,' said Dave Klein, senior vice
president of BT Commercial. `Education and nonprofits will suck up a lot of
space, but demand from the big corporate office users will still be soft. We're
at the bottom of the bottom now and after 10 consecutive quarters of negative
absorption we could see some slight positive absorption by the end of the first
quarter.'
16
Major foreclosures have been noticeably absent thus far in the downturn
thanks to microscopic interest rates. If landlords continue to have to carry
empty buildings, bankruptcy courts could see more activity this year.
To the Partnership, stabilizing vacancy rates may mean that we are at the
vacancy rate bottom. High levels of space exist, and as tenant leases expire
they may be able to negotiate lower rental rates. This could lead to lower cash
flows for owners, which may mean we could experience higher foreclosures or
delinquencies.
For Partnership loans outstanding, as of March 31, 2003, the Partnership
had an average loan to value ratio computed as of the date the loan was made of
82.75%. This percentage does not account for any increases or decreases in
property values since the date the loan was made, nor does it include any
reductions in principal through amortization of payments after the loan was
made. This loan to value ratio will assist the Partnership in weathering loan
delinquencies and foreclosures should they eventuate.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following table contains information about the cash held in money
market accounts, and loans held in the Partnership's portfolio as of March 31,
2003. The presentation, for each category of information, aggregates the assets
and liabilities by their maturity dates for maturities occurring in each of the
years 2002 through 2006 and separately aggregates the information for all
maturities arising after 2006. The carrying values of these assets and
liabilities approximate their fair market values as of March 31, 2003:
2002 2003 2004 2005 2006 Thereafter Total
------------ ----------- ----------- ----------- ------------- ------------ -------------
Interest earning assets:
Money market accounts $ 432,392 $ 432,392
Average interest rate 1.00% 1.00%
Loans secured by deeds
of trust $ 677,900 613,607 145,125 96,716 3,259,473 200,865 $4,993,686
Average interest rate 10.69% 10.69% 9.35% 6.50% 7.68% 10.46% 8.60%
Market Risk.
The Partnership's primary market risk in terms of its profitability is the
exposure to fluctuations in earnings resulting from fluctuations in general
interest rates. The majority of the Partnership's mortgage loans, (100% as of
March 31, 2003) earn interest at fixed rates. Changes in interest rates may also
affect the value of the Partnership's investment in mortgage loans and the rates
at which the Partnership reinvests funds obtained from loan repayments and new
capital contributions from limited partners. If interest rates increase, the
interest rates the Partnership obtains from reinvested funds will generally
increase, but the value of the Partnership's existing loans at fixed rates will
generally tend to decrease. The risk is mitigated by the fact that the
Partnership does not intend to sell its loan portfolio, rather such loans are
held until they are paid off. If interest rates decrease, the amounts becoming
available to the Partnership for investment due to repayment of Partnership
loans may be reinvested at lower rates than the Partnership had been able to
obtain in prior investments, or than the rates on the repaid loans. In addition,
interest rate decreases may encourage borrowers to refinance their loans with
the Partnership at a time where the Partnership is unable to reinvest in loans
of comparable value.
The Partnership does not hedge or otherwise seek to manage interest rate
risk. The Partnership does not enter into risk sensitive instruments for trading
purposes.
17
Controls and Procedures.
Within the 90 days prior to the date of this report, the general partner of
the Partnership carried out an evaluation, under the supervision and with the
participation of the general partner's management, including the general
partner's President and Chief Financial Officer, of the effectiveness of the
design and operation of the Partnership's disclosure controls and procedures
pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the President
and Chief Financial Officer of the general partner concluded that the
Partnership's disclosure controls and procedures are effective. There were no
significant changes in the Partnership's internal controls or in other factors
that could significantly affect these controls subsequent to the date of their
evaluation.
18
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, part of the Form S-11 and subsequent amendments related
to the offering of Partnership investments, pages 11-12, 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 their
affiliates for services rendered during the three months ended March 31, 2003.
All such compensation is in compliance with the guidelines and limitations set
forth in the Prospectus.
Entity Receiving Description of Compensation and Services Rendered Amount
Compensation
- -----------------------------------------------------------------------------------------------------------
I. Redwood Mortgage Corp. Loan Servicing Fee for servicing loans............................$12,258
General Partners
&/or Affiliates Asset Management Fee for managing assets...........................$2,121
General Partners 1% interest in profits...............................................$754
II. FEES PAID BY BORROWERS ON LOANS PLACED BY COMPANIES RELATED TO THE
GENERAL PARTNERS WITH THE PARTNERSHIP (EXPENSES OF BORROWERS NOT OF THE
PARTNERSHIP):
Redwood Mortgage Corp. Mortgage Brokerage Commissions for services in connection
with the review, selection, evaluation, negotiation, and
extension of the loans paid by the borrowers and not by the
Partnership........................................................$1,164
Redwood Mortgage Corp. Processing and Escrow Fees for services in connection with
notary, document preparation, credit investigation, and escrow
fees payable by the borrowers and not by the
Partnership...........................................................$70
Gymno Corporation Reconveyance Fee......................................................$33
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 . . . . . . . . . . . . . . . . . . . . . . . . . . $4,846
19
PART 2
OTHER INFORMATION
Item 1. Legal Proceedings
The Partnership periodically is a defendant in various legal
actions. Please refer to note (7) of financial statements.
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
(99.1) Certification of Michael R. Burwell, General Partner
(99.2) Certification of Michael R. Burwell, President,
Secretary/Treasurer & Chief Financial Officer of
Gymno Corporation, General Partner
(b) Form 8-K
There were no 8-K filings in the quarter ended March 31, 2003.
20
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 15th day of May
2003.
REDWOOD MORTGAGE INVESTORS VI
By: /S/ Michael R. Burwell
-----------------------------------
Michael R. Burwell, General Partner
By: Gymno Corporation, General Partner
By: /S/ Michael R. Burwell
----------------------------------------------
Michael R. Burwell, President,
Secretary/Treasurer & Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person on behalf of the registrant
and in the capacity indicated on the 15th day of May 2003.
Signature Title Date
/S/ Michael R. Burwell
- ------------------------
Michael R. Burwell General Partner May 15, 2003
/S/ Michael R. Burwell
- ------------------------
Michael R. Burwell President, Secretary/Treasurer & May 15, 2003
CFO of Gymno Corporation
(Principal Financial and
Accounting Officer);
Director of Gymno Corporation
21
Exhibit 99.1
GENERAL PARTNER CERTIFICATION
I, Michael R. Burwell, General Partner, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Redwood Mortgage
Investors VI, a California Limited Partnership (the "Registrant");
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this quarterly report;
4. The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, is made known to us,
particularly during the period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the Registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date.
5. The Registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the Registrant's auditors and the audit
committee of Registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to record,
process, summarize and report financial data and have identified for the
Registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal controls.
6. The Registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
/s/ Michael R. Burwell
- -----------------------------------
Michael R. Burwell, General Partner
May 15, 2003
22
Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Redwood Mortgage Investors VI
(the "Partnership") on Form 10-Q for the period ending March 31, 2003 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
pursuant to 18 U.S.C. (S) 1350, as adopted pursuant to (S) 906 of the
Sarbanes-Oxley Act of 2002, I, Michael R. Burwell, General Partner of the
Partnership, certify, that to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Partnership.
/s/ Michael R. Burwell
- -----------------------------------
Michael R. Burwell, General Partner
May 15, 2003
23
Exhibit 99.2
PRESIDENT AND CHIEF FINANCIAL OFFICER CERTIFICATION
I, Michael R. Burwell, President and Chief Financial Officer of Gymno
Corporation, General Partner, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Redwood Mortgage
Investors VI, a California Limited Partnership (the "Registrant");
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this quarterly report;
4. The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, is made known to us,
particularly during the period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the Registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date.
5. The Registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the Registrant's auditors and the audit
committee of Registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to record,
process, summarize and report financial data and have identified for the
Registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal controls.
6. The Registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
/s/ Michael R. Burwell
- ---------------------------------
Michael R. Burwell, President and
Chief Financial Officer of Gymno
Corporation, General Partner
May 15, 2003
24
Exhibit 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Redwood Mortgage Investors VI
(the "Partnership") on Form 10-Q for the period ending March 31, 2003 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
pursuant to 18 U.S.C. (S) 1350, as adopted pursuant to (S) 906 of the
Sarbanes-Oxley Act of 2002, I, Michael R. Burwell, President,
Secretary/Treasurer & Chief Financial Officer of Gymno Corporation, General
Partner of the Partnership, certify that to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Partnership.
/s/ Michael R. Burwell
- ------------------------------------
Michael R. Burwell, President,
Secretary/Treasurer & Chief Financial
Officer of Gymno Corporation, General Partner
May 15, 2003
25