REDWOOD MORTGAGE INVESTORS VIII
                       (a California Limited Partnership)
                               Index to Form 10-K

                                December 31, 1997

                                     Part I

                                                                       Page No.
Item 1 - Business                                                            3
Item 2 - Properties                                                        3-5
Item 3 - Legal Proceedings                                                   6
Item 4 - Submission of Matters to a vote of Security Holders (partners)      6

                                                     Part II

Item 5 - Market for the Registrants Partners Capital and related matters     6
Item 6 - Selected Financial Data                                           6-8
Item 7 - Managements Discussion and Analysis of Financial Condition and   
Results of Operations                                                      9-10 
Item 8 - Financial Statements and Supplementary Data                      11-35
Item 9 - Changes in and Disagreements with Accountants on Accounting and  
Financial Disclosure                                                         36 

                                                     Part III

Item 10 - Directors and Executive Officers of the Registrant                 36
Item 11 - Executive Compensation                                             37
Item 12 - Security Ownership of Certain Beneficial Owners and management     38
Item 13 - Certain Relationships and Related Transactions                     38

                                                     Part IV

Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K.38-39

Signatures                                                                   40


<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    Form 10-K
                Annual Report Pursuant to Section 13 or 15 (d) of
                       the Securities Exchange Act of 1934

      For the year ended December 31, 1997 Commission file number 333-13113
-------------------------------------------------------------------------------

                         REDWOOD MORTGAGE INVESTORS VIII
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

      California                                             94-3158788
-------------------------- -----------------------------------------------------
(State or other jurisdiction of                (I.R.S. Employer Identification)
 incorporation or organization)

650 El Camino Real Suite G, Redwood City, CA                     94063
--------------------------------------------------------------------------------
(address of principal executive offices)                      (zip code)

Registrants telephone No. including area code                (650) 365-5341
--------------------------------------------------------------------------------

Securities registered pursuant to Section 12(b) of the Act:

Title of each class                  Name of each exchange on which registered
------------------------------------------------------ -------------------------
Limited Partnership Units                          None
--------------------------------------------------------------------------------

Securities registered pursuant to Section 12(g) of the Act:  
     Limited Partnership Units

     Indicate by check mark whether the  registrant (1) has filed all reports to
be filed by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934 the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports),  and (2) has been subject to such filing requirements for
the past 90 days.

YES XXX                                  NO
-------                                  -------

     As of December 31, 1997,  the limited  partnership  units  purchased by non
affiliates was 204,896.7655 units computed at $100.00 a unit for $20,489,676.55

Documents incorporated by reference:

     Portions of the Prospectus  dated May 19, 1993,  and a new Prospectus  came
into effect on December 4, 1996, (the  Prospectus) are incorporated in Parts II,
III,  and  IV.  Exhibits  filed  as part of  Form  S-11  Registration  Statement
#333-13113 are referenced in part IV.

<PAGE>

                                     Part I

Item 1 - Business

     Redwood  Mortgage  Investors VIII, a California  limited  partnership  (the
Partnership), is organized to engage in business as a mortgage lender, for the
primary  purpose of making loans secured  primarily by first and second deeds of
trust on California real estate. Loans are arranged and serviced by Redwood Home
Loan Co.,  (dba Redwood  Mortgage) an  affiliate  of the General  Partners.  The
Partnerships  objectives  are to make loans that will: (i) yield a high rate of
return from mortgage  lending;  and (ii) preserve and protect the  Partnerships
capital.  Investors should not expect the Partnership to provide tax benefits of
the type commonly associated with limited  partnership tax shelter  investments.
The Partnership is intended to serve as an investment  alternative for investors
seeking current income.  However, unlike other investments which are intended to
provide  current income,  an investment in the Partnership  will be less liquid,
not  readily  transferable,  and  not  provide  a  guaranteed  return  over  its
investment life.

     Initially,  a minimum of 2,500  Units  ($250,000)  and a maximum of 150,000
Units  $15,000,000) were sold. This initial offering closed on October 31, 1996.
Subsequently,  the  Partnership  commenced  a second  offering  of up to 300,000
additional  Units  ($30,000,000)  commencing on December 4, 1996.  All units are
being offered on a best efforts basis,  which means that no one is  guaranteeing
that any  minimum  number of Units will be sold,  through  broker-dealer  member
firms of the National Association of Securities Dealers,  Inc. (See TERMS OF THE
OFFERING and PLAN OF DISTRIBUTION).

     The Partnership began selling Units in February,  1993, and began investing
in  mortgages  in April,  1993.  At  December  31,  1997,  the  Partnership  has
investments  in  Mortgage   Investments   with  principal   balances   totalling
$25,304,989 with interest rates thereon ranging from 8.00% to 14.00%.  Currently
First Trust Deeds  comprise  67.59% of the Mortgage  Investment  portfolio  with
Junior loans (2nd and 3rd Trust Deeds) making up 32.41%.  Owner-occupied  homes,
combined  with  non-owner  occupied  Mortgage  Investments,  total 30.68% of the
Mortgage Investment.  Loans secured by multi-family properties make up 23.64% of
the total Mortgage Investments.  Commercial Mortgage Investments, now comprising
45.68% of the  portfolio,  have decreased  20.82% from last year.  84.04% of the
total Mortgage  Investments,  are in six counties of the San Francisco Bay Area.
The County of San Joaquin  makes up 4.73% of the  Mortgage  Investments  and the
balance of Mortgage Investments are primarily in Northern  California.  Mortgage
Investment  size  increased  this past year,  and is now averaging  $460,091 per
Mortgage  Investment,  up from  $147,231  in 1996.  This  increase is due to the
ability of the  Partnership by virtue of its increasing size to invest in larger
Mortgage  Investments.  The average Mortgage Investment as of December 31, 1997,
represents 2.20% of Limited  Partners capital and 1.82% of outstanding  Mortgage
Investments.  Some  of  the  Mortgage  Investments  are  fractionalized  between
affiliated  partnerships with objectives  similar to those of the Partnership to
further reduce risk.  Average equity per loan  transaction  stood at 44.17%,  an
increase of 4.17% from the  previous  year.  This  average  equity is  generally
considered very  conservative.  Generally,  the more equity, the more protection
for  the  lender.  The  General  Partners  believe  the  Partnerships  Mortgage
Investment  portfolio is in good condition with only one property in foreclosure
as of the end of December, 1997.

Item 2 - Properties

     In 1995,  the  Partnership  chose to allow a senior lender to foreclose out
its  deed of trust  on one of its  Mortgage  Investments.  The  Partnership  has
commenced a legal action to collect this debt. As of December 31, 1997,  $15,000
of the  amount  due has  been  collected.  The  remaining  balance  due has been
recorded  as an  account  receivable  in the  financial  statements.  Additional
payments  are  expected in years 1998 and 1999.  As of December  31,  1997,  the
Partnership  owned a vacant lot acquired  through the  foreclosure of one of its
Mortgage  Investments.  The vacant lot is valued at $70,138.  Additionally,  the
Partnership wholly owns a limited liability company (LLC), whose sole asset is a
partially  completed single family  residence.  This partially  completed single
family  residence  was  originally   foreclosed  upon  by  the  Partnership  and
subsequently  transferred  to  the  LLC  at  a  cost  of  $181,139.   Additional
expenditures  over the $181,139 base,  have been primarily for completion of the
construction.
<PAGE>

     A summary of the Partnerships  Mortgage Investment Portfolio as of December
31, 1997, is set forth below.

Mortgage Investments as a Percentage of Total Mortgage Investments

First Trust Deeds                                               $17,103,865.29
Appraised Value of Properties                                    39,159,062.00
  Total Investment as a % of Appraisal                                  43.68%
Second Trust Deed Mortgage Investments                            8,163,623.62
Third Trust Deed Mortgage Investments                                37,500.00
First Trust Deeds due other Lenders                              23,704,918.00
Second Trust Deeds due other Lenders                                519,648.00

Total Debt                                                      $49,529,554.91

  Appraised Property Value                                      $88,714,541.00
  Total Investments as a % of Appraisal                                 55.83%

Number of Mortgage Investments Outstanding                                  55

Average Investment                                                 $460,090.71
Average Investment as a % of Net Assets                                  2.20%
Largest Investment Outstanding                                    2,100,000.00
Largest Investment as a % of Net Assets                                 10.03%

Loans as a Percentage of Total Mortgage Investments

First Trust Deeds                                                       67.59%
Second Trust Deeds                                                      32.26%
Third Trust Deeds                                                        0.15%
                                                              -----------------
Total                                                                  100.00%

Mortgage Investments by
Type of Property                        Amount              Percent

Owner Occupied Homes                   $2,445,423.26             9.66%
Non-Owner Occupied Homes                5,318,721.42            21.02%
Apartments                              5,982,649.06            23.64%
Commercial                             11,558,195.17            45.68%
                                   ------------------      ------------

Total                                 $25,304,988.91           100.00%

<PAGE>

     The following is a distribution of Mortgage  Investments  outstanding as of
December 31, 1997 by Counties.

County                                Total                     Percent
                              Mortgage Investments

Alameda                                $6,036,017.84             23.85%
San Francisco                           5,889,597.32             23.27%
San Mateo                               5,256,978.68             20.78%
Marin                                   1,975,170.49              7.81%
Santa Clara                             1,540,730.38              6.09%
Stanisalus                              1,450,000.00              5.73%
San Joaquin                             1,197,108.71              4.73%
Contra Costa                              658,880.01              2.60%
Solano                                    480,000.00              1.90%
Monterey                                  395,015.54              1.56%
Fresno                                    128,880.24              0.51%
Mendocino                                 125,000.00              0.49%
El Dorado                                 118,810.72              0.47%
Sacramento                                 52,798.98              0.21%
                             ------------------------        -----------

Total                                 $25,304,988.91            100.00%


Statement of Condition of Mortgage Investments
         Number of Mortgage Investments in Foreclosure        1

<PAGE>



Item 3 - Legal Proceedings

     In the normal course of business,  the  Partnership  may become involved in
various  types of legal  proceedings  such as  assignment  of rents,  bankruptcy
proceedings, appointment of receivers, unlawful detainers, judicial foreclosure,
etc.,  to enforce the  provisions  of the deeds of trust,  collect the debt owed
under the promissory  notes,  or to protect/ recoup its investment from the real
property secured by the deeds of trust. None of these actions would typically be
of any  material  importance.  As of the date  hereof,  the  Partnership  is not
involved in any legal proceedings other than those that would be considered part
of the normal course of business.

Item 4 - Submission of matters to vote of Security Holders (Partners).

No matters have been submitted to a vote of the Partnership.

                                     Part II

Item 5 - Market for the Registrants Units and Related Partnership Matters.

     300,000 units at $100 each  (minimum 20 units) are being  offered  (150,000
units were previously  offered and sold) through  broker-dealer  member firms of
the National  Association  of  Securities  Dealers on a best  efforts  basis (as
indicated in Part I item 1).  Investors have the option of withdrawing  earnings
on a monthly,  quarterly,  or annual basis or reinvesting  and  compounding  the
earnings.  Limited Partners may withdraw from the Partnership in accordance with
the terms of the  Partnership  Agreement  subject to possible  early  withdrawal
penalties. There is no established public trading market.

     A  description  of  the  Partnership  units,   transfer   restrictions  and
withdrawal  provisions  is more  fully  described  under  the  section  entitled
Description  of Units and  summary of Limited  Partnership  Agreement,  pages 67
through 75 of the Prospectus,  a part of the referenced  Registration Statement,
which is incorporated by reference.

Item 6 - Selected Financial Data

     Redwood Mortgage  Investors VIII began operations in April 1993.  Financial
results for years 1984 through the nine months  ended  September  30, 1997,  for
prior  partnerships are incorporated by reference to the Prospectus (S-11) dated
December 4, 1996,  Table III pages 104 through 138, and in Supplement No.3 dated
November 26, 1997.

<PAGE>

     Financial  condition and results of operation for the Partnership for three
years to December 31, 1997 were:
<TABLE>

                                                             Balance Sheet
                                                                Assets
<CAPTION>

                                                                          December 31,
                                                      ------------------------------------------------------

                                                               1997                1996                1995
                                                      --------------       -------------      --------------

<S>                                                        <C>                 <C>                 <C>     
Cash                                                       $663,159            $664.434            $380,318
Accounts Receivable:
   Mortgage investments secured by Deeds of Trust        25,304,989          15,642,990          12,047,252
   Accrued interest and other fees                          341,976             196,530             113,301
   Advances on Mortgage Investments                         205,804               8,679               8,431
   Other receivables - Unsecured                             62,844              75,334              71,316
   Less allowance for losses                              (257,500)           (117,803)            (39,152)
Investment in Limited Liability Corporation                 251,139             191,139                   0
Real estate owned, net                                       70,138              66,991                   0
Organization cost net of amortization                         1,875               4,375               6,875
Prepaid Expenses                                             10,151              20,720              17,718
Due from General Partners/Related Companies                   2,999                 311               3,049

                                                      ==============       =============      ==============
                                                        $26,657,574         $16,753,700         $12,609,108
                                                      ==============       =============      ==============


                                                   Liabilities and Partners Capital

                                                                          December 31,
                                                      -----------------------------------------------------

                                                               1997                1996               1995
                                                                           -------------      -------------
                                                      --------------
Liabilities:
Deferred interest                                           $83,066            $217,480                 $0
Note payable - Bank                                       5,640,000           1,500,000          1,910,000
Accounts payable                                              3,355              20,625              4,010
Subscriptions to partnership in applicant status                  0             310,937                  0
                                                      --------------       -------------      -------------
                                                         $5,726,421          $2,049,042         $1,914,010
                                                      --------------       -------------      -------------

Partners  Capital
  Limited partners subject to redemption                 20,914,721          14,693,293         10,687,031
  General Partners                                           16,432              11,365              8,067
                                                      --------------       -------------      -------------
                                                        $20,931,153         $14,704,658        $10,695,098
                                                      --------------       -------------      -------------

                                                        $26,657,574         $16,753,700        $12,609,108
                                                      ==============       =============      =============
</TABLE>
<PAGE>

<TABLE>

                                                          Statement of Income
<CAPTION>


<S>                                                            <C>             <C>             <C>       
Gross Revenue                                                  $2,629,457      $1,726,635      $1,050,236
Expenses                                                          820,937         493,110          194,495
                                                            --------------    ------------     ------------
Income before  interest  credited to Partners in applicant      1,808,520       1,233,525          855,741
status
Interest credited to Partners in applicant status                   9,562           2,618           18,908
                                                            --------------    ------------     ------------

Net Income                                                     $1,798,958      $1,230,907         $836,833
                                                            ==============    ============     ============

Net income to General Partners (1%)                               $17,990         $12,309           $8,368
                                                            ==============    ============     ============

Net Income to Limited Partners (99%)                           $1,780,968      $1,218,598         $828,465
                                                            ==============    ============     ============


Net Income per $1,000  invested  by Limited  Partners  for
entire period (annualized)
   - where income is reinvested and compounded                        $84             $84              $83
                                                            ==============    ============     ============

   -   where   partner    receives   income   in   monthly            $81             $81              $80
distributions
                                                            ==============    ============     ============
<FN>
     The financial  results for the year ending December 31, 1995,  reflects net
income  of  $836,833  which  is an  annualized  yield  of  approximately  8.33%.
Annualized  yield  for  1996 was  8.39%,  and for 1997  was  8.40%.  An  average
annualized yield since inception through December 31, 1997, was 8.36%.
</FN>
</TABLE>
<PAGE>

Item II
          MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                              RESULTS OF OPERATIONS

     On December  31, 1997,  the  Partnership  was in the offering  stage of its
second offering,  ($30,000,000) and contributed capital totalled $14,932,017 for
the first offering and  $5,557,659 for the second  offering with an aggregate of
$20,489,676 (Limited Partners). Of this amount, $0 remained in applicant status.
Accordingly,   together  with  initial  approved  offering  of  $15,000,000  the
Partnership  has approval for an aggregate  offering of  $45,000,000 in Units of
$100 each.

     At December 31, 1997, the  Partnerships  Mortgage  Investments  outstanding
totalled $25,304,989. The primary reason for an increase in Mortgage Investments
Outstanding  from  $6,484,707 in 1994, to $12,047,252 in 1995, to $15,642,990 in
1996, and to $25,304,989 was the additional  capital admitted to the Partnership
through  sale  of  Limited  Partnership  Units.   Additional  Partners  Capital
contributions have totalled  $4,508,824,  $3,834,799,  $3,863,536 and $5,565,372
and the  reinvestment  of  earnings  by  partners  who have  elected to reinvest
earnings have totalled $239,956, $524,988, $800,218 and $1,119,465 for the years
ended December 31, 1994,  December 31, 1995,  December 31, 1996 and December 31,
1997,  respectively.  To a lesser extent,  Mortgage Investments outstanding have
also increased through the utilization of the Partnerships  line of credit. The
effect of more outstanding  Mortgage  Investments  raised the interest earned on
Mortgage Investments for the years ended December 31, 1994, 1995, 1996 and 1997,
to $480,110, $1,031,029, $1,718,208 and $2,613,008 respectively.  Interest rates
on Mortgage  Investments  ranged  from 8.00% to 14.00%.  The  Partnership  began
funding  Mortgage  Investments  on April 14, 1993 and as of December  31,  1997,
distributed earnings at an average annualized yield of 8.36%.

     Currently,  mortgage  interest rates have decreased from those prevalent at
the  inception of the  Partnership.  New loans will be originated at these lower
interest rates which will reduce the average  return across the entire  Mortgage
Investment  portfolio  held by the  Partnership.  In the future,  interest rates
likely will change from their current  levels.  The General  Partners  cannot at
this time predict at what levels interest rates will be in the future.  Although
the rates  charged by the  Partnership  are  influenced by the level of interest
rates in the market,  the General  Partners do not anticipate that rates charged
by the Partnership to its borrowers will change significantly from the beginning
of 1997 over the next 12 months. Based upon the rates payable in connection with
the existing Mortgage Investments, the current and anticipated interest rates to
be charged by the Partnership and the General Partners experience,  the General
Partners  anticipate  that the annualized  yield will range between eight & nine
percent (8% - 9%).

     During 1994, the Partnership did not have a credit line; therefore Interest
on Note  Payable-Bank  was -0-. In 1995, the  Partnership  established a line of
credit  with a  commercial  bank  secured by its  Mortgage  Investments  and has
increased  the limit from  $3,000,000 to  $6,000,000.  For the years ended 1995,
1996 and December 31, 1997, interest on Note Payable-Bank was $25,889,  $188,635
and $340,633 respectively. The primary reason for this increase during 1996, was
that the Partnership did not have access to the credit facility until September,
1995.  For  1997,  the  increase  in  interest  on notes  payable-Bank  has been
attributed to a higher  overall  credit  facility  utilization.  Currently,  the
Partnership  has borrowed  $5,640,000 at an interest rate of prime + 1/2%.  This
facility  could  increase as the  Partnerships  capital  increases.  This added
source of funds will help in maximizing  the  Partnership  yield by allowing the
Partnership to minimize the amount of funds in lower yield  investment  accounts
when appropriate Mortgage Investments are not currently available. Additionally,
the Mortgage  Investments  made by the  Partnership  bear  interest at a rate in
excess of the rate payable to the bank which  extended  the line of credit,  the
amount to be retained by the  Partnership,  after  payment of the line of credit
cost, will be greater than without the use of the line of credit. As of December
31, 1997, the balance  remained at $5,640,000 and in accordance with the line of
credit, the Partnership paid all accrued interest as of that date.

     The Partnerships income and expenses, accruals and delinquencies are within
the  normal  range of the  General  Partners  expectations,  based  upon  their
experience  in  managing  similar  partnerships  over  the  last  twenty  years.
Borrowers foreclosures,  as set forth under Results of Operations, are a normal
aspect of Partnership  operations and the General Partners  anticipate that they
will not have a material effect on liquidity. Cash is constantly being generated
from interest earnings,  late charges,  pre-payment  penalties,  amortization of
principal  and pay-off on Mortgage  Investments.  Currently,  cash flow  exceeds
Partnership  expenses and earnings payout  requirements.  As Mortgage Investment
opportunities become available,  excess cash and available funds are invested in
new Mortgage Investments.
<PAGE>

     The General Partners regularly review the Mortgage  Investments  portfolio,
examining the status of delinquencies,  the underlying collateral securing these
Mortgage  Investments,  borrowers payment records, etc. Data from the local real
estate  market and of the national and local  economy are  reviewed.  Based upon
this  information and other data,  loss reserves are increased or decreased.  In
1995, 1996, and 1997, the Partnership  made provisions for doubtful  accounts of
$26,032,  $55,383,  and $139,804,  respectively.  These  provisions for doubtful
accounts were made primarily as a prudent  action to guard against  unidentified
collection  losses. The provision for doubtful accounts as of December 31, 1997,
of $257,500 is considered by the General Partners to be adequate. Because of the
number of  variables  involved,  the  magnitude  of the swings  possible and the
General  Partners  inability to control many of these factors actual results may
and do  sometimes  differ  significantly  from  estimates  made  by the  General
Partners.

     Its now clear the Northern  California  recession  reached bottom in 1993.
Since then, the California economy has been improving, slowly at first, but now,
more vigorously. This improvement is reflected in increasing property values, in
job growth,  personal income growth,  etc.,  which all translates into more loan
activity, which of course, is healthy for lending activity.

     At the time of subscription to the  Partnership,  Limited  Partners make an
irrevocable decision to either take distributions of earnings monthly, quarterly
or annually or to compound  earnings  in their  capital  account.  For the years
ended  December 31,  1995,  December  31,  1996,  and  December  31,  1997,  the
Partnership made  distributions of earnings to Limited Partners after allocation
of  syndication  costs  of,  $303,477,   $418,380  and  $495,480   respectively.
Distribution  of Earnings to Limited  Partners  after  allocation of syndication
costs for the years ended December 31, 1995,  December 31, 1996 and December 31,
1997,  to Limited  Partners  capital  accounts and not  withdrawn was $524,988,
$800,218 and $1,119,465 respectively. As of December 31, 1995, December 31, 1996
and  December  31,  1997,   Limited  Partners   electing  to  withdraw  earnings
represented 40%, 34% and 30%  respectively of the Limited  Partners  outstanding
capital  accounts.  The decreases in percentage of Limited Partners  electing to
withdraw  earnings  is due to an  increase  in percent of new  Limited  Partners
choosing to compound earnings and the dilution effect occurring when compounding
Limited Partners capital accounts grow through earnings reinvestment compared to
Limited Partners that have chosen to liquidate earnings.

     The Partnership  also allows the Limited Partners to withdraw their capital
account  subject  to  certain   limitations  (see   liquidation   provisions  of
Partnership  Agreement).  Once a Limited Partners initial five year hold period
has passed the General Partners expect to see an increase in liquidations due to
the ability of Limited  Partners to withdraw  without  penalty.  This ability to
withdraw  five  years  after a Limited  Partners  investment  has the effect of
providing  Limited Partner  liquidity  which the General  Partners then expect a
portion of the Limited Partners to avail themselves of. This has the anticipated
effect of the Partnership growing, primarily through reinvestment of earnings in
years one through five. The General Partners expect to see increasing numbers of
Limited Partner withdrawals in years five through eleven, at which time the bulk
of those Limited Partners who have sought withdrawal have been liquidated. After
year eleven,  liquidation  generally subsides and the Partnership  capital again
tends to increase through earnings reinvestment. Since the five year hold period
has yet to expire,  as of December  31,  1997,  Limited  Partners may not as yet
avail  themselves  of this  provision  for  liquidation.  Additionally,  Limited
Partners may withdraw  over a period of one year subject to certain  limitations
and  penalties.  For the years ended  December 31, 1995,  December 31, 1996, and
December 31, 1997,  $5,640,  $146,755 and $132,619  respectively were liquidated
subject to the 10% penalty for early  withdrawal.  These  withdrawals are within
the normally  anticipated  range that the General Partners would expect in their
experience in this and other  partnerships.  The General  Partners expect that a
small  percentage  of Limited  Partners  will elect to liquidate  their  capital
accounts  over one year  with a 10%  early  withdrawal  penalty.  In  originally
conceiving  the  Partnership,  the General  Partners  wanted to provide  Limited
Partners  needing  their  capital  returned  a degree of  liquidity.  Generally,
Limited Partners electing to withdraw over one year need to liquidate investment
to raise cash.  The trend the  Partnership  is  experiencing  in  withdrawals by
Limited  Partners  electing a one year  liquidation  program  represents a small
percentage of Limited Partner capital as of December 31, 1995, December 31, 1996
and December 31, 1997,  respectively  and is expected by the General Partners to
commonly occur at these levels.
<PAGE>



              Item 8 - Financial Statements and Supplementary Data

     Redwood Mortgage Investors VIII, a California Limited Partnership's list of
Financial Statements and Financial Statement schedules:

A-Financial Statements

     The following  financial  statements of Redwood Mortgage Investors VIII are
included in Item 8:

  -  Independent Auditors Report,
  -  Balance Sheets - December 31, 1997, and December 31, 1996,
  -  Statements of Income for the three years ended December 31, 1997.
  -  Statements of Partners Capital for the three years ended December 31, 1997.
  -  Statements of Cash Flows for the three years ended December 31, 1997.
  -  Notes to Financial Statements - December 31, 1997.

B-Financial Statement Schedules

     The following  financial  statement schedules of Redwood Mortgage Inventors
VIII are included in Item 8.


 -  Schedule II,   - Amounts receivable from related parties and underwriters,
                     promoters, and employees other than related parties
 -  Schedule VIII  - Valuation of Qualifying Accounts,
 -  Schedule IX    - Short Term Borrowings.
 -  Schedule XII   - Mortgage Investments on real estate.

     All  other  schedules  for  which  provision  is  made  in  the  applicable
accounting  regulations  of the  Securities  and  Exchange  Commission  are  not
required under the related instructions or are inapplicable,  and therefore have
been omitted.
<PAGE>

                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                             6 FINANCIAL STATEMENTS
                                DECEMBER 31, 1997
                         (With Auditors Report Thereon)



<PAGE>

                                PARODI & CROPPER
                          CERTIFIED PUBLIC ACCOUNTANTS
                       3658 Mount Diablo Blvd., Suite #205
                               Lafayette CA 94549
                                 (510) 284-3590




                          INDEPENDENT AUDITORS REPORT


THE PARTNERS
REDWOOD MORTGAGE INVESTORS VIII

     We have audited the financial  statements and related  schedules of REDWOOD
MORTGAGE INVESTORS VIII (A California Limited  Partnership)  listed in Item 8 on
form 10-K  including  balance  sheets as of  December  31, 1997 and 1996 and the
statements of income,  changes in partners  capital and cash flows for the three
years ended December 31, 1997. These financial statements are the responsibility
of the Partnerships  management.  Our responsibility is to express an opinion on
these financial statements based on our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all material  respects,  the financial position of REDWOOD MORTGAGE INVESTORS
VIII as of December  31, 1997 and 1996,  and the results of its  operations  and
cash flows for the three years ended  December  31,  1997,  in  conformity  with
generally accepted  accounting  principles.  Further, it is our opinion that the
schedules  referred to above present fairly the information set forth therein in
compliance  with the  applicable  accounting  regulations  of the Securities and
Exchange Commission.





                              /s/ Parodi & Cropper
                                PARODI & CROPPER





Lafayette, California
February 27, 1998
<PAGE>
<TABLE>

                      
                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                                 BALANCE SHEETS
                           DECEMBER 31, 1997 AND 1996

<CAPTION>

                                                                ASSETS

                                                                          1997                 1996
                                                                     ---------------      ---------------

<S>                                                                        <C>                  <C>     
Cash                                                                       $663,159             $664,434
                                                                     ---------------      ---------------

Accounts receivable:
  Mortgage Investments, secured by deeds of trust                        25,304,989           15,642,990
  Accrued Interest on Mortgage Investments                                  341,976              196,530
  Advances on Mortgage Investments                                          205,804                8,679
  Accounts receivables, unsecured                                            62,844               75,334
                                                                     ---------------      ---------------
                                                                         25,915,613           15,923,533

  Less allowance for doubtful accounts                                      257,500              117,803
                                                                     ---------------      ---------------
                                                                         25,658,113           15,805,730
                                                                     ---------------      ---------------

Real Estate owned, acquired through foreclosure,
 held for sale                                                               70,138               66,991
Investment in limited liability corporation, at cost which
  approximates market                                                       251,139              191,139
Organization costs, less accumulated amortization of $10,625
 and $8,125, respectively                                                     1,875                4,375
Due from related companies                                                    2,999                  311
Prepaid expense-deferred loan fee                                            10,151               20,720
                                                                     ---------------      ---------------

                                                                        $26,657,574          $16,753,700
                                                                     ===============      ===============


<FN>
See accompanying notes to financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>


                                                    REDWOOD MORTGAGE INVESTORS VIII
                                                  (A California Limited Partnership)
                                                            BALANCE SHEETS
                                                      DECEMBER 31, 1997 AND 1996


                                                   LIABILITIES AND PARTNERS CAPITAL
<CAPTION>

                                                                          1997                 1996
                                                                     ---------------      ---------------

Liabilities:
<S>                                                                          <C>                 <C>    
  Accounts payable and accrued expenses                                      $3,355              $20,625
  Note payable - bank line of credit                                      5,640,000            1,500,000
  Deferred interest income                                                   83,066              217,480
  Subscriptions to partnership in applicant status                                0              310,937
                                                                     ---------------      ---------------
                                                                          5,726,421            2,049,042
                                                                     ---------------      ---------------



Partners Capital:
     Limited partners  capital, subject to redemption (note 4E):
          Net of unallocated syndication costs of $431,994 and
          $414,190 for 1997 and 1996, respectively:
          and formation loan receivable of $1,386,693 and
$1,073,706 for 1997 and 1996, respectively                               20,914,721           14,693,293

     General Partners Capital, net of unallocated syndication
costs of $4,364 and $4184for 1997 and 1996, respectively                     16,432               11,365
                                                                     ---------------      ---------------

                     Total Partners Capital                              20,931,153           14,704,658
                                                                     ---------------      ---------------

                     Total Liabilities and Partners  Capital            $26,657,574          $16,753,700
                                                                     ===============      ===============

<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>

<TABLE>
                                                    REDWOOD MORTGAGE INVESTORS VIII
                                                  (A California Limited Partnership)
                                                         STATEMENTS OF INCOME
                                              FOR THE THREE YEARS ENDED DECEMBER 31, 1997

<CAPTION>

                                                                             YEARS ENDED DECEMBER 31,
                                                                ----------------------------------------------------

                                                                    1997              1996                1995
                                                                -------------     --------------      --------------
Revenues:
<S>                                                               <C>                <C>                 <C>       
  Interest on Mortgage Investments                                $2,613,008         $1,718,208          $1,031,029
  Interest on bank deposits                                            9,487              4,083              13,120
  Late charges                                                         6,432              3,847               3,876
  Miscellaneous                                                          530                497               2,211
                                                                -------------     --------------      --------------
                                                                   2,629,457          1,726,635           1,050,236
                                                                -------------     --------------      --------------

Expenses:
  Mortgage servicing fees                                            189,692            155,912              85,456
  Interest on note payable - bank                                    340,633            188,638              25,889
  Amortization of loan origination fees                               16,819             11,999               2,531
  Provision for doubtful accounts and losses on real estate
    acquired through foreclosure                                     139,804             55,383              26,032
  Asset management fee - General Partner                              24,966             17,053              11,587
  Amortization of organization costs                                   2,500              2,500               2,500
  Clerical costs through Redwood Mortgage                             54,549             38,799              22,769
  Professional services                                               36,717             17,687              16,178
  Printing, supplies and postage                                       9,584              1,192                  92
  Other                                                                5,673              3,947               1,461
                                                                -------------     --------------      --------------
                                                                     820,937            493,110             194,495
                                                                -------------     --------------      --------------

Income before interest credited to partners in applicant           1,808,520          1,233,525             855,741
status

Interest credited to partners in applicant status                      9,562              2,618              18,908
                                                                -------------     --------------      --------------

Net Income                                                         $1798,958         $1,230,907            $836,833
                                                                =============     ==============      ==============

Net income:  To General Partners(1%)                                 $17,990            $12,309              $8,368
                     To Limited Partners (99%)                     1,780,968          1,218,598             828,465
                                                                =============     ==============      ==============
Total - net income                                                $1,798,958         $1,230,907            $836,833
                                                                =============     ==============      ==============

Net income per $1,000 invested by Limited
 Partners for entire period:
-where income is reinvested and compounded                               $84               $ 84                $ 83
                                                                =============     ==============      ==============

-where partner receives income in monthly distributions                  $81               $ 81                $ 80
                                                                =============     ==============      ==============

<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
                                                    REDWOOD MORTGAGE INVESTORS VIII
                                                  (A California Limited Partnership)
                                              STATEMENTS OF CHANGES IN PARTNERS CAPITAL
                                              FOR THE THREE YEARS ENDED DECEMBER 31, 1997

                                                                                  PARTNERS CAPITAL
                                                            --------------------------------------------------------------
                                                                              LIMITED PARTNERS CAPITAL
                                                            --------------------------------------------------------------
                                                              Capital
                                          Partners In         Account       Unallocated        Formation
                                           Applicant          Limited       Syndication          Loan
                                            Status           Partners          Costs          Receivable         Total
                                         --------------     ------------    -------------     ------------    ------------
<CAPTION>


<S>                                           <C>            <C>              <C>              <C>             <C>       
Balances at December 31, 1994                 $189,300       $7,519,424       $(234,303)       $(525,256)      $6,759,865

Contributions of Application                 3,634,264                0                0        (250,373)       (250,373)
Formation Loan increases                             0                0                0                0               0
Interest   credited   to   partners  in         18,908                0                0                0               0
applicant status

Upon admission to Partnership:
    Interest withdrawn                         (7,673)                0                0                0               0
    Transfers to Partners  capital         (3,834,799)        3,831,211                0                0       3,831,211

Net Income                                           0          828,465                0                0         828,465
Syndication costs incurred                           0                0        (173,581)                0       (173,581)
Allocation of syndication costs                      0         (85,045)           85,045                0               0
Partners  withdrawals                                0        (308,554)                0                0       (308,554)
Early withdrawal penalties                           0            (564)              162              400             (2)
                                         --------------     ------------    -------------     ------------    ------------

Balances at December 31, 1995                        0       11,784,937        (322,677)        (775,229)      10,687,031

Contributions on Application                 4,172,718                0                0                0               0
Formation Loan increases                             0                0                0        (314,996)       (314,996)
Formation Loan payments                              0                0                0            8,961           8,961
Interest   credited   to   partners  in          2,618                0                0                0               0
applicant status

Upon admission to Partnership:
    Interest withdrawn                           (863)                0                0                0               0
    Transfers to Partners  capital         (3,863,536)        3,859,312                0                0       3,859,312

Net Income                                           0        1,218,598                0                0       1,218,598
Syndication costs incurred                           0                0        (212,542)                0       (212,542)
Allocation of syndication costs                      0        (116,523)          116,523                0               0
Partners  withdrawals                                0        (553,027)                0                0       (553,027)
Early withdrawal penalties                           0         (12,108)            4,506            7,558            (44)
                                         --------------     ------------    -------------     ------------    ------------

Balances at December 31, 1996                  310,937       16,181,189        (414,190)      (1,073,706)      14,693,293

Contributions on Application                 5,251,969                0                0                0               0
Formation Loan increases                             0                0                0        (420,510)       (420,510)
Formation Loan payments                              0                0                0           98,999          98,999
Interest   credited   to   partners  in          9,562                0                0                0               0
applicant status

Upon admission to Partnership:
    Interest withdrawn                         (1,849)                0                0                0               0
    Transfers to Partners  capital         (5,570,619)        5,565,372                0                0       5,565,372

Net Income                                           0        1,780,968                0                0       1,780,968
Syndication costs incurred                           0                0        (188,517)                0       (188,517)
Allocation of syndication costs                      0        (166,023)          166,023                0               0
Partners  withdrawals                                0        (614,837)                0                0       (614,837)
Early withdrawal penalties                           0         (13,261)            4,690            8,524            (47)
                                         --------------     ------------    -------------     ------------    ------------
Balances at December 31, 1997                       $0      $22,733,408       $(431,994)      $(1,386,693)    $20,914,721
                                         ==============     ============    =============     ============    ============
<FN>
See accommpanying notes to financial statements
</FN>
</TABLE>
<PAGE>

<TABLE>
                                                    REDWOOD MORTGAGE INVESTORS VIII
                                                  (A California Limited Partnership)
                                              STATEMENTS OF CHANGES IN PARTNERS CAPITAL
                                              FOR THE THREE YEARS ENDED DECEMBER 31, 1997

                                                                          PARTNERS CAPITAL
                                            ------------------------------------------------------------------------------
                                                            GENERAL PARTNERS CAPITAL
                                            ----------------------------------------------------------
                                                Capital           Unallocated                                  Total
                                                Account           Syndication             Total              Partners
                                                General              Costs                                    Capital
                                               Partners
                                            ----------------    -----------------    -----------------     ---------------
<CAPTION>
<S>                                                  <C>                <C>                    <C>             <C>       
Balances at December 31, 1994                        $7,737             $(2,366)               $5,371          $6,765,236

Contributions of Application                              0                    0                    0                   0
Formation loan increases                                  0                    0                    0           (250,373)
Interest   credited   to   partners  in                   0                    0                    0                   0
applicant status

Upon admission to partnership:
    Interest withdrawn                                    0                    0                    0                   0
    Transfers to Partners  capital                    3,588                    0                3,588           3,834,799

Net Income                                            8,368                    0                8,368             836,833
Syndication costs incurred                                0              (1,753)              (1,753)           (175,334)
Allocation of syndication costs                       (859)                  859                    0                   0
Partners  withdrawals                               (7,509)                    0              (7,509)           (316,063)
Early withdrawal penalties                                0                    2                    2                   0
                                            ----------------    -----------------    -----------------     ---------------

Balances at December 31, 1995                        11,325              (3,258)                8,067          10,695,098

Contributions on Application                              0                    0                    0                   0
Formation loan increases                                  0                    0                    0           (314,996)
Formation loan payments                                                                                             8,961
Interest   credited   to   partners  in                   0                    0                    0                   0
applicant status

Upon admission to partnership:
    Interest withdrawn                                    0                    0                    0                   0
    Transfers to Partners  capital                    4,224                    0                4,224           3,863,536

Net Income                                           12,309                    0               12,309           1,230,907
Syndication costs incurred                                0              (2,147)              (2,147)           (214,689)
Allocation of syndication costs                     (1,177)                1,177                    0                   0
Partners  withdrawals                              (11,132)                    0             (11,132)           (564,159)
Early withdrawal penalties                                0                   44                   44                   0
                                            ----------------    -----------------    -----------------     ---------------

Balances at December 31, 1996                        15,549              (4,184)               11,365          14,704,658

Contributions on Application                              0                    0                    0                   0
Formation Loan increases                                  0                    0                    0           (420,510)
Formation Loan payments                                   0                    0                    0              98,999
Interest   credited   to   partners  in                   0                    0                    0                   0
applicant status

Upon admission to partnership:
    Interest withdrawn                                    0                    0                    0                   0
    Transfers to Partners  capital                    5,247                    0                5,247           5,570,619

Net Income                                           17,990                    0               17,990           1,798,958
Syndication costs incurred                                0              (1,904)              (1,904)           (190,421)
Allocation of syndication costs                     (1,677)                1,677                    0                   0
Partners  withdrawals                              (16,313)                    0             (16,313)           (631,150)
Early withdrawal penalties                                0                   47                   47                   0
                                            ----------------    -----------------    -----------------     ---------------
Balances at December 31, 1997                       $20,796             $(4,364)              $16,432         $20,931,153
                                            ================    =================    =================     ===============
<FN>
See accompanying notes to financial statements
</FN>
</TABLE>
<PAGE>

<TABLE>
                                                    REDWOOD MORTGAGE INVESTORS VIII
                                                  (A California Limited Partnership)
                                                       STATEMENTS OF CASH FLOWS
                                              FOR THE THREE YEARS ENDED DECEMBER 31, 1997
<CAPTION>

                                                                       1997              1996                1995
                                                                   --------------    --------------      -------------
Cash flows from operating activities:
<S>                                                                   <C>               <C>                  <C>     
  Net income                                                          $1,798,958        $1,230,907           $836,833
  Adjustments to reconcile net income to net cash provided by
       operating activities:
    Amortization of organization costs                                     2,500             2,500              2,500
    Provision for doubtful accounts.                                     139,804            78,651             26,032
    Provision for losses (gains) on real estate held for sale                  0          (23,268)                  0
    Increase (decrease) in accounts payable                             (17,270)            16,615              4,010
    (Increase) in accrued interest & advances                          (342,571)          (83,477)           (45,334)
    (Increase) decrease in amount due from related companies             (2,688)             2,738            (3,049)
    (Increase) decrease in deferred loan fee                              10,569           (3,002)           (17,718)
    Increase (decrease ) in deferred interest income                   (134,414)           217,480                  0
                                                                   --------------    --------------      -------------
                                                                                     --------------

      Net cash provided by operating activities                        1,454,888         1,439,144            803,274
                                                                   --------------    --------------      -------------

Cash flows from investing activities:


    Principal collected on Mortgage Investments                       10,279,337         9,019,190          1,508,190
    Mortgage Investments made                                       (19,941,336)      (13,148,944)        (7,133,221)
    Disposition of real estate held for sale                                   0           299,154                  0
    Additions to real estate held for sale                               (3,254)                 0                  0
    Additions to Limited Liability Corporation                          (60,000)                 0                  0
    Accounts receivables, unsecured - (disbursements) receipts            12,490           (4,018)            (8,830)
                                                                  ---------------    --------------      -------------

      Net cash used in investing activities                          (9,712,763)       (3,834,618)        (5,633,861)
                                                                  ---------------    --------------      -------------

Cash flows from financing activities

   Increase (decrease) in note payable-bank                            4,140,000         (410,000)          1,910,000
   Contributions by partner applicants                                 5,251,969         4,172,718          3,634,264
   Interest credited to partners in applicant status                       9,562             2,618             18,908
   Interest withdrawn by partners in applicant status                    (1,849)             (863)            (7,673)
   Partners withdrawals                                                (631,150)         (564,159)          (316,063)
   Syndication costs incurred                                          (190,421)         (214,689)          (175,334)
   Formation Loan increases                                            (420,510)         (314,996)          (250,373)
   Formation Loan collections                                             98,999             8,961                  0
                                                                  ---------------    --------------      -------------

      Net cash provided by financing activities                        8,256,600         2,679,590          4,813,729
                                                                  ---------------    --------------      -------------

Net increase (decrease) in cash and cash equivalents                     (1,275)           284,116           (16,858)

Cash - beginning of period                                               664,434           380,318            397,176
                                                                  ---------------    --------------      -------------

Cash - end of period                                                    $663,159          $664,434           $380,318
                                                                  ===============    ==============      =============
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>

                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

NOTE 1 - ORGANIZATION AND GENERAL

     Redwood Mortgage  Investors VIII, (the Partnership) is a California Limited
Partnership,  of which the General Partners are D. Russell  Burwell,  Michael R.
Burwell and Gymno  Corporation,  a California  corporation owned and operated by
the individual  General  Partners.  The  Partnership  was organized to engage in
business  as a  mortgage  lender  for the  primary  purpose  of making  Mortgage
Investmenst  secured  by  Deeds of Trust on  California  real  estate.  Mortgage
Investments are being arranged and serviced by Redwood Home Loan Co. dba Redwood
Mortgage,  an affiliate  of the General  Partners.  At December  31,  1997,  the
Partnership  was in the offering stage,  wherein  contributed  capital  totalled
$20,489,676 in limited partner  contributions of an approved  aggregate offering
of $45,000,000, in units of $100 each (204,897).

     A  minimum  of 2,500  units  ($250,000)  and a  maximum  of  150,000  units
($15,000,000)  were initially  offered through  qualified  broker-dealers.  This
initial offering was closed in October,  1996. In December 1996, the Partnership
commenced a second  offering of an  additional  300,000 Units  ($30,000,000)  As
Mortgage  Investments  are identified,  partners are transferred  from applicant
status to admitted  partners  participating in Mortgage  Investment  operations.
Each months income is  distributed  to partners based upon their  proportionate
share of partners  capital.  Some partners have elected to withdraw  income on a
monthly, quarterly or annual basis.

     A.  Sales  Commissions  -  Formation  Loan Sales  commissions  are not paid
directly  by  the  Partnership  out  of  the  offering  proceeds.  Instead,  the
Partnership  loans to Redwood  Mortgage,  an affiliate of the General  Partners,
amounts to pay all sales  commissions  and amounts  payable in  connection  with
unsolicited  orders.  This loan is referred to as the  Formation  Loan.  It is
unsecured and non-interest bearing.

     The Formation Loan relating to the initial  $15,000,000  offering  totalled
$1,074,840,  which was 7.2% of limited  partners  contributions  of  $14,932,017
(under the limit of 9.1% relative to the initial offering).  It is to be repaid,
without interest,  in ten annual  installments of principal,  which commenced on
January 1, 1997,  following the year the initial offering  closed,  which was in
1996.

     The Formation Loan relating to the second offering  ($30,000,000)  totalled
$435,895  at  December  31,  1997,  which  was  7.8%  of  the  limited  partners
contributions  of  $5,557,659.  Sales  commissions  range from 0% (units sold by
General Partners) to 9% of gross proceeds. The Partnership  anticipates that the
sales  commissions  will  approximate  7.6% based on the assumption  that 65% of
investors will elect to reinvest earnings,  thus generating 9% commissions.  The
principal  balance of the Formation  Loan will  increase as additional  sales of
units are made each year.  The amount of the  annual  installment  payment to be
made by Redwood  Mortgage,  during the offering  stage,  will be  determined  at
annual  installments of one-tenth of the principal balance of the Formation Loan
as of  December  31 of each  year.  Such  payment  shall be due and  payable  by
December 31 of the following year with the first such payment beginning December
31, 1997.  Upon  completion of the  offering,  the balance will be repaid in ten
equal annual installments.
<PAGE>

<TABLE>
                                                    REDWOOD MORTGAGE INVESTORS VIII
                                                  (A California Limited Partnership)
                                                     NOTES TO FINANCIAL STATEMENTS
                                                           DECEMBER 31, 1997

The following summarizes Formation Loan transactions to December 31, 1997:

                                               Initial              Subsequent             Total
                                             Offering of           Offering of
                                             $15,000,000           $30,000,000
                                            ---------------       ---------------      ---------------
<CAPTION>
<S>                                            <C>                    <C>                 <C>        
Limited Partner contributions                  $14,932,017            $5,557,659          $20,489,676
                                            ===============       ===============      ===============

Formation Loan made                             $1,074,840               435,895            1,510,735
Payments to date                                 (107,960)                     0            (107,960)
Early withdrawal penalties applied                (16,082)                     0             (16,082)
                                            ---------------       ---------------      ---------------

Balance December 31, 1996                         $950,798              $435,895           $1,386,693
                                            ===============       ===============      ===============

Percent loaned of Partners  contributions             7.2%                  7.8%                 7.4%
                                            ===============       ===============      ===============
</TABLE>
     The Formation Loan, which is receivable from Redwood Mortgage, an affiliate
of the General Partners,  has been deducted from Limited Partners Capital in the
balance  sheet.  As amounts are collected from Redwood  Mortgage,  the deduction
from capital will be reduced.

     B. Other  Organizational and Offering Expenses  Organizational and offering
expenses, other than sales commissions,  (including printing costs, attorney and
accountant fees,  registration and filing fees and other costs), will be paid by
the Partnership.

     Through  December 31, 1997,  organization  costs of $12,500 and syndication
costs of  $861,031  had been  incurred  by the  Partnership  with the  following
distribution:
<TABLE>
                                             Syndication Costs
                                --------------------------------------------
                                         Offering
                                ----------------------------
                                 Initial         Subsequent                     Organization
                                15,000,000       30,000,000        Total           Costs           Total
                                -----------      -----------     -----------      ---------      ----------
<CAPTION>
<S>                               <C>               <C>             <C>             <C>            <C>    
Costs incurred                    $569,865          291,166         861,031         12,500         873,531
Early withdrawal penalties         (9,451)                0         (9,451)              0         (9,451)
applied
Allocated and amortized to       (386,296)         (28,926)       (415,222)       (10,625)       (425,847)
date
                                ----------- ---- ----------- --- ----------- ---- --------- ---- ----------

December 31, 1997 balance         $174,118          262,240         436,358          1,875         438,233
                                =========== ==== =========== === =========== ==== ========= ==== ==========
</TABLE>
     Organization  and syndication  costs  attributable to the initial  offering
($15,000,000)  were  limited  to the  lesser  of 10% of the  gross  proceeds  or
$600,000 with any excess being paid by the General  Partners.  Applicable  gross
proceeds were $14,932,017.  Related  expenditures  totalled  $582,365  ($569,865
syndication costs plus $12,500 organization expense) or 3.90%.

     As of December 31, 1997,  syndication costs  attributable to the subsequent
offering  ($30,000,000)  totalled  $291,166,  with  the  costs  of the  offering
document being greater at the initial stages.  The syndication  costs payable by
the  Partnership  are  estimated to be  $1,200,000 if the maximum is sold (4% of
$30,000,000).  The General Partners will pay any syndication expenses (excluding
selling  commissions)  in  excess  of ten  percent  of  the  gross  proceeds  or
$1,200,000.
<PAGE>

                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A Accrual Basis

     Revenues and expenses are  accounted for on the accrual basis of accounting
wherein  income is recognized as earned and expenses are recognized as incurred.
Once a Mortgage  Investment is  categorized  as impaired,  interest is no longer
accrued thereon.

B. Management Estimates

     In  preparing  the  financial  statements,  management  is required to make
estimates based on the information available that affect the reported amounts of
assets and  liabilities  as of the balance  sheet date and revenues and expenses
for the related periods.  Such estimates relate principally to the determination
of the  allowance  for doubtful  accounts,  including  the valuation of impaired
mortgage  investments,  and  the  valuation  of  real  estate  acquired  through
foreclosure. Actual results could differ significantly from these estimates.

C. Mortgage Investments, Secured by Deeds of Trust

     The  Partnership  has both the  intent  and  ability  to hold the  Mortgage
Investments to maturity, i.e., held for long-term investment. They are therefore
valued at cost for financial  statement  purposes  with  interest  thereon being
accrued by the simple interest method.

     Financial   Accounting  Standards  Board  Statements  (SFAS)  114  and  118
(effective  January 1, 1995) provide that if the probable  ultimate  recovery of
the carrying amount of a Mortgage  Investment,  with due  consideration  for the
fair value of  collateral,  is less than the  recorded  investment  and  related
amounts due and the  impairment is considered  to be other than  temporary,  the
carrying  amount of the investment  (cost) shall be reduced to the present value
of future cash flows.  The adoption of these  statements did not have a material
effect on the  financial  statements  of the  Partnership  because  that was the
valuation method previously used on impaired loans.

     At December 31, 1997,  1996, and 1995,  there were no Mortgage  Investments
categorized as impaired by the Partnership. Had there been a computed amount for
the reduction in carrying  values of impaired  loans,  the reduction  would have
been included in the allowance for doubtful accounts.

     As presented in Note 10 to the financial  statements,  the average Mortgage
Investment  to  appraised  value  of  security  at  the  time  the  losses  were
consummated  was  55.83%.  When a loan is valued  for  impairment  purposes,  an
updating is made in the valuation of collateral  security.  However,  such a low
loan to value ratio has the tendency to minimize reductions for impairment.

D. Cash and Cash Equivalents

     For purposes of the  statements  of cash flows,  cash and cash  equivalents
include interest bearing and non-interest bearing bank deposits.

E. Real Estate Owned, Held for Sale

     Real Estate owned,  held for sale,  includes real estate  acquired  through
foreclosure  and is  stated  at the  lower  of the  recorded  investment  in the
property,  net of any senior  indebtedness,  or at the propertys estimated fair
value,  less estimated  costs to sell. At December 31, 1997,  there was one such
piece of property  with costs  totaling  $75,138  less a reduction  of $5,000 to
arrive at the net fair value of $70,138.
<PAGE>

                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

     Effective  January 1, 1996,  the  Partnership  adopted  the  provisions  of
Statement  No 121  (SFAS  121)  of the  Financial  Accounting  Standards  Board,
Accounting  for the Impairment of Long Lived Assets and for Long Lived Assets to
be disposed of. The  adoption of SFAS 121 did not have a material  impact on the
Partnerships  financial position because the methods indicated were essentially
those previously used by the Partnership.

F. Investment in Limited Liability Corporation (see Note 7)

     The Partnership  carries its investment in a Limited Liability  Corporation
as investment in real estate, which is at the lower of costs or fair value, less
estimated costs to sell.

G. Income Taxes

     No provision  for Federal and State  income taxes is made in the  financial
statements  since  income taxes are the  obligation  of the partners if and when
income taxes apply.

H. Organization and Syndication Costs

     The Partnership  bears its own  organization  and syndication  costs (other
than certain sales  commissions  and fees described  above)  including legal and
accounting  expenses,   printing  costs,  selling  expenses,  and  filing  fees.
Organizational  costs have been  capitalized  and will be amortized  over a five
year period.  Syndication  costs are charged against  partners  capital and are
being  allocated  to  individual   partners   consistent  with  the  partnership
agreement.

I. Allowance for Doubtful Accounts 

     Mortgage  Investments and the related accrued interest,  fees, and advances
are  analyzed  on a  continuous  basis  for  recoverability.  Delinquencies  are
identified and followed as part of the Mortgage  Investment  system. A provision
is made for doubtful  accounts to adjust the allowance for doubtful  accounts to
an amount  considered by management to be adequate,  with due  consideration  to
collateral values, to provide for unrecoverable  accounts receivable,  including
impaired  Mortgage  Investments,   unspecified  mortgage  investments,   accrued
interest and advances on Mortgage  Investments,  and other  accounts  receivable
(unsecured).  The  composition  of the  allowance  for  doubtful  accounts as of
December 31, 1997, and 1996 was as follows:

                                                  December 31,
                               -----------------------------------------------
                                     1997                            1996
                               ---------------                 ---------------

Impaired mortgage investments           $0                              $0
Unspecified mortgage investments   213,500                          72,803
Amounts receivable, unsecured       44,000                          45,000
                                -----------                 ---------------
                                  $257,500                        $117,803
                                ===========                 ===============
<PAGE>

                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

J. Net Income Per $1,000 Invested

     Amounts  reflected  in the  statements  of income as net  income per $1,000
invested by Limited Partners for the entire period are actual amounts  allocated
to Limited  Partners who have their  investment  throughout  the period and have
elected to either  leave their  earnings to compound or have  elected to receive
monthly  distributions of their net income.  Individual income is allocated each
month based on the Limited Partners pro rata share of Partners Capital.  Because
the net income  percentage  varies from month to month,  amounts per $1,000 will
vary for those individuals who made or withdrew  investments  during the period,
or select other options. However, the net income per $1,000 average invested has
approximated  those  reflected  for those whose  investments  and  options  have
remained constant.

NOTE 3 - GENERAL PARTNERS AND RELATED PARTIES

     The  following  are  commissions  and/or fees which are paid to the General
Partners and/or related parties.

A. Mortgage Brokerage Commissions

     For fees in connection with the review, selection, evaluation,  negotiation
and extension of Partnership  Mortgage Investments in an amount up to 12% of the
Mortgage  Investments until 6 months after the termination date of the offering.
Thereafter,  Mortgage  Investment  brokerage  commissions  will be limited to an
amount not to exceed 4% of the total  Partnership  assets per year. The Mortgage
Investment  brokerage  commissions  are paid by the borrowers,  and thus, not an
expense of the Partnership.  In 1997, Mortgage Investment brokerage  commissions
paid by the borrowers was $837,399.

B. Mortgage Servicing Fees

     Monthly  mortgage  servicing  fees of up to 1/8 of 1% (1.5%  annual) of the
unpaid  principal,  is paid to Redwood  Mortgage,  or such  lesser  amount as is
reasonable and customary in the geographic area where the property  securing the
mortgage is located.  Mortgage servicing fees of $189,692,  $155,912and  $85,456
were incurred for years 1997, 1996 and 1995 respectively.

C. Asset Management Fee

     The General  Partners  receive  monthly fees for managing the  Partnerships
Mortgage  Investment  portfolio and operations up to 1/32 of 1% of the net asset
value (3/8 of 1% annual).  Management fees of $24,966,  $17,053and  $11,587 were
incurred for years 1997, 1996 and 1995, respectively.
<PAGE>
                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997
D. Other Fees

     The  Partnership  Agreement  provides for other fees such as  reconveyance,
mortgage  assumption and mortgage  extension fees. Such fees are incurred by the
borrowers and are paid to parties related to the General Partners.

E. Income and Losses

     All income  will be  credited  or charged to  partners in relation to their
respective  partnership  interests.  The  partnership  interest  of the  General
Partners (combined) shall be a total of 1%.

F. Operating Expenses

     The General Partners or their affiliate  (Redwood  Mortgage) are reimbursed
by the  Partnership  for all  operating  expenses  actually  incurred by them on
behalf of the Partnership,  including without limitation,  out-of-pocket general
and administration expenses of the Partnership, accounting and audit fees, legal
fees and expenses,  postage and preparation of reports to Limited Partners. Such
reimbursements are reflected as expenses in the Statement of Income.

     The General  Partners  collectively or severally were to contribute 1/10 of
1% in cash  contributions  as proceeds from the offering are admitted to limited
Partner capital.  As of December 31, 1997 a General Partner,  GYMNO Corporation,
had  contributed  $20,488,  as capital in accordance with Section 4.02(a) of the
Partnership Agreement.

NOTE 4 - OTHER PARTNERSHIP PROVISIONS

A. Applicant Status

     Subscription  funds  received from  purchasers of units are not admitted to
the Partnership until appropriate  lending  opportunities are available.  During
the period prior to the time of admission,  which is  anticipated  to be between
1-120 days in most cases, purchasers  subscriptions will remain irrevocable and
will earn interest at money market rates,  which are lower than the  anticipated
return on the Partnerships Mortgage Investment portfolio.

     During the periods  ending  December 31,  1997,  1996,  and 1995,  interest
totalling $9,562, $2,618 and $18,908  respectively,  was credited to partners in
applicant  status.   As  Mortgage   Investments  were  made  and  partners  were
transferred  to  regular  status  to  begin  sharing  in  income  from  Mortgage
Investments  secured by deeds of trust, the interest credited was either paid to
the  investors  or  transferred  to  partners  capital  along with the original
investment.

B. Term of the Partnership

     The term of the  Partnership  is  approximately  40  years,  unless  sooner
terminated as provided. The provisions provide for no capital withdrawal for the
first five  years,  subject  to the  penalty  provision  set forth in (E) below.
Thereafter,  investors  have the right to withdraw over a five-year  period,  or
longer.

C. Election to Receive Monthly, Quarterly or Annual Distributions

     Upon subscriptions, investors elect either to receive monthly, quarterly or
annual distributions of earnings allocations,  or to allow earnings to compound.
Subject to certain  limitations,  a compounding investor may subsequently change
his  election,  but  an  investors  election  to  have  cash  distributions  is
irrevocable.
<PAGE>

                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

D. Profits and Losses

     Profits and losses are allocated  among the Limited  Partners  according to
their respective capital accounts after 1% is allocated to the General Partners.

E. Liquidity, Capital Withdrawals and Early Withdrawals

     There  are  substantial   restrictions  on  transferability  of  Units  and
accordingly an investment in the Partnership is illiquid.  Limited Partners have
no right to  withdraw  from the  Partnership  or to obtain  the  return of their
capital  account for at least one year from the date of  purchase  of Units.  In
order to provide a certain degree of liquidity to the Limited Partners after the
one-year  period,  Limited  Partners may  withdraw all or part of their  Capital
Accounts from the  Partnership in four quarterly  installments  beginning on the
last day of the calendar  quarter  following  the quarter in which the notice of
withdrawal is given,  subject to a 10% early withdrawal penalty. The 10% penalty
is applicable to the amount  withdrawn as stated in the Notice of Withdrawal and
will be deducted from the Capital  Account and the balance  distributed  in four
quarterly installments.  Withdrawal after the one-year holding period and before
the five-year  holding period will be permitted only upon the terms set forth in
the Partnership Agreement.

     Limited Partners will also have the right after five years from the date of
purchase of the Units to withdraw from the Partnership on an installment  basis,
generally  over a five year  period in twenty  (20)  quarterly  installments  or
longer.  Once this five year  period  expires,  no  penalty  will be  imposed if
withdrawal   is  made  in  twenty  (20)   quarterly   installments   or  longer.
Notwithstanding  the  five-year  (or  longer)  withdrawal  period,  the  General
Partners will liquidate all or part of a Limited  Partners  capital  account in
four quarterly  installments  beginning on the last day of the calendar  quarter
following the quarter in which the notice of  withdrawal is given,  subject to a
10% early withdrawal  penalty applicable to any sums withdrawn prior to the time
when such sums could have been  withdrawn  pursuant to the five-year (or longer)
withdrawal period.

     The Partnership will not establish a reserve from which to fund withdrawals
and,  accordingly,  the  Partnerships  capacity  to return a  Limited  Partners
capital is restricted to the availability of Partnership cash flow.

F. Guaranteed Interest Rate For Offering Period

     During the period  commencing with the day a Limited Partner is admitted to
the  Partnership  and ending 3 months after the offering  termination  date, the
General Partners shall guarantee an earnings rate equal to the greater of actual
earnings from mortgage operations or 2% above The Weighted Average cost of Funds
Index for the Eleventh  District Savings  Institutions  (Savings & Loan & Thrift
Institutions)  as computed by the Federal  Home Loan Bank of San  Francisco on a
monthly basis, up to a maximum interest rate of 12%. To date, actual realization
exceeded the guaranteed amount for each month.

NOTE 5- LEGAL PROCEEDINGS

The Partnership is not a defendant in any legal actions.

NOTE 6 - NOTE PAYABLE - BANK LINE OF CREDIT

     The Partnership  has a bank line of credit expiring  September 30, 1999, of
up to $6,000,000 at .5% over prime secured by its Mortgage Investment portfolio.
The note payable  balances were  $5,640,000 and $1,500,000 at December 31, 1997,
and 1996,  respectively,  and the  interest  rate was 9% at December  31,  1997,
(8.50% prime plus .50%).
<PAGE>

                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

NOTE 7 - INVESTMENT IN LIMITED LIABILITY CORPORATION

     As a result of acquiring real property through foreclosure, the Partnership
has  contributed  its  interest   (principally  land)  to  a  Limited  Liability
Corporation,  which  is  owned  100%  by  the  Partnership,  will  complete  the
construction and sell the property.  The Partnership expects to realize a profit
from the venture.

NOTE 8 - INCOME TAXES

     The following reflects a reconciliation  from net assets (Partners Capital)
reflected in the financial statements to the tax basis of those net assets:
<TABLE>

                                                                          December 31,
                                                            ------------------------------------------
                                                                  1997                      1996
                                                            -----------------          ---------------
<CAPTION>

<S>                                                              <C>                      <C>        
Net Assets - Partners  Capital per financial statements          $20,931,153              $14,704,658
Unamortized syndication costs                                        436,358                  418,374
Allowance for doubtful accounts                                      257,500                  117,803
Formation loans receivable                                         1,386,693                1,073,706
                                                            -----------------          ---------------
Net assets tax basis                                             $23,011,704              $16,314,541
                                                            =================          ===============
</TABLE>

     In 1997,  approximately  61% of taxable  income was allocated to tax exempt
organizations, i.e., retirement plans. Such plans do not have to file income tax
returns  unless their  unrelated  business  income  exceeds  $1,000.  Applicable
amounts become taxable when distribution is made to participants.

NOTE 9 - FAIR VALUE OF FINANCIAL INVESTMENTS

     The following  methods and assumptions were used to estimate the fair value
of financial instruments:

     (a) Cash and Cash  Equivalents The carrying  amount equals fair value.  All
amounts, including interest bearing, are subject to immediate withdrawal.

     (b)  The  carrying  value  of  mortgage   investments  (see  note  2(c)  is
$25,304,989.  The fair value of these  investments  of  $25,710,340 is estimated
based upon projected  cash flows  discounted at the estimated  current  interest
rates at  which  similar  loans  would be made.  The  applicable  amount  of the
allowance for doubtful accounts along with accrued interest and advances related
thereto  should  also be  considered  in  evaluating  the fair value  versus the
carrying value.
<PAGE>
<TABLE>

                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

NOTE 10- ASSET CONCENTRATIONS AND CHARACTERISTICS

     The  Mortgage  Investments  are  secured  by  recorded  deeds of trust.  At
December  31,  1997,  there were 55 Mortgage  Investments  outstanding  with the
following characteristics:
<CAPTION>

<S>                                                                                                       <C>
Number of Mortgage Investments outstanding                                                                55
Total Mortgage Investments outstanding                                                           $25,304,989

Average Mortgage Investment outstanding                                                             $460,091
Average Mortgage Investment as percent of total                                                        1.82%
Average Mortgage Investment as percent of Partners  Capital                                            2.20%

Largest Mortgage Investment outstanding                                                            2,100,000
Largest Mortgage Investment as percent of total                                                        8.30%
Largest Mortgage Investment as percent of Partners  Capital                                           10.03%

Number of counties where security is located (all California)                                             14
Largest percentage of Mortgage Investments in one county                                              23.85%
Average Mortgage Investment to appraised value of security at time loan was consummated               55.83%

Number of Mortgage Investments in foreclosure status                                                       1
Amount of Mortgage Investments in foreclosure                                                       $118,811

</TABLE>
<TABLE>

The following categories of mortgage investments are pertinent at December 31, 1997 and 1996:


                                                                          December 31,
                                                            ------------------------------------------
                                                                  1997                      1996
                                                            -----------------          ---------------
<CAPTION>

<S>                                                              <C>                       <C>       
First Trust Deeds                                                $17,103,865               $6,545,779
Second Trust Deeds                                                 8,163,624                8,797,211
Third Trust Deeds                                                     37,500                  300,000
                                                            -----------------          ---------------
  Total mortgage investments                                      25,304,989               15,642,990
Prior liens due other lenders                                     24,224,566               25,161,374
                                                            -----------------          ---------------
  Total debt                                                     $49,529,555              $40,804,364
                                                            =================          ===============

Appraised property value at time of loan                         $88,714,541              $70,100,408
                                                            =================          ===============

Total investments as a percent of appraisals                          55.83%                   58.21%
                                                            =================          ===============

Investments by Type of Property

Owner occupied homes                                              $2,445,423               $1,808,921
Non-Owner occupied homes                                           5,318,722                2,288,036
Apartments                                                         5,982,649                2,521,515
Commercial                                                        11,558,195                9,024,518
                                                            =================          ===============
                                                                 $25,304,989              $15,642,990
                                                            =================          ===============
<FN>
The interest rates on the mortgage investments range from 8.00% to 14.00% at December 31, 1997.
</FN>
</TABLE>

<PAGE>

                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

     Scheduled  maturity  dates of mortgage  investments as of December 31, 1997
are as follows:

                        Year Ending
                        December 31,
                     -------------------

                            1998                        $3,631,543
                            1999                         7,707,533
                            2000                         5,016,894
                            2001                         1,887,779
                            2002                         1,546,742
                         Thereafter                      5,514,498
                                                    ===============
                                                       $25,304,989
                                                    ===============


     The  scheduled  maturities  for 1998 include  approximately  $1,123,089  in
Mortgage  Invesments  which are past  maturity at December  31,  1997.  Interest
payment on these loans are current.

     One Mortgage  Investment in the  principal  amount of $118,811 had interest
paid through September 1, 1996, and is in foreclosure.  That Mortgage Investment
which is the only loan  categorized  as delinquent,  is not considered  impaired
because the underlying security is sufficient to cover amount due.

     The cash  balance at December  31,  1997 of  $663,159  was in one bank with
interest  bearing  balances  totalling  $597,751.  The  balances  exceeded  FDIC
insurance  limits (up to $100,000 per bank) by  $563,159.  This bank is the same
financial  institution  that has provided the  Partnership  with the  $6,000,000
limit line of credit.  At December 31, 1997, draw down against this facility was
$5,640,000.  As and when deposits in the  Partnerships  bank accounts  increase
significantly  beyond the  insured  limit,  the funds are  either  placed on new
Mortgage Investments or used to pay-down on the line of credit balance.

<PAGE>

<TABLE>

                                 SCHEDULE II AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
                                    PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES. Rule 12-03


Column A                    Column B               Column C            Column D                   Column E
Name of Debtor              Balance Beginning      Additions                 Deductions            Balance at end of period
                            of period 12/31/96                          (1)            (2)           (1)           (2)
                                                                      Amounts        Amounts       Current     Not Current
                                                                     collected     written off              12/31/97
<CAPTION>

Redwood Mortgage
<S>                           <C>                       <C>           <C>             <C>           <C>          <C>     
1st Offering                  $1,058,322                $0            $99,000         $8,524        $0.00        $950,798
2nd Offering                  $15,384                $420,511            0              0             0          $435,895
                              ------------- --------------------- ---------------- ------------- ------------- -----------

Total                         $1,073,706               $420,511       $99,000         $8,524          0        $1,386,693
                              ============= ===================== ================ ============= ============= ===========
<FN>
     The above  schedule  represents  the  Formation  Loan  borrowed  by Redwood
Mortgage from the Partnership to pay for the selling commissions on units. It is
an  unsecured  loan  and  will  not  bear  interest.  It will be  repaid  to the
Partnership in ten annual installments as described in Note 1 A to the financial
statements.  The amount written off in column D (2) represents the proportionate
amount of early withdrawal penalties allocated to the Formation Loan as provided
in the prospectus.
</FN>
</TABLE>
<PAGE>

<TABLE>

                                           SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
                                                    REDWOOD MORTGAGE INVESTORS VIII


Column A           Column B                        Column C                Column D           Column E
Description        Balance                         Additions               Deductions         Balance at
                                      ------------------------------------
                   beginning of             (1)                 (2)          Describe         End of Period
                   of period         Charged to          Charged
                                                         (credtited) to
                                     Costs & Expenses    Other accounts -
                                                         Describe
<CAPTION>

Year Ended
12/31/97

Deducted from
Asset accounts:

Allowance for
<S>                        <C>                 <C>                        <C>           <C>          <C>     
Doubtful accts             $117,803            $139,804                   0             $107         $257,500

Cumulative
write-down of
Real Estate
held for sale
(REO)                        $5,000                   0                   0                0           $5,000

                   ================= =================== =================== ================ ================
Totals                     $122,803            $139,804                   0          (a)$107         $262,500
                   ================= =================== =================== ================ ================

<FN>
(a)  represents loss realized
</FN>
</TABLE>
<PAGE>
<TABLE>

SCHEDULE XII

                                                 MORTGAGE INVESTMENTS ON REAL ESTATE.
                                               RULE 12-29 MORTGAGE LOANS ON REAL ESTATE

Col. A    Col. B    Col. C    Col. D     Col. E     Col. F        Col. G         Col. H     Col. I     Col. J
Descp.    Interest  Final     Periodic   Prior      Face Amt.     Carrying     Principal    Type of    Geographic
          Rate      Maturity  Payment    Liens      of Mortgage   amount of    amount of    Lien       County
                    Date      Terms                 Investments   Mortgage     Mortgage                Location
                                                    (original     Investments  Investments
                                                    amount)                    subject to
                                                                               Delinq.
                                                                               Principal
                                                                               or Interest
========= ========= ========= ========== ========== ============= ============ ============ ========== ================
<CAPTION>

<S>        <C>      <C>        <C>         <C>        <C>          <C>            <C>       <C>        <C>       
Comm.      13.750%  11/01/99   2,044.77    156,750    175,500.00   169,221.02     0.00      2nd Mtg    Alameda
Comm.      13.750%  10/01/96     458.33       0.00     40,000.00    40,000.00     0.00      1st Mtg    Santa Clara
Res.       12.000%  07/01/98   1,337.20     37,236    130,000.00   118,810.72  118,810.72   2nd Mtg    El Dorado
Comm       12.000%  09/01/03     848.61       0.00     82,500.00    80,900.33     0.00      1st Mtg    Alameda
Comm       11.000%  09/01/05     846.15    846,019     67,500.00    52,799.10     0.00      2nd Mtg    Sacramento
Comm       12.000%  11/01/98   2,057.23      5,635    200,000.00    53,288.38     0.00      2nd Mtg    San Francisco
Comm       10.000%  12/01/98   1,689.33       0.00    192,500.00   189,719.45     0.00      1st Mtg    Alameda
Comm       12.000%  02/01/99   5,131.13       0.00    390,000.00   503,457.45     0.00      1st Mtg    Santa Clara
Apts       11.500%  11/01/99   1,980.58    713,917    200,000.00   197,177.72     0.00      2nd Mtg    San Joaquin
Res.       11.000%  12/01/03   3,185.37  1,060,486    325,000.00   316,536.00     0.00      2nd Mtg    San Francisco
Res        11.000%  04/01/99   4,999.70    775,649    525,000.00   517,441.79     0.00      2nd Mtg    Contra Costa
Apts       11.500%  04/01/05     330.09       0.00    400,000.00    33,333.33     0.00      1st Mtg    San Joaquin
Comm       12.500%  07/01/00   1,387.44       0.00    130,000.00   128,880.24     0.00      1st Mtg    Fresno
Res        11.750%  07/01/10     802.36     74,551     66,000.00    63,356.42     0.00      2nd Mtg    Alameda
Apts       12.000%  08/01/00   6,951.28  3,033,304    660,000.00   648,713.71     0.00      2nd Mtg    San Joaquin
Comm       12.000%  10/01/96     600.00    290,711     60,000.00    60,000.00     0.00      2nd Mtg    Alameda
Apts       11.875%  01/01/01   4,330.76       0.00    425,000.00   421,788.45     0.00      1st Mtg    San Mateo
Res        11.875%  01/01/01   2,292.76       0.00    225,000.00   223,299.67     0.00      1st Mtg    San Mateo
Comm       12.500%  01/01/06   3,415.23       0.00    320,000.00   317,883.95     0.00      1st Mtg    San Joaquin
Comm       11.750%  02/01/99   1,018.34       0.00    104,000.00   103,938.28     0.00      1st Mtg    Contra Costa
Comm       11.875%  02/01/06   4,541.40       0.00    435,000.00   429,504.95     0.00      1st Mtg    San Mateo
Comm       12.000%  03/01/01     789.92       0.00     75,000.00    73,975.20     0.00      1st Mtg    San Mateo
Comm       12.000%  12/31/01   9,792.73  5,492,794    955,000.00   979,272.92     0.00      2nd Mtg    Santa Clara
Res        11.500%  04/01/06   1,039.81       0.00    105,000.00   104,184.14     0.00      1st Mtg    San Francisco
Res        12.000%  12/01/97   9,366.28       0.00    910,000.00   906,413.85     0.00      1st Mtg    Marin
Res        12.000%  08/01/01   1,250.00       0.00    125,000.00   125,000.00     0.00      1st Mtg    Mendocino
Apts       12.000%  02/01/98   1,538.89     74,597  1,427,500.00    84,241.05     0.00      2nd Mtg    San Francisco
Comm       12.000%  03/01/01     684.60     74,754     65,000.00    64,443.04     0.00      2nd Mtg    San Mateo
Comm       12.000%  02/01/99     186.00     20,800     18,000.00    18,000.00     0.00      2nd Mtg    Santa Clara
Land       12.000%  01/01/00  14,500.00    880,313  1,450,000.00  1,450,000.00    0.00      2nd Mtg    Stanisalus
Comm       14.000%  04/01/06   6,847.13       0.00    700,000.00   583,813.76     0.00      1st Mtg    San Francisco
Apts       10.750%  04/01/07  16,125.00  6,714,769  1,800,000.00  1,800,000.00    0.00      2nd Mtg    Alameda
Res        11.500%  05/01/99     359.38  1,660,639     37,500.00    37,500.00     0.00      3rd Mtg    Contra Costa
Comm       11.750%  05/01/02   3,828.76       0.00    370,000.00   346,742.31     0.00      1st Mtg    San Mateo
Res        11.500%  11/01/98   2,012.50       0.00    210,000.00   210,000.00     0.00      1st Mtg    San Francisco
Comm       11.500%  05/01/99  20,125.00       0.00  2,100,000.00  2,100,000.00    0.00      1st Mtg    Alameda
Res        12.000%  06/01/99     500.00    262,342     50,000.00    50,000.00     0.00      2nd Mtg    Alameda
Res        12.000%  12/01/97   1,155.20    910,000    120,000.00   116,674.81     0.00      2nd Mtg    Marin
Comm       10.500%  06/01/00  5,687..50       0.00    400,000.00   650,000.00     0.00      1st Mtg    San Mateo
Comm       12.000%  07/01/02  10,500.00       0.00  1,350,000.00  1,050,000.00    0.00      1st Mtg    San Francisco
Res        11.000%  07/01/00   3,575.00       0.00    390,000.00   390,000.00     0.00      1st Mtg    San Francisco
Res        12.000%  01/01/99   3,626.03    350,000    700,000.00   395,015.54     0.00      2nd Mtg    Monterey
Res        10.500%  07/01/00   5,068.88       0.00    579,300.00   579,300.00     0.00      1st Mtg    San Francisco
Comm       12.500%  10/01/02   1,562.50       0.00    150,000.00   150,000.00     0.00      1st Mtg    San Francisco
Res        11.500%  04/01/99   8,761.13    579,300  1,320,000.00   922,966.50     0.00      2nd Mtg    San Francisco
</TABLE>
<PAGE>

<TABLE>

Col. A    Col. B     Col. C    Col. D     Col. E     Col. F       Col. G         Col. H     Col. I     Col. J
Descp.    Interest   Final     Periodic   Prior      Face Amt.    Carrying     Principal    Type of    Geographic
          Rate       Maturity  Payment    Liens      of           amount of    amount of    Lien       County
                     Date      Terms                 Mortgage     Mortgage     Mortgage                Location
                                                     Investments  Investments  Investments
                                                     (original                 subject to
                                                     amount)                   Delinq.
                                                                               Principal
                                                                               or Interest
========= ========== ========= ========== ========== ============ ============ ============ ========== ===============
<CAPTION>

<S>         <C>      <C>        <C>            <C>    <C>          <C>            <C>       <C>        <C>         
Apts        11.500%  10/01/99   9,056.25       0.00   945,000.00   945,000.00     0.00      1st Mtg    San Mateo
Apts        11.000%  10/01/98  16,669.58       0.00  2,200,000.00 1,852,394.82    0.00      1st Mtg    San Mateo
Comm        11.000%  10/01/07   6,190.11       0.00   345,000.00   649,534.32     0.00      1st Mtg    San Francisco
Res         11.500%  04/01/99   9,993.00    210,000   561,750.00    85,665.19     0.00      2nd Mtg    San Francisco
Land        13.000%  10/01/00   5,200.00       0.00   480,000.00   480,000.00     0.00      1st Mtg    Solano
Res          8.000%  11/01/27   1,834.42       0.00   250,000.00   249,830.25     0.00      1st Mtg    San Mateo
Res         12.000%  05/01/99   2,278.15       0.00  2,400,000.00  710,068.11     0.00      1st Mtg    San Francisco
Res         12.000%  05/01/99   8,898.50       0.00  1,300,000.00  952,081.83     0.00      1st Mtg    Marin
Comm        12.000%  01/01/03   8,328.21       0.00  1,075,000.00  832,820.75     0.00      1st Mtg    Alameda
 Res        11.500%  01/01/00   6,612.50       0.00   690,000.00   690,000.00     0.00      1st Mtg    Alameda
                               ---------- ---------- ------------ ------------ ------------

Total                      $254,191.02  $24,224,566  $30,807,050.00 $25,304,989.35    $118,810.72
<FN>

Notes:

     None of the above Mortgage Investments is considered  impaired.  Therefore,
none of them has been written down. The allowance for doubtful accounts includes
$213,500  relating  to the  above  Mortgage  Investments  and  accrued  interest
receivable and advances related thereto.

     Amounts  reflected  in column G (carrying  amount of Mortgage  Investments)
represents both cost and the tax basis of the loans.
</FN>
</TABLE>
<PAGE>

<TABLE>


Schedule XII

Reconciliation of carrying amount (cost) of Mortgage Investments at close of periods

                                                             Year ended December 31,
                                            ----------------------------------------------------------

                                                 1997                  1996                 1995
                                            ---------------       ---------------      ---------------
<CAPTION>

<S>                                            <C>                   <C>                   <C>       
Balance at beginning of year                   $15,642,990           $12,047,252           $6,484,707
                                            ---------------       ---------------      ---------------
Additions during period:
  New Mortgage Investments                      19,941,336            13,148,944            7,133,221
  Other                                                  0                     0                    0
                                            ---------------       ---------------      ---------------
                  Total Additions               19,941,336            13,148,944            7,133,221
                                            ---------------       ---------------      ---------------


Deductions during period:
  Collections of principal                      10,279,337             9,019,190            1,508,190
  Foreclosures                                           0               534,016                    0
  Cost of Mortgage Investments sold                      0                     0                    0
  Amortization of Premium                                0                     0                    0
  Other                                                  0                     0               62,486
                                            ---------------       ---------------      ---------------
                  Total Deductions              10,279,337             9,553,206            1,570,676
                                            ---------------       ---------------      ---------------

Balance at close of year                       $25,304,989           $15,642,990          $12,047,252
                                            ===============       ===============      ===============
</TABLE>
<PAGE>

<TABLE>

SCHEDULE IX

                                                         SHORT TERM BORROWINGS
                                             REDWOOD MORTGAGE INVESTORS VIII - RULE 12-10



Column A                Column B         Column C            Column D              Column E            Column F
Category of Aggregate   Balance at End   Weighted Average    Maximum Amount        Average Amount      Weighted Average
Short-Term Borrowings   of Period        Interest Rate       Outstanding           Outstanding         Interest Rate
                                                                                                       during
                                                             During the Period     During the Period   the period
======================= ================ =================== ===================== =================== ===================
<CAPTION>


<S>                     <C>                    <C>                <C>                  <C>                   <C>  
Year-Ended 12/31/97     $5,640,000             9.05%              $6,000,000           $3,765,515            9.05%

</TABLE>



<PAGE>

            Item 9 - Changes in and Disagreements with Accountants on
                       Accounting and Financial Disclosure

     The  Partnership  has neither  changed its accountants nor does it have any
disagreement  on any matter of  accounting  principles,  practices  or financial
statement disclosures.

                                    Part III

          Item 10 - Directors and Executive Officers of the Registrant

     The Partnership has no Officers or Directors. Rather, the activities of the
Partnership  are managed by the three General  Partners of which two individuals
are D. Russell  Burwell and Michael R.  Burwell.  The third  General  Partner is
Gymno Corporation,  a California  corporation,  formed in 1986. The Burwells are
the two shareholders of Gymno Corporation, a California corporation, on an equal
(50-50) basis.

<PAGE>



Item 11 - Executive Compensation

COMPENSATION OF THE GENERAL PARTNERS AND AFFILIATES BY PARTNERSHIP

     As  indicated  above  in  Item  10,  the  Partnership  has no  officers  or
directors. The Partnership is managed by the General Partners. There are certain
fees and other items paid to management and related parties.

     A more  complete  description  of management  compensation  is found in the
Prospectus,  pages 6-7, under the section  Compensation of the General  Partners
and the Affiliates,  which is incorporated  by reference.  Such  compensation is
summarized below.

     The  following  compensation  has been  paid to the  General  Partners  and
Affiliates  for services  rendered  during the year ended December 31, 1997. All
such compensation is in compliance with the guidelines and limitations set forth
in the Prospectus.


Entity Receiving Compensation  Description of Compensation and Services   Amount
                                        Rendered
---------------------------------------------------- -------------------------


I. Redwood Mortgage.          Mortgage Servicing Fee for servicing
                              Mortgage Investments                     $189,692
                                  
General Partners &/or Affiliate  Asset Management Fee for
                                  managing assets                       $24,966

General Partners              1% interest in  profits                   $17,990
                                    
                              Less allocation of syndication costs        1,677
                                                                        $16,313

     II. FEES PAID BY BORROWERS ON MORTGAGE LOANS PLACED BY COMPANIES RELATED TO
THE GENERAL  PARTNERS  WITH THE  PARTNERSHIP  (EXPENSES OF BORROWERS  NOT OF THE
PARTNERSHIP)

Redwood Mortgage   Mortgage  Brokerage  Commissions  for services in
                   connection    with   the    review,    selection,
                   evaluation,  negotiation,  and  extension  of the
                   Mortgage  Investments  paid by the  borrowers and
                   not by the Partnership                              $837,399
                                     
Redwood Mortgage   Processing   and  Escrow  Fees  for  services  in
                   connection  with  notary,  document  preparation,
                   credit investigation,  and escrow fees payable by
                   the borrowers and not by the Partnership             $17,240
                                   

     III. IN ADDITION, THE GENERAL PARTNERS AND/OR RELATED COMPANIES PAY CERTAIN
EXPENSES ON BEHALF OF THE PARTNERSHIP FOR WHICH IT IS REIMBURSED AS NOTED IN THE
STATEMENT OF INCOME.                                                   $54,549
<PAGE>

Item 12 - Security Ownership of Certain Beneficial Owners and Management

     The General  Partners are to own a combined total of 1% of the  Partnership
including a 1% portion of income and losses.

Item 13 - Certain Relationships and Related Transactions

     Refer to footnote 3 of the notes to financial  statements in Part II item 8
which describes related party fees and data.

     Also refer to the Prospectus dated December 4, 1996,  (incorporated  herein
by reference) on pages 4-5  Compensation of General  Partners and Affiliates and
page 5 Conflicts of Interest.


                                     Part IV

Item 14 - Exhibits, Financial Statements and Schedules, and Reports on Form 8-K.

A.   Documents filed as part of this report are incorporated:

     1. In Part II, Item 8 under A - Financial Statements.

     2. The Financial Statement Schedules are listed in Part II -Item 8 under B 
         - Financial Statement Schedules.

<PAGE>

3.  Exhibits.

  Exhibit No.    Description of Exhibits
--------------   --------------------------

       3.1       Limited Partnership Agreement
       3.2       Form of Certificate of Limited Partnership Interest
       3.3       Certificate of Limited Partnership
      10.1       Escrow Agreement
      10.2       Servicing Agreement
      10.3       (a)  Form of Note secured by Deed of Trust for Construction 
                 Loans which provides for principal and interest payments.
                 (b)  Form of Note secured by Deed of Trust for Commercial and
                 Multi-Family loans which provides for principal and interest
                 payments
                 (c)  Form of Note secured by Deed of Trust for Commercial and
                  Multi-Family loans which provides for interest only payments
                 (d)  Form of Note secured by Deed of Trust for Single Family 
                  Residential Loans which provides for interest and principal
                   payments.
                  (e)  Form of Note secured by Deed of Trust for Single Family
                   Residential loans which provides for interest only payments.
      10.4        (a)  Deed of Trust, Assignment of Leases and Rents, Security 
                  Agreement and Fixture Filing to accompany Exhibits  10.3 (a),
                  and (c).
                  (b)  Deed of Trust, Assignment of Leases and Rents, Security
                  Agreement and Fixture Filing to accompany Exhibit 10.3 (b).
                  (c)  Deed of Trust, Assignment of Leases and Rents, Security
                   Agreement and Fixture Filing to accompany Exhibit 10.3 (c).
      10.5         Promissory Note for Formation Loan
      10.6         Agreement to Seek a Lender
      24.1         Consent of Parodi & Cropper
      24.2         Consent of Stephen C. Ryan & Associates

     All of these exhibits were previously filed as the exhibits to Registrants
Statement on Form S-11 (Registration No. 333-13113 and incorporated by reference
herein).


B.       Reports of Form 8-K.

         No reports on Form 8-K have been filed during the last quarter of the 
          period covered by this report.

C.       See A (3) above.

D.       See A (2) above. Additional reference is made to the prospectus (S-11 
         filed as part of the Registration Statement) to pages 94 through 97,
         revised Prospectus dated December 4, 1996, and Supplement No. 3 dated 
         November 26, 1997, for financial data related to Gymno Corporation, a
         General Partner.
<PAGE>

                                   SIGNATURES

     Pursuant  to the  requirements  of Section  13 or 15 (d) of the  Securities
Exchange Act of 1934 the  registrant has duly caused this report to be signed on
its behalf by the undersigned, thereto duly authorized on the 24th day of March,
1998.


REDWOOD MORTGAGE INVESTORS VIII


By:      /S/ D. Russell Burwell
         ---------------------------------------------
         D. Russell Burwell, General Partner


By:      /S/ Michael R. Burwell
         ---------------------------------------------
         Michael R. Burwell, General Partner


By:      Gymno Corporation, General Partner


         By:     /S/ D. Russell Burwell
                 ---------------------------------------------
                 D. Russell Burwell, President


         By:     /S/ Michael R. Burwell
                 ---------------------------------------------
                 Michael R. Burwell, Secretary/Treasurer


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacity indicated on the 24th day of March, 1998.


Signature                        Title                                Date


/S/ D. Russell Burwell
----------------------
D. Russell Burwell          General Partner                       March 24, 1998


/S/ Michael R. Burwell
-----------------------
Michael R. Burwell          General Partner                       March 24, 1998



/S/ D. Russell Burwell
-----------------------
D. Russell Burwell       President of Gymno Corporation,          March 24, 1998
                         (Principal Executive Officer);
                         Director of Gymno Corporation


/S/ Michael R. Burwell
----------------------
Michael R. Burwell        Secretary/Treasurer of Gymno            March 24, 1998
                         Corporation (Principal Financial
                         and Accounting Officer);
                         Director of Gymno Corporation

<PAGE>