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

                                December 31, 2002


                                                Part I
<TABLE>

                                                                                                              Page No.

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

     Item 1   - Business                                                                                         3
     Item 2   - Properties                                                                                       7
     Item 3   - Legal Proceedings                                                                                7
     Item 4   - Submission of Matters to a Vote of Security Holders (Partners)                                   7

                                                Part II

     Item 5   - Market for the Registrant's "Limited Partnership Units" and Related Unitholder Matters           7
     Item 6   - Selected Consolidated Financial Data                                                             8
     Item 7   - Management's Discussion and Analysis of Financial Condition and Results of Operations           11
     Item 7a  - Quantitative and Qualitative Disclosures About Market Risk                                      18
     Item 8   - Consolidated Financial Statements and Supplementary Data                                        21
     Item 9   - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure            47

                                               Part III

     Item 10 - Directors and Executive Officers of the Registrant                                               47
     Item 11 - Executive Compensation                                                                           47
     Item 12 - Security Ownership of Certain Beneficial Owners and Management                                   48
     Item 13 - Certain Relationships and Related Transactions                                                   48
     Item 14 - Controls and Procedures                                                                          48

                                                Part IV

     Item 15 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K                                 49

     Signatures                                                                                                 50

     Certifications                                                                                             52

</TABLE>




                                       1
<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, 2002 Commission file number 333-83882
--------------------------------------------------------------------------------

                           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)

900 Veterans Blvd., Suite 500, Redwood City, CA             94063
--------------------------------------------------------------------------------
  (address of principal executive offices)                 (zip code)

Registrant's telephone number 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
--------------------------------------------------------------------------------
        None                                            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,  2002,  the limited  partnership  Units  purchased  by
non-affiliates was 88,660,947 Units aggregating $91,238,920.

Documents incorporated by reference:

     Portions of the Prospectus  effective  October 30, 2002, and post effective
Amendment  No. 2 dated  February 18,  2003,  containing  supplement  No. 1 dated
January 31, 2003, (the "Prospectus"), are incorporated in Parts II, III, and IV.
Exhibits  filed  as part of Form  S-11  Registration  Statement  #333-83882  are
incorporated by reference in part IV.




                                       2
<PAGE>



                                     Part I


Item 1 - Business

     Redwood  Mortgage  Investors VIII, a California  Limited  Partnership  (the
"Partnership"),  was  organized  in 1993 of  which  Michael  R.  Burwell,  Gymno
Corporation and Redwood Mortgage Corp.,  both California  Corporations,  are the
general  partners.  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. The Partnership's  objectives are to make
loans that will: (i) yield a high rate of return from mortgage lending; and (ii)
preserve and protect the Partnership's 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,  the Partnership  offered a minimum of $250,000 and a maximum of
$15,000,000 in Units,  of which  $14,932,017  were sold.  This initial  offering
closed on October 31, 1996.  Subsequently,  the  Partnership  commenced a second
offering of up to  $30,000,000  in Units  commencing  on December 4, 1996.  This
offering sold  $29,992,574 in Units and was closed on August 30, 2000. On August
31, 2000 the  Partnership  commenced its third  offering for another  30,000,000
Units  ($30,000,000).  This offering sold $29,998,622 in Units and was closed on
April 23, 2002.  On October 30, 2002 the  Partnership  commenced  its fourth and
current  offering of 50,000,000  Units  ($50,000,000).  As of December 31, 2002,
16,315,707 Units for $16,315,707 were sold in this fourth offering, bringing the
aggregate sale of Units to  $91,238,920.  Units in the fourth offering 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  Section of the
prospectus entitled "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,  2002,  the  Partnership  has
investments  in loans with principal  balances  totaling  $83,650,000.  Interest
rates ranged from 7.50% to 18.00%.  Currently  First Trust Deeds comprise 55.13%
of the total amount of the loan portfolio,  an increase of 3.21% over 2001 level
of 51.92%.  Junior loans (2nd and 3rd Trust Deeds) make up 44.87%, a decrease of
3.21% over 2001 level of 48.08%. Loans secured by owner-occupied homes, combined
with  loans  secured  by  non-owner  occupied  homes,  total  43.72% of the loan
portfolio.  Loans secured by multi-family  properties make up 7.86% of the total
loans.  Commercial  loans now comprise  48.42% of the portfolio,  an increase of
2.63% from last year. Of the total loans,  73.81% are in six counties of the San
Francisco  Bay Area,  16.56% are in counties  adjacent to the San  Francisco Bay
Area.  The balance of loans 9.63% are in other  counties  located in California.
Loan size  increased  this year,  and is now averaging  $1,195,000  per loan, up
$106,000 from the average loan balance of  $1,089,000 in 2001.  This increase is
due to the ability of the Partnership by virtue of its increasing size to invest
in larger loans.  The average loan as of December 31, 2002,  represents 1.25% of
limited partner capital and 1.43% of outstanding loans, compared to December 31,
2001 when  average loan size of 1.48% of limited  partners  capital and 1.32% of
outstanding  loans.  Some of the loans  are  fractionalized  between  affiliated
partnerships  with  objectives  similar to those of the  Partnership  to further
reduce risk.  Average  equity per loan  transaction,  which is our loan plus any
senior loans, divided by the property's  appraised value,  subtracted from 100%,
stood at 39.39%,  a decrease  in equity of 0.94% from the  previous  year.  This
average equity is considered conservative.  Generally, the more equity, the more
protection for the lender.  The general partners believe the Partnership's  loan
portfolio is in good  condition with six properties in foreclosure as of the end
of December 2002. Loan balances of these foreclosed  properties  represent 4.82%
of the loan portfolios.  Of these  foreclosures,  four have entered into workout
agreements, with the borrowers making regular monthly payments.

     Delinquencies  are discussed  under Item 7 -  Management's  Discussion  and
Analysis of Financial Condition and Results of Operations.

     During the year the  Partnership  acquired two pieces of real  estate,  one
through  foreclosure  and the other in lieu of  foreclosure.  To protect its own
assets  and reduce  liability,  the  Partnership  subsequently  transferred  the
property  to two newly  formed  LLCs.  One of the LLCs,  Russian  Hill  Property
Company,  is 100% owned by the  Partnership  and in the other,  Stockton  Street
Property Company,  the Partnership owns controlling  interest with an affiliate,
the other investor in the foreclosed  loan. The Partnership  intends to sell the
properties and dissolve the LLCs. The two LLCs are further discussed under Notes
to Consolidated Financial Statements (Note 5).

                                       3
<PAGE>


     The  Partnership's  net income  continued to take an upward trend.  The net
income increased from $4,287,000 in 2000 to $6,093,000 in 2001 and to $7,486,000
in 2002. This was made possible largely through investment of additional capital
derived from sale of Units and to some extent, through the use of line of credit
facility   investment  into  loans.  The  loan  portfolio  base  increased  from
$68,571,000 in 2000, to $82,790,000 in 2001, to $83,650,000 in 2002, an increase
of  22%.  During  December,  2002  the  Partnership  received  loan  payoffs  of
approximately $9,000,000,  which it was not able to replace with new loans until
2003.  Mortgage  interest  income  almost  doubled  from  $6,261,000  in 2000 to
$11,416,000  in  2002,  an  increase  of  82.34%.   During  the  year  2002  the
Partnership's  annualized  yield on compounding  accounts was 8.70% and 8.40% on
monthly distributing accounts.

Competition and General Economic Conditions.

     The Partnership's  major competitors in providing mortgage loans are banks,
savings and loan associations,  thrifts, conduit lenders,  mortgage brokers, and
other entities both larger and smaller than the Partnership.  The Partnership is
competitive  in large part  because the general  partners  generate all of their
loans.  The general partners have been in the business of making or investing in
mortgage  loans in Northern  California  since 1978 and have developed a quality
reputation and recognition within the field.

     Mortgage  interest rates have fallen during the last 18 to 24 months.  This
has been  partially  due to actions by the  Federal  Reserve  Bank to reduce the
discount rate on borrowings  charged to member banks, a slowing  economy and low
rates of inflation. Although the general trend for interest rates has been down,
many lenders have tightened  their credit and reduced their lending  exposure in
various  markets and  property  types.  This credit  tightening  from  competing
lenders  would  generally  provide  the  Partnership  with  additional   lending
opportunities at attractive interest rates.  However, as a result of the slowing
economy,  there are now  fewer  transactions  in the  marketplace,  which  could
potentially  reduce  the  number of lending  opportunities  to the  Partnership.
Continued  rate  reductions  by the Federal  Reserve  Bank, a continued  slowing
economy,  and a low  inflation  rate could have the effect of reducing  mortgage
yields in the  future.  Current  loans  with  relatively  high  yields  could be
replaced with loans with lower yields,  which in turn could reduce the net yield
paid to the limited partners.  In addition, if there is less demand by borrowers
for loans  and,  thus,  fewer  loans for the  Partnership  to invest in, it will
invest its excess cash,  including  proceeds from the offering of the Units,  in
shorter-term alternative investments yielding considerably less than the current
investment portfolio.



                                       4
<PAGE>



Loan Portfolio.

     A summary of the  Partnership's  Loan Portfolio as of December 31, 2002, is
set forth below (in thousands):

  Loans as a Percentage of Appraised Values

First Trust Deeds                                                       $46,117
Appraised Value of Properties                                            89,766
                                                                 --------------
      Total Investment as a % of Appraisal                               51.37%
                                                                 ==============

First Trust Deed Loans                                                   46,117
Second Trust Deed Loans                                                  30,930
Third Trust Deed Loans                                                    6,603
                                                                 --------------
      Total of Trust Deed Loans                                          83,650

Priority Positions due other Lenders:
   First Trust Deed Loans due other Lenders                              72,335
   Second Trust Deed Loans due other Lenders                              7,511
                                                                 --------------

      Total Debt                                                       $163,496
                                                                 ==============

  Appraised Property Value at Time of Loan                              269,773
      Total Debt as a % of Appraisal                                     60.61%
                                                                 ==============

Number of Loans Outstanding                                                  70

Average Loan                                                             $1,195
Average Loan as a % of Loans Outstanding                                  1.43%
Largest Loan Outstanding                                                  4,943
Largest Loan as a % of Loans Outstanding                                  5.91%

Loans as a Percentage of Total Loans                                 Percent
-----------------------------------------------                  --------------
First Trust Deed Loans                                                   55.13%
Second Trust Deed Loans                                                  36.98%
Third Trust Deed Loans                                                    7.89%
                                                                 --------------
Total Trust Deed Loan Percentage                                        100.00%
                                                                 ==============

Type of Loans by Property                             Amount          Percent
-----------------------------------------------    -------------  -------------
Owner Occupied Homes                                     $12,854         15.37%
Non-Owner Occupied Homes                                  23,720         28.35%
Apartments                                                 6,572          7.86%
Commercial                                                40,504         48.42%
                                                   -------------  -------------
Total                                                    $83,650        100.00%
                                                   =============  =============




                                       5
<PAGE>



     The following is a  distribution  of loans  outstanding  as of December 31,
2002 by Counties (in thousands):

      County                             Total Loans          Percent
      -----------------------------     --------------    ---------------
      San Francisco                           $22,767             27.22%
      Santa Clara                              18,427             22.03%
      San Mateo                                13,242             15.83%
      Napa                                      8,131              9.72%
      Stanislaus                                5,475              6.54%
      Los Angeles                               4,495              5.37%
      Alameda                                   3,862              4.62%
      Marin                                     3,139              3.75%
      Riverside                                 1,500              1.79%
      El Dorado                                   900              1.08%
      Lake                                        708              0.85%
      Contra Costa                                304              0.36%
      San Diego                                   270              0.32%
      Sonoma                                      250              0.30%
      Merced                                      180              0.22%
                                        --------------    ---------------
      Total                                   $83,650            100.00%
                                        ==============    ===============

Statement of Condition of Loans
         Number of Loans in Foreclosure                       6


     Scheduled  maturity  dates of loans as of December  31, 2002 are as follows
(in thousands):

                   Year Ending
                  December 31,
                ------------------
                      2003                   $44,101
                      2004                    12,912
                      2005                    11,879
                      2006                     1,723
                      2007                     8,198
                   Thereafter                  4,837
                                       --------------
                                             $83,650
                                       ==============

     The  scheduled   maturities   for  2003  include   fifteen  loans  totaling
$18,765,000, and representing 22.43% of the portfolio, past maturity at December
31,  2002.  Two of these  totaling  $7,000,000  were paid off in February  2003.
Several other  borrowers are in process of selling the properties or refinancing
their loans through other institutions, as this is an opportune time for them to
do so and take  advantage of the lower interest  rate.  The  Partnership  allows
borrowers to  occasionally  continue to make the payments on debt past  maturity
for periods of time. Interest payments on twelve of these loans were delinquent.
These   delinquencies   were  not  considered  serious  enough  to  warrant  the
commencement of foreclosure action.




                                       6
<PAGE>



Item 2 - Properties

     During 2002, the  Partnership  acquired the real estate  security on two of
its  loans.  In each  instance,  in order to reduce  potential  liabilities  the
Partnership  subsequently  transferred  the  acquired  real  estate to two newly
formed LLCs. One property was transferred to Stockton  Street Property  Company,
LLC. This property acquired through  foreclosure is comprised of six condominium
units.  In order to sell these units,  the  Partnership was required to obtain a
"White Report" from the  Department of Real Estate.  That report was obtained in
February, 2003. Two of the condominiums were listed for sale in March, 2003. One
of the six  units  will  require  renovations  estimated  to cost  approximately
$230,000 and that work is  currently  commenced.  The  remaining 4 units will be
placed  for sale later in the year.  The  general  partners  have  examined  the
property  with real estate  professionals,  reviewed the appraisal and concluded
that the  property,  upon sale,  appears  adequate  to cover the sums due to the
Partnership.  The  Partnership's  net investment in the Stockton Street Property
Company, LLC at December 31, 2002 was $2,378,000, net of the Partnership's share
of senior debt.

     The other property was transferred to Russian Hill Property  Company,  LLC.
The real estate was held off the market so as to avoid  becoming  "stale" during
the winter of 2002.  The general  partners  anticipate  placing the property for
sale during 2003. The  Partnership's net investment in the Russian Hill Property
Company, LLC was $3,913,000 net of a valuation allowance of $500,000.


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,  or 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  Registrant's  "Limited  Partnership  Units"  and
Related Unitholder Partnership Matters

     50,000,000 Units at $1 each (minimum purchase of 2,000 Units) are currently
being offered  ($75,000,000 in Units were previously  offered and sold through a
series  of  offerings)  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.  As of December 31, 2002,  2006 limited
partners  held  88,660,947  Units  of  limited   partnership   interest  in  the
Partnership.

     A  description  of  the  Partnership  Units,   transfer   restrictions  and
withdrawal  provisions  is  more  fully  described  under  the  section  of  the
prospectus  entitled  "Description of Units" and "Summary of Limited Partnership
Agreement",  pages 72 through  74 of the  prospectus,  a part of the  referenced
registration statement, which is incorporated by reference.




                                       7
<PAGE>




     Item 6 - Selected Consolidated Financial Data

     Redwood Mortgage Investors VIII began operations in April 1993.

     Financial  condition and results of operation for the Partnership as of and
for the five  years  ended  December  31,  2002 were (in  thousands,  except for
limited partner amounts):

                                 Balance Sheets
                                     Assets
<TABLE>

                                                                          December 31,
                                          ------------------------------------------------------------------------------
                                             2002             2001            2000             1999            1998
                                          ------------     ------------    ------------     ------------    ------------
<S>                                            <C>              <C>             <C>              <C>              <C>
Cash                                           $7,188           $1,917          $1,460           $1,603           $ 529

Loans
   Loans secured by deeds of trust             83,650           82,790          68,571           35,693          31,906

   Loans, unsecured                                 -                4              54               49              49

   Accrued interest and late fees               3,913            3,345           1,039              712             459

   Advances on loans                              279              195             172               33             211

   Less allowance for losses                  (3,021)          (2,247)         (1,345)            (834)           (414)

Other receivables                                 888                -               -                -               -

Investment in LLC                               9,286                -               -              373             304
Real estate owned  (REO), net                       -                -               -                -              66
Prepaid expenses and other assets                  22                6              13                6              12
                                          ------------     ------------    ------------     ------------    ------------
                                             $102,205          $86,010         $69,964          $37,635         $33,122
                                          ============     ============    ============     ============    ============
</TABLE>




                                       8
<PAGE>



                        Liabilities and Partners Capital
<TABLE>

                                                                          December 31,
                                          ------------------------------------------------------------------------------
                                             2002             2001            2000             1999            1998
                                          ------------     ------------    ------------     ------------    ------------
Liabilities

<S>                                            <C>              <C>             <C>              <C>              <C>
   Accounts payable                            $  449           $   74          $   30           $   29           $   3
   Payable to affiliate                           294              109               -                -               -

   Note payable  - bank                             -           11,400          16,400                -           5,947
                 - other                        1,782                -               -                -               -
   Deferred interest                              112                -              82              214             125
   Minority interest                            1,213                -               -                -               -
   Subscriptions to Partnership in
     applicant status                           2,578              673             225              330               -
                                          ------------     ------------    ------------     ------------    ------------
                                                6,428           12,256          16,737              573           6,075
                                          ------------     ------------    ------------     ------------    ------------

Partners' capital
  Limited partners subject to
       redemption                              95,690           73,687          53,180           37,030          27,025
  General partners subject to
       redemption                                  87               67              47               32              22
                                          ------------     ------------    ------------     ------------    ------------
       Total partners' capital                 95,777           73,754          53,227           37,062          27,047
                                          ------------     ------------    ------------     ------------    ------------

                                             $102,205         $ 86,010        $ 69,964         $ 37,635        $ 33,122
                                          ============     ============    ============     ============    ============
</TABLE>




                                       9
<PAGE>


<TABLE>


                              Statements of Income

                                                                          December 31,
                                          ------------------------------------------------------------------------------
                                             2002             2001            2000             1999            1998
                                          ------------     ------------    ------------     ------------    ------------
<S>                                           <C>               <C>             <C>              <C>             <C>
Gross revenue                                 $11,537           $9,035          $6,349           $4,426          $3,406
Expenses                                        4,050            2,941           2,056            1,482           1,127
                                          ------------     ------------    ------------     ------------    ------------
Income before interest credited to
     partners in applicant status               7,487            6,094           4,292            2,944           2,279
Interest credited to partners in
     applicant status                               1                1               5                2               5
                                          ------------
                                                           ------------    ------------     ------------    ------------

Net income                                    $ 7,486           $6,093          $4,287           $2,942          $2,274
                                          ============     ============    ============     ============    ============

Net income to general partners (1%)                75               61              43               29              23
Net income to limited partners (99%)            7,411            6,032           4,244            2,913           2,251
                                          ------------     ------------    ------------     ------------    ------------

Total net income                              $ 7,486           $6,093          $4,287           $2,942          $2,274
                                          ============     ============    ============     ============    ============

Net income per $1,000 invested by
   limited partners for entire period
   (annualized)
        - where income is compounded
               and retained                       $87              $90             $86              $84             $84
                                          ============     ============    ============     ============    ============

        - where partner receives income
               in monthly distributions           $84              $86             $83              $81             $81
                                          ============     ============    ============     ============    ============
</TABLE>

     The annualized  yield,  when income is compounded and retained for 1999 was
8.42%, for 2000 was 8.58%, for 2001 it was 8.98%, and for 2002 it was 8.69%. Our
average annualized yield, when income is compounded and retained, from inception
through December 31, 2002, was 8.44%.




                                       10
<PAGE>



     Item 7 - Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations


 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OF THE PARTNERSHIP

Critical Accounting Policies.

     In  preparing  the  financial  statements,  management  is required to make
estimates based on the information available that affect the reported amounts of
assets and  liabilities  as of the balance  sheet date.  Such  estimates  relate
principally to the  determination of (1) the allowance for loan losses (i.e. the
amount of  allowance  established  against  loans  receivable  as an estimate of
potential  loan losses)  including  the accrued  interest and advances  that are
estimated to be unrecoverable based on estimates of amounts to be collected plus
estimates of the value of the property as  collateral  and (2) the  valuation of
real estate acquired through  foreclosure.  At December 31, 2002, there were two
real estate properties acquired.

     Loans and the related accrued interest, late fees and advances are analyzed
on a continuous  basis for  recoverability.  Delinquencies  are  identified  and
followed as part of the loan system.  Delinquencies  are  determined  based upon
contractual  terms.  A provision is made for loan losses to adjust the allowance
for loan losses to an amount  considered by management to be adequate,  with due
consideration  to  collateral  values,  to provide for  unrecoverable  loans and
receivables,  including impaired loans, other loans, accrued interest, late fees
and advances on loans and other accounts receivable (unsecured). The Partnership
charges  off  uncollectible  loans  and  related  receivables  directly  to  the
allowance account once it is determined that the full amount is not collectible.

     Statement of Financial  Accounting  Standards Nos. 114 and 118 provide that
if the probable  ultimate  recovery of the carrying  amount of a loan,  with due
consideration  for the fair  value  of  collateral,  is less  than  amounts  due
according to the  contractual  terms of the loan  agreement and the shortfall in
the amounts due are not  insignificant,  the carrying  amount of the  investment
shall be reduced to the  present  value of future cash flows  discounted  at the
loan's effective interest rate. If a loan is collateral dependent,  it is valued
at the estimated fair value of the related collateral.

     If events and/or changes in circumstances  cause management to have serious
doubts  about the  collectibility  of the  contractual  payments,  a loan may be
categorized  as impaired  and  interest  is no longer  accrued.  Any  subsequent
payments on impaired loans are applied to reduce the outstanding  loan balances,
including accrued interest and advances.

     Recent  trends in the  economy  have been taken into  consideration  in the
aforementioned  process of arriving at the  allowance  for loan  losses.  Actual
results could vary from the aforementioned provisions for losses.

Forward Looking Statements.

     Some of the  information  in the Form  10-K  may  contain  forward  looking
statements.  Uses of words  such as  "will",  "may",  "anticipate",  "estimate",
"continue"  or other forward  looking  words,  discuss  future  expectations  or
predictions.  The foregoing analysis of 2002 includes forward looking statements
and  predictions  about the possible  future  events,  results of operations and
financial  condition.  As such, this analysis may prove to be inaccurate because
of  assumptions  made by the general  partners or the actual  development of the
future  events.  No  assurance  can be given  that any of  these  statements  or
predictions will ultimately prove to be correct or substantially correct.

Related Parties.

     The general partners of the Partnership are Redwood  Mortgage Corp.,  Gymno
Corporation  and Michael R.  Burwell.  Most  Partnership  business is  conducted
through Redwood Mortgage Corp., which arranges,  services and maintains the loan
portfolio for the benefit of the  Partnership.  The fees received by the general
partners are paid pursuant to the  partnership  agreement and are  determined at
the sole discretion of the general partner.  In the past the general partner has
elected not to take the maximum compensation. The following is a list of various
Partnership activities for which related parties are compensated.





                                       11
<PAGE>




     o Mortgage  Brokerage  Commissions  For fees in connection with the review,
selection,  evaluation,  negotiation and extension of loans, the Partnership may
collect an amount  equivalent  to 12% of the loaned  amount until 6 months after
the termination date of the offering. Thereafter, the loan brokerage commissions
(points) will be limited to an amount not to exceed 4% of the total  Partnership
assets per year. The loan brokerage  commissions are paid by the borrowers,  and
thus,  are not an  expense  of the  Partnership.  In 2000,  2001 and 2002,  loan
brokerage  commissions  paid by the borrowers  were  $1,873,000,  $1,155,000 and
$996,000, respectively.

     o Mortgage  Servicing Fees Monthly mortgage  servicing fees of up to 1/8 of
1% (1.5% on an annual basis) of the unpaid principal of the Partnership's  loans
are paid to Redwood  Mortgage  Corp., or such lesser amount as is reasonable and
customary in the  geographic  area where the  property  securing the mortgage is
located.  Mortgage  servicing  fees of $506,000,  $552,000 and  $1,098,000  were
incurred for the years ended December 31, 2000, 2001 and 2002, respectively.

     o Asset  Management  Fees The general  partners  receive  monthly  fees for
managing the Partnership's portfolio and operations up to 1/32 of 1% of the `net
asset  value'  (3/8 of 1% on an annual  basis).  Management  fees to the general
partners of $61,000,  $158,000 and $325,000 were incurred by the Partnership for
years 2000, 2001 and 2002, respectively.

     o Other Fees The partnership  agreement  provides that the general partners
may receive other fees such as  reconveyance,  mortgage  assumption and mortgage
extension  fees.  Such fees are  incurred by the  borrowers  and are paid to the
general partners.

     o Income and Losses  All  income  and  losses  are  credited  or charged to
partners in relation to their respective partnership  interests.  The allocation
to the general partners (combined) shall be a total of 1%.

     o  Operating  Expenses  The  general  partners  may  be  reimbursed  by the
Partnership for all operating  expenses actually incurred by it on behalf of the
Partnership,   including   without   limitation,   out-of-pocket   general   and
administration  expenses of the  Partnership,  accounting and audit fees,  legal
fees and expenses, postage and preparation of reports to limited partners.

     o  Contributed  Capital  The  general  partners  jointly or  severally  are
required to  contribute  1/10 of 1% in cash  contributions  as proceeds from the
offerings  are received from the limited  partners.  As of December 31, 2001 and
2002, a general partner, Gymno Corporation, had contributed $70,000 and $91,000,
respectively,  as capital in accordance  with Section 4.02(a) of the partnership
agreement.

     o Sales  Commission  - "Formation  Loan" to Redwood  Mortgage  Corp.  Sales
commissions  relating to the capital  contributions  by limited partners are not
paid directly by the  Partnership  out of the offering  proceeds.  Instead,  the
Partnership  loans  to  Redwood  Mortgage  Corp.,  a  general  partner,  amounts
necessary to pay all sales  commissions  and amounts  payable in connection with
unsolicited  sales.  The loan is  referred  to as the  "Formation  Loan".  It is
unsecured and  non-interest  bearing and is applied to reduce  limited  partners
capital in the consolidated  balance sheets. The sales commissions range between
0 (for Units sold by the  general  partners)  and 9%. It is  estimated  that the
total amount of the Formation Loan will approximate 7.6% based on the assumption
that 65% of the investors will reinvest  earnings,  which qualify for the higher
commission percentage.  Formation Loans made to Redwood Mortgage Corp. were on a
per offering basis.

     The following table summarizes Formation Loan transactions through December
31, 2002 (in thousands):
<TABLE>

                                        1st Offering     2nd Offering      3rd Offering      4th Offering         Total
                                        -------------    --------------    -------------     -------------     ------------
<S>   <C>                                   <C>              <C>              <C>               <C>               <C>
      Limited partner contributions         $ 14,932         $  29,993        $  29,999         $  16,316         $ 91,239
                                        =============    ==============    =============     =============     ============
      Formation Loans made                     1,075             2,272            2,218             1,300            6,865
      Payments to date                         (595)             (661)            (211)                 -          (1,467)
      Early withdrawal penalties
          applied                               (50)              (63)             (28)                 -            (141)
                                        -------------    --------------    -------------     -------------     ------------

      Balance December 31, 2002              $   430          $  1,548         $  1,979          $  1,300         $  5,257
                                        =============    ==============    =============     =============     ============
</TABLE>


                                       12
<PAGE>


     The amount of the annual  installments  paid by Redwood  Mortgage Corp. are
determined at annual  installment  of one-tenth of the principal  balance of the
Formation Loan at December 31 of each year until the offering  period is closed.
Thereafter,  the  remaining  Formation  Loan  is paid  in ten  equal  amortizing
payments over a period of ten years.

     On December  31, 2002,  the  Partnership  was in the offering  stage of its
fourth offering, ($50,000,000).  Contributed capital equaled $14,932,017 for the
first offering,  $29,992,574 for the second offering,  $29,998,622 for the third
offering,  and  $16,315,707  for the fourth  offering,  totaling an aggregate of
$91,238,920  as of December 31, 2002.  Of this  amount,  $2,577,973  remained in
applicant status.

Results of Operations - For the years ended December 31, 2000, 2001, and 2002.

     The net income increase of $1,345,000 (46%) for the year ended December 31,
2000, was primarily  attributable  to an increase in interest earned on loans of
$1,924,000,  an increase in late fees of $38,000,  a decrease in  provision  for
loan losses and real estate acquired through  foreclosure of $33,000;  offset by
expense  increases  due primarily to the increased  size of the  Partnership  of
$147,000 for mortgage  servicing fees,  $361,000 for interest on line of credit,
$29,000 for clerical costs through  Redwood  Mortgage  Corp.,  $19,000 for asset
management  fees,  and $32,000 for  professional  fees for 2000.  The net income
increase  of  $1,806,000  (42%) for the year  ended  December  31,  2001 was due
primarily to an increase in interest earned on loans of $2,659,000,  an increase
in late fees of $33,000, and a decrease in professional fees of $51,000;  offset
by expense increases due primarily to the increased size of the Partnership loan
of $46,000 for mortgage servicing fees,  $85,000 for interest expense,  $596,000
for  provisions  for losses on loans,  $97,000 for asset  management  fees,  and
$127,000 for clerical cost from Redwood  Mortgage Corp. The net income  increase
of $1,393,354 (23%) for the year ended December 31, 2002 was due primarily to an
increase in interest earned on loans of $2,496,000,  an increase in late fees of
$15,000, a decrease in interest expense of $456,000; offset by expense increases
due primarily to the increased size of the  Partnership of $546,000 for mortgage
servicing  fees,  $323,000 for provisions for losses on loans and provisions for
losses on real estate,  $167,000 for asset management fees, $25,000 for clerical
costs from Redwood Mortgage Corp.,  $53,000 for  professional  fees and $444,000
for broker expense.

     The increase in interest on loans of $1,924,000 (44%), $2,659,000 (42%) and
$2,496,000  (28%)  for the  years  ended  December  31,  2000,  2001  and  2002,
respectively,  was due primarily to the increased size of the  Partnership  loan
portfolio, which increased from $35,693,000 at December 31, 1999, to $68,571,000
at December 31, 2000, to  $82,790,000  at December 31, 2001 and  $83,650,000  at
December  31,  2002.  The  average   outstanding   loan  balance  for  2002  was
approximately  $87,000,000  but was  significantly  reduced  by loan  payoffs in
December, 2002. The lower percentage rate of interest increase (28%) on loans in
2002 is reflective of the lower interest rate environment in 2002 as compared to
2000 and 2001 and a smaller  increase in outstanding  loans than previous years.
This was also offset in 2002 by  "additional  interest"  received on one loan of
$888,000 during 2002.

     The late charge income increases of $38,000 (136%),  $33,000 (50%), $15,000
(15%)  for the  years  ended  2000,  2001 and  2002,  respectively,  is  largely
attributed to the growth in the loan portfolio.

     The  increase  in interest  on the line of credit of  $361,000  (69%),  and
$85,000  (10%)  during  the years  ended 2000 and 2001 is  reflective  of higher
credit line usage in 2000 and 2001 offset by significantly lower borrowing rates
in the latter part of 2001.  Our credit line is tied to prime and the prime rate
declined  from 9.5% to 4.75 during  2001.  The  decrease  of  $456,000  (48%) in
interest  expense in 2002 is  primarily  due to the lower prime  interest  rates
existing  throughout 2002 and  approximately 20% average lower credit line usage
during the year.  The  Partnership  utilized its bank line of credit less during
2002 than 2001.

     The increase in mortgage servicing fees for 2000, 2001 and 2002 of $147,000
(41%),  $46,000 (9%) and  $546,000  (99%).  Mortgage  servicing  fees  increased
primarily  due to  increases in the  outstanding  loan  portfolio.  During 2002,
additional servicing fees were earned related to impaired loans. The Partnership
does not accrue  servicing  fees to Redwood  Mortgage  Corp. on impaired  loans.
Rather,  servicing fees on impaired loans are incurred as borrower  payments are
received.

     The decrease of $33,000 (8%) in 2000 in provisions  for losses on loans and
real estate was due to low  expectation  of loan losses in 2000. The increase in
provisions  for losses on loans in 2001 of $596,000  (159%) is primarily  due to
the loan portfolio  increasing in amount and due to recognition  that we were in
more difficult  economic  times.  The increase in provisions for losses on loans
and real  estate  of  $323,000  (34%) in 2002  reflects  the  general  partners'
estimate of appropriate  allowances for anticipated losses. As the Partnership's
loan portfolio has increased and since the  Partnership  acquired two properties
in 2002,  the  provisions  for loss have also been  increased.


                                       13
<PAGE>


     The  increase  in  management  fees of $19,000  (45%),  $97,000  (150%) and
$167,000 (106%) for 2000, 2001 and 2002, respectively, is due to the increase in
capital  under  management  in 2000,  2001 and 2002.  In  addition,  the general
partners began collecting the full asset management fees of .375% during 2002 as
compared to .25% in 2001 and .125% in 2000.

     The  increase  in  clerical  costs of $29,000  (34%),  $127,000  (112%) and
$25,000  (10%) for 2000,  2001 and 2002,  respectively,  is due  primarily to an
increase in the Partnership size and in 2001 to an upgrade of computer  hardware
and software.

     The increase in brokerage fees of $444,000 in 2002 from $0 in 2000 and 2001
is due to the  Partnership  having an obligation to pay one-half of  "additional
interest"  collected on one of its loans to a non-affiliated real estate broker.
This  expense  ends  with  the  full  collection  of the  "additional  interest"
anticipated to be in 2003.

     Partnership  capital continued to increase as the Partnership  received new
limited  partner   capital   contributions   of  $14,887,000,   $19,712,000  and
$21,563,000 and retained the earnings of limited partners that have chosen to do
so of $2,751,000,  $3,892,000 and $4,716,000 for the years 2000,  2001 and 2002,
respectively. The Partnership ceased raising funds during the period of May 2002
through October 2002 while it was in application status for a fourth offering of
Units. The fourth offering  commenced  October 30, 2002 and funds raised will be
used to increase the Partnership's capital base and provide funds for additional
mortgage loans.

     The  Partnership  began  funding loans on April 14, 1993 and as of December
31,  2002,  had  credited  earnings  to limited  partners  who elected to retain
earnings at an average  annualized yield of 8.44%.  Limited partners who elected
to have their earnings  distributed  monthly had an average  annualized yield of
8.17% since inception through December 31, 2002.

     In 1995,  the  Partnership  established  a line of credit with a commercial
bank secured by its loan  portfolio.  Since its inception,  the credit limit has
increased from $3,000,000 to  $20,000,000.  The size of the credit line facility
could again increase as the Partnership's  capital increases.  This added source
of funds  may help in  maximizing  the  Partnership's  yield by  permitting  the
Partnership to minimize the amount of funds in lower yield  investment  accounts
when appropriate  loans are not available.  Additionally,  the loans 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, 2000,  2001 and 2002, the outstanding
balance on the line of credit was $16,400,000, $11,400,000 and $0, respectively.
Cash generated from interest earnings, late charges,  amortization on principal,
loan  payoffs and capital  contributed  by limited  partners was utilized to pay
down the credit line in full at year ended December 31, 2002.

     During 2001,  and through  December 31, 2002, the Federal  Reserve  reduced
interest  rates by cutting the Federal  Funds Rate  twelve  times to 1.25%.  The
effect of the previous cuts has greatly reduced short-term interest rates and to
a  lesser  extent  reduced  long-term   interest  rates.  The  general  partners
anticipate  that new loans  will be placed  at rates  approximately  1% to 1.50%
lower than  similar  loans  during  2002.  The  lowering of  interest  rates has
encouraged  those  borrowers that have mortgages with higher interest rates than
those  currently  available  to  seek  refinancing  of  their  obligations.  The
Partnership may face prepayments in the existing portfolio from borrowers taking
advantage  of these  lower  rates.  However,  demand  for loans  from  qualified
borrowers  continues to be strong and as prepayments occur, the general partners
expect to replace paid off loans with loans at somewhat lower interest rates. At
this time, the general partners believe that the average loan portfolio interest
rate will decline  approximately .50% to .75% over the year 2003.  Nevertheless,
based  upon the  rates  payable  in  connection  with the  existing  loans,  and
anticipated  interest  rates to be charged by the  Partnership  and the  general
partners' experience,  the general partners anticipate that the annualized yield
will range between 7.5% and 8.25% in 2003.

Allowance for Losses.

     The general  partners  regularly  review the loan portfolio,  examining the
status  of  delinquencies,  the  underlying  collateral  securing  these  loans,
borrowers' payment records, etc. Based upon this information and other data, the
allowance for loan losses is increased or decreased. Borrower foreclosures are a
normal aspect of Partnership  operations.  The Partnership is not a credit based
lender and hence  while it reviews the credit  history and income of  borrowers,
and if  applicable,  the income from income  producing  properties,  the general
partners expect that we will on occasion take back real estate security.  During
2001, and continuing in 2002, the Northern  California real estate market slowed
and the national and local economies have slipped into recession. As of December
31, 2002,  six notices of default are currently  filed  beginning the process of
foreclosing six of our loans. The principal  amounts of the six foreclosed loans
total  $4,029,000 or 4.82% of the loan  portfolio.  Four of these borrowers have
entered into workout  agreements,  with the  borrowers  making  regular  monthly
payments.


                                       14
<PAGE>


     The Partnership has also entered into workout agreements with borrowers who
are past maturity or delinquent in their regular  payments.  The Partnership had
workout  agreements on approximately 6 loans totaling  $5,209,000 as of December
31,  2002.  Typically,  a workout  agreement  allows the  borrower to extend the
maturity date of the balloon  payment and/or allows the borrower to make current
monthly  payments while  deferring for periods of time,  past due payments,  and
allows time to pay the loan in full.  These workout  agreements and foreclosures
generally  exist  within  our loan  portfolio  to  greater  or  lesser  degrees,
depending primarily on the health of the economy. The number of foreclosures and
workout agreements will rise during difficult economic times and conversely fall
during good economic times.  The number and amount of  foreclosures  existing at
December 31, 2002, in management's  opinion,  does not have a material effect on
our results of operations or liquidity.  These  workouts and  foreclosures  have
been considered when  management  arrived at appropriate  loan loss reserves and
based on our  experience,  are reflective of our loan  marketplace  segment.  In
2002, the Partnership filed some foreclosure proceedings to enforce the terms of
our loans. In some of these instances the borrowers have been able to remedy the
foreclosures  we  have  filed.  As  of  December  31,  2002,  we  have  existing
foreclosure   proceedings  against  six  loans  totaling   $4,029,000.   Of  the
foreclosures,  four have entered into workout agreements, which call for regular
monthly  payments.  The  Partnership  did not  acquire  any  properties  through
foreclosure in 2000 and 2001. During 2002, we completed foreclosure of two loans
resulting in the acquisition of two real estate  properties.  The  Partnership's
principal  balances were $6,565,000 after excluding an affiliated  Partnership's
interest  in one of the  properties.  In 2003,  we may acquire  additional  real
estate  through the  foreclosure  process.  Borrower  foreclosures  are a normal
aspect of Partnership  operations and the general partners  anticipate that they
will not have a  material  effect  on  liquidity.  As a  prudent  guard  against
potential losses,  the general partners have made provisions for losses on loans
and real estate acquired through  foreclosure of $3,521,000 through December 31,
2002. These provisions for losses were made to guard against  collection losses.
The total cumulative provision for losses as of December 31, 2002, 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.

Borrower Liquidity and Capital Resources.

     The Partnership  relies upon purchases of Units,  loan payoffs,  borrowers'
mortgage payments, and, to a lesser degree, its line of credit for the source of
funds for loans. Recently,  mortgage interest rates have decreased somewhat from
those available at the inception of the  Partnership.  If interest rates were to
increase  substantially,  the yield of the Partnership's loans may provide lower
yields  than other  comparable  debt-related  investments.  As such,  additional
limited  partner Unit purchases  could  decline,  which would reduce the overall
liquidity  of the  Partnership.  Additionally,  since the  Partnership  has made
primarily  fixed rate loans,  if interest  rates were to rise, the likely result
would be a slower prepayment rate for the Partnership.  This could cause a lower
degree of liquidity as well as a slowdown in the ability of the  Partnership  to
invest in loans at the then current  interest  rates.  Conversely,  in the event
interest rates were to decline,  the  Partnership  could see both or either of a
surge  of Unit  purchases  by  prospective  limited  partners,  and  significant
borrower  prepayments,  which,  if the  Partnership  can  only  obtain  the then
existing lower rates of interest may cause a dilution of the Partnership's yield
on loans,  thereby  lowering  the  Partnership's  overall  yield to the  limited
partners.  The  Partnership to a lesser degree relies upon its line of credit to
fund loans.  Generally,  the  Partnership's  loans are fixed  rate,  whereas the
credit line is a variable rate loan.  In the event of a significant  increase in
overall  interest  rates,  the credit line rate of interest  could increase to a
rate above the average  portfolio rate of interest.  Should such an event occur,
the general  partners would desire to pay off the line of credit.  Retirement of
the line of credit would reduce the overall  liquidity of the Partnership.  Cash
is constantly being generated from borrower payments of interest,  principal and
loan payoffs.  Currently,  cash flow greatly  exceeds  Partnership  expenses and
earnings  requirements.  Excess cash flow is invested in new loan opportunities,
when available,  and is used to reduce the Partnership  credit line or for other
Partnership business.

     At the time of subscription to the Partnership, limited partners must elect
either to receive  monthly,  quarterly  or annual  cash  distributions  from the
Partnership,  or to compound earnings in their capital account. If you initially
elect to receive monthly, quarterly or annual distributions, such election, once
made,   is   irrevocable.   However  an  investor  may  elect  to  receive  such
distributions on a monthly, quarterly or annual basis. If the investor initially
elects  to  compound  earnings  in  his/her  capital  account,  in  lieu of cash
distributions,  the investor may, after three (3) years, change the election and
receive monthly,  quarterly or annual cash distributions.  Earnings allocable to
limited partners who elect to compound  earnings in their capital account,  will
be retained by the  Partnership  for making  further  loans or for other  proper
Partnership  purposes,  and such amounts will be added to such limited partners'
capital accounts.



                                       15
<PAGE>




     During the periods  stated  below,  the  Partnership,  after  allocation of
syndication costs, made the following allocation of earnings both to the limited
partners  who  elected  to  compound  their  earnings,  and those  that chose to
distribute:

                                2000              2001               2002
                            -------------     --------------    ---------------
   Compounding                 $2,751,000         $3,892,000         $4,716,000
   Distributing                $1,245,000         $1,962,000         $2,517,000

     As of December 31, 2000,  December  31,  2001,  December 31, 2002,  limited
partners electing to receive cash distributions of earnings represented 31%, 34%
and 35%,  respectively of the limited  partners'  outstanding  capital accounts.
These  percentages  have  remained   relatively  stable.  The  general  partners
anticipate  that after all capital has been raised,  the  percentage  of limited
partners  electing to withdraw earnings will decrease due to the dilution effect
which occurs when compounding  limited  partners'  capital accounts grow through
earnings reinvestment.

     The Partnership  also allows the limited partners to withdraw their capital
account  subject to certain  limitations  and penalties  (see  "Withdrawal  From
Partnership" in the Limited  Partnership  Agreement).  Once a limited  partner's
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  partner's
investment has the effect of providing limited partner liquidity and the general
partners  expect a portion of the limited  partners to avail  themselves of this
liquidity.  This has the anticipated effect of increasing the net capital of the
Partnership, primarily through retained earnings during the offering period. The
general partners expect to see increasing numbers of limited partner withdrawals
during a limited partner's 5th through 10th anniversary,  at which time the bulk
of those limited partners who have sought withdrawal have been liquidated. Since
the  five-year  hold period for most limited  partners has yet to expire,  as of
December 31, 2002, many limited partners may not as yet avail themselves of this
provision for  liquidation.  Earnings and capital  liquidations  including early
withdrawals during the three years ended December 31, 2002 were:

                                 2000              2001               2002
                             -------------     --------------    ---------------

   Cash distributions           $1,245,000         $1,962,000         $2,517,000
   Capital liquidation*          $ 762,000         $1,425,000         $1,049,000
                             -------------     --------------    ---------------

   Total                        $2,007,000         $3,387,000         $3,566,000
                             =============     ==============    ===============

* These amounts represent gross of early withdrawal penalties.

     Additionally,  limited  partners  may  liquidate  their  investment  over a
one-year period subject to certain  limitations  and penalties.  During the past
three years ended  December  31,  2002,  capital  liquidated  subject to the 10%
penalty for early withdrawal was:

                      2000             2001              2002
                --------------    --------------    --------------
                      $310,000          $730,000          $244,000

     This represents  0.58%,  0.99%,  and 0.26% of the limited  partners' ending
capital for the years ended  December 31, 2000,  2001,  and 2002,  respectively.
These  withdrawals  are within the normally  anticipated  range and  represent a
small percentage of limited partner capital.

Current Economic Conditions.

     The  Partnership  makes  loans  primarily  in  Northern  California.  As of
December  31, 2002,  approximately  73.81% of the loans held were in the six San
Francisco  Bay  Area  Counties,  16.57%  were in  counties  adjacent  to the San
Francisco  Bay Area and the balance  (9.63%) were in other  counties  throughout
California.  Like the rest of the nation,  the San  Francisco  Bay Area has also
felt the recession and accompanying  slow down in economic growth and increasing
unemployment.  The technology  companies of Silicon Valley,  and now the airline
industry,  the tourism  industry and other industries are feeling the effects of
the overall United States recession,  which includes lower earnings,  losses and
layoffs.


                                       16
<PAGE>


     As contained in a collection  of real estate  statistics  listed in the San
Francisco Chronicle dated December 20, 2002 Bay Area home prices rose again. The
article states,  "Despite a struggling economy, the median home price in the Bay
Area in  November  rose 13% on a  year-over-year  basis,  though  the  price has
leveled  since its all-time  high this summer,  a real estate  information  firm
reported  Thursday.  Driven by historically  low interest  rates,  the number of
homes sold increased  24.4% between  November 2001 and November  2002;  however,
that  comparison is somewhat skewed given that sales plunged after September 11,
2001.

     The  median  home  price  in the nine Bay Area  counties  was  $416,000  in
November,  compared with  $368,000 last  November,  said  DataQuick  Information
Systems in La Jolla (San Diego County).  Compared with October,  the median rose
2%, and the number of sales fell 12.8%. In July and August,  the Bay Area median
hit a record high $417,000.  Last fall, in the wake of a sagging economy and the
terrorist attacks,  home prices and sales cooled considerably.  But beginning in
January, prices and sales shot up around the country as interest rates plummeted
and consumers  looked for an alternative  to the gyrating  stock market.  At the
same time,  many  economists  have  suggested  a housing  bubble is brewing  and
predict  home prices may fall,  particularly  in  expensive  markets such as San
Francisco and Boston.  The median price of a  single-family  home  nationwide is
$159,600,  according  to the  National  Association  of  Realtors.  (DataQuick's
figures  include  both  single-family  homes  and  condos.)  `The  days of rapid
appreciation have ended,' said Ken Rosen, a real estate and economics  professor
at UC  Berkeley.  He noted that home  prices  have  appreciated  far faster than
personal income in the Bay Area in recent years.  `Next year, we may see a small
rise (in home prices),  but there could be some significant weakness if interest
rates  go up and the  economy  gets  worse,'  Rosen  said.  On the  other  hand,
DataQuick researcher John Karevoll said he sees no evidence of a major price dip
in the Bay Area despite an uptick in the number of notices of default, the first
step in the foreclosure  process.  `Housing is in a fairly good state,' Karevoll
said. `Default activity would have to double for it to be a concern.'

     The typical  monthly  mortgage  payment Bay Area residents  committed to in
November was $1,843.  The peak was $2,124 in May 2000.  Marin County  posted the
highest median home price - $602,000 - in November. Solano County had the lowest
median  price  -  $291,000  - but  it  experienced  the  biggest  year-over-year
percentage  price increase.  In November 2001, the county's median was $247,000.
The  median  is the price at which  half of sales are above and half are  below.
Sales in Santa Clara County,  where the high-tech tumble has pushed unemployment
to 7.8%,  showed the largest jump, from 1,284 last November to 1,894 last month.
But that falls short of the  county's  typical  November  sales count of between
1,900 and 2,300.  Re/Max  real  estate  agent  Bruce  Scheer in  Cupertino  said
DataQuick's numbers don't tell the whole story. Although sales in the county are
up nearly 48% year over year,  the number of homes on the market is up more than
60%.  `There's a lot more  inventory,  and sales have  slowed,'  Scheer said, `I
think people are worried that the economy is going to get worse,  and they think
that if they wait to sell their home, they'll get less for it.'"

     The San Francisco  Chronicle  dated December 20, 2002 further  analyzed the
home sale price by county  comparing sales of November 2001 versus November 2002
as follows:
<TABLE>

                                   Homes sold             Percent                Median*                Percent
          County             Nov. `01      Nov. `02       change        Nov. `01        Nov. `02        change
    -------------------     -----------    ----------    ----------    -----------     ------------    ----------
<S> <C>                          <C>           <C>           <C>             <C>              <C>          <C>
    Alameda                      1,309         1,771         35.3%           $352             $407         15.6%
    Contra Costa                 1,464         1,599           9.2            308              352           4.3
    Marin                          309           334           8.1            513              602          17.3
    Napa                           159           171           7.5            341              398          16.7
    San Francisco                  355           493          38.9            492              568          15.4
    San Mateo                      531           620          16.8            490              522           6.5
    Santa Clara                  1,284         1,894          47.5            421              446           5.9
    Solano                         635           733          15.4            247              291          17.8
    Sonoma                         598           650           8.7            319              342           7.2
                            ===========    ==========    ==========    ===========     ============    ==========
    Bay Area                     6,644         8,265         24.4%           $368             $416         13.0%

</TABLE>

*in thousands



                                       17
<PAGE>



     In spite of the slowing economy,  commercial  lending  opportunities  exist
which the Partnership may advantage  itself of. Office vacancy is very high. The
San  Francisco  Business  Times dated October 10, 2002 states "Grubb & Ellis has
reported a slight  decrease  in office  vacancy in San  Francisco  for the third
quarter, breaking a two-year losing streak. The commercial real estate firm said
vacancy dropped to 21.9% with 127,000 square feet of positive absorption.  Colin
Yasukochi, research director of Grubb & Ellis' San Francisco office, said office
demand has turned  positive  for the first time in two years.  He  reported  1.3
million square feet of gross leasing  activity in the quarter.  The five biggest
deals of the quarter:

o Zurich Insurance took 77,000 square feet at 560 Mission street;
o Gensler Architecture signed a 57,000-square-foot lease at 2 Harrison Street;
o Law firm Clifford Chance opening its Bay Area headquarters at One market with
  47,000 square feet;
o Bank of the West and PayMap each signed leases of at least 50,000 square feet.

     `The sustained gross leasing  activity bodes well for more positive news in
the fourth  quarter,'  Yasukochi  said.  `However,  over 650,000  square feet of
mostly vacant new space  scheduled for delivery in that same quarter will likely
cause  vacancy to rise.' He predicts a sustained  recovery is two to three years
away."

     To the Partnership,  stabilizing  vacancy rates may mean that we are at the
vacancy rate bottom.  High levels of space exist,  and as tenants  leases expire
they may be able to negotiate lower rental rates.  This could lead to lower cash
flows for owners,  which may mean we could  experience  higher  delinquencies or
foreclosures on commercial properties.

     On or about March 19, 2003 the United States entered into an armed conflict
with Iraq.  While the general partners do not anticipate that this conflict will
affect the real estate  market in  Northern  California,  a  prolonged  military
conflict could have adverse  effects on the economy of the United States,  which
could eventually impact the local real estate market.

     As of December 31, 2002, the Partnership had an average loan to value ratio
computed  as of the date the loan was made of 60.61%.  This did not  account for
any increases or decreases in property  values since the date the loan was made,
nor does it include any reductions in principal through amortization of payments
after  the  loan  was  made.  This  low loan to  value  ratio  will  assist  the
Partnership  in  weathering  loan  delinquencies  and  foreclosures  should they
eventuate.

     The  foregoing  analysis  of  year  2002  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  assumptions  made by the general  partners or the actual
development  of  future  events.  No  assurance  can be given  that any of these
statements or predictions  will ultimately  prove to be correct or substantially
correct.

Item 7a - Quantitative and Qualitative Disclosures About Market Risk

     The  following  table  contains  information  about  the cash held in money
market accounts, loans held in the Partnership's portfolio and a note payable on
our line of credit as of December 31, 2002. The presentation,  for each category
of  information,  aggregates the assets and  liabilities by their maturity dates
for  maturities  occurring in each of the years 2003 through 2007 and separately
aggregates the information  for all maturities  arising after 2007. The carrying
values of these assets and liabilities  approximate  their fair market values as
of December 31, 2002 (in thousands).
<TABLE>
<S>   <C>                                   <C>         <C>         <C>         <C>         <C>       <C>            <C>
                                            2003        2004        2005        2006        2007      Thereafter     Total
                                         ----------- ----------- ----------- ----------- ----------- ------------- -----------
      Interest earning assets:
      Money market accounts                 $ 5,971                                                                   $ 5,971
      Average interest rate                   1.05%                                                                     1.05%
      Loans secured by deeds of trust       $44,101     $12,912     $11,879     $ 1,723     $ 8,198       $ 4,837     $83,650
      Average interest rate                  12.14%      10.73%      11.60%      11.64%      10.46%        11.51%      11.64%

      Interest bearing liabilities
      Note payable to bank                        -           -           -           -           -             -           -
      Average interest rate                   4.00%           -           -           -           -             -       4.00%

</TABLE>



                                       18
<PAGE>



Market Risk.

     The  Partnership's  note  payable to the bank for its line of credit  bears
interest  at a  variable  rate,  tied  to  the  prime  rate.  As a  result,  the
Partnership's primary market risk exposure with respect to its obligations is to
changes in interest  rates,  which will affect the interest cost of  outstanding
amounts on the note payable. The Partnership may also suffer market risk tied to
general trends  affecting  real estate values that may impact the  Partnership's
security for its loans.

     The Partnership's  primary market risk in terms of its profitability is the
exposure to  fluctuations  in earnings  resulting from  fluctuations  in general
interest  rates.  The majority of the  Partnership's  mortgage loans (100% as of
December 31, 2002) earn interest at fixed rates.  Changes in interest  rates may
also affect the value of the Partnership's  investment in mortgage loans and the
rates at which the Partnership reinvests funds obtained from loan repayments and
new capital contributions from limited partners. If interest rates increase, the
interest  rates the  Partnership  obtains from  reinvested  funds will generally
increase,  but the value of the Partnership's existing loans at fixed rates will
generally  tend to  decrease.  The  risk  is  mitigated  by the  fact  that  the
Partnership  does not intend to sell its loan  portfolio,  rather such loans are
held until they are paid off. If interest rates decrease,  the amounts  becoming
available to the  Partnership  for  investment  due to repayment of  Partnership
loans may be  reinvested  at lower rates than the  Partnership  had been able to
obtain in prior investments, or than the rates on the repaid loans. In addition,
interest rate  decreases may encourage  borrowers to refinance  their loans with
the  Partnership at a time where the  Partnership is unable to reinvest in loans
of comparable value.

     The  Partnership  does not hedge or otherwise seek to manage  interest rate
risk. The Partnership does not enter into risk sensitive instruments for trading
purposes.


PORTFOLIO REVIEW - For the years ended December 31, 2000, 2001 and 2002.

Loan Portfolio.

     The Partnership's  loan portfolio  consists primarily of short-term (one to
five years),  fixed rate loans secured by real estate.  As of December 31, 2000,
2001 and 2002 the Partnership's loans secured by real property collateral in the
six San  Francisco Bay Area counties  (San  Francisco,  San Mateo,  Santa Clara,
Alameda, Contra Costa, and Marin) represented  $55,555,000 (81.0%),  $68,291,000
(82.5%),  and  $61,741,000  (73.81%)  of the  outstanding  loan  portfolio.  The
remainder of the  portfolio  represented  loans  secured by real estate  located
primarily in Northern  California.  No Partnership loan equals or exceeds 10% of
the Partnership's assets.

     As of December 31, 2000,  approximately 38.25% ($26,225,000),  was invested
in loans  secured by single  family  homes  (1-4  units),  approximately  12.34%
($8,459,000), was invested in loans secured by multifamily dwellings (apartments
over 4 units), approximately 40.95% ($28,082,000), was invested in loans secured
by commercial  properties,  and approximately 8.47% ($5,806,000) was invested in
loans  secured  by  land.  As  of  December  31,  2001,  approximately,   45.35%
($37,542,000), was invested in loans secured by single family homes (1-4 units),
approximately  8.86%  ($7,337,000)  was invested in loans secured by multifamily
dwellings  (apartments over 4 units),  approximately  38.78%  ($32,105,000)  was
invested in loans  secured by commercial  properties,  and  approximately  7.01%
($5,806,000)  was  invested in loans  secured by land.  As of December 31, 2002,
approximately,  43.72%  ($36,574,000),  was invested in loans  secured by single
family homes (1-4 units), approximately 7.86% ($6,572,000) was invested in loans
secured by  multi-family  dwellings  (apartments  over 4 units),  approximately,
38.36% ($32,089,000) was invested in loans secured by commercial properties, and
approximately 10.06% ($8,415,000) was invested in loans secured by land.



                                       19
<PAGE>




     As of December 31, 2002, the Partnership  held 70 loans secured by deeds of
trust. The following table sets forth the priorities,  asset  concentrations and
maturities of the loans held by the Partnership as of December 31, 2002.

            PRIORITIES, ASSET CONCENTRATIONS AND MATURITIES OF LOANS
                     As of December 31, 2002 (in thousands)

                                     # of Loans          Amount         Percent
                                    -------------     ------------   -----------

1st Mortgages                                  31         $ 46,117           55%
2nd Mortgages                                  32           30,930           37%
3rd Mortgages                                   7            6,603            8%
                                    =============     ============   ===========
     Total                                     70         $ 83,650       100.00%

Maturing 12/31/03 and prior                    28         $ 44,101        52.72%
Maturing prior to 12/31/04                     13           12,912        15.44%
Maturing prior to 12/31/05                      8           11,879        14.20%
Maturing after 12/31/05                        21           14,758        17.64%
                                    =============     ============   ===========
     Total                                     70         $ 83,650       100.00%

Average Loan                                              $  1,195         1.43%
Largest Loan                                                 4,943         5.91%
Smallest Loan                                                   27         0.03%
Average Loan-to-Value                                                     60.61%


ASSET QUALITY

     A consequence  of lending  activities is that  occasionally  losses will be
experienced  and that the  amount  of such  losses  will vary from time to time,
depending  upon the risk  characteristics  of the loan  portfolio as affected by
economic  conditions and the financial  experiences of borrowers.  Many of these
factors  are beyond the  control of the  general  partners.  There is no precise
method of predicting  specific  losses or amounts that ultimately may be charged
off on  particular  segments of the loan  portfolio,  especially in light of the
current economic environment.

     The conclusion that a loan may become  uncollectible,  in whole or in part,
is  a  matter  of  judgment.  Although  institutional  lenders  are  subject  to
requirements and regulations  that, among other things,  require them to perform
ongoing analyses of their portfolios,  loan-to-value ratios, reserves, etc., and
to obtain and maintain  current  information  regarding  their borrowers and the
securing properties, the Partnership is not subject to these regulations and has
not adopted these practices.  Rather,  the general partners,  in connection with
the  periodic  closing  of the  accounting  records of the  Partnership  and the
preparation  of the financial  statements,  determine  whether the allowance for
loan losses is adequate to cover potential loan losses of the Partnership. As of
December 31, 2002 the general  partners have  determined  that the allowance for
loan losses of $3,021,000  (3.15% of net assets) is adequate in amount.  Because
of the number of variables  involved,  the magnitude of the swings  possible and
the general partners' inability to control many of these factors, actual results
may and do sometimes  differ  significantly  from  estimates made by the general
partners.  As of  December  31,  2002,  20 loans  were  delinquent  over 90 days
amounting  to  $28,650,000,  of which  $9,454,500  had been  brought  current in
February, 2003. Additionally,  $2,957,000 of these delinquent loans were subject
to workout  agreements,  which require the borrower to make regular monthly loan
payments and/or payments plus additional catch up amounts.






                                       20
<PAGE>



Item 8 - Consolidated Financial Statements and Supplementary Data

A - Consolidated Financial Statements

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

   o      Independent Auditors' Report
   o      Consolidated Balance Sheets - December 31, 2002, and December 31, 2001
   o      Consolidated Statements of Income for the years ended December 31,
          2002, 2001 and 2000
   o      Consolidated Statements of Change In Partners' Capital for the years
          ended December 31, 2002, 2001 and 2000
   o      Consolidated Statements of Cash Flows for the years ended December 31,
          2002, 2001 and 2000
   o      Notes to Consolidated Financial Statements

B - Consolidated Financial Statement Schedules

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

   o      Schedule II  -  Valuation and Qualifying Accounts
   o      Schedule IV  -  Loans 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.



                                       21
<PAGE>












                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                        CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001
                         AND FOR EACH OF THE THREE YEARS
                      IN THE PERIOD ENDED DECEMBER 31, 2002






                                       22
<PAGE>



                              ARMANINO McKENNA LLP
                          CERTIFIED PUBLIC ACCOUNTANTS
                       12667 Alcosta Boulevard, Suite 500
                               San Ramon, CA 94583
                                 (925) 790-2600



                          INDEPENDENT AUDITORS' REPORT



To the Partners
Redwood Mortgage Investors VIII
Redwood City, California

     We have audited the  accompanying  consolidated  balance  sheets of Redwood
Mortgage  Investors VIII (a California  limited  partnership) as of December 31,
2002 and 2001 and the  related  consolidated  statements  of income,  changes in
partners' capital and cash flows for each of the three years in the period ended
December  31,   2002.   These   consolidated   financial   statements   are  the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these consolidated financial statements and schedules based on our
audits.

     We conducted our audits in accordance  with  auditing  standards  generally
accepted in the United States of America.  Those standards  require that we plan
and  perform  the  audits 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 consolidated  financial  statements  referred to above
present  fairly,  in all material  respects,  the financial  position of Redwood
Mortgage  Investors  VIII as of December 31, 2002 and 2001and the results of its
operations  and cash  flows  for each of the  three  years in the  period  ended
December 31, 2002, in conformity with accounting  principles  generally accepted
in the United States of America.

     Our  audits  were  conducted  for the  purpose of forming an opinion on the
basic consolidated financial statements taken as a whole. Schedule II and IV are
presented for purposes of additional analysis and are not a required part of the
basic consolidated financial statements.  Such information has been subjected to
the  auditing  procedures  applied  in  the  audits  of the  basic  consolidated
financial  statements  and, in our  opinion,  is fairly  stated in all  material
respects in relation to the basic consolidated  financial  statements taken as a
whole.



                                                ARMANINO McKENNA LLP




San Ramon, California
February 21, 2003



                                       23
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                           CONSOLIDATED BALANCE SHEETS
                    December 31, 2002 AND 2001 (in thousands)
<TABLE>

                                     ASSETS
                                                                                      2002             2001
                                                                                  --------------   --------------
<S>                                                                                    <C>             <C>
   Cash and cash equivalents                                                           $  7,188        $   1,917
                                                                                  --------------   --------------
   Loans
      Loans secured by deeds of trust                                                    83,650           82,790
      Loans, unsecured                                                                        -                4
      Allowance for loan losses                                                         (3,021)          (2,247)
                                                                                  --------------   --------------
        Net loans                                                                        80,629           80,547
                                                                                  --------------   --------------

   Interest and other receivables
      Accrued interest and late fees                                                      3,913            3,345
      Advances on loans                                                                     279              195
      Other receivables                                                                     888                -
                                                                                  --------------   --------------
                                                                                          5,080            3,540
                                                                                  --------------   --------------

   Loan origination fees, net                                                                22                6
   Real estate held for sale (net of reserve of $500)                                     9,286                -
                                                                                  --------------   --------------
                                                                                          9,308                6
                                                                                  --------------   --------------

        Total assets                                                                  $ 102,205         $ 86,010
                                                                                  ==============   ==============

                        LIABILITIES AND PARTNERS' CAPITAL
   Liabilities
      Line of credit                                                                  $       -         $ 11,400
      Accounts payable                                                                      449               74
      Payable to affiliate                                                                  294              109
      Deferred interest                                                                     112                -
      Note payable                                                                        1,782                -
                                                                                  --------------   --------------
        Total liabilities                                                                 2,637           11,583
                                                                                  --------------   --------------

   Minority interest                                                                      1,213                -
                                                                                  --------------   --------------
   Investors in applicant status                                                          2,578              673
                                                                                  --------------   --------------

   Partners' capital
      Limited partners' capital, subject to redemption net of unallocated
        syndication costs of $592 and $400 for 2002 and 2001, respectively; And
        formation loan receivable of $5,257 and $4,126 for 2002
        And 2001, respectively                                                           95,690           73,687

      General partners' capital, net of unallocated syndication costs
        of $6 and $4 for 2002 and 2001, respectively                                         87               67
                                                                                  --------------   --------------
        Total partners' capital                                                          95,777           73,754
                                                                                  --------------   --------------
        Total liabilities and  partners' capital                                      $ 102,205         $ 86,010
                                                                                  ==============   ==============
</TABLE>

     The accompanying notes are an integral part of these consolidated financial
statements



                                       24
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                        CONSOLIDATED STATEMENTS OF INCOME
              For the Years Ended December 31, 2002, 2001 and 2000
             (in thousands, except for per limited partner amounts)
<TABLE>

                                                                    2002              2001              2000
                                                               ---------------    --------------   ---------------
<S>                                                                    <C>                <C>               <C>
Revenues
   Interest on loans                                                 $ 11,416          $  8,920          $  6,261
   Late fees                                                              114                99                66
   Other                                                                    7                16                22
                                                               ---------------    --------------   ---------------
                                                                       11,537             9,035             6,349
                                                               ---------------    --------------   ---------------

Expenses
   Mortgage servicing fees                                              1,098               552               506
   Interest expense                                                       516               972               887
   Amortization of loan origination fees                                   12                14                12
   Provisions for losses on loans                                         780               957               376
   Provisions for losses on real estate                                   500                 -                 -
   Asset management fees                                                  325               158                61
   Clerical costs from Redwood Mortgage Corp.                             266               241               114
   Professional services                                                   66                13                64
   Broker expense                                                         444                 -                 -
   Other                                                                   44                35                42
                                                               ---------------    --------------   ---------------
                                                                        4,051             2,942             2,062
                                                               ---------------    --------------   ---------------

     Net income                                                      $  7,486          $  6,093          $  4,287
                                                               ===============    ==============   ===============

Net income
   General partners (1%)                                             $     75          $     61          $     43
   Limited partners (99%)                                               7,411             6,032             4,244
                                                               ---------------    --------------   ---------------

                                                                     $  7,486          $  6,093          $  4,287
                                                               ===============    ==============   ===============

Net income per $1,000 invested by limited partners
  for entire period
   Where income is reinvested and compounded                         $     87          $     90          $     86
                                                               ===============    ==============   ===============
   Where partner receives income in periodic distributions           $     84          $     86          $     83
                                                               ===============    ==============   ===============
</TABLE>

     The accompanying notes are an integral part of these consolidated financial
statements




                                       25
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
             Consolidated Statements of changes in partners' capital
       For the Years Ended December 31, 2002, 2001 and 2000 (in thousands)
<TABLE>

                                                                                     Limited Partners
                                                                 ----------------------------------------------------------
<S>                                              <C>               <C>           <C>            <C>              <C>
                                                 Investors In      Capital       Unallocated    Formation        Total
                                                   Applicant       Limited       Syndication       Loan        Partners'
                                                    Status        Partners'         Costs       Receivable      Capital
                                                 --------------  -------------  -------------- -------------  -------------
Balances at December 31, 1999                          $   330       $ 39,531       $   (342)     $ (2,159)      $  37,030
 Contributions on application                           14,887              -               -             -              -
 Formation loan increases                                    -              -               -       (1,102)        (1,102)
 Formation loan payments                                     -              -               -           230            230
 Interest credited to partners in applicant status           5              -               -             -              -
 Interest withdrawn                                        (1)              -               -             -              -
 Transfers to partners' capital                       (14,996)         14,981               -             -         14,981
 Net income                                                  -          4,244               -             -          4,244
 Syndication costs incurred                                  -              -            (227)            -          (227)
 Allocation of syndication costs                             -          (248)             248             -              -
 Partners' withdrawals                                       -        (1,976)               -             -        (1,976)
 Early withdrawal penalties                                  -           (30)              10            20              -
                                                 --------------  -------------  -------------- -------------  -------------

Balances at December 31, 2000                              225         56,502           (311)       (3,011)         53,180
 Contributions on application                           19,712              -               -             -              -
 Formation loan increases                                    -              -               -       (1,462)        (1,462)
 Formation loan payments                                     -              -               -           300            300
 Interest credited to partners in applicant status           1              -               -             -              -
 Transfers to partners' capital                       (19,265)         19,245               -             -         19,245
 Net income                                                  -          6,032               -             -          6,032
 Syndication costs incurred                                  -              -           (291)             -          (291)
 Allocation of syndication costs                             -          (178)             178             -              -
 Partners' withdrawals                                       -        (3,317)               -             -        (3,317)
 Early withdrawal penalties                                  -           (70)              24            46              -
                                                 --------------  -------------  -------------- -------------  -------------

Balances at December 31, 2001                              673         78,214           (400)       (4,126)         73,687
 Contributions on application                           21,563              -               -             -              -
 Formation loan increases                                    -              -               -       (1,677)        (1,677)
 Formation loan payments                                     -              -               -           530            530
 Interest credited to partners in applicant status           1              -               -             -              -
 Transfers to partners' capital                       (19,659)         19,659               -             -         19,659
 Net income                                                  -          7,411               -             -          7,411
 Syndication costs incurred                                  -              -           (377)             -          (377)
 Allocation of syndication costs                             -          (178)             178             -              -
 Partners' withdrawals                                       -        (3,543)               -             -        (3,543)
 Early withdrawal penalties                                  -           (23)               7            16              -
                                                 --------------  -------------  -------------- -------------  -------------

Balances at December 31, 2002                         $  2,578      $ 101,540       $   (592)     $ (5,257)      $  95,690
                                                 ==============  =============  ============== =============  =============
</TABLE>

     The accompanying notes are an integral part of these consolidated financial
statements



                                       26
<PAGE>


                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
             Consolidated Statements of changes in partners' capital
       For the Years Ended December 31, 2002, 2001 and 2000 (in thousands)
<TABLE>

                                                                      General Partners
                                                  ---------------------------------------------------------
<S>                                                 <C>                 <C>                   <C>                <C>
                                                    Capital Account     Unallocated           Total              Total
                                                        General         Syndication     General Partners'      Partners'
                                                       Partners'           Costs             Capital            Capital
                                                  -------------------- ---------------  -------------------  --------------
Balances at December 31, 1999                                 $    35         $   (3)              $    32       $  37,062
 Contributions on application                                       -               -                    -               -
 Formation loan increases                                           -               -                    -         (1,102)
 Formation loan payments                                            -               -                    -             230
 Interest credited to partners in applicant status                  -               -                    -               -
 Capital contributed                                               15               -                   15          14,996
 Net income                                                        43               -                   43           4,287
 Syndication costs incurred                                         -             (2)                  (2)           (229)
 Allocation of syndication costs                                  (2)               2                    -               -
 Partners' withdrawals                                           (40)               -                 (40)         (2,016)
 Early withdrawal penalties                                         -               -                    -               -
                                                  -------------------- ---------------  -------------------  --------------

Balances at December 31, 2000                                      51             (3)                   48          53,228
 Contributions on application                                       -               -                    -               -
 Formation loan increases                                           -               -                    -         (1,462)
 Formation loan payments                                            -               -                    -             300
 Interest credited to partners in applicant status                  -               -                    -               -
 Capital contributed                                               20               -                   20          19,265
 Net income                                                        61               -                   61           6,093
 Syndication costs incurred                                         -             (3)                  (3)           (294)
 Allocation of syndication costs                                  (2)               2                    -               -
 Partners' withdrawals                                           (59)               -                 (59)         (3,376)
 Early withdrawal penalties                                         -               -                    -               -
                                                  -------------------- ---------------  -------------------  --------------

Balances at December 31, 2001                                      71             (4)                   67          73,754
 Contributions on application                                       -               -                    -               -
 Formation loan increases                                           -               -                    -         (1,677)
 Formation loan payments                                            -               -                    -             530
 Interest credited to partners in applicant status                  -               -                    -               -
 Capital contributed                                               22               -                   22          19,681
 Net income                                                        75               -                   75           7,486
 Syndication costs incurred                                         -             (4)                  (4)           (381)
 Allocation of syndication costs                                  (2)               2                    -               -
 Partners' withdrawals                                           (73)               -                 (73)         (3,616)
 Early withdrawal penalties                                         -               -                    -               -
                                                  -------------------- ---------------  -------------------  --------------

Balances at December 31, 2002                                 $    93         $   (6)             $     87       $  95,777
                                                  ==================== ===============  ===================  ==============
</TABLE>


     The accompanying notes are an integral part of these consolidated financial
statements



                                       27
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                      Consolidated Statements of cash flows
       For the Years Ended December 31, 2002, 2001 and 2000 (in thousands)
<TABLE>
<S>                                                            <C>               <C>               <C>
                                                               2002              2001              2000
                                                          ----------------  ----------------  ---------------

Cash flows from operating activities
   Net income                                                    $  7,486          $  6,093         $  4,287
   Adjustments to reconcile net income to
     net cash provided by operating activities
     Provision for loan and real estate losses                      1,280               957              376
     Change in operating assets and liabilities                                                            -
        Unsecured loans                                                 4                50              (5)
        Accrued interest and late fees                            (1,253)           (2,306)            (328)
        Advances on loans                                           (312)              (23)            (139)
        Other receivables                                           (888)                 -                -
        Loan origination fees                                        (16)                 7                6
        Accounts payable                                              375                44                1
        Payable to affiliate                                          185               109                -
        Deferred interest                                             112              (82)            (131)
                                                          ----------------  ----------------  ---------------
Net cash provided by operating activities                           6,973             4,849            4,067
                                                          ----------------  ----------------  ---------------

Cash flows from investing activities
   Loans originated                                              (32,601)          (47,512)         (49,289)
   Principal collected on loans                                    26,083            33,239           16,546
   Payments for development of real estate                          (219)                 -                -
   Proceeds from disposition of real estate                             -                 -              360
                                                          ----------------  ----------------  ---------------
Net cash used in investing activities                             (6,737)          (14,273)         (32,383)
                                                          ----------------  ----------------  ---------------

Cash flows from financing activities
   Borrowings (repayments) on line of credit, net                (11,400)           (5,000)           16,400
   Repayments on note payable                                         (7)                 -                -
   Contributions by partner applicants                             21,586            19,713           14,892
   Interest withdrawn by partners in applicant status                   -                 -              (1)
   Partners' withdrawals                                          (3,616)           (3,376)          (2,017)
   Syndication costs paid                                           (381)             (294)            (229)
   Formation loan lending                                         (1,677)           (1,462)          (1,102)
   Formation loan collections                                         530               300              230
                                                          ----------------  ----------------  ---------------
Net cash provided by financing activities                           5,035             9,881           28,173
                                                          ----------------  ----------------  ---------------

Net increase (decrease) in cash and cash equivalents                5,271               457            (143)

Cash and cash equivalents - beginning of year                       1,917             1,460            1,603
                                                          ----------------  ----------------  ---------------

Cash and cash equivalents - end of year                         $   7,188         $   1,917         $  1,460
                                                          ================  ================  ===============
Supplemental disclosures of cash flow information
   Cash paid for interest                                        $    516          $    972          $   888
                                                          ================  ================  ===============
</TABLE>

     The accompanying notes are an integral part of these consolidated financial
statements



                                       28
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2002, 2001 and 2000


note 1 - Organizational and General

     Redwood  Mortgage  Investors VIII, a California  Limited  Partnership  (the
"Partnership"),  was  organized  in 1993.  The general  partners  are Michael R.
Burwell,  an individual,  Gymno  Corporation,  and Redwood Mortgage Corp.,  both
California corporations.  The Partnership was organized to engage in business as
a mortgage  lender for the primary  purpose of making loans  secured by deeds of
trust on  California  real  estate.  Loans are being  arranged  and  serviced by
Redwood Mortgage Corp., a general partner. At December 31, 2002, the Partnership
was  in  its  fourth  offering  stage,   wherein   contributed  capital  totaled
$91,238,920 of approved aggregate offerings of $125,000,000.  As of December 31,
2002 and 2001, $ 2,578,000  and  $673,000,  respectively,  remained in applicant
status, and total Partnership Units sold of 88,660,947 and were in the aggregate
of $91,239,000 and $69,676,000 respectively.

     A minimum of $250,000 and a maximum of  $15,000,000  in  Partnership  Units
were initially offered through qualified  broker-dealers.  This initial offering
closed in October 1996. In December  1996,  the  Partnership  commenced a second
offering of an  additional  $30,000,000,  which  closed on August 30,  2000.  On
August 31, 2000,  the  Partnership  commenced a third offering for an additional
$30,000,000,  which closed in April 2002. On October 31, 2002,  the  Partnership
commenced  a  fourth  offering  for an  additional  $50,000,000.  As  loans  are
identified,  partners are transferred from applicant status to admitted partners
participating in loan operations.

Sales commissions - formation loans

     Sales  commissions  are not paid  directly  by the  Partnership  out of the
offering proceeds. Instead, the Partnership loans to Redwood Mortgage Corp., one
of the  general  partners,  amounts  to pay all sales  commissions  and  amounts
payable in  connection  with  unsolicited  orders.  This loan is  unsecured  and
non-interest bearing and is referred to as the "formation loan."

     The Formation  Loan relating to the initial  $15,000,000  offering  totaled
$1,075,000, which was 7.2% of limited partners' contributions of $14,932,000. It
is being repaid, without interest, in ten annual installments of $107,000, which
commenced on January 1, 1997, following the year the initial offering closed.

     The Formation Loan relating to the second  offering  ($30,000,000)  totaled
$2,272,000, which was 7.6% of limited partners' contributions of $29,993,000. It
is being repaid, without interest, in ten equal annual installments of $201,000,
which  commenced  on  January 1, 2001,  following  the year the second  offering
closed.  Additional  payments  on this loan were also made  during the  offering
period.

     The Formation  Loan relating to the third  offering  ($30,000,000)  totaled
$2,218,000,   which  was  7.4%  of  the  limited   partners'   contributions  of
$29,999,000. It is to be repaid, without interest, in ten annual installments of
$178,000,  which will commence on January 1, 2003.  Additional  payments on this
loan were also made during the offering stage.

     The Formation Loan relating to the fourth  offering  ($50,000,000)  totaled
$1,300,000  as of December  31,  2002,  which was 8.0% of the  limited  partners
contributions  of  $16,316,000  through  December  31,  2002.  An  equal  annual
repayment  schedule on this loan,  without  interest,  will commence in the year
subsequent to the closing of this offering.

     For the fourth  offering,  sales  commissions paid to brokers 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 full 9% commissions. The principal balance of the Formation Loan will
increase  as  additional  sales of units are  made.  The  amount  of the  annual
installment  payment to be made by Redwood  Mortgage Corp.,  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.




                                       29
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2002, 2001 and 2000


note 1 - Organizational and General (continued)

Sales commissions - formation loans (continued)

     The following  summarizes  Formation Loan transactions to December 31, 2002
(in thousands):
<TABLE>
<S>                            <C>            <C>                  <C>              <C>              <C>
                               Initial        Subsequent           Third            Fourth
                             Offering of      Offering of       Offering of      Offering of
                               $15,000          $30,000           $30,000          $50,000           Total
                             -------------   --------------    --------------    -------------    ------------
  Limited Partner
     Contributions                $14,932          $29,993           $29,999          $16,316         $91,239
                             =============   ==============    ==============    =============    ============

  Formation Loan made             $ 1,075          $ 2,272           $ 2,218          $ 1,300         $ 6,865
  Repayments to date                (595)            (661)             (211)                -         (1,467)
  Early withdrawal
    penalties applied                (50)             (63)              (28)                -           (141)
                             -------------   --------------    --------------    -------------    ------------
  Balance,
    December 31, 2002             $   430          $ 1,548           $ 1,979          $ 1,300         $ 5,257
                             =============   ==============    ==============    =============    ============

  Percent loaned                     7.2%             7.6%              7.4%             8.0%            7.5%
</TABLE>

     The Formation Loan has been deducted from limited  partners' capital in the
consolidated  balance  sheets.  As amounts are collected  from Redwood  Mortgage
Corp., the deduction from capital will be reduced.

Syndication costs

     The Partnership bears its own syndication  costs,  other than certain sales
commissions,  including legal and accounting  expenses,  printing costs, selling
expenses  and filing  fees.  Syndication  costs are  charged  against  partners'
capital and are being  allocated  to  individual  partners  consistent  with the
partnership agreement.

     Through  December  31,  2002,  syndication  costs  of  $2,071,000  had been
incurred by the Partnership with the following distribution (in thousands):

           Costs incurred                                                $2,071
           Early withdrawal penalties applied                              (72)
           Allocated to date                                            (1,401)
                                                                ---------------
           December 31, 2002 balance                                      $ 598
                                                                ===============

     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 $14,932,000.
Related expenditures  totaled $582,000 ($570,000  syndication costs plus $12,000
organization expense) or 3.9%.

     Syndication costs  attributable to the second offering  ($30,000,000)  were
limited to the lesser of 10% of the gross proceeds or $1,200,000 with any excess
being paid by the general  partners.  Gross proceeds of the second offering were
$29,993,000. Syndication costs totaled $598,000 or 2% of contributions.



                                       30
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2002, 2001 and 2000


note 1 - Organizational and General (continued)

Syndication costs (continued)

     Syndication  costs  attributable to the third offering  ($30,000,000)  were
limited to the lesser of 10% of the gross proceeds or $1,200,000 with any excess
being paid by the general  partners.  Gross  proceeds of the third offering were
$29,999,000. Syndication costs totaled $643,000 or 2% of contributions.

     Syndication costs attributable to the fourth offering ($50,000,000) will be
limited to the lesser of 10% of the gross proceeds or $2,000,000 with any excess
to be paid by the general partners. As of December 31, 2002, the fourth offering
had incurred syndication costs of $260,000 (1.6% of contributions).

Term of the partnership

     The  Partnership  is scheduled  to  terminate on December 31, 2032,  unless
sooner terminated as provided.


note 2 - Summary of Significant Accounting Policies

Basis of  presentation

     The Partnership's consolidated financial statements include the accounts of
its 100%-owned  subsidiary,  Russian Hill Property Company,  LLC ("Russian") and
its 66%-owned  subsidiary,  Stockton Street Property Company,  LLC ("Stockton").
All significant  intercompany  transactions and balances have been eliminated in
consolidation.

     Certain reclassifications,  not affecting previously reported net income or
total partner  capital,  have been made to the  previously  issued  consolidated
financial statements to conform to the current year classification.

Management estimates

     The  preparation of  consolidated  financial  statements in conformity with
accounting  principles  generally  accepted  in the  United  States  of  America
requires management to make estimates and assumptions about the reported amounts
of assets and liabilities  and disclosures of contingent  assets and liabilities
at the date of the consolidated financial statements and the reported amounts of
revenues  and  expenses  during  the  reported  period.  Such  estimates  relate
principally to the determination of the allowance for loan losses, including the
valuation  of  impaired  loans and the  valuation  of real estate held for sale.
Actual results could differ significantly from these estimates.

Loans, secured by deeds of trust

     Loans generally are stated at their  outstanding  unpaid principal  balance
with interest thereon being accrued by the effective interest method.

     Statement of Financial  Accounting  Standards Nos. 114 and 118 provide that
if the probable  ultimate  recovery of the carrying  amount of a loan,  with due
consideration  for the fair  value  of  collateral,  is less  than  amounts  due
according to the  contractual  terms of the loan  agreement and the shortfall in
the amounts due are not  insignificant,  the carrying  amount of the  investment
shall be reduced to the  present  value of future cash flows  discounted  at the
loan's effective interest rate. If a loan is collateral dependent,  it is valued
at the estimated fair value of the related collateral.




                                       31
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2002, 2001 and 2000


note 2 - Summary of Significant Accounting Policies (continued)

Loans, secured by deeds of trust (continued)

     If events and or changes in circumstances  cause management to have serious
doubts  about the  collectibility  of the  contractual  payments,  a loan may be
categorized  as impaired  and  interest  is no longer  accrued.  Any  subsequent
payments on impaired loans are applied to reduce the outstanding  loan balances,
including  accrued  interest and advances.  At December 31, 2002 and 2001, loans
categorized as impaired by the Partnership  were $0 and $710,000,  respectively,
with a reduction in the carrying  value of the impaired loans of $0 and $88,000,
respectively.  The  reduction  in the carrying  value of the  impaired  loans is
included  in the  allowance  for loan  losses.  The  average  impaired  recorded
investment  in impaired  loans was  $355,000  for 2002 and 2001,  and was $0 for
2000.

     At December 31, 2002, the Partnership had twenty loans, past due 90 days or
more  totaling  $28,650,000,  of which  $9,454,500  had been brought  current in
February,  2003.  The  Partnership  does not consider these loans to be impaired
because there is sufficient  collateral to cover the amount  outstanding  to the
Partnership and is still accruing  interest on these loans. As presented in Note
11 to the consolidated financial statements, the average loan to appraised value
of  security at the time the loans were  consummated  for loans  outstanding  at
December 31, 2002 and 2001 was 60.61% and 59.67%,  respectively.  When loans are
considered  impaired,  the  allowance  for loan losses is updated to reflect the
change in the valuation of  collateral  security.  However,  a low loan to value
ratio has the tendency to minimize reductions for impairment.

     During 2002, the Partnership  restructured three previously  impaired loans
into two new loans  with a lower  interest  rate.  The amount  restructured  was
$1,090,000.  Had the loans been current in accordance  with their original terms
and had been outstanding  throughout the entire year, the Partnership would have
recognized  gross  interest  income of $85,000 for the year ended  December  31,
2002. The Partnership  recognized $61,000 of interest income on the restructured
loans for the year ended December 31, 2002.

Allowance for loan losses

     Loans and the related accrued interest, late fees and advances are analyzed
on a continuous  basis for  recoverability.  Delinquencies  are  identified  and
followed as part of the loan system.  Delinquencies  are  determined  based upon
contractual  terms.  A provision is made for loan losses to adjust the allowance
for loan losses to an amount  considered by management to be adequate,  with due
consideration  to  collateral  values,  to provide for  unrecoverable  loans and
receivables,  including impaired loans, other loans, accrued interest, late fees
and advances on loans and other accounts receivable (unsecured). The Partnership
charges  off  uncollectible  loans  and  related  receivables  directly  to  the
allowance account once it is determined that the full amount is not collectible.

     The  composition  of the  allowance for loan losses as of December 31, 2002
and 2001 was as follows (in thousands):


                                                  2002               2001
                                            ---------------    ---------------
        Impaired loans                             $     -            $    88
        Specified loans                                120                  -
        General                                      2,901              2,155
        Unsecured loans                                  -                  4
                                            ---------------    ---------------
                                                   $ 3,021            $ 2,247
                                            ===============    ===============




                                       32
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2002, 2001 and 2000


note 2 - Summary of Significant Accounting Policies (continued)

Allowance for loan losses (continued)

     Activity in the allowance for loan losses is as follows for the years ended
December 31:

                                      2002            2001             2000
                                  -------------   -------------    -------------
   Beginning balance                    $ 2,247         $ 1,345           $  834
   Restructured loans                        11               -                -
   Additions charged to income              780             873              469
   Write-offs                              (17)              29               42
                                  -------------   -------------    -------------
                                        $ 3,021         $ 2,24           $ 1,345
                                  =============   =============    =============

Cash and cash equivalents

     The  Partnership  considers all highly liquid  financial  instruments  with
maturities  of  three  months  or  less  at the  time  of  purchase  to be  cash
equivalents.

Real estate held for sale

     Real estate held for sale includes real estate acquired through foreclosure
and is stated  at the lower of the  recorded  investment  in the loan,  plus any
senior  indebtedness,  or at the property's estimated fair value, less estimated
costs  to  sell.  During  2002,  there  were  two  properties  acquired  by  the
Partnership.   Both  of  these   properties   are  held  in  limited   liability
corporations, which are majority owned by the Partnership (see Note 5).

     In accordance  with  Statement of Financial  Accounting  Standards No. 144,
"Accounting  for the  Impairment  or  Disposition  of Long  Lived  Assets,"  the
Partnership  periodically compares the carrying value of real estate to expected
undiscounted  future cash flows for the purpose of assessing the  recoverability
of the recorded amounts.  If the carrying value exceeds future undiscounted cash
flows, the assets are reduced to estimated fair value. The Partnership increased
the  allowance  for losses on real estate  held for sale by $500,000  during the
year ended December 31, 2002.

Loan origination fees

     The Partnership capitalizes fees for obtaining bank financing. The fees are
amortized over the life of the financing using the straight-line method.

Income taxes

     No  provision  for federal and state income taxes (other than an $800 state
minimum tax) is made in the consolidated financial statements since income taxes
are the obligation of the partners if and when income taxes apply.

Net income per $1,000 invested

     Amounts  reflected  in the  statements  of income as net  income per $1,000
invested by limited  partners  for the entire  period are amounts  allocated  to
limited  partners  who held  their  investment  throughout  the  period and have
elected to either  leave their  earnings to compound or have  elected to receive
periodic distributions of their net income.  Individual income is allocated each
month  based on the  limited  partners'  pro rata  share of  partners'  capital.
Because the net income percentage varies from month to month, amounts per $1,000
will vary for those  individuals  who made or  withdrew  investments  during the
period, or selected other options.



                                       33
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2002, 2001 and 2000


note 2 - Summary of Significant Accounting Policies (continued)

Late fee revenue

     Late fees are generally  charged at 6% of the monthly  installment  payment
past due. During 2002, 2001 and 2000, late fee revenue of $114,000,  $99,000 and
$66,000,  respectively,  was recorded.  The  Partnership has a recorded late fee
receivable at December 31, 2002 and 2001 of $133,000 and $80,000,  respectively.
An allowance for uncollectible  late fees of $58,000 and $0 at December 31, 2002
and 2001, respectively is reflected in the allowance for loan losses.

Recently issued accounting pronouncements

     In January 2003,  the Financial  Accounting  Standards  Board (FASB) issued
FASB  Interpretation  46  "Consolidation  of  Variable  Interest  Entities,   an
Interpretation of ARB No. 51" (FIN 46). FIN 46 is effective  immediately for any
variable  interest  entities  created  after  January 31, 2003 and is  effective
beginning in the third quarter of 2002 to any variable interest entities created
prior to the issuance of the interpretation.  FIN 46 provides a new framework to
identify  variable  interest  entities  and  determining  when an entity  should
include the assets,  liabilities,  non-controlling  interests and the results of
activities  of a  variable  interest  entity in its  financial  statements.  The
implementation  of FIN 46 is not anticipated to have any  significant  effect on
the Partnership.

note 3 - Other Partnership Provisions

     The Partnership is a California limited partnership. The rights, duties and
powers of the general and limited  partners of the  Partnership  are governed by
the limited  partnership  agreement and Sections 15611 et seq. of the California
Corporations Code.

     The general partners are in complete  control of the Partnership  business,
subject to the voting rights of the limited partners on specified  matters.  Any
one of the general  partners acting alone has the power and authority to act for
and bind the Partnership.

     A majority of the outstanding  limited  partnership  interests may, without
the permission of the general partners,  vote to: (i) terminate the Partnership,
(ii) amend the limited  partnership  agreement,  (iii) approve or disapprove the
sale of all or  substantially  all of the  assets  of the  Partnership  and (iv)
remove or replace one or all of the general partners.

     The  approval  of all  limited  partners is required to elect a new general
partner to continue the Partnership business where there is no remaining general
partner  after a general  partner  ceases to be a general  partner other than by
removal.

Applicant status

     Subscription  funds received from  purchasers of Partnership  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 - 90 days,  purchasers'  subscriptions  will remain
irrevocable  and will earn interest at money market rates,  which are lower than
the anticipated return on the Partnership's loan portfolio.

     During 2002,  2001 and 2000,  interest  totaling  $1,000,  $800 and $5,000,
respectively,  were credited to partners in applicant status. As loans were made
and partners were  transferred to regular status to begin sharing in income from
loans  secured by deeds of trust,  the interest  credited was either paid to the
investors  or  transferred   to  partners'   capital  along  with  the  original
investment.




                                       34
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2002, 2001 and 2000


note 3 - Other Partnership Provisions (continued)

Election to receive monthly, quarterly or annual distributions

     At subscription,  investors elect to receive  monthly,  quarterly or annual
distributions of earnings allocations, or to allow earnings to compound. Subject
to certain  limitations,  a  compounding  investor may  subsequently  change his
election, but an investor's election to have cash distributions is irrevocable.

Profits and losses

     Profits and losses are allocated  among the limited  partners  according to
their respective capital accounts monthly after 1% of the profits and losses are
allocated to the general partners.

Liquidity, capital withdrawals and early withdrawals

     There are substantial  restrictions on transferability of Partnership units
and accordingly an investment in the Partnership is non-liquid. 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.

     After five years from the date of purchase of the units,  limited  partners
have the  right  to  withdraw  from the  Partnership  on an  installment  basis.
Generally this is done over a five-year period in twenty quarterly installments.
Once a limited  partner has been in the  Partnership  for the minimum  five-year
period,  no penalty will be imposed if  withdrawal  is made in twenty  quarterly
installments  or longer.  Notwithstanding  the five-year (or longer)  withdrawal
period,  the general  partners may liquidate all or part of a limited  partner's
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. This withdrawal is subject to a 10% early withdrawal  penalty  applicable
to any sums withdrawn prior to the time when such sums could have been withdrawn
without penalty.

     The Partnership will not establish a reserve from which to fund withdrawals
and,  accordingly,  the  Partnership's  capacity  to return a limited  partner's
capital is restricted to the availability of Partnership cash flow.

Guaranteed interest rate for offering period

     For the first three offerings,  the general partners guaranteed 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%. The interest rate was guaranteed  during the period commencing with
the day a limited partner was admitted to the Partnership and ended three months
after the initial through third offering  termination  date,  which in all cases
was August 2002.  Through August 2002,  actual earnings  exceeded the guaranteed
amount for each month.






                                       35
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2002, 2001 and 2000


note 4 - General Partners and Related Parties

     The following are  commissions  and/or fees,  which are paid to the general
partners.

Mortgage brokerage commissions

     For fees in connection with the review, selection, evaluation,  negotiation
and extension of loans, the Partnership may collect an amount  equivalent to 12%
of the loaned amount until 6 months after the termination  date of the offering.
Thereafter, loan brokerage commissions (points) will be limited to an amount not
to exceed 4% of the  total  Partnership  assets  per  year.  The loan  brokerage
commissions  are paid by the  borrowers  and  thus,  are not an  expense  of the
Partnership.  In 2002,  2001 and 2000,  loan brokerage  commissions  paid by the
borrowers were $996,000, $1,156,000 and $1,878,000, respectively.

Mortgage servicing fees

     Monthly  mortgage  servicing  fees of up to 1/8 of 1% (1.5%  annual) of the
unpaid  principal  are paid to  Redwood  Mortgage  Corp.,  based  on the  unpaid
principal balance of the loan portfolio,  or such lesser amount as is reasonable
and customary in the geographic area where the property securing the mortgage is
located. Once a loan is categorized as impaired,  mortgage servicing fees are no
longer accrued thereon. Additional service fees are recorded upon the receipt of
any  subsequent   payments  on  impaired  loans.   Mortgage  servicing  fees  of
$1,098,000,  $552,000  and  $506,000  were  incurred  for  2002,  2001 and 2000,
respectively.  The  Partnership  has a payable to  Redwood  Mortgage  Corp.  for
servicing  fees of  $294,000  and  $109,000  at  December  31,  2002  and  2001,
respectively.

Asset management fee

     The general  partners  receive monthly fees for managing the  Partnership's
loan  portfolio and operations up to 1/32 of 1% of the "net asset value" (3/8 of
1% annual).  Asset  management  fees of  $325,000,  $158,000  and  $61,000  were
incurred for 2002, 2001 and 2000, respectively.

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 the general partners.

Operating expenses

     Redwood Mortgage Corp., a general partner, is reimbursed by the Partnership
for  all  operating  expenses  incurred  by it on  behalf  of  the  Partnership,
including without limitation,  out-of-pocket general and administration expenses
of the Partnership,  accounting and audit fees, legal fees and expenses, postage
and  preparation  of reports to limited  partners.  During 2002,  2001 and 2000,
operating expenses totaling $266,000,  $241,000 and $114,000 respectively,  were
reimbursed to Redwood Mortgage Corp.

Contributed capital

     The general  partners  jointly or severally are to contribute 1/10 of 1% of
limited  partners'  contributions  in cash  contributions  as proceeds  from the
offerings  are received from the limited  partners.  As of December 31, 2002 and
2001,  Gymno  Corporation,  a general  partner,  had capital in accordance  with
Section 4.02(a) of the Partnership Agreement.





                                       36
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2002, 2001 and 2000


note 5 - Real Estate Held for Sale

     During 2002, the  Partnership  contributed  its interests in two foreclosed
real properties into two limited liability companies ("LLCs"). The Partnership's
investments  in the  LLCs are  reflected  at the  lower  of cost or fair  value,
including estimated costs of property disposition.

The following schedule reflects the cost of the LLCs' properties and recorded
reductions to estimated fair values:

        Costs of properties                                      $ 9,786
        Reduction in value                                         (500)
                                                            -------------
        Real estate held for sale                                $ 9,286
                                                            =============

Russian

     During 2002, a  single-family  residence  that secured a  Partnership  loan
totaling  $4,402,000,  including accrued interest and advances,  was transferred
via a  statutory  warranty  deed to a new entity  named  Russian  Hill  Property
Company, LLC ("Russian").  Russian was formed by the Partnership to complete the
development and sale of the property. The assets and liabilities of Russian have
been  consolidated  into the  accompanying  consolidated  balance  sheets of the
Partnership.  Costs related to the sale of this property are being  capitalized;
thus,  there was no income or expense  recognized by Russian  during 2002. As of
December 31, 2002, the Partnership had advanced approximately $37,000 to Russian
for sales costs.  At December 31, 2002, the  Partnership's  total  investment in
Russian was $3,913,000, net of a valuation allowance of $500,000.

Stockton

     During 2002, six condominium units that secured a Partnership loan totaling
$2,163,000,  including  accrued  interest and advances,  were  transferred via a
statutory  warranty deed to a new entity named Stockton Street Property Company,
LLC  ("Stockton").  In  addition,  senior  debt was  assumed by  Stockton on the
property in the amount of  $1,789,000  (see Note 7).  Stockton was formed by the
Partnership  and  an  affiliate  to  complete   development  and  sales  of  the
condominium  units.  The  Partnership  is co-manager of Stockton  along with the
other member and is to receive 66% of the profits or losses. As such, the assets
and  liabilities  of  Stockton  have  been  consolidated  into the  accompanying
consolidated  balance  sheets of the  Partnership.  Development  costs are being
capitalized;  thus, there was no income or expense recognized by Stockton during
2002. As of December 31, 2002, advances of approximately  $238,000 were made for
construction and other related development costs and $87,000 of interest expense
was  capitalized.  At December 31, 2002, the  Partnership's  total investment in
Stockton was $5,373,000.


note 6 - Bank Line of Credit

     The  Partnership has a bank line of credit expiring July 10, 2004, of up to
$20,000,000 at prime secured by its loan  portfolio.  The  outstanding  balances
were $0 and  $11,400,000  at  December  31,  2002 and  2001,  respectively.  The
interest rate was 4.25%  (prime) at December 31, 2002.  The line of credit calls
for certain  financial  covenants.  The Partnership was in compliance with these
covenants for the years ended December 31, 2002 and 2001.

     Should the  general  partners  choose not to renew the line of credit,  the
balance then outstanding would be converted to a three-year term loan.





                                       37
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2002, 2001 and 2000


note 7 - Note Payable

     The  Partnership  assumed a bank loan of $1,789,000 in connection  with the
foreclosure on a property (see Note 5). As of December 31, 2002,  $1,782,000 was
outstanding on this note. The loan is secured by the property and bears interest
at 5.68% at December 31, 2002.

Future maturities on the note payable are as follows (in thousands):

                      2003                      $   22
                      2004                          23
                      2005                          24
                      2006                          26
                      2007                          27
                   Thereafter                    1,660
                                           ------------
                                               $ 1,782
                                           ============


note 8 - Income Taxes

     The following  reflects a reconciliation  of partners' capital reflected in
the consolidated  financial  statements to the tax basis of Partnership  capital
(in thousands):

                                                     2002             2001
                                                 -------------    --------------
   Partners' capital per consolidated
      financial statements                            $ 95,777          $ 73,754
   Non-amortized syndication costs                         598               403
   Allowance for loan losses                             3,521             2,247
   Formation loans receivable                            5,257             4,126
                                                 -------------    --------------

   Partners' capital - tax basis                      $105,153          $ 80,530
                                                 =============    ==============

     In 2002 and 2001, approximately 47% and 48% of taxable income was allocated
to  tax-exempt  organizations  (i.e.,  retirement  plans),  respectively.   Such
organizations generally do not have to file income tax returns.


note 9 - Fair Value of Financial Instruments

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

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

     (b)  Secured  loans  carrying  value was  $83,650,000  and  $82,790,000  at
December  31,  2002 and 2001,  respectively.  The fair  value of these  loans of
$84,976,000 and  $84,000,000,  respectively,  was estimated based upon projected
cash flows  discounted at the estimated  current interest rates at which similar
loans would be made.  The  applicable  amount of the  allowance  for loan losses
along  with  accrued  interest  and  advances  related  thereto  should  also be
considered in evaluating the fair value versus the carrying value.



                                       38
<PAGE>




                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2002, 2001 and 2000


note 10 - Non-cash Transactions

     During 2002, the  Partnership  foreclosed on two  properties  (see Note 5),
which  resulted in an increase in real estate held for sale and notes payable of
$8,354,000  and  $1,789,000,  respectively  and a decrease in loans  receivable,
accrued   interest  and   advances  of   $5,986,000,   $383,000  and   $196,000,
respectively.

     During 2002, the Partnership  restructured  three loans that resulted in an
increase to loans  receivable  and the allowance for loan losses of $345,000 and
$11,000,  respectively  and a  decrease  to accrued  interest  and  advances  of
$302,000 and $32,000, respectively.


note 11 - Asset Concentrations and Characteristics

     The loans are secured by recorded deeds of trust.  At December 31, 2002 and
2001,  there were 70 and 76 secured loans  outstanding,  respectively,  with the
following characteristics (dollars in thousands):

<TABLE>

<S>                                                                         <C>                <C>
                                                                            2002               2001
                                                                       ---------------    ---------------
  Number of secured loans outstanding                                           70                 76
  Total secured loans outstanding                                         $ 83,650            $82,790

  Average secured loan outstanding                                         $ 1,195            $ 1,089
  Average secured loan as percent of total                                   1.43%              1.32%
  Average secured loan as percent of partners' capital                       1.25%              1.48%

  Largest secured loan outstanding                                         $ 4,943            $ 7,000
  Largest secured loan as percent of total                                   5.91%              8.46%
  Largest secured loan as percent of partners' capital                       5.16%              9.49%

  Number of counties where security is located (all California)                 15                 12
  Largest percentage of secured loans in one county                         27.22%             41.40%
  Average secured loan to appraised value of security                       60.61%             59.67%
     at time loan was consummated

  Number of secured loans in foreclosure status                                  6                  3
  Amount of secured loans in foreclosure                                   $ 4,029            $ 1,051

</TABLE>



                                       39
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2002, 2001 and 2000


note 11 - Asset Concentrations and Characteristics (continued)

     The following  secured loan  categories  were held at December 31, 2002 and
2001 (in thousands):
<TABLE>

<S>                                                                     <C>                <C>
                                                                        2002               2001
                                                                   ---------------     --------------
     First trust deeds                                                   $ 46,117           $ 42,984
     Second trust deeds                                                    30,930             34,641
     Third trust deeds                                                      6,603              5,165
                                                                   ---------------     --------------
           Total loans                                                     83,650             82,790
     Prior liens due other lenders                                         79,846             67,945
                                                                   ---------------     --------------

           Total debt                                                   $ 163,496          $ 150,735
                                                                   ===============     ==============

     Appraised property value at time of loan                           $ 269,773          $ 252,604

     Total investments as a percent of appraisals                          60.61%             59.67%

     Investments by type of property
           Owner occupied homes                                          $ 12,854           $ 11,019
           Non-owner occupied homes                                        23,720             26,523
           Apartments                                                       6,572              7,337
           Commercial                                                      40,504             37,911
                                                                   ---------------     --------------

                                                                         $ 83,650           $ 82,790
                                                                   ===============     ==============
</TABLE>

The interest rates on the loans range from 7.50% to 14.00% at December 31, 2002.

     Scheduled  maturity  dates of secured  loans as of December 31, 2002 are as
follows:

          Year Ending December 31,
     ------------------------------------
                    2003                                $44,101
                    2004                                 12,912
                    2005                                 11,879
                    2006                                  1,723
                    2007                                  8,198
                 Thereafter                               4,837
                                                  --------------
                                                        $83,650
                                                  ==============


     The  scheduled   maturities   for  2002  include   fifteen  loans  totaling
$18,765,000  (22.4%),  which are past  maturity at December 31,  2002.  Interest
payments on thirteen of these loans were delinquent. Two of these loans totaling
$7,000,000 were paid off subsequent to year-end.





                                       40
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2002, 2001 and 2000


note 11 - Asset Concentrations and Characteristics (continued)

     Cash  deposits at December  31, 2002 of  $7,370,000  were in one bank.  The
balances   exceeded  FDIC  insurance   limits  (up  to  $100,000  per  bank)  by
approximately  $7,270,000.  This bank is the same financial institution that has
provided the  Partnership  with the $20,000,000  maximum line of credit.  As and
when deposits in the Partnership's bank accounts increase  significantly  beyond
the insured limit,  the funds are either placed on new loans or used to pay-down
the line of credit balance.


note 12 - Commitments and Contingencies

Construction loans

     The  Partnership  has  construction  loans,  which are at various stages of
completion.  The  Partnership  has approved  the  borrowers up to a maximum loan
balance; however, disbursements are made during completion phases throughout the
construction   process.   At  December  31,  2002,   there  was   $2,338,000  of
undistributed construction loans.

Workout agreements

     The Partnership has negotiated  various workout  agreements with borrowers.
The  Partnership  is not obligated to fund  additional  money as of December 31,
2002.  There  are  approximately  six  loans  totaling   $5,209,000  in  workout
agreements as of December 31, 2002.

Legal proceedings

     The  Partnership is involved in various legal actions arising in the normal
course of business.  In the opinion of management,  such matters will not have a
material effect upon the financial position of the Partnership.



                                       41
<PAGE>


                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2002, 2001 and 2000


note 13 - Selected Financial Information (Unaudited)
<TABLE>

                                                                      Calendar Quarter
                                           ------------------------------------------------------------------------
                                              (in thousands, except for Net income per $1,000 invested amounts)
<S>                                          <C>            <C>            <C>            <C>             <C>
                                             First          Second         Third          Fourth          Annual
                                           -----------    -----------    -----------   -------------    ------------
Revenues
    2002                                       $2,602         $2,515         $3,165         $ 3,266         $11,548
    2001                                        2,151          2,195          2,265           2,425           9,035
    2000                                        1,094          1,373          1,884           1,998           6,349

Expenses
    2002                                          799            665          1,311           1,287           4,062
    2001                                          802            711            676             753           2,942
    2000                                          164            337            763             798           2,062


Net income allocated to general partners
    2002                                           18             18             19              20              75
    2001                                           13             14             15              17              61
    2000                                            9             10             11              12              43

Net income allocated to limited partners
    2002                                        1,784          1,831          1,836           1,960           7,411
    2001                                        1,335          1,469          1,573           1,655           6,032
    2000                                          920          1,026          1,110           1,188           4,244

Net income per $1,000 invested
    Where income is reinvested
         2002                                      21             21             21              24              87
         2001                                      22             22             22              24              90
         2000                                      21             21             21              23              86
    Where income is withdrawn
         2002                                      21             21             21              21              84
         2001                                      20             22             22              20              86
         2000                                      20             21             21              21              83

</TABLE>

note 14 -Subsequent Events

     Subsequent to year-end and through the date of this report, the Partnership
has received  $5,799,000 of new investor money for the current  offering and had
admitted $2,379,000 of partners in applicant status into the Partnership.





                                       42
<PAGE>



SCHEDULE II

                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                        VALUATION AND QUALIFYING ACCOUNTS
                                December 31, 2002
                                 (in thousands)
<TABLE>
<S>     <C>                             <C>               <C>             <C>              <C>                <C>

       Col A                            Col B                     Col. C                   Col. D             Col E
    Description                       Balance at                  Additions               Deductions        Balance at
                                                       -------------------------------
                                      Beginning           Charged to      Charged to                      End of Period
                                      of Period            Costs &          Other
                                                           Expenses        Accounts
------------------------------------------------------------------------------------------------------------------------

Year Ended December 31, 2002

Deducted from asset accounts

Allowance for loan losses                $   2,247         $    780        $    11(a)      $   (17)(b)        $  3,021

Cumulative write-down of
   real estate held for sale (REO)               -              500              -                -                500
                                     -------------- ---------------- ---------------  --------------   ----------------
                                         $   2,247        $   1,280        $    11         $   (17)(b)        $  3,521
                                     ============== ================ ===============  =============    ================

</TABLE>

      Note (a) - Represents restructuring of loans.

      Note (b) - Represents write-offs of loans.



                                       43
<PAGE>



SCHEDULE IV

                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                          mortgage loans on real estate
                         rule 12-29 loans on real estate
                                December 31, 2002
                                 (in thousands)
<TABLE>
<S>       <C>          <C>          <C>         <C>        <C>              <C>         <C>         <C>       <C>

 Col. A   Col. B       Col. C       Col. D      Col. E     Col. F           Col. G      Col. H      Col. I    Col. J
  Desc.  Interest       Final      Periodic     Prior   Face Amt of      Carrying Amt.  Pr. Amt.   Type of  Geog. County
           Rate       Maturity     Payment      Liens     Mortgage         Mortgage    Subject to    Lien     Location
                        Date        Terms                Orig. Amt        Investment   Delinquency
Comm.     14.00%      04/01/06      $   12     $    -      $   700         $   399       $     -      1st   San Francisco
Res.      13.50%      07/01/00           7          -          579             579           143      1st   San Francisco
Comm.     12.50%      10/01/02           4          -          150              27             -      1st   San Francisco
Comm.     11.00%      10/01/07           6          -          650             631             -      1st   San Francisco
Res.      18.00%      03/01/00          11        579          951             762           233      2nd   San Francisco
Res.      14.00%      02/01/01          11          -          910             910           255      1st   San Francisco
Res.      11.50%      12/01/00          23        910          953           2,331           574      2nd   San Francisco
Res.      12.00%      05/01/03          12          -        1,210           1,210           194      1st   Marin
Land      11.00%      01/01/01          13        363        1,800           1,392            92      2nd   Stanislaus
Land      11.00%      07/01/01          24        358        2,600           2,600           167      2nd   Stanislaus
Res.      10.25%      09/01/09           8        668          850             834             -      2nd   Santa Clara
Apts.     12.50%      11/15/02           4         47           39             304             -      2nd   Contra Costa
Land      11.00%      11/01/00           2      2,968          222             190            51      3rd   Stanislaus
COMM.     11.50%      02/01/05           4        493          400             396             -      2nd   San Francisco
Land      11.50%      07/01/01           5      2,600          476             476            32      2nd   Stanislaus
Comm.     12.00%      12/01/01          28          -        4,970           4,495             -      1st   Los Angeles
Comm.     10.50%      06/01/06           7          -          775             764             -      1st   San Mateo
Apts.     12.00%      08/01/03          40          -        4,000           4,000           480      1st   San Francisco
Comm.     12.00%      05/01/07           9      2,916          799             796             -      2nd   Santa Clara
Res.      12.00%      03/01/01          13          -        1,325           1,325           133      1st   Marin
Apts.     12.50%      04/01/02           1      4,000          290             289            33      2nd   San Francisco
Comm.     13.00%      11/01/02           2        310          205             205            16      2nd   Alameda
Comm.     12.50%      01/01/04           0        845          692             692             -      2nd   San Francisco
Res.      12.50%      11/01/02          11          -        1,675           1,647             -      1st   Napa
Comm.     11.50%      04/01/02          46          -        4,750           4,750           182      1st   San Francisco
Comm.     12.00%      04/01/02          23      4,750        2,250           2,250           135      2nd   San Francisco
Res.      12.00%      05/01/03          16      7,741        4,117           1,524             -      3rd   Santa Clara
Res.      11.50%      05/01/02           6          -          606             604             -      1st   Marin
Apts.     11.50%      06/01/06           2          -          182             180             -      1st   Merced
Res.      13.25%      12/01/02          20        582        2,188           2,188            98      2nd   Santa Clara
Res.      13.25%      01/01/03          20          -        3,516           3,515             -      1st   Napa
Comm.     11.50%      08/01/06           4          -          350             310             -      1st   San Mateo
Res.      11.00%      08/01/03           7        665          800             800             -      2nd   Santa Clara
Res.      13.25%      03/01/03          14          -        3,368           2,998             -      1st   San Mateo

</TABLE>


                                       44
<PAGE>



SCHEDULE IV (continued)
<TABLE>
<S>       <C>         <C>          <C>          <C>          <C>          <C>            <C>       <C>        <C>
 Col. A   Col. B      Col. C       Col. D       Col. E       Col. F       Col. G         Col. H    Col. I     Col. J
  Desc.  Interest     Final       Periodic      Prior     Face Amt of  Carrying Amt    Pr. Amt.   Type of  Geog. County
           Rate      Maturity     Payment       Liens      Mortgage      Mortgage      Subject to   Lien      Location
                       Date        Terms                  Orig. Amt     Investment     Delinquency
Res.      11.00%     11/01/04         4        1,132           423            89             -      3rd    San Mateo
Res.      10.25%     11/01/04        13        2,484         1,500         1,499             -      2nd    San Mateo
Res.      11.50%     12/01/06         1          167            70            70             -      2nd    Stanislaus
Res.      10.25%     12/01/04         3          978           300           300             -      2nd    San Francisco
Comm.     12.50%     01/01/03        10        7,000         2,455         2,455           102      3rd    San Francisco
Land      9.50%      02/01/04         8            -           987           987             -      1st    Santa Clara
Res.      11.00%     02/01/04         6           65           708           708             -      2nd    Lake
Apts.     11.00%     03/01/07         1          179           100            99             -      2nd    Alameda
Land      12.50%     03/01/05         3            -           270           270             -      1st    San Diego
Comm.     11.00%     03/01/07        16            -         1,600         1,592             -      1st    Alameda
Res.      10.00%     12/01/02         3            -           318           316            32      1st    San Mateo
Comm.     7.50%      02/28/07         5            -           770           770             -      1st    Santa Clara
Comm.     7.50%      02/28/07         2            -           320           320             -      1st    Alameda
Res.      10.25%     04/01/05        14            -         1,650         1,650             -      1st    Napa
Apts.     10.50%     12/31/02        15       15,440         1,700         1,700             -      2nd    San Mateo
Comm.     13.00%     06/01/05        41       10,000         4,550         4,943             -      2nd    Santa Clara
Comm.     10.50%     08/01/04        32            -         3,600         3,600             -      1st    Santa Clara
Res.      10.25%     08/01/04         4        1,648           263           256             -      2nd    Santa Clara
Res.      10.50%     08/01/07        18        3,500         2,000         1,997             -      2nd    San Francisco
Res.      13.25%     02/01/04         2          638           431           184             -      2nd    Santa Clara
Res.      10.50%     09/01/07         2        1,468           805           196             -      3rd    Santa Clara
Res.      11.50%     09/01/05        12            -         1,300         1,300             -      1st    Alameda
Res.      10.50%     09/01/05         3          494           346           346             -      2nd    Alameda
Res.      10.50%     09/01/05         2          710           269           269             -      2nd    San Mateo
Res.      11.00%     09/01/04         7            -           493           747             -      1st    Stanislaus
Res.      10.25%     10/01/04        11        1,102         1,250         1,250             -    1st&3rd  Santa Clara
Res.      10.50%     10/01/05        16            -         1,781         1,781             -      1st    San Mateo
Comm.     10.50%     10/01/07         4            -           441           441             -      1st    San Mateo
Res.      10.50%     10/01/07         2          245           159           207             -      2nd    San Mateo
Res.      12.00%     07/01/03         4        2,450           368           368             -      2nd    San Mateo
Land      11.25%     06/01/04        23            -         2,500         2,500             -      1st    San Mateo
Comm.     11.25%     12/01/07         9          718           900           900             -    1st&3rd  El Dorado
Res.      10.00%     11/01/05        11          500         1,320         1,320             -      2nd    Napa
Comm.     10.00%     12/01/07         2        1,802           250           250             -      2nd    Sonoma
Res.      12.75%     07/01/04         1          749           650            99             -      2nd    Santa Clara
Comm.     10.00%     01/01/08        13            -         1,500         1,500             -      1st    Riverside
                                ------------------------------------------------------------------
Total                            $  731     $ 79,846      $ 87,692      $ 83,650      $  2,951
                                ==================================================================
</TABLE>




                                       45
<PAGE>



SCHEDULE IV

                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                          mortgage loans on real estate
                   rule 12-29 loans on real estate (continued)
                                December 31, 2002
                                 (in thousands)

Reconciliation of carrying amount (cost) of loans at close of periods
<TABLE>

                                                                  Year ended December 31,
                                                   ------------------------------------------------------
                                                         2002               2001               2000
                                                   -----------------  -----------------   ---------------
<S>                                                       <C>               <C>               <C>
   Balance at beginning of year                           $  82,790         $   68,571        $   35,693

   Additions during period:
      New loans                                              32,601             47,512            49,289
      Other                                                   1,060                  -               135
                                                   -----------------  -----------------   ---------------
        Total Additions                                      33,661             47,512            49,424
                                                   -----------------  -----------------   ---------------

   Deductions during period:
      Collections of principal                               26,083             33,239            16,546
      Foreclosures                                            5,986                  -                 -
      Cost of loans sold                                          -                  -                 -
      Amortization of premium                                     -                  -                 -
      Other                                                     732                 54                 -
                                                   -----------------  -----------------   ---------------
        Total Deductions                                     32,801             33,293            16,546
                                                   -----------------  -----------------   ---------------

   Balance at close of year                               $  83,650          $  82,790         $  68,571
                                                   =================  =================   ===============
</TABLE>





                                       46
<PAGE>



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

None


                                    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 three general partners, one of whom is an individual,
Michael R. Burwell.  The other two general  partners are Gymno  Corporation  and
Redwood  Mortgage  Corp.  Both are California  corporations,  formed in 1986 and
1978,  respectively.  Mr.  Burwell  is one  of the  two  shareholders  of  Gymno
Corporation,  a  California  corporation,  on an equal  (50-50)  basis.  Redwood
Mortgage  Corp.  is a  subsidiary  of the Redwood  Group Ltd.,  whose  principal
stockholder is D. Russell Burwell, the other shareholder of Gymno Corporation.


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   (S-11)  dated   October  30,  2002,   page  5,  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, 2002. All
such compensation is in compliance with the guidelines and limitations set forth
in the prospectus.
<TABLE>
<S>  <C>                                    <C>                                                         <C>

     Entity Receiving Compensation          Description of Compensation and Services Rendered           Amount
     ----------------------------------------------------------------------------------------------------------------
     I. Redwood Mortgage Corp.              Mortgage Servicing Fee for servicing loans.....................$1,098,000
         (General Partner)

     General Partners &/or Affiliates       Asset Management Fee for managing assets.........................$325,000

     General Partners                       1% interest in profits............................................$75,000
                                            Less allocation of syndication costs...............................$2,000
                                                                                                    -----------------
                                                                                                              $73,000

     General Partners &/or Affiliates       Portion of early withdrawal penalties applied to
                                            reduce Formation Loan.............................................$16,000

</TABLE>



                                       47
<PAGE>




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

<S><C>                         <C>                                                                            <C>
   Redwood Mortgage Corp.      Mortgage Brokerage Commissions for services in
                               connection with the review, selection, evaluation,
                               negotiation, and extension of the loans paid by the
                               borrowers and not by the Partnership...........................................$996,000

   Redwood Mortgage Corp.      Processing and Escrow Fees for services in borrowers
                               connection with notary, document preparation, credit
                               investigation, and escrow fees payable by the
                               and not by the Partnership......................................................$23,000

   Gymno Corporation           Reconveyance Fee.................................................................$4,000
</TABLE>


     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
CONSOLIDATED  STATEMENTS OF INCOME . . . . . . . . . . . . . . . . . . .$266,000


     Item 12 - Security Ownership of Certain Beneficial Owners and Management

     The  general  partners  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  footnotes  3  and  4 of  the  Notes  to  Consolidated  Financial
Statements in Part II item 8, which describes related party fees and data.

     Also refer to the Prospectus dated October 30, 2002,  (incorporated  herein
by reference) on page 5 "Compensation of General Partners and Affiliates".


Item 14 - Controls and Procedures

     Based  on  their  evaluation  of the  effectiveness  of  the  Partnership's
disclosure  controls  and  procedures,  as of a date within 90 days prior to the
date of the filing of this report,  the President and Chief Financial Officer of
Gymno  Corporation  and  Redwood  Mortgage  Corp.,  the  Partnership's   general
partners,  have  concluded  that  the  Partnership's   disclosure  controls  and
procedures are effective and sufficient to ensure that the  Partnership  record,
process,  summarize,  and report  information  required to be  disclosed  in its
periodic reports filed under the Securities Exchange Act within the time periods
specified by the Securities and Exchange Commission's rules and forms.

     Subsequent  to the  date  of such  evaluation,  there  have  not  been  any
significant  changes in the Partnership's  internal controls or in other factors
that could significantly affect these controls,  including any corrective action
with regard to significant deficiencies and material weaknesses.



                                       48
<PAGE>



                                     Part IV


Item 15 - Exhibits, Financial Statements 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 - Consolidated Financial Statements.

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

         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



     All of these exhibits were previously filed as the exhibits to Registrant's
Registration Statement on Form S-11 (Registration No. 333-41410 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 (filed
         as part of the S-11 registration statement) dated October 30, 2002,
         supplement No. 1 dated January 31, 2003 (post effective amendment No. 2
         to the S-11 registration statement), for financial data related to
         Gymno Corporation, and Redwood Mortgage Corp., the Corporate General
         Partners.


                                       49
<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 31st day of March,
2003.


REDWOOD MORTGAGE INVESTORS VIII


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


By:   Gymno Corporation, General Partner


By:   /S/ Michael R. Burwell
      -------------------------------------------
      Michael R. Burwell, President, Secretary,
      and Principal Financial Officer



By:   Redwood Mortgage Corp.


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





                                       50
<PAGE>



     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 31st day of March, 2003.


Signature                                  Title                        Date



/S/ Michael R. Burwell
----------------------------
Michael R. Burwell                   General Partner              March 31, 2003



/S/ Michael R. Burwell
----------------------------
Michael R. Burwell            President of Gymno Corporation,     March 31, 2003
                               (Principal Executive Officer);
                               Director of Gymno Corporation
                               Secretary/Treasurer of Gymno
                              Corporation (Principal Financial
                                   and Accounting Officer);




/S/ Michael R. Burwell
----------------------------
Michael R. Burwell          President, Secretary/Treasurer of     March 31, 2003
                             Redwood Mortgage Corp.
                              (Principal Financial and
                               Accounting Officer);
                           Director of Redwood Mortgage Corp.




                                       51
<PAGE>



                                                                    Exhibit 99.1

                          GENERAL PARTNER CERTIFICATION


     I, Michael R. Burwell, General Partner of the Partnership, certify that:

     1. I have  reviewed  this  annual  report on Form 10-K of Redwood  Mortgage
Investors VIII, a California Limited Partnership (the "Registrant");

     2. Based on my  knowledge,  this annual  report does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

     3. Based on my knowledge, the consolidated financial statements,  and other
financial  information  included in this annual  report,  fairly  present in all
material respects the financial condition,  results of operations and cash flows
of the Registrant as of, and for, the periods presented in this annual report;

     4. The  Registrant's  other  certifying  officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

     (a)  designed  such  disclosure  controls  and  procedures  to ensure  that
material  information  relating to the  Registrant,  including its  consolidated
subsidiaries, is made known to us by others within those entities,  particularly
during the period in which this annual report is being prepared;

     (b) evaluated the effectiveness of the Registrant's disclosure controls and
procedures  as of a date  within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

     (c)  presented  in  this  quarterly   report  our  conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date.

     5. The Registrant's other certifying  officers and I have disclosed,  based
on our most  recent  evaluation,  to the  Registrant's  auditors  and the  audit
committee  of  Registrant's  board  of  directors  (or  persons  performing  the
equivalent function):

     (a) all  significant  deficiencies  in the design or  operation of internal
controls  which  could  adversely  affect  the  Registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
Registrant's auditors any material weaknesses in internal controls; and

     (b) any fraud,  whether or not material,  that involves management or other
employees who have a significant role in the Registrant's internal controls.

     6. The Registrant's other certifying  officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.



/s/ Michael R. Burwell
-----------------------------------
Michael R. Burwell, General Partner
March 31, 2003



                                       52
<PAGE>



                                                                    Exhibit 99.1


                            CERTIFICATION PURSUANT TO
                             18 U.S.C SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


     In connection  with the Annual Report of Redwood  Mortgage  Investors  VIII
(the  "Partnership")  on Form 10-K for the period  ending  December  31, 2002 as
filed with the  Securities  and  Exchange  Commission  on the date  hereof  (the
"Report"), pursuant to 18 U.S.C. (S) 1350, as adopted pursuant to (S) 906 of the
Sarbanes-Oxley  Act of 2002,  I,  Michael  R.  Burwell,  General  Partner of the
Partnership, certify that to the best of my knowledge:

     (1) The Report fully  complies  with the  requirements  of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
material  respects,  the  financial  condition  and results of operations of the
Partnership.


/s/ Michael R. Burwell
-----------------------------------
Michael R. Burwell, General Partner
March 31, 2003



                                       53
<PAGE>





                                                                    Exhibit 99.2

               PRESIDENT AND CHIEF FINANCIAL OFFICER CERTIFICATION

     I,  Michael R.  Burwell,  President  and Chief  Financial  Officer of Gymno
Corporation, General Partner of the Partnership, certify that:

     1. I have  reviewed  this  annual  report on Form 10-K of Redwood  Mortgage
Investors VIII, a California Limited Partnership (the "Registrant");

     2. Based on my  knowledge,  this annual  report does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

     3. Based on my knowledge, the consolidated financial statements,  and other
financial  information  included in this annual  report,  fairly  present in all
material respects the financial condition,  results of operations and cash flows
of the Registrant as of, and for, the periods presented in this annual report;

     4. The  Registrant's  other  certifying  officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

     (a)  designed  such  disclosure  controls  and  procedures  to ensure  that
material  information  relating to the  Registrant,  including its  consolidated
subsidiaries, is made known to us by others within those entities,  particularly
during the period in which this annual report is being prepared;

     (b) evaluated the effectiveness of the Registrant's disclosure controls and
procedures  as of a date  within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

     (c) presented in this annual report our conclusions about the effectiveness
of the  disclosure  controls and  procedures  based on our  evaluation as of the
Evaluation Date.

     5. The Registrant's other certifying  officers and I have disclosed,  based
on our most  recent  evaluation,  to the  Registrant's  auditors  and the  audit
committee  of  Registrant's  board  of  directors  (or  persons  performing  the
equivalent function):

     (a) all  significant  deficiencies  in the design or  operation of internal
controls  which  could  adversely  affect  the  Registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
Registrant's auditors any material weaknesses in internal controls: and

     (b) any fraud,  whether or not material,  that involves management or other
employees who have a significant role in the Registrant's internal controls.

     6. The Registrant's other certifying  officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


/s/ Michael R. Burwell
----------------------------------
Michael R. Burwell, President, and
Chief Financial Officer of Gymno
Corporation, General Partner
March 31, 2003



                                       54
<PAGE>




                                                                    Exhibit 99.2


                            CERTIFICATION PURSUANT TO
                             18 U.S.C SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


     In connection  with the Annual Report of Redwood  Mortgage  Investors  VIII
(the  "Partnership")  on Form 10-K for the period  ending  December  31, 2002 as
filed with the  Securities  and  Exchange  Commission  on the date  hereof  (the
"Report"), pursuant to 18 U.S.C. (S) 1350, as adopted pursuant to (S) 906 of the
Sarbanes-Oxley Act of 2002, I, Michael R. Burwell, President and Chief Financial
Officer of Gymno Corporation,  General Partner of the Partnership,  certify that
to the best of my knowledge:

     (1) The Report fully  complies  with the  requirements  of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
material  respects,  the  financial  condition  and results of operations of the
Partnership.


/s/ Michael R. Burwell
----------------------------------
Michael R. Burwell, President, and
Chief Financial Officer of Gymno
Corporation, General Partner
March 31, 2003



                                       55
<PAGE>



                                                                    Exhibit 99.3

                            PRESIDENT'S CERTIFICATION


     I, Michael R. Burwell,  president of Redwood Mortgage Corporation,  General
Partner, certify that:

     1. I have  reviewed  this  annual  report on Form 10-K of Redwood  Mortgage
Investors VIII, a California Limited Partnership (the "Registrant");

     2. Based on my  knowledge,  this annual  report does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

     3. Based on my knowledge, the consolidated financial statements,  and other
financial  information  included in this annual  report,  fairly  present in all
material respects the financial condition,  results of operations and cash flows
of the Registrant as of, and for, the periods presented in this annual report;

     4. The  Registrant's  other  certifying  officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

     (a)  designed  such  disclosure  controls  and  procedures  to ensure  that
material  information  relating to the  Registrant,  including its  consolidated
subsidiaries, is made known to us by others within those entities,  particularly
during the period in which this annual report is being prepared;

     (b) evaluated the effectiveness of the Registrant's disclosure controls and
procedures  as of a date  within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

     (c)  presented  in  this  quarterly   report  our  conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date.

     5. The Registrant's other certifying  officers and I have disclosed,  based
on our most  recent  evaluation,  to the  Registrant's  auditors  and the  audit
committee  of  Registrant's  board  of  directors  (or  persons  performing  the
equivalent function):

     (a) all  significant  deficiencies  in the design or  operation of internal
controls  which  could  adversely  affect  the  Registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
Registrant's auditors any material weaknesses in internal controls; and

     (b) any fraud,  whether or not material,  that involves management or other
employees who have a significant role in the Registrant's internal controls.

     6. The Registrant's other certifying  officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.



/s/ Michael R. Burwell
------------------------------
Michael R. Burwell, President,
Redwood Mortgage Corporation,
General Partner
March 31, 2003



                                       56
<PAGE>



                                                                    Exhibit 99.3


                            CERTIFICATION PURSUANT TO
                             18 U.S.C SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


     In connection  with the Annual Report of Redwood  Mortgage  Investors  VIII
(the  "Partnership")  on Form 10-K for the period  ending  December  31, 2002 as
filed with the  Securities  and  Exchange  Commission  on the date  hereof  (the
"Report"), pursuant to 18 U.S.C. (S) 1350, as adopted pursuant to (S) 906 of the
Sarbanes-Oxley Act of 2002, I, Michael R. Burwell,  President,  Redwood Mortgage
Corporation, General Partner, certify that to the best of my knowledge:

     (1) The Report fully  complies  with the  requirements  of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
material  respects,  the  financial  condition  and results of operations of the
Partnership.


/s/ Michael R. Burwell
-----------------------------
Michael R. Burwell, President,
Redwood Mortgage Corporation,
General Partner
March 31, 2003




                                       57