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, 2008





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:  000-17573








REDWOOD
MORTGAGE INVESTORS VI,


a
California Limited Partnership


(Exact
name of registrant as specified in its charter)








California
            94-3031211(State
      or other jurisdiction of incorporation or organization)
            (I.R.S.
      Employer Identification)








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





1





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act of 1933, as amended.





Yes
            
            
            No
            XX





Indicate
by check mark if the registrant is not required to file pursuant to Section 13
or Section 15(d) of the Securities Act of 1934, as amended.





Yes
            
            
            No
            XX





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 if disclosure of delinquent filers pursuant to Item 405 of
Regulations S-K (§ 229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to the Form
10-K.                         [X]





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See definition of “large accelerated filer”, “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.





Large
      accelerated filer
            [  ]
            
            Accelerated
      filer
            [  ]Non-accelerated
      filer
            [  ]
            
            Smaller
      reporting company
            [X]








Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).





Yes
            
            
            No
            XX





As of
June 30, 2008, the aggregate value of limited partnership Units held by
non-affiliates was $6,037,768. This calculation is based on the capital account
balance of the limited partners and excludes partnership Units held by the
general partners.





Documents
incorporated by reference:





Portions
of the Prospectus for Redwood Mortgage Investors VI, included as part of the
Form S-11 Registration Statement, SEC File No. 33-12519 dated September 3, 1987
and Supplement No. 6 dated May 16, 1989, are incorporated in Parts II, III, and
IV.


2


REDWOOD
MORTGAGE INVESTORS VI


(a
California Limited Partnership)


Index
to Form 10-K





December
31, 2008












Part IPage
      No.Item
      1
            –
      Business
            4Item
      2
            –
      Properties
            9Item
      3
            –
      Legal Proceedings
            9Item
      4
            –
      Submission of Matters to a Vote of Security Holders
    (Partners)
            9Part IIItem
      5
            –
      Market for the Registrant’s “Limited Partnership Units,” Related
      Unitholder Matters and IssuerPurchases
      of Equity Securities
            9Item
      6
            –
      Selected Financial Data
            10Item
      7
            –
      Management Discussion and Analysis of Financial Condition and Results of
      Operations
            11Item
      7A
            –
      Quantitative and Qualitative Disclosures about Market Risk
            19Item
      8
            –
      Financial Statements and Supplementary Data
            21Item
      9
            –
      Changes in and Disagreements with Accountants on Accounting and Financial
      Disclosure
            44Item
      9A(T)
            –
      Controls and Procedures
            44Item
      9B
            –
      Other Information
            44Part IIIItem
      10
            –
      Directors, Executive Officers and Corporate Governance
            45Item
      11
            –
      Executive Compensation
            46Item
      12
            –
      Security Ownership of Certain Beneficial Owners and Management, and
      Related Stockholder Matters
            47Item
      13
            –
      Certain Relationships and Related Transactions, and Director
      Independence
            47Item
      14
            –
      Principal Accountant Fees and Services
            47Part IVItem
      15
            –
      Exhibits and Financial Statement Schedules
            48Signatures
            49Certifications
            50





3


Part I





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, 2009 annualized
yield estimates, additional foreclosures in 2009, expectations regarding the
level of loan delinquencies, beliefs relating to the impact on the partnership
from current economic conditions and trends in the financial and credit markets,
beliefs regarding the partnership’s ability to recover its investment in certain
properties, beliefs regarding the effect of borrower foreclosures on liquidity,
the use of excess cash flow and the intention not to sell the partnership’s loan
portfolio.  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.








Item 1 –
Business





Redwood
Mortgage Investors VI is a California Limited Partnership. Michael R. Burwell,
an individual, and Gymno Corporation, a California corporation, are the general
partners.  The address of the general partners is 900 Veterans Blvd.,
Suite 500, Redwood City, California 94063.  The partnership’s primary
purpose is to invest its capital in first and second deeds of trust secured by
California properties.  Loans are arranged and serviced by Redwood
Mortgage Corp., an affiliate of the general partners.  The
partnership’s objectives are to make investments which will: (i) provide the
maximum possible cash returns which limited partners may elect to (a) receive as
monthly, quarterly or annual cash distributions or (b) have earnings credited to
their capital accounts and used to invest in partnership activities; and (ii)
preserve and protect the partnership’s capital.  The partnership’s
general business is more fully described under the section entitled “Investment
Objectives and Criteria”, on pages 23-26 of the Prospectus, a part of the
above-referenced Registration Statement, which is incorporated by
reference.





The
partnership was formed in September 1987, with an approved 120,000 Units of $100
each ($12,000,000).  The Units were offered on a “best efforts” basis
through broker/dealer member firms of the Financial Industry Regulatory Agency
(FINRA).  The partnership immediately began issuing Units and began
investing in loans in October 1987.  The offering terminated in
September 1989, and as of that date 97,725.94 limited partner Units were sold
realizing proceeds of $9,772,594.  At December 31, 2008, the
partnership had a balance of secured loans totaling $5,777,110 with interest
rates thereon ranging from 6.38% to 10.50%.





Currently
loans secured by first, second and third deeds of trust comprise 65%, 32% and 3%
respectively, of the total amount of the partnership’s secured loan
portfolio.  Single family homes comprise 55% of the secured loans,
down from 58% in 2007.  Commercial secured loans comprise 30% of the
portfolio, a decrease from 32% in 2007.  The majority of secured loans
(57%), are secured by properties located in the nine counties comprising the San
Francisco Bay Area.  The remaining balance is in other Northern
California counties (32%) and in Southern California counties
(11%).  Currently secured loan amounts average
$240,713.  Some of the secured loans are fractionalized between
affiliated partnerships with objectives similar to those of the partnership to
further reduce risk.  Average equity per loan transaction (which is
the partnership’s loan plus any senior loans, divided by the property’s
appraised value, subtracted from 100%), stood at 42%, based on senior loans and
appraised values at the inception of our loan.  Generally, the greater
the equity, the greater the protection for the lender.  The
partnership’s loan portfolio had one property with a principal balance of
$318,587 in foreclosure as of the end of December 2008.





4


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





For the
year ended December 31, 2008 and 2007, the partnership did not take back any
collateral from defaulted borrowers.





For the
years 2006, 2007 and 2008, the partnership’s revenues were $484,648, $511,604
and $1,148,373 respectively.  The changes in revenues were the result
of the combination of varying average loan balances, the related average
interest rates, and gain on sale of real estate owned.  For 2006, 2007
and 2008 the average loan balances and their related average interest rate
combinations were $4,830,820 and 9.20%, $4,912,259 and 9.62%, and $5,023,691 and
9.73% respectively.  Cash flow generated from mortgage interest and
loan pay-downs and pay-offs was used to meet limited partner capital and
earnings liquidations and the excess was used to make mortgage loans or for
other proper partnership purposes.  Withdrawals by limited partners
were $468,966, $527,873 and $487,521 for the three years ended December 31,
2006, 2007 and 2008, respectively.





During
the year 2008, the partnership’s annualized yield was 5.81% on compounding
accounts and 5.66% on monthly distributing accounts.





Competition
and General Economic Conditions.





The
partnership’s major competitors in providing mortgage loans are banks, savings
and loan associations, thrifts, conduit lenders, mortgage brokers, and other
entities both larger and smaller than the partnership.  Many of these
lenders are not portfolio lenders and rely upon their ability to sell notes they
have funded in order to provide further capital resources to continue their
lending operations.  The lenders that have traditionally relied upon
the sale of loans after their origination to replenish their lending capital
have found themselves unable to sell the mortgages into the market place through
the typical means of mortgage securitizations.  This inability to sell
their loans to replenish their funds available for lending has eliminated many
of these lenders. The primary sources of lending capital have been reduced to
loans that may be sold to Fannie Mae, Freddie Mac and large well-capitalized
portfolio lenders.  In all respects, money available for real estate
lending has been greatly curtailed in 2008 particularly in the latter half of
the year.  In addition to less availability of money for real estate
lending, the remaining lenders have both increased their underwriting standards
as well as eliminated a wide variety of lending programs which has significantly
reduced the number of potential borrowers for both residential and commercial
properties that may qualify for loans.  Increased lending standards
have led to reduced potential viable purchasers of real estate in general
contributing to a reduced demand for real estate.





During
2008, numerous events have buffeted the economy, the financial system and the
business sector.  These include, among others: the failure of
brokerage firm Lehman Brothers; the forced merger of the brokerage firm Bear
Stearns; the governmental bailout of insurance giant AIG; the government
takeover of both Fannie Mae and Freddie Mac (the largest holders of residential
mortgages in the United States); the merger of Bank of America with Countrywide
(the third largest holder of residential mortgages in the United States) and the
forced merger of Wachovia Bank; as well as continued declines in real estate
values. These factors have contributed to shrinking credit availability and
exposed the financial system to increased risks and decreased consumer
confidence.





In
response to the turmoil in the financial markets and to help bolster the
financial system and the economy, the United States government, through the
Federal Reserve and Treasury has adopted many measures.  These
measures include, among others, two financial stimulus packages, the temporary
raising of limits on Federal Deposit Insurance Corporation and National Credit
Union Administration from $100,000 to $250,000 per account, enacting the
Troubled Asset Relief Program to provide capital to financial institutions and
to purchase or guarantee troubled mortgage related and possibly other assets,
reducing the Federal Funds rate, placing a temporary guarantee for balances held
in money market mutual funds and enacting the Emergency Economic Stabilization
Act.  The results of these actions and future actions will take time
to have their intended effects.





5


During
2008, the Gross Domestic Product (GDP) the output of goods and services produced
by labor and property located in the United States began the year with an
increase of 0.9 percent for the 1st quarter, a 2.8 percent increase for the
second quarter and then a decrease of 0.5 percent for the 3rd quarter and a
dramatic decrease of 6.2 percent for the fourth quarter of 2008, thereby
demonstrating the rapid deterioration of the economy during the latter part of
2008.  Economists are generally of the opinion the United States
slipped into recession in December 2007 and that the recession has deepened
during 2008.





The
economic downturn has had a dramatic effect on the United States and
California’s unemployment figures.  For the fourth quarter of 2007,
unemployment for the nation averaged 4.8 percent.  During 2008 the
unemployment rate steadily rose.  Average national unemployment rose
to 4.9 percent during the first quarter of 2008, 5.3 percent in the second
quarter of 2008, 6.0 percent in the third quarter of 2008, and to 6.9 percent as
of December 31, 2008.  California’s unemployment mirrored the nation
with unemployment rising steadily and significantly throughout
2008.  California’s unemployment rate began 2008 at 6.1 percent and
ended the year at 8.7 percent.  The rapid rise in unemployment has
caused significant concerns among workers regarding their job security and
lowered their confidence in their own financial circumstances.





In
September 2007, after having left the Federal Funds Rate unchanged at 5.25
percent for more than two years, the Federal Reserve began to react to the
slowing economy, rising unemployment, and turmoil created by contractions in the
credit market and lowered the rate to 4.75 percent.  In lowering the
Federal Funds Rate, the Federal Reserve’s initial goals were to stimulate the
economy while keeping inflation in check, create jobs and increase liquidity in
the financial system.  Since the September 2007 reduction, the Federal
Funds Rate has been further lowered several times.  The most recent
reduction on December 16, 2008 was to a level of 0.00 to 0.25
percent.  The Federal Reserve has little room to reduce this rate for
any further effects on the economy.





Mortgage
interest rates are a key factor in the affordability of real estate. The higher
the interest rate, the less affordable real estate becomes.  Mortgage
interest rates are significantly influenced by the United States 10 year
treasury securities.  These securities began January 2008 at an
average rate of 3.74 percent.  They rose to a high of 4.10 percent
during June of 2008 and have been falling since to a level of 2.42 percent
during December 2008.  Mortgage interest rates followed suit as
measured by Freddie Mac for their fixed–rate 30 year conforming
loans.  They began 2008 with a January average of 5.76 percent with a
0.4 percent fee, rose to a high of 6.48 percent with a 0.7 percent fee in August
2008 and have since dropped through the remainder of 2008 to a level in December
of 5.29 percent with a 0.7 percent fee and in February 2009 to 5.13 percent with
a 0.7 percent fee.





Median
home prices have declined from their highs in 2005 and 2006.  The
median national sales price of existing homes as reported by the National
Association of Realtors was $219,000 for 2005, $221,900 for 2006 and then began
to decline to $219,000 for 2007 and to $198,100 for 2008.





6


Secured Loan
Portfolio





As of
December 31, 2008, a summary of the partnership’s secured loan portfolio is set
forth below.





Secured
      Loans as a Percentage of Appraised
Value





First
      trust deeds
              
              $
              3,720,819Second
      trust deeds
              
              
              1,856,291Third
      trust deeds
              
              
              200,000Total
      secured loans
              
              $
              5,777,110Prior
      liens due other lenders at time of loan
              
              
              4,879,119Total
      debt
              
              $
              10,656,229Appraised
      property value at time of loan
              
              $
              18,313,659Total
      secured loans as a percent of appraisals based onappraised
      values and prior liens at date of loan
              
              
              58.19
              %





Number
      of Secured Loans Outstanding
            
            24





Average
      secured loan
              
              
              240,713Average
      secured loan as a percent of partners’ capital
              
              
              4.03
              %Largest
      secured loan outstanding
              
              
              621,363Largest
      secured loan as a percent of partners’ capital
              
              
              10.40
              %Largest
      secured loan as a percent of total assets
              
              
              10.39
              %





Secured
      Loans as a Percentage of Total Secured Loans
              
              PercentFirst
      trust deeds
              
              
              64.41
              %Second
      trust deeds
              
              
              32.13Third
      trust deeds
              
              
              3.46Total
              
              
              100.00
              %





Secured
      Loans by Type of Property
              
              Amount
              
              PercentSingle
      family
              
              $
              3,156,804
              
              54.64
              %Apartments
              
              
              248,083
              
              4.29Commercial
              
              
              1,750,860
              
              30.31Land
              
              
              621,363
              
              10.76Total
              
              $
              5,777,110
              
              100.00
              %





7


The
following is a distribution of secured loans outstanding as of December 31, 2008
by California counties:





TotalSecuredCalifornia
      County
              
              Loans
              
              PercentSan Francisco Bay Area
    CountiesAlameda
              
              $
              1,153,682
              
              19.98
              %San
      Francisco
              
              
              750,000
              
              12.98Santa
      Clara
              
              
              621,363
              
              10.76Solano
              
              
              363,360
              
              6.29Napa
              
              
              248,083
              
              4.29Contra
      Costa
              
              
              153,000
              
              2.653,289,488
              
              56.95
              %Other Northern California
      CountiesMonterey
              
              
              548,604
              
              9.50
              %San
      Joaquin
              
              
              437,500
              
              7.57Butte
              
              
              318,587
              
              5.51El
      Dorado
              
              
              200,000
              
              3.46Mariposa
              
              
              119,114
              
              2.06Shasta
              
              
              107,373
              
              1.86Stanislaus
              
              
              106,709
              
              1.851,837,887
              
              31.81
              %Southern California
CountiesOrange
              
              
              247,508
              
              4.28San
      Bernardino
              
              
              205,811
              
              3.56Los
      Angeles
              
              
              196,416
              
              3.40649,735
              
              11.24
              %Total
              
              $
              5,777,110
              
              100.00
              %




Number
      of loans in foreclosure
              
              1
              
              $
              318,587





Scheduled
maturity dates of secured loans as of December 31, 2008 are as
follows:




Year
      ending December 31,
              
              Amount2009
              
              $
              1,250,8602010
              
              
              643,4592011
              
              
              1,635,4942012
              
              
              857,2172013
              
              
              199,880Thereafter
              
              
              1,190,200Total
              
              $
              5,777,110





8


The
partnership’s largest loan in the principal amount of $621,363 represents 10.76%
of outstanding secured loans and 10.39% of partnership assets.  Larger
loans sometimes increase above 10% of the secured loan portfolio or partnership
assets as these amounts decrease due to limited partner withdrawals and loan
payoffs and due to restructuring of existing loans.





The
scheduled maturities for 2009 includes no loans past maturity at December 31,
2008.  The partnership occasionally allows borrowers to continue to
make the regular interest payments on debt past maturity for periods of
time.  In many instances, the interest rate on these past maturity
loans is higher than current rates.  In the partnership’s experience,
loans can be refinanced or repaid before and after the maturity
date.  Therefore, the table of scheduled maturities is not a forecast
of future cash receipts.








Item 2 –
Properties





The
partnership did not take back any collateral security from borrowers in 2008 and
2007.





The
partnership sold to an affiliate of Redwood Mortgage Corp., for a gain of
$645,590, its one property: an undeveloped parcel of land located in East Palo
Alto, California.  The land was owned with two other affiliated
partnerships.  The partnership’s net investment at the time of sale
was $130,215.  For additional information on this sale, see Note 5 to
Notes to Financial Statements.








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 a 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,” Related Unitholder Matters and Issuer
Purchases of Equity Securities





120,000
units at $100 each (minimum 20 Units) were offered through broker-dealer member
firms of the Financial Industry Regulatory Authority (FINRA) on a “best efforts”
basis (as indicated in Part I Item 1).  All units were sold to
California residents.  Investors have the option of withdrawing
earnings on a monthly, quarterly or annual basis or having their earnings
retained in the partnership.  Limited partners may withdraw from the
partnership in accordance with the terms of the partnership agreement subject to
possible early withdrawal penalties.  There is no established public
trading market for the units.  As of December 31, 2008, 337 limited
partners had a total capital balance of $5,963,478.





A
description of the partnership’s units, transfer restrictions, and withdrawal
provisions is more fully described under the section entitled “Description of
Units” and “Summary of the Limited Partnership Agreement”, on pages 38-42 of the
Prospectus, a part of the above-referenced Registration Statement, which is
incorporated herein by reference.





During
the years 2006, 2007 and 2008, the partnership’s annualized yield on compounding
accounts was 6.13%, 6.25% and 5.81%, respectively.  During the years
2006, 2007 and 2008, the partnership’s annualized yield on monthly distributing
accounts was 5.96%, 6.08% and 5.66%, respectively.





9


Item 6 – Selected Financial
Data





Redwood
Mortgage Investors VI began operations in October, 1987.  Its
financial condition and results of operation as of and for the five years ended
December 31, 2008 were:





Balance
Sheets








2008
              
              
              2007
              
              
              2006
              
              
              2005
              
              
              2004Cash
              
              $
              333,800
              
              
              $
              515,852
              
              
              $
              161,114
              
              
              $
              4,361,983
              
              
              $
              1,090,027LoansLoans,
      secured by deeds of trust
              
              
              5,777,110
              
              
              
              4,944,898
              
              
              
              5,493,828
              
              
              
              2,021,973
              
              
              
              5,225,128Loans,
      unsecured, net
              
              
              277,126
              
              
              
              769,858
              
              
              
              712,643
              
              
              
              144,098
              
              
              
              261,276Interest
      and other receivablesAccrued
      interest and late fees
              
              
              82,450
              
              
              
              77,320
              
              
              
              68,329
              
              
              
              22,138
              
              
              
              61,364Advances
      on loans
              
              
              2,306
              
              
              
              578
              
              
              
              1,004
              
              
              
              51
              
              
              
              2,890Receivable
      from affiliate
              
              
              —
              
              
              
              12,003
              
              
              
              3,414
              
              
              
              —
              
              
              
              —Less
      allowances for loan losses
              
              
              (489,913
              )
              
              
              (323,916
              )
              
              
              (294,507
              )
              
              
              (315,379
              )
              
              
              (315,751
              )Real
      estate held, net
              
              
              —
              
              
              
              130,215
              
              
              
              130,215
              
              
              
              130,215
              
              
              
              128,902Total
      assets
              
              $
              5,982,879
              
              
              $
              6,126,808
              
              
              $
              6,276,040
              
              
              $
              6,365,079
              
              
              $
              6,453,836





Liabilities and Partners’
Capital





2008
              
              
              2007
              
              
              2006
              
              
              2005
              
              
              2004LiabilitiesAccounts
      payable
              
              $
              —
              
              
              $
              —
              
              
              $
              —
              
              
              $
              —
              
              
              $
              11,487Payable
      to affiliates
              
              
              9,640
              
              
              
              10,193
              
              
              
              10,194
              
              
              
              8,572
              
              
              
              12,541Total
      liabilities
              
              
              9,640
              
              
              
              10,193
              
              
              
              10,194
              
              
              
              8,572
              
              
              
              24,028Partners’
      capitalLimited
      partners’ capital, subjectto
      redemption
              
              
              5,963,478
              
              
              
              6,106,854
              
              
              
              6,256,085
              
              
              
              6,346,746
              
              
              
              6,420,047General
      partners’ capital
              
              
              9,761
              
              
              
              9,761
              
              
              
              9,761
              
              
              
              9,761
              
              
              
              9,761Total
      partners’ capital
              
              
              5,973,239
              
              
              
              6,116,615
              
              
              
              6,265,846
              
              
              
              6,356,507
              
              
              
              6,429,808Total
      liabilitiesand
      partners’ capital
              
              $
              5,982,879
              
              
              $
              6,126,808
              
              
              $
              6,276,040
              
              
              $
              6,365,079
              
              
              $
              6,453,836





10


Statements of
Income





2008
              
              
              2007
              
              
              2006
              
              
              2005
              
              
              2004Gross
      revenue
              
              $
              1,148,373
              
              
              $
              511,604
              
              
              $
              484,648
              
              
              $
              522,282
              
              
              $
              538,737Expenses
              
              
              800,752
              
              
              
              129,140
              
              
              
              102,522
              
              
              
              133,874
              
              
              
              191,585Net
      income
              
              $
              347,621
              
              
              $
              382,464
              
              
              $
              382,126
              
              
              $
              388,408
              
              
              $
              347,152Net
      income:to
      general partners (1%)
              
              $
              3,476
              
              
              $
              3,822
              
              
              $
              3,821
              
              
              $
              3,884
              
              
              $
              3,472to
      limited partners (99%)
              
              
              344,145
              
              
              
              378,642
              
              
              
              378,305
              
              
              
              384,524
              
              
              
              343,680$
              347,621
              
              
              $
              382,464
              
              
              $
              382,126
              
              
              $
              388,408
              
              
              $
              347,152Net
      income per $1,000 investedby
      limited partners forentire
      period:-
      where income is compounded
              
              $
              58
              
              
              $
              62
              
              
              $
              61
              
              
              $
              62
              
              
              $
              54-
      where partner receives incomein
      monthly distributions
              
              $
              57
              
              
              $
              61
              
              
              $
              60
              
              
              $
              60
              
              
              $
              53





Annualized
yields when income is compounded or distributed monthly for the years 2004
through 2008 are outlined in the table below:




Compounded
              
              
              Distributed2004
              
              
              5.40
              %
              
              
              5.27
              %2005
              
              
              6.15
              %
              
              
              5.99
              %2006
              
              
              6.13
              %
              
              
              5.96
              %2007
              
              
              6.25
              %
              
              
              6.08
              %2008
              
              
              5.81
              %
              
              
              5.66
              %





The
average annualized yield, when income is compounded from inception through
December 31, 2008 was 6.82%.  The average annualized yield, when
income is distributed monthly, from inception through December 31, 2008 was
6.59%.








Item 7 – Management
Discussion and Analysis of Financial Condition and Results of
Operations





Critical
Accounting Policies.





In
preparing the financial statements, management is required to make estimates
based on the information available that affect the reported amounts of assets
and liabilities as of the balance sheet dates and revenues and expenses during
the reporting 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 estimated to be unrecoverable based
on estimates of amounts to be collected plus estimates of the value of the
property as collateral and (2) the valuation of real estate acquired through
foreclosure.  At December 31, 2008, we did not own any real
property.





11


Loans and
the related accrued interest, late fees and advances are analyzed on a periodic
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 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 is not insignificant, the carrying amount of the investment will
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.





Real
estate held includes real estate acquired through foreclosure and is stated at
the lower of the recorded investment in the property, 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 future undiscounted 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 fair
value.





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





Recently
issued accounting pronouncements





In May
2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (SFAS 162).  SFAS 162 identifies the
sources of accounting principles and the framework for selecting the principles
to be used in the preparation of financial statements presented in conformity
with generally accepted accounting principles in the United
States.  SFAS 162 became effective on November 15,
2008.  The adoption of this statement did not have a material impact
on the partnership’s financial condition and results of operation.





On
January 1, 2008, the partnership adopted Statement of Financial Accounting
Standards No. 157, Fair Value
Measurements (SFAS 157). SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosure requirements for fair
value measurements. The partnership deferred the application of SFAS 157 for
nonfinancial assets and nonfinancial liabilities as provided for by FASB Staff
Position (FSP) FAS 157-2, Effective Date of FASB Statement No.
157 FSP FAS 157-2 defers the effective date of SFAS 157 to fiscal years
beginning after November 15, 2008, and interim periods within those fiscal years
for nonfinancial assets and nonfinancial liabilities, except items that are
recognized or disclosed at fair value in an entity's financial statements on a
recurring basis (at least annually).





In
October 2008, the FASB issued FSP FAS 157-3, Determining the Fair Value of a
Financial Asset When the Market for that Asset is Not Active, with an
immediate effective date.  The purpose of this release was to provide
further clarification regarding Level 3 inputs and the assumptions management
may make when the market for the asset in not active.  The adoption of
FSP FAS 157-3 did not have a material effect on the partnership’s results of
operations, financial position or liquidity.





In March
2006, the FASB issued SFAS No. 156, Accounting for Servicing of
Financial Assets, an amendment of FASB Statement No.140 (SFAS 156), which
permits, but does not require, an entity to account for one or more classes of
servicing rights (i.e., mortgage servicing rights) at fair value, with the
changes in fair value recorded in the statement of income.  SFAS 156
is effective in the first quarter of 2007.  The adoption of SFAS 156
did not have a material impact on the partnership’s financial condition and
results of operations.












12




On
February 15, 2007, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities (SFAS 159), which allows an entity the
irrevocable option to elect fair value for the initial and subsequent
measurement for certain financial assets and liabilities on a
contract-by-contract basis.  Subsequent changes in fair value of these
financial assets and liabilities would be recognized in earnings when they
occur.  SFAS 159 further establishes certain additional disclosure
requirements.  SFAS 159 is effective for the partnership’s financial
statements for the year beginning on January 1, 2008, with earlier adoption
permitted.  Management has elected not to adopt the fair value option
for financial assets and financial liabilities.













In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51 (SFAS
160).  SFAS 160’s objective is to improve the relevance,
comparability, and transparency of the financial information a reporting entity
provides in its consolidated financial statements by establishing accounting and
reporting standards for the noncontrolling interest in a
subsidiary.  SFAS 160 is effective for fiscal years beginning on or
after December 15, 2008, along with the interim periods within those fiscal
years.  Early adoption is prohibited.  Management is
currently evaluating the impact and timing of the adoption of SFAS 160 on the
partnership’s financial condition.













On
July 13, 2006, the FASB released FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes, an interpretation of FASB Statement No. 109 (FIN
48).  FIN 48 clarifies the accounting and reporting for income taxes
where interpretation of the tax law may be uncertain.  FIN 48
prescribes a comprehensive model for the financial statement recognition,
measurement, presentation and disclosure of income tax uncertainties with
respect to positions taken or expected to be taken in income tax
returns.  The partnership adopted FIN 48 in the first quarter of
2007.  The adoption of FIN 48 did not have a material impact on the
partnership’s financial condition and results of operations.











Related
Parties.





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





·
            Mortgage
      Brokerage CommissionsFor fees in connection with the
      review, selection, evaluation, negotiation and extension of loans, an
      affiliate of the general partners may collect 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.  For the years ended December 31, 2008, 2007 and
      2006 loan brokerage commissions paid by the borrowers were $34,508,
      $42,839, and $124,116,
respectively.





·
            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.  The table below
      summarizes the mortgage servicing fees paid by the partnership for the
      past three years.





Years
      ended December 31,2008
              
              
              
              2007
              
              
              
              2006Maximum
      chargeable
              
              $
              74,855
              
              
              $
              72,759
              
              
              $
              67,065Waived
              
              
              (49,823
              )
              
              
              (72,759
              )
              
              
              (32,180
              )Net
      charged
              
              $
              25,032
              
              
              $
              —
              
              
              $
              34,885





13





·
            Asset
      Management FeesThe 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).  The general
      partners have from time to time not charged the maximum allowable
      rate.  The table below summarizes the asset management fees paid
      by the partnership for the past three
years.





Years
      ended December 31,2008
              
              
              
              2007
              
              
              
              2006Maximum
      chargeable
              
              $
              22,787
              
              
              $
              23,355
              
              
              $
              23,800Waived
              
              
              (15,198
              )
              
              
              (15,570
              )
              
              
              (17,858
              )Net
      charged
              
              $
              7,599
              
              
              $
              7,785
              
              
              $
              5,942





·
            Other
      Fees   The partnership agreement provides that the
      general partners or their affiliates 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.





·
            Income and
      LossesAll income and losses are credited or
      charged to partners in relation to their respective partnership
      interests.  The allocation to the general partners (combined)
      may not exceed 1%.





·
            Operating
      ExpensesAn affiliate of the partnership, Redwood
      Mortgage Corp., is reimbursed by the partnership for all operating
      expenses actually incurred by it on behalf of the partnership, including
      without limitation, out-of-pocket general and administration expenses of
      the partnership, accounting and audit fees, legal fees and expenses,
      postage and preparation of reports to limited
  partners.





·
            Contributed
      CapitalThe general partners jointly and severally
      were to contribute 1/10 of 1% in cash contributions as proceeds from the
      offerings are received from the limited partners.  As of
      December 31, 2008 and 2007, a general partner, Gymno Corporation, had
      contributed $9,761 as capital in accordance with Section 4.02(a) of the
      partnership agreement.





Results of Operations– For
the years ended December 31, 2008, 2007 and 2006





Changes
in the partnership’s operating results for the years ended December 31, 2008 and
2007 are discussed below.





Changes
      for the years ended December 31,2008
              
              
              
              2007Dollars
              
              
              Percent
              
              
              
              Dollars
              
              
              PercentRevenueInterest
      on loans
              
              $
              16,520
              
              
              
              3
              
              %
              
              $
              28,079
              
              
              
              6
              
              %Interest-interest
      bearing accounts
              
              
              (18,174
              )
              
              
              (73
              )
              
              
              
              (8,982
              )
              
              
              (26
              )Gain
      on sale of real estate owned
              
              
              645,590
              
              
              
              —
              
              
              
              
              —
              
              
              
              —Late
      fees, prepayment penalties and fees
              
              
              (7,167
              )
              
              
              (50
              )
              
              
              
              7,859
              
              
              
              123Total
      revenues
              
              
              636,769
              
              
              
              124
              
              
              
              
              26,956
              
              
              
              6ExpensesMortgage
      servicing fees
              
              
              25,032
              
              
              
              —
              
              
              
              
              (34,885
              )
              
              
              (100
              )Asset
      management fees
              
              
              (186
              )
              
              
              (2
              )
              
              
              
              1,843
              
              
              
              31Clerical
      costs through Redwood Mortgage Corp.
              
              
              (422
              )
              
              
              (6
              )
              
              
              
              (1,216
              )
              
              
              (14
              )Provision
      for losses on loans and real estate
              
              
              659,820
              
              
              
              2,218
              
              
              
              
              50,615
              
              
              
              243Professional
      services
              
              
              221
              
              
              
              —
              
              
              
              
              3,090
              
              
              
              6Other
              
              
              (12,853
              )
              
              
              (50
              )
              
              
              
              7,171
              
              
              
              38Total
      expenses
              
              
              671,612
              
              
              
              520
              
              
              
              
              26,618
              
              
              
              26Net
      income
              
              $
              (34,843
              )
              
              
              (9
              )
              %
              
              $
              338
              
              
              
              —
              
              %





Please
refer to the above table throughout the discussions of Results of
Operations.





14


The
increase in interest on loans for 2007 and 2008 was due to increases in the
average secured loan portfolio balance and the related average interest
rates.  Included in each year’s interest income is the amortization of
a discount of $12,232 on an unsecured loan.  The table below recaps
the yearly averages and the effect of the discount on the average interest
rate.





AverageInterestAverage
              
              
              
              RateSecured
              
              Average
              
              AdjustedLoan
              
              Interest
              
              ForYear
              
              Balance
              
              Rate
              
              Discount2006
              
              $
              4,830,820
              
              9.20
              %
              8.94
              %2007
              
              $
              4,912,259
              
              9.62
              %
              9.37
              %2008
              
              $
              5,023,691
              
              9.73
              %
              9.49
              %





Interest
from interest bearing accounts decreased in 2007 and 2008 primarily due a
reduction in the average account balances as the partnership was able to invest
in new loans.  The decrease in income for 2007 was mitigated by an
increase in the interest rate earned from 2006.  The table below
summarizes the components in this area.





Average
              
              
              
              
              InterestInterest-
              
              Average
              
              
              BearingBearing
              
              Interest
              
              
              AccountsYear
              
              Balance
              
              Rate
              
              
              Income2006
              
              $
              1,490,983
              
              2.28
              %
              $
              33,9772007
              
              $
              885,637
              
              2.82
              %
              $
              24,9952008
              
              $
              374,797
              
              1.82
              %
              $
              6,821





The gain
on sale of real estate owned is due to the partnership’s sale of its interest in
a single property to an affiliate of Redwood Mortgage Corp. in the fourth
quarter of 2008.  See Note 5 to Notes to Financial Statements for
additional information.  The property had been held since 1993 in
joint ownership with two affiliated partnerships.





The
decrease in late fees and other income for 2008 was due to decreases of $2,364
for late fees, $2,208 for early withdrawal penalties and $2,597 for
miscellaneous items.  The increase for 2007 was due to increases of
$1,173 for late fees, $3,364 for early withdrawal penalties and $3,322 for
miscellaneous items.





The
primary reason of the increase in mortgage servicing fees for 2008 was due to a
complete waiver of these fees by Redwood Mortgage Corp of $72,759 for 2007
compared to a partial waiver in 2008 of $49,823.  The decrease in
mortgage servicing fees for 2007 was due to the afore-mentioned complete waiver
compared to a partial waiver of $32,180 in 2006





The
slight increase in asset management fees for 2007 is due to a complete waiver of
the first quarter fees in 2006 of $1,991 by the general partners.





The
decrease in clerical costs for both 2008 and 2007 was primarily attributable to
reduced clerical costs in servicing this partnership.





The
increase in the provision for losses on loans and real estate for 2008 and 2007
was due to management’s decision to increase the allowances for losses for loans
and real estate based upon the current weakness in the U.S. economy, and in
particular, the declines in the real estate market related to property values
and available liquidity.





The
increase in professional services for 2007 was due to increased fees and the
timing of professional services.  The increases were in both general
accounting and legal costs.





15


The
decrease in 2008 and the increase in 2007 in other expenses were primarily due
to costs associated with the upkeep of existing real estate properties
held.  In 2008, 2007 and 2006 the upkeep costs were $7,895, $18,687,
and $12,125, respectively.





As of
September 2, 1989, the date the offering of the partnership’s limited partner
Units was formally closed, the partnership had sold 97,725.94 limited partner
Units and its contributed capital totaled $9,772,594 of the approved $12,000,000
issue, in Units of $100 each.  On December 31, 2008 the net capital of
limited and general partners totaled $5,973,239.





The
partnership began funding loans in October 1987.  The partnership’s
secured loans outstanding as of December 31, 2008, 2007 and 2006 were
$5,777,110, $4,944,898 and 5,493,828, respectively.  The partnership
utilizes income, loan pay offs and proceeds from the sale of real estate held
properties to meet limited partner capital liquidations and make additional
loans.  During the years ended December 31, 2008, 2007 and 2006, loan
principal collections and sale proceeds of the properties exceeded limited
partner liquidations and partnership expenses.





In 2008,
the partnership funded $1,227,865 in new loans and had pay-offs of
$953,289.  The partnership was able to invest all of the pay-offs back
into new loans.  Cash held by the partnership generated from these
loan pay-offs is invested in interest-bearing accounts until a new loan
opportunity is presented.





The
partnership’s operating results and delinquencies are within the normal range of
the general partners’ expectations, based upon their experience in managing
similar partnerships over the last thirty years.  Foreclosures are a
normal aspect of partnership operations and the general partners anticipate they
will not have a material effect on liquidity.





Allowance
for Losses.





The
general partners periodically review the loan portfolio, examining the status of
delinquencies, the underlying collateral securing these loans, real estate held
expenses, sales activities, and borrower’s payment records and other data
relating to the loan portfolio.  Data on the local real estate market
and on the national and local economy are studied.  Based upon this
and other information, 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 the
partnership will on occasion take back real estate security.  At
December 31, 2008 the partnership’s loan portfolio had four loans past due 90
days or more in interest payments totaling $428,578.  As of December
31, 2008 the partnership had no loans, past maturity.  The partnership
had one filed notice of default at December 31, 2008.  The partnership
occasionally enters into workout agreements with borrowers who are past maturity
or delinquent in their regular payments.  Two of the partnership’s
loans totaling $562,046 were subject to a workout agreement as of December 31,
2008.  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,
or 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.  Management
expects the number of foreclosures and workout agreements will rise during
difficult times and conversely fall during good economic times.  These
workouts and delinquencies have been considered when management arrived at an
appropriate allowance for loan losses and based on our experience, are
reflective of our loan marketplace segment.  Because of the number of
variables involved, the magnitude of possible swings 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, 2008, 2007 and 2006 the partnership’s real estate held balance was
$0, $130,215 and $130,215, respectively.  The partnership has not
taken back any collateral security from borrowers in 2007 or
2008.  The partnership’s real estate held inventory consisted of one
property, an undeveloped piece of land.  The land was located in East
Palo Alto, California.  The partnership had held its interest in this
land since April, 1993.  The land was owned with two other affiliated
partnerships.  In December 2008, the land was sold to an affiliate of
Redwood Mortgage Corp. at the current market value.  The partnership
achieved a gain on sale of $645,590.





16


Management
provided $689,563 and $29,743 as provisions for loan losses for the years ended
December 31, 2008 and 2007, respectively.  During 2008, the
partnership charged off $523,566 to the allowance for losses for uncollectible
loans and related receivables.  As of December 31, 2008, the allowance
for loan losses totaling $489,913 is considered to be adequate.





The
partnership may restructure loans.  This is done through the
modification of an existing loan or by re-writing a 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 2008.





Liquidity
and Capital Resources.





The
partnership relies upon loan payoffs and borrowers’ mortgage payments for the
source of funds for loans.  Recently, mortgage interest rates have
decreased somewhat from those available at the inception of the
partnership.  If interest rates were to increase substantially, the
yield of the partnership’s loans may provide lower yields than other comparable
debt-related investments.  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 experience 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.  Cash is
generated from borrower payments of interest, principal, loan payoffs and from
the partnership’s sale of real estate owned properties.  Currently the
credit and financial markets are facing a significant and prolonged
disruption.  As a result, loans are not readily available to borrowers
or purchasers of real estate.  These credit constraints impacted the
partnership and our borrowers’ ability to sell properties or refinance their
loans in the event they have difficulty making loan payments or their loan
matures.  A slow down or reduction in loan repayments would likely
reduce the partnership’s cash flows and restrict the partnership’s ability to
invest in new loans or provide earnings and capital
distributions.  During 2008, cash flow exceeded partnership expenses
and earnings distribution requirements.  Excess cash flow is invested
in new loan opportunities, when available, and for other partnership
business.





At the
time of their subscription for units in the partnership, limited partners made a
decision to either take distributions of earnings monthly, quarterly or
annually, or to compound earnings in their capital account.  If a
limited partner initially elects to receive monthly, quarterly or annual
distributions, such election, once made, is irrevocable.  Earnings
allocable to limited partners, who elect to compound earnings in their capital
account, are retained by the partnership for making further loans or for other
proper partnership purposes and such amounts are added to such limited partners’
capital accounts.  The table below summarizes these allocation
elections.





Years
      ended December 31,2008
              
              
              
              2007
              
              
              
              2006Distributing
              
              $
              141,132
              
              
              $
              153,305
              
              
              $
              152,775Compounding
              
              
              203,013
              
              
              
              225,337
              
              
              
              225,530Total
              
              $
              344,145
              
              
              $
              378,642
              
              
              $
              378,305Percent
      electing distribution
              
              
              41
              %
              
              
              40
              %
              
              
              40
              %





The
partnership also allows the limited partners to withdraw their capital account
subject to certain limitations and penalties (see liquidation provisions of
partnership agreement).  These withdrawals are within the normally
anticipated range the general partners would expect in their experience in this
and other partnerships.  The general partners expect a small
percentage of limited partners will elect to liquidate their capital accounts
over one year with a 10% and/or 8% early withdrawal penalty.  In
originally conceiving the partnership, the general partners wanted to provide
limited partners needing their capital returned a degree of
liquidity.  Generally, limited partners electing to withdraw over one
year need to liquidate investments to raise cash.  The demand the
partnership is experiencing in withdrawals by limited partners electing a one
year liquidation program represents a small percentage of limited partner
capital as of December 31, 2008, 2007 and 2006, respectively, and is expected by
the general partners to commonly occur at these levels.





17


After a
five year hold period has passed, limited partners may withdraw their capital
account without penalty.  The table below sets forth actual
liquidations for the past three years:





Years
      ended December 31,2008
              
              
              
              2007
              
              
              
              2006Capital
      liquidations – without penalty
              
              $
              318,697
              
              
              $
              319,394
              
              
              $
              302,952Capital
      liquidations – subject to penalty
              
              
              27,692
              
              
              
              55,174
              
              
              
              13,239Total
              
              $
              346,389
              
              
              $
              374,568
              
              
              $
              316,191





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 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 FINRA member client account statement in
providing a per Unit estimated value of the client’s investment in the
partnership in accordance with NASD Rule 2340.





While the
general partners have set an estimated value for the 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 Units and
none is likely to develop.  Thus, there is no certainty 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.





The
partnership makes loans secured by California real estate.  As a
result, the health of the California economy and real estate market is of
primary concern to the partnership.  The majority of the partnership’s
loans are secured by property located in Northern California, dominated by loans
made in the nine counties of the San Francisco Bay Area.  As of
December 31, 2008, approximately 57 percent of the loans held by the partnership
were located in the nine counties which comprise the San Francisco Bay Area
region.





The
California economy has slowed significantly during 2008.  California
unemployment increased from 6.1 percent in December of 2007 to 8.7 percent in
December 2008.  The unemployment rate rose to over 10 percent in
February 2009 and appears likely to go higher as businesses continue to layoff
workers.  The UCLA Anderson Forecast estimates a very weak first three
quarters of 2009.  The California economy is in a recession like the
remainder of the nation.





Residential
real estate values are important to the partnership as they provide the security
behind the loans.  During 2008, residential real estate values
declined from their previous levels in 2007.  According to the
California Association of Realtors, in December 2008 the median price of an
existing single-family home in California was $281,000, a 41.5 percent decrease
from the $480,820 median for December 2007.  Sales volumes began to
increase in the second half of 2008.  The increased sales volumes have
helped to decrease inventories of homes.  The California Association
of Realtors Inventory Index for existing single-family detached homes in
December 2008 was 5.6 months, compared to 13.4 months for the same period a year
ago.  The index indicates the number of months needed to deplete the
supply of homes on the markets at the current sales rate.





18


For the
partnership loans outstanding at December 31, 2008, the partnership had an
average loan-to-value of 58.19% computed based on appraised values and senior
liens as of the date the loan was made.  This percentage does 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 on senior
indebtedness through amortization of payments after the loan was
made.  Real estate values have declined during 2008 putting upward
pressure on the partnership’s loan-to-value ratio.





Contractual Obligations Table. –None








Item
7A – Quantitative and Qualitative Disclosures About Market Risk





The
following table contains information about the cash held in money market
accounts, and loans held in the partnership’s portfolio as of December 31,
2008.  The presentation, for each category of information, aggregates
the assets and liabilities by their maturity dates for maturities occurring in
each of the years 2009 through 2013 and separately aggregates the information
for all maturities arising after 2013.  The carrying values of these
assets and liabilities approximate their fair values as of December 31,
2008:





2009
              
              
              2010
              
              
              2011
              
              
              2012
              
              
              2013
              
              
              Thereafter
              
              
              TotalInterest
      earning assets:Money
      market accounts
              
              $
              319,195
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              319,195Average
      interest rate
              
              
              1.00
              %
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1.00
              %Unsecured
      loans
              
              
              
              
              
              $
              117,811
              
              
              
              
              
              
              
              
              
              
              
              $
              159,315
              
              
              $
              277,126Average
      interest rate
              
              
              
              
              
              
              0
              %
              
              
              
              
              
              
              
              
              
              
              
              0
              %
              
              
              0
              %Loans
      secured by deedsof
      trust
              
              $
              1,250,860
              
              
              $
              643,459
              
              
              $
              1,635,494
              
              
              $
              857,217
              
              
              $
              199,880
              
              
              $
              1,190,200
              
              
              $
              5,777,110Average
      interest rate
              
              
              9.74
              %
              
              
              9.64
              %
              
              
              9.43
              %
              
              
              9.34
              %
              
              
              9.50
              %
              
              
              6.79
              %
              
              
              8.97
              %





Unsecured
loans include two loans with no stated rate of interest and a formerly secured
loan with an interest rate of 9.25%, now on nonaccrual
status.  Interest is imputed on the unsecured loans upon receipt of a
payment.  As such, the average interest rate for unsecured loans has
been reflected as 0%.





Market
Risk.





The
partnership’s primary market risk in terms of its profitability is the exposure
to 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 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 as 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.





The
partnership is also at risk for significant declines in the value of the
underlying collateral for the loans.  Should the collateral value
decline to be less than the outstanding loan balance and any related
receivables, the partnership would need to write-down the carrying value of the
loan and any related receivables to match the collateral value.  Also,
borrowers may be less inclined to make their minimum monthly payments, thus
placing a burden on the partnership’s cash flows.





19


PORTFOLIO
REVIEW





Loan
Portfolio





The
Partnership’s loan portfolio consists primarily of short-term (one to five
years), fixed rate loans secured by real estate.  As of December 31,
2008, 2007 and2006,
the partnership’s loans secured by real property collateral in the nine San
Francisco Bay Area counties (San Francisco, San Mateo, Santa Clara, Alameda,
Napa, Contra Costa, Marin, Solano and Sonoma) represented $3,289,489 (57%),
$2,578,339 (52%) and $3,462,918 (63%), respectively, of the outstanding secured
loan portfolio.  The remainder of the portfolio is represented by
loans secured by real estate located primarily in other counties of Northern
California.





As of
December 31, 2008, 2007 and 2006 the Partnership held 24, 24 and 26 secured
loans, respectively, in the following categories:





2008
              
              
              2007
              
              
              2006Single
      family homes (1-4 units)
              
              $
              3,156,804
              
              
              
              55
              %
              
              $
              2,851,528
              
              
              
              57
              %
              
              $
              4,345,689
              
              
              
              79
              %Apartments
              
              
              248,083
              
              
              
              4
              
              
              
              525,625
              
              
              
              11
              
              
              
              342,500
              
              
              
              6Commercial
              
              
              1,750,860
              
              
              
              30
              
              
              
              1,567,745
              
              
              
              32
              
              
              
              805,639
              
              
              
              15Land
              
              
              621,363
              
              
              
              11
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —Total
              
              $
              5,777,110
              
              
              
              100
              %
              
              $
              4,944,898
              
              
              
              100
              %
              
              $
              5,493,828
              
              
              
              100
              %





The
following table sets forth the priorities, asset concentrations and maturities
of loans held by the partnership as of December 31, 2008:




#
      of Loans
              
              Amount
              
              PercentFirst
      trust deeds
              13
              
              $
              3,720,819
              
              65
              %Second
      trust deeds
              10
              
              
              1,856,291
              
              32
              %Third
      trust deeds
              1
              
              
              200,000
              
              3
              %Total
              24
              
              $
              5,777,110
              
              100
              %Maturing
      prior to 12/31/09
              5
              
              $
              1,250,860
              
              22
              %Maturing
      during 2010
              2
              
              
              643,459
              
              11
              %Maturing
      during 2011
              9
              
              
              1,635,494
              
              28
              %Maturing
      after 12/31/11
              8
              
              
              2,247,297
              
              39
              %Total
              24
              
              $
              5,777,110
              
              100
              %Average
      loan
              
              
              $
              240,713
              
              4.17
              %Largest
      loan
              
              
              
              621,363
              
              10.76
              %Smallest
      loan
              
              
              
              69,481
              
              1.20
              %Average
      Loan-to-Value, based upon appraisalsand
      senior liens at date of inception of loan
              
              
              
              
              
              58.19
              %





The
partnership’s largest loan in the principal amount of $621,363 represents 10.76%
of outstanding secured loans and 10.39% of partnership assets.  Larger
loans can sometimes represent over 10% of the secured loan portfolio or
partnership assets as these amounts decrease due to limited partner withdrawals
and loan payoffs as a result of the restructuring several loans into one loan,
or seller carry back notes upon sale of real estate.





At
December 31, 2008 and 2007, the partnership had three unsecured loans, net of
discounts, totaling $277,126 and $769,858, respectively.  Two of the
loans are non-interest bearing and are due in monthly installments of $2,078
through May, 2009.  These monthly payments escalate at various times
through the loan maturity date.  Interest has been imputed on these
loans at interest rates for comparable loans made during the same
periods.





20


During
2006, a loan in the amount of $571,494 became unsecured.  The
partnership placed the loan on nonaccrual status.  The partnership
pursued collection efforts against the borrower for the entire amount of
outstanding principal, advances and past due interest.  The
partnership ultimately negotiated a settlement which resulted in a write-off of
$421,431 from the $615,431 then due which was charged against the allowance for
loan losses.  The general partners have established an allowance for
loan losses for its unsecured loans as a protection against amounts that may
ultimately prove uncollectible.





ASSET
QUALITY





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





The
conclusion 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, 2008, the general partners have
determined the allowance for loan losses of $489,913 (8.20% of partners’
capital) 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, 2008, there were no matured loans and four secured loans
delinquent in interest payments over 90 days, totaling $428,578.





The
partnership may also make loans requiring periodic disbursements of
funds.  These loans include ground up construction of buildings and
loans for rehabilitation of existing structures.  Interest on these
loans is computed at simple interest method and only on the amounts disbursed on
a daily basis. As of December 31, 2008 there were no such loans.








Item 8 – Financial
Statements and Supplementary Data





A
– Financial Statements





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





·
            Report
      of Independent Registered Public Accounting Firm·
            Balance
      Sheets – December 31, 2008 and 2007·
            Statements
      of Income for the years ended December 31, 2008, 2007 and
    2006·
            Statements
      of Changes in Partners’ Capital for the years ended December 31, 2008,
      2007 and 2006·
            Statements
      of Cash Flows for the years ended December 31, 2008, 2007 and
      2006·
            Notes
      to Financial Statements





B
– Financial Statement Schedules





The
following financial statement schedules of Redwood Mortgage Investors VI are
included in Item 8:





·
            Schedule
      II  – Valuation and Qualifying Accounts·
            Schedule
      IV – Mortgage Loans on Real Estate





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


21



































REDWOOD MORTGAGE INVESTORS
VI


(A CALIFORNIA LIMITED
PARTNERSHIP)


FINANCIAL
STATEMENTS


AND SUPPLEMENTAL
INFORMATION


AS OF
DECEMBER 31, 2008AND
2007


AND FOR EACH OF THE THREE
YEARS


IN THE PERIOD ENDED DECEMBER
31, 2008











22
























TABLE OF
CONTENTS








Page
      No.Report
      of Independent Registered Public Accounting Firm
              
              
              24Balance
      Sheets
              
              
              25Statements
      of Income
              
              
              26Statements
      of Changes in Partners’ Capital
              
              
              27Statements
      of Cash Flows
              
              
              28Notes
      to Financial Statements
              
              
              29Supplemental
      SchedulesSchedule
      II - Valuation and Qualifying Accounts
              
              
              41Schedule
      IV - Mortgage Loans on Real EstateRule
      12-29 Loans on Real Estate
              
              
              42





23



















REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM








To the
Partners


Redwood
Mortgage Investors VI


Redwood
City, California





We have
audited the accompanying balance sheets of Redwood Mortgage Investors VI (a
California limited partnership) as of December 31, 2008 and 2007 and the related
statements of income, changes in partners’ capital and cash flows for each of
the three years in the period ended December 31, 2008. These financial
statements are the responsibility of Redwood Mortgage Investors VI’s management.
Our responsibility is to express an opinion on these 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 VI 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 VI’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 financial statements referred to above present fairly, in all
material respects, the financial position of Redwood Mortgage Investors VI as of
December 31, 2008 and 2007 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2008 in conformity
with accounting principles generally accepted in the United States of
America.





Our
audits were conducted for the purpose of forming an opinion on the basic
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
financial statements. Such information has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.











/s/
ARMANINO McKENNA  LLP


_____________________________


ARMANINO
McKENNA  LLP


San
Ramon, California


March 31,
2009


24


REDWOOD
MORTGAGE INVESTORS VI


(A
California Limited Partnership)


Balance
Sheets


December
31, 2008 and 2007





ASSETS




2008
              
              
              
              2007Cash
      and cash equivalents
              
              $
              333,800
              
              
              $
              515,852LoansLoans,
      secured by deeds of trust
              
              
              5,777,110
              
              
              
              4,944,898Loans,
      unsecured, net of discount of $108,080 and$85,627
      in 2008 and 2007, respectively
              
              
              277,126
              
              
              
              769,858Allowance
      for loan losses
              
              
              (489,913
              )
              
              
              (323,916
              )Net
      loans
              
              
              5,564,323
              
              
              
              5,390,840Interest
      and other receivablesAccrued
      interest and late fees
              
              
              82,450
              
              
              
              77,320Advances
      on loans
              
              
              2,306
              
              
              
              578Receivable
      from affiliate
              
              
              —
              
              
              
              12,003Total
      interest and other receivables
              
              
              84,756
              
              
              
              89,901Real
      estate held, net
              
              
              —
              
              
              
              130,215Total
      assets
              
              $
              5,982,879
              
              
              $
              6,126,808





LIABILITIES AND PARTNERS’
CAPITAL




LiabilitiesPayable
      to affiliate
              
              $
              9,640
              
              
              $
              10,193Total
      liabilities
              
              
              9,640
              
              
              
              10,193Partners’
      capitalLimited
      partners’ capital, subject to redemption
              
              
              5,963,478
              
              
              
              6,106,854General
      partners’ capital
              
              
              9,761
              
              
              
              9,761Total
      partners’ capital
              
              
              5,973,239
              
              
              
              6,116,615Total
      liabilities and partners’ capital
              
              $
              5,982,879
              
              
              $
              6,126,808








The
      accompanying notes are an integral part of these financial
      statements





25


REDWOOD
MORTGAGE INVESTORS VI


(A
California Limited Partnership)


Statements
of Income


For
the Years Ended December 31, 2008, 2007 and 2006







2008
              
              
              
              2007
              
              
              
              2006RevenuesInterest
      on loans
              
              $
              488,868
              
              
              $
              472,348
              
              
              $
              444,269Interest
      - interest bearing accounts
              
              
              6,821
              
              
              
              24,995
              
              
              
              33,977Gain
      on sale of real estate held
              
              
              645,590
              
              
              
              —
              
              
              
              —Late
      fees, prepayment penalties and fees
              
              
              7,094
              
              
              
              14,261
              
              
              
              6,402Total
      revenues
              
              
              1,148,373
              
              
              
              511,604
              
              
              
              484,648ExpensesMortgage
      servicing fees
              
              
              25,032
              
              
              
              —
              
              
              
              34,885Asset
      management fees
              
              
              7,599
              
              
              
              7,785
              
              
              
              5,942Clerical
      costs from Redwood Mortgage Corp.
              
              
              6,768
              
              
              
              7,190
              
              
              
              8,406Provisions
      for (recovery of) losses on loansand
      real estate held
              
              
              689,563
              
              
              
              29,743
              
              
              
              (20,872
              )Professional
      services
              
              
              58,690
              
              
              
              58,469
              
              
              
              55,379Other
              
              
              13,100
              
              
              
              25,953
              
              
              
              18,782Total
      expenses
              
              
              800,752
              
              
              
              129,140
              
              
              
              102,522Net
      income
              
              $
              347,621
              
              
              $
              382,464
              
              
              $
              382,126Net
      incomeGeneral
      partners (  1%)
              
              $
              3,476
              
              
              $
              3,822
              
              
              $
              3,821Limited
      partners (99%)
              
              
              344,145
              
              
              
              378,642
              
              
              
              378,305$
              347,621
              
              
              $
              382,464
              
              
              $
              382,126Net
      income per $1,000 invested by limited partnersfor
      entire periodWhere
      income is reinvested
              
              $
              58
              
              
              $
              62
              
              
              $
              61Where
      partner receives income inmonthly
      distributions
              
              $
              57
              
              
              $
              61
              
              
              $
              60








The
      accompanying notes are an integral part of these financial
      statements





26


REDWOOD
MORTGAGE INVESTORS VI


(A
California Limited Partnership)


Statements
of Changes in Partners’ Capital


For
the Years Ended December 31, 2008, 2007 and 2006







Limited
              
              
              GeneralPartners
              
              
              Partners
              
              
              TotalBalances
      at December 31, 2005
              
              $
              6,346,746
              
              
              $
              9,761
              
              
              $
              6,356,507Net
      income
              
              
              378,305
              
              
              
              3,821
              
              
              
              382,126Early
      withdrawal penalties
              
              
              (1,059
              )
              
              
              —
              
              
              
              (1,059
              )Partners’
      withdrawals
              
              
              (467,907
              )
              
              
              (3,821
              )
              
              
              (471,728
              )Balances
      at December 31, 2006
              
              
              6,256,085
              
              
              
              9,761
              
              
              
              6,265,846Net
      income
              
              
              378,642
              
              
              
              3,822
              
              
              
              382,464Early
      withdrawal penalties
              
              
              (4,423
              )
              
              
              —
              
              
              
              (4,423
              )Partners’
      withdrawals
              
              
              (523,450
              )
              
              
              (3,822
              )
              
              
              (527,272
              )Balances
      at December 31, 2007
              
              
              6,106,854
              
              
              $
              9,761
              
              
              $
              6,116,615Net
      income
              
              
              344,145
              
              
              
              3,476
              
              
              
              347,621Early
      withdrawal penalties
              
              
              (2,215
              )
              
              
              —
              
              
              
              (2,215
              )Partners’
      withdrawals
              
              
              (485,306
              )
              
              
              (3,476
              )
              
              
              (488,782
              )Balances
      at December 31, 2008
              
              $
              5,963,478
              
              
              $
              9,761
              
              
              $
              5,973,239














The
      accompanying notes are an integral part of these financial
      statements





27


REDWOOD
MORTGAGE INVESTORS VI


(A
California Limited Partnership)


Statements
of Cash Flows


For
the Years Ended December 31, 2008, 2007 and 2006







2008
              
              
              
              2007
              
              
              
              2006Cash
      flows from operating activitiesNet
      income
              
              $
              347,621
              
              
              $
              382,464
              
              
              $
              382,126Adjustments
      to reconcile net income tonet
      cash provided by operating activitiesProvision
      for (recovery of) losses on loansand
      real estate held
              
              
              689,563
              
              
              
              29,743
              
              
              
              (20,872
              )Realized
      gain on sale of real estate held
              
              
              (645,590
              )
              
              
              —
              
              
              
              —Early
      withdrawal penalties credited to income
              
              
              (2,215
              )
              
              
              (4,423
              )
              
              
              (1,059
              )Amortization
      of discount on unsecured loans
              
              
              (12,232
              )
              
              
              (12,233
              )
              
              
              (9,174
              )Change
      in operating assets and liabilitiesLoans,
      unsecured
              
              
              47,056
              
              
              
              (44,982
              )
              
              
              9,319Accrued
      interest and late fees
              
              
              (7,061
              )
              
              
              (9,325
              )
              
              
              (80,937
              )Advances
      on loans
              
              
              (1,728
              )
              
              
              426
              
              
              
              (3,338
              )Receivable
      from affiliate
              
              
              12,003
              
              
              
              (8,589
              )
              
              
              (3,414
              )Payable
      to affiliate
              
              
              (553
              )
              
              
              (1
              )
              
              
              1,622Net
      cash provided by operating activities
              
              
              426,864
              
              
              
              333,080
              
              
              
              274,273Cash
      flows from investing activitiesPrincipal
      collected on loans
              
              
              953,289
              
              
              
              2,203,176
              
              
              
              1,150,206Loans
      originated
              
              
              (1,227,865
              )
              
              
              (1,654,246
              )
              
              
              (5,153,620
              )Proceeds
      from disposition of real estate
              
              
              154,442
              
              
              
              —
              
              
              
              —Net
      cash provided by (used in) investing activities
              
              
              (120,134
              )
              
              
              548,930
              
              
              
              (4,003,414
              )Cash
      flows from financing activitiesPartners’
      withdrawals
              
              
              (488,782
              )
              
              
              (527,272
              )
              
              
              (471,728
              )Net
      increase (decrease) in cash and cash equivalents
              
              
              (182,052
              )
              
              
              354,738
              
              
              
              (4,200,869
              )Cash
      and cash equivalents at beginning of year
              
              
              515,852
              
              
              
              161,114
              
              
              
              4,361,983Cash
      and cash equivalents at end of year
              
              $
              333,800
              
              
              $
              515,852
              
              
              $
              161,114Supplemental
      disclosure of non-cash investing activitiesSecured
      loan from sale of real estate held
              
              $
              621,363
              
              
              
              —
              
              
              
              —














The
      accompanying notes are an integral part of these financial
      statements


28


REDWOOD
MORTGAGE INVESTORS VI


(A
California Limited Partnership)


Notes
to Financial Statements


December
31, 2008, 2007 and 2006








NOTE 1 – ORGANIZATION
      AND GENERAL





Redwood
Mortgage Investors VI a California Limited Partnership, was organized in
1987.  The general partners are Michael R. Burwell, an individual, and
Gymno Corporation, a California corporation whose stockholders are Michael R.
Burwell and two trusts, both of whose trustee is Michael R.
Burwell.  The partnership was organized to engage in business as a
mortgage lender for the primary purpose of making loans secured by deeds of
trust on California real estate.  Loans are being arranged and
serviced by Redwood Mortgage Corp., an affiliate of the general
partners.





The
partnership is scheduled to terminate on December 31, 2027, unless sooner
terminated as provided in the Partnership Agreement.








NOTE 2 – SUMMARY OF
      SIGNIFICANT ACCOUNTING
POLICIES





Cash and cash
equivalents





The
partnership places its cash and temporary cash investments with high credit
quality institutions.  Periodically, such investments may exceed
federally insured limits.





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, 2008 and 2007, the partnership
had four and three loans, respectively, past maturity or more than 90 days past
due in interest payments or principal, totaling $428,578 and $541,952,
respectively. In addition, accrued interest, late charges and advances totaled
$23,491 and $28,007, respectively.  At December 31, 2008 and 2007, as
presented in Note 8, the average loan to appraised value of security based upon
appraised values and prior liens at the time the loans were consummated was
58.19% and 58.00%, respectively. When loans are considered impaired the
allowance for loan losses are updated to reflect the change in the valuation of
collateral security. The table below summarizes the impaired loans for the years
ended December 31:





Number
            
            
            Total
            
            
            Total
            
            
            Impaired
            
            
            Average
            
            
            
            
            
            Interestof
            
            
            Impaired
            
            
            Investment
            
            
            Loans
            
            
            Investment
            
            
            Interest
            
            
            IncomeImpaired
            
            
            Loan
            
            
            Impaired
            
            
            Loss
            
            
            Impaired
            
            
            Income
            
            
            ReceivedYear
            
            Loans
            
            
            Balance
            
            
            Loans
            
            
            Reserve
            
            
            Loans
            
            
            Accrued
            
            
            In
      Cash2008
            
            2
            
            $
            251,724
            
            $
            266,794
            
            $
            145,421
            
            $
            264,761
            
            $
            24,662
            
            $
            21,2192007
            
            —
            
            $
            
            
            $
            —
            
            $
            —
            
            $
            
            
            $
            —
            
            $
            —2006
            
            —
            
            $
            
            
            $
            —
            
            $
            —
            
            $
            
            
            $
            —
            
            $
            —





29


REDWOOD
      MORTGAGE INVESTORS VI


(A
      California Limited Partnership)


Notes
      to Financial Statements


December
      31, 2008, 2007 and 2006








NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (continued)





Loans unsecured,
net





In August
2008 a property on which the partnership held a second lien, was foreclosed upon
by the first lien holder, thus rendering the partnership’s loan
unsecured.  The secured loan, including accrued interest and late
charges totaled $65,657 at the time of foreclosure.  This loan, along
with additional legal fees of $1,793, was later written off against the
allowance for losses as the estimated cost to collect was determined to be too
high.





During
2006, a previously secured loan became unsecured which resulted in a decrease to
secured loans, advances and accrued interest of $531,559, $2,385 and $34,745,
respectively, and an increase to unsecured loans of $568,689.  During
2008, the partnership negotiated a settlement which resulted in a write-off of
$421,431 from the $615,431 then due which was charged against the allowance for
loan losses.





The
partnership had three unsecured loans, net of a discount, totaling
$277,126 and $769,858 at December 31, 2008 and 2007,
respectively.  Interest is not being accrued as these loans are
considered impaired; however, monthly payments are being received on each
loan.





Allowance for loan
losses





Loans and
the related accrued interest, late fees and advances are analyzed on a periodic
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 the full amount is not
collectible.





The
composition of the allowance for loan losses was as follows:





December
      31, 2008
              
              
              December
      31, 2007Percent
              
              
              
              
              
              Percentof
      loans
              
              
              
              
              
              loans
      ofin
      each
              
              
              
              
              
              in
      eachcategory
              
              
              
              
              
              categoryto
      total
              
              
              
              
              
              to
      totalAmount
              
              
              loans
              
              
              Amount
              
              
              loansBalance
      at end of period applicable to:DomesticReal
      estate – mortgageSingle
      family
              
              $
              139,730
              
              
              
              55
              %
              
              $
              75,283
              
              
              
              57
              %Apartments
              
              
              10,000
              
              
              
              4
              
              
              
              3,942
              
              
              
              11Commercial
              
              
              57,509
              
              
              
              30
              
              
              
              19,597
              
              
              
              32Land
              
              
              12,427
              
              
              
              11
              
              
              
              —
              
              
              
              —Total
      real estate – mortgage
              
              $
              219,666
              
              
              
              100
              %
              
              $
              98,822
              
              
              
              100
              %Total
      unsecured loans
              
              $
              270,247
              
              
              
              100
              %
              
              $
              225,094
              
              
              
              100
              %Total
      allowance for losses
              
              $
              489,913
              
              
              
              100
              %
              
              $
              323,916
              
              
              
              100
              %





30


REDWOOD
      MORTGAGE INVESTORS VI


(A
      California Limited Partnership)


Notes
      to Financial Statements


December
      31, 2008, 2007 and 2006








NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (continued)





Allowance for loan
losses (continued)





Activity
in the allowance for loan losses was as follows:





Years
      Ended December 31,2008
              
              
              
              2007
              
              
              
              2006Balance
      at beginning of year
              
              $
              323,916
              
              
              $
              294,507
              
              
              $
              315,379Charge-offsDomesticReal
      estate - mortgageSingle
      family
              
              
              (523,566
              )
              
              
              (334
              )
              
              
              —Apartments
              
              
              —
              
              
              
              —
              
              
              
              —Commercial
              
              
              —
              
              
              
              —
              
              
              
              —(523,566
              )
              
              
              (334
              )
              
              
              —RecoveriesDomesticReal
      estate - mortgageSingle
      family
              
              
              —
              
              
              
              —
              
              
              
              —Apartments
              
              
              —
              
              
              
              —
              
              
              
              —Commercial
              
              
              —
              
              
              
              —
              
              
              
              ——
              
              
              
              —
              
              
              
              —Net
      charge-offs
              
              
              (523,566
              )
              
              
              (334
              )
              
              
              —Additions/(recovery)
      charge to operations
              
              
              689,563
              
              
              
              29,743
              
              
              
              (20,872
              )Balance
      at end of year
              
              $
              489,913
              
              
              $
              323,916
              
              
              $
              294,507Ratio
      of net charge-offs during the period to averagesecured
      loans outstanding during the period
              
              
              9.77
              %
              
              
              0.00
              %
              
              
              0.00
              %





Real estate
held





Real
estate held includes real estate acquired through foreclosure and is stated at
the lower of the recorded investment in the property, plus any senior
indebtedness, or at the property’s estimated fair value, less estimated costs to
sell, as applicable.





The
partnership periodically compares the carrying value of real estate to expected
future undiscounted 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 fair value.











31


REDWOOD
      MORTGAGE INVESTORS VI


(A
      California Limited Partnership)


Notes
      to Financial Statements


December
      31, 2008, 2007 and 2006








NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTINGPOLICIES
(continued)





Income
taxes





No
provision for federal and state income taxes, except for a minimum state tax of
$800, is made in the financial statements since income taxes are the obligation
of the partners if and when income taxes apply.





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 monthly distributions of
their net income.  Individual income is allocated each month based on
the limited partners’ pro rata share of partners’ capital.  Because
the net income percentage varies from month to month, amounts per $1,000 will
vary for those individuals who made or withdrew investments during the period,
or select other options.





Management
estimates





The
preparation of 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
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. Actual results could
differ significantly from these estimates.





Reclassifications





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





Late fee
revenue





Late fees
are generally charged at 6% of the monthly installment payment past
due.  During 2008, 2007 and 2006, late fee revenue of $3,678, $6,041
and $4,868, respectively, was recorded.  The partnership has a late
fee receivable at December 31, 2008 and 2007 of $2,102 and $2,349,
respectively.





Recently issued accounting
pronouncements





In May
2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (SFAS 162).  SFAS 162 identifies the
sources of accounting principles and the framework for selecting the principles
to be used in the preparation of financial statements presented in conformity
with generally accepted accounting principles in the United
States.  SFAS 162 became effective on November 15,
2008.  The adoption of this statement did not have a material impact
on the partnership’s financial condition and results of operation.








32


REDWOOD
      MORTGAGE INVESTORS VI


(A
      California Limited Partnership)


Notes
      to Financial Statements


December
      31, 2008, 2007 and 2006








NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (continued)





Recently issued accounting
pronouncements (continued)





On
January 1, 2008, the partnership adopted Statement of Financial Accounting
Standards No. 157, Fair Value
Measurements (SFAS 157). SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosure requirements for fair
value measurements. The partnership deferred the application of SFAS 157 for
nonfinancial assets and nonfinancial liabilities as provided for by FASB Staff
Position (FSP) FAS 157-2, Effective Date of FASB Statement No.
157. FSP FAS 157-2 defers the effective date of SFAS 157 to fiscal years
beginning after November 15, 2008, and interim periods within those fiscal years
for nonfinancial assets and nonfinancial liabilities, except items that are
recognized or disclosed at fair value in an entity's financial statements on a
recurring basis (at least annually).





In
October 2008, the FASB issued FSP FAS 157-3, Determining the Fair Value of a
Financial Asset When the Market for that Asset is Not Active, with an
immediate effective date.  The purpose of this release was to provide
further clarification regarding Level 3 inputs and the assumptions management
may make when the market for the asset in not active.  The adoption of
FSP FAS 157-3 did not have a material effect on the partnership’s results of
operations, financial position or liquidity.





In March
2006, the FASB issued SFAS No. 156, Accounting for Servicing of
Financial Assets, an amendment of FASB Statement No. 140 (SFAS 156),
which permits, but does not require, an entity to account for one or more
classes of servicing rights (i.e., mortgage servicing rights) at fair value,
with the changes in fair value recorded in the statement of
income.  SFAS 156 is effective in the first quarter of
2007.  The adoption of SFAS 156 did not have a material impact on the
partnership’s financial condition and results of operations.







On
February 15, 2007, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities (SFAS 159), which allows an entity the
irrevocable option to elect fair value for the initial and subsequent
measurement for certain financial assets and liabilities on a
contract-by-contract basis.  Subsequent changes in fair value of these
financial assets and liabilities would be recognized in earnings when they
occur.  SFAS 159 further establishes certain additional disclosure
requirements.  SFAS 159 is effective for the partnership’s financial
statements for the year beginning on January 1, 2008, with earlier adoption
permitted.  Management has elected not to adopt the fair value option
for financial assets and financial liabilities.













In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51 (SFAS
160).  SFAS 160’s objective is to improve the relevance,
comparability, and transparency of the financial information a reporting entity
provides in its consolidated financial statements by establishing accounting and
reporting standards for the noncontrolling interest in a
subsidiary.  SFAS 160 is effective for fiscal years beginning on or
after December 15, 2008, along with the interim periods within those fiscal
years.  Early adoption is prohibited.  Management is
currently evaluating the impact and timing of the adoption of SFAS 160 on the
partnership’s financial condition.













On
July 13, 2006, the FASB released FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes, an interpretation of FASB Statement No. 109 (FIN
48).  FIN 48 clarifies the accounting and reporting for income taxes
where interpretation of the tax law may be uncertain.  FIN 48
prescribes a comprehensive model for the financial statement recognition,
measurement, presentation and disclosure of income tax uncertainties with
respect to positions taken or expected to be taken in income tax
returns.  The partnership adopted FIN 48 in the first quarter of
2007.  The adoption of FIN 48 did not have a material impact on the
partnership’s financial condition and results of operations.











33


REDWOOD
      MORTGAGE INVESTORS VI


(A
      California Limited Partnership)


Notes
      to Financial Statements


December
      31, 2008, 2007 and 2006








NOTE 3 – OTHER PARTNERSHIP
PROVISIONS





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





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





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





The
approval of the majority of 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.





Election to receive monthly,
quarterly or annual distributions





At the
time of their subscription for units, investors elected 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 units and accordingly an
investment in the partnership is non-liquid.  Limited partners had no
right to withdraw from the partnership or to obtain the return of their capital
account for at least one year from the date of purchase of partnership
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.





34


REDWOOD
      MORTGAGE INVESTORS VI


(A
      California Limited Partnership)


Notes
      to Financial Statements


December
      31, 2008, 2007 and 2006








NOTE 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 does not establish a reserve from which to fund withdrawals and,
accordingly, the partnership’s capacity to return a limited partner’s capital
account is restricted to the availability of partnership cash
flow.  Furthermore, no more than 20% of the total limited partners’
capital accounts outstanding at the beginning of any year may be liquidated
during any calendar year.








NOTE 4 – GENERAL PARTNERS
AND RELATED PARTIES





The
following are commissions and fees paid to the general partners and their
affiliates:





Mortgage brokerage
commissions





For fees
in connection with the review, selection, evaluation, negotiation and extension
of loans, Redwood Mortgage Corp., an affiliate of the general partners, may
collect 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 2008, 2007 and 2006,
loan brokerage commissions paid by the borrowers were $34,508, $42,839 and
$124,116, respectively.





Mortgage servicing
fees





Monthly
mortgage servicing fees of up to 1/8 of 1% (1.5% annually) of the unpaid
principal are paid to Redwood Mortgage Corp., an affiliate of the general
partners, 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.  Additional service fees are recorded upon the receipt of any
subsequent payments on impaired loans.  Mortgage servicing fees of
$25,032, $0 and $34,885, were incurred for 2008, 2007 and 2006,
respectively.  During 2008, 2007 and 2006 Redwood Mortgage Corp.
waived $49,823, $72,759 and $32,180 of mortgage servicing fees,
respectively.  The partnership has a payable to Redwood Mortgage Corp.
for servicing fees of $9,640 and $10,193 at December 31, 2008 and 2007,
respectively.





35


REDWOOD
MORTGAGE INVESTORS VI


(A
      California Limited Partnership)


Notes
      to Financial Statements


December
      31, 2008, 2007 and 2006








NOTE 4 – GENERAL PARTNERS
AND RELATED PARTIES (continued)





Asset management
fee









The
general partners receive monthly fees for managing the partnership’s loan
portfolio and operations of up to 1/32 of 1% of the “net asset value” (3/8 of 1%
annually).  Asset management fees of $7,599, $7,785 and $5,942, were
incurred for 2008, 2007 and 2006, respectively.  During 2008, 2007 and
2006, the general partners waived $15,198, $15,570 and $17,858 of asset
management fees, respectively.





Other
fees





The
partnership agreement provides for other fees such as reconveyance, mortgage
assumption and mortgage extension fees.  These fees are incurred by
the borrowers and paid to the general partners or affiliates.





Clerical costs through
Redwood Mortgage Corp.





The
partnership receives certain operating and administrative services from Redwood
Mortgage Corp.  Redwood Mortgage Corp. may be reimbursed by the
partnership for operating expenses incurred 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 2008, 2007 and
2006, operating expenses totaling $6,768, $7,190 and $8,406, respectively, were
reimbursed to Redwood Mortgage Corp.  To the extent that some
operating and administrative services were not reimbursed, the financial
position and results of partnership operation may be different.








NOTE 5 – REAL ESTATE
HELD





In
December 2008, the partnership, along with two other affiliates, sold its lone
property to an affiliate of Redwood Mortgage Corp. for the property’s current
market value.  The current market value was determined by a nationally
known appraiser.  The partnership’s share of the appraised value was
$776,704.  The partnership received 20% of the sales price in cash
($154,442) and the balance in the form of a secured loan of $621,363 at 7.00%,
amortized for 20 years, due in full on January 1, 2016.  The related
gain on sale was recognized in accordance with Statement of Financial Accounting
Standard No. 66, Accounting
for Sales of Real Estate.  The partnership is not obligated for
any future performance related this property.





The
following schedule reflects the costs of real estate acquired through
foreclosure and the recorded reductions to estimated fair values, including
estimated costs to sell, as of December 31, 2008 and 2007:





2008
              
              
              
              2007Costs
      of properties
              
              $
              —
              
              
              $
              130,215Reduction
      in value
              
              
              —
              
              
              
              —Real
      estate held, net
              
              $
              —
              
              
              $
              130,215





36


REDWOOD
      MORTGAGE INVESTORS VI


(A
      California Limited Partnership)


Notes
      to Financial Statements


December
      31, 2008, 2007 and 2006








NOTE 6 – INCOME
      TAXES





The
following reflects a reconciliation of partners’ capital reflected in the
financial statements to the tax basis of partnership capital:




2008
              
              
              
              2007Partners’
      capital per financial statements
              
              $
              5,973,239
              
              
              $
              6,116,615Allowance
      for loan losses and real estate
              
              
              489,913
              
              
              
              323,916Partners’
      capital tax basis
              
              $
              6,463,152
              
              
              $
              6,440,531





In 2008
and 2007, approximately 73% of taxable income was allocated to tax-exempt
organizations (e.g., retirement plans).








NOTE 7 – FAIR VALUE OF
      FINANCIAL INSTRUMENTS





SFAS 157
defines fair value as the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. The partnership determines the fair
values of its financial assets and financial liabilities based on the fair value
hierarchy established in SFAS 157. The standard describes three levels of inputs
that may be used to measure fair value (Level 1, Level 2 and Level 3). Level 1
inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities that the Partnership has the ability to access at the measurement
date. An active market is a market in which transactions occur with sufficient
frequency and volume to provide pricing information on an ongoing basis. Level 2
inputs are inputs other than quoted prices that are observable for the asset or
liability, either directly or indirectly. Level 3 inputs are unobservable inputs
for the asset or liability. Unobservable inputs reflect the partnership’s own
assumptions about the assumptions market participants would use in pricing the
asset or liability (including assumptions about risk). Unobservable inputs are
developed based on the best information available in the circumstances and may
include the partnership’s own data.





The
      partnership does not record loans at fair value on a recurring
      basis.





Financial
assets and liabilities measured at fair value on a non-recurring basis as of
December 31, 2008:  ($ in thousands)





Fair
      Value Measurement at Report Date UsingQuoted
      Prices
              Significantin
      Active
              Other
              SignificantMarkets
      for
              Observable
              Unobservable
              TotalIdentical
      Assets
              Inputs
              Inputs
              as
      ofItem
              (Level
      1)
              (Level
      2)
              (Level
      3)
              12/31/2008Impaired
      loans
              $—
              $—
              $251,724
              $251,724





37


REDWOOD
      MORTGAGE INVESTORS VI


(A
      California Limited Partnership)


Notes
      to Financial Statements


December
      31, 2008, 2007 and 2006








NOTE 7 – FAIR VALUE OF
      FINANCIAL INSTRUMENTS
(continued)





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 (Level 2).  The fair value of these non-impaired loans of
      $5,527,000 and $4,899,000 at December 31, 2008 and 2007, 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. For
      loans in which a specific allowance is established based on the fair value
      off the collateral, the partnership records the loan as nonrecurring Level
      2 if the fair value of the collateral is based on an observable market
      price or a current appraised value.  If an appraised value is
      not available or the fair value of the collateral is considered impaired
      below the appraised value and there is no observable market price, the
      partnership records the loan as nonrecurring Level
  3.





(c)
            Unsecured
      loans (Level 3).  The carrying amount equals fair
      value. Unsecured loans are valued at their principal less any
      discount or loss reserves established by management after taking into
      account the borrower’s creditworthiness and ability to repay the
      loan.








NOTE 8 – LOAN CONCENTRATIONS
AND CHARACTERISTICS





At
December 31, 2008 and 2007, the loans secured by recorded deeds of trust had the
following characteristics:





2008
              
              
              
              2007Number
      of secured loans outstanding
              
              
              24
              
              
              
              24Total
      secured loans outstanding
              
              $
              5,777,110
              
              
              $
              4,944,898Average
      secured loan outstanding
              
              $
              240,713
              
              
              $
              206,037Average
      secured loan as percent of total secured loans
              
              
              4.17
              %
              
              
              4.17
              %Average
      secured loan as percent of partners’ capital
              
              
              4.03
              %
              
              
              3.37
              %Largest
      secured loan outstanding
              
              $
              621,363
              
              
              $
              400,000Largest
      secured loan as percent of total secured loans
              
              
              10.76
              %
              
              
              8.09
              %Largest
      secured loan as percent of partners’ capital
              
              
              10.40
              %
              
              
              6.54
              %Largest
      secured loan as percent of total assets
              
              
              10.39
              %
              
              
              6.53
              %Number
      of counties where securityis
      located (all California)
              
              
              16
              
              
              
              14Largest
      percentage of secured loans in one county
              
              
              19.98
              %
              
              
              22.26
              %Number
      of secured loans in foreclosure
              
              
              1
              
              
              
              —Amounts
      of secured loans in foreclosure
              
              $
              318,587
              
              
              $
              —





At times,
a specific loan may increase above 10% of the secured loan portfolio or
partnership assets as the loan portfolio and assets of the partnership decrease
due to limited partner withdrawals and/or loan payoffs.


38


REDWOOD
      MORTGAGE INVESTORS VI


(A
      California Limited Partnership)


Notes
      to Financial Statements


December
      31, 2008, 2007 and 2006








NOTE 8 – LOAN CONCENTRATIONS
AND CHARACTERISTICS (continued)





The
following categories of secured loans were held at December 31, 2008 and
2007:




2008
              
              
              
              2007First
      trust deeds
              
              $
              3,720,819
              
              
              $
              2,764,524Second
      trust deeds
              
              
              1,856,291
              
              
              
              1,980,374Third
      trust deeds
              
              
              200,000
              
              
              
              200,000Total
      loans
              
              
              5,777,110
              
              
              
              4,944,898Prior
      liens due other lenders at time of loan
              
              
              4,879,119
              
              
              
              5,715,592Total
      debt
              
              $
              10,656,229
              
              
              $
              10,660,490Appraised
      property value at time of loan
              
              $
              18,313,659
              
              
              $
              18,380,414Average
      secured loan to appraised valueof
      security based on appraised values and priorliens
      at time loan was consummated
              
              
              58.19
              %
              
              
              58.00
              %Loans
      by type of propertySingle
      family
              
              $
              3,156,804
              
              
              $
              2,851,528Apartments
              
              
              248,083
              
              
              
              525,625Commercial
              
              
              1,750,860
              
              
              
              1,567,745Land
              
              
              621,363
              
              
              
              —Total
      secured loans
              
              $
              5,777,110
              
              
              $
              4,944,898





Interest
rates on the loans range from 6.38% to 10.50% at December 31, 2008 and 8.50% to
10.50% at December 31, 2007





Scheduled
maturity dates of secured loans as of December 31, 2008 are as
follows:




Year
      Ending December 31,2009
              
              $
              1,250,8602010
              
              
              643,4592011
              
              
              1,635,4942012
              
              
              857,2172013
              
              
              199,880Thereafter
              
              
              1,190,200$
              5,777,110





The
scheduled maturities for 2009 had no loans which were past maturity at December
31, 2008.  Occasionally, the partnership allows borrowers to continue
to make the payments on loans past maturity for periods of
time.  Also, it is the partnership’s experience loans can be
refinanced or repaid before the maturity date.  Therefore, the above
tabulation for scheduled maturities is not a forecast of future cash
receipts.





39


REDWOOD
      MORTGAGE INVESTORS VI


(A
      California Limited Partnership)


Notes
      to Financial Statements


December
      31, 2008, 2007 and 2006








NOTE 9 – COMMITMENTS AND
CONTINGENCIES





Workout
agreements





From time
to time, the partnership negotiates various contractual workout agreements with
borrowers.  Under the terms of these workout agreements the
partnership is not obligated to make any additional monetary advances for the
maintenance or repair of the collateral securing the loans.  As of
December 31, 2008 and 2007, there were two and three loans, respectively, in
workout agreements.





Legal
proceedings





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








NOTE 10 – SELECTED FINANCIAL
INFORMATION (Unaudited)





Calendar
      QuarterFirst
              
              
              Second
              
              
              Third
              
              
              Fourth
              
              
              AnnualRevenues2008
              
              $
              124,841
              
              
              $
              127,506
              
              
              $
              127,237
              
              
              $
              768,789
              
              
              $
              1,148,3732007
              
              $
              130,633
              
              
              $
              120,180
              
              
              $
              128,359
              
              
              $
              132,432
              
              
              $
              511,604Expenses2008
              
              $
              33,912
              
              
              $
              38,506
              
              
              $
              41,706
              
              
              $
              686,628
              
              
              $
              800,7522007
              
              $
              34,199
              
              
              $
              24,211
              
              
              $
              33,066
              
              
              $
              37,664
              
              
              $
              129,140Net
      income allocatedto
      general partners2008
              
              $
              909
              
              
              $
              890
              
              
              $
              856
              
              
              $
              821
              
              
              $
              3,4762007
              
              $
              964
              
              
              $
              960
              
              
              $
              953
              
              
              $
              945
              
              
              $
              3,822Net
      income allocatedto
      limited partners2008
              
              $
              90,020
              
              
              $
              88,110
              
              
              $
              84,675
              
              
              $
              81,340
              
              
              $
              344,1452007
              
              $
              95,470
              
              
              $
              95,010
              
              
              $
              94,340
              
              
              $
              93,822
              
              
              $
              378,642Net
      income per $1,000 investedWhere
      income isReinvested2008
              
              $
              15
              
              
              $
              14
              
              
              $
              15
              
              
              $
              14
              
              
              $
              582007
              
              $
              15
              
              
              $
              15
              
              
              $
              16
              
              
              $
              16
              
              
              $
              62Withdrawn2008
              
              $
              15
              
              
              $
              14
              
              
              $
              14
              
              
              $
              14
              
              
              $
              572007
              
              $
              15
              
              
              $
              15
              
              
              $
              15
              
              
              $
              16
              
              
              $
              61


40


REDWOOD
      MORTGAGE INVESTORS VI


(A
      California Limited Partnership)


Schedule
      II


Valuation
      and Qualifying Accounts


For
      the Years Ended December 31, 2008, 2007 and
2006











B
              
              
              
              CBalance
      at
              
              
              Additions
              
              
              
              
              
              
              EA
              
              
              Beginning
              
              
              Charged
      to Costs
              
              
              Charged
      to
              
              
              
              D
              
              
              Balance
      atDescription
              
              
              of
      Period
              
              
              and
      Expenses
              
              
              Other
      Accounts
              
              
              Deductions
              
              
              End
      of PeriodYear
      ended December 31, 2006Deducted
      from asset accountsAllowance
      for loan losses
              
              
              $
              315,379
              
              
              $
              (20,872
              )
              
              $
              —
              
              
              $
              —
              
              
              $
              294,507Cumulative
      write-down ofreal
      estate owned
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —$
              315,379
              
              
              $
              (20,872
              )
              
              $
              —
              
              
              $
              —
              
              
              $
              294,507Year
      ended December 31, 2007Deducted
      from asset accountsAllowance
      for loan losses
              
              
              $
              294,507
              
              
              $
              29,743
              
              
              $
              —
              
              
              $
              (334
              )
              
              $
              323,916Cumulative
      write-down ofreal
      estate owned
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —$
              294,507
              
              
              $
              29,743
              
              
              $
              —
              
              
              $
              (334
              )
              
              $
              323,916Year
      ended December 31, 2008Deducted
      from asset accounts
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              )Allowance
      for loan losses
              
              
              $
              323,916
              
              
              $
              689,563
              
              
              $
              —
              
              
              $
              (523,566
              )
              
              $
              489,913Cumulative
      write-down ofreal
      estate owned
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —$
              323,916
              
              
              $
              689,563
              
              
              $
              —
              
              
              $
              (523,566
              )
              
              $
              489,913





41


REDWOOD
      MORTGAGE INVESTORS VI


(A
      California Limited Partnership)


Schedule
      IV


Mortgage
      Loans on Real Estate


Rule
      12-29 Loans on Real Estate


December
      31, 2008








Col.
      HPrincipalCol.
      F
              
              
              
              
              
              Amount
      ofFace
              
              
              Col.
      G
              
              
              LoansCol.
      C
              
              Col.
      D
              
              
              
              
              
              Amount
              
              
              Carry
              
              
              Subject
      to
              
              
              Col.
      JCol.
      B
              
              Final
              
              Periodic
              
              
              Col.
      E
              
              
              of
      Mortgage
              
              
              Amount
      of
              
              
              Delinquent
              
              Col.
      I
              CaliforniaCol.
      A
              
              Interest
              
              Maturity
              
              Payment
              
              
              Prior
              
              
              Original
              
              
              Mortgage
              
              
              Principal
              
              Type
      of
              GeographicDescription
              
              Rate
              
              Date
              
              Terms
              
              
              Liens
              
              
              Amount
              
              
              Investment
              
              
              or
      Interest
              
              Lien
              LocationRes.
              
              
              9.50
              %
              11/01/13
              
              $
              1,682
              
              
              $
              168,133
              
              
              $
              200,000
              
              
              $
              199,880
              
              
              
              —
              
              2nd
              MontereyRes
              
              
              9.50
              %
              01/01/14
              
              
              2,104
              
              
              
              —
              
              
              
              250,250
              
              
              
              250,250
              
              
              
              —
              
              1st
              AlamedaRes.
              
              
              8.50
              %
              03/01/09
              
              
              1,771
              
              
              
              —
              
              
              
              200,000
              
              
              
              250,000
              
              
              
              —
              
              1st
              MontereyRes.
              
              
              9.25
              %
              06/01/10
              
              
              2,057
              
              
              
              198,779
              
              
              
              250,000
              
              
              
              243,459
              
              
              
              —
              
              2nd
              AlamedaComm.
              
              
              9.50
              %
              02/01/09
              
              
              2,078
              
              
              
              —
              
              
              
              262,500
              
              
              
              262,500
              
              
              
              —
              
              1st
              San
      JoaquinRes.
              
              
              9.63
              %
              04/01/11
              
              
              1,062
              
              
              
              173,882
              
              
              
              125,000
              
              
              
              119,114
              
              
              
              —
              
              2nd
              MariposaRes.
              
              
              9.75
              %
              06/01/11
              
              
              601
              
              
              
              75,015
              
              
              
              70,000
              
              
              
              69,481
              
              
              
              69,481
              
              2nd
              San
      BernardinoRes.
              
              
              9.75
              %
              06/01/11
              
              
              859
              
              
              
              255,618
              
              
              
              100,000
              
              
              
              99,384
              
              
              
              98,724
              
              2nd
              MontereyRes.
              
              
              8.88
              %
              07/01/11
              
              
              2,958
              
              
              
              866,667
              
              
              
              399,990
              
              
              
              400,000
              
              
              
              —
              
              2nd
              San
      FranciscoRes.
              
              
              9.00
              %
              06/01/11
              
              
              1,609
              
              
              
              1,020,306
              
              
              
              200,000
              
              
              
              196,416
              
              
              
              —
              
              2nd
              Los
      AngelesRes.
              
              
              9.75
              %
              10/01/11
              
              
              932
              
              
              
              —
              
              
              
              108,500
              
              
              
              107373
              
              
              
              107,373
              
              1st
              ShastaRes.
              
              
              9.00
              %
              12/06/11
              
              
              1,950
              
              
              
              —
              
              
              
              260,000
              
              
              
              259,973
              
              
              
              —
              
              1st
              AlamedaRes.
              
              
              10.00
              %
              01/01/12
              
              
              1,275
              
              
              
              —
              
              
              
              153,000
              
              
              
              153,000
              
              
              
              153,000
              
              1st
              Contra
      CostaRes.
              
              
              9.75
              %
              12/01/11
              
              
              1,186
              
              
              
              —
              
              
              
              138,000
              
              
              
              136,329
              
              
              
              —
              
              1st
              San
      BernardinoRes.
              
              
              9.75
              %
              05/01/12
              
              
              926
              
              
              
              163,230
              
              
              
              107,800
              
              
              
              106,709
              
              
              
              —
              
              2nd
              StanislausRes.
              
              
              9.25
              %
              06/01/12
              
              
              2,057
              
              
              
              445,918
              
              
              
              250,000
              
              
              
              247,508
              
              
              
              —
              
              2nd
              OrangeComm.
              
              
              10.50
              %
              07/01/09
              
              
              3285
              
              
              
              —
              
              
              
              450,001
              
              
              
              363360
              
              
              
              —
              
              1st
              SolanoComm.
              
              
              9.00
              %
              07/01/12
              
              
              2,625
              
              
              
              —
              
              
              
              350,000
              
              
              
              350,000
              
              
              
              —
              
              1st
              San
      FranciscoComm.
              
              
              10.00
              %
              03/01/09
              
              
              1,667
              
              
              
              475,698
              
              
              
              200,001
              
              
              
              200,000
              
              
              
              —
              
              3rd
              El
      DoradoComm.
              
              
              10.00
              %
              02/01/09
              
              
              1,458
              
              
              
              1,035,873
              
              
              
              175,000
              
              
              
              175,000
              
              
              
              —
              
              2nd
              San
      JoaquinRes.
              
              
              6.38
              %
              03/01/15
              
              
              2,000
              
              
              
              —
              
              
              
              319,500
              
              
              
              318,587
              
              
              
              —
              
              1st
              ButteComm.
              
              
              9.88
              %
              05/01/10
              
              
              3,292
              
              
              
              —
              
              
              
              400,004
              
              
              
              400,000
              
              
              
              —
              
              1st
              AlamedaApts.
              
              
              10.50
              %
              06/01/11
              
              
              2,188
              
              
              
              —
              
              
              
              250,002
              
              
              
              248,084
              
              
              
              —
              
              1st
              NapaLand
              
              
              7.00
              %
              01/01/16
              
              
              4,817
              
              
              
              —
              
              
              
              621,363
              
              
              
              621,363
              
              
              
              —
              
              1st
              Santa
      ClaraTotal
              
              
              
              
              
              
              $
              46,439
              
              
              $
              4,879,119
              
              
              $
              5,840,911
              
              
              $
              5,777,110
              
              
              $
              428,578








Note:  Most
      loans have balloon payments due at
maturity.





42


REDWOOD
      MORTGAGE INVESTORS VI


(A
      California Limited Partnership)


Schedule
      IV


Mortgage
      Loans on Real Estate


Rule
      12-29 Loans on Real Estate
(Continued)








Reconciliation
      of carrying amount (cost) of loans at close of
  periods








Year
      ended December 31,2008
              
              
              
              2007
              
              
              
              2006Balance
      at beginning of year
              
              $
              4,944,898
              
              
              $
              5,493,828
              
              
              $
              2,021,973Additions
      during periodNew
      loans
              
              
              1,849,228
              
              
              
              1,654,246
              
              
              
              5,153,620Other
              
              
              —
              
              
              
              —
              
              
              
              —Total
      additions
              
              
              1,849,228
              
              
              
              1,654,246
              
              
              
              5,153,620Deductions
      during periodCollections
      of principal
              
              
              953,289
              
              
              
              2,203,176
              
              
              
              1,150,206Foreclosures
              
              
              —
              
              
              
              —
              
              
              
              —Cost
      of loans sold
              
              
              —
              
              
              
              —
              
              
              
              —Amortization
      of premium
              
              
              —
              
              
              
              —
              
              
              
              —Other
              
              
              63,727
              
              
              
              —
              
              
              
              531,559Total
      deductions
              
              
              1,017,016
              
              
              
              2,203,176
              
              
              
              1,681,765Balance
      at close of year
              
              $
              5,777,110
              
              
              $
              4,944,898
              
              
              $
              5,493,828





43


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





There
were no disagreements with the partnership’s independent registered public
accounting firm during the years ended December 31, 2008 and 2007.








Item 9A(T) – Controls and
Procedures





Evaluation
of Disclosure 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 defined in
Rule 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the
period covered by this report.  Based upon that evaluation, the
general partners concluded the partnership’s disclosure controls and procedures
were effective.





General Partner's Report on Internal
Control Over Financial Reporting.





The
general partners are responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in the
Exchange Act Rule 13a-15(f). The internal control over financial reporting is
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with accounting principles generally accepted in the United States of
America.





The
general partners and their respective managements conducted an evaluation of the
effectiveness of the partnership’s internal control over financial reporting
based on the Internal Control
- Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on the results of this
evaluation, the general partners concluded the partnership’s internal control
over financial reporting was effective as of December 31, 2008.





This
annual report does not include an attestation report of the partnership's
independent registered public accounting firm regarding internal control over
financial reporting. The general partner’s report was not subject to attestation
by the partnership's independent registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission permitting the
partnership to provide only the general partner’s report in this annual
report.





Changes
to Internal Control Over Financial Reporting.





There
have not been any changes in the partnership’s internal control over financial
reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act)
during the quarter ended December 31, 2008 that have materially affected, or are
reasonably likely to materially affect, the partnership’s internal control over
financial reporting.








Item 9B – Other
Information





None








44


Part III








Item 10 – Directors,
Executive Officers and Corporate Governance





The
partnership has no officers or directors.  Rather, the activities of
the partnership are managed by the two general partners, one of whom is an
individual, Michael R. Burwell.  The second general partner is Gymno
Corporation, a California corporation, formed in
1986.  Mr. Burwell is one of the three shareholders of Gymno
Corporation, a California corporation, and has a 50% interest in the
corporation.  The remaining two shareholders are trusts as to which
Mr. Burwell is the trustee of each trust.





The
General Partners.





Michael R. Burwell.Michael R.
Burwell, age 52, 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 two trusts, each of
which Michael R. Burwell is the trustee.  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.  Michael R. Burwell has a controlling
interest in this company through his ownership of stock and as trustee of the
Burwell trusts.





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.








45


Item 11 – Executive
Compensation





COMPENSATION OF THE GENERAL
PARTNERS AND AFFILIATES BY PARTNERSHIP





As
indicated above in item 10, the partnership has no officers or
directors.  The partnership is managed by the general
partners.  There are certain fees and other items paid to management
and related parties.  A more complete description of management
compensation is found in the Prospectus, pages 11-12, under the section
“Compensation of the General Partners and the Affiliates”, which is incorporated
by reference. Such compensation is summarized below.





The
following compensation has been paid to the general partners and affiliates for
services rendered during the year ended December 31, 2008.  All such
compensation is in compliance with the guidelines and limitations set forth in
the partnership agreement.





I.  THE
FOLLOWING COMPENSATION HAS BEEN PAID TO THE GENERAL PARTNERS AND/OR THEIR
AFFILIATES FOR SERVICES RENDERED DURING THE YEAR ENDED DECEMBER 31,
2008.  ALL SUCH COMPENSATION IS IN COMPLIANCE WITH THE GUIDELINES AND
LIMITATIONS SET FORTH IN THE PARTNERSHIP AGREEMENT.





Entity
      Receiving Compensation
              Description
      of Compensation and Services Rendered
              
              AmountRedwood
      Mortgage Corp.
              Loan
      Servicing Fee for servicing loans
              
              $
              25,032General
      Partners &/or Affiliates
              Asset
      Management Fee for managing assets
              
              $
              7,599General
      Partners
              1%
      interest in profits
              
              $
              3,476





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





Redwood
      Mortgage Corp.
              Mortgage
      Brokerage Commissions for services in connectionwith
      the review, selection, evaluation, negotiation, and
    extensionof
      the loans paid by the borrowers and not by the partnership
              
              $
              34,508Redwood
      Mortgage Corp.
              Processing
      and Escrow Fees for services in connection withnotary,
      document preparation, credit investigation, and escrowfees
      payable by the borrowers and not by the partnership
              
              $
              2,744Gymno
      Corporation
              Reconveyance
      Fee
              
              $
              134





III.
IN ADDITION, THE GENERAL PARTNERS AND/OR RELATED COMPANIES PAY CERTAIN EXPENSES
ON BEHALF OF THE PARTNERSHIP FOR WHICH IT IS REIMBURSED AS NOTED IN THE
STATEMENT OF INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.. . . . . . . . . . . . . . . . . . . . . . . . . . $6,768





46


Item 12 – Security Ownership
of Certain Beneficial Owners and Management, and Related Stockholder
Matters





The
general partners own an aggregate total of 1% of the partnership including a 1%
portion of income and losses.








Item 13 – Certain
Relationships and Related Transactions, and Director
Independence





Refer to
footnotes 3 and 4 of the Notes to Financial Statements in Part II item 8, which
describes related party fees and data, and to footnote 5 which describes a sale
of property in which the partnership had an interest to an affiliate of Redwood
Mortgage Corp.





Also
refer to sections of the Prospectus “Compensation of General Partners and
Affiliates”, page 11, and “Conflicts of Interest”, page 13, as part of the
above-referenced Registration Statement, which is incorporated by
reference.





Since the
partnership does not have a board of directors and since the general partners
are not considered independent of the partnership, the partnership does not have
the equivalent of independent directors.








Item 14 – Principal
Accountant Fees and Services





Fees for
services performed for the partnership by the principal accountant for 2008 and
2007 are as follows:





Audit Fees  The
aggregate fees billed during the years ended December 31, 2008 and 2007 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
and review of financial statements included in the partnership’s Quarterly
Reports on Form 10-Q were $52,175 and $47,120, respectively.





Audit Related
Fees   There were no fees billed during the years ended
December 31, 2008 and 2007 for audit-related services.





Tax fees   The
aggregate fees billed for tax services for the years ended December 31, 2008 and
2007 were $3,030 and $4,338, 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, 2008 and 2007.





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





47





Part
IV








Item 15 – Exhibits and
Financial Statement Schedules








A.          Documents
filed as part of this report:





1. The
Financial Statements are listed in Part II, Item 8 under A-Financial
Statements.





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





3.
Exhibits.








Exhibit
      No
            
            Description
      of Exhibits





3.1
            
            Limited
      Partnership Agreement3.2
            
            Form
      of Certificate of Limited Partnership Interest3.3
            
            Certificate
      of Limited Partnership10.1
            
            Escrow
      Agreement10.2
            
            Servicing
      Agreement10.3
            (a)
            Form
      of Note secured by Deed of Trust which provides for principal and interest
      payments(b)
            Form
      of Note secured by Deed of Trust which provides principal and interest
      payments and right of assumption(c)
            Form
      of Note secured by Deed of Trust which provides for interest only
      payments(d)
            Form
      of Note10.4
            (a)
            Deed
      of Trust and Assignment of Rents to accompany Exhibits 10.3 (a) and
      (c)(b)
            Deed
      of Trust and Assignment of Rents to accompany Exhibits 10.3
      (b)(c)
            Deed
      of Trust to accompany Exhibit 10.3 (d)10.5
            
            Promissory
      Note for Formation Loan10.6
            
            Agreement
      to Seek a Lender31.1
            
            Certification
      of General Partner pursuant to Section 302 of the Sarbanes-Oxley Act of
      200231.2
            
            Certification
      of General Partner pursuant to Section 302 of the Sarbanes-Oxley Act of
      200232.1
            
            Certification
      of General Partner pursuant to Section 906 of the Sarbanes-Oxley Act of
      200232.2
            
            Certification
      of General Partner pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002








All of
the above exhibits other than 31.1, 31.2, 32.1 and 32.2, were previously filed
as the exhibits to Registrant’s Statement on Form S-11 (Registration No.
33-12519) and incorporated by reference herein.





B.          
 See (A) 3 above





C.
            See
      (A) 2 above. Additional reference is made to prospectus (S-11) dated
      September 3, 1987 to pages 56 through 59 and supplement #6 dated May 16,
      1989 pages 16-18, for financial data related to Gymno Corporation, a
      general partner.








48


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,
2009.





REDWOOD
      MORTGAGE INVESTORS VI








By:
              /S/
      Michael R. BurwellMichael
      R. Burwell, General PartnerBy:
              Gymno
      Corporation, General PartnerBy:
              /S/
      Michael R. BurwellMichael
      R. Burwell, President, Secretary
                &
      Chief Financial Officer





Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following person on behalf of the registrant and in the
capacity indicated on the 31st day of March, 2009.





Signature
            Title
            Date











/S/
      Michael R. BurwellMichael
      R. Burwell
            
            General
      Partner
            
            March
      31, 2009








/S/
      Michael R. BurwellMichael
      R. Burwell
              
              President,
      Secretary & Chief Financial Officer of Gymno Corporation (Principal
      Financial and Accounting Officer);
                Director
      of Gymno Corporation
              
              March
      31, 2009








49





Exhibit
31.1


GENERAL
PARTNER CERTIFICATION





I,
      Michael R. Burwell, certify that:





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





2.
            Based
      on my knowledge, this 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
      report;





3.
            Based
      on my knowledge, the financial statements, and other financial information
      included in this 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
      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-15(e) and 15d-15(e)) and internal
      control over financial reporting (as defined in Exchange Act Rules
      13a-15(f) and 15-d-15(f)) for the Registrant and
  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 report is being
      prepared;





(b)
            designed
      such internal control over financial reporting, or caused such internal
      control over financial reporting to be designed under our supervision, to
      provide reasonable assurance regarding the reliability of financial
      reporting and the preparation of financial statements for external
      purposes in accordance with generally accepted accounting
      principles;





(c)
            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





(d)
            disclosed
      in this report any change in the registrant’s internal control over
      financial reporting that occurred during the registrant’s most recent
      fiscal quarter (the registrant’s forth 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 the Registrant’s
      board of directors (or persons performing the equivalent
      functions):





(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 information;
  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,
2009


50


Exhibit
31.2





PRESIDENT
AND CHIEF FINANCIAL OFFICER CERTIFICATION





I,
      Michael R. Burwell, certify that:





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





2.
            Based
      on my knowledge, this 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
      report;





3.
            Based
      on my knowledge, the financial statements, and other financial information
      included in this 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
      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-15(e) and 15d-15(e)) and internal
      control over financial reporting (as defined in Exchange Act Rules
      13a-15(f) and 15-d-15(f)) for the Registrant and
  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 report is being
      prepared;





(b)
            designed
      such internal control over financial reporting, or caused such internal
      control over financial reporting to be designed under our supervision, to
      provide reasonable assurance regarding the reliability of financial
      reporting and the preparation of financial statements for external
      purposes in accordance with generally accepted accounting
      principles;





(c)
            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





(d)
            disclosed
      in this report any change in the registrant’s internal control over
      financial reporting that occurred during the registrant’s most recent
      fiscal quarter (the registrant’s forth 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 the Registrant’s
      board of directors (or persons performing the equivalent
      functions):





(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 information;
  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, Secretary/Treasurer and


Chief
Financial Officer, of Gymno


Corporation,
General Partner


March 31,
2009


51


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 VI (the
“Partnership”) on Form 10-K for the period ended December 31, 2008 as filed with
the Securities and Exchange Commission on the date hereof (the “Report”),
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, I, Michael R. Burwell, certify, 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.





A signed
original of this written statement required by Section 906 has been provided to
Redwood Mortgage Investors VI and will be retained by Redwood Mortgage Investors
VI and furnished to the Securities and Exchange Commission or its staff upon
request.








/s/
Michael R. Burwell


_____________________________


Michael
R. Burwell, General Partner


March 31,
2009


52





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 VI (the
“Partnership”) on Form 10-K for the period ended December 31, 2008 as filed with
the Securities and Exchange Commission on the date hereof (the “Report”),
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, I, Michael R. Burwell, certify, 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.





A signed
original of this written statement required by Section 906 has been provided to
Redwood Mortgage Investors VI and will be retained by Redwood Mortgage Investors
VI and furnished to the Securities and Exchange Commission or its staff upon
request.














/s/
Michael R. Burwell


_____________________________


Michael
R. Burwell, President,


Secretary/Treasurer
& Chief Financial


Officer
of Gymno Corporation, General Partner


March
      31, 2009





53