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

                                December 31, 1998

                                     Part I

                                                                       Page No.
Item 1 - Business                                                            3
Item 2 - Properties                                                        4-5
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                                                     9-12
Item 8 - Financial Statements and Supplementary Data                      3-37
Item 9 - Changes in and Disagreements with Accountants on Accounting and  
Financial Disclosure                                                        38
                                    Part III

Item 10 - Directors and Executive Officers of the Registrant                38
Item 11 - Executive Compensation                                            39
Item 12 - Security Ownership of Certain Beneficial Owners and management    40
Item 13 - Certain Relationships and Related Transactions                    40

                                     Part IV

Item 14 - Exhibits, Financial Statement Schedules, and Reports 
on Form 8-K.                                                             40-41

Signatures                                                                  42

<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, 1998 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               XXXX                                  NO
--------------------------------                        -----------------------

     As of December 31, 1998,  the limited  partnership  units  purchased by non
affiliates was 255,901.349 units computed at $100.00 a unit for $25,590,134.90

Documents incorporated by reference:

     Portions of the  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
Mortgage  Corp.,  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,  1998,  the  Partnership  has
investments  in  Mortgage   Investments   with  principal   balances   totalling
$31,905,958.  Interest rates ranged from 8.00% to 14.00%.  Currently First Trust
Deeds comprise 70.05% of the total amount of the Mortgage Investment  portfolio,
an increase of 3.64% over 1997 level of 67.59%.  Junior loans (2nd and 3rd Trust
Deeds)   make  up   29.95%,   a   decrease   of  2.46%   over   1997   level  of
32.41%.Owner-occupied   homes,   combined  with  non-owner   occupied   Mortgage
Investments, total 47.77% of the Mortgage Investment portfolio. Loans secured by
multi-family  properties  make up  10.20%  of the  total  Mortgage  Investments.
Commercial  Mortgage  Investments,  now  comprise  42.03%  of the  portfolio,  a
decrease from 45.68% last year. 74.72% of the total Mortgage Investments, are in
six counties of the San  Francisco Bay Area.  The County of Stanislaus  makes up
18.87% of the Mortgage Investments.  Stanislaus County is a fringe County to the
San  Francisco  Bay Area.  In 1998 the  Partnership  received  many good lending
opportunities  from  this  County.  The  balance  of  Mortgage  Investments  are
primarily in Northern  California.  Mortgage Investment size increased this past
year, and is now averaging $580,108 per Mortgage Investment, up from $460,091 in
1997.  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, 1998, represents 2.14% of Limited Partners capital
and 1.82% of  outstanding  Mortgage  Investments,  similar to December  31, 1997
average Mortgage  Investment size of 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 40.50%,  a decrease  in equity of 3.67% 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  no
property in foreclosure as of the end of December, 1998.



<PAGE>








Item 2  Properties

     A summary of the Partnerships Mortgage Investment Portfolio as of December
31, 1998,  is set forth below.  Mortgage  Investments  as a Percentage  of Total
Mortgage Investments

First Trust Deeds                                               $22,349,185.44
Appraised Value of Properties                                    39,834,914.00
  Total Investment as a % of Appraisal                                  56.10%
First Trust Deeds                                                22,349,185.44
Second Trust Deed Mortgage Investments                            8,469,460.20
Third Trust Deed Mortgage Investments                             1,087,312.76
                                                              -----------------
                                                                 31,905,958.40
First Trust Deeds due other Lenders                              24,567,947.50
Second Trust Deeds due other Lenders                              1,843,148.00

Total Debt                                                      $58,317,053.90

  Appraised Property Value                                      $98,011,150.00
  Total Investments as a % of Appraisal                                 59.50%

Number of Mortgage Investments Outstanding                                  55

Average Investment                                                 $580,108.33
Average Investment as a % of Net Assets                                  2.14%
Largest Investment Outstanding                                    2,600,000.00
Largest Investment as a % of Net Assets                                  9.61%

Loans as a Percentage of Total Mortgage Investments

First Trust Deeds                                                       70.05%
Second Trust Deeds                                                      26.54%
Third Trust Deeds                                                        3.41%
                                                              -----------------
Total                                                                  100.00%

Mortgage Investments by
Type of Property                        Amount              Percent

Owner Occupied Homes                   $6,450,199.30            20.22%
Non-Owner Occupied Homes                8,789,444.65            27.55%
Apartments                              3,256,602.28            10.20%
Commercial                             13,409,712.17            42.03%
                                   ------------------      ------------

Total                                 $31,905,958.40           100.00%

<PAGE>

The following is a distribution of Mortgage  Investments  outstanding as of
December 31, 1998 by Counties.

County                                Total                     Percent
                              Mortgage Investments

San Francisco                         $10,418,398.60             32.65%
Stanislaus                              6,022,000.00             18.87%
San Mateo                               5,377,296.75             16.85%
Santa Clara                             3,372,148.70             10.57%
Alameda                                 2,437,266.64              7.64%
Marin                                   1,278,414.93              4.01%
San Joaquin                             1,188,750.02              3.73%
Contra Costa                              955,639.66              3.00%
Monterey                                  679,413.15              2.13%
Fresno                                    128,363.57              0.40%
Sacramento                                 48,266.38              0.15%
                             ------------------------        -----------

Total                                 $31,905,958.40            100.00%


Statement of Condition of Mortgage Investments
         Number of Mortgage Investments in Foreclosure        -0-

Scheduled  maturity  dates of mortgage  investments as of December 31, 1998
are as follows:

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

                            1999                              $11,815,481
                            2000                                9,576,318
                            2001                                5,540,542
                            2002                                1,515,906
                            2003                                1,336,291
                         Thereafter                             2,121,420
                                                            ===============
                                                              $31,905,958
                                                            ===============


     The  scheduled  maturities  for  1999  include  approximately  $265,376  in
Mortgage  Investments  which are past  maturity at December 31,  1998.  Interest
payment on only one of these loans was delinquent.

     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 commenced
a legal  action to collect  this debt.  A  settlement  was reached for this debt
collection.  As of  December  31,  1998,  $30,000  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 year 1999.

     As of  December  31,  1998,  the  Partnership  owned a vacant lot  acquired
through  the  foreclosure  of Mortgage  Investment.  The vacant lot is valued at
$66,000.  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  basis,  have  been  primarily  for
completion of the construction.
<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  December 31, 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.4 dated April 24, 1998.
<PAGE>



<TABLE>

Financial  condition and results of operation for the Partnership for three
years to December 31, 1998 were:
<CAPTION>

                                                             Balance Sheet
                                                                Assets

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

                                                               1998                1997                1996
                                              
                                                      --------------      --------------       -------------
<S>                                                        <C>                 <C>                 <C>     
Cash                                                       $528,688            $663,159            $664.434
Accounts Receivable:
   Mortgage Investments secured by Deeds of Trust        31,905,958          25,304,989          15,642,990
   Accrued interest and other fees                          459,418             341,976             196,530
   Advances on Mortgage Investments                         211,145             205,804               8,679
   Other receivables - Unsecured                             48,849              62,844              75,334
   Less allowance for losses                              (414,073)           (257,500)           (117,803)
Investment in Limited Liability Corporation                 304,139             251,139             191,139
Real estate owned, net                                       66,000              70,138              66,991
Organization cost net of amortization                             0               1,875               4,375
Prepaid Expenses                                             11,835              10,151              20,720
Due from General Partners/Related Companies                       0               2,999                 311

                                                      ==============       =============       =============
                                                       $33,121,959         $26,657,574         $16,753,700
                                                      ==============       =============       =============


                                                   Liabilities and Partners Capital

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

                                                               1998                1997                1996
                                                      --------------     ---------------       -------------
                                                                         
Liabilities:
Deferred interest                                          $124,805             $83,066            $217,480
Note payable - Bank                                       5,947,000           5,640,000           1,500,000
Accounts payable                                              2,500               3,355              20,625
Subscriptions to partnership in applicant status                  0                   0             310,937
                                                      --------------      --------------       -------------
                                                         $6,074,305          $5,726,421          $2,049,042
                                                      --------------      --------------       -------------

Partners Capital
  Limited partners subject to redemption                 27,025,331          20,914,721          14,693,293
  General Partners                                           22,323              16,432              11,365
                                                                          --------------       -------------
                                                      --------------
                                                         27,047,654         $20,931,153         $14,704,658
                                                      --------------
                                                                          --------------       -------------

                                                        $33,121,959         $26,657,574         $16,753,700
                                                      ==============      ==============       =============

</TABLE>
<PAGE>

<TABLE>

<CAPTION>
                                                                   Statement of Income


                                                                           December 31,
                                                      --------------------------------------------------------
                                                                     1998                1997            1996
                                                      --------------------     ---------------    ------------

<S>                                                            <C>                 <C>             <C>       
Gross Revenue                                                  $3,406,021          $2,629,457      $1,726,635
Expenses                                                        1,127,439             820,937         493,110
                                                            --------------     ---------------    ------------
Income before  interest  credited to Partners in applicant      2,278,582           1,808,520       1,233,525
status
Interest credited to Partners in applicant status                   4,454               9,562           2,618
                                                            --------------     ---------------    ------------

Net Income                                                     $2,274,128          $1,798,958      $1,230,907
                                                            ==============     ===============    ============

Net income to General Partners (1%)                               $22,741             $17,990         $12,309
                                                            ==============     ===============    ============

Net Income to Limited Partners (99%)                           $2,251,387          $1,780,968      $1,218,598
                                                            ==============     ===============    ============


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

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



<FN>
     Annualized yield for 1996 was 8.39%, 1997 was 8.40% and for 1998 was 8.40%.
An average  annualized  yield since  inception  through  December 31, 1998,  was
8.36%.
</FN>
</TABLE>
<PAGE>


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

     On December  31, 1998,  the  Partnership  was in the offering  stage of its
second offering, ($30,000,000). Contributed capital totalled $14,932,017 for the
first  offering  and  $10,658,118  for  the  second  offering  an  aggregate  of
$25,590,135  (Limited  Partners) as of December 31, 1998.  Of this amount,  none
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, 1998, the Partnerships  Mortgage  Investments  outstanding
totalled $31,905,958. 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, to  $25,304,989  in 1997, and to $31,905,958 to December 31, 1998, was the
additional  capital  admitted  to  the  Partnership   through  sale  of  Limited
Partnership  Units and  reinvestment of Limited  Partners  earnings.  Additional
Limited Partners Capital  contributions have totalled  $4,508,824,  $3,834,799,
$3,863,536,  $5,565,372  and  $5,100,458,  and the  reinvestment  of earnings by
Limited Partners who have elected to reinvest  earnings have totalled  $239,956,
$524,988,  $800,218,  $1,119,465 and $1,440,687 for the years ended December 31,
1994,  December 31, 1995, December 31, 1996, December 31, 1997, and December 31,
1998,  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, 1997,
and  1998  to  $480,110,  $1,031,029,   $1,718,208,  $2,613,008  and  $3,376,293
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, 1998,  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 Mortgage Investments will be originated at
these lower  interest  rates which could  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 1999 over the next 12 months. Based upon the rates payable
in  connection  with  the  existing  Mortgage   Investments,   the  current  and
anticipated  interest  rates to be charged by the  Partnership  and the  General
Partners experience,  the General Partners anticipate that the annualized yield
will range between eight & nine percent (8% - 9%).

     In 1995,  the  Partnership  established  a line of credit with a commercial
bank secured by its Mortgage  Investments  and since its inception has increased
the limit from $3,000,000 to $8,000,000.  For the years ended December 31, 1996,
and 1997,  and December 31, 1998,  interest on Note  Payable-Bank  was $188,638,
$340,633  and  $513,566  respectively.  For 1997,  and the twelve  months  ended
December  31,  1998,  the  increase in interest on notes  payable-Bank  has been
attributed to a higher overall credit facility  utilization.  As of December 31,
1998 the  Partnership  has borrowed  $5,947,000  at an interest  rate of prime +
1/2%. This facility could again 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, 1998,  the balance  remained at  $5,947,000  and in
accordance with the line of credit, the Partnership paid all accrued interest as
of that date.

<PAGE>


     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-one  years.
Mortgage servicing fees increased from $155,912 to $189,692, and to $295,052 for
the years ended December 31, 1996,  1997 and 1998.  The mortgage  servicing fees
increased  primarily  due to increase  in the  outstanding  Mortgage  Investment
portfolio.  Asset  Management  fees  increased  from $17,053 to $24,966,  and to
$31,651 for the years ended December 31, 1996, 1997 and 1998, respectively.  The
Asset  Management  fee increase  was due  primarily  to the  increased  Partners
capital which the General Partners are managing.  All other Partnership expenses
fluctuated within a narrow range commonly expected to occur, except for interest
on note payable bank which is discussed earlier in the Management Discussion and
Analysis  of  Financial   Condition   and  Results  of   Operations.   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.  Excess cash flow will be
invested in new Mortgage Investment opportunities when available, used to reduce
the Partnership credit line or in other Partnership business.

     The General Partners regularly review the Mortgage  Investments  portfolio,
examining the status of delinquencies,  the underlying collateral securing these
Mortgage  Investments,  borrowers payment records, etc. Data from the local real
estate  market and of the national and local  economy are  reviewed.  Based upon
this  information and other data,  loss reserves are increased or decreased.  In
1996, 1997, and 1998, the Partnership  made provisions for doubtful  accounts of
$55,383,  $139,804,  and $162,969  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, 1998,
of $414,073 is considered by the General Partners to be adequate. Because of the
number of  variables  involved,  the  magnitude  of the swings  possible and the
General  Partners  inability to control many of these factors actual results may
and do  sometimes  differ  significantly  from  estimates  made  by the  General
Partners.

     The December 1998 issue of Western  Economic  Developments,  published by
the  Federal  Reserve  Bank of San  Francisco,  said  the  following  about  the
California economy:

     The pace of  economic  growth in  California  was solid in recent  months,
despite continued contraction in some major industries. Total payroll employment
rose 3.2 percent on an annual basis in October and  November.  This is above the
average growth rate for the first eleven months of 1998, but it is below the 3.8
percent pace from last year.  Faced by declining export demand and rising import
competition,   durable   goods   manufacturers   cut   employment  in  November.
Manufacturers of computers and electronic components have been particularly hard
hit this year, and aerospace employment has contracted. However, the pace of job
creation has remained strong in sectors other than  manufacturing,  and this has
helped to lower the state unemployment rate to 5.7 percent in November.

     Californias  state and local  governments  have created new jobs at about a
2.5 percent annual pace this year, a pickup from prior years that is due in part
to improved fiscal  capacity.  About 21,000 of the 29,000 jobs created this year
were for educators at local schools.

     To the Partnership, the above evaluation of the California economy means an
increase in property values, job growth, personal income growth, etc., which all
translates  into  more  loan  activity,  which of  course,  is  healthy  for the
Partnerships 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,  1996,  December  31,  1997,  and  December  31,  1998,  the
Partnership made  distributions of earnings to Limited Partners after allocation
of  syndication  costs  of,  $418,380,   $495,480  and  $614,383   respectively.
Distribution  of Earnings to Limited  Partners  after  allocation of syndication
costs for the years ended December 31, 1996, December 31, 1997, and December 31,
1998,
<PAGE>

to Limited  Partners  capital  accounts  and not  withdrawn  was  $800,218,
$1,119,465 and $1,440,687  respectively.  As of December 31, 1996,  December 31,
1997,  and December 31, 1998,  Limited  Partners  electing to withdraw  earnings
represented 34%, 30% 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
for most of the  investors  has yet to expire,  as of December  31,  1998,  many
Limited  Partners  may  not  as yet  avail  themselves  of  this  provision  for
liquidation. Earnings and capital liquidations including early withdrawals since
inception, 1993 through December 31, 1998 were:
<TABLE>

                               1993        1994        1995        1996        1997        1998
                            ----------- ----------- ----------- ----------- ----------- -----------

<S>                            <C>        <C>         <C>         <C>         <C>         <C>     
Earnings Liquidation           $46,855    $165,814    $303,477    $418,380    $495,480    $614,383
Capital Liquidation                  0           0      $5,640    $146,755    $132,619    $257,344
                            ----------- ----------- ----------- ----------- ----------- -----------

Total                          $46,855    $165,814    $309,117    $565,135    $628,099    $871,727
                            =========== =========== =========== =========== =========== ===========
</TABLE>

     Additionally,  Limited  Partners  may  withdraw  over a period  of one year
subject to certain  limitations and penalties.  For the years ended December 31,
1996, December 31, 1997, and December 31, 1998, $146,755,  $132,619 and $244,213
respectively  were liquidated  subject to the 10% penalty for early  withdrawal.
This  represents  only  1.00%,  0.63% and 0.90% of the Limited  Partners  ending
capital for the years ended  December  31,  1996,  1997 and 1998,  respectively.
These  withdrawals  are within the normally  anticipated  range that the General
Partners would expect in their  experience in this and other  Partnerships.  The
General  Partners expect that a small  percentage of Limited Partners will elect
to liquidate  their capital  accounts over one year with a 10% early  withdrawal
penalty. In originally  conceiving the Partnership,  the General Partners wanted
to  provide  Limited  Partners  needing  their  capital  returned  a  degree  of
liquidity.  Generally,  Limited Partners electing to withdraw over one year need
to liquidate investment to raise cash. The trend the Partnership is experiencing
in  withdrawals  by Limited  Partners  electing a one year  liquidation  program
represents  a small  percentage  of Limited  Partner  capital as of December 31,
1996, December 31, 1997, and December 31, 1998, respectively, and is expected by
the General Partners to commonly occur at these levels.

     The Year 2000 will be a challenge for the entire world, with respect to the
conversion of existing computerized operations. The Partnership is completing an
assessment of Year 2000 hardware and software issues. This assessment is not yet
fully complete.  The Partnership  relies on Redwood Mortgage Corp., an affiliate
of the Partnership,  and third parties to provide loan and investor services and
other  computerized  functions,  effected by Year 2000 computerized  operations.
Major  services  provided  to  the  Partnership  by  these  companies  are  loan
servicing,  accounting  and  investor  services.  The  vendors  that  supply the
software for loan servicing  have already  confirmed  compliance  with Year 2000
issues.  Installation  of accounting  software that is Year 2000  compliant will
begin after the  1998-year  ends.
<PAGE>

     The  investor  servicing  software  Year  2000  compliance  is still  under
assessment.  Existing investor servicing software maintenance agreements provide
for  conversion  to  Year  2000   compliance  to  be  provided  by  the  vendor.
Additionally,  the  Partnership  has  contacted  several  vendors  that  provide
investor  services as a possible  alternative to continuing to provide investors
services in house.  It would appear that these service  providers  would be more
expensive  than the  current  in house  systems  but they do  provide  a back-up
alternative in the event of our own failure to fully convert.  Hardware utilized
by  Redwood   Mortgage   Corp.,   is  currently  being  tested  to  insure  that
modifications  necessary to be made prior to Year 2000 can be  accomplished.  At
this juncture, existing hardware appears to be substantially compliant with Year
2000 issues.

     The costs of updating  the various  software  systems  will be borne by the
various  companies  that supply the  Partnership  with services.  Therefore,  no
significant  capital outlays are  anticipated  and the Partnership  expects only
incidental costs of conversion for Year 2000 issues.

     The Partnership is in the business of making Mortgage  Investments  secured
by real estate. The most important factor in making the Mortgage  Investments is
the value of the real estate  security.  Year 2000 issues have some potential to
effect  industries  and  businesses  located  in the  marketplaces  in which the
Partnership places its Mortgage  Investments.  This would only have an affect on
the Partnership if Year 2000 issues cause a significant downturn in the northern
California economy. In fact, Silicon Valley is located in our marketplace. There
may be significant  increased  demand for Silicon Valley type services and goods
as companies make ready for the Year 2000 conversion.

     Although not fully developed, if all or any accounting,  loan servicing and
investor  services   conversions   should  fail,  the  size  and  scope  of  the
Partnerships  activities  are such that they  could be  handled  at an equal or
higher cost on a manual basis or outsourced to other  servicers  existing in the
industry,  while correcting systems problems and are likely to be temporarily in
nature.  While this would  entail some  initial set up costs,  these costs would
likely not be so significant as to have a material effect upon the  Partnership.
Shifting portions of daily operations to manual or outsourced systems may result
in time delays.  Time delays in providing  accurate  and  pertinent  information
could negatively affect customer relations and lead to the potential loss of new
loans and Limited Partner investments.

     The  foregoing  analysis  of  Year  2000  issues  includes  forward-looking
statements  and  predictions  about  possible  or  future  events,   results  of
operations  and  financial  condition.  As such,  this  analysis may prove to be
inaccurate  because of the assumptions made by the General Partner or the actual
development  of  future  events.  No  assurance  can be given  that any of these
forward-looking  statements and predictions  will ultimately prove to be correct
or even substantially correct.

     Various  other  risks and  uncertainties  could  also  affect the Year 2000
analysis  causing the effect on the Partnership to be more severe than discussed
above. The General  Partners Year 2000 compliance  testing cannot guarantee that
all computer  systems will function  without  error beyond the Year 2000.  Risks
also exist with respect to Year 2000 compliance by external parties who may have
no  relationship  to the  Partnership  or the General  Partners,  but who have a
significant  relationship with one or more third parties,  and may have a system
failure that adversely  affects the  Partnerships  ability to conduct  business.
While the General Partners are attempting to identify such external parties,  no
assurance can be given that it will be able to do so. Furthermore, third parties
with  direct  relationships  with  the  Partnership,  whose  systems  have  been
identified  as likely to be Year 2000  compliant,  may suffer a breakdown due to
unforeseen circumstances.  It is also possible that the information collected by
the General  Partners for these third parties  regarding  their  compliance with
Year  2000  issues  may be  incorrect.  Finally,  it  should  be noted  that the
foregoing  discussion of Year 2000 issues assumes that to the extent the General
Partners systems fail, whether because of unforeseen complications or because of
third parties failure, switching to manual operations will allow the Partnership
to continue to conduct its  business.  While the General  Partner  believes this
assumption to be reasonable,  if it is incorrect,  the Partnerships  results of
operations would likely be adversely affected.
<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, 1998, and December 31, 1997,
-  Statements of Income for the three years ended December 31, 1998.
-  Statements of Partners Capital for the three years ended December 31, 1998.
-  Statements of Cash Flows for the three years ended December 31, 1998.
-  Notes to Financial Statements - December 31, 1998.

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)
                              FINANCIAL STATEMENTS
                                DECEMBER 31, 1998
                         (With Auditors Report Thereon)
<PAGE>




                                PARODI & CROPPER
                          CERTIFIED PUBLIC ACCOUNTANTS
                       3658 Mount Diablo Blvd., Suite #205
                               Lafayette CA 94549
                                 (925) 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, 1998 and 1997 and the
statements of income,  changes in partners capital and cash flows for the three
years ended December 31, 1998. 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, 1998 and 1997,  and the results of its  operations  and
cash flows for the three years ended  December  31,  1998,  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/ Bruce Cropper
                                                           PARODI & CROPPER





Lafayette, California
March 3, 1999
<PAGE>

<TABLE>
<CAPTION>

                                                    REDWOOD MORTGAGE INVESTORS VIII
                                                  (A California Limited Partnership)
                                                            BALANCE SHEETS
                                                      DECEMBER 31, 1998 AND 1997


                                                                ASSETS

                                                                          1998                 1997
                                                                     ---------------      ---------------

<S>                                                                        <C>                  <C>     
Cash                                                                       $528,688             $663,159
                                                                     ---------------      ---------------

Accounts receivable:
  Mortgage Investments, secured by deeds of trust                        31,905,958           25,304,989
  Accrued Interest on Mortgage Investments                                  459,418              341,976
  Advances on Mortgage Investments                                          211,145              205,804
  Accounts receivables, unsecured                                            48,849               62,844
                                                                     ---------------      ---------------
                                                                         32,625,370           25,915,613

  Less allowance for doubtful accounts                                      414,073              257,500
                                                                     ---------------      ---------------
                                                                         32,211,297           25,658,113
                                                                     ---------------      ---------------

Real Estate owned, acquired through foreclosure,
 held for sale                                                               66,000               70,138
Investment in limited liability corporation, at cost which
  approximates market                                                       304,139              251,139
Organization costs, less accumulated amortization of $12,500
 and $10,625, respectively                                                        0                1,875
Due from related companies                                                        0                2,999
Prepaid expense-deferred loan fee                                            11,835               10,151
                                                                     ---------------      ---------------

                                                                        $33,121,959          $26,657,574
                                                                     ===============      ===============


<FN>

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

<TABLE>
<CAPTION>

                                                    REDWOOD MORTGAGE INVESTORS VIII
                                                  (A California Limited Partnership)
                                                            BALANCE SHEETS
                                                      DECEMBER 31, 1998 AND 1997


                                                   LIABILITIES AND PARTNERS CAPITAL

                                                                          1998                 1997
                                                                     ---------------      ---------------

Liabilities:
<S>                                                                          <C>                  <C>   
  Accounts payable and accrued expenses                                      $2,500               $3,355
  Note payable - bank line of credit                                      5,947,000            5,640,000
  Deferred interest income                                                  124,805               83,066
                                                                     ---------------      ---------------
                                                                          6,074,305            5,726,421
                                                                     ---------------      ---------------



Partners Capital:
     Limited partners capital, subject to redemption (note 4E):
          Net of unallocated syndication costs of $353,875 and
          $431,994 for 1998 and 1997, respectively:
          and formation loan receivable of $1,640,904 and
$1,386,693
          for 1998 and 1997, respectively                                27,025,331           20,914,721

     General Partners Capital, net of unallocated syndication
costs
          of $3,574 and $4,364 for 1998 and 1997, respectively               22,323               16,432
                                                                     ---------------      ---------------

                     Total Partners  Capital                             27,047,654           20,931,153
                                                                     ---------------      ---------------

                     Total Liabilities and Partners  Capital            $33,121,959          $26,657,574
                                                                     ===============      ===============

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

<TABLE>
<CAPTION>
                                                    REDWOOD MORTGAGE INVESTORS VIII
                                                  (A California Limited Partnership)
                                                         STATEMENTS OF INCOME
                                              FOR THE THREE YEARS ENDED DECEMBER 31, 1998


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

                                                                    1998              1997             1996
                                                                -------------     -------------    --------------
Revenues:
<S>                                                               <C>               <C>               <C>       
  Interest on Mortgage Investments                                $3,376,293        $2,613,008        $1,718,208
  Interest on bank deposits                                            8,946             9,487             4,083
  Late charges                                                        19,384             6,432             3,847
  Miscellaneous                                                        1,398               530               497
                                                                -------------     -------------    --------------
                                                                   3,406,021         2,629,457         1,726,635
                                                                -------------     -------------    --------------

Expenses:
  Mortgage servicing fees                                            295,052           189,692           155,912
  Interest on note payable - bank                                    513,566           340,633           188,638
  Amortization of loan origination fees                               11,415            16,819            11,999
  Provision for doubtful accounts and losses on real estate
    acquired through foreclosure                                     162,969           139,804            55,383
  Asset management fee - General Partner                              31,651            24,966            17,053
  Amortization of organization costs                                   1,875             2,500             2,500
  Clerical costs through Redwood Mortgage                             67,453            54,549            38,799
  Professional services                                               27,462            36,717            17,687
  Printing, supplies and postage                                       7,089             9,584             1,192
  Other                                                                8,907             5,673             3,947                
                                                                -------------     -------------    -------------- 
                                                                   1,127,439           820,937           493,110
                                                                -------------     -------------    --------------

Income before interest credited to partners in applicant           2,278,582         1,808,520         1,233,525
status

Interest credited to partners in applicant status                      4,454             9,562             2,618
                                                                -------------     -------------    --------------

Net Income                                                        $2,274,128         $1798,958        $1,230,907
                                                                =============     =============    ==============

Net income:  To General Partners(1%)                                 $22,741           $17,990           $12,309
                     To Limited Partners (99%)                     2,251,387         1,780,968         1,218,598
                                                                =============     =============    ==============
Total - net income                                                $2,274,128        $1,798,958        $1,230,907
                                                                =============     =============    ==============

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

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

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

                                                    REDWOOD MORTGAGE INVESTORS VIII
                                                  (A California Limited Partnership)
                                              STATEMENTS OF CHANGES IN PARTNERS CAPITAL
                                              FOR THE THREE YEARS ENDED DECEMBER 31, 1998

                                                                                  PARTNERS CAPITAL
                                                            --------------------------------------------------------------
                                                                              LIMITED PARTNERS CAPITAL
                                                            --------------------------------------------------------------

                                                              Capital
                                          Partners In         Account       Unallocated       Formation
                                           Applicant          Limited       Syndication         Loan
                                            Status           Partners          Costs         Receivable          Total
                                         --------------     ------------    ------------    --------------    ------------

<S>                                                 <C>     <C>              <C>               <C>            <C>        
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

Contributions on Application                 5,105,559                0               0                 0               0
Formation Loan increases                             0                0               0         (403,518)       (403,518)
Formation Loan payments                              0                0               0           133,580         133,580
Interest   credited   to   partners  in          4,454                0               0                 0               0
applicant status

Upon admission to Partnership:
    Interest withdrawn                         (1,553)                0               0                 0               0
    Transfers to Partners  capital         (5,108,460)        5,103,359               0                 0       5,103,359

Net Income                                           0        2,251,387               0                 0       2,251,387
Syndication costs incurred                           0                0       (126,453)                 0       (126,453)
Allocation of syndication costs                      0        (196,317)         196,317                 0               0
Partners  withdrawals                                0        (847,661)               0                 0       (847,661)
Early withdrawal penalties                           0         (24,066)           8,255            15,727            (84)
                                         --------------     ------------    ------------    --------------    ------------

Balances at December 31, 1998                       $0      $29,020,110      $(353,875)      $(1,640,904)     $27,025,331
                                         ==============     ============    ============    ==============    ============
<FN>
See accompanying notes to financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                                    REDWOOD MORTGAGE INVESTORS VIII
                                                  (A California Limited Partnership)
                                              STATEMENTS OF CHANGES IN PARTNERS CAPITAL
                                              FOR THE THREE YEARS ENDED DECEMBER 31, 1998

                                                                          PARTNERS CAPITAL
                                            ------------------------------------------------------------------------------
                                                            GENERAL PARTNERS CAPITAL
                                            ----------------------------------------------------------

                                                Capital           Unallocated                                  Total
                                                Account           Syndication             Total              Partners
                                                General              Costs                                    Capital
                                               Partners
                                            ----------------    -----------------    -----------------     ---------------

<S>                                                 <C>                 <C>                    <C>            <C>        
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

Contributions on Application                              0                    0                    0                   0
Formation Loan increases                                  0                    0                    0           (403,518)
Formation Loan payments                                   0                    0                    0             133,580
Interest   credited   to   partners  in                   0                    0                    0                   0
applicant status

Upon admission to partnership:
    Interest withdrawn                                    0                    0                    0                   0
    Transfers to Partners  capital                    5,101                    0                5,101           5,108,460

Net Income                                           22,741                    0               22,741           2,274,128
Syndication costs incurred                                0              (1,277)              (1,277)           (127,730)
Allocation of syndication costs                     (1,983)                1,983                    0                   0
Partners  withdrawals                              (20,758)                    0             (20,758)           (868,419)
Early withdrawal penalties                                0                   84                   84                   0
                                            ----------------    -----------------    -----------------     ---------------

Balances at December 31, 1998                       $25,897             $(3,574)              $22,323         $27,047,654
                                            ================    =================    =================     ===============
<FN>
See accompanying notes to financial statements
</FN>
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
                                                    REDWOOD MORTGAGE INVESTORS VIII
                                                  (A California Limited Partnership)
                                                       STATEMENTS OF CASH FLOWS
                                              FOR THE THREE YEARS ENDED DECEMBER 31, 1998

                                                                       1998               1997               1996
                                                                  ---------------     --------------     --------------
Cash flows from operating activities:
<S>                                                                   <C>                <C>                <C>       
  Net income                                                          $2,274,128         $1,798,958         $1,230,907
  Adjustments to reconcile net income to net cash provided by
       operating activities:
    Amortization of organization costs                                     1,875              2,500              2,500
    Provision for doubtful accounts.                                     156,573            139,804             78,651
    Provision for losses (gains) on real estate held for sale              6,396                  0           (23,268)
    Increase (decrease) in accounts payable                                (855)           (17,270)             16,615
    (Increase) in accrued interest & advances                          (122,783)          (342,571)           (83,477)
    (Increase) decrease in amount due from related companies               2,999            (2,688)              2,738
    (Increase) decrease in deferred loan fee                             (1,684)             10,569            (3,002)
    Increase (decrease ) in deferred interest income                      41,739          (134,414)            217,480
                                                                  ---------------     --------------     --------------

      Net cash provided by operating activities                        2,358,388          1,454,888          1,439,144
                                                                  ---------------     --------------     --------------

Cash flows from investing activities:

    Principal collected on Mortgage Investments                       14,262,838         10,279,337          9,019,190
    Mortgage Investments made                                       (20,863,807)       (19,941,336)       (13,148,944)
    Disposition of real estate held for sale                                   0                  0            299,154
    Additions to real estate held for sale                               (2,258)            (3,254)                  0
    Additions to Limited Liability Corporation                          (53,000)           (60,000)                  0
    Accounts receivables, unsecured - (disbursements) receipts            13,995             12,490            (4,018)
                                                                  ---------------     --------------     --------------

      Net cash used in investing activities                          (6,642,232)        (9,712,763)        (3,834,618)
                                                                  ---------------     --------------     --------------

Cash flows from financing activities

   Increase (decrease) in note payable-bank                              307,000          4,140,000          (410,000)
   Contributions by partner applicants                                 5,105,559          5,251,969          4,172,718
   Interest credited to partners in applicant status                       4,454              9,562              2,618
   Interest withdrawn by partners in applicant status                    (1,553)            (1,849)              (863)
   Partners withdrawals                                                (868,419)          (631,150)          (564,159)
   Syndication costs incurred                                          (127,730)          (190,421)          (214,689)
   Formation Loan increases                                            (403,518)          (420,510)          (314,996)
   Formation Loan collections                                            133,580             98,999              8,961
                                                                  ---------------     --------------     --------------

      Net cash provided by financing activities                        4,149,373          8,256,600          2,679,590
                                                                  ---------------     --------------     --------------

Net increase (decrease) in cash and cash equivalents                   (134,471)            (1,275)            284,116

Cash - beginning of period                                               663,159            664,434            380,318
                                                                  ---------------     --------------     --------------

Cash - end of period                                                    $528,688           $663,159           $664,434
                                                                  ===============     ==============     ==============

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


                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1998

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
Investments  secured  by  Deeds of Trust on  California  real  estate.  Mortgage
Investments  are being  arranged  and  serviced by Redwood  Mortgage  Corp.,  an
affiliate of the General Partners.  At December 31, 1998, the Partnership was in
the offering stage,  wherein contributed capital totalled $25,590,135 in limited
partner contributions of an approved aggregate offering of $45,000,000, in units
of $100 each (255,902).

     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
$839,413  at  December  31,  1998,  which  was  7.9%  of  the  limited  partners
contributions  of $10,658,118.  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>
<CAPTION>

                                                    REDWOOD MORTGAGE INVESTORS VIII
                                                  (A California Limited Partnership)
                                                     NOTES TO FINANCIAL STATEMENTS
                                                           DECEMBER 31, 1998

The following summarizes Formation Loan transactions to December 31, 1998:

                                               Initial              Subsequent
                                             Offering of           Offering of
<S>                                          <C>                   <C>                    <C>                          
                                             $15,000,000           $30,000,000             Total
                                            ---------------       ---------------      ---------------

Limited Partner contributions                  $14,932,017           $10,658,117          $25,590,134
                                            ===============       ===============      ===============

Formation Loan made                             $1,074,840               839,413            1,914,253
Payments to date                                 (198,316)              (43,223)            (241,539)
Early withdrawal penalties applied                (31,810)                     0             (31,810)

Balance December 31, 1998                         $844,714              $796,190           $1,640,904
                                            ===============       ===============      ===============

Percent loaned of Partners  contributions             7.2%                  7.9%                 7.5%
                                            ===============       ===============      ===============

     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, 1998,  organization  costs of $12,500 and syndication
costs of  $988,761  had been  incurred  by the  Partnership  with the  following
distribution:

                                                    Syndication
                                           Organization
<CAPTION>
                                                                    Costs            Total
                                           Costs
                                           -----------------     -------------    -------------
<S>                                                <C>                <C>          <C>       
Costs incurred                                     $988,761           $12,500      $1,001,261
Early withdrawal penalties applied                 (17,790)                 0         (17,190)
Allocated and amortized to date                   (613,522)          (12,500)        (626,022)
                                        -- ----------------- --- ------------- -- -------------

December 31, 1998 balance                          $357,449                 0         $357,449
                                        == ================= === ============= == =============
</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, 1998,  syndication costs  attributable to the subsequent
offering  ($30,000,000)  totalled $418,896,  (3.93% of contributions),  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, 1998

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, 1998,  1997, and 1996,  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  59.50%.  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, 1998,  there was one such
piece of property  with costs  totaling  $77,396  less a reduction of $11,396 to
arrive at the net fair value of $66,000.
<PAGE>


                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1998

     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 were amortized over a five year
period.  Syndication  costs are charged against  partners capital and are being
allocated to individual partners consistent with the partnership agreement.

I. Allowance for Doubtful Accounts 

     Mortgage  Investments and the related accrued interest,  fees, and advances
are  analyzed  on a  continuous  basis  for  recoverability.  Delinquencies  are
identified and followed as part of the Mortgage  Investment  system. A provision
is made for doubtful  accounts to adjust the allowance for doubtful  accounts to
an amount  considered by management to be adequate,  with due  consideration  to
collateral values, to provide for unrecoverable  accounts receivable,  including
impaired  Mortgage  Investments,   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, 1998, and 1997 was as follows:

                                                   December 31,
                                      -----------------------------------------
                                          1998                         1997
                                      ---------------          ---------------

Impaired mortgage investments                  $0                           $0
Unspecified mortgage investments          370,073                      213,500
Amounts receivable, unsecured              44,000                       44,000
                                      ---------------           ---------------
                                         $414,073                     $257,500
                                      ===============           ===============

<PAGE>


                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1998

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, are not an
expense of the  Partnership.  In 1998 and 1997,  Mortgage  Investment  brokerage
commissions paid by the borrowers were $604,836 and $837,399, respectively.

B. Mortgage Servicing Fees

     Monthly  mortgage  servicing  fees of up to 1/8 of 1% (1.5%  annual) of the
unpaid  principal,  is paid to Redwood  Mortgage,  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 $295,052,  $189,692 and $155,912
were incurred for years 1998, 1997 and 1996, 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 $31,651, $24,966 and $17,053 were
incurred for years 1998, 1997 and 1996, respectively.

D. Other Fees

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

E. Income and Losses

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

<PAGE>

                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1998

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, 1998 a General Partner,  GYMNO Corporation,
had  contributed  $25,588,  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,  1998,  1997 and 1996,  interest
totalling $4,454,  $9,562 and $2,618  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.

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.



<PAGE>



                           REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1998

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, 2000, of
up to $8,000,000 at .5% over prime secured by its Mortgage Investment portfolio.
The note payable  balances were  $5,947,000 and $5,640,000 at December 31, 1998,
and 1997,  respectively,  and the interest  rate was 8.25% at December 31, 1998,
(7.75% prime plus .50%).

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, and which will complete the
construction and sell the property.  The Partnership expects to realize a profit
from  the  venture.  

                                                                  
<PAGE>
                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1998

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>
<CAPTION>

                                                                          December 31,
                                                            ------------------------------------------
                                                                  1998                      1997
                                                            -----------------          ---------------

<S>                                                             <C>                      <C>        
Net Assets - Partners Capital per financial statements          $27,047,654              $20,931,153
Unamortized syndication costs                                        357,449                  436,358
Allowance for doubtful accounts                                      414,073                  257,500
Formation loans receivable                                         1,640,904                1,386,693
                                                            -----------------          ---------------
Net assets tax basis                                             $29,460,080              $23,011,704
                                                            =================          ===============
</TABLE>

     In 1998 and 1997, approximately 61% and 61% of taxable income was allocated
to tax exempt organizations, i.e., retirement plans, respectively. Such plans do
not have to file income tax returns  unless  their  unrelated  business  income
exceeds $1,000.  Applicable  amounts become taxable when distribution is made to
participants.

NOTE 9 - FAIR VALUE OF FINANCIAL INVESTMENTS

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

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

     (b)  The  carrying  value  of  mortgage   investments  (see  note  2(c)  is
$31,905,958.  The fair value of these  investments  of  $32,231,632 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>
<CAPTION>
                                                    REDWOOD MORTGAGE INVESTORS VIII
                                                  (A California Limited Partnership)
                                                     NOTES TO FINANCIAL STATEMENTS
                                                           DECEMBER 31, 1998

NOTE 10- ASSET CONCENTRATIONS AND CHARACTERISTICS

     The  Mortgage  Investments  are  secured  by  recorded  deeds of trust.  At
December  31,  1998,  there were 55 Mortgage  Investments  outstanding  with the
following characteristics:

Number of Mortgage Investments outstanding                                                                55
<S>                                                                                              <C>        
Total Mortgage Investments outstanding                                                           $31,905,958

Average Mortgage Investment outstanding                                                             $580,108
Average Mortgage Investment as percent of total                                                        1.82%
Average Mortgage Investment as percent of Partners Capital                                            2.14%

Largest Mortgage Investment outstanding                                                            2,600,000
Largest Mortgage Investment as percent of total                                                        8.15%
Largest Mortgage Investment as percent of Partners Capital                                            9.61%

Number of counties where security is located (all California)                                             11
Largest percentage of Mortgage Investments in one county                                              32.65%
Average Mortgage Investment to appraised value of security at time loan was consummated               59.50%

Number of Mortgage Investments in foreclosure status                                                     -0-
Amount of Mortgage Investments in foreclosure                                                            -0-

<FN>
The following categories of mortgage investments are pertinent at December 31, 1998 and 1997:
</FN>
</TABLE>
<TABLE>
<CAPTION>

                                                                          December 31,
                                                            -----------------------------------------
                                                                  1998                    1997
                                                            -----------------       -----------------

<S>                                                              <C>                     <C>        
First Trust Deeds                                                $22,349,185             $17,103,865
Second Trust Deeds                                                 8,469,460               8,163,624
Third Trust Deeds                                                  1,087,313                  37,500
                                                            -----------------       -----------------
  Total mortgage investments                                      31,905,958              25,304,989
Prior liens due other lenders                                     26,411,096              24,224,566
                                                            -----------------       -----------------
  Total debt                                                     $58,317,054             $49,529,555
                                                            =================       =================

Appraised property value at time of loan                         $98,011,150             $88,714,541
                                                            =================       =================

Total investments as a percent of appraisals                          59.50%                  55.83%
                                                            =================       =================

Investments by Type of Property

Owner occupied homes                                              $6,450,199              $2,445,423
Non-Owner occupied homes                                           8,789,445               5,318,722
Apartments                                                         3,256,602               5,982,649
Commercial                                                        13,409,712              11,558,195
                                                            -----------------       -----------------
                                                                 $31,905,958             $25,304,989
                                                            =================       =================
<FN>
The interest rates on the mortgage investments range from 8.00% to 14.00% at December 31, 1998.
</FN>
</TABLE>
<PAGE>

                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1998

     Scheduled  maturity  dates of mortgage  investments as of December 31, 1998
are as follows:

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

                            1999                                    $11,815,481
                            2000                                      9,576,318
                            2001                                      5,540,542
                            2002                                      1,515,906
                            2003                                      1,336,291
                         Thereafter                                   2,121,420
                                                                ===============
                                                                    $31,905,958
                                                                ===============


     The  scheduled  maturities  for  1999  include  approximately  $265,376  in
Mortgage  Investments  which are past  maturity at December 31,  1998.  Interest
payment on only one of these loans was delinquent.

     The cash  balance at December  31,  1998 of  $528,688  was in one bank with
interest  bearing  balances  totalling  $492,951.  The  balances  exceeded  FDIC
insurance  limits (up to $100,000 per bank) by  $428,688.  This bank is the same
financial  institution  that has provided the  Partnership  with the  $8,000,000
limit line of credit.  At December 31, 1998, draw down against this facility was
$5,947,000.  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>
<CAPTION>


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 12/31/97                          (1)            (2)           (1)            (2)
                                                                      Amounts        Amounts       Current      Not Current
                                                                     collected     written off             12/31/98

<S>                           <C>                    <C>             <C>             <C>              <C>        <C>       
Redwood Mortgage Corp.        $1,386,693             $403,518        $133,580        $15,727          0          $1,640,904
                              ------------- --------------------- ---------------- ------------- ------------- ---------------

Total                         $1,386,693               $403,518      $133,580        $15,727          0          $1,640,904
                              ============= ===================== ================ ============= ============= ===============
<FN>
     The above  schedule  represents  the  Formation  Loan  borrowed  by Redwood
Mortgage Corp. 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>
<CAPTION>
                                           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
                                                         (credited) to
                                     Costs & Expenses    Other accounts -
                                                         Describe

Year Ended
12/31/98

Deducted from
Asset accounts:

Allowance for
<S>                        <C>                 <C>                        <C>              <C>       <C>     
Doubtful accts             $257,500            $156,573                   0                0         $414,073

Cumulative
write-down of
Real Estate
held for sale
(REO)                        $5,000              $6,396                   0                0          $11,396

                   ================= =================== =================== ================ ================
Totals                     $262,500            $162,969                   0                0         $425,469
                   ================= =================== =================== ================ ================

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

<TABLE>
<CAPTION>

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 Liens    Face Amt. of    Carrying       Principal  Type of   Geographic
          Rate     Maturity  Payment                     Mortgage        amount of      amount     Lien      County
                   Date      Terms                       Investments     Mortgage       of                   Location
                                                         (original       Investments    Mortgage
                                                         amount)                        Investments
                                                                                        subject
                                                                                        to
                                                                                        Delinq.
                                                                                        Principal
                                                                                        or
                                                                                        Interest
========= ======== ========= ============ ============== =============== ============== ========== ========= =============

<S>         <C>    <C>   <C>    <C>          <C>             <C>            <C>              <C>    <C>          <C>        
Comm        13.75  11/01/99     2,044.77     156,750.00      175,500.00     167,868.51       0.00   2nd mtg       Alameda 
Comm        13.75  10/01/96       458.33           0.00       40,000.00      40,000.00       0.00   1st mtg   Santa Clara
Comm        12.00  09/01/03       848.61           0.00       82,500.00      80,397.94       0.00   1st mtg       Alameda
Comm        11.00  09/01/05       846.15     846,019.00       67,500.00      48,266.38       0.00   2nd mtg    Sacramento
Comm        12.00  11/01/98     2,057.23       5,635.00      200,000.00      35,656.54       0.00   2nd mtg San Francisco
Comm        10.00  12/01/98     1,689.33           0.00      192,500.00     189,719.44   8,446.65   1st mtg       Alameda
Comm        12.00  02/01/99     5,131.14           0.00      503,457.45     503,457.45       0.00   1st mtg   Santa Clara
Apts        11.00  11/01/99     1,980.58     713,917.00      200,000.00     196,026.80       0.00   2nd mtg   San Joaquin
Res         11.00  12/01/03     3,185.37   1,060,486.00      325,000.00     312,953.37       0.00   2nd mtg San Francisco
Res         11.00  04/01/99     4,999.70     775,649.00      525,000.00     514,203.86       0.00   2nd mtg  Contra Costa
Apts        11.00  04/01/05       330.09           0.00      400,000.00      33,333.33       0.00   1st mtg   San Joaquin
Comm        12.00  07/01/00     1,387.44           0.00      130,000.00     128,363.57       0.00   1st mtg        Fresno
Res         11.75  07/01/10       802.36      74,551.00       66,000.00      61,041.72       0.00   2nd mtg       Alameda
Apts        12.00  08/01/00     6,951.28   3,033,304.00      660,000.00     642,827.22       0.00   2nd mtg   San Joaquin
Comm        12.00  01/01/06     3,415.23           0.00      320,000.00     316,562.67       0.00   1st mtg   San Joaquin
Comm        11.75  02/01/99     1,018.34           0.00      104,000.00     103,935.80       0.00   1st mtg  Contra Costa
Comm        12.00  03/01/01       789.92           0.00       75,000.00      73,336.90       0.00   1st mtg     San Mateo
Comm        12.00  12/31/01    10,106.91   5,492,794.00      955,000.00   1,010,691.25       0.00   2nd mtg   Santa Clara
Res         11.00  04/01/06     1,039.81           0.00      105,000.00     103,234.28       0.00   1st mtg San Francisco
Comm        12.00  03/01/01       684.60      74,754.00       65,000.00      63,930.02       0.00   2nd mtg     San Mateo
Comm        12.00  02/01/99       186.00      46,800.00       18,000.00      18,000.00       0.00   2nd mtg   Santa Clara
Land        12.00  01/01/00    14,500.00     880,313.00    1,450,000.00   1,450,000.00  43,500.00   2nd mtg    Stanislaus
Comm        14.00  04/01/06    12,160.05           0.00      700,000.00     664,719.00       0.00   1st mtg San Francisco
Res         11.00  05/01/99       359.38   1,660,639.00       37,500.00      37,500.00       0.00   3rd mtg  Contra Costa
Comm        11.75  05/01/02     3,828.76           0.00      370,000.00     315,906.53       0.00   1st mtg     San Mateo
Res         12.00  06/01/99       500.00     262,342.00       50,000.00      50,000.00   1,000.00   2nd mtg       Alameda
Comm        12.00  07/01/02    10,500.00           0.00    1,350,000.00   1,050,000.00       0.00   1st mtg San Francisco
Res         11.00  07/01/00     1,787.50           0.00      195,000.00     195,000.00       0.00   1st mtg San Francisco
Res         12.00  01/01/99     6,726.86     350,000.00      712,500.00     679,413.15       0.00   2nd mtg      Monterey
Res         10.00  07/01/00     5,068.88           0.00      579,300.00     579,300.00       0.00   1st mtg San Francisco
Comm        12.00  10/01/02     1,562.50           0.00      150,000.00     150,000.00       0.00   1st mtg San Francisco
Res         11.00  04/01/99    11,661.04     579,300.00    1,320,000.00   1,229,459.90       0.00   2nd mtg San Francisco
Apts        11.00  10/01/99    18,944.44           0.00    2,200,000.00   2,000,000.00       0.00   1st mtg     San Mateo
Comm        11.00  10/01/07     6,190.11           0.00      650,000.00     646,554.51       0.00   1st mtg San Francisco
Res          8.00  11/01/27     1,834.42           0.00      250,000.00     247,707.97       0.00   1st mtg     San Mateo
Res         12.00  05/01/99    11,310.80           0.00    2,400,000.00   1,178,418.38       0.00   1st mtg San Francisco
Comm        12.00  01/01/03     9,736.79           0.00    1,075,000.00     942,939.03       0.00   1st mtg       Alameda
Res         11.00  01/01/00     9,361.09           0.00      945,300.00     945,300.00       0.00   1st mtg       Alameda
Land        11.00  09/01/99     3,354.17           0.00      350,000.00     350,000.00       0.00   1st mtg    Stanislaus
Res         11.00  05/01/00     3,226.67           0.00      352,000.00     352,000.00       0.00   1st mtg San Francisco
Res         12.00  04/01/00     8,940.00   1,500,000.00      894,000.00     894,000.00  17,880.00   3rd mtg         Marin
Comm        12.00  12/01/99     3,000.00   1,124,681.00      300,000.00     300,000.00       0.00   2nd mtg  Contra Costa
Land        11.00  12/01/00    10,273.34           0.00    1,072,000.00   1,072,000.00       0.00   1st mtg    Stanislaus
Land        11.00  07/01/99    11,720.99   3,143,154.00    1,515,000.00   1,237,406.63       0.00   2nd mtg San Francisco
Apts        12.00  08/01/99     3,771.25           0.00      390,000.00     384,414.93       0.00   1st mtg         Marin
Res         11.00  03/01/00     1,126.59   2,122,800.00      950,700.00     155,812.76       0.00   3rd mtg San Francisco
Res         12.00  09/01/01    12,778.56           0.00    1,137,500.00   1,242,583.71       0.00   1st mtg San Francisco
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

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 Liens    Face Amt. of    Carrying       Principal  Type of   Geographic
          Rate     Maturity  Payment                     Mortgage        amount of      amount     Lien      County
                   Date      Terms                       Investments     Mortgage       of                   Location
                                                         (original       Investments    Mortgage
                                                         amount)                        Investments
                                                                                        subject
                                                                                        to
                                                                                        Delinq.
                                                                                        Principal
                                                                                        or
                                                                                        Interest
========= ======== ========= ============ ============== =============== ============== ========== ========= =============

<S>         <C>    <C>   <C>   <C>                 <C>     <C>            <C>                <C>    <C>        <C>          
Res         11.00  10/01/01    22,916.66           0.00    2,500,000.00   2,500,000.00       0.00   1st mtg    Stanislaus
Res         11.00  05/01/00     8,720.83           0.00      910,000.00     910,000.00       0.00   1st mtg San Francisco
Res         11.00  06/01/00    11,068.75   1,320,000.00    1,155,000.00     185,565.98       0.00   2nd mtg San Francisco
Res         10.00  11/01/00     1,750.00     277,207.50      210,000.00      76,415.33       0.00   2nd mtg     San Mateo
Res         11.00  05/01/00     9,132.92     910,000.00      953,000.00     189,733.54       0.00   2nd mtg San Francisco
Comm        11.00  12/01/00    16,500.00           0.00    1,800,000.00   1,800,000.00       0.00   1st mtg   Santa Clara
Res         10.87  12/01/99    23,562.50           0.00    2,600,000.00   2,600,000.00       0.00   1st mtg     San Mateo
Comm        11.50  12/05/01     6,229.17           0.00      650,000.00     650,000.00       0.00   1st mtg    Stanislaus
                             ------------ -------------- --------------- --------------
                             $334,058.21  $26,411,095.50 $37,383,257.45  $31,905,958.40
<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
$370,073  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>
<CAPTION>

Schedule XII

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

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

                                                 1998                  1997                 1996
                                            ---------------       ---------------      ---------------

<S>                                            <C>                   <C>                  <C>        
Balance at beginning of year                   $25,304,989           $15,642,990          $12,047,252
                                            ---------------       ---------------      ---------------
Additions during period:
  New Mortgage Investments                      20,863,807            19,941,336           13,148,944
  Other                                                  0                     0                    0
                                            ---------------       ---------------      ---------------
                  Total Additions               20,863,807            19,941,336           13,148,944
                                            ---------------       ---------------      ---------------


Deductions during period:
  Collections of principal                      14,262,838            10,279,337            9,019,190
  Foreclosures                                           0                     0              534,016
  Cost of Mortgage Investments sold                      0                     0                    0
  Amortization of Premium                                0                     0                    0
  Other                                                  0                     0                    0
                                            ---------------       ---------------      ---------------
                  Total Deductions              14,262,838            10,279,337            9,553,206
                                            ---------------      ---------------       ---------------

Balance at close of year                       $31,905,958           $25,304,989          $15,642,990
                                            ===============       ===============      ===============
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

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
----------------------- ---------------- ------------------- --------------------- ------------------- -------------------


<S>                     <C>                    <C>                <C>                  <C>                   <C>  
Year-Ended 12/31/98     $5,947,000             8.92%              $6,547,000           $5,757,315            8.92%

</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, 1998. All
such compensation is in compliance with the guidelines and limitations set forth
in the Prospectus.
<TABLE>
<CAPTION>

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

I. Redwood Mortgage.                 Mortgage   Servicing   Fee   for   servicing
<S>                                                                                       <C>     
                                     Mortgage Investments ......................          $295,052
                   

General Partners &/or Affiliate      Asset Management Fee for managing assets              $31,651

General Partners                     1% interest in profits.....................           $22,741
 
                                     Less allocation of syndication costs........            1,983
                                                                                           $20,758
</TABLE>


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      $604,836

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                                       $13,813


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.                                                    $67,453

<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,  Supplement No. 3 dated November 26, 1997,and
Supplement  No. 4 dated  April 24,  1998 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,
1999.


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, 1999.


Signature                              Title                           Date


/S/ D. Russell Burwell
---------------------------------
D. Russell Burwell                 General Partner                March 24, 1999


/S/ Michael R. Burwell
---------------------------------
Michael R. Burwell                 General Partner                March 24, 1999



/S/ D. Russell Burwell
---------------------------------
D. Russell Burwell             President of Gymno Corp.,          March 24, 1999
                              (Principal Executive Officer);
                              Director of Gymno Corporation


/S/ Michael R. Burwell
---------------------------------
Michael R. Burwell            Secretary/Treasurer of Gymno        March 24, 1999
                            Corporation (Principal Financial
                                 and Accounting Officer);
                              Director of Gymno Corporation


<PAGE>