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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 September 30, 2002
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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
------------------------------------ ---------------------------------------
(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
---------------- --------------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES NO NOT APPLICABLE XX
--------------- --------------- --------------
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest date.
NOT APPLICABLE
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
BALANCE SHEETS
SEPTEMBER 30, 2002 (unaudited) and DECEMBER 31, 2001 (audited)
ASSETS
September 30, December 31,
2002 2001
---------------- ---------------
(unaudited) (audited)
Cash $ 446,539 $190,414
---------------- ---------------
Loans
Loans, secured by deeds of trust, held to maturity 5,593,401 4,970,433
Loans, unsecured - 82,362
---------------- ---------------
5,593,401 5,052,795
Less allowance for loan losses (398,062) (370,612)
---------------- ---------------
Net loans 5,195,339 4,682,183
---------------- ---------------
Interest and other receivables
Accrued interest and late fees 41,636 761,473
Advances on loans 28,900
197,946
---------------- ---------------
Total interest and other receivables 70,536
959,419
---------------- ---------------
Note receivable - Redwood Mortgage Corp. -
178,200
Real estate owned, held for sale 1,143,903 1,093,503
---------------- ---------------
Total assets $6,856,317 $7,103,719
================ ===============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable $ 13,068 $ 20,261
Deferred interest -
74,022
--------------- ---------------
Total liabilities 13,068
94,283
--------------- ---------------
Partners' capital
Limited partners' capital, subject to redemption 6,833,483 6,999,670
General partners' capital 9,766 9,766
--------------- ---------------
Total partners' capital 6,843,249 7,009,436
--------------- ---------------
Total liabilities and partners' capital $6,856,317 $7,103,719
=============== ===============
The accompanying notes are an integral part of these financial statements.
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
STATEMENTS OF INCOME
FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2002 and 2001 (unaudited)
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------- --------------------------------
2002 2001 2002 2001
------------- ------------- -------------- --------------
Revenues
Interest - on loans $479,892 390,580 122,405 123,159
Interest - interest bearing accounts 4,098 11,960 1,263 4,017
Interest on promissory note 7,128 4,912 - 3,476
Late charges, prepayment penalties, and fees 29,958 12,809 1,673 3,951
------------- ------------- -------------- --------------
521,076 420,261 125,341 134,603
------------- ------------- -------------- --------------
Expenses
Loan servicing fees 111,836 31,757 12,381 9,904
Asset management fees 6,535 6,879 2,162 2,262
Clerical costs through Redwood Mortgage Corp. 17,372 21,763 5,663 6,511
Provisions for losses on loans
and real estate acquired through foreclosure 68,895 6,792 1,677 6,792
Professional services 26,725 18,368 11,492 2,245
Other 7,102 8,505 1,613 1,535
------------- ------------- -------------- --------------
238,465 94,064 34,988 29,249
------------- ------------- -------------- --------------
Net income $282,611 326,197 90,353 105,354
============= ============= ============== ==============
Net income
General partners (1%) $ 2,826 3,262 903 1,054
Limited partners (99%) 279,785 322,935 89,450 104,300
------------- ------------- -------------- --------------
$282,611 326,197 90,353 105,354
============= ============= ============== ==============
Net income per $1,000 invested by limited
partners for entire period:
-where income is reinvested and compounded $40.86 $44.87 $12.99 $14.48
============= ============= ============== ==============
-where partner receives income in monthly
Distributions $40.13 $44.01 $12.93 $14.41
============= ============= ============== ==============
The accompanying notes are an integral part of these financial statements.
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 (unaudited)
Limited General
Partners Partners Total
------------- -------------- --------------
Balances at December 31, 2001 $6,999,670 $9,766 $7,009,436
Net income 279,785 2,826 282,611
Early withdrawal penalties (5,833) - (5,833)
Partners' withdrawals (440,139) (2,826) (442,965)
------------ ------------- -------------
Balances at September 30, 2002 $6,833,483 $9,766 $6,843,249
============ ============= =============
The accompanying notes are an integral part of these financial statements.
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 and 2001 (unaudited)
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------
2002 2001
---------------- ---------------
Cash flows from operating activities
Net income $ 282,611 $ 326,197
Adjustments to reconcile net income to
net cash provided by operating activities
Provision for loan losses 68,895 6,792
Early withdrawal penalties credited to income (5,833) (10,449)
Change in operating assets and liabilities
Accrued interest and advances on loans 766,901 (67,145)
Accounts payable (7,193) -
Deferred interest (74,022) -
---------------- ---------------
Net cash provided by operating activities 1,031,359 255,395
---------------- ---------------
Cash flows from investing activities
Principal collected on loans 1,116,703 1,863,950
Loans made (1,615,402) (1,103,266)
Payments for real estate owned held for sale (16,961) (547,580)
Proceeds on sale of real estate owned, held for sale 5,191 60,345
---------------- ---------------
Net cash provided by (used in) investing activities (510,469) 273,449
---------------- ---------------
Cash flows from financing activities
Partners' withdrawals (442,965) (598,899)
Note receivable - Redwood Mortgage Corp. 178,200 125,000
---------------- ---------------
Net cash used in financing activities (264,765) (473,899)
---------------- ---------------
Net increase in cash 256,125 54,945
Cash - beginning of year 190,414 354,860
---------------- ---------------
Cash - end of period $ 446,539 $ 409,805
================ ===============
The accompanying notes are an integral part of these financial statements.
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002 (unaudited)
NOTE 1 - ORGANIZATION AND GENERAL
Redwood Mortgage Investors VI, (the "Partnership") is a California Limited
Partnership, of which the general partners are Michael R. Burwell and Gymno
Corporation, a California corporation owned and operated on an equal 50/50%
basis by Michael R Burwell and by D. Russell Burwell, a former general partner.
The Partnership was organized to engage in business as a mortgage lender for the
primary purpose of making loans secured by Deeds of Trust on California real
estate. Loans are being arranged and serviced by Redwood Mortgage Corp., an
affiliate of the general partners. The offering of Partnership Units was closed
in 1989, with contributed capital totaling $9,772,594.
Each month's income is distributed to partners based upon their
proportionate share of partners' capital. Some partners have elected to withdraw
income on a monthly, quarterly or annual basis.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Accrual Basis
Revenues and expenses are accounted for on the accrual basis of accounting
wherein income is recognized as earned and expenses are recognized as incurred.
B. Management Estimates
In preparing the financial statements, management is required to make
estimates based on the information available that affect the reported amounts of
assets and liabilities as of the balance sheet dates and revenues and expenses
for the related periods. 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 acquired through foreclosure. Actual results could
differ significantly from these estimates.
C. Loans, Secured by Deeds of Trust
The Partnership has both the intent and ability to hold the loans to
maturity, i.e., held for long-term investment. Loans are valued at cost for
financial statement purposes with interest thereon being accrued by the
effective interest method.
Financial Accounting Standards Board Statements (SFAS) 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
amounts due are not insignificant, the carrying amount of the investment (cost)
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.
Once a loan is categorized as impaired, interest is no longer accrued
thereon. Any subsequent payments on impaired loans are applied to the
outstanding balances on the Partnership's books. At September 30, 2002 and
December 31, 2001, there were loans categorized as impaired by the Partnership
of $451,765 and $2,467,891, respectively. In addition the impaired loans have
accrued interest, late charges and advances totaling $12,796 and $828,967 at
September 30, 2002, and December 31, 2001. During the first quarter of 2002,
impaired loans including accrued interest and advances thereon totaling
$2,933,698 were paid-off and re-written. The decrease in the carrying value
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002 (unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
of the impaired loans of $38,634, and $287,985, at September 30, 2002 and
December 31, 2001, respectively, is included in the allowance for loan losses.
The average recorded investment in the impaired loans was $451,765 and
$2,468,698, for the nine months ended September 30, 2002, and for the year ended
December 31, 2001, respectively. During the nine months through September 30,
2002, and the year ended December 31, 2001, $0 and $189,690, was received as
cash payments on these loans, respectively.
As presented in Note 9 to the financial statements, the average loan to
appraised value of security at the time the loans were consummated for loans
still outstanding at September 30, 2002 and at December 31, 2001 was 85.46% and
71.27%, respectively. When loans are valued for impairment purposes, the
allowance is updated to reflect the change in the valuation of collateral
security. However, this loan to value ratio tends to minimize reductions for
impairment.
D. Cash and Cash Equivalents
The Partnership considers all highly liquid financial instruments with a
maturity of three months or less to be cash equivalents.
E. Real Estate Owned, Held for Sale
Real estate owned, held for sale, includes real estate acquired through
foreclosure and is stated at the lower of the recorded investment in the
property, net of any senior indebtedness, or at the property's estimated fair
value, less estimated costs to sell.
The following schedule reflects the costs of real estate acquired through
foreclosure and the recorded reductions to estimated fair values, less estimated
costs to sell:
September 30, December 31,
2002 2001
------------------ -----------------
Costs of properties $1,639,484 $1,627,696
Reduction in value and for estimated selling costs (495,581) (534,193)
------------------ -----------------
Fair value reflected in financial statements $1,143,903 $1,093,503
================== =================
F. 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.
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002 (unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
G. Allowance for Loan Losses
Loans and the related accrued interest, fees and advances are analyzed on a
continuous basis for recoverability. Delinquencies are identified and followed
as part of the loan system. 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 value to provide for unrecoverable loans
and receivables, including impaired loans, unspecified loans, accrued interest
and advances on loans, and other accounts receivable (unsecured). The
composition of the allowance for loan losses as of September 30, 2002 and
December 31, 2001 was as follows:
September 30, December 31,
2002 2001
----------------- -----------------
Impaired loans $38,634 $287,985
Unspecified loans 359,428 265
Loans, unsecured - 82,362
----------------- -----------------
$398,062 $370,612
================= =================
Allowance for Loan Losses Reconciliation:
Activity in the allowance for loan losses is as follows for the nine months
ending September 30, 2002, and for the year ending December 31, 2001:
September 30, December 31,
2002 2001
----------------- -----------------
Beginning Balance $ 370,612 $ 261,452
Provision for loan losses 68,895 109,160
Write-offs (41,445) -
----------------- -----------------
Ending Balance $ 398,062 $ 370,612
================= =================
H. Net Income Per $1,000 Invested
Amounts reflected in the statements of income as net income per $1,000
invested by limited partners for the entire period are actual amounts allocated
to limited partners who held their investment throughout the period and have
elected to either leave their earnings to compound or have elected to receive
monthly distributions of their net income. Individual income is allocated each
month based on the limited partners' pro rata share of partners' capital.
Because net income 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.
I. Late Fee Revenue
The Partnership recognizes late fee revenue when it is earned. Late fees
are charged at 6% of the monthly balance, and are accrued net of an allowance
for uncollectible late fees. For the nine months ended September 30, 2002 and
September 30, 2001, late fee revenue of $723 and $1,064, respectively, was
recorded.
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002 (unaudited)
NOTE 3 - GENERAL PARTNERS AND RELATED PARTIES
The following are commissions and/or fees, which are paid to the general
partners and/or related parties.
A. Mortgage Brokerage Commissions
For fees in connection with the review, selection, evaluation, negotiation
and extension of the 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. Such commissions totaled $15,511 and $33,206, for the nine
months ended September 30, 2002 and September 30, 2001, respectively.
B. Mortgage Servicing Fees
Redwood Mortgage Corp. receives monthly mortgage servicing fees of up to
1/8 of 1% (1.5% annual) of the unpaid principal, or such lesser amount as is
reasonable and customary in the geographic area where the property securing the
loan is located. Mortgage servicing fees of $111,836 and $31,757, were incurred
for the nine months through September 30, 2002, and September 30, 2001,
respectively.
C. 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). Management fees of $6,535 and $6,879 were incurred for the nine
months through September 30, 2002, and September 30, 2001, respectively.
D. 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.
E. Operating Expenses
The general partners or their affiliate (Redwood Mortgage Corp.) are
reimbursed by the Partnership for all operating expenses actually incurred by
them on behalf of the Partnership, including without limitation, out-of-pocket
general and administration expenses of the Partnership, accounting and audit
fees, legal fees and expenses, postage and preparation of reports to limited
partners. During the nine months through September 30, 2002, and September 30,
2001, clerical costs totaling $17,372 and $21,763, respectively, were reimbursed
to Redwood Mortgage Corp. and are included in expenses in the Statements of
Income.
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002 (unaudited)
NOTE 4 - OTHER PARTNERSHIP PROVISIONS
The Partnership is a California limited partnership. The rights, duties and
powers of the general and limited partners of the Partnership are governed by
the limited partnership agreement and Sections 15611 et seq. of the California
Corporations Code.
The general partners are in complete control of the Partnership business,
subject to the voting rights of the limited partners on specified matters. Any
one of the general partners acting alone has the power and authority to act for
and bind the Partnership.
A majority of the outstanding limited partnership interests may, without
the permission of the general partners, vote to: (i) terminate the Partnership,
(ii) amend the limited partnership agreement, (iii) approve or disapprove the
sale of all or substantially all of the assets of the Partnership and (iv)
remove or replace one or all of the general partners.
The approval of all limited partners is required to elect a new general
partner to continue the Partnership business where there is no remaining general
partner after a general partner ceases to be a general partner other than by
removal.
A. Term of the Partnership
The term of the Partnership is approximately 40 years, unless sooner
terminated as provided. Investors have the right to withdraw their capital over
a five-year period, or longer.
B. Election to Receive Monthly, Quarterly or Annual Distributions
Upon subscription, investors elected either to receive monthly, quarterly
or annual distributions of earnings allocations, or to allow earnings to
compound. Subject to certain limitations, a compounding investor may
subsequently change his election, but an investor's election to have cash
distributions is irrevocable.
C. Profits and Losses
Profits and losses are allocated monthly among the limited partners
according to their respective capital accounts after 1% is allocated to the
general partners.
D. Withdrawal From Partnership
There are substantial restrictions on transferability of Units and
accordingly an investment in the Partnership is not liquid. Limited partners had
no right to withdraw from the Partnership or to obtain the return of their
capital account for at least one year from the date of purchase of Units, which
in all instances had occurred as of September 30, 2002. In order to provide a
certain degree of liquidity to the limited partners after the one-year period,
limited partners may withdraw all or part of their capital accounts from the
Partnership in four quarterly installments beginning on the last day of the
calendar quarter following the quarter in which the Notice of Withdrawal is
given, subject to a 10% early withdrawal penalty. The 10% penalty is applicable
to the amount withdrawn early and will be deducted from the capital account.
Withdrawal after the one-year holding period and before the five-year holding
period described below was permitted only upon the terms set forth above.
The Partnership will not establish a reserve from which to fund withdrawals
and, accordingly, the Partnership's capacity to return a limited partner's
capital account is restricted to the availability of Partnership cash flow.
Furthermore, no more than 20% of the total limited partners' capital accounts
outstanding at the beginning of any year shall be liquidated during any calendar
year.
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002 (unaudited)
NOTE 5 - NOTE RECEIVABLE - REDWOOD MORTGAGE CORP.
Redwood Mortgage Corp., an affiliate of the general partners which arranges
and services the loans of the Partnership, has committed to subsidize certain
loan losses of the Partnership in the form of a note receivable. The note bears
interest at 8% and will be paid over a three-year period to the extent that
Partnership losses occur relative to certain identified properties. Mortgage
servicer subsidies for the year 2001, were $178,200. The note was paid-off,
together with accrued interest, in June, 2002.
NOTE 6 - 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.
NOTE 7 - INCOME TAXES
The following reflects a reconciliation from net assets (partners' capital)
reflected in the financial statements to the tax basis of those net assets:
September 30, December 31,
2002 2001
----------------- -----------------
Net assets - partners' capital per financial statements $6,843,249 $7,009,436
Allowance for loan losses 398,062 370,612
----------------- -----------------
Net assets tax basis $7,241,311 $7,380,048
================= =================
In 2001 approximately 73% of taxable income was allocated to tax exempt
organizations (i.e., retirement plans). Such plans do not have to file income
tax returns unless their "unrelated business income" exceeds $1,000. Applicable
amounts become taxable when distribution is made to participants.
NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of financial instruments:
(a) Cash and cash equivalents - The carrying amount equals fair value. All
amounts, including interest-bearing accounts are subject to immediate
withdrawal.
(b) Secured loans - (see note 2 (c)) carrying value was $5,593,401 and
$4,970,433 at September 30, 2002 and December 31, 2001, respectively. The fair
value of these investments of $4,835,919and $5,036,556 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 is also
considered in evaluating the fair value versus the carrying value.
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002 (unaudited)
NOTE 9 - ASSET CONCENTRATIONS AND CHARACTERISTICS
Most loans are secured by recorded deeds of trust. At September 30, 2002,
and December 31, 2001 there were 24 and 27secured loans outstanding,
respectively, with the following characteristics:
September 30, December 31,
2002 2001
----------------- -----------------
Number of secured loans outstanding 24 27
Total secured loans outstanding $5,593,401 $4,970,433
Average secured loan outstanding $ 233,058 $ 184,090
Average secured loan as percent of total 4.17% 3.70%
Average secured loan as percent of partners' capital 3.41% 2.63%
Largest secured loan outstanding $2,103,300 $1,376,117
Largest secured loan as percent of total 37.60% 27.69%
Largest secured loan as percent of partners' capital 30.74% 19.63%
Number of counties where security is located (all California) 9 10
Largest percentage of secured loans in one county 39.54% 40.75%
Average secured loan to appraised value of security at time
loan was consummated 85.46% 71.27%
Number of secured loans in foreclosure 0 3
Amount of secured loans in foreclosure $ 0 $ 439,311
The following categories of loans were held at September 30, 2002 and December
31, 2001:
September 30, December 31,
2002 2001
----------------- -----------------
First Trust Deeds $4,806,005 $3,770,088
Second Trust Deeds 787,396 1,136,481
Third Trust Deeds - 63,864
----------------- -----------------
Total loans 5,593,401 4,970,433
Prior liens due other lenders 2,606,052 5,627,002
----------------- -----------------
Total debt $8,199,453 $10,597,435
================= =================
Appraised property value at time of loan $9,594,410 $14,868,548
================= =================
Total investments as a percent of appraisals 85.46% 71.27%
================= =================
Investments by type of property
Owner occupied homes $ 743,509 $ 741,154
Non-owner occupied homes 74,793 181,952
Apartments 626,137 562,015
Commercial 4,148,962 3,485,312
----------------- -----------------
$5,593,401 $ 4,970,433
================= =================
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002 (unaudited)
NOTE 9 - ASSET CONCENTRATIONS AND CHARACTERISTICS (Continued)
Scheduled maturity dates of loans as of September 30, 2002 are as follows:
Year Ending
December 31,
-----------------------
2002 $ 541,899
2003 399,449
2004 675,759
2005 40,125
2006 164,466
Thereafter 3,771,703
--------------------
$5,593,401
====================
The remaining scheduled maturities for 2002 include two loans totaling
$253,255 (4.53%) which are past maturity at September 30, 2002. Of these loans,
none were categorized as delinquent over 90 days.
The bank cash balance at September 30, 2002 of $484,999, before clearing
deposits in transit and outstanding checks, was in one bank. The balances
exceeded FDIC insurance limits (up to $100,000 per bank) by $384,999.
Workout Agreements
The Partnership has negotiated various contractual workout agreements with
borrowers whose loans are past maturity or who are delinquent in making
payments. The Partnership is not obligated to fund additional money as of
September 30, 2002. There are approximately two loans totaling $177,005 in
workout agreements as of September 30, 2002.
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002 (unaudited)
NOTE 10 - SELECTED FINANCIAL INFORMATION (UNAUDITED)
Calendar Quarter
--------------------------------------------------------------
First Second Third Fourth Annual
------------- ------------ ------------- ------------ -------------
2002 $275,176 $ 120,559 $ 125,341 - -
2001 $143,077 142,581 134,603 315,639 735,900
2000 $150,583 172,579 158,243 303,804 785,209
Expenses
2002 $177,383 $ 26,094 $ 34,988 - -
2001 $ 30,562 34,253 29,249 215,185 309,249
2000 $ 25,204 52,044 41,218 188,814 307,280
Net income allocated to general partners
2002 $ 978 $ 945 $ 903 - -
2001 $ 1,125 1,083 1,054 1,004 4,266
2000 $ 1,254 1,205 1,170 1,150 4,779
Net income allocated to limited partners
2002 $ 96,815 $ 93,520 $ 89,450 - -
2001 $111,390 107,245 104,300 99,450 422,385
2000 $124,125 119,330 115,855 113,840 473,150
Net income per $1,000 invested
where income is
Reinvested
2002 $ 14 $ 13 $ 13 - -
2001 $ 15 $ 15 $ 14 $ 15 $ 59
2000 $ 15 $ 15 $ 15 $ 17 $ 62
Withdrawn
2002 $ 14 $ 13 $ 13 - -
2001 $ 15 $ 15 $ 14 $ 14 $ 58
2000 $ 15 $ 15 $ 15 $ 16 $ 61
NOTE 11 - RECENT PRONOUNCEMENTS
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS 144 amends existing
accounting guidance on asset impairment and provides a single accounting model
for long-lived assets to be disposed of. Among other provisions, the new rules
change the criteria for classifying an asset as held-for-sale. The standard also
broadens the scope of business to be disposed of that qualify for reporting as
discontinued operations, and changes the timing of recognizing losses on such
operations. The Partnership will adopt SFAS No. 144 in fiscal year 2002.
Management does not feel that the adoption of this standard will have a material
effect on the Partnership's results of operations or financial position.
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 doubtful accounts
(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 September 30, 2002,
there were 3 properties acquired through foreclosure.
Loans and related accrued interest, fees, and advances are analyzed on a
continuous basis for recoverability. Delinquencies are identified and followed
as part of the loan system. Provisions are made for bad debt to adjust the
allowance for doubtful accounts to an amount considered by management to be
adequate, with due consideration to collateral values and to provide for
unrecoverable accounts receivable, including impaired loans, other loans,
accrued interest, late fees and advances on loans, and other accounts receivable
(unsecured).
Recent trends in the economy have been taken into consideration in the
aforementioned process of arriving at the allowance for doubtful accounts.
Actual results could vary from the aforementioned provisions for losses.
Forward Looking Statements.
Some of the information in the Form 10-Q 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 2002 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 Corp. 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 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 and 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 nine months ended September
30, 2002 and 2001, loan brokerage commissions paid by the borrowers were $15,511
and $33,206, 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
is paid to Redwood Mortgage Corp., or such lesser amount as is reasonable and
customary in the geographic area where the property securing the mortgage is
located. Mortgage servicing fees of $111,836 and $31,757 were incurred for the
nine months ended September 30, 2002 and 2001, respectively.
o Asset Management Fee 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 $6,535 and $6,879 were incurred by the Partnership for the nine
months ended September 30, 2002 and 2001, 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. Such reimbursements are reflected as expenses in the statement
of income.
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 September 30, 2002 and 2001, a general
partner, Gymno Corporation, had contributed $9,766 and $9,766 respectively, as
capital in accordance with Section 4.02(a) of the partnership agreement.
Results of Operations - For the three and nine months ended September 30, 2002
and 2001
The net income decrease of $15,001 (14%) for the three months ended
September 30, 2002 versus the three month period ended September 30, 2001 was
due primarily to a decrease in interest earned on loans of $754, a decrease in
interest-interest bearing accounts of $2,754 (69%), a decrease in interest on
promissory note of $3,476, a reduction in late charges of $2,278 (58%), and
expense increases. Significant expense increases or (decreases) for the three
month period ended September 30, 2002 versus September 30, 2001 included higher
mortgage servicing fees of $2,477, and a decrease in the provision for losses on
loans and real estate acquired through foreclosure of ($5,115).
The net income decrease of $43,586 (13%) for the nine months ended
September 30, 2002 versus the nine month period ended September 30, 2001 was due
primarily to an increase in interest earned on loans of $89,312 and an increase
in late charges of $17,149; offset by expense increases. Significant expense
increases or (decreases) for the nine month period ended September 30, 2002
versus September 30, 2001 included higher mortgage servicing fees of $80,079, an
increase in the provision for losses on loans and real estate acquired through
foreclosure of $62,103, and an increase in professional fees of $8,357.
The increase (decrease) in interest on loans of ($754) (1%) and $89,312
(23%) for the three and nine month periods ended September 30, 2002 versus
September 30, 2001 was due to collection of interest on loans previously
considered impaired a higher average loan portfolio balance; offset by a lower
average loan portfolio interest rate. The balance of the secured loan portfolio
at September 30, 2002 and 2001 was $5,593,401 and $4,919,661, respectively.
The decrease in interest-interest bearing accounts of $2,754 (69%) and
$7,862 (66%) for the three and nine month periods ended September 30, 2002
versus September 30, 2001 is due to reduced cash during 2002 held in interest
bearing accounts and significantly reduced returns from interest bearing account
in 2002 versus 2001.
The decrease in interest on promissory note to 0 in the three months ended
September 30, 2002 is reflective of the note being paid off earlier in 2002. The
increase in interest on promissory note of $2,216 (45%) for the nine months
ended September 30, 2002 versus September 30, 2001 is reflective of a higher
average balance outstanding in 2002 versus 2001.
The decrease in late charge revenue of $2,278 (58%) for the three months
ended September 30, 2002 versus 2001 is reflective of less loans delinquent. The
increase in late charge revenue of $17,149 (134%) for the nine months ended
September 30, 2002 versus September 30, 2001 reflects greater collection of past
due borrower payments in 2002.
The increase in mortgage servicing fees of $2,477 (25%) and $80,079 (252%)
for the three and nine month periods ended September 30, 2002 versus September
30, 2001 is primarily attributable higher average loan portfolio balances at
September 30, 2002 and 2001, respectively.
The increase (decrease) of ($5,115) and $62,103 (914%) in provision for
losses on loans and real estate acquired through foreclosure for the three
months and nine months ended September 30, 2002 versus the respective three and
nine month periods ended September 30, 2001 reflects the general partners'
estimate of an appropriate allowance for anticipated losses. At September 30,
2002, total provisions for losses on loans and real estate acquired through
foreclosure equaled $398,062, which the general partners consider to be
adequate.
The increase in professional fees of $9,247 (412%) and $8,357 (45%) for the
three and nine months ended September 30, 2002 versus September 30, 2001 is due
to the Partnership incurring greater costs and timing differences in 2002 than
in 2001 in relation to its audit and tax return processing and the timing of
such charges.
Since January 2001, the Federal Reserve has been dramatically cutting its
core interest rates with twelve successive cuts, ranging from .25% to .50%. The
latest cut occurred on November 6, 2002, which reduced the Federal Funds Rate to
1.25%. 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. The general partners anticipate that
new loans will be placed at rates approximately 1% lower than similar loans
during 2001. 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. Demand for loans from qualified
borrowers continues to be strong and as prepayments occur, we expect to replace
paid off 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 2002. The September 2002
quarter shows a reduction in interest income of $754 over the corresponding
quarter of 2001. Interest income for the nine month period through September 30,
2002, however, shows an overall increase of $89,312 over the September 30, 2001
interest income. This occurred due to 1st quarter 2002 collection of interest on
loans, previously considered impaired. 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 will range between 5.25% and 6.00% for the
year 2002.
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 nine (and
three months) ended September 30, 2002 and 2001, the Partnership made
distributions of earnings to limited partners of $95,484 and $121,392 ($30,071
and $38,263), respectively. Distribution of earnings for the nine and (three
months) ended September 30, 2002 and 2001, to limited partners' capital accounts
and not withdrawn, was $184,301 and $201,543 ($59,379 and $66,037),
respectively. As of September 30, 2002 and December 31, 2001, 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 nine (and three months) ended September 30, 2002
and 2001, $72,922 and $130,611 ($17,257 and $44,050), 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 trend the Partnership is
experiencing in withdrawals by limited partners electing a one year liquidation
program represents a small percentage of limited partner capital as of December
31, 2001, and the nine months through September 30, 2002, respectively, and is
expected by the general partners to commonly occur at these levels.
Additionally, for the nine (and three months) ended September 30, 2002 and
2001, $277,567 and $354,083 ($101,141 and $102,044), respectively, were
liquidated by limited partners who have elected a liquidation program over a
period of five years or longer. The general partners expect a portion of the
limited partners to take advantage of this provision. This had the anticipated
effect of the Partnership growing, primarily through reinvestment of earnings in
years one through five. Then 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.
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-five 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 September 30,
2002, there were no loans in foreclosure. As of September 30, 2002 the
Partnership's real estate owned account balance was $1,143,903. This account had
a balance of $1,093,503 as of December 31, 2001. The Partnership acquired an
additional piece of property through foreclosure as of September 30, 2002.
Management believes that reserves previously set aside in anticipation of this
acquisition are adequate. The Partnership has an interest in land located in
East Palo Alto, CA which was acquired through foreclosure. The Partnership's
basis of $128,001 and $128,443 for the nine months through September 30, 2002
and for the year ended December 31, 2001, respectively, has been invested with
that of two other partnerships. In order to pursue development options, rezoning
of the property's existing residential zoning classification will be required.
The Partnership is continuing to explore remediation options available to
mitigate the pesticide contamination, which affects the property. This pesticide
contamination appears to be the result of agricultural operations by prior
owners. The general partners do not believe at this time that remediation of the
pesticide contaminants will have a material adverse effect on the financial
condition of the Partnership. The efforts of the general partners to subdivide
the land have met with success. The arsenic contaminated portion of the property
has been delivered to the party responsible for the arsenic contamination. The
remaining land will be made available for development or sale by the
Partnership. The general partners believe this to be a good result for the
Partnership.
The general partners received Mortgage Brokerage Commissions from the loan
borrowers of $1,906 and $15,511 for the three and nine months ended September
30, 2002 as compared to $0 and $33,206 for the three and nine months ended
September 30, 2001. The reduction is due to less loans written in the three
months and nine months ended September 30, 2002.
Current Economic Conditions.
The Partnership makes loans primarily in Northern California. As of
September 30, 2002, approximately 85%, ($4,740,152) of the loans held by the
Partnership were in the four 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.
Despite fears over failing businesses, ongoing job losses and dwindling
stock portfolios, the real estate market seems to be doing remarkably well.
According to the San Jose Mercury News of August 20, 2002, Bay Area home sales
rose 22% in July compared with a year earlier, continuing an upward trend that
began in January. The median price of homes in the nine-county area rose nearly
10% from last year to $436,000. With the Bay Area economy still faltering and
unemployment as high as 7.6% in Santa Clara County, many had expected real
estate prices would be down by now, not up from a year ago. Mortgage rates at
historic lows and a decent supply of homes on the market have kept the local
market relatively busy, especially for lower-priced homes. Annual price
appreciation varied from 5.1% in Santa Clara County, where the median price was
$515,000 for existing single-family homes sold in July, to 22.5% in Napa County,
where the median price was $359,000. Sales of single-family homes rose 22.8% in
Santa Clara County, according to statistics released by DataQuick Information
Systems, which gathers data from public records. Most counties saw sales
activity increase more than 20% from last year, and the growth was closer to 30%
in Alameda and San Mateo counties. But the July data reflects transactions
negotiated in May and June, and local real estate agents say the market has
slowed dramatically since June. "I think fewer transactions and lower prices are
in the near future," said Gary Shapiro of ReMax Real Estate Services in
Cupertino. "It's already here." The slowdown is partly a normal seasonal change,
real estate agents say, as prospective buyers vacation rather than house hunt.
For the Partnership, these statistics imply that the values of the homes secured
by mortgages in our portfolio should remain firm and assist in reducing losses
if the take back of collateral through the foreclosure process should eventuate.
It also implies increased loan activity, as the number of real estate
transactions is increasing, leaving more loan opportunities for lenders.
According to the San Francisco Chronicle, "The Bay Area commercial market's
fundamental indicators are showing signs of hitting bottom, but a recovery is at
least 18 months away, according to reports last week from major real estate
services firms. At the end of the third quarter, both Cushman & Wakefield and
Grubb & Ellis found incremental positive news for the stagnant San Francisco
office market, but it was barely reason to smile. Cushman & Wakefield said the
rate of decline in asking rents has slowed substantially. Average rent in the
central business district fell to $31.56 per square foot from $32.40 the
previous quarter. Grubb & Ellis said the San Francisco office market showed a
positive net absorption, or demand, for the first time in two years. A grand
total of 127,000 square feet was absorbed." To the Partnership, these higher
vacancy rates may mean that we could experience higher delinquencies and
foreclosures if our borrowers' tenants' leases expire or their rental space
becomes available through business failures.
As of September 30, 2002 the Partnership had an average loan to value ratio
computed as of the date the loan was made of 85.46%. This did not account for
any changes in property values for loans, which were acquired by the Partnership
during 1998, 1999, 2000, and 2001 when Northern California Real Estate
substantially increased in value. This loan to value will assist the Partnership
in weathering downturns in real estate values if they materialize in the coming
months.
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 September
30, 2002. 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 September 30, 2002:
2002 2003 2004 2005 2006 Thereafter Total
------------ ----------- ------------ ----------- ----------- ------------ -------------
Interest earning assets:
Money market accounts $415,233 $ 415,233
Average interest rate 1.30% 1.30%
Loans secured by deeds
of trust $541,899 399,449 675,759 40,125 164,466 3,771,703 $5,593,401
Average interest rate 10.45% 8.95% 10.72% 7.00% 8.04% 7.08% 8.01%
Interest bearing liabilities: $ 0 $ 0
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
September 30, 2002) 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.
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 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").
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 nine months ended September 30,
2002. 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........................... $111,836
General Partners
&/or Affiliates Asset Management Fee for managing assets......................... $6,535
General Partners 1% interest in profits........................................... $2,826
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....................................................... $15,511
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....................................................... $953
Gymno Corporation, Inc. Reconveyance Fee.................................................. $200
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 . . . . . . . . . . . . . . . . . . . . . . . . . . $17,372
PART 2
OTHER INFORMATION
Item 1. Legal Proceedings
The Partnership periodically is a defendant in
various legal actions. Please refer to note (6)
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 September 30, 2002.
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
November, 2002.
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 November, 2002.
Signature Title Date
/S/ Michael R. Burwell
- -----------------------------
Michael R. Burwell General Partner November 14, 2002
/S/ Michael R. Burwell
- -----------------------------
Michael R. Burwell President, Secretary/Treasurer November 14, 2002
& CFO of Gymno Corporation
(Principal Financial and
Accounting Officer);
Director of Gymno Corporation
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, including its consolidated
subsidiaries, is made known to us by others within those entities, 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 date 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
November 14, 2002
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 September 30, 2002 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
November 14, 2002
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, including its consolidated
subsidiaries, is made known to us by others within those entities, 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 date 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
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Michael R. Burwell, President and
Chief Financial Officer, of Gymno
Corporation, General Partner
November 14, 2002
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 September 30, 2002 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
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Michael R. Burwell, President,
Secretary/Treasurer & Chief Financial
Officer of Gymno Corporation, General Partner
November 14, 2002