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 June 30, 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
JUNE 30, 2003 and DECEMBER 31, 2002 (unaudited)
ASSETS
June 30, December 31,
2003 2002
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Cash $ 728,232 $ 341,127
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Loans
Loans, secured by deeds of trust 4,721,826 5,183,100
Loans, unsecured, net discount of $131,352 223,697 223,697
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4,945,523 5,406,797
Less allowance for loan losses (296,928) (275,294)
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Net loans 4,648,595 5,131,503
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Interest and other receivables
Accrued interest and late fees 54,648 61,384
Advances on loans 3,659 31,007
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Total interest and other receivables 58,307 92,391
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Real estate held for sale, net 1,312,702 1,234,541
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Total assets $ 6,747,836 $ 6,799,562
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LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable $ 13,068 $ 11,953
Payable to affiliate 12,486 14,643
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Total liabilities 25,554 26,596
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Partners' capital
Limited partners' capital, subject to
redemption 6,712,516 6,763,200
General partners' capital 9,766 9,766
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Total partners' capital 6,722,282 6,772,966
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Total liabilities and partners' capital $ 6,747,836 $ 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 AND SIX MONTHS ENDED JUNE 30, 2003 and 2002 (unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------------- --------------------------------
2003 2002 2003 2002
------------- ------------ ------------- ------------
Revenues
Interest on loans $ 126,415 $ 108,940 $ 234,060 $ 296,832
Interest - interest bearing accounts 754 1,678 1,734 2,835
Interest on promissory note - 7,128 - 7,128
Late charges, prepayment penalties, and fees 22,446 2,813 24,274 28,285
------------- ------------ ------------- ------------
149,615 120,559 260,068 335,080
------------- ------------ ------------- ------------
Expenses
Loan servicing fees 12,399 12,377 24,657 99,455
Asset management fees 2,111 2,177 4,232 4,373
Clerical costs through Redwood Mortgage Corp. 4,397 5,755 9,243 11,709
Provisions for losses on loans and real estate 21,068 (593) 21,634 6,563
Professional services 14,096 2,725 27,484 15,233
Other 3,653 3,653 5,515 5,489
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57,724 26,094 92,765 142,822
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Net income $ 91,891 $ 94,465 $ 167,303 $ 192,258
============= ============ ============= ============
Net income
General partners (1%) $ 919 $ 945 $ 1,673 $ 1,923
Limited partners (99%) 90,972 93,520 165,630 190,335
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$ 91,891 $ 94,465 $ 167,303 $ 192,258
============= ============ ============= ============
Net income per $1,000 invested by limited
partners for entire period:
-where income is reinvested and compounded $12.28 $13.48 $24.71 $27.51
============= ============ ============= ============
-where partner receives income in monthly
distributions $12.23 $13.42 $24.46 $27.20
============= ============ ============= ============
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 SIX MONTHS ENDED JUNE 30, 2003 and 2002 (unaudited)
SIX MONTHS ENDED JUNE 30,
---------------------------------
2003 2002
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Cash flows from operating activities
Net income $ 167,303 $ 192,258
Adjustments to reconcile net income to net cash provided
by operating activities
Provision for loan losses 21,634 6,563
Early withdrawal penalties credited to income (1,246) (4,453)
Change in operating assets and liabilities
Accrued interest and advances on loans 34,084 841,373
Accounts payable and payable to affiliate (1,042) (7,193)
Deferred interest - (74,022)
Prepaid expenses - (5,774)
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Net cash provided by operating activities 220,733 948,752
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Cash flows from investing activities
Principal collected on loans 682,853 756,882
Loans originated (221,579) (1,097,697)
Payments for real estate held for sale (78,161) (5,551)
Proceeds from disposition of real estate - 5,191
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Net cash provided by (used in) investing activities 383,113 (341,175)
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Cash flows from financing activities
Partners' withdrawals (216,741) (294,973)
Collection of note receivable - Redwood Mortgage Corp. - 178,200
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Net cash used in financing activities (216,741) (116,773)
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Net increase in cash 387,105 490,804
Cash - beginning of year 341,127 190,414
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Cash - end of period $ 728,232 $ 681,218
============= =============
The accompanying notes are an integral part of these financial statements.
4
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
Notes to Financial Statements
JUNE 30, 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 six month period ended June 30,
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 June 30, 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 June 30, 2003 and December
31, 2002. The average recorded investment in the impaired loans was $96,716 for
the six months ended June 30, 2003 and $1,282,304 for the year ended December
31, 2002, respectively.
At June 30, 2003 the Partnership had one loan past due 90 days or more
totaling $144,349 (3.06% of the secured loan portfolio) and at December 31, 2002
the Partnership had two loans past due 90 days or more totaling $207,648 (4.01%
of the secured loan portfolio). The Partnership does not consider these loans to
be impaired because there is sufficient collateral to cover the amount
outstanding to the Partnership, and the Partnership is still accruing interest
on these loans.
Allowance for loan losses
The composition of the allowance for loan losses as of June 30, 2003 and
December 31, 2002 was as follows:
June 30, December 31,
2003 2002
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Impaired loans $ 6,620 $ 6,620
Specified loans 44,977 44,977
General 21,634 -
Unsecured loans 223,697 223,697
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$ 296,928 $ 275,294
============== ==============
Activity in the allowance for loan losses is as follows for the six months
ended June 30, 2003 and 2002:
June 30, December 31,
2003 2002
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Beginning balance $ 275,294 $ 370,612
Provision for loan losses 21,634 3,083
Recoveries - (8,947)
Restructures - (48,009)
Write-offs - (41,445)
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$ 296,928 $ 275,294
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5
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
Notes to Financial Statements
JUNE 30, 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.
Management estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions about the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Such estimates relate principally to the
determination of the allowance for loan losses, including the valuation of
impaired loans and the valuation of real estate held for sale. Actual results
could differ significantly from these estimates.
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.
6
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
Notes to Financial Statements
JUNE 30, 2003 (unaudited)
note 3 - General Partners and Related Parties (continued)
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.
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).
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.
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 June 30, 2003 and December 31, 2002:
June 30, December 31,
2003 2002
-------------- --------------
Costs of properties $ 2,096,893 $ 2,018,732
Reduction in value (784,191) (784,191)
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Real estate held for sale $ 1,312,702 $ 1,234,541
============== ==============
7
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
Notes to Financial Statements
JUNE 30, 2003 (unaudited)
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 $4,721,826 and $5,183,100 at June 30, 2003
and December 31, 2002, respectively. The fair value of these loans of $4,420,008
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.
note 6 - Asset Concentrations and Characteristics
Loans are secured by recorded deeds of trust. At June 30, 2003 and December
31, 2002, there were 17 and 22 secured loans outstanding respectively, with the
following characteristics:
June 30, December 31,
2003 2002
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Number of secured loans outstanding 17 22
Total secured loans outstanding $ 4,721,826 $ 5,183,100
Average secured loan outstanding $ 277,754 $ 235,595
Average secured loan as percent of total 5.88% 4.55%
Average secured loan as percent of partners' capital 4.13% 3.48%
Largest secured loan outstanding $ 2,103,300 $ 2,103,300
Largest secured loan as percent of total 44.54% 40.58%
Largest secured loan as percent of partners' capital 31.29% 31.05%
Number of counties where security is located (all California) 10 10
Largest percentage of secured loans in one county 46.82% 42.67%
Average secured loan to appraised value of security at time
loan was consummated 84.28% 79.68%
Number of secured loans in foreclosure - -
Amounts of secured loans in foreclosure $ - $ -
8
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
Notes to Financial Statements
JUNE 30, 2003 (unaudited)
note 6 - Asset Concentrations and Characteristics (continued)
The following categories of secured loans were held at June 30, 2003 and
December 31, 2002:
June 30, December 31,
2003 2002
-------------- --------------
First trust deeds $ 4,095,881 $ 4,392,120
Second trust deeds 625,945 790,980
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Total loans 4,721,826 5,183,100
Prior liens due other lenders 2,166,997 2,779,170
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Total debt $ 6,888,823 $ 7,962,270
============== ==============
Appraised property value at time of loan $ 8,173,851 $ 9,992,743
============== ==============
Total investments as a percent of appraisals 84.28% 79.68%
============== ==============
Investments by type of property
Owner occupied homes $ 718,416 $ 749,707
Non-owner occupied homes 74,349 74,674
Apartments 139,797 566,600
Commercial 3,789,264 3,792,119
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$ 4,721,826 $ 5,183,100
============== ==============
Scheduled maturity dates of secured loans as of June 30, 2003 are as follows:
Year Ending December 31,
-----------------------------------
2003 $ 278,233
2004 613,416
2005 145,125
2006 96,716
2007 3,259,216
Thereafter 329,120
--------------
$ 4,721,826
==============
Cash deposits at June 30, 2003 of $707,263, 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 $607,263. The Partnership has a
substantial amount of its loan receivable balance from one borrower at June 30,
2003 and December 31, 2002. This borrower accounted for approximately 65% and
62% of the loan balances at such dates. This borrower accounted for
approximately 42% and 31% of interest revenue for the six months ended June 30,
2003 and year ended December 31, 2002, respectively.
At June 30, 2003 and December 31, 2002 there was a collateral shortfall
related to certain of these loans. Redwood Mortgage Corp. has provided a
guarantee of any such shortfalls incurred by the Partnership.
9
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
Notes to Financial Statements
JUNE 30, 2003 (unaudited)
note 7 - Commitments and Contingencies
Workout agreements
The Partnership has negotiated various contractual workout agreements with
borrowers. TUnder the terms of these workout agreements the Partnership is not
obligated to make any additional monetary advances for the maintenance or repair
of the collateral securing the loans as of June 30, 2003 and December 31, 2002.
There are two loans totaling $176,215 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.
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 and revenues and expenses
for the reporting periods. 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 June 30, 2003, there were three real estate
properties held for sale, 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.
10
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 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.
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. Loan brokerage commissions paid by
the borrowers were $6,414 and $1,906 for the six months ended June 30, 2003 and
2002, and $5,250 and $1,906 for the three months ended June 30, 2003 and 2002,
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 $24,657 and $99,455 were incurred for the
six months ended June 30, 2003 and 2002, and $12,399 and $12,377 were incurred
for the three months ended June 30, 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 $4,232 and $4,373 were incurred by the Partnership for the six
months ended June 30, 2003 and 2002, and $2,111 and $2,177 were incurred for the
three months ended June 30, 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 June 30, 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.
11
Results of Operations - For the six and three months ended June 30, 2003
and 2002
The net income decrease of $24,955 (13%) for the six months, and $2,574
(2.72%) for the three months ended June 30, 2003 versus June 30, 2002 was due
primarily to a decrease in interest earned on loans of $62,772 for the six
months and an increase of $17,475 for the three months, and a decrease in late
charges and other fees of $4,011 for the six months and an increase of $19,633
for the three months. These income changes were offset by significant expense
changes for the six and three months ended June 30, 2003 including a decrease in
loan servicing fees of $74,798 for the six months and an increase of $22 for the
three months, an increase in the provision for losses on loans and real estate
acquired through foreclosure of $15,071 for the six months and an increase of
$21,661 for the three months, decreases in clerical costs of $2,466 for the six
months and $1,358 for the three months, and an increase in professional services
of $12,251 for the six months and $11,371 for the three months.
The decrease in interest on loans of $62,772 for the six months ended June
30, 2003 was due to lower average loan portfolio and a lower average loan
portfolio interest rate. The increase in interest income for the second quarter
of 2003 of $17,475 is due to lower average loan portfolio and lower average
interest rates; offset by collection of interest on previously impaired loan.
The decrease in late charge revenue and other fees of $4,011 for the six
months ended June 30, 2003 versus 2002 is reflective of more loans being
current. An increase of $19,633 in late charge revenue for the three months
ended June 30, 2003 versus June 30, 2002, represents late charges and fee income
of approximately $17,000 derived from a delinquent loan that was paid off in
June, 2003.
The decrease in loan servicing fees of $74,798 for the six and an increase
of $22 for the three months ended June 30, 2003 versus June 30, 2002 is
primarily attributable to the lower average loan portfolio balances during 2003
and to additional servicing fees incurred on impaired loans collected in the
first quarter of 2002. 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 increase of $15,071 in provision for losses on loans and real estate
acquired through foreclosure for the six months ended June 30, 2003 versus 2002
reflects the general partners' estimate that the existing reserves are adequate
as supplemented by a guarantee received from Redwood Mortgage Corp. relating to
the collectibility of certain Partnership loans.
The increase in professional services of $12,251 for the six months, and
$11,371 for the three months ended June 30, 2003, was due to timing of services
provided in 2003 compared to 2002 in relation to its audit and tax return
processing and increases in costs of such services.
Partnership capital decreased from $6,772,996 at December 31, 2002 to
$6,722,282 at June 30, 2003. The decrease is attributable to continued earnings
and capital liquidations.
The Partnership began funding loans in October 1987. The Partnership's
secured loans outstanding as of June 30, 2003 and 2002 were $4,721,826 and
$5,435,518, respectively. The overall decrease in loans outstanding at June 30,
2003 from December 31, 2002, was due primarily to the Partnership utilizing loan
payoffs to meet limited partner capital liquidations, and to fund costs of real
estate held for sale. During this period, loan principal collections exceeded
limited partner liquidations.
Since January 2001, and through June 30, 2003, the Federal Reserve has
reduced interest rates significantly by cutting the Federal Funds Rate to 1.00%.
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
12
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
..50% to .75% 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, but do not guarantee, 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 June 30, 2003,
there were no properties in foreclosure. As of June 30, 2003 and 2002, the
Partnership's real estate held for sale account balance was $1,312,702 and
$1,132,493, 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.
Allowance for Losses.
The general partners regularly review the loan portfolio, examining the
status of delinquencies, the underlying collateral securing these loans, real
estate held for sale expenses, and 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 June 30, 2003, no notices of
default were filed on existing loans. 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 $176,215 (3.73% of the secured loan portfolio) as of June 30, 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
delinquencies and workout agreements existing at June 30, 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 $21,634 and $6,563
as provision for loan losses for the six months through June 30, 2003 and 2002,
respectively. As of June 30, 2003, there is a collateral shortfall on certain
secured loans that has not been reserved for. Redwood Mortgage Corp. has
guaranteed to cover any losses sustained by the Partnership related to these
loans. Management believes that reserves previously set aside are adequate.
PORTFOLIO REVIEW - For the six months ended June 30, 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 June 30, 2003 and
2002 the Partnership's loans secured by real property collateral in the six San
Francisco Bay Area counties (San Francisco, San Mateo, Santa Clara, Alameda,
Contra Costa, and Marin) represented $4,349,833 (92%) and $4,502,235 (83%) of
the outstanding loan portfolio. The remainder of the portfolio represented loans
secured by real estate located primarily in Northern California.
13
As of June 30, 2003, approximately 16.79% ($792,765), was invested in loans
secured by single family homes (1-4 units), approximately 2.96% ($139,797), was
invested in loans secured by multifamily dwellings (apartments over 4 units),
approximately 80.25% ($3,789,264), was invested in loans secured by commercial
properties. As of June 30, 2002, approximately 11.23% ($610,510), was invested
in loans secured by single family homes (1-4 units), approximately 11.60%
($630,284) was invested in loans secured by multifamily dwellings (apartments
over 4 units), approximately 77.17% ($4,194,724) was invested in loans secured
by commercial properties.
As of June 30, 2003, the Partnership held 17 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 June 30, 2003:
PRIORITIES, ASSET CONCENTRATIONS AND MATURITIES OF LOANS
As of June 30, 2003
# of Loans Amount Percent
----------- ------------- -----------
1st Mortgages 9 $ 4,095,881 87%
2nd Mortgages 8 625,945 13%
=========== ============= ===========
Total 17 $ 4,721,826 100%
Maturing 12/31/03 and prior 5 $ 278,233 6%
Maturing prior to 12/31/04 2 613,416 13%
Maturing prior to 12/31/05 2 145,125 3%
Maturing after 12/31/05 8 3,685,052 78%
=========== ============= ===========
Total 17 $ 4,721,826 100%
Average Loan $ 277,754 6%
Largest Loan 2,103,300 45%
Smallest Loan 2,956 0.06%
Average Loan-to-Value 84%
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 six and
three months ended June 30, 2003 and 2002, the Partnership made distributions of
earnings to limited partners of $55,409 and $65,412 for the six months, and
$27,630 and $31,751 for the three months, respectively. Distribution of earnings
to limited partners for the six and three months ended June 30, 2003 and 2002,
to limited partners' capital accounts and not withdrawn, was $110,221 and
$124,923 for the six months, and $63,342 and $61,769 for the three months,
respectively. As of June 30, 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 six and three months ended June 30, 2003 and
2002, $15,534 and $55,665 for the six months, and $6,987 and $27,243 for the
three months, 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 June 30, 2003 and 2002, respectively, and is expected by
the general partners to commonly occur at these levels.
14
Additionally, for the six and three months ended June 30, 2003 and 2002,
$145,368 and $176,426 for the six months, and $71,683 and $85,091 for the three
months, 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 June
30, 2003, approximately 92%, ($4,502,235) of the loans held by the Partnership
were in six 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 May 16, 2003, mortgage rates are at their lowest in 30
years. The article stated, "The average 30-year fixed mortgage dropped to 5.45%
for the week ending today down from 5.62% last week, according to Freddie Mac,
the government-sponsored entity that buys and repackages mortgages for sale to
the equity market. Freddie Mac has kept weekly mortgage rate records since 1971,
when Richard Nixon was in the White House. Fifteen-year fixed mortgages hit a
12-year low, dipping to an average 4.84%, down from 4.97% last week. One-year
adjustable rate mortgages, known as ARMs, edged up slightly to 3.67% this week
from 3.66% last week. This time last year, the average 30-year rate was 6.89%,
the 15-year rate was 6.37% and the ARM rate was 4.81%. For the year so far, the
average 30-year rate is at 5.83%, under the 5.9% average in 1963, Freddie Mac
said."
15
According to the San Francisco Chronicle for the week of June 21, 2003, the
mortgage defaults dropped across the U.S. The article stated, "Fewer California
and U.S. homeowners defaulted on their mortgages in the first quarter, as
plunging interest rates helped trim monthly house payments, a mortgage banking
group reported Friday. At the same time, however, soaring personal bankruptcies
and persistent job losses - largely in the Midwest - helped push the U.S.
foreclosure rate to a record 1.20%, the Mortgage Bankers Association said. "We
saw very modest improvement (in mortgage delinquencies) this quarter, because we
didn't see the improvement in the economy we would have expected," said Doug
Duncan, chief economist at the Washington D.C., trade group. "If economy
continues to muddle along ... we won't see rapid improvement in delinquencies."
In California, 2.66% of homeowners were late on their mortgage payments by at
least 30 days in the first three months of the year on a non-seasonally adjusted
basis, compared with 3.10% a year ago. Nationwide, 4.52% of homeowners were
delinquent on home payments, versus 4.65% in the first quarter of 2002. U.S.
data are compiled on a seasonally adjusted basis to account for differences in
state laws regarding foreclosure. Much of the decrease in defaults can be
attributed to historically low interest rates, which have allowed consumers to
refinance and slash their monthly house payments."
On the commercial scene, the San Francisco Business Times for the week of
June 27, 2003 stated, "Preliminary second quarter numbers from two brokerage
houses concurred that commercial vacancy was basically as flat as the Indian
bread over the last quarter, ticking up a mere 0.1% from March. Newmark & Co.
Real Estate said that total vacancy was 17.1%, versus 17% last quarter, while
Grubb & Ellis saw vacancy at 24.1%, up slightly from 24%. "I think what it's
saying is we really have not had significant job growth to take down some of the
vacant space, " said Monica Finnegan, managing principal with Newmark, "Even if
we have some slight absorption, we have another level of lay-offs at another
organization." Colin Yasukochi, regional manager of research and client services
for California at Grubb & Ellis, saw the numbers as potentially more sweet bread
than sourdough, noting that they might indicate the market is finally
stabilizing. The article further stated "The direction of rents themselves is
also a source of discrepancy in the reports, though ironically so. The seemingly
less optimistic Newmark said direct rent was $21.88 in second quarter, actually
up slightly from $21.74 last quarter. "Some of the high rise, premier buildings
are still trying to capture higher rents," Finnegan said. "So you're looking at
average rents that reflect Class A across the board." Meanwhile, Grubb reported
that Class A rents citywide, declined from $28.40 to $28.10, and Yasukochi said
they could continue to erode slightly over the next few quarters."
To the Partnership, lower interest rates may mean more borrowers coming
forward for equity loans or for refinancing. Declines in defaults will stabilize
delinquencies and foreclosures. Stabilizing commercial vacancies and little
appreciation in rental rates may mean that we are at the vacancy rate bottom.
For Partnership loans outstanding, as of June 30, 2003, the Partnership had
an average loan to value ratio computed as of the date the loan was made of
84.28%. 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.
16
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 June 30,
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 2003 through 2007 and separately aggregates the information for all
maturities arising after 2007. The carrying values of these assets and
liabilities approximate their fair market values as of June 30, 2003:
2003 2004 2005 2006 2007 Thereafter Total
----------- ----------- ----------- ------------ ------------ ------------ -------------
Interest earning assets:
Money market accounts $589,355 $ 589,355
Average interest rate 0.90% 0.90%
Loans secured by deeds
of trust $278,233 613,416 145,125 96,716 3,259,216 329,120 $4,721,826
Average interest rate 10.09% 10.69% 9.35% 6.50% 7.68% 10.00% 8.40%
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
June 30, 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.
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.
ASSET QUALITY
A consequence of lending activities is that occasionally losses will be
experienced and that the amount of such losses will vary from time to time,
depending upon the risk characteristics of the loan portfolio as affected by
economic conditions and the financial experiences of borrowers. Many of these
factors are beyond the control of the general partners. There is no precise
method of predicting specific losses or amounts that ultimately may be charged
off on particular segments of the loan portfolio, especially in light of the
current economic environment.
17
The conclusion that a loan may become uncollectible, in whole or in part,
is a matter of judgment. Although institutional lenders are subject to
requirements and regulations that, among other things, require them to perform
ongoing analyses of their portfolios, loan-to-value ratios, reserves, etc., and
to obtain and maintain current information regarding their borrowers and the
securing properties, the Partnership is not subject to these regulations and has
not adopted all of these practices. Rather, the general partners, in connection
with the periodic closing of the accounting records of the Partnership and the
preparation of the financial statements, determine whether the allowance for
loan losses is adequate to cover potential loan losses of the Partnership. As of
June 30, 2003 the general partners have determined that the allowance for loan
losses and real estate owned of $1,081,119 (16.08% of net assets) is adequate in
amount. 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. As of June 30, 2003, one loan was delinquent over 90 days
amounting to $144,349. Two loans, including the delinquent loan, totaling
$176,215 were subject to workout agreements, which require the borrower to make
regular monthly loan payments and/or payments plus additional catch up amounts.
The Partnership owns three properties, each acquired through foreclosure.
One property acquired in 2002 has been renovated and is currently listed for
sale. A second property acquired in 2000 is in contract pending sale. The third
property acquired in 1993 is available for sale.
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 six months ended June 30, 2003. All
such compensation is in compliance with the guidelines and limitations set forth
in the Prospectus.
Entity Receiving Compensation Description of Compensation and Services Rendered Amount
- -----------------------------------------------------------------------------------------------------
I. Redwood Mortgage Corp. Loan Servicing Fee for servicing loans......................$24,657
General Partners
&/or Affiliates Asset Management Fee for managing assets.....................$4,232
General Partners 1% interest in profits.......................................$1,673
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..................................................$6,414
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....................................................$388
Gymno Corporation Reconveyance Fee...............................................$106
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 . . . . . . . . . . . . . . . . . . . . . . . . . . $9,243
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 June 30, 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 14th day of August
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 14th day of August 2003.
Signature Title Date
/S/ Michael R. Burwell
- -----------------------
Michael R. Burwell General Partner August 14, 2003
/S/ Michael R. Burwell
- -----------------------
Michael R. Burwell President, Secretary/Treasurer & August 14, 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
August 14, 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 June 30, 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
August 14, 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
August 14, 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 June 30, 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
August 14, 2003
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