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

                                December 31, 2004


<TABLE>
<S>        <C>                                                                                                <C>
                                                    Part I
                                                                                                              Page No.
                                                                                                            -----------
Item 1   - Business                                                                                               3
Item 2   - Properties                                                                                             7
Item 3   - Legal Proceedings                                                                                      8
Item 4   - Submission of Matters to a Vote of Security Holders (Partners)                                         8

                                                   Part II

Item 5   - Market for the Registrant's "Limited Partnership Units" and Related Unitholder Matters                 8
Item 6   - Selected Consolidated Financial Data                                                                   9
Item 7   - Management's Discussion and Analysis of Financial Condition and Results of Operations                 11
Item 7a  - Quantitative and Qualitative Disclosures About Market Risk                                            21
Item 8   - Consolidated Financial Statements and Supplementary Data                                              24
Item 9   - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                  52
Item 9a  - Controls and Procedures                                                                               52
Item 9b  - Other Information                                                                                     52

                                                   Part III

Item 10  - Directors and Executive Officers of the Registrant                                                    52
Item 11  - Executive Compensation                                                                                54
Item 12  - Security Ownership of Certain Beneficial Owners and Management                                        55
Item 13  - Certain Relationships and Related Transactions                                                        55
Item 14  - Principal Accountant Fees & Services                                                                  55

                                                   Part IV

Item 15 - Exhibits, Financial Statements and Schedules                                                           56

Signatures                                                                                                       57

Certifications                                                                                                   59
</TABLE>


                                       1
<PAGE>



                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    Form 10-K

        (Mark One)
        [X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934

                      For the Year Ended December 31, 2004

                                       OR

        [   ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934

         For the transition period from ______________ to ______________

                       Commission File Number: 333-106900

                        REDWOOD MORTGAGE INVESTORS VIII,
                        a California Limited Partnership
             (Exact name of registrant as specified in its charter)

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

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

                                 (650) 365-5341
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12 (b) of the Act:    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 during
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            XX             No
          --------------             -------------

     Indicate by check mark whether the registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act).

Yes                           No          XX
          --------------             -------------

     As of June 30, 2004, the aggregate value of limited  partnership units held
by  non-affiliates  was  $157,071,000.  This calculation is based on the capital
account balance of the limited partners and excludes limited  partnership  units
held by the general partner.

Documents incorporated by reference:

     Portions of the  Prospectus  effective  October 7, 2003, and post effective
Amendment  No. 4 dated  February  11  2005,  containing  supplement  No. 3 dated
February 11, 2005, (the  "Prospectus"),  are  incorporated in Parts II, III, and
IV. Exhibits filed as part of Form S-11 Registration  Statement  #333-106900 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. 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  $14,932,000  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  $29,993,000 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 $29,999,000 in units and was closed on
April 23,  2002.  On  October  30,  2002 the  partnership  commenced  its fourth
offering for an additional  50,000,000 units  ($50,000,000).  This offering sold
$49,985,000  in units and was closed on October 6, 2003.  On October 7, 2003 the
partnership  commenced  its fifth  and  current  offering  of  75,000,000  units
($75,000,000).  As of December 31, 2004,  $47,314,000  in units was sold in this
fifth offering,  bringing the aggregate sale of units to $172,223,000.  Units in
the fifth 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.

     The  partnership  began selling units in February 1993, and began investing
in  mortgages  in  April  1993.  At  December  31,  2004,  the  partnership  has
investments  in secured loans with  principal  balances  totaling  $171,745,000.
Interest rates ranged from 8.50% to 13.25%. Currently First Trust Deeds comprise
67.01% of the total amount of the secured loan  portfolio,  an increase of 9.64%
over the 2003 level of 57.37%.  Junior  loans (2nd and 3rd Trust  Deeds) make up
32.99%,  a decrease  of 9.64% from the 2003  level of 42.63%.  Loans  secured by
owner-occupied  homes,  combined with loans secured by non-owner occupied homes,
total  49.12% of the  secured  loan  portfolio.  Loans  secured by  multi-family
properties  make up 18.04%  of the total  secured  loans.  Commercial  loans now
comprise 31.83% of the secured portfolio, a decrease of 3.84% from last year and
land made up 1.01% of the secured loan  portfolio.  Of the total secured  loans,
76.36% are in six  counties  of the San  Francisco  Bay Area,  and 12.33% are in
counties  adjacent to the San Francisco Bay Area.  The balance of secured loans,
11.31% are in other counties located in California.  Average loan size increased
this year,  and is now  averaging  $2,289,000  per loan,  up  $472,000  from the
average loan balance of $1,817,000 in 2003.  This increase is due to the ability
of the  partnership by virtue of its increasing  size to invest in larger loans.
Additionally,  there is less  competition  due to fewer lenders being capable of
funding  larger loans,  which allows the  partnership to charge a higher rate of
interest than on smaller sized loans.  The average loan as of December 31, 2004,
represents  1.25% of partner  capital and 1.33% of  outstanding  secured  loans,
compared  to December  31,  2003 when  average  loan size  represented  1.31% of
partners' capital and 1.23% of outstanding  secured loans. Some of the loans are
fractionalized between affiliated  partnerships with objectives similar to those
of the partnership to further reduce risk. However, as the partnership has grown
in size the number of  fractionalized  loans has decreased and represents 13.33%
of the loan portfolio. Average equity per loan transaction at the time the loans
were made based upon appraisals and prior liens at such time,  which is our loan
plus any senior loans,  divided by the property's  appraised  value,  subtracted
from 100%,  stood at 43.06%,  a  decrease  in equity of 2.97% 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  2004.  The  principal  balances of these
foreclosed  properties  represent 8.55% of the secured loan  portfolio.  Four of
these  foreclosures  have  entered  into  workout  agreements.   The  number  of
foreclosures  and principal  amounts are relatively  low. The  partnership  does
expect that during 2005 additional foreclosures may need to be filed in order to
collect  payment from borrowers who have become  delinquent.  This is typical of
our market and the  partnership  expects to have a level of  delinquency  higher
than banking institutions within its portfolio.

                                       3
<PAGE>

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

     For the year ended December 31, 2004, the partnership acquired one property
through foreclosure and acquired three adjacent parcels of land through deeds in
lieu of foreclosure on three loans to one borrower.  During 2003 no foreclosures
were completed.  During 2002 the partnership took back real estate collateral on
two defaulted  loans.  One through a foreclosure sale and the other as a deed in
lieu of  foreclosure.  To  assist in  protecting  its own  assets  and to reduce
liability,  the partnership  subsequently transferred the properties acquired in
2002 to two newly formed  Limited  Liability  Companies,  or "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  owned  controlling
interest with an affiliate, the other investor in the foreclosed loan. Assets of
the Stockton Street Property Company were completely sold in 2003. This LLC will
be dissolved after its final tax return for year 2004 is filed.  The partnership
also intends to sell the property of Russian Hill Property  Company and dissolve
this LLC in the  future.  The two  LLCs are  further  discussed  under  Notes to
Consolidated  Financial  Statements  (Note 5).  With  respect to the  properties
acquired in 2004 the  partnership  may  transfer  the real estate to one or more
LLCs during 2005. One of the properties is a single-family residence, upon which
the borrower was doing substantial renovation that was not completed at the time
of foreclosure.  As of December 31, 2004, the  partnership's  investment in this
property,  net of a  $500,000  reserve,  totaled  $1,437,000.  The  other  three
properties  acquired  in  2004  were  deeded  to  the  partnership  in  lieu  of
foreclosure.  They are  undeveloped  parcels of land comprised of three separate
lots. The land is within the incorporated area of Stanislaus County, California.
Currently  the  property is on the market for sale.  As of December 31, 2004 the
partnership's  investment in this property totaled  $4,378,000.  The property is
jointly owned by two other affiliated partnerships. The partnership has provided
loss reserves of $1,000,000 against all properties owned.

     The  partnership's  net income  continued to take an upward trend.  The net
income  increased  from  $7,486,000  in  2002  to  $9,594,000  in  2003  and  to
$12,132,000  in 2004.  This was made  possible  largely  through  investment  of
additional  capital  derived  from sales of  partnership  units into loans.  The
secured loan portfolio  increased from  $83,650,000 in 2002, to  $147,174,000 in
2003 and to  $171,745,000  in 2004,  an  increase of 105.31%  over the  two-year
period.  Although net income increased it did not increase in direct  proportion
to the increased  size of the loan  portfolio  mainly  because newly  originated
loans were placed at lower interest rates.  Until the past six months,  interest
rates had been declining  steadily since 2001. The bank prime rate as of January
1, 2001, 2002,  2003, 2004 and 2005 was 9.50%,  4.75%,  4.25%,  4.00% and 5.25%,
respectively. The partnership has placed its loans at interest rates competitive
in the marketplace.  Mortgage interest income increased from $11,416,000 in 2002
to  $12,496,000  in 2003 and to $16,437,000 in 2004, an increase of 44% over the
two-year  period.  During the year 2004 the  partnership's  annualized  yield on
compounding accounts was 7.22% and 6.99% on monthly distributing accounts.

     Due to a calendaring  oversight,  the  partnership did not timely renew its
permit with the California Department of Corporations ("DOC"). Upon discovery of
this  oversight,  the  partnership  applied for and received  from the DOC a new
permit  allowing the  partnership to continue  sales in  California.  To correct
those  sales  that  occurred  without  a  permit  from  the  DOC in  place,  the
partnership  offered to repurchase the units sold during the period of September
10, 2004 through January 18, 2005. The repurchase offer was made to an aggregate
of   $16,370,000  of  prior  unit  sales.   The  repurchase   offer  expired  on
approximately  March 7, 2005. The repurchase offer was accepted by three limited
partners for a total of $74,000 in unit sales and the partnership  made a timely
repurchase of the units.

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. Many of these competitors are unable,  due to their size, to compete with
the partnership's  ability to make loans larger than $1,000,000 per transaction.
The  partnership's  ability to  regularly  entertain  loan  requests at or above
$1,000,000  reduces  competition  and can provide  either higher  quality loans,
higher  returns,  or both.  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.

                                       4
<PAGE>

     Beginning in July of 2004,  the Federal  Reserve  changed its interest rate
policy from one of three years of continuously lowered interest rates, which hit
a 40 year historic  interest  rate low, to one of tempered but gradual  interest
rate  increases.  In keeping with this new policy  since July 2004,  the Federal
Reserve has  increased the Federal  Funds Rate by one quarter  percentage  point
(1/4 of one percent) at each of its last five  meetings to 2.25% as of March 22,
2005. This  deliberate  upward change in the Federal Funds Rate has caused short
term interest rates to rise, and to a lesser degree, pushed longer term rates up
as well.  Nationally and more specifically in Northern California,  the location
of the majority of our lending activities, the economies are recovering from the
economic  downturn from 2000 to 2003.  Employment  and job creation is improving
but is still lower than  desirable.  During 2004, the residential and commercial
real  estate  markets  in  Northern  California  enjoyed  a solid  year of price
appreciation. With the prospect of solid real estate values, low interest rates,
and an  improving  economy,  lenders  of all types are  anxious to lend money to
borrowers  secured  by their  real  estate.  Competition  for  loans is  fierce.
Additionally,  those  borrowers that had waited hoping to find the bottom of the
interest  rate cycle,  have decided  that the time has come to  refinance  their
existing higher rate loans. This has caused a significant  amount of loan runoff
to lower interest rate lenders than the partnership. These two factors have made
it  difficult,  particularly  in the final  quarter of the year 2004, to stay as
fully invested as is optimum. It is anticipated that significant competition for
loans will  continue.  Excess cash will be invested  in  short-term  alternative
investments,  such as money market  funds  yielding  considerably  less than the
current loan investment portfolio.

Secured Loan Portfolio.

     A summary of the  partnership's  secured loan  portfolio as of December 31,
2004, is set forth below (in thousands):
<TABLE>
<S>    <C>                                                                     <C>
       Loans as a Percentage of Appraised Values

       First Trust Deeds                                                       $   115,082
       Appraised Value of Properties at Time of Loan                               234,372
                                                                              -------------
             Total Investment as a % of Appraisal                                   49.10%
                                                                              =============

       First Trust Deed Loans                                                      115,082
       Second Trust Deed Loans                                                      50,282
       Third Trust Deed Loans                                                        6,381
                                                                              -------------
             Total of Trust Deed Loans                                             171,745

       Priority Positions due Other Lenders:
         First Trust Deed Loans due Other Lenders                                   81,579
         Second Trust Deed Loans due Other Lenders                                  17,561
                                                                              -------------

             Total Debt                                                        $   270,885
                                                                              =============

         Appraised Property Value at Time of Loan                                  475,710
             Total Debt as a % of Appraisal based on appraised
               values and prior liens at date loan was consummated                  56.94%
                                                                              =============

       Number of Secured Loans Outstanding                                              75

       Average Secured Loan                                                    $     2,289
       Average Secured Loan as a % of Secured Loans Outstanding                      1.33%
       Largest Secured Loan Outstanding                                             12,045
       Largest Secured Loan as a % of Secured Loans Outstanding                      7.01%
       Largest Secured Loan as a % of Partnership Assets                             6.00%

       Secured Loans as a Percentage of Total Secured Loans                     Percent
       ------------------------------------------------------------------     -------------
       First Trust Deed Loans                                                       67.01%
       Second Trust Deed Loans                                                      29.28%
       Third Trust Deed Loans                                                        3.71%
                                                                              -------------
       Total Trust Deed Loan Percentage                                            100.00%
                                                                              =============
</TABLE>


                                       5
<PAGE>
<TABLE>
<S>    <C>                                                    <C>              <C>
       Type of Secured Loans by Property                      Amount           Percent
       ------------------------------------------------     ------------     ------------
       Owner Occupied Homes                                  $    9,234            5.38%
       Non-Owner Occupied Homes                                  75,125           43.74%
       Apartments                                                30,981           18.04%
       Commercial                                                54,670           31.83%
       Land                                                       1,735            1.01%
                                                            ------------     ------------
       Total                                                 $  171,745          100.00%
                                                            ============     ============
</TABLE>

     The following is a distribution of secured loans outstanding as of December
31, 2004 by Counties (in thousands):

<TABLE>
<S>                     <C>                                           <C>             <C>
                                                                      Total
                        California County                         Secured Loans       Percent
       -----------------------------------------------------     ---------------    -------------

       San Francisco Bay Area Counties
       San Francisco                                              $      35,173           20.48%
       Alameda                                                           30,886           17.98%
       Contra Costa                                                      25,357           14.77%
       Santa Clara                                                       16,987            9.89%
       San Mateo                                                         13,256            7.72%
       Marin                                                              9,484            5.52%
                                                                 ---------------    -------------
                                                                        131,143           76.36%

       San Francisco Bay Area Adjacent Counties
       Sacramento                                                        12,971            7.55%
       Napa                                                               4,234            2.47%
       San Joaquin                                                        3,971            2.31%
                                                                 ---------------    -------------
                                                                         21,176           12.33%

       Other California Counties
       Los Angeles                                                        6,236            3.63%
       Riverside                                                          5,150            3.00%
       Fresno                                                             3,611            2.10%
       All others                                                         4,429            2.58%
                                                                 ---------------    -------------
                                                                         19,426           11.31%

                 Total                                            $     171,745          100.00%
                                                                 ===============    =============
</TABLE>

Statement of Condition of Secured Loans
         Number of Secured Loans in Foreclosure                        6


                                       6
<PAGE>

     Scheduled  maturity  dates of secured  loans as of December 31, 2004 are as
follows (in thousands):

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

                   2005              $    68,761
                   2006                   68,829
                   2007                   21,185
                   2008                    3,629
                   2009                    8,844
                Thereafter                   497
                                    -------------
                                     $   171,745
                                    =============

     The scheduled  maturities for 2005 include six loans  totaling  $8,047,000,
and representing 4.69% of the secured loan portfolio,  past maturity at December
31, 2004.  Several  borrowers  are in the process of selling the  properties  or
refinancing their loans through other institutions, as this is an opportune time
for them to do so and/or take advantage of lower interest rates. The partnership
allows  borrowers  to  occasionally  continue to make the  payments on debt past
maturity  for  periods of time.  Interest  payments on three of these loans were
delinquent 90 days or more. Of these past maturity  loans,  the  partnership has
begun  foreclosure on four with principal  balances totaling  $7,439,000.  These
four foreclosures are included in the total number of foreclosures  begun by the
partnership, which total six.


Item 2 - Properties

     In 2004 the partnership took back the real estate collateral  securing four
loans from defaulted  borrowers,  one through foreclosure and the others through
deeds in lieu of foreclosure.  No collateral was taken back during 2003.  During
2002, the partnership  took back the real estate  collateral  security on two of
its  loans.  For the  properties  owned in 2002,  in order to  reduce  potential
liabilities the partnership  subsequently transferred at its book value the real
estate taken back to two newly formed Limited Liability  Companies  "LLCs".  One
property  was  transferred  to  Stockton  Street  Property  Company,  LLC.  This
property,  taken back through  foreclosure,  was  comprised  of six  condominium
units. Management of the LLC was through its managing member, Michael Burwell, a
general  partner of the  partnership.  All six units held by the Stockton Street
Property  Company,  LLC were sold in 2003 at an overall  loss of  $127,000.  The
partnership's  proportionate  share of this loss was $85,000.  It is anticipated
that in 2005 the Stockton Street Property Company, LLC will be closed, remaining
assets  transferred back to the partnership in proportion to its ownership,  and
its operations will cease.

     The other property taken back in 2002 was  transferred at its book value to
Russian  Hill  Property  Company,  LLC.  The real estate was held off the market
during 2003 and 2004, as the real estate market for this luxury view condominium
in a prestigious  neighborhood of San Francisco was very slow. The management of
this LLC, in  consultation  with real  estate  professionals,  will  continue to
review the market activity during 2005 and will place the property for sale when
the timing is considered to be opportune.  The partnership's net interest in the
LLC was $3,979,000 net of a valuation allowance of $500,000. Michael R. Burwell,
general partner of the partnership, is manager of this LLC.

     In September,  2004,  the  partnership  acquired a single family  residence
through a foreclosure  sale. At the time the  partnership  took ownership of the
property,  the partnership's  investment  totaled  $1,937,000  including accrued
interest and advances.  The borrower had begun a  substantial  renovation of the
property,  which was not completed at the time of  foreclosure.  The partnership
has decided to pursue  development  of the property by processing  plans for the
creation of two condominium units on the property.  These plans will incorporate
the majority of the existing  improvements  currently located on the property. A
reserve of $500,000 to cover  potential  losses has been made for this property,
based upon management's estimate of the fair value of the property.

                                       7
<PAGE>

     In December,  2004, the partnership  acquired an undeveloped parcel of land
in lieu of foreclosure. The land is located in Stanislaus County, California. It
is comprised of three separate lots,  which total  approximately  14 acres.  The
parcels are currently for sale.  The  partnership's  investment in this property
totaled $4,377,000,  including accrued interest and advances,  as of the date of
the  acquisition.  This  property  is  jointly  owned  by two  other  affiliated
partnerships.


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

     75,000,000 units at $1 each (minimum purchase of 2,000 units) are currently
being offered  ($125,000,000 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 compounding  the earnings.  Limited  partners may
withdraw  from the  partnership  in  accordance  with the  terms of the  limited
partnership agreement subject to possible early withdrawal  penalties.  There is
no established  public trading  market.  As of December 31, 2004,  4,857 limited
partners  had a capital  balance of  $183,368,000,  net of  Formation  Loans and
syndication costs.

     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  73 of the  prospectus,  a part of the  referenced
registration statement, which is incorporated by reference.

                                       8
<PAGE>

Item 6 - Selected Consolidated Financial Data

     Redwood Mortgage Investors VIII began operations in April 1993.

     Consolidated   financial   condition  and  results  of  operation  for  the
partnership  as of and for the five  years  ended  December  31,  2004  were (in
thousands,  except for net income per $1,000  invested by limited  partners  for
entire period):

                           Consolidated Balance Sheets

                                     Assets

<TABLE>
<S>                                                <C>             <C>             <C>             <C>            <C>
                                                                             December 31,
                                               ----------------------------------------------------------------------------
                                                   2004            2003            2002            2001           2000
                                               ------------    ------------     -----------     -----------    ------------
Cash and cash equivalents                       $   16,301      $    8,921       $   7,188       $   1,917      $    1,460

Loans
  Loans, secured by deeds of trust                 171,745         147,174          83,650          82,790          68,571
  Loans, unsecured                                      34              34               -               4              54
  Accrued interest and late fees                     4,895           4,735           3,913           3,345           1,039
  Advances on loans                                    131             416             279             195             172
  Less allowance for losses                        (2,343)         (2,649)         (3,021)         (2,247)         (1,345)

Other receivables                                        -               -             888               -              -

Real estate held for sale, net                       9,793           3,979           9,286               -              -
Other assets                                            62              44              22               6             13
                                               ------------    ------------     ------------    -----------    -----------
                                                $  200,618      $  162,654       $  102,205      $  86,010      $  69,964
                                               ============    ============     ============    ===========    ===========

                        Liabilities and Partners' Capital

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

                                                   2004            2003             2002            2001           2000
                                               ------------    ------------     ------------    -----------    ------------
Liabilities

   Accounts payable                             $       25      $      224       $      449      $      74      $       30
   Payable to affiliate                                638             448              294            109               -
   Line of credit                                   16,000          22,000                -         11,400          16,400
   Note payable                                          -               -            1,782              -               -
   Deferred interest                                     -               -              112              -              82
   Minority interest                                     -               -            1,213              -               -
   Subscriptions to partnership in
     applicant status                                  424           1,210            2,578            673             225
                                               ------------    ------------     ------------    -----------    ------------
                                                    17,087          23,882            6,428         12,256          16,737
                                               ------------    ------------     ------------    -----------    ------------

Partners' capital
  Limited partners subject to
     Redemption                                    183,368         138,649           95,690         73,687          53,180
  General partners subject to
     Redemption                                        163             123               87             67              47
                                               ------------    ------------     ------------    -----------    ------------
        Total partners' capital                    183,531         138,772           95,777         73,754          53,227
                                               ------------    ------------     ------------    -----------    ------------

                                                $  200,618      $  162,654       $  102,205      $  86,010      $   69,964
                                               ============    ============     ============    ===========    ============
</TABLE>


                                       9
<PAGE>


                        Consolidated Statements of Income
<TABLE>
<S>                                                <C>             <C>             <C>             <C>             <C>
                                                                                December 31,
                                               ----------------------------------------------------------------------------
                                                   2004            2003            2002            2001            2000
                                               ------------    ------------    ------------    ------------    ------------
Gross revenue                                   $   17,133      $   12,958      $   11,691      $    9,088      $    6,396

Expenses                                             4,981           3,369           4,204           2,994           2,104
                                               ------------    ------------    ------------    ------------    ------------
Income before interest credited to
  partners in applicant status                      12,152           9,589           7,487           6,094           4,292
Interest credited to partners in
  applicant status                                      20              37               1               1               5
                                               ------------    ------------    ------------    ------------    ------------
Minority interest share of subsidiary loss               -              42               -               -               -

Net income                                      $   12,132      $    9,594      $    7,486      $    6,093      $    4,287
                                               ============    ============    ============    ============    ============

Net income to general partners (1%)                    121              96              75              61              43
Net income to limited partners (99%)                12,011           9,498           7,411           6,032           4,244
                                               ------------    ------------    ------------    ------------    ------------

Total net income                                $   12,132      $    9,594      $    7,486      $    6,093      $    4,287
                                               ============    ============    ============    ============    ============

Net income per $1,000 invested by
    limited partners for entire period
      (annualized)
  - where income is compounded and
       retained                                 $       72      $       78      $       87      $       90      $       86
                                               ============    ============    ============    ============    ============

  - where partner receives income in
       monthly distributions                    $       70      $       75      $       84      $       86      $       83
                                               ============    ============    ============    ============    ============
</TABLE>

     Annualized yields when income is compounded or distributed  monthly for the
years 2000 through 2004 are outlined in the table below:

                                        Compounded          Distributed
                                      ---------------     ----------------
                    2000                  8.58%                8.26%
                    2001                  8.98%                8.63%
                    2002                  8.69%                8.36%
                    2003                  7.76%                7.50%
                    2004                  7.22%                6.99%

     The average annualized yield, when income is compounded and retained,  from
inception  through December 31, 2004, was 8.24%. The average  annualized  yield,
when income is distributed monthly, from inception through December 31, 2004 was
7.95%

     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 presentation.

                                       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 consolidated 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 consolidated balance sheet dates and
income  and  expenses  during  the  reported  periods.   Such  estimates  relate
principally to the  determination of (1) the allowance for loan losses (i.e. the
amount of  allowance  established  against  loans  receivable  as an estimate of
potential  loan losses)  including  the accrued  interest and advances  that are
estimated to be unrecoverable based on estimates of amounts to be collected plus
estimates of the value of the property as  collateral  and (2) the  valuation of
real estate owned through  foreclosure.  At December 31, 2004,  the  partnership
owned  five real  estate  properties,  which  were  taken  back  from  defaulted
borrowers.

     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.

     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.

     Certain  statements  in this  Report on Form 10-K which are not  historical
facts may be considered forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
and  Exchange  Act of 1934,  as  amended,  including  statements  regarding  the
Company's expectations,  hopes, intentions, beliefs and strategies regarding the
future.  Forward-looking statements include statements regarding future interest
rates and  economic  conditions  and their  effect  on the  Partnership  and its
assets,  trends  in the  California  real  estate  market,  estimates  as to the
allowance for loan losses, estimates of future limited partner withdrawals,  the
total amount of the Formation Loan, and 2005 annualized yield estimates.  Actual
results  may  be   materially   different   from  what  is   projected  by  such
forward-looking  statements.  Factors that might cause such a difference include
unexpected  changes in economic  conditions  and interest  rates,  the impact of
competition and competitive  pricing and downturns in the real estate markets in
which the Company has made loans. All forward-looking statements and reasons why
results may differ  included  in this Form 10-K are made as of the date  hereof,
and we assume no  obligation  to update any such  forward-looking  statement  or
reason why actual results may differ.

                                       11
<PAGE>

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.

     o Mortgage  Brokerage  Commissions  For fees in connection with the review,
selection, evaluation,  negotiation and extension of loans, the general partners
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 2004, 2003 and
2002,  loan  brokerage  commissions  paid  by  the  borrowers  were  $2,443,000,
$2,621,000 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. Once a loan is categorized as impaired,  mortgage servicing fees are no
longer accrued thereon.  Additional servicing fees are recorded upon the receipt
of any  subsequent  payments  on  impaired  loans.  Mortgage  servicing  fees of
$1,565,000, $1,057,000 and $1,098,000 were incurred for the years ended December
31, 2004, 2003 and 2002, respectively.

     These  servicing  fees  were  charged  at 1%, on an  annual  basis,  of the
outstanding  principal balances.  If the maximum mortgage servicing fee of 1.5%,
on an annual basis, had been charged to the  partnership,  then net income would
have been reduced by  approximately  $783,000.  Reducing net income  reduces the
annualized  yields. An increase or decrease in this fee within the limits set by
the partnership's agreement directly impacts the yield to the limited partners.

     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 $630,000, $468,000 and $325,000 were incurred by the partnership for
years 2004, 2003 and 2002, respectively.

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

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

     o  Operating  Expenses  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, 2004 and
2003,  a general  partner,  Gymno  Corporation,  had  contributed  $174,000  and
$133,000,  respectively,  as capital in accordance  with Section  4.02(a) of the
partnership agreement.

                                       12
<PAGE>

     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, 2004 (in thousands):

<TABLE>
<S>                                        <C>            <C>            <C>            <C>            <C>           <C>
                                                                      Offering
                                       -----------------------------------------------------------------------
                                           1st            2nd            3rd            4th            5th           Total
                                       -----------    -----------    -----------    -----------    -----------    -----------
     Limited partner contributions      $  14,932      $  29,993      $  29,999      $  49,985      $  47,314      $ 172,223
                                       ===========    ===========    ===========    ===========    ===========    ===========
     Formation Loans made                   1,075          2,272          2,218          3,777          3,570         12,912
     Repayments to date                     (785)        (1,013)          (558)          (495)           (45)        (2,896)
     Early withdrawal penalties
        Applied                              (75)          (112)           (78)              -              -          (265)
                                       -----------    -----------    -----------    -----------    -----------    -----------
     Balance, December 31, 2004         $     215      $   1,147      $   1,582      $   3,282      $   3,525      $   9,751
                                       ===========    ===========    ===========    ===========    ===========    ===========
</TABLE>

     The amount of the annual  installments  paid by Redwood  Mortgage Corp. are
determined at annual  installments 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.  Interest  has been  imputed at the market
rate of interest in effect at the date the  offering  closed.  See footnote 1 to
the consolidated financial statements.

     On December  31, 2004,  the  partnership  was in the offering  stage of its
fifth offering,  ($75,000,000).  Contributed capital equaled $14,932,000 for the
first offering,  $29,993,000 for the second offering,  $29,999,000 for the third
offering,  $49,985,000  for the fourth  offering and  $47,314,000  for the fifth
offering, totaling an aggregate of $172,223,000 as of December 31, 2004. Of this
amount, $424,000 remained in applicant status.

                                       13
<PAGE>

Results of Operations - For the years ended December 31, 2004, 2003 and 2002.

     Changes in the partnership's operating results for the years ended December
31, 2004, 2003 and 2002 are discussed below:
<TABLE>
<S>                                                                         <C>                 <C>
                                                                      Changes for the years ended December 31,
                                                                   ---------------------------------------------

                                                                            2004                2003
                                                                        -------------       -------------

Net income                                                               $ 2,538,000         $ 2,108,000
                                                                        =============       =============
  Revenue
     Interest on loans                                                     3,941,000           1,080,000
     Late fees                                                                17,000              87,000
     Other                                                                   217,000             100,000
                                                                        -------------       -------------
                                                                         $ 4,175,000         $ 1,267,000
                                                                        -------------       -------------

  Expenses
     Mortgage servicing fees                                                 508,000            (41,000)
     Interest expense                                                        551,000           (445,000)
     Amortization of loan origination fees                                    33,000              11,000
     Provision for losses on loans                                           364,000               2,000
     Provision for losses on real estate held for sale                             -           (500,000)
     Clerical costs through Redwood Mortgage Corp.                            17,000              24,000
     Asset management fees                                                   162,000             143,000
     Professional services                                                   100,000              45,000
     Broker expense                                                        (181,000)           (263,000)
     Amortization of discount on imputed interest                            124,000              41,000
     Other                                                                  (41,000)             142,000
                                                                        -------------       -------------
                                                                         $ 1,637,000         $ (841,000)
                                                                        -------------       -------------

          Net income increase                                            $ 2,538,000         $ 2,108,000
                                                                        =============       =============
</TABLE>

     Although the average interest rate of the loan portfolio declined to 10.02%
from 10.47% for the years ended  December 31, 2004 and 2003,  respectively,  the
interest income of the partnership  continued to increase by $3,941,000 (31.54%)
to  $16,437,000 in 2004 and by $1,080,000  (9.46%) to $12,496,000 in 2003.  This
was  primarily  due to the  increased  size of the  partnership's  secured  loan
portfolio,  which increased by $24,571,000  (16.70%) to $171,745,000 in 2004 and
by $63,524,000 (75.94%) to $147,174,000 in 2003. Average loan portfolio balances
for the  years  ended  December  31,  2004,  2003 and 2002,  were  $159,460,000,
$115,412,000  and  $83,220,000,  respectively.  The increases in interest income
were also due to earnings of  additional  interest of $277,000  and $465,000 for
the years ended December 31, 2004 and 2003,  respectively.  The lower percentage
rate of interest  increase on loans (9.46%) in 2003 was due in part to the lower
interest  rate  environment  in 2003  versus 2002 and less  additional  interest
earned of $525,000 in 2003 than 2002.

     Late charge  income  increases  of $17,000  (8%) and $87,000  (76%) for the
years ended December 31, 2004 and 2003 were primarily attributable to the growth
in the loan portfolio.

     The increase in other income of $217,000  (83%) and $100,000  (63%) for the
years ended  December  31, 2004 and 2003,  respectively,  was  primarily  due to
increased  imputed  interest  income from the larger  Formation Loan existing of
$9,751,000,  $7,550,000  and  $5,258,000  for the years ended December 31, 2004,
2003 and 2002,  respectively.  Imputed interest income was $319,000 and $195,000
for the years ended December 31, 2004 and 2003, respectively.  Additionally, the
partnership may accept  unsolicited  orders for units from investors who utilize
the services of a registered  investment  advisor.  If an investor  utilizes the
services of a registered investment advisor in acquiring units, Redwood Mortgage
Corp.  will  contribute  to  the  partnership  an  amount  equal  to  the  sales
commissions  otherwise  attributable  to a sale of units through a participating
broker  dealer.  This  amount  is based on the  investor's  election  to  retain
earnings (9%) or have their earnings distributed (5%). In 2004 $111,000 was paid
and recorded under other income.

                                       14
<PAGE>

     The   increase/(decrease)  in  mortgage  servicing  fees  of  $508,000  and
($41,000)  for the years ended  December  31, 2004 and 2003,  respectively,  was
primarily attributable to increases in the outstanding loan portfolio.  The loan
portfolio increased by $24,571,000  (16.70%) in 2004 and $63,524,000 (75.94%) in
2003.  The increase in servicing  fees for the year ended  December 31, 2004 was
also due to an increased average loan portfolio  balance of $159,460,000,  which
the partnership  maintained in 2004 versus an average balance of $115,412,000 in
2003.  The decrease in servicing  fees in 2003 was due to  additional  servicing
fees were earned in 2002 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 paid as borrower payments are received.

     Interest  expense on the line of credit is tied to the bank's  prime  rate.
The  decrease in interest  expense of $445,000  for the year ended  December 31,
2003 was primarily  attributable  to a substantial  reduction in the prime rate.
The prime rate was 4.75% as of December  31,  2001.  This rate  remained  static
until November,  2002 when it was reduced to 4.25%. A further reduction by 0.25%
to 4% was made in June,  2003. The decline in interest  expense in 2003 was also
due to a lower  average  credit  line  usage of  $10,863,000  for the year ended
December 31, 2002 versus  $6,170,000  for the year ended  December 31, 2003.  An
increase in interest  expense of $551,000 in 2004 was primarily  attributable to
increased  borrowing,  which averaged  $14,000,000 during 2004, and increases in
the prime rate from 4% in January,  2004 to 5.25% as of December  31,  2004,  an
average of 4.44%.

     The increase in loan  origination  fees was primarily  attributable  to the
costs  involved in negotiating an extension of the maturity date and an increase
in the credit line facility.

     The increase in  provision  for losses on loans and real estate of $364,000
for the year ended December 31, 2004 was primarily  attributable  to an increase
in the loan  portfolio  balance,  the potential  acquisition  of two  properties
totaling  $6,315,000  and an  increase  in  foreclosures  to six loans  totaling
$14,682,000 as of December 31, 2004,  versus three loans totaling  $2,931,000 as
of December  31, 2003.  The  decrease in the  provision of $498,000 for the year
ended  December 31, 2003 was primarily  attributable  to increased  stability in
real estate market,  the stabilization of the economy, a decline in foreclosures
amounts  from  $4,029,000  in  2002  to  $2,931,000  in  2003  and  management's
determination  that no additional amounts were needed related to the real estate
held for sale.  The  increases in clerical  costs of $17,000 and $24,000 for the
years ended December 31, 2004 and 2003, respectively, was primarily attributable
to an increase in partnership size.

     The increase in professional services of $100,000 and $45,000 for the years
ended December 31, 2004 and 2003,  respectively,  was primarily  attributable to
the increased  size of the  partnership  and  increased  costs  associated  with
various partnership regulatory filings and the annual audit.

     The broker  expense  decline of $263,000  for the year ended  December  31,
2003, was primarily 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  ended in 2003  with the full  collection  of the
additional interest totaling $1,250,000.

     The  increase in  management  fees of $162,000  and  $143,000 for the years
ended  December 31, 2004 and 2003,  respectively,  was due to an increase in net
asset  value under  management,  which  increased  from  $95,690,000  in 2002 to
$138,649,000 in 2003 and to $183,368,000 in 2004.

     The increases in amortization  of discount on imputed  interest of $124,000
and $41,000 for the years ended  December  31, 2004 and 2003,  respectively,  is
primarily  attributable  to  increases  in the  Formation  Loan from the sale of
additional limited partnership investments.

     The increase/(decrease) in other expenses of ($41,000) and $142,000 for the
years ended December 31, 2004 and 2003,  respectively,  was primarily due to the
loss sustained on the sale of the Stockton  Street Property Co., LLC real estate
of $85,000 in 2003, increased subscription interest while new funds from limited
partners  awaited  entry into the  partnership  and the  expensing of the upkeep
costs of the properties owned by the partnership.

                                       15
<PAGE>

     Partnership  capital continued to increase as the partnership  received new
limited  partner   capital   contributions   of  $40,954,000,   $40,030,000  and
$21,563,000 and retained the earnings of limited partners that have chosen to do
so of $7,367,000,  $5,958,000 and $4,716,000 for the years 2004,  2003 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 closed on October 6,
2003. On October 7, 2003 the partnership  commenced its fifth offering and funds
raised will be used to increase the partnership's capital base and provide funds
for  additional  mortgage  loans.  As of December 31, 2004 the limited  partners
total units purchased was 171,799,000 units aggregating $172,223,000.

     The  partnership  began  funding loans on April 14, 1993 and as of December
31,  2004 had  credited  earnings  to  limited  partners  who  elected to retain
earnings  at an  average  annualized  yield of  8.24%  since  inception  through
December  31,  2004.  Limited  partners  who  elected  to  have  their  earnings
distributed  monthly had an average  annualized  yield of 7.95% since  inception
through December 31, 2004.

     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  $42,000,000.  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, 2004 and 2003, the outstanding balance
on the line of credit was $16,000,000 and $22,000,000, respectively.

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,  the Northern  California  real estate  market slowed and the national and
local  economies  slipped  into  recession.  During  2002 and 2003,  the economy
stabilized.  During 2004 the California economy and the Northern California real
estate market have strengthened.  At December 31, 2004 the partnership had eight
loans past due 90 days or more on interest totaling $23,101,000. With respect to
four of these  eight  loans,  we have filed  notices of default,  beginning  the
process of  foreclosure.  The  principal  amounts  of the four filed  notices of
default  total  $13,192,000  or 7.68% of the loan  portfolio.  Among these four,
three  borrowers  totaling   $3,839,000  in  loans  have  entered  into  workout
agreements.  Additionally,  the  partnership  has filed two  notices  of default
against  borrowers  that  are  not 90  days  delinquent  on  interest,  totaling
$1,491,000. At December 31, 2004 the partnership had notices of default filed on
six loans with an aggregate principal outstanding of $14,682,000.

     In addition to the three workout  agreements with borrowers in foreclosure,
the partnership also entered into workout agreements with borrowers who are past
maturity or  delinquent  in their regular  payments.  At December 31, 2004,  the
total  number of  partnership  workout  agreements  with  borrowers  was  eight,
including matured,  foreclosed or 90-day delinquent loans.  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, 2004, 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 2004, 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.
During 2002, we completed the  foreclosure  of two loans,  which resulted in the
partnership  taking back two real estate  properties.  These properties are more
fully  discussed  under  Item  2  -  Properties.  The  partnership's  foreclosed
principal  balances were $6,565,000 after excluding an affiliated  partnership's
interest in one of the  properties.  During 2003,  one of the  properties  owned
through foreclosure was sold at an overall loss of $127,000, with $85,000 of the
loss allocated to the  partnership  and the remaining  $42,000  allocated to the
minority  interest.  During 2003 the  partnership did not take back any property
through  the  foreclosure  process.  In 2004,  the  partnership  took  back four

                                       16
<PAGE>

properties through foreclosure or deeds in lieu of foreclosure. We may take back
additional  real  estate  through  the  foreclosure  process  in 2005.  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  owned  through  foreclosure  of
$3,343,000 at December 31, 2004.  These provisions for losses were made to guard
against  collection  losses.  The total  cumulative  provision  for losses as of
December 31, 2004, is considered by the general partners to be adequate. Because
of the number of variables  involved,  the magnitude of the swings  possible and
the general partners' inability to control many of these factors, actual results
may and do sometimes  differ  significantly  from  estimates made by the general
partners.

     The  partnership  may  restructure  loans.  This is done either through the
modification  of an existing  loan or by  re-writing a whole new loan.  It could
involve,  among other  changes,  an extension  in maturity  date, a reduction in
repayment amount, a reduction in interest rate or granting an additional loan.

     No  loans  were   restructured  in  2004.   During  2003,  the  partnership
restructured three loans by granting one new loan and modifying two other loans.
During 2003, the total amount of restructured loans was $15,599,000.

Borrower Liquidity and Capital Resources.

     The  partnership  relies upon sales of  partnership  units,  loan  payoffs,
borrowers'  mortgage  payments,  and, to a lesser degree, its line of credit for
the source of funds for loans.  Over the past several years,  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.  Cash  is  constantly  being
generated from borrower interest  payments,  late charges,  amortization of loan
principal and loan payoffs.  Currently,  cash flow exceeds partnership expenses,
earnings and limited partner capital payout requirements.  Excess cash flow will
be  invested  in new loan  opportunities,  when  available,  and will be used to
reduce the partnership credit line or in other partnership business. 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 an investor
initially elects to receive  monthly,  quarterly or annual  distributions,  such
election,  once  made,  is  irrevocable.  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.

     During  the years  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:

                                 2004             2003              2002
                            -------------     -------------    -------------
  Compounding                 $7,367,000       $5,958,000        $4,716,000
  Distributing                $4,452,000       $3,362,000        $2,517,000


                                       17
<PAGE>

     Capital balances of limited partners electing to receive cash distributions
of earnings  represented 36%, 36% and 35% of the limited  partners'  outstanding
capital  accounts as of December 31, 2004,  2003 and 2002,  respectively.  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 holding 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, 2004, 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, 2004 were:

                                   2004             2003              2002
                               -------------     -------------    -------------

 Cash distributions              $4,452,000        $3,362,000       $2,517,000
 Capital liquidation*            $1,988,000        $1,845,000       $1,049,000
                               -------------     -------------    -------------

     Total                       $6,440,000        $5,207,000       $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,  2004,  capital  liquidated  subject to the 10%
penalty for early withdrawal was:

                     2004             2003              2002
                -------------    --------------    -------------
                   $794,000         $786,000          $244,000

     This  represents  0.43%,  0.57% and 0.26% of the limited  partners'  ending
capital for the years ended  December  31,  2004,  2003 and 2002,  respectively.
These  withdrawals  are within the normally  anticipated  range and  represent a
small percentage of limited partner capital.

     In some  cases in order to  satisfy  Broker  Dealers  and  other  reporting
requirements, the general partners have valued the limited partners' interest in
the  partnership  on a basis which  utilizes a per unit  system of  calculation,
rather than based upon the investors' capital account. This information has been
reported  in this manner in order to allow the  partnership  to  integrate  with
certain  software used by the Broker Dealers and other  reporting  entities.  In
those cases, the partnership will report to Broker Dealers,  Trust Companies and
others a  "reporting"  number of units based upon a $1.00 per unit  calculation.
The number of reporting units provided will be calculated based upon the limited
partner's  capital  account  value  divided by $1.00.  Each  investor's  capital
account balance is set forth  periodically on the partnership  account statement
provided  to  investors.  The  reporting  units are solely  for  Broker  Dealers
requiring such information for their software programs and do not reflect actual
units owned by a limited  partner or the limited  partners' right or interest in
cash flow or any other  economic  benefit in the  partnership.  Each  investor's
capital  account balance is set forth  periodically  on the partnership  account
statement  provided  to  investors.  The  amount of  partnership  earnings  each
investor is entitled to receive is determined by the ratio that each  investor's
capital account bears to the total amount of all investor  capital accounts then
outstanding.  The capital account balance of each investor should be included on
any NASD member client account statement in providing a per unit estimated value
of the client's investment in the partnership in accordance with NASD Rule 2340.

                                       18
<PAGE>

     While the general  partners have set an estimated value for the partnership
units,  such  determination  may not be  representative  of the  ultimate  price
realized  by an  investor  for such units upon sale.  No public  trading  market
exists for the partnership's units and none is likely to develop. Thus, there is
no certainty  that the units can be sold at a price equal to the stated value of
the capital account. Furthermore, the ability of an investor to liquidate his or
her investment is limited subject to certain  liquidation rights provided by the
partnership,  which may include early  withdrawal  penalties (See the section of
the  Prospectus  entitled  "Risk  Factors  -  Purchase  of Units is a Long  Term
Investment").

Current Economic Conditions.

     Since  January,  2001, and through  December 31, 2003, the Federal  Reserve
reduced interest rates significantly by cutting the Federal Funds Rate to 1.00%.
From July 1 through December 31, 2004, the Federal Reserve increased the Federal
Funds Rate four times by one quarter  percentage point (1/4 of one percent) each
time to 2.00%.  The  effect of these  changes  has  greatly  reduced  short-term
interest  rates and to a lesser extent reduced  long-term  interest  rates.  The
recent  upward  movement  in the  Federal  Funds  Rate  during  2004 has  raised
short-term rates but has not yet raised long-term interest rates  significantly.
New loans will be originated at then existing  interest rates. In the future the
general  partners  anticipate  that interest rates likely will change from their
current  levels.  The general  partners  cannot,  at this time,  predict at what
levels  interest rates will be in the future.  The general  partners  anticipate
that new  loans  will be  placed  during  2005 at rates  similar  to those  that
prevailed in 2004. 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 remain  relatively
stable over the year 2005.  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 6.75% and 7.25% in 2005.

     The  partnership  makes  loans  primarily  in  Northern  California.  As of
December  31, 2004,  approximately  76.36% of the loans held were in the six San
Francisco  Bay  Area  Counties,  12.33%  were in  counties  adjacent  to the San
Francisco  Bay Area and the  balance  11.31% were in other  counties  throughout
California.  Like the rest of the nation,  the San  Francisco  Bay Area felt the
recession  and  accompanying   slow  down  in  economic  growth  and  increasing
unemployment.

     Recently  the  national  and  Northern  California  economies  seem  to  be
improving.  Job creation  remains a concern,  as little job creation seems to be
evident.  The partnership makes loans primarily in Northern  California and real
estate values of residential,  commercial,  multi-family properties and land are
of particular  interest to the partnership.  Real estate is the primary security
for the partnership's loans.

     The residential  real estate market in California  continues to appreciate.
The San  Francisco  Chronicle  dated  January 20, 2005  reported  that  "Despite
earlier forecasts of softer housing demand in 2004, low interest rates drove the
Bay Area real estate market to record levels last year. The median sale price of
a single-family home in 2004 was $532,000,  a 17% rise over $455,000 in 2003 and
the highest for any year since 1988,  real  estate  information  firm  DataQuick
reported  Wednesday.  A total of 134,848  houses and condos changed hands in the
nine  counties in 2004,  blowing past the previous  peak of 122,149 set in 2003.
December,  traditionally  a slow time for real estate sales,  closed out 2004 in
strong  -  although  not  record-setting  -  fashion.  The  median  price  for a
single-family  home hit $554,000,  a 17% jump over the December 2003 median. The
record median of $560,000 was set in November.  The housing boom wasn't expected
to last through  2004.  In the face of  anticipated  interest  rate hikes,  many
economists had predicted that local and national real estate markets would cool.
But after mortgage rates rose for several weeks in the spring, disappointing job
growth  reignited fears about the economy,  driving rates lower. The uncertainty
created  by both  rising  and  falling  rates  prompted  buyers to jump into the
housing market. John Karevoll, [a researcher at DataQuick in La Jolla (San Diego
County)]  expects  appreciation  rates to ease from the mid to high teens to the
single  digits once the benchmark  30-year fixed  mortgage rate climbs closer to
6.5 or 7.0% later in the year.  Last week,  mortgage  giant Freddie Mac said the
30-year fixed rate hit 5.74%.

                                       19
<PAGE>

     While the residential  market outlook remains strong overall the commercial
real estate market appears equally as strong.

     As reported  in the San  Francisco  Business  Times for the week of January
7-13, 2005 "The numbers are in and they're looking pretty.  San Francisco office
market  fundamentals  improved  during the last  quarter of 2004,  with  overall
vacancy shrinking to between 15.4% and 19%, depending on which brokerage firm is
crunching  the  numbers.  Main  reasons?  Dwindling  supply  due  to  stalemated
construction,  a handful of  residential  conversions  and a hopped-up  tally of
positive net  absorption.  According to Tove  Nilsen,  Colliers  International's
director of market  research,  the S.F office  market as a whole logged  699,843
square feet of positive absorption during the last quarter of the year, bringing
the annual total to 1.2 million square feet. Cushman & Wakefield Senior Research
Associate  Brad Van Blois (who counts 1.198  Million  square feet of overall net
absorption for the year)  attributes a big chunk of that - 302,610 square feet -
to fresh companies  moving to town.  Space-hungry/expanding  companies also made
this the sixth  consecutive  quarter  for  positive  net  absorption  - a marked
turnaround from the exodus of mid-2000 to mid-2003.  And rents? They stabilized.
For the year,  city-wide Class A direct rent decreased 1.9% to $28.80 per square
foot,  Class B space slipped 1.6% to $22.80 and Class C declined 4.3% to $19.44,
according  to  Cushman &  Wakefield.  Class A rents in the  commercial  business
district also dropped, to $30.48 in the fourth quarter compared to $30.60 during
the same period last year, also according to Van Blois.  But prime Class A space
in the  financial  district  is  getting  harder to come by,  with the  sweetest
sublease space now soaked up by other tenants and mostly  commodity  space left.
Class A space in the financial  district was $31.15, up from $30.36 the previous
quarter,  according to Nilsen. As expected,  commercial building sales - the hot
ticket for all of last year - beat all previous records.  Low interest rates and
pent up demand  pushed  dozens of  investors  to buy a whopping  $2.5 billion in
commercial  buildings in the city this year, beating the $2.4 billion record set
in 2000,  according to Nilsen.  [Van Blois] added: "The market fundamentals have
improved each quarter,  and it's  encouraging,  but overall we still have a long
way to go." Sales stayed steady  through the year end,  with 23  commercial  and
industrial properties closing escrow during the month of November,  according to
Jennifer Raike of Old Republic Title Co.'s monthly list of transactions."

     As of December 31, 2004, the partnership had an average loan to value ratio
based  upon  appraisals  and  prior  liens  as of the  date the loan was made of
56.94%.  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.

Contractual Obligations

     A summary of the contractual  obligations of the partnership as of December
31, 2004 is set forth below (in thousands):
<TABLE>
<S>   <C>                                <C>            <C>                    <C>                <C>
      Contractual Obligation             Total          Less than 1 Year       1-3 Years          3-5 Years
    --------------------------       --------------    -----------------     --------------    --------------

    Line of credit                    $     16,000      $             -       $      5,333      $     10,667
    Construction loans                       9,286                9,286                  -                 -
    Rehabilitation loans                     8,880                8,880                  -                 -
                                     --------------    -----------------     --------------    --------------

         Total                        $     34,166      $        18,166       $      5,333      $     10,667
                                     ==============    =================     ==============    ==============
</TABLE>


                                       20
<PAGE>

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 our line of
credit  as of  December  31,  2004.  The  presentation,  for  each  category  of
information,  aggregates the assets and  liabilities by their maturity dates for
maturities  occurring  in each of the years  2005  through  2009 and  separately
aggregates the information  for all maturities  arising after 2009. The carrying
values of these assets and liabilities  approximate  their fair market values as
of December 31, 2004 (in thousands).
<TABLE>
<S>                                      <C>        <C>       <C>        <C>        <C>       <C>             <C>
                                         2005       2006      2007       2008       2009      Thereafter      Total
                                      --------------------------------------------------------------------------------
Interest earning assets:
Money market accounts                  $ 8,772                                                               $  8,772
Average interest rate                    1.20%                                                                  1.20%
Loans secured by deeds of trust        $68,761    $68,829    $21,185    $ 3,629    $ 8,844      $   497      $171,745
Average interest rate                   10.79%      9.61%      9.68%      9.42%      9.28%        8.50%        10.02%

Interest bearing liabilities
Line of credit                         $16,000          -          -          -          -            -      $ 16,000
Average interest rate                    5.00%          -          -          -          -            -         5.00%
</TABLE>

Market Risk.

     The partnership's 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 line of credit. 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 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, 2004, 2003 and 2002

Secured Loan Portfolio.

     The partnership's  secured loan portfolio  consists primarily of short-term
(one to five years), fixed rate loans secured by real estate. As of December 31,
2004, 2003 and 2002 the partnership's  loans secured by real property collateral
in the six San  Francisco Bay Area counties  (San  Francisco,  San Mateo,  Santa
Clara,  Alameda,  Contra Costa, and Marin)  represented  $131,143,000  (76.36%),
$107,211,000 (72.85%) and $61,741,000 (73.81%), respectively, of the outstanding
secured 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.

                                       21
<PAGE>

     The  following  table  sets  forth the  distribution  of loans  held by the
partnership  by property  type for the years ended  December 31, 2004,  2003 and
2002 (in thousands):
<TABLE>
<S>                                     <C>              <C>          <C>              <C>          <C>              <C>
                                                                           December 31,
                                       --------------------------------------------------------------------------------------
                                                2004                           2003                          2002
                                       ------------------------      -------------------------     --------------------------

Single family homes (1-4 units)         $  84,359        49.12%       $  66,631        45.27%       $  36,574        43.72%
Apartments (over 4 units)                  30,981        18.04%          22,649        15.39%           6,572         7.86%
Commercial                                 54,670        31.83%          52,502        35.67%          32,089        38.36%
Land                                        1,735         1.01%           5,392         3.67%           8,415        10.06%
                                       -----------    ----------     -----------    ----------     -----------    ----------

          Total                         $ 171,745       100.00%       $ 147,174       100.00%       $  83,650       100.00%
                                       ===========    ==========     ===========    ==========     ===========    ==========
</TABLE>

     As of December 31, 2004, the partnership  held 75 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, 2004.


        PRIORITIES, ASSET CONCENTRATIONS AND MATURITIES OF SECURED LOANS
                     As of December 31, 2004 (in thousands)

<TABLE>
<S>    <C>                                                                <C>             <C>             <C>
                                                                          # of Loans      Amount          Percent
                                                                         -----------    -----------     ------------

       1st Mortgages                                                             43      $ 115,082           67.01%
       2nd Mortgages                                                             28         50,282           29.28%
       3rd Mortgages                                                              4          6,381            3.71%
                                                                         ===========    ===========     ============
            Total                                                                75      $ 171,745          100.00%

       Maturing in 2005                                                          21      $  68,761           40.04%
       Maturing in 2006                                                          24         68,829           40.07%
       Maturing in 2007                                                          11         21,185           12.34%
       Maturing after 12/31/07                                                   19         12,970            7.55%
                                                                         ===========    ===========     ============
            Total                                                                75      $ 171,745          100.00%

       Average secured loan as a % of secured loan portfolio                             $   2,289            1.33%
       Largest secured loan as a % of secured loan portfolio                                12,045            7.01%
       Smallest secured loan as a % of secured loan portfolio                                   50            0.03%
       Average secured loan-to-value at time of loan based on
           appraisals and prior liens at time of loan                                                        56.94%
       Largest secured loan as a % of partnership assets                                    12,045            6.00%
</TABLE>


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.

                                       22
<PAGE>

     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  certain of these  practices.  Rather,  the  general  partners,  in
connection  with  the  periodic  closing  of  the  accounting   records  of  the
partnership and the preparation of the financial  statements,  determine whether
the allowance for loan losses is adequate to cover  potential loan losses of the
partnership.  As of December 31, 2004 the general  partners have determined that
the allowance for loan losses and real estate held for sale of $3,343,000 (1.82%
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, 2004,  eleven loans were delinquent over 90 days in interest payments and/or
past maturity with an aggregate principal  outstanding of $25,013,000.  Of these
delinquent  loans,  five  loans  with  an  aggregate  principal  outstanding  of
$6,424,000 were subject to workout agreements.

     The partnership also makes loans requiring periodic disbursements of funds.
As of December  31, 2004 there were  thirteen  such loans.  These loans  include
loans for the ground up construction  of buildings and loans for  rehabilitation
of existing  structures.  Interest  on these  loans is computed  with the simple
interest method and only on the amounts disbursed on a daily basis.

     A summary of the status of the partnership's  loans, which are periodically
disbursed as of December 31, 2004, is set forth below (in thousands):

                                Complete Construction       Rehabilitation
                               -----------------------     -----------------
 Disbursed funds                       $14,362                  $41,373
 Undisbursed funds                     $ 9,286                  $ 8,880

     "Construction  Loans" are  determined  by the  management to be those loans
made to borrowers for the  construction of entirely new structures or dwellings,
whether  residential,  commercial  or  multifamily  properties.  For  each  such
Construction Loan, the partnership has approved a maximum balance for such loan;
however,  disbursements are made in phases throughout the construction  process.
As of December 31, 2004, the partnership had commitments for Construction  Loans
totaling  $23,648,000,  of which  $14,362,000  in  Construction  Loans  had been
disbursed  and  had  an  additional  $9,286,000  is  yet  to be  disbursed.  The
$23,648,000 of Construction  Loans  committed  exceeds 10% of the loan portfolio
which is in excess of the partnership's limit on Construction Loan funding.  The
partnership will not make any additional  Construction  Loan  obligations  until
such  time  as  the  aggregate  amount  of  the  outstanding  Construction  Loan
commitments is less than 10% of the loan portfolio.  During February,  2005, one
of these loans with a total commitment of $8,400,000 was paid in full.

     The  partnership  also  makes  loans,  the  proceeds  of which  are used to
remodel,  add to and/or rehabilitate an existing structure or dwelling,  whether
residential,   commercial  or   multifamily   properties   and  which,   in  the
determination  of  management,  are not  construction  loans.  These  loans  are
referred to by management as "Rehabilitation Loans". As of December 31, 2004 the
partnership  had  funded  $41,373,000  in  Rehabilitation  Loans and  $8,880,000
remained  to be  disbursed  for a  combined  total  of  $50,253,000.  While  the
partnership  does  not  classify  Rehabilitation  Loans as  Construction  Loans,
Rehabilitation  Loans do carry  some of the same  risks as  Construction  Loans.
There is no limit on the  amount of  Rehabilitation  Loans the  partnership  may
make.

                                       23
<PAGE>

Item 8 - Consolidated Financial Statements and Supplementary Data

A - Consolidated Financial Statements

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

  o Report of Independent Registered Public Accounting Firm
  o Consolidated Balance Sheets - December 31, 2004, and December 31, 2003
  o Consolidated Statements of Income for the years ended December 31, 2004,
     2003 and 2002
  o Consolidated Statements of Changes In Partners' Capital for the years ended
     December 31, 2004, 2003 and 2002
  o Consolidated Statements of Cash Flows for the years ended December 31, 2004,
     2003 and 2002
  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.

                                       24
<PAGE>










                         REDWOOD MORTGAGE INVESTORS VIII
                       (A CALIFORNIA LIMITED PARTNERSHIP)
                        CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003
                         AND FOR EACH OF THE THREE YEARS
                      IN THE PERIOD ENDED DECEMBER 31, 2004
















                                       25
<PAGE>








                                TABLE OF CONTENTS

                                                                     Page No.
                                                                   ------------

 Report of Independent Registered Public Accounting Firm                27

 Consolidated Balance Sheets                                            28

 Consolidated Statements of Income                                      29

 Consolidated Statements of Changes in Partners' Capital                30

 Consolidated Statements of Cash Flows                                  32

 Notes to Consolidated Financial Statements                             33

 Supplemental Schedules

   Schedule II -  Valuation and Qualifying Accounts                     48

   Schedule IV - Mortgage Loans on Real Estate                          49
      Rule 12-29 Loans on Real Estate





                                       26
<PAGE>


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




             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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,
2004 and 2003 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,   2004.   These   consolidated   financial   statements   are  the
responsibility   of  Redwood   Mortgage   Investors   VIII's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

     We  conducted  our audits in  accordance  with the  standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audits to obtain reasonable  assurance about whether the
financial  statements  are  free  of  material  misstatement.  Redwood  Mortgage
Investors VIII is not required to have, nor were we engaged to perform, an audit
of  its  internal  control  over  financial   reporting.   Our  audits  included
consideration  of  internal  control  over  financial  reporting  as a basis for
designing audit  procedures that are appropriate in the  circumstances,  but not
for the  purpose  of  expressing  an  opinion  on the  effectiveness  of Redwood
Mortgage   Investors   VIII's   internal   control  over  financial   reporting.
Accordingly,  we express no such opinion. An audit also includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements,  assessing the accounting  principles used and significant estimates
made by management, and 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 consolidated financial position of
Redwood  Mortgage  Investors  VIII as of  December  31,  2004  and  2003 and the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended  December 31, 2004 in conformity  with generally
accepted accounting principles 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.  Schedules 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 14, 2005
(except for footnote 14,
for which the date is March 10, 2005)

                                       27
<PAGE>


                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                           Consolidated Balance Sheets
                           December 31, 2004 and 2003
                                 (in thousands)

                                     ASSETS
<TABLE>
<S>      <C>                                                                    <C>              <C>
                                                                                2004             2003
                                                                            -------------    -------------

         Cash and cash equivalents                                           $    16,301      $     8,921
                                                                            -------------    -------------

         Loans
            Loans secured by deeds of trust                                      171,745          147,174
            Loans, unsecured                                                          34               34
            Allowance for loan losses                                            (2,343)          (2,649)
                                                                            -------------    -------------
              Net loans                                                          169,436          144,559
                                                                            -------------    -------------

         Interest and other receivables
            Accrued interest and late fees                                         4,895            4,735
            Advances on loans                                                        131              416
                                                                            -------------    -------------
              Total interest and other receivables                                 5,026            5,151
                                                                            -------------    -------------

         Other assets
            Loan origination fees, net                                                62               44
            Real estate held for sale, net                                         9,793            3,979
                                                                            -------------    -------------
              Total other assets                                                   9,855            4,023
                                                                            -------------    -------------

              Total assets                                                   $   200,618      $   162,654
                                                                            =============    =============

                        LIABILITIES AND PARTNERS' CAPITAL

         Liabilities
            Line of credit                                                   $    16,000      $    22,000
            Accounts payable                                                          25              224
            Payable to affiliate                                                     638              448
                                                                            -------------    -------------
              Total liabilities                                                   16,663           22,672
                                                                            -------------    -------------

         Investors in applicant status                                               424            1,210
                                                                            -------------    -------------

         Partners' capital
            Limited partners' capital, subject to redemption, net
             of unallocated syndication costs of $1,084 and $875
             for 2004 and 2003, respectively; and net of formation
             loan receivable of $9,751 and $7,550 for 2004 and 2003,
             respectively                                                        183,368          138,649

            General partners' capital, net of unallocated syndication
             costs of $11 and $9 for 2004 and 2003, respectively                     163              123
                                                                            -------------    -------------
              Total partners' capital                                            183,531          138,772
                                                                            -------------    -------------

              Total liabilities and  partners' capital                       $   200,618      $   162,654
                                                                            =============    =============
</TABLE>

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

                                       28
<PAGE>


                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                        Consolidated Statements of Income
              For the Years Ended December 31, 2004, 2003 and 2002
             (in thousands, except for per limited partner amounts)

<TABLE>
<S><C>                                                                    <C>              <C>               <C>
                                                                          2004             2003              2002
                                                                      -------------    --------------    -------------
   Revenues
      Interest on loans                                                $    16,437      $     12,496      $    11,416
      Late fees                                                                218               201              114
      Other                                                                    478               261              161
                                                                      -------------    --------------    -------------
                                                                            17,133            12,958           11,691
                                                                      -------------    --------------    -------------
   Expenses
      Mortgage servicing fees                                                1,565             1,057            1,098
      Interest expense                                                         622                71              516
      Amortization of loan origination fees                                     56                23               12
      Provision for losses on loans                                          1,146               782              780
      Provision for losses on real estate held for sale                          -                 -              500
      Asset management fees                                                    630               468              325
      Clerical costs from Redwood Mortgage Corp.                               307               290              266
      Professional services                                                    211               111               66
      Broker expense                                                             -               181              444
      Amortization of discount on imputed interest                             319               195              154
      Other                                                                    145               228               44
                                                                      -------------    --------------    -------------
                                                                             5,001             3,406            4,205
                                                                      -------------    --------------    -------------

   Income before minority interest                                          12,132             9,552            7,486

   Minority interest share of subsidiary loss                                    -                42                -
                                                                      -------------    --------------    -------------

   Net income                                                          $    12,132      $      9,594      $     7,486
                                                                      =============    ==============    =============

   Net income
      General partners (1%)                                            $       121      $         96      $        75
      Limited partners (99%)                                                12,011             9,498            7,411
                                                                      -------------    --------------    -------------

                                                                       $    12,132      $      9,594      $     7,486
                                                                      =============    ==============    =============

   Net income per $1,000 invested by
     limited partners for entire period
      Where income is compounded                                       $        72      $         78      $        87
      Where partner receives income in monthly distributions           $        70      $         75      $        84
</TABLE>



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

                                       29
<PAGE>


                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
             Consolidated Statements of Changes in Partners' Capital
              For the Years Ended December 31, 2004, 2003 and 2002
                                 (in thousands)

<TABLE>
<S>                                                   <C>              <C>           <C>               <C>               <C>
                                                                                           Limited Partners
                                                                     -------------------------------------------------------------
                                                      Partners         Capital                                           Total
                                                         In            Account       Unallocated       Formation        Limited
                                                      Applicant        Limited       Syndication         Loan,         Partners'
                                                       Status         Partners          Costs            Gross          Capital
                                                     ------------    ------------    -------------    ------------    ------------

Balances at December 31, 2001                         $      673      $   78,214      $     (400)      $  (4,127)      $   73,687
   Contributions on application                           21,563               -                -               -               -
   Formation loan increases                                    -               -                -         (1,677)         (1,677)
   Formation loan payments received                            -               -                -             530             530
   Interest credited to partners in applicant                  1               -                -               -               -
    status
   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)         (5,258)          95,690
   Contributions on application                           40,030               -                -               -               -
   Formation loan increases                                    -               -                -         (2,929)         (2,929)
   Formation loan payments received                            -               -                -             575             575
   Interest credited to partners in applicant                 37               -                -               -               -
    status
   Interest withdrawn                                       (14)               -                -               -               -
   Transfers to partners' capital                       (41,421)          41,421                -               -          41,421
   Net income                                                  -           9,498                -               -           9,498
   Syndication costs incurred                                  -               -            (478)               -           (478)
   Allocation of syndication costs                             -           (178)              178               -               -
   Partners' withdrawals                                       -         (5,128)                -               -         (5,128)
   Early withdrawal penalties                                  -            (79)               17              62               -
                                                     ------------    ------------    -------------    ------------    ------------

Balances at December 31, 2003                              1,210         147,074            (875)         (7,550)         138,649
   Contributions on application                           40,954               -                -               -               -
   Formation loan increases                                    -               -                -         (3,117)         (3,117)
   Formation loan payments received                            -               -                -             855             855
   Interest credited to partners in applicant                 20               -                -               -               -
    status
   Interest withdrawn                                        (8)               -                -               -               -
   Transfers to partners' capital                       (41,752)          41,752                -               -          41,752
   Net income                                                  -          12,011                -               -          12,011
   Syndication costs incurred                                  -               -            (417)               -           (417)
   Allocation of syndication costs                             -           (192)              192               -               -
   Partners' withdrawals                                       -         (6,365)                -               -         (6,365)
   Early withdrawal penalties                                  -            (77)               16              61               -
                                                     ------------    ------------    -------------    ------------    ------------

Balances at December 31, 2004                         $      424      $  194,203      $   (1,084)      $ (9,751)       $ 183,368
                                                     ============    ============    =============    ============    ============
</TABLE>


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

                                       30
<PAGE>


                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
       Consolidated Statements of Changes in Partners' Capital (continued)
              For the Years Ended December 31, 2004, 2003 and 2002
                                 (in thousands)

<TABLE>
<S>                                                       <C>            <C>                 <C>               <C>
                                                                      General Partners
                                                       ------------------------------------------------
                                                          Capital                            Total
                                                          Account        Unallocated        General            Total
                                                          General        Syndication       Partners'         Partners'
                                                         Partners           Costs           Capital           Capital
                                                       --------------   --------------    -------------    --------------

Balances at December 31, 2001                           $         71     $        (4)      $        67      $     73,754
   Contributions on application                                    -                -                -                 -
   Formation loan increases                                        -                -                -           (1,677)
   Formation loan payments received                                -                -                -               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
   Contributions on application                                    -                -                -                 -
   Formation loan increases                                        -                -                -           (2,929)
   Formation loan payments received                                -                -                -               575
   Interest credited to partners in applicant status               -                -                -                 -
   Interest withdrawn                                              -                -                -                 -
   Capital contributed                                            40                -               40            41,461
   Net income                                                     96                -               96             9,594
   Syndication costs incurred                                      -              (5)              (5)             (483)
   Allocation of syndication costs                               (2)                2                -                 -
   Partners' withdrawals                                        (95)                -             (95)           (5,223)
   Early withdrawal penalties                                      -                -                -                 -
                                                       --------------   --------------    -------------    --------------

Balances at December 31, 2003                                    132              (9)              123           138,772
   Contributions on application                                    -                -                -                 -
   Formation loan increases                                        -                -                -           (3,117)
   Formation loan payments received                                -                -                -               855
   Interest credited to partners in applicant status               -                -                -                 -
   Interest withdrawn                                              -                -                -                 -
   Capital contributed                                            41                -               41            41,793
   Net income                                                    121                -              121            12,132
   Syndication costs incurred                                      -              (4)              (4)             (421)
   Allocation of syndication costs                               (2)                2                -                 -
   Partners' withdrawals                                       (118)                -            (118)           (6,483)
   Early withdrawal penalties                                      -                -                -                 -
                                                       --------------   --------------    -------------    --------------

Balances at December 31, 2004                           $        174     $       (11)      $       163      $    183,531
                                                       ==============   ==============    =============    ==============
</TABLE>


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

                                       31
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                      Consolidated Statements of Cash Flows
              For the Years Ended December 31, 2004, 2003 and 2002
                                 (in thousands)

<TABLE>
<S>       <C>                                                               <C>             <C>              <C>
                                                                            2004            2003             2002
                                                                        ------------    -------------    ------------
          Cash flows from operating activities
             Net income                                                  $   12,132      $     9,594      $    7,486
             Adjustments to reconcile net income to
               net cash provided by operating activities
                Amortization of loan fees                                        56               23              12
                Imputed interest income                                       (319)            (195)           (154)
                Amortization of discount                                        319              195             154
                Provision for loan and real estate losses                     1,146              782           1,280
                Realized loss on sale of real estate                              -              127               -
                Minority interest share of subsidiary loss                        -             (42)               -
                Change in operating assets and liabilities
                  Unsecured loans                                                 -                -               4
                  Accrued interest and late fees                            (2,566)          (3,448)         (1,253)
                  Advances on loans                                              74            (500)           (312)
                  Other receivables                                               -              888           (888)
                  Loan origination fees                                        (74)             (45)            (28)
                  Accounts payable                                            (199)            (225)             375
                  Payable to affiliate                                          190              154             185
                  Deferred interest                                               -            (112)             112
                                                                        ------------    -------------    ------------
          Net cash provided by operating activities                          10,759            7,196           6,973
                                                                        ------------    -------------    ------------

          Cash flows from investing activities
             Loans originated                                              (81,579)         (96,820)        (32,601)
             Principal collected on loans                                    52,359           35,097          26,083
             Payments for development of real estate                              -            (706)           (219)
             Proceeds from disposition of real estate                             -            6,036               -
                                                                        ------------    -------------    ------------
          Net cash used in investing activities                            (29,220)         (56,393)         (6,737)
                                                                        ------------    -------------    ------------

          Cash flows from financing activities
             Borrowings (repayments) on line of credit, net                 (6,000)           22,000        (11,400)
             Repayments on note payable                                           -          (1,782)             (7)
             Contributions by partner applicants                             41,007           40,093          21,586
             Partners' withdrawals                                          (6,483)          (5,223)         (3,616)
             Syndication costs paid                                           (421)            (483)           (381)
             Formation loan lending                                         (3,117)          (2,929)         (1,677)
             Formation loan collections                                         855              575             530
             Distributions to minority interest                                   -          (1,321)               -
                                                                        ------------    -------------    ------------
          Net cash provided by financing activities                          25,841           50,930           5,035
                                                                        ------------    -------------    ------------

          Net increase in cash and cash equivalents                           7,380            1,733           5,271

          Cash and cash equivalents - beginning of year                       8,921            7,188           1,917
                                                                        ------------    -------------    ------------

          Cash and cash equivalents - end of year                        $   16,301      $     8,921      $    7,188
                                                                        ============    =============    ============

          Supplemental disclosures of cash flow information
             Cash paid for interest                                      $      622      $        71      $      516
</TABLE>

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

                                       32
<PAGE>


                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
                        December 31, 2004, 2003 and 2002


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, 2004, the Partnership
was  in  its  fifth  offering  stage,   wherein   contributed   capital  totaled
$172,223,000 of approved aggregate offerings of $200,000,000. As of December 31,
2004 and 2003,  $424,000  and  $1,210,000,  respectively,  remained in applicant
status,  and total  Partnership units sold were in the aggregate of $172,223,000
and $131,269,000, 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  which  closed in
October 2003. On October 7, 2003, the Partnership commenced a fifth offering for
an additional $75,000,000.

     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 offering  ($15,000,000)  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. Payments on this loan were also made during the offering period prior to
the close of the offering.

     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 being repaid, without interest, in ten annual installments of
$178,000,  which  commenced  on January 1,  2003,  following  the year the third
offering closed.  Payments on this loan were also made during the offering stage
prior to the close of the offering.

     The formation loan relating to the fourth  offering  ($50,000,000)  totaled
$3,777,000, which was 7.6% of the limited partners contributions of $49,985,000.
It is being repaid,  without interest,  in ten annual  installments of $365,000,
which  commenced  on  January 1, 2004,  following  the year the fourth  offering
closed.  Payments on this loan were also made during the offering stage prior to
the close of the offering.

                                       33
<PAGE>

                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
                        December 31, 2004, 2003 and 2002


1.     Organizational and General (continued)

     Sales commissions - formation loans (continued)

     The formation  loan relating to the fifth  offering  ($75,000,000)  totaled
$3,570,000  as of December  31,  2004,  which was 7.5% of the  limited  partners
contributions  of  $47,314,000  through  December  31,  2004.  An  equal  annual
repayment  schedule on this loan,  without  interest,  will commence in the year
subsequent to the closing of this offering. Payments on this loan are being made
during the offering stage prior to the close of the offering.

     For the offerings,  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.

     The following  summarizes  formation loan transactions to December 31, 2004
(in thousands):
<TABLE>
<S>  <C>                           <C>              <C>              <C>            <C>              <C>            <C>
                                   Initial          Second           Third          Fourth           Fifth
                                  Offering of     Offering of      Offering of    Offering of      Offering of
                                   $15,000         $30,000          $30,000        $50,000          $75,000         Total
                                 ------------    -------------    ------------   -------------    ------------    -----------
     Limited Partner
       contributions              $   14,932      $    29,993      $   29,999     $    49,985      $   47,314      $ 172,223
                                 ============    =============    ============   =============    ============    ===========

     Formation loan made          $    1,075      $     2,272      $    2,218     $     3,777      $    3,570      $  12,912
     Discount on
       imputed interest                 (25)            (303)           (291)           (571)           (748)        (1,938)
                                 ------------    -------------    ------------   -------------    ------------    -----------
     Formation loan
       made, net                       1,050            1,969           1,927           3,206           2,822         10,974
     Repayments to date                (785)          (1,013)           (558)           (495)            (45)        (2,896)
     Early withdrawal
       penalties applied                (75)            (112)            (78)               -               -          (265)
                                 ------------    -------------    ------------   -------------    ------------    -----------
     Formation loan, net
       at December 31, 2004              190              844           1,291           2,711           2,777          7,813
     Unamortized discount
       on imputed interest                25              303             291             571             748          1,938
                                 ------------    -------------    ------------   -------------    ------------    -----------
     Balance,
       December 31, 2004          $      215      $     1,147      $    1,582     $     3,282      $    3,525      $   9,751
                                 ============    =============    ============   =============    ============    ===========

     Percent loaned                     7.2%             7.6%            7.4%            7.6%            7.5%           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.  Interest has been imputed at
the market  rate of  interest  in effect at the date the  offerings  closed.  An
estimated   amount  of  imputed   interest  is  recorded  for  offerings   still
outstanding.  During  2004,  2003 and 2002  amortization  expense  of  $319,000,
$195,000 and  $154,000,  respectively,  was recorded  related to the discount on
imputed interest.

                                       34
<PAGE>


                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
                        December 31, 2004, 2003 and 2002


1.     Organizational and General (continued)

     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,  2004,  syndication  costs  of  $2,974,000  had been
incurred by the Partnership with the following distribution (in thousands):

              Costs incurred                                   $   2,974
              Early withdrawal penalties applied                   (104)
              Allocated to date                                  (1,775)
                                                              -----------
              December 31, 2004 balance                        $   1,095
                                                              ===========

     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.

     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 2.1% of contributions.

     Syndication costs  attributable to the fourth offering  ($50,000,000)  were
limited to the lesser of 10% of the gross proceeds or $2,000,000 with any excess
to be paid by the general  partners.  Gross proceeds of the fourth offering were
$49,985,000. Syndication costs totaled $658,000 or 1.3% of contributions.

     Syndication costs attributable to the fifth offering  ($75,000,000) will be
limited to the lesser of 10% of the gross proceeds or $3,000,000 with any excess
to be paid by the general partners.  As of December 31, 2004, the fifth offering
had incurred syndication costs of $505,000 (1.1% of contributions).

     Term of the partnership

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

                                       35
<PAGE>

                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
                        December 31, 2004, 2003 and 2002


2.     Summary of Significant Accounting Policies

     Basis of presentation

     The Partnership's consolidated financial statements include the accounts of
its 100%-owned subsidiaries,  Russian Hill Property Company, LLC ("Russian") and
Borrette  Property  Company,  LLC  ("Borrette"),  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 presentation.

     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 dates of the consolidated  financial  statements and the reported amounts
of revenues and expenses  during the reported  periods.  Such  estimates  relate
principally to the determination of the allowance for loan losses, including the
valuation  of  impaired  loans and the  valuation  of real estate 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 as earned.

     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 loan is
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.  At December 31, 2004 and 2003, there
were no loans  categorized as impaired by the Partnership.  The average recorded
investment in impaired loans was $0 for 2004 and 2003 and $355,000 for 2002.

     At December 31, 2004 and 2003, the Partnership had eleven and sixteen loans
past  maturity  or  past  due 90 days or  more  in  interest  payments  totaling
$25,013,000 and $27,182,000,  respectively.  In addition, accrued interest, late
charges  and  advances on these  loans  totaled  $3,202,000  and  $3,813,000  at
December  31, 2004 and 2003,  respectively.  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  based upon  appraised  values and
prior  indebtedness at the time the loans were consummated for loans outstanding
at December  31, 2004 and 2003 was 56.94% and 53.97%,  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 2003, the Partnership  restructured  three loans into a new loan and
restructured  two loans into an existing loan,  both with lower interest  rates.
The amount restructured was $15,599,000.

                                       36
<PAGE>


                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
                        December 31, 2004, 2003 and 2002


2.     Summary of Significant Accounting Policies (continued)

     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, 2004
and 2003 was as follows (in thousands):

                                              2004             2003
                                          ------------     -----------

              Specified loans              $      137       $      49
              General                           2,206           2,600
                                          ------------     -----------

                                           $    2,343       $   2,649
                                          ============     ===========

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

                                      2004             2003            2002
                                   ------------     -----------     -----------

   Beginning balance                $    2,649       $   3,021       $   2,247
   Restructured loans                        -               -              11
   Additions charged to income           1,146             782             780
   Transfers                             (500)               -               -
   Write-offs                            (952)         (1,154)            (17)
                                   ------------     -----------     -----------
                                    $    2,343       $   2,649       $   3,021
                                   ============     ===========     ===========

     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.

     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.

                                       37
<PAGE>

                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
                        December 31, 2004, 2003 and 2002


2.     Summary of Significant Accounting Policies (continued)

     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.

     Late fee revenue

     Late fees are generally  charged at 6% of the monthly  installment  payment
past due. During 2004, 2003 and 2002, late fee revenue of $218,000, $201,000 and
$114,000,  respectively,  was recorded.  The Partnership has a recorded late fee
receivable at December 31, 2004 and 2003 of $180,000 and $193,000, respectively.

     Recently issued accounting pronouncements

     In December 2003, the American  Institute of Certified  Public  Accountants
(AICPA)  Accounting  Standards  Executive  Committee (AcSEC) issued Statement of
Position 03-03,  "Accounting for Certain Loans or Debt Securities  Acquired in a
Transfer"(SOP  03-3).  SOP 03-03 is effective for loans acquired in fiscal years
beginning  after December 15, 2004,  with early adoption  encouraged.  SOP 03-03
addresses  accounting for differences  between  contractual  cash flows and cash
flows expected to be collected from an investor's initial investment in loans or
debt securities acquired in a transfer if those differences are attributable, at
least in part,  to credit  quality.  It  includes  loans  acquired  in  business
combinations   and   applies   to  all   nongovernmental   entities,   including
not-for-profit organizations.  The SOP does not apply to loans originated by the
entity.  The implementation of SOP 03-03 is not expected to have any significant
effect on the Partnership.


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.

                                       38
<PAGE>


                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
                        December 31, 2004, 2003 and 2002


3.    Other Partnership Provisions (continued)

     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 the 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  subscription funds are needed to fund a loan,
to  fund  the  formation  loan,   create   appropriate   reserves,   or  to  pay
organizational  expense or other proper partnership purposes.  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 2004, 2003 and 2002, interest totaling $20,000,  $37,000 and $1,000,
respectively,  was 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.

     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.

                                       39
<PAGE>

                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
                        December 31, 2004, 2003 and 2002


3.    Other Partnership Provisions (continued)

     Liquidity, capital withdrawals and early withdrawals (continued)

     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. Furthermore,
no more than 20% of the total limited partners' capital accounts  outstanding at
the beginning of any year, shall be liquidated during any calendar year.


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 general partners 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 2004, 2003 and 2002, loan brokerage commissions paid by the
borrowers were $2,443,000, $2,621,000 and $996,000, 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
$1,565,000,  $1,057,000  and $1,098,000  were incurred for 2004,  2003 and 2002,
respectively.  The  Partnership  had a payable to  Redwood  Mortgage  Corp.  for
servicing  fees of  $638,000  and  $448,000  at  December  31,  2004  and  2003,
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 $630,000,  $468,000  and  $325,000  were
incurred for 2004, 2003 and 2002, respectively.

                                       40
<PAGE>

                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
                        December 31, 2004, 2003 and 2002


4.    General Partners and Related Parties (continued)

     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 2004,  2003 and 2002,
operating expenses totaling $307,000, $290,000 and $266,000,  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, 2004 and
2003,  Gymno  Corporation,  a general  partner,  had capital in accordance  with
Section 4.02(a) of the Partnership Agreement.


5.    Real Estate Held for Sale

     The following  schedule  reflects the cost of the  properties  and recorded
reductions  to estimated  fair values,  including  estimated  costs to sell,  at
December 31 (in thousands):

                                                  2004             2003
                                              ------------     -----------

     Costs of properties                       $   10,793       $   4,479
     Reduction in value                           (1,000)           (500)
                                              ------------     -----------

       Real estate held for sale, net          $    9,793       $   3,979
                                              ============     ===========

     In December,  2004, the Partnership acquired land through a deed in lieu of
foreclosure.  At this  date  the  Partnership's  investment  totaled  $4,377,000
including accrued interest and advances. Management believes that the full value
of this  investment  will be recovered  from eventual sale of the property based
upon its current estimate of the property's fair value.

     In September,  2004,  the  Partnership  acquired a single family  residence
through a foreclosure  sale. At the time the  Partnership  took ownership of the
property,  the Partnership's  investment  totaled  $1,937,000  including accrued
interest and advances.  The borrower had begun a  substantial  renovation of the
property,  which was not completed at the time of  foreclosure.  The Partnership
has decided to pursue  development  of the property by processing  plans for the
creation of two condominium units on the property.  These plans will incorporate
the majority of the existing  improvements  currently  located on the  property.
Management  has  transferred  $500,000  from the  allowance for loan losses as a
reserve to cover  potential  losses for this property,  based upon  management's
estimate of the fair value of the property.

                                       41
<PAGE>


                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
                        December 31, 2004, 2003 and 2002


5.    Real Estate Held for Sale (continued)

     During 2002, the  Partnership  contributed  its interests in two foreclosed
real properties into two limited liability companies ("LLCs").

     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,  liabilities  and operating
results of Russian have been  consolidated  into the  accompanying  consolidated
financial  statements  of  the  Partnership.  Costs  related  to  the  sale  and
development of this property were capitalized  during 2003.  Commencing  January
2004, costs related to sales and maintenance of the property are being expensed.
At December 31, 2004 and 2003, the Partnership's total investment in Russian was
$3,979,000, 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.  The  assets,
liabilities and operating  results of Stockton have been  consolidated  into the
accompanying  consolidated financial statements of the Partnership.  Development
costs were capitalized during construction; thus, there was no income or expense
recognized  by  Stockton  during a portion of 2003.  As of  December  31,  2003,
advances of approximately  $132,000 were made for construction and other related
development costs and $48,000 of interest expense was capitalized, respectively.
As of December 31,  2003,  the property had been sold and a net loss of $127,000
was incurred, of which $42,000 was allocated to the minority interest.


6.    Bank Line of Credit

     The Partnership has a $42,000,000  bank line of credit through November 25,
2005,  with  borrowings  at  prime  and  secured  by  its  loan  portfolio.  The
outstanding  balances were  $16,000,000 and $22,000,000 at December 31, 2004 and
2003,  respectively.  The interest rate was 5.00% at December 31, 2004 and 4.00%
at December 31, 2003. The line of credit requires the Partnership to comply with
certain  financial  covenants.  The  Partnership  was in  compliance  with these
covenants at December 31, 2004 and 2003.


7.    Note Payable

     During  2002,  the  Partnership  assumed  a  bank  loan  of  $1,789,000  in
connection with the foreclosure on a property (see Note 5). The loan was secured
by the property and bore interest at 5.68%.  As of December 31, 2003,  this loan
has been paid in full upon the sale of the related property.

                                       42
<PAGE>


                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
                        December 31, 2004, 2003 and 2002


 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):

                                                 2004              2003
                                            -------------     -------------

  Partners' capital per consolidated
   financial statements                      $   183,531       $   138,772
  Non-allocated syndication costs                  1,095               884
  Allowance for loan losses and
   real estate held for sale                       3,343             3,149
  Formation loans receivable                       9,751             7,550
                                            -------------     -------------

  Partners' capital - tax basis              $   197,720       $   150,355
                                            =============     =============

     In 2004 and  2003,  approximately  46% and 47%,  respectively,  of  taxable
income was allocated to tax-exempt organizations (i.e., retirement plans).


 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  $171,745,000  and  $147,174,000  at
December  31,  2004 and 2003,  respectively.  The fair  value of these  loans of
$173,067,000 and $148,552,000,  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.


 10.  Non-cash Transactions

     During 2004, the Partnership  foreclosed on, or acquired  property  through
deeds in lieu of foreclosure, four properties (see Note 5), which resulted in an
increase  in real estate  held for sale and  allowance  for real estate held for
sale  of  $6,315,000  and  $500,000,   respectively  and  a  decrease  in  loans
receivable,  accrued  interest,  advances  and  allowance  for  loan  losses  of
$4,422,000, $1,840,000, $53,000 and $500,000, respectively.

     During 2003, the Partnership  restructured  three loans that resulted in an
increase to secured loans  receivable  of  $2,989,000  and a decrease to accrued
interest and advances of $2,626,000 and $363,000, respectively.

     During 2003, a previously secured loan became unsecured which resulted in a
decrease to secured  loans  receivable  of $34,000 and an increase to  unsecured
loans of $34,000.

                                       43
<PAGE>


                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
                        December 31, 2004, 2003 and 2002


11.   Asset Concentrations and Characteristics

     Most loans are secured by recorded deeds of trust. At December 31, 2004 and
2003,  there were 75 and 81 secured loans  outstanding,  respectively,  with the
following characteristics (dollars in thousands):
<TABLE>
<S>       <C>                                                                      <C>              <C>
                                                                                   2004             2003
                                                                               -------------    -------------

          Number of secured loans outstanding                                            75               81
          Total secured loans outstanding                                       $   171,745      $   147,174

          Average secured loan outstanding                                      $     2,289      $     1,817
          Average secured loan as percent of total secured loans                      1.33%            1.23%
          Average secured loan as percent of partners' capital                        1.25%            1.31%

          Largest secured loan outstanding                                      $    12,045      $    16,010
          Largest secured loan as percent of total secured loans                      7.01%           10.88%
          Largest secured loan as percent of partners' capital                        6.56%           11.54%
          Largest secured loan as a percent of total assets                           6.00%            9.84%

          Number of counties where security
             is located (all California)                                                 17               20

          Largest percentage of secured loans
             in one county                                                           20.48%           26.47%

          Average secured loan to appraised value
             of security based on appraised values and
             prior liens at time loan was consummated                                56.94%           53.97%

          Number of secured loans in foreclosure status                                   6                3
          Amount of secured loans in foreclosure                                $    14,682      $     2,931
</TABLE>



                                       44
<PAGE>


                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
                        December 31, 2004, 2003 and 2002


11.   Asset Concentrations and Characteristics (continued)

     The following  secured loan  categories  were held at December 31, 2004 and
2003 (in thousands):
<TABLE>
<S>      <C>                                                            <C>              <C>
                                                                        2004             2003
                                                                    -------------    ------------

         First trust deeds                                           $   115,082      $   84,437
         Second trust deeds                                               50,282          61,247
         Third trust deeds                                                 6,381           1,490
                                                                    -------------    ------------
                Total loans                                              171,745         147,174
         Prior liens due other lenders at time of loan                    99,140         116,870
                                                                    -------------    ------------

                Total debt                                           $   270,885      $  264,044
                                                                    =============    ============

          Appraised property value at time of loan                   $   475,710      $  489,219

                Total secured loans as a percent of appraisals            56.94%          53.97%

          Secured loans by type of property
            Owner occupied homes                                     $     9,234      $   13,656
            Non-owner occupied homes                                      75,125          52,975
            Apartments                                                    30,981          22,649
            Commercial                                                    54,670          52,502
            Land                                                           1,735           5,392
                                                                    -------------    ------------

                                                                     $   171,745      $  147,174
                                                                    =============    ============
</TABLE>

     The interest  rates on the loans range from 8.50% to 13.25% at December 31,
2004 and 7.50% to 18.00% at December 31, 2003.

     Scheduled  maturity  dates of secured  loans as of December 31, 2004 are as
follows (in thousands):

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

                              2005                         $    68,761
                              2006                              68,829
                              2007                              21,185
                              2008                               3,629
                              2009                               8,844
                           Thereafter                              497
                                                          -------------
                                                           $   171,745
                                                          =============


                                       45
<PAGE>


                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
                        December 31, 2004, 2003 and 2002


11.   Asset Concentrations and Characteristics (continued)

     The scheduled  maturities for 2005 include six loans  totaling  $8,047,000,
and representing 4.69% of the portfolio, which are past maturity at December 31,
2004. Interest payments on three of these loans were delinquent and are included
in the total of loans 90 days or more  delinquent  presented  in Note 2. Several
borrowers are in process of selling the  properties or  refinancing  their loans
through  other  institutions,   to  take  advantage  of  lower  interest  rates.
Occasionally,  the Partnership allows borrowers to continue to make the payments
on debt past maturity for periods of time. Of these six past maturity loans, the
Partnership has begun foreclosure  proceedings by filing a notice of default, on
four with aggregate principal balances totaling $7,439,000.

     Cash deposits at December 31, 2004 exceeded  FDIC  insurance  limits (up to
$100,000 per bank) by approximately $10,744,000.


12.   Commitments and Contingencies

     Construction / rehabilitation loans

     The Partnership makes construction and  rehabilitation  loans which are not
fully disbursed at loan inception. The Partnership has approved the borrowers up
to a maximum loan balance;  however,  disbursements are made periodically during
completion  phases of the construction or  rehabilitation or at such other times
as  required  under  the loan  documents.  At  December  31,  2004,  there  were
$18,166,000 of  undisbursed  loan funds which will be funded by a combination of
borrower  monthly  mortgage  payments,  line of  credit  draws,  retirements  of
principal on current loans, cash and capital  contributions from investors.  The
Partnership  does not maintain a separate  cash reserve to hold the  undisbursed
obligations, which are intended to be funded.

     Workout agreements

     The  Partnership has negotiated  various workout  agreements with borrowers
whose loans are past  maturity or who are  delinquent  in making  payments.  The
Partnership is not obligated to fund  additional  money as of December 31, 2004.
There are eight loans totaling  $8,415,000 in workout  agreements as of December
31, 2004.

     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.

                                       46
<PAGE>

                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Notes to Consolidated Financial Statements
                        December 31, 2004, 2003 and 2002


13.   Selected Financial Information (Unaudited)
<TABLE>
<S>    <C>                                               <C>           <C>            <C>           <C>            <C>
                                                                         Calendar Quarter
                                                      (in thousands, except for per limited partner amounts)
                                                      ------------------------------------------------------
                                                         First         Second         Third         Fourth         Annual
                                                      ----------     ----------    ----------     ----------     ----------
       Revenues
          2004                                         $  3,850       $  3,785      $  4,504       $  4,994       $ 17,133
          2003                                         $  2,789       $  3,072      $  3,225       $  3,872       $ 12,958

       Expenses
          2004                                         $  1,117       $    907      $  1,418       $  1,559       $  5,001
          2003                                         $    659       $    711      $    722       $  1,272       $  3,364

       Net income allocated to general partners
          2004                                         $     27       $     29      $     31       $     34       $    121
          2003                                         $     21       $     24      $     25       $     26       $     96


       Net income allocated to limited partners
          2004                                         $  2,706       $  2,849      $  3,055       $  3,401       $ 12,011
          2003                                         $  2,109       $  2,337      $  2,478       $  2,574       $  9,498


       Net income per $1,000 invested
          where income is
            Reinvested and compounded
              2004                                     $     18       $     18      $     18       $     18       $     72
              2003                                     $     20       $     19      $     18       $     21       $     78


            Withdrawn
              2004                                     $     18       $     17      $     17       $     18       $     70
              2003                                     $     20       $     19      $     18       $     18       $     75
</TABLE>

14.   Subsequent Events

     Subsequent  to  December  31,  2004 and  through  February  11,  2005,  the
Partnership  had  received  $5,091,000  of new  investor  money for the  current
offering and had admitted  $3,668,000  of partners in applicant  status into the
Partnership.  The admitted  amount includes  $424,000 that awaited  admission at
December 31, 2004.

     Subsequent  to  December  31,  2004 and  through  February  11,  2005,  the
Partnership  had foreclosed and acquired one property.  As of December 31, 2004,
the Partnership's investment in the loan totaled $1,336,000.

     Due to a calendaring  oversight,  the  Partnership did not timely renew its
permit with the California Department of Corporations ("DOC"). Upon discovery of
this  oversight,  the  Partnership  applied for and received  from the DOC a new
permit allowing the Partnership to continue sales in California.  To correct the
$16,370,000 in sales that occurred  without a permit from the DOC in place,  the
Partnership  offered to  repurchase  the Units sold  during  this  period.  Upon
expiration  of  the  offer  in  March  2005,  $74,000  was  repurchased  by  the
Partnership.

                                       47
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                 Schedule II - Valuation and Qualifying Accounts
                                December 31, 2004
                                 (in thousands)


<TABLE>
<S>              <C>                            <C>            <C>                <C>                  <C>               <C>
                                                                  Col. C - Additions
                                                Col B.       --------------------------------                            Col E.
                                              Balance at       Charged to         Charged                                Balance
                 Col A.                       Beginning        Costs and          to Other             Col. D            at End
              Description                     of Period         Expenses          Accounts           Deductions         of Period
----------------------------------------    --------------   --------------    --------------     ---------------     ------------

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
                                            ==============   ==============    ==============     ===============     ============

Year Ended December 31, 2003

Deducted from asset accounts

Allowance for loan losses                    $      3,021     $        782      $          -       $     (1,154) (b)   $    2,649

Cumulative write-down of
  real estate held for sale (REO)                     500                -                 -                   -              500
                                            --------------   --------------    --------------     ---------------     ------------
                                             $      3,521     $        782      $          -       $     (1,154) (b)   $    3,149
                                            ==============   ==============    ==============     ===============     ============

Year Ended December 31, 2004

Deducted from asset accounts

Allowance for loan losses                    $      2,649     $      1,146      $      (500)       $       (952) (b)   $    2,343
Cumulative write-down of
  real estate held for sale (REO)                     500                -               500                   -            1,000
                                            --------------   --------------    --------------     ---------------     ------------
                                             $      3,149     $      1,146      $          -       $       (952) (b)   $    3,343
                                            ==============   ==============    ==============     ===============     ============
</TABLE>



(a) - Represents restructuring of loans.

(b) - Represents write-offs of loans.


                                       48
<PAGE>


                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Schedule IV - Mortgage Loans on Real Estate
                         Rule 12-29 Loans on Real Estate
                                 (in thousands)

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

                                                                                          Col. H
                                                                                        Principal
                                                               Col. F                     Amount
                                                                Face         Col. G      of Loans
                        Col. C      Col. D                    Amount of     Carrying    Subject to   Col. I      Col. J
            Col. B      Final      Periodic       Col. E      Mortgage      Amount of   Delinquent    Type     California
Col. A     Interest    Maturity    Payment        Prior       Original      Mortgage     Principal     of      Geographic
Descrip.     Rate        Date       Terms         Liens        Amount      Investment   or Interest   Lien      Location
------------------------------------------------------------------------------------------------------------------------------

Comm.       11.75%     12/01/09    $      3     $      -     $     148     $     128    $      -     1st         Yuba
Res.        12.00%     05/01/03          12            -         1,210         1,210       1,210     1st         Marin
Apts.       12.50%     11/15/02           4           47            39           292         292     2nd         Contra Costa
Comm.       11.50%     02/01/05           4          493           400           395           -     2nd         San Francisco
Apts.       12.00%     07/01/06          40            -         4,000         7,057       7,057     1st         San Francisco
Comm.       12.00%     05/01/07           8        2,916           799           788         788     2nd         Santa Clara
Res.        12.00%     05/01/03          13            -         1,325         1,325       1,325     1st         Marin
Res.        13.25%     01/01/04          20            -         3,515         1,304       1,304     1st         Napa
Comm.       11.50%     08/01/06           3            -           350           271           -     1st         San Mateo
Land         9.50%     07/01/05           8            -           987           987           -     1st         Santa Clara
Res.        10.00%     12/01/02           3            -           318           316         316     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
Comm.       13.00%     06/01/05          41        8,100         4,550         6,020       6,020     2nd         Santa Clara
Comm.       10.50%     08/01/04          31            -         3,600         3,600       3,600     1st         Santa Clara
Res.        10.25%     06/01/06           4        1,647           263           215           -     2nd         Santa Clara
Res.        10.50%     09/01/07           2        1,468           805           520           -     3rd         Santa Clara
Res.        11.50%     09/01/05          12            -         1,300         1,299           -     1st         Alameda
Res.        10.50%     09/01/05           2          710           269           269           -     2nd         San Mateo
Res.        10.50%     10/01/05          16            -         1,781         1,781       1,781     1st         San Mateo
Comm.       10.50%     10/01/07           4            -           441           435           -     1st         San Mateo
Comm.       11.25%     12/01/07           9          718           900           892           -     1st & 3rd   El Dorado
Res.        10.00%     11/01/05          11          500         1,320         1,320       1,320     2nd         Napa
Comm.       10.00%     01/01/08          13            -         1,500         1,500           -     1st         River Side
Comm.       10.00%     12/31/04          87            -        10,440        10,440           -     1st         San Francisco
Res.        11.50%     12/01/05          41            -         7,700         8,364           -     1st         San Mateo
Comm.       10.00%     04/01/05          47            -         5,293         6,236           -     1st         Los Angeles
Apts.       10.00%     06/01/05          16        2,147         1,950         1,549           -     2nd         Contra Costa
Apts.       13.00%     01/02/06          29       14,800         2,660         2,660           -     2nd         Santa Clara
Comm.       12.00%     07/01/06          25            -         2,500         2,500           -     1st         Sacramento
Res.        11.00%     07/01/05           9            -         6,074         3,610           -     1st         Fresno
Comm.       11.00%     07/01/06          33            -         3,570         3,570           -     1st         Alameda
Apts.        9.50%     01/01/09           4            -           413           409           -     1st         San Joaquin
Comm.        9.50%     12/01/05          22            -         2,750         2,750           -     1st         San Francisco
Res.         9.25%     12/01/08           1          376           130           129           -     2nd         Santa Clara
Apts.        9.50%     11/01/05          29        3,115         3,650         3,650           -     2nd         River Side
Comm.        9.00%     01/01/06          25            -         3,375         3,375           -     1st         San Joaquin
Res.        10.00%     12/25/05         133        5,577        16,010        12,045           -     2nd         Alameda
Res.         8.50%     01/01/06           8            -         1,070         1,062           -     1st         Placer
Comm.        9.50%     01/01/06          13            -         1,610         1,610           -     1st         Alameda
</TABLE>


                                       49
<PAGE>


                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Schedule IV - Mortgage Loans on Real Estate
                         Rule 12-29 Loans on Real Estate
                                 (in thousands)

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

                                                                                          Col. H
                                                                                         Principal
                                                                Col. F                     Amount
                                                                 Face         Col. G      of Loans
                        Col. C       Col. D                    Amount of     Carrying    Subject to   Col. I     Col. J
            Col. B      Final       Periodic       Col. E      Mortgage      Amount of   Delinquent    Type    California
Col. A     Interest    Maturity     Payment        Prior       Original      Mortgage     Principal     of     Geographic
Descrip.     Rate        Date        Terms         Liens        Amount      Investment   or Interest   Lien     Location
------------------------------------------------------------------------------------------------------------------------------
Res.         8.50%     10/01/10           4          190           500           497           -       2nd       Alameda
Res.        10.00%     01/25/06           6       22,354         8,245         4,868           -       3rd       San Mateo
Apts.       10.00%     03/10/07          43            -         5,200         5,200           -       1st       Santa Clara
Res.         8.50%     04/01/06           6        1,655           800           800           -       2nd       San Francisco
Res.         9.00%     05/01/09           3        2,400           335           335           -       2nd       San Francisco
Res.         9.25%     04/01/06           9            -         1,180         1,180           -       1st       San Francisco
Apts.        9.25%     06/01/06           5            -           666           666           -       1st       San Francisco
Res.         9.25%     05/01/09           9          735         1,085         1,081           -       2nd       San Mateo
Comm.        9.50%     05/01/09           3          242           375           374           -       2nd       San Francisco
Res.         9.25%     06/01/09           3            -           403           403           -       1st       Contra Costa
Apts.        9.25%     06/01/06           7            -           881           881           -       1st       San Francisco
Res.         8.50%     06/01/09           -          313            50            50           -       2nd       San Mateo
Apts.        9.25%     06/01/06           7            -           875           875           -       1st       San Francisco
Res.         9.25%     06/01/09           2            -           188           187           -       1st       San Joaquin
Res.        10.75%     07/01/06          20            -         8,400         2,172           -       1st       San Francisco
Comm.        9.00%     06/01/09           4        2,850           500           498           -       2nd       Santa Clara
Comm.       10.00%     06/01/07          39            -         4,650         4,650           -       1st       Marin
Land         9.00%     07/01/09           6            -           750           748           -       1st       Lake
Res.         9.25%     07/01/09           6          716           690           689           -       2nd       San Mateo
Res.         8.75%     01/01/06          78            -        15,615         6,344           -       1st       Alameda
Res.        10.50%     07/01/06          14            -         2,400         1,600           -       1st       San Diego
Comm.        9.00%     08/01/09           2          785           300           299           -       2nd       Marin
Comm.        9.00%     08/01/09          15            -         2,000         1,600           -       1st       San Francisco
Comm.        9.50%     08/01/09          16            -         1,947         1,943           -       1st       Alameda
Res.         9.25%     10/01/07           3          764           385           385           -       2nd       San Francisco
Res.         8.75%     09/01/06          86            -        11,684        11,506           -       1st       Contra Costa
Res.        10.00%     09/01/06          37       11,685         7,821         4,382           -       2nd       Contra Costa
Res.         9.25%     10/01/06          83        1,389        10,540        10,471           -       2nd       Sacramento
Res.         9.00%     11/01/08          15            -         2,000         2,000           -       1st       Marin
Apts.        8.75%     01/01/07          50            -         6,900         6,900           -       1st       Contra Costa
Apts.       10.00%     01/01/07           2        6,900         1,890           324           -       2nd       Contra Costa
Comm.       11.00%     05/01/09           1          612           100           100           -       3rd       San Francisco
Apts.       11.00%     06/01/06           1          881           641           143           -       2nd       San Francisco
Apts.       11.00%     06/01/06           2          875           908           375           -       2nd       San Francisco
Res.        11.00%     04/01/06           -        1,180           425           246           -       2nd       San Francisco
                                  ---------------------------------------------------------------
   Total                           $  1,379     $ 99,140     $ 201,434     $ 171,745    $ 25,013
                                  ===============================================================
</TABLE>


Note: Most loans have balloon payments due at maturity


                                       50
<PAGE>


                         REDWOOD MORTGAGE INVESTORS VIII
                       (A California Limited Partnership)
                   Schedule IV - Mortgage Loans on Real Estate
                   Rule 12-29 Loans on Real Estate (continued)
                                 (in thousands)


     Reconciliation of carrying amount (cost) of loans at close of periods
<TABLE>
<S>   <C>                                                  <C>              <C>               <C>
                                                                   Year ended December 31,
                                                       ------------------------------------------------

                                                           2004             2003              2002
                                                       --------------   --------------    -------------
      Balance at beginning of year                      $    147,174     $     83,650      $    82,790

      Additions during period
         New loans                                            81,579           96,820           32,601
         Other                                                     -            2,989            1,060
                                                       --------------   --------------    -------------
           Total additions                                    81,579           99,809           33,661
                                                       --------------   --------------    -------------

      Deductions during period
         Collections of principal                             52,359           35,097           26,083
         Foreclosures                                          4,422                -            5,986
         Cost of loans sold                                        -                -                -
         Amortization of premium                                   -                -                -
         Other                                                   227            1,188              732
                                                       --------------   --------------    -------------
           Total deductions                                   57,008           36,285           32,801
                                                       --------------   --------------    -------------

      Balance at close of year                          $    171,745     $    147,174      $    83,650
                                                       ==============   ==============    =============
</TABLE>


                                       51
<PAGE>


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

     There  were no  disagreements  with the  partnership's  independent  public
accountants during the years ended December 31, 2004 and 2003.


Item 9a. - Controls and Procedures

     The partnership  carried out an evaluation,  under the supervision and with
the participation of the general partners of the effectiveness of the design and
operation of the partnership's  disclosure controls and procedures as of the end
of the period  covered by this report  pursuant to Rule 13a-15 of the Securities
Exchange  Act of 1934,  as  amended.  Based upon that  evaluation,  the  general
partners  concluded that the  partnership's  disclosure  controls and procedures
were effective in timely alerting the general  partners to material  information
relating to the  Partnership  that is  required  to be included in our  periodic
filings with the Securities and Exchange Commission.

     There were no significant  changes in the  partnership's  internal  control
over financial  reporting  during the  partnership's  fourth fiscal quarter that
have materially affected,  or are likely to materially affect, the partnership's
internal control over financial reporting.


Item 9b. - Other Information

     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
stockholders are the Burwell Trusts, the other shareholder of Gymno Corporation.

     The General Partners.

     Michael R.  Burwell.  Michael R. Burwell,  age 48,  General  Partner,  past
member  of  Board  of  Trustees  and  Treasurer,   Mortgage  Brokers   Institute
(1984-1986);  President,  Director,  Chief Financial  Officer,  Redwood Mortgage
Corp.  (1979-present);  Director,  Secretary  and  Treasurer  A  &  B  Financial
Services, Inc. (1980-present);  President, Director, Chief Financial Officer and
Secretary (since 1986) of Gymno Corporation;  President, Director, Secretary and
Treasurer of The Redwood Group, Ltd. (1979-present).  Mr. Burwell is licensed as
a real estate sales person.

     Gymno  Corporation.  Gymno  Corporation,  General Partner,  is a California
corporation  formed in 1986 for the  purpose  of acting as a general  partner of
this  partnership  and of other limited  partnerships  formed by the  individual
general partners. The shares in Gymno Corporation are held equally by Michael R.
Burwell  and the  estate  of D.  Russell  Burwell.  Upon the  completion  of the
administration of D. Russell  Burwell's  estate,  Michael R. Burwell will have a
controlling  interest in Gymno Corporation.  Michael R. Burwell is a director of
Gymno and the director  position held by D. Russell Burwell is currently vacant.
Michael R. Burwell is its President, Chief Financial Officer and Secretary.

     Redwood  Mortgage  Corp.  Redwood  Mortgage Corp. is a licensed real estate
broker  incorporated  in 1978 under the laws of the State of California,  and is
engaged  primarily in the business of arranging  and servicing  mortgage  loans.
Redwood  Mortgage  Corp.  will act as the loan  broker  and  servicing  agent in
connection  with  loans,  as it has done on  behalf  of  several  other  limited
partnerships formed by the general partners.

                                       52
<PAGE>

Financial Oversight by General Partners.

     The partnership  does not have a board of directors or an audit  committee.
Accordingly,  the general  partners  serve the  equivalent  function of an audit
committee  for,  among  other  things,  the  following  purposes:   appointment,
compensation,  review  and  oversight  of the  work  of our  independent  public
accountants,  and  establishing  the  enforcing of the Code of Ethics.  However,
since the partnership  does not have an audit committee and the general partners
are not independent of the partnership,  the partnership does not have an "audit
committee financial expert."

Code of Ethics.

     The  general  partners  have  adopted  a Code of Ethics  applicable  to the
general partners and to any agents, employees or independent contractors engaged
by the  general  partners  to perform the  functions  of a  principal  financial
officer, principal accounting officer or controller of the partnership,  if any.
You may obtain a copy of this Code of Ethics,  without  charge,  upon request by
calling our Investor Services Department at (650) 365-5341.

                                       53
<PAGE>

Item 11 - Executive Compensation


       COMPENSATION OF THE GENERAL PARTNERS AND AFFILIATES BY PARTNERSHIP

     As  indicated  above  in  Item  10,  the  partnership  has no  Officers  or
Directors. The partnership is managed by the general partners. There are certain
fees and other items paid to management and related parties.

     A more  complete  description  of management  compensation  is found in the
prospectus (S-11) dated October 7, 2003, 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, 2004. 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.....................$1,565,000
          (General Partner)

    General Partners &/or Affiliates        Asset Management Fee for managing assets.........................$630,000

    General Partners                        1% interest in profits...........................................$121,000
                                            Less allocation of syndication costs...............................$2,000
                                                                                                       ---------------
                                                                                                             $119,000
    General Partners &/or Affiliates        Portion of early withdrawal penalties applied to
                                            reduce Formation Loan.............................................$61,000
</TABLE>


     II. FEES PAID BY BORROWERS ON MORTGAGE LOANS PLACED WITH THE PARTNERSHIP BY
COMPANIES  RELATED TO THE GENERAL  PARTNERS  DURING THE YEAR ENDED  DECEMBER 31,
2004 (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.............................$2,443,000

    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..........................................$35,000

    Gymno Corporation                     Reconveyance Fee....................................................$24,429
</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 DURING THE YEAR ENDED DECEMBER 31, 2004 . . .
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $307,000



                                       54
<PAGE>

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 7, 2003, (incorporated herein by
reference) on page 5 "Compensation of General Partners and Affiliates".


Item 14 - Principal Accountant Fees and Services

     Fees for services performed for the partnership by the principal accountant
for 2004 and 2003 are as follows:

     Audit Fees The aggregate  fees billed  during the years ended  December 31,
2004  and  2003  for  professional  services  rendered  for  the  audit  of  the
partnership's  annual financial  statements included in the partnership's Annual
Report  on  Form  10-K,   review  of  financial   statements   included  in  the
partnership's  Quarterly  Reports  on Form  10-Q and for  services  provided  in
connection with regulatory filings were $161,839 and $101,302, respectively.

     Audit  Related  Fees  There  were no fees  billed  during  the years  ended
December 31, 2004 and 2003 for audit-related services.

     Tax fees The  aggregate  fees billed for tax  services  for the years ended
December  31, 2004 and 2003,  were $9,027 and $5,487,  respectively.  These fees
relate to professional services rendered primarily for tax compliance.

     All Other  Fees  There were no other  fees  billed  during the years  ended
December 31, 2004 and 2003.

     All audit and non-audit  services are approved by the general partner prior
to the accountant being engaged by the partnership.


                                       55
<PAGE>


                                     Part IV


Item 15 - Exhibits, Financial Statements and Schedules

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
       31.1         Certification of General Partner pursuant to Section 302 of
                     the Sarbanes-Oxley Act of 2002
       31.2         Certification of General Partner pursuant to Section 302 of
                     the Sarbanes-Oxley Act of 2002
       31.3         Certification of General Partner pursuant to Section 302 of
                     the Sarbanes-Oxley Act of 2002
       32.1         Certification of General Partner pursuant to Section 906 of
                     the Sarbanes-Oxley Act of 2002
       32.2         Certification of General Partner pursuant to Section 906 of
                     the Sarbanes-Oxley Act of 2002
       32.3         Certification of General Partner pursuant to Section 906 of
                     the Sarbanes-Oxley Act of 2002

     All of the above exhibits,  other than exhibit 31.1, 31.2, 31.3, 32.1, 32.2
and 32.3,  were previously  filed as the exhibits to  Registrant's  Registration
Statement  on  Form  S-11  (Registration  No.  333-106900  and  incorporated  by
reference herein).

B.  See A (3) above.

C.  See A (2) above. Additional reference is made to the prospectus (filed as
    part of the S-11 registration statement) dated October 7, 2003, supplement
    No. 3 dated February 11, 2005 (post effective amendment No.  4 to the S-11
    registration statement), for financial data related to Gymno Corporation,
    and Redwood Mortgage Corp., the Corporate General Partners.

                                       56
<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,
2005.


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


                                       57
<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, 2005.


       Signature                      Title                         Date



/S/ Michael R. Burwell
-----------------------
Michael R. Burwell               General Partner                March 31, 2005



/S/ Michael R. Burwell
-----------------------
Michael R. Burwell        President of Gymno Corporation,       March 31, 2005
                          (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, 2005
                          Redwood Mortgage Corp. (Principal
                           Financial and Accounting Officer);
                          Director of Redwood Mortgage Corp.


                                       58
<PAGE>


                                                                    Exhibit 31.1


                          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 annual
report;

     3. Based on my knowledge,  the 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,  or caused such
disclosure  controls and  procedures to be designed  under our  supervision,  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 and presented in this report our conclusions  about the effectiveness
of the disclosure  controls and procedures,  as of the end of the period covered
by this report based on such evaluation; and

     (c) disclosed in this report any change in the Registrant's  annual control
over  financial  reporting  that occurred  during the  Registrant's  most recent
fiscal quarter (the Registrant's  fourth fiscal quarter in the case of an annual
report) that has  materially  affected,  or is  reasonably  likely to materially
affect, the Registrant's internal control over financial reporting; and

     5. The Registrant's other certifying  officers and I have disclosed,  based
on our most recent evaluation of internal control over financial  reporting,  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 and material  weaknesses in the design or
operation of internal  control over  financial  reporting  which are  reasonably
likely  to  adversely  affect  the  Registrant's  ability  to  record,  process,
summarize and report financial data; and

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




/s/ Michael R. Burwell
-----------------------------------
Michael R. Burwell, General Partner
March 31, 2005

                                       59
<PAGE>

                                                                    Exhibit 31.2



               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 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,  or caused such
disclosure  controls and  procedures to be designed  under our  supervision,  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 and presented in this report our conclusions  about the effectiveness
of the disclosure  controls and procedures,  as of the end of the period covered
by this report based on such evaluation; and

     (c) disclosed in this report any change in the Registrant's  annual control
over  financial  reporting  that occurred  during the  Registrant's  most recent
fiscal quarter (the Registrant's  fourth fiscal quarter in the case of an annual
report) that has  materially  affected,  or is  reasonably  likely to materially
affect, the Registrant's internal control over financial reporting; and

     5. The Registrant's other certifying  officers and I have disclosed,  based
on our most recent evaluation of internal control over financial  reporting,  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 and material  weaknesses in the design or
operation of internal  control over  financial  reporting  which are  reasonably
likely  to  adversely  affect  the  Registrant's  ability  to  record,  process,
summarize and report financial data; and

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




/s/ Michael R. Burwell
-----------------------------------
Michael R. Burwell, President, and
Chief Financial Officer of Gymno
Corporation, General Partner
March 31, 2005

                                       60
<PAGE>

                                                                    Exhibit 31.3



                            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 annual
report;

     3. Based on my knowledge,  the 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,  or caused such
disclosure  controls and  procedures to be designed  under our  supervision,  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 and presented in this report our conclusions  about the effectiveness
of the disclosure  controls and procedures,  as of the end of the period covered
by this report based on such evaluation, and

     (c) disclosed in this report any change in the Registrant's  annual control
over  financial  reporting  that occurred  during the  Registrant's  most recent
fiscal quarter (the Registrant's  fourth fiscal quarter in the case of an annual
report) that has  materially  affected,  or is  reasonably  likely to materially
affect, the Registrant's internal control over financial reporting; and

     5. The Registrant's other certifying  officers and I have disclosed,  based
on our most recent evaluation of internal control over financial  reporting,  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 and material  weaknesses in the design or
operation of internal  control over  financial  reporting  which are  reasonably
likely  to  adversely  affect  the  Registrant's  ability  to  record,  process,
summarize and report financial; and

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




/s/ Michael R. Burwell
-----------------------------
Michael R. Burwell, President,
Redwood Mortgage Corporation,
General Partner
March 31, 2005

                                       61
<PAGE>

                                                                    Exhibit 32.1


                            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 ended December 31, 2004 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 at the dates and for the periods indicated.




/s/ Michael R. Burwell
-----------------------------------
Michael R. Burwell, General Partner
March 31, 2005

                                       62
<PAGE>

                                                                    Exhibit 32.2



                            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 ended December 31, 2004 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 at the dates and for the periods indicated.




/s/ Michael R. Burwell
----------------------------------
Michael R. Burwell, President, and
Chief Financial Officer of Gymno
Corporation, General Partner
March 31, 2005

                                       63
<PAGE>

                                                                    Exhibit 32.3




                            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 ended December 31, 2004 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 at the dates and for the periods indicated.




/s/ Michael R. Burwell
------------------------------
Michael R. Burwell, President,
Redwood Mortgage Corporation,
General Partner
March 31, 2005

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