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

                                December 31, 1996

                                     Part I

                                                                      Page No.
Item 1 - Business                                                           4
Item 2 - Properties                                                       5-6
Item 3 - Legal Proceedings                                                  7
Item 4 - Submission of Matters to a vote of Security Holders (partners)     7

                                     Part II

Item 5 - Market for the Registrants Partners   Capital and related          7
matters.
Item 6 - Selected Financial Data                                           8-9
Item 7 - Managements Discussion and Analysis of Financial Condition 
         and Results of Operations                                       10-11
Item 8 - Financial Statements and Supplementary Data                     12-35
Item 9 - Changes in and Disagreements with Accountants on Accounting
         and Financial Disclosure                                           36

                                    Part III

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

                                     Part IV


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

Signatures                                                                  40
<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    Form 10-K

     Annual Report  Pursuant to Section 13 or 15(d) of the  Securities  Exchange
Act of 1934

         For the year ended December 31, 1996 Commission File number 33-12519
--------------------------------------------------------------------------------

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

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

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

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

Securities registered pursuant to Section 12 (b) of the Act:     None

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

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

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

YES        XX                                  NO
   ---------------                                      ------------------

     At the close of the sale of units in 1989,  the limited  partnership  units
purchased by  non-affiliates  was 97,715.94 units computed at $100.00 a unit for
$9,771,594, excluding General Partners Contribution of $9,772.

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, incorporated in Parts
II, III, and IV.

<PAGE>

                                     Part I

Item 1 - Business

     Redwood  Mortgage  Investors VI is a California  limited  partnership  (the
Partnership),  of which D.  Russell  Burwell,  Michael  R.  Burwell  and Gymno
Corporation, a California corporation,  are the General Partners. The address of
the General  Partners is 650 El Camino Real,  Suite G, Redwood City,  California
94063.  The  Partnerships  primary purpose is to invest its capital in Mortgage
Investments secured by Northern California properties.  Mortgage Investments are
arranged  and  serviced  by  Redwood  Home Loan Co,  dba  Redwood  Mortgage,  an
affiliate of the General  Partners.  The  Partnership's  objectives  are to make
investments,  as referred to above, 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 Partnerships  capital.  The  Partnerships  general business is
more fully  described  under the section  entitled  Investment  Objectives  and
Criteria,  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 and immediately began issuing
units. It began investing in Mortgage Investments in October,  1987. At December
31,  1996,  the  Partnership  had a balance of  Mortgage  Investments  totalling
$9,313,924 with interest rates thereon ranging from 4.00% to 14.75%.

     Currently  First Trust Deeds  comprise  52.92% of the  Mortgage  Investment
portfolio.  Second Mortgage Trust Deeds comprise  40.04% of Mortgage  Investment
portfolio,  third  Mortgage  Trust Deeds have 4.36% and 4th Mortgage Trust Deeds
have 2.68% of the Mortgage Investment portfolio.  Owner-occupied homes, combined
with  non-owner  occupied  homes,  total  25.95%  of the  Mortgage  Investments.
Mortgage  Investments  to  apartments  make  up  8.44%  of  the  total  Mortgage
Investments portfolio. Commercial Mortgage Investment origination increased from
last year, now comprising  65.61% of the  portfolio,  an increase of 7.68%.  The
past year brought us many outstanding low loan to value lending opportunities in
the  commercial  segment of the  market.  The major  concentration  of  Mortgage
Investments, comprising of 81.17% of the total loans, are in six counties of the
Bay Area.  The County of  Stanislaus  makes up 7.30% of the Mortgage  Investment
portfolio  and the  balance,  as  stated  on page  five of this  report,  are in
primarily Northern  California.  Currently Mortgage Investment size is averaging
$143,291  per  Mortgage  Investment.   Some  of  the  Mortgage  Investments  are
fractionalized between affiliated  partnerships with objectives similar to those
of the Partnership to further reduce risk.  Average equity per loan  transaction
stood  at  34.09%.  A 40%  equity  average  on  loan  origination  is  generally
considered very  conservative.  Generally,  the more equity, the more protection
for the lender.  The  Partnerships  Mortgage  Investment  portfolio  is in good
condition  with only three  properties in foreclosure as of the end of December,
1996, totalling $549,356.
<PAGE>

Item 2 - Properties

     As of December 31, 1996, a summary of the Partnership's Mortgage Investment
portfolio is set forth below.

Mortgage Investments as a Percentage of Total Mortgage Investments


   
First Trust Deeds                                   $4,928,793.88
Appraised Value of Properties                        7,572,407.00
   Total Investment as a % of Appraisal                    65.09%
Second Trust Deed Mortgage Investments               3,729,581.41
Third Trust Deed Mortgage Investments                  405,566.64
Fourth Trust Deed Mortgage Investments*                249,982.09
First Trust Deeds due other Lenders                 15,847,471.00
Second Trust Deeds due other Lenders                 1,174,343.00
Third Trust Deeds due other Lenders                    178,571.00


Total Debt                                         $26,514,309.02

   Appraised Property Value                        $40,225,303.00
   Total Investments as a % of Appraisal                   65.91%


Number of Mortgage Investments Outstanding                     65


Average Investment                                     143,291.14
Average Investment as a % of Net Assets                     1.36%
Average Investment as a % of Net Assets                     1.38%
Largest Investment Outstanding                       1,376,117.03
Largest Investment as a % of Net Assets                    13.08%
Largest Investment as a % of Net Assets                    13.24%
    

Mortgage Investments  as a Percentage of Total Mortgage Investments

First Trust Deeds                                          52.92%
Second Trust Deeds                                         40.04%
Third Trust Deeds                                           4.36%
Fourth Trust Deeds                                          2.68%
                                              --------------------
                                                          100.00%
Total

Mortgage Investments by Type          Amount              Percent
of Property

Owner Occupied Homes                $1,443,834.69          15.50%
Non-Owner Occupied Homes               973,497.96          10.45%
Apartments                             786,362.54           8.44%
Commercial                           6,110,228.83          65.61%
                                 -----------------     -----------
Total                               $9,313,924.02         100.00%

*Footnote on following page
<PAGE>



     The following is a  distribution  of loans  outstanding  as of December 31,
1996 by Counties.

Santa Clara               $2,814,972.31           30.22%
Alameda                    1,705,266.67           18.31%
San Mateo                  1,450,824.87           15.58%
Contra Costa                 769,837.13            8.26%
Stanislaus                   679,802.62            7.30%
Sacramento                   447,589.10            4.81%
San Francisco                442,090.69            4.75%
Sonoma                       377,279.38            4.05%
El Dorado                    214,773.21            2.31%
Ventura                      195,000.00            2.09%
Shasta                        82,407.46            0.88%
Monterey                      72,380.95            0.78%
Santa Cruz                    38,157.67            0.41%
Solano                        23,541.96            0.25%
                     -------------------      -----------

Total                     $9,313,924.02          100.00%


     * Redwood Mortgage  Investors VI, together with other Redwood  Partnerships
hold a second and a fourth trust deed against the secured property. In addition,
the principals behind the borrower corporation have given personal guarantees as
collateral.  The overall loan to value ratio on this loan is 76.52%. Besides the
borrower  paying an interest rate of 12.25%,  the  partnership and other lenders
will also  participate in profits.  We have had previous loan activity with this
borrower which had been concluded  successfully,  with extra earnings earned for
the other partnerships involved.


Statement of Condition of Mortgage Investments:

         Number of Mortgage Investments in Foreclosure               3

<PAGE>

Item 3 - Legal Proceedings

     In the normal course of business,  the  Partnership  may become involved in
various types of legal  proceedings  such as  assignments  of rents,  bankruptcy
proceedings,   appointments   of   receivers,   unlawful   detainers,   judicial
foreclosures,   etc.,  to  enforce  the  provisions  of  the  deeds.  Management
anticipates  that the  ultimate  outcome of these legal  matters will not have a
material  adverse  effect on the net assets of the  Partnership  in light of the
Partnership's  allowance  for  doubtful  accounts.  As of the date  hereof,  the
Partnership is not involved in any legal proceedings other than those that would
be considered part of the normal course of business.

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

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

                                     Part II

Item 5 - Market for the Registrants Partners Capital and Related Matters.

     120,000  units  at $100  each  (minimum  20  units)  were  offered  through
broker-dealer  member firms of the National Association of Securities Dealers on
a best efforts  basis (as  indicated in Part I item 1). All units have been sold
only in California. There is no established public trading market for the units.

     Investors are in two categories.  Some have opted to withdraw earnings on a
monthly,  quarterly  or  annual  basis  while the  others  are  reinvesting  and
compounding the earnings.

     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, pages
38-42 of the Prospectus, a part of the above-referenced  Registration statement,
which is incorporated by reference.

     As of  December  31,  1996,  there  were  761  holders  of  record  of  the
Partnerships units. A decrease of 11 from 1995.
<PAGE>

Item 6 - Selected Financial Data

     Redwood  Mortgage  Investors  VI began  operations  in  October  1987.  Its
financial  condition  and results of  operation  for three years to December 31,
1996 were:
<TABLE>

                                                            Balance Sheets
                                                                Assets

                                                                          December 31,
                                                      ------------------------------------------------------
                                                               1996                1995                1994
                                                      --------------      --------------      --------------
<S>                                                        <C>                 <C>                 <C>     
Cash                                                       $180,597            $283,976            $447,804
Accounts Receivable:
  Mortgage loans, secured by Deeds of Trust               9,313,924          10,402,491          10,993,996
  Accrued Interest & other fees                             405,783             445,816             322,173
  Advances on Real Estate Loans                             108,019             131,936              30,273
  Other                                                     251,531             322,913             297,426
                                                      --------------      --------------      --------------
                                                        $10,079,257         $11,303,156         $11,643,868

Less Allowance for doubtful accounts                        252,850             283,284             209,073
                                                      --------------      --------------      --------------
                                                         $9,826,407         $11,019,872         $11,434,795

   
Real Estate Owned acquired through foreclosure
  held for sale                                           1,441,007           1,501,712           2,231,592
Formation loan due from Redwood Mortgage.                   121,849             184,177             246,505
Partnership Interest                                        496,040             456,821                   0
Due from Related Companies                                        0                 935                   0
                                                      --------------      --------------      --------------
                                                        $12,065,900         $13,447,493         $14,360,696
                                                      ==============      ==============      ==============
                                                        $11,944,051         $13,263,316         $14,118,191
                                                      ==============      ==============      ==============
    

                                                   Liabilities and Partners Capital

Liabilities:
  Notes Payable - Bank Line of Credit                    $1,530,511          $2,041,011          $2,376,511
  Accounts payable & accrued expenses                             0                   0                   0
  Deferred interest on Mortgage Investments                  18,522                   0                   0
                                                      --------------      --------------      --------------
          Total Liabilities                               1,549,033           2,041,011           2,376,511
                                                      --------------      --------------      --------------

   
Partners Capital:
     Limited Partners  capital, subject to               10,385,252          11,212,539          11,727,914
redemption
     General Partners  capital                                9,766               9,766               9,766
                                                      --------------      --------------      --------------


          Total Partners  Capital                        10,395,018          11,222,305          11,737,680

                                                        $12,065,900         $13,447,493         $14,360,696
                                                      ==============      ==============      ==============
          Total Liabilities and Partners  Capital       $11,944,051         $13,263,316         $14,114,191
                                                     ==============      ==============      ==============
     
</TABLE>
<PAGE>

<TABLE>


                                                         Statements of Income

                                                               1996                1995                1994
                                                      --------------      --------------      --------------

<S>                                                      <C>                 <C>                 <C>       
Gross Revenue                                            $1,167,859          $1,277,782          $1,391,088
Expenses                                                    579,697             659,434             726,386
                                                      ==============      ==============      ==============
Net Income                                                  588,162             618,348             664,702
                                                      ==============      ==============      ==============


Net Income: to General Partners (1%)                         $5,882              $6,183              $6,647
                     to Limited Partners (99%)              582,280             612,165             658,055
                                                      --------------      --------------      --------------

                                                           $588,162            $618,348            $664,702
                                                      ==============      ==============      ==============


Net Income per $1,000 invested by Limited
 Partners for entire period:
  - where income is reinvested and compounded                    54                  53                  55
                                                      ==============      ==============      ==============

  -where partner receives income in monthly
     distributions                                               52                  52                  54
                                                      ==============      ==============      ==============
</TABLE>
<PAGE>

   
     Item 7 - Managements  Discussion  and Analysis of Financial  Condition and
Results of Operations


     On December 31, 1996, the  Partnerships  net capital  totalled  $10,516,867
$10,395,018.

     The Partnership began funding Mortgage  Investments in October 1987, and as
of  December  31,  1996  had  distributed   income  at  an  average   annualized
(compounded) yield of 7.95%.  Current earnings are lower than those prevalent at
the outset, primarily because interest rates generally have dropped dramatically
since 1988.  The  Partnership  does not  anticipate  a  significant  increase or
decrease in mortgage rates in the foreseeable  future and expects the prevailing
interest  rates to fluctuate  in a narrow  range in the near future.  Management
expects the yield, net of provision for losses, to increase slightly in 1997.

     Currently,  mortgage  interest rates are lower than those  prevalent at the
inception of the Partnership.  New Mortgage  Investments are being originated at
these lower  interest  rates.  The result is a reduction  of the average  return
across the entire Mortgage Investment portfolio held by the Partnership.  In the
future, interest rates likely will change from their current levels. The General
Partners  cannot at this time predict at what levels  interest  rates will be in
the future. The General Partners believe the rates charged by the Partnership to
its borrowers will not change  significantly in the immediate future. Based upon
the rates  payable in connection  with the existing  Mortgage  Investments,  the
current and anticipated  interest rates to be charged by the  Partnerships,  and
current  reserve   requirements,   the  General  Partners  anticipate  that  the
annualized  yield next year will range only  slightly  higher  from its  current
rate.

     Each year,  the  Partnership  negotiates a line of credit with a commercial
bank which is secured by its Mortgage Investment  portfolio.  Currently,  it has
the  capacity  to borrow up to  $2,500,000  at Prime plus 1%,  (9.25%).  Current
borrowings of $1,530,511  have the effect of leveraging the portfolio about 15%.
This added  source of funds will help in  maximizing  the  Partnership  yield by
allowing  the  Partnership  to  minimize  the  amount  of funds  in lower  yield
investment  accounts when  appropriate  Mortgage  Investments  are not currently
available because the Mortgage Investments made by the Partnership bear interest
at a rate in excess of the rate  payable to the bank which  extended the line of
credit.  Interest  and line of credit  costs for the years ended 1994,  1995 and
1996 was $185,131, $212,915 and $158,175 respectively.  The interest rate on the
line of credit  remained at prime plus one  percent.  An increase in the average
overall usage of the credit line of  approximately  $310,000 for the years ended
1994 and 1995  resulted  in the  higher  interest  and line of credit  costs.  A
decrease  in  average  overall  usage  of the  credit  line for 1996 and 1995 of
approximately  $625,000  resulted in the  decreased  interest and line of credit
costs.

     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 nineteen years.  Foreclosures are a
normal aspect of partnership operations and the General Partners anticipate that
they will not have a material  effect on  liquidity.  As of December  31,  1996,
there were two properties in  foreclosure.  Cash is continually  being generated
from interest  earnings,  late charges,  prepayment  penalties,  amortization of
notes and pay-off of notes. Currently,  this amount exceeds Partnership expenses
and  earnings  and  principal  payout   requirements.   As  Mortgage  Investment
opportunities become available,  excess cash and available funds are invested in
new Mortgage Investments.

     The General Partners  regularly review the Mortgage  Investment  portfolio,
examining the status of delinquencies,  the underlying collateral securing these
Mortgage  Investments,  REO expenses,  sales activities,  and borrowers payment
records and other data relating to the Mortgage  Investment  portfolio.  Data on
the local real estate market, and on the national and local economy are studied.
Based upon this  information  and more,  Mortgage  Investment  loss reserves and
allowance  for doubtful  accounts are  increased  or  decreased.  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.
Management provided $472,967 and $344,807 as provision for doubtful accounts for
the years ended  December 31, 1994 and  December  31, 1995.  The decrease in the
provision reflects the decrease in the amount of REO, unsecured  receivables and
the decreasing  levels of delinquency  within the portfolio.  Additionally,  the
General Partners felt that the bottom of the real estate cycle had been reached,
reflecting  a  decreasing  need  to set  aside  reserves  for  the  continuously
declining  real  estate  values as had been the case in the early  1990s in the
California real estate market.
<PAGE>

     The Northern  California  recession reached bottom in 1993. Since then, the
California  economy  has  been  improving,   slowly  at  first,  but  now,  more
vigorously.  A wide variety of indicators suggest that the economy in California
was strong in 1996,  and the State is well - positioned  for fast  growth.  This
improvement is reflective in increasing property values, in job growth, personal
income growth,  etc., which should  translate into more loan activity.  Which of
course, is healthy for our lending activity.

     At the time of subscription to the  Partnership,  Limited  Partners make an
irrevocable decision to either take distributions of earnings monthly, quarterly
or annually or to compound  earnings  in their  capital  account.  For the years
ended December 31, 1995 and December 31, 1996 the Partnership made distributions
of  earnings to Limited  Partners  after  allocation  of  syndication  costs of,
$296,915 and $288,796 respectively. Distribution of Earnings to Limited Partners
after allocation of syndication  costs for the years ended December 31, 1995 and
December 31, 1996 to Limited  Partners  capital  accounts and not withdrawn was
$315,250  and  $293,484  respectively.  As of December 31, 1995 and December 31,
1996 Limited Partners electing to withdraw earnings represented 50 % and 49 % of
the Limited Partners outstanding capital accounts.

     The Partnership  also allows the Limited Partners to withdraw their capital
account  subject  to  certain   limitations  (see   liquidation   provisions  of
Partnership  Agreement).  For the years ended December 31, 1995 and December 31,
1996,  $43,364 and $96,362 were liquidated  subject to the 10% penalty for early
withdrawal. These withdrawals are within the normally anticipated range that the
General   Partners   would  expect  in  their   experience  in  this  and  other
Partnerships.  The General  Partners  expect that a small  percentage of Limited
Partners will elect to liquidate their capital accounts over one year with a 10%
early withdrawal penalty. In originally conceiving the Partnership,  the General
Partners wanted to provide  Limited  Partners  needing their capital  returned a
degree of liquidity.  Generally,  Limited Partners electing to withdraw over one
year need to liquidate  investment to raise cash. The trend we are  experiencing
in  withdrawals  by Limited  Partners  electing a one year  liquidation  program
represents a small percentage of Limited Partner capital as of December 31, 1995
and December 31, 1996  respectively  and is expected by the General  Partners to
commonly occur at these levels.

     Additionally,  for the years ended December 31, 1995 and December 31,1996 $
849,599 and $1,086,737  were  liquidated by Limited  Partners who have elected a
liquidation program over a period of five years or longer. Once the initial five
year hold  period has passed the General  Partners  expect to see an increase in
liquidations due to the ability of Limited Partners to withdraw without penalty.
This ability to withdraw after five years by Limited  Partners has the effect of
providing  Limited Partner  liquidity  which the General  Partners then expect a
portion of the Limited Partners to avail themselves of. This has the anticipated
effect of the partnership growing, primarily through reinvestment of earnings in
years one through five. The General Partners expect to see increasing numbers of
Limited Partner withdrawals in years five through eleven, at which time the bulk
of those Limited Partners who have sought withdrawal have been liquidated. After
year eleven,  the gross figures  generally  should  subside and the  Partnership
capital again tends to increase.
    
<PAGE>

              Item 8 - Financial Statements and Supplementary Data

     Redwood Mortgage Investors VI, a California  Limited  Partnerships list of
Financial Statements and Financial Statement schedules:

A- Financial Statements

   Independent Auditors Report,
   Balance Sheets - December 31, 1996, and December 31, 1995,
   Statements of Income for the three years ended December 31, 1996,
   Statements of Changes in Partners Capital for the three years ended 
      December 31, 1996
   Statements of Cash Flows for the three years ended December 31, 1996,
   Notes to Financial Statements - December 31, 1996.

B. - Financial Statement Schedules

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

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

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


















                          REDWOOD MORTGAGE INVESTORS VI
                       (A California Limited Partnership)
                              FINANCIAL STATEMENTS
                                DECEMBER 31, 1996
                         (with Auditors Report Thereon)



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




                          INDEPENDENT AUDITORS REPORT


THE PARTNERS
REDWOOD MORTGAGE INVESTORS VI

     We have audited the financial  statements and related  schedules of REDWOOD
MORTGAGE  INVESTORS VI (A California  Limited  Partnership)  listed in Item 8 on
form 10-K  including  balance  sheets as of  December  31, 1996 and 1995 and the
statements of income,  changes in partners capital and cash flows for the three
years ended December 31, 1996. These financial statements are the responsibility
of the Partnerships management.  Our responsibility is to express an opinion on
these financial statements based on our audits.

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

     In our opinion,  the financial statements referred to above present fairly,
in all material  respects,  the financial position of REDWOOD MORTGAGE INVESTORS
VI as of December 31, 1996 and 1995,  and the results of its operations and cash
flows for the three years ended  December 31, 1996 in conformity  with generally
accepted  accounting  principles.  Further, it is our opinion that the schedules
referred to above present fairly the information set forth therein in compliance
with the  applicable  accounting  regulations  of the  Securities  and  Exchange
Commission.

   
     As explained in note 2(k) and 11 to the financial statements, the formation
loan  receivable from Redwood  Mortgage has been  reclassified as a reduction in
Partners  Capital until  collections  are received.  There was no effect on net
income.
    


                              /S/ A. Bruce Cropper
                                PARODI & CROPPER






Lafayette, California
February 28, 1997
<PAGE>
<TABLE>

                          REDWOOD MORTGAGE INVESTORS VI
                       (A California Limited Partnership)
                                 BALANCE SHEETS
                           DECEMBER 31, 1996 AND 1995

                                     ASSETS
<CAPTION>

                                                                          1996                 1995
                                                                     ---------------      ---------------

<S>                                                                        <C>                  <C>     
Cash                                                                       $180,597             $283,976
                                                                     ---------------      ---------------

   
Accounts receivable:
  Mortgage Investments, secured by deeds of trust                         9,313,924           10,402,491
  Accrued Interest on Mortgage Investments                                  405,783              445,816
  Advances on Mortgage Investments                                          108,019              131,936
  Accounts receivables, unsecured                                           251,531              322,913
                                                                     ---------------      ---------------
                                                                         10,079,257           11,303,156
  Less allowance for doubtful accounts                                      252,850              283,284
                                                                     ---------------      ---------------
                                                                          9,826,407           11,019,872
                                                                     ---------------      ---------------


Real estate owned, held for sale, acquired through foreclosure            1,441,007            1,501,712
Investment in Partnership                                                   496,040              456,821
Formation loan due from Redwood Mortgage.                                   121,849              184,177
Prepaid expenses and other assets                                                 0                  935
                                                                     ---------------      ---------------

                                                                        $12,065,900          $13,447,493
                                                                     ===============      ===============
          Total Assets                                                  $11,944,051          $13,263,316
                                                                     ===============      ===============


                                                   LIABILITIES AND PARTNERS CAPITAL


Liabilities:
  Deferred Interest                                                         $18,522                   $0
  Note payable - bank line of credit                                      1,530,511            2,041,011
                                                                     ---------------      ---------------
  Total Liabilities                                                       1,549,033            2,041,011

Partners  Capital                                                        10,516,867           11,406,482
                                                                     ---------------      ---------------

                                                                        $12,065,900          $13,447,493
                                                                     ===============      ===============

Partners Capital:
  Limited Partners capital, subject to redemption, (note 4D):
      net of formation loan receivable of $121,847 and $184,177,
          for 1996 and 1995 respectively                                 10,385,252           11,212,539

General Partners  Capital:                                                    9,766                9,766
                                                                     ---------------      ---------------
    Total Partners  capital                                              10,395,018           11,222,305
    Total Liabilities and Partners  capital                             $11,944,051          $13,263,316
                                                                     ===============      ===============

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

<TABLE>

                          REDWOOD MORTGAGE INVESTORS VI
                       (A California Limited Partnership)
                              STATEMENTS OF INCOME
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1996

<CAPTION>

                                                                          YEARS ENDED DECEMBER 31,
                                                             ---------------------------------------------------
                                                                 1996               1995               1994
                                                             -------------      --------------     -------------
Revenues:
<S>                                                            <C>                 <C>               <C>       
   
  Interest on Mortgage Investments                             $1,135,218          $1,256,499        $1,363,898
  Interest on bank deposits                                         4,750               5,206            10,798
  Late charges, prepayment penalties, and fees                     27,891              16,077            16,392
                                                             -------------      --------------     -------------
                                                                1,167,859           1,277,782         1,391,088
                                                             -------------      --------------     -------------


Expenses:
  Mortgage servicing fees                                          44,565              42,056                 0
  General partners  asset management fees                               0                   0             8,942
  Clerical costs through Redwood Mortgage                          31,838              23,341                 0
  Interest and line of credit costs                               158,175             212,915           185,131
  Provision for doubtful accounts and losses
      on real estate acquired through foreclosure                 312,684             344,807           472,967
  Professional services                                            17,825              19,452            45,256
  Other                                                            14,610              16,863            14,090
                                                             -------------      --------------     -------------
                                                                  535,132             617,378           726,386
                                                                  579,697             659,434           726,386
                                                             -------------      --------------     -------------

Net Income                                                       $588,162            $618,348          $664,702
                                                             =============      ==============     =============

Net income:  To General Partners(1%)                               $5,882              $6,183            $6,647
                      To Limited Partners (99%)                  $582,280            $612,165          $658,055
                                                             =============      ==============     =============
                                                                 $588,162            $618,348          $664,702
                                                             =============      ==============     =============

Net income per $1,000 invested by Limited
 Partners for entire period:
  -where income is reinvested and compounded                          $54                 $53               $55
                                                             =============      ==============     =============

  -where partner receives income in monthly distributions             $52                 $52               $54
                                                             =============      ==============     =============

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

                                                     REDWOOD MORTGAGE INVESTORS VI
                                                  (A California Limited Partnership)
                                              STATEMENTS OF CHANGES IN PARTNERS CAPITAL
                                              FOR THE THREE YEARS ENDED DECEMBER 31, 1996
<CAPTION>

                                              PARTNERS CAPITAL


                                         GENERAL             LIMITED
                                        PARTNERS             PARTNERS              TOTAL
                                      -------------- ---- --------------- ---- ---------------


<S>                                           <C>             <C>                  <C>       
Balances at December 31, 1993                 9,773           12,342,173           12,351,946

  Net income                                  6,647              658,055              664,702
  Early withdrawal penalties                      0             (12,790)             (12,790)
  Partners  withdrawals                     (6,654)          (1,013,019)          (1,019,673)
                                      --------------      ---------------      ---------------

Balances at December 31, 1994                $9,766           11,974,419           11,984,185

  Net income                                  6,183              612,165              618,348
  Early withdrawal penalties                      0              (4,336)              (4,336)
  Partners  withdrawals                     (6,183)          (1,185,532)          (1,191,715)
                                      --------------      ---------------      ---------------

Balances at December, 1995                   $9,766           11,396,716           11,406,482

  Net income                                  5,882              582,280              588,162
  Early withdrawal penalties                      0              (8,721)              (8,721)
  Partner s withdrawals                     (5,882)          (1,463,174)          (1,469,056)
                                      --------------      ---------------      ---------------

Balances at December 31, 1996                $9,766           10,507,101           10,516,867
                                      ==============      ===============      ===============




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

<TABLE>
   

                                                     REDWOOD MORTGAGE INVESTORS VI
                                                  (A California Limited Partnership)
                                              STATEMENTS OF CHANGES IN PARTNERS CAPITAL
                                              FOR THE THREE YEARS ENDED DECEMBER 31, 1996
<CAPTION>


                                                                    PARTNERS CAPITAL
                                   -------------------------------------------------------------------------------------
                                              LIMITED PARTNERS CAPITAL                  GENERAL PARTNERS CAPIAL
                                   ------------------------------------------------ ------------------------------------

                                     Capital 
                                     Account          Formation 
                                     Limited            Loan                               General
                                     Partners         Receivable          Total           Partners            Total
                                   --------------    -------------    ---------------    ------------     --------------

<S>                                  <C>               <C>               <C>                  <C>           <C>        
Balances at December 31, 1993        $12,342,173       $(285,771)        $12,056,402          $9,773        $12,066,175

Formation loan collections                     0           31,164             31,164               0             31,164
Net income                               658,055                0            658,055           6,647            664,702
Early withdrawal penalties              (12,790)            8,102            (4,688)               0            (4,688)
Partners  withdrawals                (1,013,019)                0        (1,013,019)         (6,654)        (1,019,673)
                                   --------------    -------------                       ------------     --------------


Balances at December 31, 1994         11,974,419        (246,505)         11,727,914          $9,766         11,737,680

Formation loan collections                     0           59,581             59,581               0             59,581
Net income                               612,165                0            612,165           6,183            618,348
Early withdrawal penalties               (4,336)            2,747            (1,589)               0            (1,589)
Partners  withdrawals                (1,185,532)                0        (1,185,532)         (6,183)        (1,191,715)
                                   --------------    -------------                       ------------     --------------

Balances at December 31, 1995         11,396,716        (184,177)         11,212,539          $9,766         11,222,305

Formation loan collections                     0           56,803             56,803               0             56,803
Net income                               582,280                0            582,280           5,882            588,162
Early withdrawal penalties               (8,721)            5,525            (3,196)               0            (3,196)
Partners  withdrawals                (1,463,174)                0        (1,463,174)         (5,882)        (1,469,056)
                                   --------------    -------------    ---------------    ------------     --------------

Balances at December 31, 1996        $10,507,101       $(121,849)        $10,385,252          $9,766        $10,395,018
                                   ==============    =============    ===============    ============     ==============

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

<TABLE>
   

                                                     REDWOOD MORTGAGE INVESTORS VI
                                                  (A California Limited Partnership)
                                                       STATEMENTS OF CASH FLOWS
                                              FOR THE THREE YEARS ENDED DECEMBER 31, 1996

<CAPTION>

                                                                      YEARS ENDED DECEMBER 31,
                                                        -----------------------------------------------------
                                                             1996                1995               1994
                                                        ---------------      -------------      -------------
Cash flows from operating activities:
<S>                                                           <C>                <C>                <C>     
  Net income                                                  $588,162           $618,348           $664,702
  Adjustments to reconcile net income to net
   cash provided by operating activities:
    Provision for doubtful accounts                             65,804             74,718            277,594
    Early withdrawal penalty credited to income                (3,196)            (1,589)            (4,688)
    Provision for Losses on real estate held for sale          246,880            270,089            195,373
    (Increase) decrease in assets:
       Accrued interest & advances                              63,950          (225,306)            157,963
       Prepaid expenses and other assets                           935              (935)              1,524
     Increase (decrease) in liabilities:
       Accounts payable and accrued expenses                         0                  0           (29,328)
       Deferred Interest on Mortgage Investments                18,522                  0            (8,456)
                                                         --------------      -------------      -------------

      Net cash provided by operating activities                984,253            736,914          1,259,372
                                                         --------------      -------------      -------------
      Net cash provided by operating activities                981,057            735,325          1,254,684
                                                         --------------      -------------      -------------

Cash flows from investing activities:
  Principal collected on Mortgage Investments                3,295,834          2,273,233          2,769,970
  Mortgage Investments made                                (2,474,843)        (2,062,626)        (3,299,838)
  Formation loan collections                                    62,328             62,328             39,266
  Additions to real estate held for sale                     (242,869)          (169,015)          (390,566)
  Dispositions of real estate held for sale                    299,414            526,889            267,463
  Investment in Partnership                                   (39,219)                  0                  0
                                                         --------------      -------------      -------------

    Net cash provided by (used in) investing activities        900,645            630,809          (613,705)
                                                         --------------      -------------      -------------
    Net cash provided by (used in) investing activities        838,317            568,481          (652,971)
                                                         --------------      -------------      -------------

Cash flows from financing activities:
 Net increase (decrease) in note payable-bank                (510,500)          (335,500)            412,295
 Partners withdrawals                                      (1,469,056)        (1,191,715)        (1,019,673)
 Early withdrawal penalties, net                               (8,721)            (4,336)           (12,790)
                                                         --------------      -------------      -------------
  Formation loan collections                                    56,803             59,581             31,164
                                                         --------------      -------------      -------------

    Net cash provided by (used in) financing activities    (1,988,277)        (1,531,551)          (620,168)
                                                         --------------      -------------      -------------
    Net cash provided by (used in) financing activities    (1,922,753)        (1,467,634)          (576,214)
                                                         --------------      -------------      -------------

Net increase (decrease) in cash                              (103,379)          (163,828)             25,499

Cash - beginning of period                                     283,976            447,804            422,305
                                                         --------------      -------------      -------------

Cash - end of period                                          $180,597           $283,976           $447,804
                                                         ==============      =============      =============
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
    

<PAGE>

                          REDWOOD MORTGAGE INVESTORS VI
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1996

     NOTE 1  ORGANIZATION  AND  GENERAL  Redwood  Mortgage  Investors  VI,  (the
Partnership) is a California Limited partnership,  of which the General Partners
are D. Russell Burwell,  Michael R. Burwell and Gymno Corporation,  a California
corporation  owned  and  operated  by  the  individual  General  Partners.   The
partnership  was  organized  to engage in business as a mortgage  lender for the
primary  purpose  of making  Mortgage  Investments  secured by Deeds of Trust on
California real estate.  Mortgage Investments are being arranged and serviced by
Redwood  Home Loan Co. (RHL Co.),  dba Redwood  Mortgage,  an  affiliate  of the
General  Partners.  The offering was closed with  contributed  capital  totaling
$9,781,366.

     Each  months   income  is   distributed   to  partners   based  upon  their
proportionate share of partners capital. Some partners have elected to withdraw
income on a monthly, quarterly or annual basis.

     A. Sales  Commissions - Formation  Loan Sales  commissions  ranging from 0%
(units sold by General  Partners) to 10% of gross  proceeds were paid to Redwood
Mortgage.,  an affiliate of the General  Partners that arranges and services the
Mortgage Investments.  To finance the sales commissions,  the Partnership loaned
to Redwood  Mortgage  $623,255 (the  Formation  Loan)  relating to contributed
capital of  $9,781,366.  The Formation  Loan is unsecured,  and is being repaid,
without interest,  in ten annual installments of principal,  commencing December
31, 1989.

     The following  reflects  transactions in the Formation Loan account through
December 31, 1996:

       Amount loaned during 1987,1988 and 1989                         $623,255
       Less:
         Cash repayments                             $459,462
         Allocation of early withdrawal penalties      41,944           501,406
                                                   ===========      -----------

       Balance December 31, 1996                                       $121,849
                                                                    ===========


     The formation loan, which is receivable from Redwood Mortage,  an affiliate
of the General  Partners,  has been deducted from Limited  Partners capital in
the balance sheet. As amounts are collected from Redwood Mortgage, the deduction
from capital will be reduced. (See Note 11)

     B. Other  Organizational and Offering Expenses  Organizational and offering
expenses, other than sales commissions,  (including printing costs, attorney and
accountant  fees, and other costs),  paid by the  Partnership  from the offering
proceeds  totaled  $360,885 or 3.69% of the gross  proceeds  contributed  by the
Partners.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenues and expenses are accounted for on the accrual basis of accounting.

     The Partnership  bears its own  organization  and syndication  costs (other
than certain sales  commissions  and fees described  above)  including legal and
accounting expenses,  printing costs, selling expenses, a 1% wholesale brokerage
fee and filing fees.  Organizational  costs of $14,750 were capitalized and were
amortized  over a five year period.  Syndication  costs of $346,135 were charged
against partners capital and were allocated to individual  partners  consistent
with the partnership agreement over a five year period.


<PAGE>
   

                          REDWOOD MORTGAGE INVESTORS VI
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1996

     Property  acquired  through  foreclosure  will be held for  prompt  sale to
return the funds to the loan portfolio.  Such property is recorded at cost which
includes the principal  balance of the former  Mortgage  Investment  made by the
Partnership  plus  accrued  interest,  payments  made to keep the  senior  loans
current,  costs of  obtaining  title and  possession,  less rental  income or at
estimated net realizable value, if less. The difference between such costs and
estimated  net  realizable  value is deducted  from cost in the Balance Sheet to
arrive at the carrying value of such property.

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

     Mortgage  Investments and the related accrued  interest,  fees and advances
are  analyzed  on a  continuous  basis  for  recoverability.  Delinquencies  are
identified and followed as part of the Mortgage  Investment  system. A provision
is made for doubtful  accounts to adjust the allowance for doubtful  accounts to
an amount  considered by management to be adequate to provide for  unrecoverable
accounts receivable.

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

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

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Accrual Basis

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


                          REDWOOD MORTGAGE INVESTORS VI
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1996

B. Management Estimates

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

C. Mortgage Investments, Secured by Deeds of Trust

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

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

     At  December  31,  1996,  1995 and  1994,  reductions  in the cost of loans
categorized  as  impaired  by the  Partnership  totalled  $13,006,  $45,933  and
$45,000,  respectively.  The  reduction  in  stated  value was  accomplished  by
increasing the allowances for doubtful accounts.

     As presented in Note 8 to the financial statements as of December 31, 1996,
the average  mortgage  investment to appraised value of security at the time the
loans  were  consummated  was  65.91%.  When a loan  is  valued  for  impairment
purposes, an updating is made in the valuation of collateral security.  However,
such a low loan to value ratio tends to minimize reductions for impairment.

D. Cash and Cash Equivalents

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

E. Real Estate Owned, Held for Sale

     Real estate owned,  held for sale,  includes real estate  acquired  through
foreclosure  and is  stated  at the  lower  of the  recorded  investment  in the
property,  net of any senior  indebtedness,  or at the propertys estimated fair
value, less estimated costs to sell.
    
<PAGE>

   

                          REDWOOD MORTGAGE INVESTORS VI
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1996

     The following  schedule  reflects the costs of real estate acquired through
foreclosure and the recorded reductions to estimated fair values, less estimated
costs to sell as of December 31, 1996 and 1995:

                                                   December 31,
                               -----------------------------------------------
                                    1996                            1995
                             ---------------                 ---------------

Costs of properties             $1,743,382                      $1,588,879
Reduction in value                 302,375                          87,167
                             --------------                 ---------------

Fair value reflected in
 financial statements           $1,441,007                      $1,501,712
                            ===============                 ===============

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

F. Investment in Partnership (see note 5)

     The  Partnership  accounts  for  its  investment  in a  partnership  as  an
investment  in real estate,  which is at the lower of costs or fair value,  less
estimated costs to sell. At December 31, 1996, cost is considered less than fair
value and the investment is stated at cost in the financial statements.

G. Income Taxes

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

H. Organization and Syndication Costs

     The Partnership  bears its own  organization  and syndication  costs (other
than certain sales  commissions  and fees described  above)  including legal and
accounting expenses,  printing costs, selling expenses, a 1% wholesale brokerage
fee and filing fees.  Organizational  costs of $14,750 were capitalized and were
amortized  over a five year period.  Syndication  costs of $346,135 were charged
against partners capital and were allocated to individual  partners  consistent
with the Partnership Agreement.

I. Allowance for Doubtful Accounts

     Mortgage  Investments and the related accrued  interest,  fees and advances
are  analyzed  on a  continuous  basis  for  recoverability.  Delinquencies  are
identified and followed as part of the Mortgage  Investment  system. A provision
is made for doubtful  accounts to adjust the allowance for doubtful  accounts to
an amount  considered by management  to be adequate  with due  consideration  to
collateral value to provide for  unrecoverable  accounts  receivable,  including
impaired  mortgage  investments,   unspecified  mortgage  investments,   accrued
interest and advances on mortgage  investments,  and other  accounts  receivable
(unsecured).  The  composition  of the  allowance  for  doubtful  accounts as of
December 31, 1996 and 1995 was a follows:
    
<PAGE>
   


                          REDWOOD MORTGAGE INVESTORS VI
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1996


                                                  December 31,
                                   ------------------------------------------
                                      1996                            1995
                                   ------------                 ---------------

Impaired mortgage investments        $13,006                         $45,933
Unspecified mortgage investments      59,844                          37,351
Accounts receivable, unsecured       180,000                         200,000
                                   ------------                 ---------------
                                    $252,850                        $283,284
                                   ===========                 ===============

J. Net Income Per $1,000 Invested

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

K. Reclassifications and Changes in Presentation

     Certain  reclassifications not affecting net income have been made to prior
year  amounts to conform to the current  year  presentation.  In  addition,  the
formation loan receivable, previously categorized as an asset, has been deducted
from Limited  Partners  capital  until  collected  from Redwood  Mortgage,  and
affiliate of the General Partners (see Note 11).


NOTE 3 - GENERAL PARTNERS AND RELATED PARTIES

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

     A. Mortgage Brokerage  Commissions Loan brokerage  commissions for services
in connection with the review, selection, evaluation,  negotiation and extension
of the Mortgage  Investments  were limited up to 12% of the principal  amount of
the loans through the period ending 6 months after the  termination  date of the
offering.  Thereafter,  commissions are limited to an amount not to exceed 4% of
the  total  Partnership  assets  per  year.  Such  commissions  are  paid by the
borrowers, thus, not an expense of the Partnership.

     B. Mortgage  Servicing  Fees Monthly  mortgage  servicing  fees are paid to
Redwood Mortgage up to 1/8 of 1% (1.5% annual) of the unpaid principal,  or such
lesser amount as is reasonable  and customary in the  geographic  area where the
property securing the Mortgage  Investment is located.  (currently at 1/12 of 1%
or 1% annual).  The amount  remitted to the partnership and recorded as interest
on Mortgage  Investments is net of such fees. In 1994 $123,758 of the total loan
service  fees of  $123,758,  in 1995  $50,741 of the total loan  service fees of
$92,797  and in 1996,  $41,779 of the total loan  service  fees of $86,344  were
waived by the Redwood Mortgage.  Mortgage servicing fees of $44,565, $42,056 and
$0 were incurred for years 1996, 1995 and 1994, respectively.
    

<PAGE>
   


                          REDWOOD MORTGAGE INVESTORS VI
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1996

     C. Asset Management Fee Pursuant to the partnership agreement,  The General
Partners  receive  a  monthly  fees  for  managing  the  Partnerships  Mortgage
Investment  portfolio  and  operations  equal  of up to  1/32  of 1%  (3/8 of 1%
annual). of the net asset value. Such fees were reduced from $45,974 to $8,942
in  1994,  $44,336  to $0.00 in 1995,  and  $41,802  to $0.00 in 1996,  with the
difference being waived by the General  Partners.  Management fees of $0, $0 and
$8,942 were incurred for years 1996, 1995 and 1994, respectively.

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

     E.  Income  and Losses All income is  credited  or charged to  partners  in
relation to their respective partnership interests.  The partnership interest of
the General Partners (combined) is a total of 1%.

     F.  Operating  Expenses The General  Partners or their  affiliate  (Redwood
Mortgage) are reimbursed by the Partnership for all operating  expenses actually
incurred by them on behalf of the  Partnership,  including  without  limitation,
out-of-pocket general and administration expenses of the Partnership, accounting
and audit fees,  legal fees and expenses,  postage and preparation of reports to
Limited  Partners.  In 1994,  1995, and 1996,  clerical  costs  totaling  $0.00,
$23,341, and $31,838  respectively,  were reimbursed to Redwood Mortgage and are
included  in  expenses  in the  Statements  of Income.  The 1994  expenses  were
absorbed by the Redwood Mortgage.

NOTE 4 OTHER PARTNERSHIP PROVISIONS

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

     B.  Election to Receive  Monthly,  Quarterly or Annual  Distributions  Upon
subscriptions,  investors elected either to receive monthly, quarterly or annual
distributions of earnings  allocations,  or to allow earnings to compound for at
least a period of 5 years.

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

     D. Withdrawal  From  Partnership A Limited Partner had no right to withdraw
from the Partnership or to obtain the return of his capital account for at least
five years after such units are purchased which in all instances had occurred by
December 31,  1996.  After that time,  at the  election of the Partner,  capital
accounts  can  be  returned  over a  five  year  period  in 20  equal  quarterly
installments or such longer period as is requested.
    
<PAGE>

                          REDWOOD MORTGAGE INVESTORS VI
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1996

     Notwithstanding  the  above,  in order  to  provide  a  certain  degree  of
liquidity to the Limited Partners, the General Partners will liquidate a Limited
Partners entire 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. Such liquidations shall, however, be subject to a 10% early
withdrawal  penalty applicable to any sums withdrawn prior to the time when such
sums otherwise could have been withdrawn  pursuant to the liquidation  procedure
set forth  above.  The 10% early  withdrawal  penalty  will be  received  by the
Partnership, and a portion of the sums collected as such penalty will be applied
toward the next installment(s) of principal under the Formation Loan owed to the
Partnership by Redwood  Mortgage.  Such portion shall be determined by the ratio
between  the  initial  amount of  Formation  Loan and the total  amount of other
organization and syndication costs incurred by the Partnership in this offering.
The  balance of any such early  withdrawal  penalties  shall be  retained by the
Partnership for its own account and applied against syndication costs. Since the
syndication  costs have been fully  amortized as of December 31, 1993, the early
withdrawal  penalties  gained in the future will be applied on the same basis as
before with the amount  otherwise being credited to the syndication  costs being
credited to income for the period.

     The Partnership will not establish a reserve from which to fund withdrawals
and,  accordingly,  the  Partnership's  capacity  to return a  Limited  Partners
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 shall be liquidated during any calendar
year.

     NOTE 5 -  INVESTMENT  IN  PARTNERSHIP.  The  Partnerships  interest in land
acquired  through  foreclosure,  located in East Palo Alto with costs  totalling
$496,040 has been  invested with that of two other  Partnerships  (total cost to
date, primarily land, of $1,021,798) in a partnership which is in the process of
constructing  approximately  72 single family homes for sale.  Redwood  Mortgage
Investors  V, VI,  and VII have  first  priority  on return of  investment  plus
interest thereon, in addition to a share of profits realized.

     NOTE 6 - NOTE PAYABLE BANK - LINE OF CREDIT The Partnership has a bank line
of credit  secured by its Mortgage  Investment  portfolio up to $2,500,000 at 1%
over prime. The balances were $2,041,011 and $1,530,511 at December 31, 1995 and
1996, respectively,  and the interest rate at December 31, 1996 was 9.25% (8.25%
prime + 1%).

     NOTE 7 - LEGAL  PROCEEDINGS The Partnership is not a defendant in any legal
actions.  However,  legal actions against  borrowers and other involved  parties
have been initiated by the Partnership to help assure payments against unsecured
accounts receivable totaling $251,531.

     Management  anticipates that the ultimate outcome of the legal matters will
not have a material  adverse effect on the net assets of the  Partnership,  with
due  consideration  having been given in arriving at the  allowance for doubtful
accounts.
<PAGE>

                          REDWOOD MORTGAGE INVESTORS VI
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1996
NOTE 8 - INCOME TAXES

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

                                        December 31,
                             --------------------------------------
                                         1996                           1995
                                 ----------------               ---------------

Net assets - Partners Capital
per financial statements            $10,395,018                   $11,222,305
                                        121,849                       184,177
Allowance for doubtful accounts         252,850                       283,284
                                  ----------------               ---------------
Net assets tax basis                 $10,769,717                   $11,689,766
                                  ================               ===============

     In 1996,  approximately  73% of taxable  income was allocated to tax exempt
organizations i.e.,  retirement plans. Such plans do not have to file income tax
returns  unless their  unrelated  business  income  exceeds  $1,000.  Applicable
amounts become taxable when distribution is made to participants.

NOTE 9 - FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

     (b) The  Carrying  Value  of  Mortgage  Investments  - (see  note 2 (c)) is
$9,313,924.  The December 31, 1996 fair value of these investments of $9,221,000
is estimated based upon projected cash flows discounted at the estimated current
interest rates at which similar loans would be made.  The  applicable  amount of
the allowance  for doubtful  accounts  along with accrued  interest and advances
related  thereto  should also be considered in evaluating  the fair value versus
the carrying value.
    

<PAGE>
   

                          REDWOOD MORTGAGE INVESTORS VI
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1996

NOTE 8 10- ASSET CONCENTRATIONS AND CHARACTERISTICS

     The  Mortgage  Investments  are  secured  by  recorded  deeds of trust.  At
December  31,  1996,  there were 65 Mortgage  Investments  outstanding  with the
following characteristics:

Number of Mortgage Investments outstanding                          65
Total Mortgage Investments outstanding                      $9,313,924

Average Mortgage Investment outstanding                       $143,291
Average Mortgage Investment as percent of total                   1.54%
Average Mortgage Investment as percent of Partners  Capital       1.36%
Average Mortgage Investment as percent of Partners  Capital       1.38%

Largest Mortgage Investment outstanding                      $1,376,117
Largest Mortgage Investment as percent of total                   14.77%
Largest Mortgage Investment as percent of Partners  Capital       13.08%
Largest Mortgage Investment as percent of Partners  Capital       13.24%

Number of counties where security is located (all California)         14
Largest percentage of Mortgage Investments in one county           30.22%
Average Mortgage Investment to appraised value of security at time
     Mortgage Investment was consummated                            65.91%
Number of Mortgage Investments in foreclosure                           2


     The cash  balance at December  31,  1996 of $180,597  was in two banks with
interest  bearing  balances  totalling  $149,247.  The  balances  exceeded  FDIC
insurance limits (up to $100,000 per bank) by $49,247.

     The following  categories of mortgage investments are pertinent at December
31, 1996 and 1995:


                                                December 31,
                                    ------------------------------------------
                                     1996                      1995
                              -----------------          ---------------
First Trust Deeds                 $4,928,794               $4,449,229
Second Trust Deeds                 3,729,581                5,187,807
Third Trust Deeds                    405,567                  531,527
Fourth Trust Deeds                   249,982                  233,928
                               -----------------          ---------------
  Total mortgage investments       9,313,924               10,402,491
Prior liens due other lenders     17,200,385               21,437,338
                               -----------------          ---------------
  Total debt                      $26,514,309              $31,839,829
                               =================          ===============

Appraised property value at
 time of loan                     $40,225,303              $49,439,750
                             =================          ===============

Total investments as a percent 
of appraisals                          65.91%                   64.40%
                             =================          ===============

Investments by Type of Property

Owner occupied homes               $1,443,835               $2,323,009
Non-Owner occupied homes              973,498                  612,008
Apartments                            786,362                1,129,878
Commercial                          6,110,229                6,337,596
                              =================          ===============
                                   $9,313,924              $10,402,491
                              =================          ===============
    
<PAGE>


   
     Scheduled  maturity  dates of mortgage  investments as of December 31, 1996
are as follows:


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

                            1997                           $2,516,933
                            1998                            2,264,238
                            1999                            1,999,100
                            2000                              415,140
                            2001                              555,380
                         Thereafter                         1,563,133
                                                        ===============
                                                           $9,313,924
                                                        ===============

     The scheduled maturities for 1997 include approximately $1,631,054 in loans
which are past  maturity  at  December  31,  1996.  $334,583 of those loans were
categorized as delinquent over 90 days.

     Five loans with  principal  outstanding  of $549,356 had interest  payments
overdue  in excess  of 90 days.  Two loans  had  impaired  provisions  totalling
$13,006 at December 31, 1996.

     The cash  balance at December  31,  1996 of $180,597  was in two banks with
interest  bearing  balances  totalling  $149,247.  The  balances  exceeded  FDIC
insurance limits (up to $100,000 per bank) by $49,247.


NOTE 11 - CHANGE IN PRESENTATION

     The formation loan  receivable from Redwood  Mortgage,  an affiliate of the
General  Partners,  has been  categorized  as a reduction  in Limited  Partners
Capital,  the source of the funds.  It was previously  reflected as an asset. As
payments are received,  or early withdrawal  penalties  realized,  the formation
loan  balance  will be reduced and restored to Limited  Partners  Capital.  The
total of the formation  loan  outstanding  was $121,849 and $184,177 at December
31, 1996 and 1995, respectively.

     In addition,  Limited  Partners Capital and General  Partners  Capital are
reflected  separately  in  the  Balance  Sheet,  whereas  they  were  previously
reflected separately in the Statement of Changes in Partners Capital.

    
<PAGE>

<TABLE>

SCHEDULE II

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

        Column A          Column B       Column C       Column D             Column E
     Name of Debtor       Balance Beg.   Additions           Deductions        Balance at end of period
                          of period
                          12/31/95
                                                         (1)        (2)        (1)              (2)
                                                      Amounts     Amounts   Current         Not Current
                                                      collected   written   12/31/96
                                                                  off *

<S>                         <C>             <C>        <C>         <C>        <C>             <C>     
Redwood Mortgage.           $184,177        $0.00      $56,803     $5,525     $0.00           $121,849

<FN>
     The above  schedule  represents  the  Formation  Loan  borrowed  by Redwood
Mortgage from the Partnership to pay for the selling commissions on units. It is
an unsecured loan and bears no interest.  It is being repaid to the  Partnership
in ten equal annual installments of principal only commencing December 31, 1989.

     * The amount written off is comprised of the  application of the applicable
portion of early withdrawal penalties as provided in the prospectus.
</FN>
</TABLE>
<PAGE>

<TABLE>

   
SCHEDULE VIII


                                                   VALUATION AND QUALIFYING ACCOUNTS
                                                     REDWOOD MORTGAGE INVESTORS VI

Col. A             Col. B                    Col. C               Col. D                Col. E
Description        Balance                  Additions             Deductions            Balance at
                                 --------------------------------
                   Beginning           (1)             (2)        Describe             End of Period
                   of Period     Charged to       Charged     to
                                 Costs            Other
                                 & Expenses       Accounts -
                                                  Describe
<CAPTION>

Year Ended
12/31/96

Deducted from
Asset Accounts:

Allowance for
<S>                  <C>            <C>               <C>         <C>                        <C>     
Doubtful Accounts    $283,284       $312,684          $0.00       $343,118                   $252,850

Cumulative
write-down of
Real Estate held 
for sale (REO)       $87,167         246,880          31,672               0                 302,375

Total                $370,450        312,684         127,910               0                 555,225
                   ============= ================ =============== ==================== =====================
</TABLE>

    
<PAGE>

<TABLE>

SCHEDULE IX

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

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

Year-Ended
  
<S>                <C>               <C>               <C>               <C>               <C>  
12/31/96           $1,530,511        9.30%             $2,041,011        $1,697,816        9.30%

</TABLE>
<PAGE>

<TABLE>

SCHEDULE XII

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

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


<S>        <C>      <C>       <C>         <C>       <C>          <C>             <C>       <C>       <C>         
Comm.      14.750%  09/01/95  $2,241.96   $250,000  $185,000.00  $182,034.79     0.00      2nd Mtg   San Mateo
Res.       13.750%  10/01/96   1,833.33    369,163   160,000.00   160,000.00     0.00      2nd Mtg   San Mateo
Comm       13.750%  10/01/96     644.53       0.00    56,250.00    56,250.00     0.00      1st Mtg   Santa Clara
Res.       12.500%  02/01/07     554.63       0.00    45,000.00    38,157.67     0.00      1st Mtg   Santa Cruz
Res.       10.000%  12/24/01     545.86       0.00    67,257.75    61,767.97     0.00      1st Mtg   Alameda
Res.        7.375%  02/01/99     602.96       0.00    87,300.00    82,637.41     0.00      1st Mtg   Alameda
Res.        6.000%  04/01/96     106.81     10,470    21,361.99    21,361.99     0.00      2nd Mtg   Sacramento
Res.        4.000%  04/01/97     113.30       0.00    23,130.95    23,130.86     0.00      1st Mtg   Sacramento
Res.        4.000%  04/01/97     120.00       0.00    24,384.59    23,946.78     0.00      1st Mtg   Sacramento
Comm        7.000%  08/06/02     551.36     30,802    82,873.25    78,851.88     0.00      2nd Mtg   Alameda
Res.        7.000%  11/01/97     844.85       0.00   115.140.00   107,900.06     0.00      1st Mtg   San Mateo
Comm       12.500%  01/01/08   1,343.45     64,620   109,000.00    96,802.83     0.00      2nd Mtg   Santa Clara
Comm       12.250%  01/01/98   5,104.16    442,592   499,998.81   499,998.81     0.00      2nd Mtg   Contra Costa
Comm       12.000%  06/01/98     497.08       0.00    58,500.00    47,774.46     0.00      1st Mtg   Sonoma
Apts        2.000%  05/01/06     540.83     89,904   100,000.00    96,893.59     0.00      2nd Mtg   Sacramento
Res.       12.000%  07/01/98   2,417.24     67,312   235,000.00   214,773.21  214,773.21   2nd Mtg   El Dorado
Res.       13.500%  09/01/08     280.90     18,085    21,635.32    19,856.23     0.00      2nd Mtg   Contra Costa
Comm.      12.000%  11/01/98   2,057.23     11,864   200,000.00    74,423.44     0.00      2nd Mtg   Sacramento
Comm.      10.000%  12/01/98   1,755.14       0.00   200,000.00   197,660.10     0.00      1st Mtg   Stanislaus
Comm       12.250%  01/01/98   2,601.02  1,126,508   249,999.40   249,982.09     0.00      4th Mtg   Contra Costa
Comm       10.000%  12/01/98   5,046.04       0.00   575,000.00   567,649.23     0.00      1st Mtg   Alameda
Comm.       7.000%  12/01/03   1,151.48    562,500    99,172.75    83,132.89     0.00      2nd Mtg   Alameda
Comm.      12.000%  02/01/99  14,025.08       0.00  1,376,117.03 1,376,117.03    0.00      1st Mtg   Santa Clara
Res.       12.000%  06/01/04   1,053.22     50,205   100,000.00    98,077.41     0.00      2nd Mtg   Santa Clara
Land       12.000%  07/01/96   1,352.50    679,258   135,250.00   135,250.00  135,250.00   3rd Mtg   Sonoma
Comm        8.500%  11/07/99     515.73       0.00    72,809.59    72,809.59     0.00      1st Mtg   Sonoma
Land       11.500%  12/20/96   4,620.53    146,582   567,856.74   482,142.52     0.00      2nd Mtg   Stanislaus
Res.        8.000%  12/01/00     500.00    148,004    52,500.00    48,474.54     0.00      2nd Mtg   Santa Clara
Apts        7.000%  02/10/05     234.06     80,250    40,125.00    40,125.00     0.00      2nd Mtg   San Francisco
Res.       12.000%  06/25/94     100.00       0.00    10,000.00    10,000.00     0.00      1st Mtg   Sacramento
Res.       12.000%  03/01/98   1,500.29       0.00   280,000.00   147,206.50     0.00      1st Mtg   Alameda
Apts       11.500%  04/01/05     723.24       0.00   150,000.00    73,034.37     0.00      1st Mtg   San Francisco
Comm.       9.000%  05/10/02     670.52       0.00    83,333.33    82,407.46     0.00      1st Mtg   Shasta
Comm.      12.000%  12/31/99   2,500.00  2,439,050   450,000.00   250,000.00     0.00      2nd Mtg   Santa Clara
Res         8.000%  09/27/00     482.54     96,429    72,380.95    72,380.95     0.00      2nd Mtg   Monterey
Comm.      12.000%  12/01/11     756.11       0.00    63,000.00    61,680.63     0.00      1st Mtg   Alameda
Comm       11.875%  12/01/06   1,566.00       0.00   150,000.00   149,146.45     0.00      1st Mtg   San Mateo
Comm       12.000%  12/31/01   3,486.42  1,955,550   348,641.64   348,641.64     0.00      2nd Mtg   Santa Clara
Res.        7.000%  05/15/01     850.00       0.00   145,000.00   144,970.32     0.00      1st Mtg   San Mateo
Land       12.000%  02/01/97   3,822.50       0.00   382,250.00   382,250.00     0.00      1st Mtg   Santa Clara
Res         8.000%  09/18/03     166.58       0.00    22,655.51    22,655.51     0.00      1st Mtg   Sonoma
Res         8.000%  09/30/03     170.67       0.00    23,211.95    23,211.95     0.00      1st Mtg   Sonoma
Res.        8.000%  04/10/97     247.04       0.00    37,055.61    37,055.61     0.00      1st Mtg   San Mateo
Comm       12.000%  02/01/99     232.27  1,279,200    49,200.00    22,536.11     0.00      2nd Mtg   Santa Clara
<PAGE>



Col. A    Col. B    Col. C    Col. D     Col. E      Col. F       Col. G        Col. H     Col. I    Col. J
Descp.    Interest  Final     Periodic   Prior       Face Amt.    Carrying    Principal    Type of   Geographic
          Rate      Maturity  Payment    Liens       of           amount of   amount of    Lien      County
                    Date      Terms                  Mortgage     Mortgage    Mortgage               Location
                                                     Investment   Investment  Investments
                                                     (original                subject to
                                                     amount)                  Delinq.
                                                                              Principal
                                                                              or Interest
--------- --------- --------- ---------- ----------- ------------ ----------- ------------ --------- --------------
<S>        <C>      <C>          <C>           <C>     <C>         <C>           <C>       <C>       <C>       
Res.       13.000%  12/01/99     704.17        0.00    65,000.00   65,000.00     0.00      1st Mtg   Ventura
Res.       13.000%  12/01/99     704.17        0.00    65,000.00   65,000.00     0.00      1st Mtg   Ventura
Res.       13.000%  12/01/99     704.17        0.00    65,000.00   65,000.00     0.00      1st Mtg   Ventura
Res.       13.500%  03/01/03     467.39        0.00    36,000.00   23,541.96     0.00      1st Mtg   Solano
Apts       10.000%  12/01/00   1,487.60   4,125,105   275,000.00  134,601.37     0.00      2nd Mtg   Alameda
Res.       10.000%  08/01/03     576.96     262,720    49,000.00   33,271.52     0.00      2nd Mtg   San Mateo
Apts.      13.000%  09/01/98     807.53        0.00    73,000.00   66,937.61     0.00      1st Mtg   Alameda
Apts.      13.000%  11/01/03     759.15     341,094    60,000.00   41,115.41     0.00      2nd Mtg   San Francisco
Comm.      13.750%  11/01/03   2,202.61        0.00   167,500.00  109,205.55     0.00      1st Mtg   Alameda
Apts.      14.000%  03/01/92   1,184.87     960,000   100,000.00   96,971.58     0.00      2nd Mtg   Santa Clara
Comm.      14.500%  05/01/04   4,233.05     532,392   310,000.00  228,570.86     0.00      2nd Mtg   San Mateo
Res.       11.500%  06/01/97   3,113.39        0.00   314,000.00  311,595.63     0.00      1st Mtg   Alameda
Comm       prime+3  11/20/95   1,052.47     185,351   200,000.00  199,332.60  199,332.60   3rd Mtg   San Mateo
Apts.      14.000%  06/01/92     473.95     196,000    40,000.00   38,851.17     0.00      3rd Mtg   Santa Clara
Res.       15.250%  07/01/04     984.46      78,672    73,000.00   55,683.04     0.00      2nd Mtg   San Francisco
Comm       14.500%  08/01/04   1,365.50        0.00   100,000.00   75,577.87     0.00      1st Mtg   Sonoma
Res.       14.500%  04/01/05     546.20     150,804    40,000.00   32,132.87     0.00      3rd Mtg   San Francisco
Res.       14.500%  07/01/92   2,416.67     340,827   200,000.00  200,000.00     0.00      2nd Mtg   San Francisco
Apts       11.000%  06/29/98   2,004.26        0.00   210,459.34  197,832.44     0.00      1st Mtg   Sacramento
Res.       10.000%  08/01/00   1,428.14        0.00   160,000.00  159,682.86     0.00      1st Mtg   San Mateo
Res.       14.500%  08/01/92     604.17     109,072    50,000.00   48,859.80     0.00      2nd Mtg   San Mateo

Total                       $98,350.34  17,200,385.00 10,480,351.50  9,313,924.02  549,355.81

   
<FN>
     Notes:
--------------------------------------------------------------------------------
Two loans had impaired  provisions  totalling  $13,006 included in the allowance
for doubtful  accounts of $72,850  relating to mortgage  investments at December
31,  1996.  Impaired  loans are  defined  as loans  where  the costs of  related
balances   exceeds   the   anticipated   fair  value  less  costs  to   collect.
--------------------------------------------------------------------------------
  
-------------------------------------------------------------------------------
Amounts  reflected  in  column  G  (carrying  amount  of  mortgage  investments)
represents    both    costs    and    the    tax    basis    of    the    loans.
------------------------------------------------------------------------------
</FN>
</TABLE>
    
<PAGE>

   
Schedule XII


     Reconciliation of carrying amount of Mortgage Investment at close of period
(12/31/96)

Balance at beginning of period 12/31/95                          $10,402,491
Additions during period:
New Mortgage Investments                          2,474,843
Other                                                     0        2,474,843
------------------------------------------- ---------------- ----------------
                                                                 $12,877,334


Deduction during period:
Collections of principal                         $3,295,834
Foreclosures                                        267,576
Cost of Mortgage Investments sold                         0
Amortization of Premium                                   0
Other                                                     0       $3,563,410
------------------------------------------- ---------------- ----------------


Balance at close of period (12/31/96)                             $9,313,924
                                                             ----------------

Schedule XII

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

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

                                                 1996                  1995                 1994
                                            ---------------       ---------------      ---------------

<S>                                            <C>                   <C>                  <C>        
Balance at beginning of year                   $10,402,491           $10,993,896          $12,294,197
                                            ---------------       ---------------      ---------------
Additions during period:
  New Mortgage Investments                       2,474,843             2,062,626            3,299,838
  Other                                                  0                     0                    0
                                            ---------------       ---------------      ---------------
                  Total Additions               $2,474,843            $2,062,626           $3,299,838
                                            ---------------       ---------------      ---------------


Deductions during period:
  Collections of principal                       3,295,834             2,273,233            2,769,970
  Foreclosures                                     267,576               357,461            1,525,819
  Cost of Mortgage Investments sold                      0                     0                    0
  Amortization of Premium                                0                     0                    0
  Other                                                  0                23,437              304,250
                                            ---------------       ---------------      ---------------
                  Total Deductions               3,563,410             2,654,131            4,600,039
                                            ---------------       ---------------      ---------------

Balance at close of year                        $9,313,924           $10,402,491          $10,993,996
                                            ===============       ===============      ===============
</TABLE>
    
<PAGE>




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

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



                                    Part III

          Item 10 - Directors and Executive Officers of the Registrant.

     The Partnership has no officers or directors. Rather, the activities of the
Partnership  are managed by the three General  Partners of which two individuals
are D. Russell  Burwell and Michael R.  Burwell.  The third  General  Partner is
Gymno Corporation,  a California  corporation,  formed in 1986. The Burwells are
the  two  shareholders  of  this  corporation  on  an  equal  (50-50)  basis.  A
description  of the General  Partners is set forth on page 22 of the  Prospectus
under the section Management.

<PAGE>

Item 11 - Executive Compensation

       COMPENSATION OF THE GENERAL PARTNERS AND AFFILIATES BY PARTNERSHIP

     As  indicated  above  in  item  10,  the  Partnership  has no  officers  or
directors. The Partnership is managed by the General Partners. There are certain
fees and other items paid to  management  and related  parties.  A more complete
description of management compensation is found in the Prospectus,  pages 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, 1996. All
such compensation is in compliance with the guidelines and limitations set forth
in the Prospectus.

Entity Receiving        Description of Compensation and              Amount
Compensation                Services Rendered
---------------------- ---------------------------------------------- ----------
I.
Redwood Mortgage       Mortgage Servicing Fee for servicing Mortgage
                       Investments                                   $44,565

General Partners
&/or Affiliates        Asset Management Fee for managing assets           $0

General Partners       1% interest in profits                         $5,882


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



Redwood Mortgage       Mortgage Brokerage Commissions for services
                       in connection with the review, selection,
                       evaluation, negotiation, and extension of the
                       Mortgage Investments paid by the borrowers
                       and not by the Partnership                      $28,943

Redwood Mortgage       Processing and Escrow Fees for services in
                       connection with notary, document preparation,
                       credit investigation, and escrow fees payable by
                       the borrowers and not by the Partnership         $1,724


     III. IN ADDITION,  THE GENERAL PARTNER AND/OR RELATED COMPANIES PAY CERTAIN
EXPENSES ON BEHALF OF THE PARTNERSHIP FOR WHICH IT IS REIMBURSED AS NOTED IN THE
STATEMENT OF INCOME....................................................$31,838

<PAGE>

    Item 12 - Security Ownership of Certain Beneficial Owners and Management

     The  General  Partners  receive  a  combined  total  of  a 1%  interest  in
Partnership   income  and  losses  and   distributions  of  cash  available  for
distribution.

            Item 13 - Certain Relationships and Related Transactions

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

     Also refer to 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.


                                                                Part IV

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

(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.

<PAGE>

         3. Exhibits.


Exhibit No.                Description of Exhibits

     3.1           Limited Partnership Agreement
     3.2           Form of Certificate of Limited Partnership Interest
     3.3           Certificate of Limited Partnership
    10.1           Escrow Agreement (1)
    10.2           Servicing Agreement (1)
    10.3           (a) Form of Note secured by Deed of Trust which provides for
                   principal and interest payments (1)
                   (b) Form of Note secured by Deed of Trust which provides
                   principal and interest payments and right of assumption (1)
                   (c) Form of Note secured by Deed of Trust which provides for
                   interest only payments (1)
                   (d) Form of Note (1)
    10.4           (a) Deed of Trust and Assignment of Rents to accompany  
                    Exhibits 10.3 (a) and (c) (1)
                   (b) Deed of Trust and Assignment of Rents to accompany 
                    Exhibits 10.3 (b) (1)
                   (c) Deed of Trust to accompany Exhibit 10.3 (d) (1)
    10.5           Promissory Note for Formation Loan (1)
    10.6           Agreement to Seek a Lender (1)
    24.1           Consent of Parodi & Cropper (1)
    24.2           Consent of Stephen C. Ryan & Associates (1)


     All of these exhibits were previously filed as the exhibits to Registrants
Statement on Form S-11 (Registration No. 33-12519) and incorporated by reference
herein.

(B)      Reports on form 8-K

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

(C)      See (A) 3 above

(D)      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.
<PAGE>

                                   Signatures

     Pursuant  to the  requirements  of Section  13 or 15 (d) of the  Securities
Exchange Act of 1934 the  registrant has duly caused this report to be signed on
its behalf by the undersigned, thereto duly authorized on the 20th day of March,
1997.

REDWOOD MORTGAGE INVESTORS VI


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


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


By:      Gymno Corporation, General Partner


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


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


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report has been signed below by the following person on behalf of the registrant
and in the capacity indicated on the 20th day of March, 1997.


Signature                     Title                                Date


/S/ D. Russell Burwell
----------------------
D. Russell Burwell         General Partner                       March 20, 1997


/S/ Michael R. Burwell
----------------------
Michael R. Burwell         General Partner                       March 20, 1997



/S/ D. Russell Burwell
----------------------
D. Russell Burwell        President of Gymno Corporation,        March 20, 1997
                          (Principal Executive Officer);
                          Director of Gymno Corporation


/S/ Michael R. Burwell
----------------------
Michael R. Burwell         Secretary/Treasurer of Gymno          March 20, 1997
                           Corporation (Principal Financial
                           and Accounting Officer);
                           Director of Gymno Corporation