SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

                       FOR ANNUAL AND TRANSITION REPORTS
                      PURSUANT TO SECTIONS 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)
_X ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES  EXCHANGE ACT
OF 1934__ For the fiscal year ended December 31, 1999

                                   OR

     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE
ACT OF 1934__ For the transition period from _________ to _________

                     Commission File No. 0-25935

                         THE RIDGEWOOD POWER GROWTH FUND
             (Exact Name of Registrant as Specified in Its Charter)

        Delaware                           22-3495594
(State or Other Jurisdiction             (I.R.S. Employer Identification No.)
of Incorporation or Organization)

  c/o Ridgewood Power Corporation, 947 Linwood Avenue, Ridgewood, New Jersey
07450
  (Address of Principal Executive Offices)                        (Zip Code)

Registrant's Telephone Number, including Area Code:  (201) 447-9000

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

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

Investor Shares of Beneficial Interest
(Title of Class)

     Indicate  by check mark  whether the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[X]

     There is no market for the Shares. The aggregate capital contributions made
for the Registrant's  voting Shares held by  non-affiliates of the Registrant at
April 13, 2000 was $64,294,170.

Exhibit Index is located on page __.



<PAGE>

PART I

Item 1.  Business.
Forward-looking statement advisory

As with some other statements made by or on behalf of the Ridgewood Power Growth
Fund (the  "Fund")  from time to time,  has  forward-looking  statements.  These
statements  discuss  business  trends and other  matters  relating to the Fund's
future results,  year 2000  remediation and the business  climate and are found,
among other places, at Items 1(c)(3),  1(c)(4),  1(c)(5),  1(c)(6), 1(c)(7), and
2(b). In order to make these statements, the Fund has had to make assumptions as
to the future. It has also had to make estimates in some cases about events that
have already happened, and to rely on data that may be found to be inaccurate at
a later time. Because these forward-looking statements are based on assumptions,
estimates and changeable  data, and because any attempt to predict the future is
subject  to  other  errors,  what  happens  to the  Fund  in the  future  may be
materially different from the Fund's statements here.

     The Fund therefore warns readers of this document that they should not rely
on these  forward-looking  statements without considering all of the things that
could make them inaccurate.  This Registration Statement discusses many (but not
all) of the risks and  uncertainties  that might  affect  these  forward-looking
statements.

     Some of these are changes in political and economic conditions,  federal or
state  regulatory  structures,   government  taxation,  spending  and  budgetary
policies,  government  mandates,  demand for electricity and thermal energy, the
ability of customers to pay for energy received,  supplies of fuel and prices of
fuels, operational status of plant, mechanical breakdowns, availability of labor
and the  willingness  of electric  utilities to perform  existing power purchase
agreements in good faith.  Some of these cautionary  factors that readers should
consider are  described  below at Item 1(c)(5) - Trends in the Electric  Utility
and Independent Power Industries.

     By making these  statements  now, the Fund is not making any  commitment to
revise these forward-looking  statements to reflect events that happen after the
date of this document or to reflect unanticipated future events.

(a)  General Development of Business.

     The Registrant is the Ridgewood Power Growth Fund, which was organized as a
Delaware  business  trust in January  1998 to  participate  in the  development,
construction  and  operation of  independent  power  generating  facilities  and
capital  facilities  ("Independent  Power  Projects" or  "Projects").  Ridgewood
Energy Holding Corporation ("Ridgewood Holding"), a Delaware corporation, is the
Corporate Trustee of the Fund.

     The Fund has sold whole and fractional shares of beneficial interest in the
Fund ("Investor  Shares") at $100,000 per Investor Share.  Its offering began on
February  9,  1998  and  is  ongoing.  As of  April  13,  2000,  it  had  raised
approximately  $64,300,000.  Net of offering fees, commissions and expenses, the
offering had provided as of that date approximately  $53,400,000 for investments
in the development and acquisition of Projects and operating expenses.  The Fund
has 1,143  record  holders of Investor  Shares (the  "Investors").  As described
below in Item 1(c)(4),  the Fund has invested or committed  approximately  $33.5
million of its assets as follows:


U.K. landfill gas generating stations .......................       $22,000,000
Egyptian resort electricity and water projects ..............         6,500,000
Mediterranean fiber optic cable project .....................         1,500,000
ZapWorld.com (electric vehicles) ............................         4,000,000

         Total                                                      $33,500,000

     The Fund is also  contemplating  a  $10,000,000  investment in 10 operating
hydroelectric  facilities  with long-term  sales  contracts,  currently owned by
Synergics Inc. and in additional projects in Egypt. The Fund is actively seeking
additional Projects for investment.

     The Fund has two Managing  Shareholders:  Ridgewood Power LLC, a New Jersey
limited liability company ("Ridgewood Power") and Ridgewood Power VI LLC ("Power
VI Co"),  which is also a New Jersey  limited  liability  company.  The Managing
Shareholders have direct and exclusive  discretion in the management and control
of the affairs of the Fund.  Both Ridgewood Power and Power VI Co are controlled
by Robert E.  Swanson,  who is the manager of each.  The officers of Power VI Co
are also the same as those of Ridgewood Power and Power VI Co currently does not
conduct any  business.  It is  anticipated  that  Ridgewood  Power will take all
actions necessary to manage the Fund,  without any participation by Power VI Co,
unless Ridgewood Power were to become unable to act as the Managing  Shareholder
because of a possible  reorganization of other, similar investment programs that
it manages.  In that case,  Power VI Co would be  activated to serve as Managing
Shareholder. A further discussion of Ridgewood Power and Power VI Co is found at
Item 5(b) - Directors and  Executive  Officers - Managing  Shareholders.  In the
remainder  of  this  Registration  Statement,  when a  reference  is made to the
"Managing  Shareholder," it is to Ridgewood Power so long as it acts as Managing
Shareholder  and to  Power  VI Co if  Power  VI Co is  activated  to  serve as a
Managing  Shareholder.  The two  Managing  Shareholders  and the  Investors  are
collectively referred to as the "Shareholders."

     The Fund  currently  has three  Independent  Panel  Members.  Approval of a
majority  of  the  Independent   Panel  Members  is  required  for  approval  of
transactions  between the Fund and other  investment  programs  sponsored by the
Managing  Shareholder.  The  Independent  Panel Members do not exercise  general
oversight of the Managing  Shareholder  or of the Fund and are not  directors of
the  Fund.  The  Independent  Panel  Members  do  not  have  any  management  or
administrative powers over the Fund or its property.

     The Fund has a Corporate Trustee, Ridgewood Energy Holding Corporation. The
Corporate  Trustee acts on the  instructions of the Managing  Shareholder and is
not authorized to take independent  discretionary  action on behalf of the Fund.
See Item 5 - Directors  and  Executive  Officers of the  Registrant  below for a
further description of the management of the Fund.

   The  Managing  Shareholders  are  controlled  by  Robert E.  Swanson,  who is
currently their sole manager and chief executive officer.  For information about
the merger of the prior Managing Shareholder,  Ridgewood Power Corporation, into
Ridgewood  Power LLC, see Item 10(b) - Directors and  Executive  Officers of the
Registrant - Managing  Shareholder.  The following chart illustrates some of the
important  relationships  among the Fund, the Managing  Shareholders and some of
their affiliates.

The Ridgewood Power Growth Fund and certain affiliates as of March 1, 2000 (some
entities and relationships omitted)


             Robert E. Swanson         Family trusts
                         x                  x (Mr. Swanson has
 Sole manager            x                  x  sole voting and
 Chief executive officer x                  x  investment power)
 Owner of 46% of equity  x                  x Owners of 54% of equity
        _________________X__________________X______________________________
       x             x                x        x            x             x
       x             x                x        x            x             x
       x             x                x        x            x             x
Ridgewood   Ridgewood Power   Ridgewood    Ridgewood    Ridgewood   Ridgewood
Securities   Management LLC   Power LLC    Energy       Power VI     Capital
Corporation                                Holding        LLC       Management
                                          Corporation                  LLC

             Operates power                Corporate                  Manager
Placement    plants for five  Managing     Trustee       Co-Managing  of two
agent        power trusts     Shareholder  for all      Shareholder   venture
("Ridgewood    ("RPMCo")       of six      six trusts    (dormant)    capital
 Securities")                  trusts          x          of the      funds &
                            ("Ridgewood        x           Fund       marketing
                               Power")         x     ("Power VI Co")  affiliate
                                  x            x                x   ("Ridgewood
                                  x            x                x     Capital")
                                  x            x                x         x
    ______________________________x____________x_____________   x         x
    x           x          x           x            x        x  x         x
    x           x          x           x            x        x  x         x
Ridgewood   Ridgewood   Ridgewood   Ridgewood   Ridgewood  The Ridgewood  x
Electric    Electric    Electric    Electric    Electric   Power Growth   x
Power Trust Power Trust Power Trust Power Trust Power Trust   Fund        x
    I          II         III          IV           V         (the        x
("Power I") ("Power II")("Power III")("Power IV")("Power V") "Fund")      x
                                                                          x
                                          ________________________________X__
                                          x                                  x
                                          x                                  x
                                   Ridgewood Capital          Ridgewood Capital
                                   Venture Partners         Venture Partners II
                                            (the "Venture Capital Funds")



Power I through V are referred to as the "Prior Programs."


 (b)  Financial Information about Industry Segments.

     The  Fund has been  organized  to  operate  in only one  industry  segment:
independent  power  generation and related capital,  infrastructure  and venture
projects.

(c)  Narrative Description of Business.

(1) General Description.  The Fund's investment objectives are:

     providing  capital  appreciation over an extended period of time, either by
(a) selling  all or some of the Fund's  assets or (b)  changing  the Fund into a
more liquid investment (by combining with other companies, by a public offering,
by creating a market for the Investor Shares or otherwise) and

     generating  current cash flow for  distribution  to Investors to the extent
consistent with the capital appreciation objective.

     The Fund intends to achieve its objectives by making equity  investments in
"Projects"  or in  companies  owning  Projects or assets  that may benefit  from
industry  deregulation.  In many  cases,  the Fund may  operate  those  Projects
itself.  The Projects may include  conventionally  fueled,  small to medium-size
independent electric power plants; landfill gas, biomass or other "waste" fueled
power plants that generate  electricity  or heat, or both,for sale while helping
to remedy environmental  problems;  cogeneration plants that produce electricity
and heat  together  for sale;  other power  generating  facilities  that produce
electricity,  heat or motive  power for sale or use;  waste  transfer  stations,
pumping  facilities  and other  facilities  that  contribute to the operation of
other  Projects;  o other  types  of  capital  projects,  such  as fuel  plants,
processing  facilities  and  recycling  facilities,  that are  expected  to have
consistent cash flows similar to those from  independent  electric power plants;
and  equity  interests  in  companies   affected  by  the  deregulation  of  the
electricity industry,  including those with long-term or unconventional business
strategies.

     The Fund will not invest in nuclear power facilities.

     The Fund will try to invest in Projects that provide  long-term cash flows.
Its  investments  will be structured  for federal income tax purposes as "direct
participation"  investments,  so that  income,  gains,  losses,  deductions  and
credits flow through to each Investor's  personal tax return, and are subject to
tax only once.  Investors will  generally have limited  liability for the Fund's
obligations and those of the Projects.

The Fund has decided to sell Investor  Shares only to to "Accredited  Investors"
(as defined by the Securities and Exchange Commission), which include

o individuals whose individual net worth, or joint net worth together with their
spouse's, exceeds $1,000,000 at the time of purchase;
o  individuals  whose  income  exceeded  $200,000 in each of the two most recent
years or whose joint  income with their  spouses'  exceeded  $300,000 in each of
those  years,  if they  reasonably  expect to reach the same income level in the
current year;
o private  pension  funds or employee  benefit  plans that either have assets in
excess  of $5  million  or that  have the  investment  decisions  made by a plan
fiduciary that is a bank,  savings and loan  association,  insurance  company or
registered investment advisor;
o  self-directed  pension  fund  or  employee  benefit  plan  accounts,  if  the
investment decision is made solely by a person that is an Accredited Investor;
o banks,  trust  companies,  savings and loan  associations  and  certain  other
financial institutions, whether acting as fiduciaries or for their own accounts;
or
o any other  "Accredited  Investor" as that term is defined in the  Commission's
Regulation D (see DEFINITIONS-ACCREDITED INVESTOR).

The Fund may also in its discretion  sell Investor  Shares to certain  Investors
who are not themselves accredited investors. These Investors must have family or
other   relationships  with  other  Investors  who  are  themselves   accredited
investors.  The  permitted  relationships  are  defined  by Rule  501(e)  of the
Securities and Exchange Commission.

(2) Risk Considerations

     General
     Investment in the Fund involves  substantial risks and potential  conflicts
of  interest  and is  suitable  only for  those  persons  who meet the  investor
suitability  standards on a continuing basis, have a substantial net worth, have
no need for liquidity from such investment, and are able to bear the loss of the
entire investment.  Each prospective Investor should consider carefully the risk
factors attendant to the purchase of Shares,  including without limitation those
discussed  below,  and each should review the investment with his own legal, tax
and financial advisors. In addition, each prospective Investor should understand
that  the  Subscription   Agreement  and  the  Declaration  materially  restrict
Investors from selling or otherwise disposing of their Shares.

Importance of Regulatory and Political Environments
     Independent  Power  Projects,   including  cogeneration   facilities,   are
creatures of the regulatory and political process. Since the passage of PURPA in
1978,  the  Independent  Power  industry  has  grown,  in  large  part,  because
regulatory and political  environments  made it feasible to amass the large sums
of long-term  capital needed to develop,  construct and operate power plants. In
particular, the regulatory advantages currently provided by PURPA for Qualifying
Facilities are essential for the viability of most  Independent  Power Projects.
Modification  or repeal of PURPA or the regulations  thereunder  could make some
Projects uneconomic.

     In  several  states,   including   Massachusetts,   Maine  and  California,
requirements  may be imposed on sellers  of  electricity  to  purchase a minimum
amount of "renewable" power (generally,  power from small hydroelectric  plants,
geothermal,  solar or wind plants, or plants that burn non-fossil fuels).  These
requirements  may be very  advantageous  for the types of Projects  the Fund may
invest  in,  but  adverse  state or federal  action  might  make those  Projects
uneconomic in the future. Further, it is possible that future developments, such
as more stringent  requirements of environmental  laws and enforcement  policies
thereunder,  could  affect  the costs of and the  manner in which  Projects  are
developed,  built or operated.  There can be no assurance that in such event the
Projects  would be able to recover  all or any of such  increased  costs or that
their businesses and financial  conditions would not be materially and adversely
affected.

Deregulatory Initiatives
     The Comprehensive Energy Policy Act of 1992 (the "1992 Energy Act") removed
certain  restrictions  imposed  by the  Holding  Company  Act on the  ability of
electric utility holding companies and electric utilities to control their local
markets.  Since  passage of the 1992 Energy Act,  FERC in its Order 888 of April
1996 has deregulated the wholesale  market for electricity (the market for sales
to local  utilities or distributors of  electricity).  Further,  many states are
implementing plans to further encourage  investment in wholesale  generators and
to facilitate  utility decisions to spin off or divest generating  capacity from
the  transmission  or  distribution  businesses of the  utilities.  As a result,
Independent  Power  Projects in the future will face  competition  not only from
other  Independent  Power  Projects  seeking to sell  electricity on a wholesale
basis but also from exempt wholesale generators,  electric utilities with excess
capacity and independent  generators spun off or otherwise  separated from their
parent utilities.

     On the other hand,  by expanding  the  potential  pool of Projects in which
electric  utility holding  companies and electric  utilities are able to invest,
the 1992  Energy Act has  resulted  in  increased  competition  from the holding
companies  and  utilities  to  develop  promising   Projects  and  in  increased
competition in the sale of electricity by Independent  Power Projects.  Further,
the 1992 Energy Act and Order 888  introduced an element of  competition  in the
transmission  component of the  electric  power  industry by requiring  electric
utilities to make available their  transmission  facilities to Independent Power
Projects where it is in the public interest and does not unreasonably impair the
reliability of electricity service. In April 1996, FERC adopted Order 888, which
required electric utilities and power pools to make transmission  facilities and
information available on equal terms to all generators.

     The deregulation of transmission may benefit the Fund in the future in that
deregulated transmission may give Projects in which the Fund participates access
to customers that are not geographically located near the Projects. If there are
limitations on transmission  capacity,  however,  the Fund might have to compete
and bid for capacity in order to transmit electricity to distant customers if it
is selling in a competitive  market or if it is selling  "renewable"  power to a
distant  customer.  In those  events,  the Fund might  have to  compete  against
companies  that are far larger  and more  diversified  than  itself or that have
lower costs of operation or access to transmission facilities.  If the Fund were
unsuccessful in obtaining  transmission  capacity,  it might not be able to sell
its output except to local utilities (or in some cases, local retail customers).
There is no assurance  local  customers  would  purchase  that power or that the
local price would be as advantageous  as the price more distant  customers would
pay.

     The large scale  deregulation of transmission  facilities is likely to have
other  far-reaching  effects  which  may be  adverse  to the  Independent  Power
industry,  generally,  or to the  particular  facilities  owned by the Fund.  In
particular, because the Fund anticipates investing in small scale facilities, it
may be  difficult  for it in the short run to market  power to end users or over
long   distances.   As  a  result,   it  may  suffer   significant   competitive
disadvantages.

     State initiatives to deregulate and encourage competition in the businesses
of generating  electric power and transmitting it to customers are also creating
significant risks.  Further,  jurisdictional  disputes between federal and state
regulators  and proposed  congressional  actions have hampered the creation of a
coordinated  regulatory posture and have raised significant  questions as to the
allocation of electric  utility costs and obligations  that may not be recovered
by utilities in a competitive environment. As a result, although it appears that
competitive  generating  markets  will be  created in many  states and  possibly
nationally,  there is uncertainty as to the eventual regulatory  environment and
the risks and opportunities it will create.

     As various states  implement  retail  deregulation,  a number of additional
risks are posed for Independent Power Projects.  In many states,  local electric
utilities are being  required or encouraged to sell their  generating  stations.
Often,  large electric  utilities,  affiliates of natural gas marketers or other
large  entities  have  purchased  large  quantities  of  these  assets  and thus
immediately  become sizable  competitors in the market to sell  electricity.  In
some  other  states,  local  electric  utilities  will be  permitted  to  retain
generating  assets and sell power to themselves.  In that event, they may prefer
purchases from their own plants and opportunities for Independent Power Projects
to sell electricity in a competitive market may be stifled.

     Further,  in a  competitive  market,  prices  for  electricity  may be very
volatile.  If a  generator  is  nonetheless  able to  obtain a  long-term  Power
Contract,  the prices under that  contract may be  inadequate to cover costs and
yield a return,  or the generator may lose  opportunities to sell electricity at
higher prices. If a generator is unable to obtain a long-term Power Contract and
sells its output under short term contracts on in a spot or auction market,  the
prices  received  may be  inadequate  to cover costs or to permit the Project to
earn a return. Prices may vary so much as to make planning impossible.  There is
no assurance that the generator will be able to obtain new Power Contracts so as
to keep its Project in continuous operation and the generator may have to absorb
significant  costs of Project shutdown and restart as well as lay off and rehire
its workforce, as has occurred with two Projects located in Maine in which Power
IV and Power V have invested.

     These factors have caused new investment in independent power plants in the
United States to be  substantially  reduced,  have  intensified the pressures on
larger market  participants to consolidate,  have created additional  incentives
for  generating  efficiency  and low-cost  production  of power,  have tended to
depress the purchase prices of existing  small-scale  Projects and are likely to
have  additional,  unpredictable  effects.  Recently,  a  number  of very  large
utilities,  natural gas companies and independent generation companies have paid
significant  premiums  over book value or other  measures  of value to  purchase
large  packages of power  plants  being  divested by  utilities  and others have
announced plans to construct extremely  large-scale merchant power plants. These
transactions  or  proposals  have been in the range of  hundreds  of millions of
dollars  to  billions  of  dollars.   This  may  indicate  that  these  industry
participants  have  concluded  that very large scale is a necessary  competitive
advantage.

     The Fund instead will attempt to follow a  diversified  strategy  that does
not  attempt  to  compete  head-on  with these  types of  competitors.  The Fund
believes that in many cases  emphasis on scale and  purchasing  market share may
lead to  suboptimal  returns.  Instead,  the Fund  will  seek to  develop  niche
markets,  to engage in ventures with large utilities or other  participants that
need its  investments  for financial or regulatory  reasons or to acquire equity
interests  in  undervalued  companies.  Where  possible,  the Fund may invest in
existing  Projects  with  long-term  Power  Contracts  that are less  exposed to
competitive forces, or in Projects with regulatory or tax advantages.  There can
be no assurance,  however,  that these strategies will be successful or that the
Fund will not be competitively disadvantaged by its relatively small size.

Threats to Power Contracts
     The Power Contract with the local utility,  industrial host or other energy
purchaser  is perhaps the most  important  contract  to an existing  Independent
Power  Project.  Many  long-term  Power  Contracts  between local  utilities and
independent  power  producers  now  provide  for  rates  in  excess  of  current
short-term  rates for  purchased  power and the  utilities  are  treating  their
contractual  obligations  as a form  of  stranded  cost.  There  has  been  much
speculation  that in the course of  deregulating  the electric  power  industry,
federal or state regulators or utilities would attempt to invalidate these power
purchase  contracts as a means of throwing some of the costs of  deregulation on
the owners of independent power plants.

     To date, the Federal Energy Regulatory  Commission and each state regulator
that has addressed the issue have ruled that existing  Power  Contracts will not
be  affected  by their  deregulation  initiatives.  The  regulators  have so far
rejected the requests of a few utilities to invalidate existing Power Contracts.
Further, no action has yet been taken by federal or state legislators to date to
impair Independent Power Projects' existing power sales contracts, and there are
federal  constitutional   provisions  restricting  actions  to  impair  existing
contracts.  There can not be any  assurance,  however,  that the  rapid  changes
occurring in the industry and the economy as a whole would not cause  regulators
or  legislative  bodies to attempt to change the  regulatory  structure  in ways
harmful  to  Independent  Power  Projects  or  to  attempt  to  impair  existing
contracts.  In  particular,  some  regulatory  agencies have urged  utilities to
construe  Power  Contracts  strictly and to police  Independent  Power  Projects
compliance with those Power Contracts vigorously. Predicting the consequences of
any legislative or regulatory  action is inherently  speculative and the effects
of any  action  proposed  or  effected  in the future may harm or help the Fund.
Because of the consistent position of the regulatory authorities to date and the
other factors  discussed here, the Fund believes that so long as it performs its
obligations  under the Power  Contracts,  it will be entitled to the benefits of
those contracts.

     In recent years,  many electric  utilities that have entered into long-term
Power  Contracts have  concluded  that the prices set under those  contracts are
disadvantageous to them under current conditions.  Accordingly,  they have often
attempted to exploit all possible  means of  terminating  these Power  Contracts
with Independent Power Projects,  including requests to regulatory  agencies and
alleging  violations  of  even  immaterial  terms  of  the  Power  Contracts  as
justification  for terminating  those contracts.  The Fund's current  investment
strategy includes the purchase  smaller-sized  Projects with existing  long-term
Power  Contracts.  If the prices for  electricity  under those  contracts are in
excess of the prices charged by alternative  sources, or if the electric utility
purchasers  under those  contracts  have other  incentives  to  terminate  those
contracts, the Fund may face material costs in contesting those utility actions.
Power II,  which is a previous  Power Trust  sponsored by  Ridgewood  Power,  is
currently  defending a legal  proceeding  in  California  which  involves such a
challenge.  A second  Power  Trust,  Power I,  succesfully  defended  a  similar
challenge in 1995-1997.

Other Aspects of Power Contracts
     A generating  facility which uses biomass or "waste" fuel, such as landfill
gas or waste coal, may be a Qualifying  Facility under PURPA.  However, in order
for a cogeneration  facility using conventional fuel to be a Qualifying Facility
under PURPA and current  regulations,  at least 5% of a Project's  total  energy
output must be "useful" heat energy that  typically is sold or made available in
the form of steam or hot water to an entity (the "Steam  Host").  Under  current
regulatory  interpretations,  heat  energy is "useful" if its use has a business
purpose  independent  from the sale of  electricity  and there is some  economic
justification for the use. Typically,  a Project meets its PURPA requirements by
entering  into a long term  contract  with a Steam Host which  provides that the
Steam Host will take delivery of sufficient thermal energy to permit the Project
to meet the  requirements of PURPA.  If a cogeneration  Project did not meet the
requirements for supplying heat energy to a Steam Host because, for example, the
Steam  Host  went  out  of  business,  or  the  thermal  contract  is  otherwise
terminated,  that  cogenerating  Project  might lose its status under PURPA as a
Qualifying  Facility.  If as a result of this loss of  status  the  cogenerating
Project  became  subject to federal and state  regulation or its Power  Contract
were terminated or modified, the cogenerating Project might incur material loss.
Although  PURPA  provides  grace periods for a  cogeneration  Project to find an
alternative Steam Host,  potential  alternate Steam Hosts may be very limited or
non-existent  because of the practical  necessity for a Steam Host to be located
adjacent to the Project to minimize heat loss.

     Under PURPA,  electric power utilities are directed to purchase electricity
output  offered to them by Qualifying  Facilities at a price no greater than the
utilities'  avoided costs of generating  electricity  from another  source.  The
Power Contracts for many existing Projects have been negotiated with the utility
as long term  agreements  to  purchase  the  Projects'  output.  There can be no
assurance  that the rates offered to a new Project or the other terms of a Power
Contract will be sufficiently  favorable to induce  development and construction
of a Project or permit profitable operation of a completed Project.

     Many long-term Power Contracts provide for levelized rates over the life of
the  contracts or shorter  periods,  which are  designed to stabilize  projected
revenues  earned by an Independent  Power Project.  The effect of many levelized
rate contracts is to provide that the utility will purchase  electricity  from a
Project at higher rates in the earlier  years in exchange for an agreement  from
the Project to accept lower rates to be paid by the utility in later years. If a
Project experiences operational difficulties and produces less than the expected
volume of electricity  in later years,  it may be required to make cash payments
to the utility to compensate for such shortfall, thereby reducing available cash
flow to the Project owner.

     Although  there is some  risk  that a utility  bound by a  long-term  Power
Contract may be unable to meet its purchase  obligations,  under current federal
law and current law in most states  electric  utilities are required to maintain
prudent financing  structures and are reviewed  periodically by their regulators
for  compliance  with  these  requirements.  In  addition,  if state  regulators
approve,  the payments made by a utility to an Independent  Power Project may be
included  as  allowed  costs  to be  passed  through  to  the  utility's  retail
customers,  thereby giving the utility an additional source of revenue which can
be used to make payments to the Independent Power Project. Accordingly,  failure
of a utility to meet payment  obligations to an Independent  Power Project which
is operating in compliance with its Power Contract has been a rare occurrence.

     Most  deregulatory  programs treat Power Contracts with prices in excess of
market prices as "stranded costs" and provide for reimbursement to utilities for
those stranded costs for an extended period of time. During these periods, which
can range from three to ten years or longer in some instances, there may be some
assurance that the utilities will pay. However,  retail  deregulation may impose
other  financial  strains on  electric  utilities,  which will be  relegated  to
maintaining  the  distribution   network  and  delivering  power  to  individual
residential,  commercial and industrial locations.  Those utilities will have to
downsize and reorganize their workforces and resources and compete in many cases
as suppliers of electricity.  It is likely that some utilities may reorganize or
enter  bankruptcy if they are unable to meet these  challenges.  In those cases,
the  Fund may be  unable  to  collect  amounts  due to it or may have its  Power
Contracts  abrogated in bankruptcy.  Industrial  and other retail  purchasers of
power do not have an assured source of revenue from which to make payments under
the Power Contract and a Project  selling to them must rely solely on the credit
of such  purchaser.  Consequently,  although  the Fund will  conduct a  business
review of each purchaser's  creditworthiness prior to contracting with it, there
can be no  assurance  that it will  remain in  business  over time or be able to
perform its payment obligations for the duration of the Power Contract.

     In the event of a default or failure to pay by an energy  purchaser under a
Power  Contract  because of its bankruptcy or  insolvency,  regulatory  changes,
failure of a Project to comply with the terms of its  contract or other  events,
there  can be no  assurance  that  the  Project  will be able to  obtain a Power
Contract  with  another  purchaser  or to  obtain a Power  Contract  on terms as
favorable as those of the previous contract.

     The Fund expects that if it were to invest in capital  facilities  or other
investments  outside the electric power industry,  those  facilities  would have
output contracts  providing for long-term payments by a responsible  customer or
customers  for the  facilities'  production.  These  contracts  would  likely be
structured in a manner similar to Power Contracts with non-utility customers. In
that  event,  the  Fund  would  be  subject  to  the  risks  of  the  customers'
creditworthiness  and the long-term  anticipated  demand for the products.  With
regard to investments  in other types of industries,  such as Zap Power Systems,
Inc., the Fund's  investment is subject to the many risks of any enterprise that
markets its products to consumers. In addition, Zap's business plan contemplates
marketing  its bicycles  and vehicles  through  dealers and  franchisees.  Zap's
ability  to do so  profitably  will  depend  upon its  ability  to  organize  an
effective  dealer  and  franchise  system  and to create a mass  market  through
advertising  and  marketing  efforts for its  products.  Zap has no  significant
experience in those areas.

Reliance on Fuel Supplies at Appropriate Prices
     Since  the  cost of fuel is  usually  one of the  largest  components  of a
Project's  operating  costs  (especially  so in the case of natural gas, coal or
oil-fired electric power Projects), the success of a Project may depend not only
on the availability of fuel supplies but also on the Project's ability to obtain
long term contracts for fuel and fuel transportation at appropriate prices.

     The Fund will  attempt  to  invest  in  Projects  which  have  fuel  supply
arrangements  which  closely match the fuel  adjustment  provisions of the Power
Contract with the utility,  industrial user or other energy  purchaser,  so that
changes in Project fuel costs will be offset by corresponding changes in revenue
from the sale of energy. Existing Projects that do not have favorable fuel price
adjustment  provisions  in fuel supply  contracts  may have  purchase  prices or
values that are significantly discounted from those of other Projects.

     If fuel prices  payable by a Project are  relatively  high  compared to the
contract price of energy,  the Project may not be able to generate  energy on an
economic  basis.  On the other hand, if a Project's  economic  returns are based
upon  the  ability  to  generate   substantial   fuel  savings  through  use  of
cogeneration and other more efficient power generation technologies,  lower fuel
prices may tend to reduce the value of the fuel savings and may adversely affect
the financial  performance  of the Project.  Since  cogeneration  and other more
efficient  technologies  often require  higher  capital costs than  conventional
power plants, periods of very low fuel prices could result in fuel savings which
are insufficient to cover the additional capital costs,  thereby creating losses
from the Project.

     Small  scale  Projects  may find it  difficult  or  uneconomical  to obtain
long-term  fuel supply  contracts and thus may be exposed to risks of fuel price
escalations.  For example,  after a relatively long period of depressed  prices,
natural  gas prices in many areas  tripled  between  summer  1996 and the winter
months of 1996-1997.  These  increases  adversely  affected many small  Projects
operated by Prior Programs, although RPMCo was able to negotiate one-year supply
contracts for many Projects it managed at a price  substantially  less than peak
prices.  Because the Fund may be a relatively  small consumer of fuel, it may be
difficult for it to economically hedge fuel prices or purchase reliable supplies
on a long term  basis.  In that  case,  the Fund may be exposed to the risk that
fuel  price  increases  could  reduce  or even  eliminate  profitability  of its
Projects.

     A separate  component  of a  Project's  overall  fuel  requirements  is the
availability,  reliability and cost of transporting the fuel to the Project. For
example,  Projects fired by natural gas may be dependent upon a single  pipeline
for  transportation  of large  volumes  of  natural  gas,  and may be  adversely
affected by the costs of transportation on the pipeline or by outages,  capacity
restrictions,  priority allocations to other customers or other events affecting
the pipeline.  Some Projects are designed to operate on alternate fuels (such as
using fuel oil when natural gas is  unavailable)  but these  alternate fuels are
also subject to similar variables of availability, cost and transportation.

         In contrast to the Power Contract, which is one of the first objectives
of a Project,  the fuel supply contracts are frequently obtained relatively late
in the development process or in the operating stage. There is no assurance that
adequate  fuel  supply  arrangements  for  a  Project  will  be  available  from
dependable sources and at acceptable prices at the time required.

     It should be noted  that  hydroelectric  Projects  and  landfill-gas-fueled
Projects may have little or no net fuel expense. However, hydroelectric Projects
are  dependent  on rainfall  and  snowfall to create river flow and droughts can
severely limit or cease their output.  Landfill gas-fired Projects often have no
alternate source of fuel, and federal regulations effectively limit their use of
alternate  fossil fuels (such as natural gas) to 25% of total fuel use per year.
Therefore  an  interruption  for any reason of the fuel supply from the landfill
(because  of  equipment   problems,   default  by  the  fuel  supply   operator,
environmental  requirements or routine  maintenance,  for example) may reduce or
eliminate the ability of the Project to operate.

Environmental Regulation
     Projects   in  which  the  Fund  will   participate   will  be  subject  to
environmental regulation by federal, state and local government authorities. The
failure  to  comply  and to  maintain  compliance  with  these  regulations  may
potentially  result in  substantial  liability  for  pollution and other damages
under statutes and  regulations  relating to  environmental  matters.  Thus, the
regulatory risks associated with the environment should be considered  carefully
by Investors before investing in the Fund. Environmental regulation includes the
requirement  that the  Projects  in which the Fund will  participate  obtain and
maintain  various  regulatory  approvals,  licenses  and  permits.  The  process
involved in obtaining these approvals can be quite time consuming and expensive,
resulting in delays in the  development or construction of a Project or imposing
operating  limitations  on the Project.  These  factors  could lead to increased
costs to the Fund. If the Fund invests in Projects that were developed by others
or that have an  operating  history,  it may  become  liable for  pollution  and
environmental  discharges  that occurred before it took ownership of the Project
or that the Fund had no ability  to affect.  As a result,  the  purchase  of any
existing Project or any Project located on land affected by previous  activities
may subject  the Fund to  unpredictable  and  material  contingent  liabilities.
Although the Fund through its investigation of Projects will attempt to minimize
such contingencies, there can be no assurance that it can do so.

     In  addition,   there  can  be  no  assurance  that  future   environmental
legislation or regulations will not affect Project economics.  The imposition of
more  stringent  environmental  laws and  more  effective  enforcement  policies
thereunder   could   significantly   increase  the  costs  associated  with  the
development,  construction and operation of any Project and, thus, substantially
reduce the return which  Investors  could  anticipate  with regard to the Fund's
interest therein.  For example,  ongoing  implementation of Title V of the Clean
Air Act Amendments of 1990 will require all existing  industrial  sources of air
pollution to obtain new operating  permits and to comply with  additional  daily
operational limits.

Identifying Projects
     There is no assurance that there will be a sufficient  number of attractive
potential Projects available to the Fund. In seeking to participate in Projects,
in many  cases the Fund is  likely to  encounter  significant  competition  from
construction companies,  equipment vendors, electric and gas utilities and their
affiliates,  other Project Sponsors and investment  groups which  participate in
the  development,   construction  and  operation  of  Projects.  Many  of  these
competitors have greater experience in the independent power industry or project
development or have superior capital resources.

     The  consolidation  of the  independent  power  industry  has  resulted  in
increased competition for acquire most available electric generating Projects in
the United States.  The process of identifying  and investing in Projects can be
protracted and during that period  Investors' funds are held in U.S.  Government
securities,  in money market funds  holding  those  securities  or in short-term
commercial  paper  or  money  market  instruments  at lower  yields  than  those
anticipated  from the  Projects.  Factors that may cause delays  include lack of
funds  for  the  Fund  to  begin  the  acquisition  process,  variations  in the
availability  of Projects and funds  available to other  purchasers of Projects,
negotiations and  environmental and regulatory delays caused by agency action or
the need to investigate or remediate conditions before investing funds. The Fund
seeks to reduce the period  necessary  to invest  funds,  primarily  through the
Early  Investor  Incentive,  which was  instituted  to allow  programs  to begin
acquiring Projects during their offering periods. The period from the closing of
the offering to 90% investment of available funds dropped from  approximately 29
months in Ridgewood  Power I to 9-1/2  months in Ridgewood  Power III but was 22
months for  Ridgewood  Power IV and is over 24 months for  Ridgewood Power V.

Need for Diversification
         The Fund expects that it will participate in several Projects. However,
the size of each  investment  may depend upon a variety of  factors,  including,
among other  things,  the amount of funds  available  to the Fund,  the size and
timing of the  proposed  investment,  the  availability  of  capital  from other
investors,  the ability of other investment  programs  sponsored by the Managing
Shareholders to participate,  and the requirements of other  participants in the
transaction.  Based on prior experience, the Fund believes that the likely range
for each major investment by the Fund may be from 10% to 33% of the Fund's total
capital,  and may exceed 33% if the Fund  participates  in certain  larger scale
Projects.  There can be no assurance  that any  Projects  will earn a return and
failure of any Project to earn a satisfactory  return may have an adverse effect
on the financial performance of the Fund as a whole if that Project represents a
significant portion of the Fund's investments.

Risks of Foreign Investments
     The Fund may invest in  Projects  located  outside the United  States.  The
Managing  Shareholders and Prior Programs have not yet invested material amounts
in foreign  Projects,  although  they have  evaluated  several  proposals,  have
expended funds on due diligence and  exploratory  investments and are developing
Projects in Egypt. Neither Managing Shareholder and none of their Affiliates has
any significant experience in evaluating, investing in, developing, operating or
disposing of Projects  located  outside the United States.  Among the risks that
the Fund will  encounter in making  investments  outside the United  States are:
risks in relying upon unknown or little-known  foreign businesses as partners or
operators of projects, increased costs for legal, accounting,  environmental and
other  services,  exposure to  unfamiliar  systems of  governmental  regulation,
electricity pricing,  taxation,  employment relations and economic organization,
inability  to obtain  goods and services  from abroad or local  requirements  to
purchase  goods and services of unknown  characteristics  and quality from local
suppliers, credit risks in dealing with local businesses and customers,  foreign
exchange risks such as depreciation of the local currency  against the dollar or
inability  to transfer  money to the United  States,  governmental  and business
corruption,  kidnapping,  extortion and other risks to the Fund's personnel, and
difficulty in selling or disposing of Projects or assets.
Utilization of Funds for Undesignated Projects

     The Fund may  direct a  substantial  portion  of the net  proceeds  of this
offering  of  Shares  to  Projects  that  have  not  been   designated  in  this
Registration  Statement,  as it may be  supplemented  from time to time, and the
Fund may be unable to or may decline to participate in any specific  investments
described in this Registration  Statement or any supplements  thereto.  Further,
the Fund's investment  objectives are broad and grant a great deal of discretion
to the Managing Shareholder in determining whether a potential Project is within
the  Fund's  objectives.  Therefore,  prospective  Investors  may not be able to
evaluate  the  Projects  in which the Fund  participates  before  they  purchase
Shares;  nor will  prospective  Investors  have any  voice in the  selection  of
Projects  after they purchase  Shares,  and the Fund may invest in Projects that
differ from those  described in this  Registration  Statement or from those that
the Prior  Programs have invested in.  Consequently,  Investors  will be relying
upon the judgment of the Managing Shareholder for such decisions.

Projects  Require  Large  Amounts  of  Capital  and  Time  for  Development  and
Construction  The Fund may  commit a  significant  portion  of its  capital to a
single Project,  and it is possible that  additional  capital may be required to
complete a Project or make  necessary  alterations or additions to such Project.
There can be no assurance that the Fund will have access to any such  additional
capital or that the Project can obtain any such  additional  capital  from other
sources on satisfactory  terms.  Further, to the extent the Fund participates in
larger Projects, extended periods of time (one to three years) may elapse before
the Project commences operation.

Construction
     The Fund may invest in the development and construction of new Projects and
if it does so, it will be exposed  to the risks  that arise in the  construction
stage of a Project.  These  risks  include  interruptions  of  supplies  or work
stoppages;  delays  caused by  changes  in plans and  specifications;  inclement
weather; subcontractor  non-performance;  planning error; contractor insolvency;
cost increases;  regulatory  changes;  and other  construction-related  matters.
Although  the Fund  will  attempt  to  reduce  those  risks  where  possible  by
contracting  with   responsible   contractors  or  suppliers  on  a  turnkey  or
performance  incentive  basis (where these risks are assumed by others),  it may
not be possible to do so effectively.

Financing and Leverage
     Although  the Fund does not  intend to borrow  any funds to make its equity
investments in Projects,  certain Projects may require non-recourse construction
and/or long term financing in order to be viable. There can be no assurance that
such financing will be available at the time required on satisfactory  terms and
conditions,  and if not available,  the Project may be abandoned and all amounts
invested in the Project to that point will likely be lost.  Even if  commitments
for construction and/or long term financing are obtained by a Project,  there is
no assurance that the Project will be able to meet all of the  conditions  which
are  typically  required  by  project  finance  lenders  in order  to fund  such
financing  commitments.  Further, even if construction or long term financing is
obtained,  failure  by the  Project to obtain and  maintain  expected  operating
parameters  may lead the  holders of the debt to  foreclose  on the  Project and
eliminate the equity investment of the owners.

     The Fund will seek to limit the risks of leverage by limiting the number of
investments in Projects with leverage and/or conducting its due diligence with a
focus on the  adequacy  of debt  service  coverage  (excess  of cash  flow  over
required payments of principal and interest) and debt service  reserves,  and by
focusing on acquiring Projects with a record of prior performance.

Limited Transferability of Fund Assets
     The Fund's  interests  in many  Projects  in which it  participates  may be
illiquid. When the Fund initially commits funds to a Project, it may endeavor to
negotiate the right to sell all or part of its equity  interests in a Project at
a later time without the consents of other participants.  However, the interests
in  Project  Entities  in which the Fund  participates  with other  owners  will
typically  be closely held and the Fund's  ability to transfer its  interests in
such  Project  entities  may be  restricted  or  prohibited  by their  governing
documents,  or by other agreements among Project participants or by covenants in
financing documents.  Even if the Fund successfully negotiates the right to sell
its interest in a project without obtaining the consents of other  participants,
the Fund may find that it is  unable  to sell or  dispose  of its  interests  in
Projects  at the  times  it had  planned  or that  such  transactions  would  be
disadvantageous  to the Fund.  Successful  sales would depend upon,  among other
things,  the operating  history and  prospects for the Projects to be sold,  the
number of potential  purchasers  and the  economics of any bids made by them and
the state of the  independent  power market.  In addition,  sales of substantial
interests in a Project may result in adverse tax consequences.

     The Managing Shareholder will have full discretion to determine whether any
of the Fund  Properties  should  be sold and  which  should  be held and in what
proportions,  and the Fund will have no  obligation  to sell all or a portion of
any asset for the benefit of Investors or to retain any asset for the benefit of
Investors.  Investors  may be  required  to  remain  in  the  Fund  until  it is
terminated and dissolved.

General Risks of Operation
    The  commencement  of  operation by a Project  does not  necessarily  assure
recovery of or a profit on any  investment  made in such Project by the Fund. If
an electric generation Project or a capital project is completed and placed into
operation,  it will be subject to the general risks of the industry,  including,
but not  limited  to,  equipment  failures,  fuel  interruption,  failure of the
Project to perform  according to  projections,  loss of a Power Contract for not
maintaining a minimum required output availability or other breaches,  decreases
or  escalations  in Power  Contract or fuel supply  contract price indices in an
unexpected manner,  bankruptcy of a key customer or supplier,  failure to obtain
required  wheeling rights or use of  transmission  facilities at economic rates,
liabilities  in  tort  (which  may  exceed  insurance  coverage),  environmental
obligations,  inability  to obtain  desirable  amounts of  insurance at economic
rates, acts of God and other catastrophes.

Joint Activity with Others
     It is  anticipated  that the Fund  will  normally  participate  in a larger
Project  jointly  with one or more  other  entities  through a joint  venture or
partnership  vehicle.  To the extent that other participants in a Project cannot
fulfill their  obligations or have  divergent  interests or are in a position to
take action  contrary  to the  policies or  objectives  of the Fund,  the Fund's
interest in such venture may be adversely  affected.  In certain cases, the Fund
may  participate or be deemed to participate as a general  partner of the entity
developing the Project,  thereby exposing the Fund to general partner liability.
The Fund will seek to limit such  exposures by  interposing a limited  liability
entity between the Fund and the Project, or by obtaining specific agreement from
other  Project  participants  they will not seek  recourse  against  Fund assets
(other than the Fund's investment in the Project) for any claims.

     Although  the  Managing  Shareholder  will remain  closely  involved in all
aspects  of the Fund's  activities,  the Fund in some  cases  (typically  larger
Projects)  will  rely  upon  the  advice  of  others  as to the  development  or
management of Projects.  Thus, a substantial  amount of  responsibility  will be
placed on third  parties who function as Project  Sponsors or Project  managers.
The success of any Project will, to a large extent, be determined by the quality
and  performance  of its Project  Sponsors and  managers.  Project  Sponsors and
Project development companies may have conflicting demands on their resources or
may  be  adversely  affected  by  other  developments  at  their  affiliated  or
associated  entities.  As a result, there is the risk that such Project Sponsors
or Project  development  companies  or their  other  investors  may be unable to
fulfill their responsibilities.

Limited Operating Experience
         Although Ridgewood Power has participated in numerous independent power
projects and  executive  officers of  Ridgewood  Power and advisors to Ridgewood
Power have  extensive  backgrounds  in the  independent  power  industry and the
construction  and operation of Independent  Power Projects,  Ridgewood Power has
limited expertise in the design, construction and operation of independent power
plants.  There can be no assurance that Ridgewood  Power's prior  experience has
given it a comprehensive  knowledge of the independent power industry sufficient
enough to result in successful or profitable operations of the Fund or that such
experience extends to all of the diverse areas of the independent power industry
or capital facilities developments in which the Fund may participate.

     Power VI Co has no business track record or experience whatever,  is not an
operating  business  and has no capital  resources.  Its  officers  are those of
Ridgewood  Power and  Ridgewood  Power will make all of its  personnel and other
resources available to Power VI Co as needed to allow Power VI Co to perform its
duties to the Fund.

     Projects  that the Fund will  operate for its own  account  will be managed
under contract with the Fund by Ridgewood  Power  Management  LLC ("RPMCo"),  an
affiliate  of the  Managing  Shareholder.  Although  many  of the  officers  and
personnel  of  Ridgewood  Power also serve as officers  and  personnel of RPMCo,
RPMCo  was  organized  in  January  1996 and thus  has  only  limited  operating
experience.  Many of its  personnel,  although  experienced,  have been recently
hired by it.  Further,  RPMCo also manages the  operations of Projects owned and
operated by the Prior Programs,  and is currently subject to substantial demands
on  its  organizational  and  management  resources.  It is  possible  that  the
management  of  Projects  to be  acquired by the Fund would be impaired by these
demands,  although  the  Managing  Shareholder  believes  that  RPMCo  will have
sufficient resources and experience to operate Projects for the Fund.

Delaware Business Trust
     The Fund has been  organized as a Delaware  business  trust having  limited
liability of the Shareholders of the Fund. Not every state in which the Fund may
conduct  business  has enacted  legislation  recognizing  the limited  liability
provisions of the Delaware  business  trust.  Accordingly,  there is a risk that
investors  will not have limited  liability for  activities of the Fund in those
states.  Such risk is  substantially,  if not entirely,  mitigated by the Fund's
conducting  its  activities  and holding its interest in Projects in such states
through  limited  liability  entities  such as limited  partnerships  or limited
liability companies.

Limitations on Liability of Managing Persons to Fund
     The Declaration  provides that the Fund's officers and agents, the Managing
Shareholders, the Corporate Trustee, the affiliates of the Managing Shareholders
and their respective directors, officers and agents when acting for the Managing
Shareholders or their affiliates on behalf of the Fund (collectively, "Ridgewood
Managing  Persons") will be  indemnified  and held harmless by the Fund from any
and all claims  rising out of their  management  of the Fund,  except for claims
arising out of the recklessness or misconduct of such persons or a breach of the
Declaration  by such  persons.  Therefore,  the right of an Investor to bring an
action against any of the Ridgewood  Managing Persons for a breach of its or his
fiduciary responsibility or other obligations to the Fund may be limited.

Disparity in Shareholder Contributions
     Power  VI Co,  in its  capacity  as a  Managing  Shareholder,  and  its key
employees  and those of the Fund and Ridgewood  Power,  through the Key Employee
Incentive  Plan, will receive,  after the  preferences to Investors,  25% of the
distributions  of the Fund. The Managing  Shareholders and employees will not be
obligated to contribute  any cash to the Fund for that  interest,  except to the
extent that Fund  Organizational,  Distribution and Offering Expenses exceed the
Organizational,  Distribution  and Offering Fee payable to Ridgewood  Poweror to
the extent the plan requires some monetary contribution by employees.  Ridgewood
Power has purchased one full share as an Investor in the Fund.

Lack of Investor Participation in Management
     Investors  have no right to vote on who  will act as  Managing  Shareholder
unless both Managing  Shareholders  resign, are removed by special action of the
Investors  or are  incapable  of  acting as  Managing  Shareholders  because  of
bankruptcy or legal disability. Similarly, Investors have no right to vote on or
select the  Independent  Panel Members of the Fund unless an  Independent  Panel
Member  resigns or is incapable of acting.  Therefore,  Investors have much more
limited rights to participate in control of the Fund than would  stockholders of
a  corporation.  The Managing  Shareholder  has the  exclusive  right to manage,
control  and  operate  the  affairs  and  business  of the  Fund and to make all
decisions relating thereto and has full, complete and exclusive  discretion with
respect to all such  matters.  Investors  have no right,  power or  authority to
participate  in the  ordinary  and  routine  management  of Fund  affairs  or to
exercise any control over the decisions of the Fund. Accordingly, no prospective
Investor should  purchase any Shares unless the prospective  Investor is willing
to entrust all aspects of management of the Fund to the Managing Shareholder.

Limited Transferability of Shares
     Shares in the Fund are an illiquid  investment.  There is no market for the
Shares,  and,  because  there will be a limited  number of persons who  purchase
Shares and significant restrictions on the transferability of such Shares, it is
expected  that no public  market will  develop.  Any change in the status of the
Shares would require  compliance with multiple  regulatory and tax  requirements
and consent from a majority in interest of Investors.  Investors  will generally
be  prohibited  from  selling  or  transferring   their  Shares  except  in  the
circumstances permitted under Article 13 of the Declaration,  and all such sales
or transfers  require the consent of the Fund,  which may withhold such approval
in its sole discretion.  Accordingly, an Investor will have no assurance that he
or she can liquidate  his or her  investment in the Fund and must be prepared to
bear the  economic  risk of the  investment  until  the Fund is  terminated  and
dissolved.

     The Shares have not been, and are not expected to be,  registered under the
Securities Act of 1933, as amended (the "Act"), or any state securities law in a
manner that will make the Shares freely  transferable  by purchasers  under such
laws and,  therefore,  cannot be resold unless they are subsequently  registered
under the Act or an exemption from such registration is available and subject to
other limitations and conditions  imposed by the Declaration.  The provisions of
Rule 144 under the Act would be available to Investors in  connection  with such
resale,  if the  requirements  of that rule are met, but the Fund has no current
intention to allow transfers to be made on the open market pursuant to the rule.

     The  illiquidity  of  and  other   significant  risks  associated  with  an
investment in the Fund make the purchase of Shares suitable only for an Investor
who has  substantial  net worth,  who has no need for liquidity  with respect to
this  investment,  who  understands  the risks  involved,  who has reviewed this
Registration  Statement and the Exhibits  hereto and the risks involved with his
or her  tax,  legal  and  investment  advisors,  and who has  adequate  means of
providing for his or her current and foreseeable needs and contingencies.

Voluntary Additional Capital Contributions
     There will be no mandatory  assessments  of the  Investors and the Managing
Shareholder. Investors may, however, be called upon on a voluntary basis to make
additional  Capital  Contributions  after the expenditure of the Initial Capital
Contributions.  If an Investor elects not to make a requested additional Capital
Contribution,   the  Managing   Shareholder  may  determine  that  the  Managing
Shareholder,  other  Investors  or other  persons may do so or may supply  loans
instead, which may result in a dilution of that Investor's interest in the Fund.

Failure Of Fund To Perform Funding Obligations

     Although  the Fund  anticipates  that it will be able to perform all of its
commitments  to invest in Projects,  in certain  instances  there may be adverse
consequences to the Fund if it were to fail to do so. For example, a partnership
agreement or other  instrument  governing the Fund's  participation in a Project
might provide  that, in the event the Fund fails to make a capital  contribution
to the partnership or particular  Project as required under such agreement,  the
Fund will forfeit its entire interest in the partnership or Project, as the case
may be.

Potential Conflicts of Interest
     There  are  material,  potential  conflicts  of  interest  involved  in the
operation of the Fund. Some examples of these potential conflicts include

     competing demands for management  resources of the Managing Shareholder and
RPMCo;
o competing demands for allocating investment or divestiture opportunities among
programs;
o competing  demands for  opportunities  to sell electric  power in  competitive
markets;
o conflicts between the interests of the Managing Shareholder and its Affiliates
in receiving  compensation  from the Fund for investment  activities,  operating
activities,  and divestitures,  as well as reimbursement  for expenses,  and the
interests of the Investors;
o conflicts relating to the allocation of costs and expenses among programs;
o conflicts  arising from the fact that the Managing
Shareholder will not make a capital  contribution in respect of its interests as
such in the Fund and that the  Investors  will  supply all of the capital of the
Fund;
o conflicts between the interests of the Fund and other programs sponsored
by the Managing  Shareholder  and its Affiliates if those programs are co-owners
of Projects with the Fund;
o conflicts as to who will supply additional  capital in the event the Fund were
to require additional contributions;
o potential interests of the Managing Shareholder or its Affiliates in competing
independent power or investment ventures;
o the lack of  independent  representation  of  Investors  in  structuring  this
offering and in determining compensation;  and
o conflicts between the interests of key employees and the Managing  Shareholder
and those of Investors  with regard to  determining  compensation  under the Key
Employees Incentive Plan.

Material  transactions  between  the Fund and other  Programs  sponsored  by the
Managing  Shareholder  and its  Affiliates  must be reviewed and approved by the
Independent Review Panel. Although the potential conflicts of interest described
here and others  cannot be  eliminated,  the Fund  believes  any such  potential
conflicts will not materially affect the obligation of Ridgewood Power and Power
VI Co in their capacities as Managing  Shareholders to act in the best interests
of the Investors and the Fund.

Tax Risks
         There are tax advantages associated with an investment in the Fund, and
there are some tax risks associated with those tax benefits.  The risks include,
but are not limited to, those discussed below.

(A) Partnership Tax Status of Fund
     While it is the  opinion of tax  counsel to  Ridgewood  Power that the Fund
should be  recognized  as a partnership  for federal  income tax purposes,  such
opinion is not binding  upon the Service and no advance  ruling from the Service
as to such status has been requested, and such a request is not contemplated. If
a secondary market for the Fund's Investor Shares develops,  the Service, in the
event it audits  the Fund,  might  attempt  to treat the Fund as an  association
taxable as a corporation. If such challenge were successful, the Investors would
be treated as if they were corporate  shareholders and, therefore,  would not be
entitled to deduct their proportionate share of the Fund's operating losses.

(B) State and Local Taxes
     Each Investor may be liable for state and local income taxes payable in the
state or locality in which the Investor is a resident or doing  business or in a
state or locality in which the Fund  conducts or is deemed to conduct  business.
Thus each Investor may be required to file multiple  state income tax returns as
a result of his investment in the Fund.

     The state of  California  has  instituted  a  withholding  requirement  for
distributions  from  organizations  taxed as partnerships  (such as the Fund and
limited  partnerships or limited liability  companies used by the Fund to invest
in Projects)  to tax  partners  located  outside  California.  If the Fund earns
income in  California,  the portion of each  distribution  to a  non-California,
taxable  Investor that is attributable to California is subject to a withholding
tax of 7%, whether or not the Investor files a California income tax return. The
Fund believes that other states may follow  California's  example, in which case
much of the income component of distributions to an Investor would be subject to
state withholding taxes.

     Each  prospective  Investor  is urged  and  expected  to  consult  with his
personal  tax advisor  with respect to the tax  consequences  connected  with an
investment in the Fund.

(3)  Business Plan and Development of Projects

Business Plan.
     As  deregulation   of  the  electricity   industry  in  the  United  States
progresses,  the uncertainties and the financial  stresses that deregulation may
create may have the effect of depressing  the stock price of companies that have
long-term  value.  Opportunities  may arise to invest  in  undervalued  industry
participants or in other businesses having unique technological  advantages.  If
so, the Fund may invest  its funds in  acquiring  majority  or  minority  equity
stakes in those companies.

Advantages of Investing in the
Independent Power Industry
         Because of historical factors, many existing independent power Projects
have long-term power sales  contracts that can provide  consistent cash flows to
Project  owners  over long  periods of time.  Further,  the side  effects of the
deregulation of the electricity industry,  which is just beginning,  are tending
to depress the purchase  price of these  Projects.  Finally,  in several  years,
those side effects  might make these  Projects  more  valuable  than the current
prices for the Projects would indicate. The Fund's decision to invest its assets
in the independent power industry is based on these trends.

         In 1978,  Congress passed the Public Utilities  Regulatory Policies Act
("PURPA"),  which was intended to create  additional  sources of electricity and
which also created the ability for companies  other than  electric  utilities to
generate and sell electricity.  Under PURPA, each electric utility must purchase
electricity   generated  by  certain  non-utility   electric  generating  plants
("Independent Power Projects") at a price equal to the utility's "avoided cost."
This avoided cost basically is the estimated  highest cost the utility would pay
otherwise to purchase  additional  electricity.  PURPA also exempts  Independent
Power Projects from many federal and state restrictions.

         PURPA does not require  utilities to enter into long-term  contracts to
buy electricity  from  Independent  Power Projects,  but in the 1980's and early
1990's many  utilities  entered into  long-term  power  purchase  contracts from
Independent  Power  Projects.  With  changes  in the  industry,  few if any  new
long-term power purchase contracts are being entered into today.

         Generating  facilities  with  existing  long-term  contracts  thus have
unique  advantages in that those  contracts are for extended terms at rates that
are  often  equal  to  or  higher  than  current  spot  rates  for  electricity.
Nevertheless,  the Fund believes that these facilities are sometimes undervalued
and can be excellent investment opportunities.

         First, the deregulatory movement has made many potential competitors of
the Fund uncertain about the value of small generating facilities with long-term
contracts.  The federal  government and state  governments are  deregulating the
electric  power  industry.  These changes will allow any company that  generates
electricity  to sell its  output to any  utility  to which it can  transmit  the
electricity,  and,  in most  states,  eventually  to any retail  customer.  This
movement will create pressures on local utilities to buy their  electricity from
the cheapest  competitive source. As a result,  local electrical  utilities with
high-cost generating facilities,  such as malfunctioning nuclear power plants or
inefficient fossil-fuel units, will find that they will not be able to use those
facilities  economically.  Even so, those utilities will be obligated to pay off
the capital costs incurred to build and maintain those uneconomic plants.  Those
costs are called "stranded costs."

         Many long-term  power purchase  contracts  between local  utilities and
independent  power  producers  now  provide  for  rates  in  excess  of  current
short-term  rates for  purchased  power and the  utilities  are  treating  their
contractual  obligations  as a form  of  stranded  cost.  There  has  been  much
speculation  that in the course of  deregulating  the electric  power  industry,
federal or state regulators or utilities would attempt to invalidate these power
purchase  contracts as a means of throwing some of the costs of  deregulation on
the owners of independent  power plants.  To date, the Federal Energy Regulatory
Commission and each state regulator that has addressed the issue have ruled that
existing  power purchase  contracts  will not be affected by their  deregulation
initiatives.  To date,  the  regulators  have  rejected  the  requests  of a few
utilities to  invalidate  existing  power  purchase  contracts.  There can be no
assurance that existing power purchase contracts will not be modified.  However,
because of the  consistent  position  of the  regulatory  authorities,  the Fund
believes that so long as it performs its  obligations  under the power  purchase
contracts, it will be entitled to the benefits of those contracts.

         Facilities  without  long-term  power  purchase  contracts  may also be
attractive  investments.  Deregulation is encouraging electric utilities to sell
off many of their existing  generating  plants. In many cases,  state regulators
are  requiring  electric  utilities  to sell many of their  plants  to  separate
electric  generating  companies,  so that a  competitive  market  for buying and
selling  electricity  can be created.  In other cases,  electric  utilities  are
voluntarily selling their generating plants because they believe they can obtain
power on the open market more efficiently.  As a result, there is a large number
of generating plants for sale today and it is expected that many more will be on
the  market  soon.  This  tends to  depress  the price of all  existing  plants.
Further,  small electric generating plants may be less attractive  purchases for
large  corporations  and  investment  groups  with  large  amounts of capital to
invest,  which may further depress their current prices.  The Fund believes that
these market  conditions may allow it to acquire small  independent power plants
at attractive prices.

         Finally,  the uncertainties caused by deregulation and by past failures
of  demand to meet  projections  have  deterred  investments  in new  generating
capacity.  Further,  as a competitive market in generating  capacity is created,
market forces are  discouraging  many utilities and  generators  from keeping as
much generating capacity in reserve as they did in prior years. While some power
marketing  groups are claiming that  efficiencies  created by deregulation  will
meet  needs for  additional  capacity,  many  electric  industry  engineers  and
consultants  have  expressed  fears that there will be shortages  of  generating
capacity within the next 10 years in many areas of the United States.  It should
also be noted that as deregulation  forces electricity prices lower,  demand for
electricity   should  rise,   other  things  being  equal.  In  addition,   many
nuclear-powered  and conventional  electric  generating plants are coming to the
end of their useful lives.

     With these  factors  shaping  the future  market,  a few large  independent
electric power  companies and their backers have announced  plans to build large
new  generating  stations  without  long term  power  purchase  contracts.  They
apparently  think by the time those large  investments  in power  plants go into
operation  (currently  estimated through 2002) those plants will be needed.  The
Fund does not intend to join in building large new power  generating  facilities
without firm  contracts for sale of the  electricity,  although if an attractive
opportunity  existed  it would do so.  Instead,  the  Fund  believes  that if it
economically and efficiently  operates and maintains small generating  Projects,
those  Projects  will increase in value from their  current  somewhat  depressed
levels if reserve capacity tightens in the industry.

         In addition, many small independent power Projects have environmentally
beneficial  features.  For example,  some small  independent  power Projects use
landfill  gas to power  their  generators.  Instead  of having the  methane  gas
produced by rotting garbage flow into the atmosphere, where it may have powerful
"greenhouse"  effects that  increase  global  warming,  the methane is burned to
produce electricity and water and carbon dioxide, which are less environmentally
destructive.  Small independent  cogeneration  power Projects can save fuel. The
Fund  will look for  small  Projects  that  have  these  kinds of  environmental
benefits, not only because of the benefit to the environment but also because it
believes that its  experience  with these kinds of small  Projects can make them
good investments.

Advantages to Investing in Other Capital Facilities
         Environmentally   beneficial  independent  power  Projects  often  have
similar,  non-electric power facilities related to them. For example, a trash-to
energy power plant may have a waste transfer  station nearby.  In  investigating
small independent power Projects, Ridgewood Power has found that there are other
capital  projects that are similar to independent  power Projects and that often
(but not necessarily)  have  environmental  benefits.  These may meet the Fund's
goals for investment  because they are expected to provide  long-term,  reliable
cash flows and have potential for long-term  appreciation.  Some of the types of
Projects that may fit this profile include:

Projects  to convert  waste  fuel or biomass  into  useful  fuels or  chemicals;
Projects  to  generate  electricity  or  heat  to  process  or  destroy  harmful
industrial  wastes;  Projects  that provide  pumping power or other motive power
more efficiently than electric or other motors;  infrastructure  facilities such
as waste transfer  stations;  or other types of capital  projects,  such as fuel
plants,  processing  facilities and recycling  facilities,  that are expected to
have consistent cash flows similar to those from Independent Power Projects.

Advantages to Investing in Other Companies
         Deregulation of the electricity industry,  like the deregulation of the
natural  gas  industry  in the last 15 years,  is  likely to have  unpredictable
effects on many utilities and electric generating  companies.  Instead of having
assured markets and  government-determined  pricing, both electric utilities and
independent  power producers without long-term Power Contracts will face rapidly
changing demand and supply for electricity. Smaller companies and companies with
long-term  or  unconventional   business  strategies  may  find  that  they  are
undervalued  by the stock  market  or that  deregulatory  uncertainties  make it
difficult to attract  capital and grow.  This may create  opportunities  for the
Fund to acquire  majority or minority  equity  interests  in those  companies on
favorable conditions. Although this type of investment is not the Fund's primary
goal, the Fund will take advantage of these opportunities if they arise.

     Although the Fund's primary focus is to invest for long-term  appreciation,
it might also elect to invest in equity  securities  with the purpose of gaining
control of a company, or for effecting a merger or business combination with the
Fund, its affiliates or non-affiliated parties, or for effecting the acquisition
of assets,  or for sale to a  successful  bidder.  The Fund might  effect any of
these  transactions  on its own,  together  with  Affiliates,  or together  with
non-Affiliates,  and might do so with the encouragement or consent of management
or controlling equity holders of the company or without such consent.

         If the Fund were to invest a substantial amount of its assets in equity
securities of other companies and did not actively own and operate power plants,
it might  become an  "investment  company"  subject to the  requirements  of the
Investment  Company Act of 1940.  The Fund does not intend to do so and will not
make  investments  that would  require  it to be  regulated  under that  statute
without the prior  consent of the holders of a majority of the  Investor  Shares
and  the  Incentive  Shares  issued  under  the  Key  Employees  Incentive  Plan
(collectively, the "Voting Shares").

The Prior Programs have not invested in majority or minority equity interests in
other operating companies because their primary investment  objective is earning
current cash flow for distribution  rather than long-term capital  appreciation.
Neither the Managing  Shareholder  nor the Fund has  significant  experience  in
making equity investments in other operating companies.

Basic Investment Approach
         When the Fund makes  investments in  Independent  Power Projects and in
other capital Projects,  it concentrates on smaller Projects in which it can buy
at least a controlling  equity interest (either together or with another program
sponsored  by the  Managing  Shareholders).  Those  investments  should be small
enough for the Fund to make several  investments and to diversify its purchases.
Therefore,  these types of investments  are expected to be in the range of $2 to
$20  million  per  investment.   Many  institutional  investors  will  not  make
investments of less than $10 to $15 million,  which may reduce  competition  for
the investments the Fund is focusing on. Also, larger companies may want to sell
their smaller  Projects so they can focus their  capital and other  resources on
other investments.  In some cases,  electric utilities may wish to sell all or a
portion of their  interest  in a Project so that they can  comply  with  federal
requirements  limiting their  investment in certain  facilities  regulated under
PURPA to 50% of the equity.

         By making equity investments, the Fund often deleverages Projects. This
decreases risk to Investors and reduces financing expenses for the Projects, and
usually  frees  up  funds  held in  amortization,  maintenance  or debt  service
reserves  that  lenders  required.  This can make more cash flow  available  for
distribution  to  Investors  and in the long term if the Fund is  successful  in
improving  the  operating  results of the Project.  After a period of successful
operation,  or based on other factors,  the Fund might conclude that the balance
of returns and risks to Investors  would be improved if a Project was leveraged.
In that case,  the strong equity  position of the Fund might make such financing
easier to obtain.

         Another  advantage  of the Fund's  approach  is that it is  prepared to
provide  equity  financing  of up to 100% of the  amount  needed to  acquire  or
develop  a  Project  and  can do so  quickly,  without  the  need  of  obtaining
additional  financing  from  institutions.   Institutional  debt  financing  for
projects in North America can be difficult to obtain quickly.

         Where possible, the Fund prefers to invest in Projects that are already
operating to reduce  development  risks and delays in earning cash flow.  If the
Fund  commits  money to  develop a  Project,  it  prefers  to invest in  smaller
Projects or Projects with short development periods.

         Where  possible,  the Fund will seek to have  operating  control over a
Project (or share  operating  control  with  another  program  sponsored  by the
Managing  Shareholders).  Ridgewood  Electric Power Trusts I through V (the five
other independent power industry programs sponsored by the Managing Shareholders
and referred to as the "Prior  Programs") now own interests in over 40 Projects,
primarily in California,  New York and New England.  Over half of these Projects
(by number and by revenues) are managed by RPMCo,  which is also wholly owned by
Robert E. Swanson.

         RPMCo  has  over  35  employees,   including  engineering,   operating,
accounting  and legal  specialists.  The Managing  Shareholders  have found that
hiring other  participants  in or developers of Projects to manage the Projects,
or hiring third party managers, often leads to inefficient management and lesser
total returns to the Funds.  Further,  common  management allows savings in fuel
purchasing,  cash  management and personnel,  creates  incentives for efficiency
over the  entire  portfolios  of  Projects,  and allows  RPMCo to gain  valuable
operating and industry experience.  RPMCo is only reimbursed for its costs, with
no profit factor.

         The Fund may hire other persons to manage Projects,  typically in cases
where the Projects are small and  difficult to manage  centrally.  In some cases
the prior owner or  developer  may retain a  significant  ownership  interest or
insist on  continuing  to operate  Projects as a condition  for selling them. In
those  situations,  the Fund will seek to obtain a  preferred  right to net cash
flow from the Project  before the other owner or  developer  is entitled to cash
flow or compensation materially in excess of its costs.

         The Fund will also  attempt  to  include  incentive  provisions  in any
management  contract that will encourage the manager or operator to maximize the
return to the Fund.  These types of provisions often give the manager a bonus if
it exceeds performance targets while reducing compensation somewhat (or allowing
the  Fund to fire  the  manager)  if the  Project's  performance  does  not meet
specified minimums.

         Finally,  in  acquiring a Project,  the Fund  ordinarily  will create a
subsidiary with limited  liability for its owners to hold the Project or a small
group of similar  Projects.  This  should  reduce the Fund's  liability  for its
subsidiaries'  operations and should isolate each Project to a reasonable extent
from liabilities of other Projects.

Investment Approach for Larger Projects
         The Fund  might  be able to  invest  in  Projects  larger  than the $20
million size described above. If it participated with larger companies in buying
or  developing a Project,  the Fund would  probably buy a minority,  non-control
equity interest. These types of transactions are heavily negotiated and there is
no typical structure for the Fund.

         However,  the Fund believes that it could be an attractive  participant
in a  purchase  of a  larger  facility,  because  its  investment  objective  is
long-term  appreciation  for its  Investors  and  because  it has ready cash for
investment.   The  Fund  thus  can   participate   quickly  and  effectively  in
negotiations.  Moreover,  it can enter  into  complicated  arrangements  such as
partnerships  with special  allocations of accounting  earnings or tax benefits,
where the Fund can receive  cash flow while  other  participants  are  allocated
disproportionate  amounts of earnings or tax items that may be more  valuable to
them. Further,  because the Fund is not related to any electric utilities,  when
it invests in a Project it can help any  electric  utility  co-owners  to comply
with the 50% utility ownership limitation for certain Projects.

Timetable for Trust Investments
        Although the amount of time needed to invest all the funds raised varies
significantly  from  program  to  program,  the  Fund  estimates  that  it  will
substantially  complete  its  investments  between  12 and 18  months  after the
offering closes, which is anticipated to occur in the second quarter of 2000.

     These time  estimates for the length of the offering and the amount of time
needed to complete buying Projects may change  significantly  depending upon the
progress of the  offering,  the amount of funds raised and the  availability  of
attractive investments.  One of the Prior Programs had approximately $14 million
of uninvested funds as of the date of this filing. As described below, Ridgewood
Power's   policy  is  to   present   investment   opportunities   first  to  the
earliest-organized program with available funds. Therefore, the Fund may have to
wait until Prior Programs are fully invested  before its funds can be applied to
Project  investments.  See Item  1(c)(2)  - Risk  Considerations  -  Identifying
Projects for  additional  factors  that may affect the Fund's  ability to invest
funds quickly.

         Until  funds from the  offering  of Shares are  invested,  they will be
deposited in bank  accounts,  in securities  issued by or guaranteed by the U.S.
Government  or its agencies or in money market funds or other funds  invested in
those  securities,  or in  investments  rated AAA or Aaa or A1P1 or higher  (for
money  market  or  commercial  paper   instruments)  by  nationally   recognized
securities  rating  organizations,  or in  securities  that  are  prior to those
investments.

Distributions from Operating Projects
         Until  the Fund has  invested  in a  significant  amount  of  operating
Projects,  it generally  will make  distributions  of  available  cash flow from
interim investments and initial Projects quarterly to Investors.  When cash flow
available from operating  Projects reaches an appropriate  level (usually within
18 to 36 months after the offering of Shares begins), the Fund will seek to make
quarterly or monthly distributions.

         Distributions  of available  cash flow can vary  depending upon Project
operating  performance,  fuel prices,  unexpected  operating  or  administrative
costs,  environmental  requirements,  scheduled and unscheduled  maintenance and
costs of equipment,  fees and expenses  payable to outside  operators or Project
participants and Trust operating costs and liabilities.

         The  Fund's   primary  goal  is  to  provide  a  capital   appreciation
opportunity  for  Investors,  both by  investing  in  assets  with  appreciation
potential  and by  positioning  itself for a future public  offering,  merger or
other  corporate  event.  Subject to these and other  factors  described  in the
remainder  of this  Confidential  Memorandum,  the Fund's  secondary  goal is to
provide Investors with annual  distributions of net cash flow, as defined in the
Declaration of Trust, of 12% of their Capital Contributions to the Fund. Because
the Fund's policy is to distribute net cash flow, a substantial  portion of many
distributions  will include funds that represent  depreciation  and amortization
charges against assets.  Occasionally,  distributions  may include funds derived
from  operating or debt service  reserves or proceeds of sales of Projects.  For
purposes of generally accepted accounting  principles,  amounts of distributions
in excess of accounting  income may be considered to be capital in nature,  even
though the Fund is  organized  to return net cash flow  rather  than  accounting
income to Investors.

         Under  current law and  conditions  Independent  Power  Projects have a
relatively  assured  source of revenues  for the length of their power  purchase
contracts. When those contracts expire or terminate, or if the Independent Power
Projects do not have fixed or formula price  contracts,  the cash flow prospects
for the Projects will depend on market  conditions  and are not  predictable  at
this time.

Sale or Disposition of Projects
         The Fund's  business  plan is not currently  geared  toward  selling or
otherwise disposing of Projects before the expiration or termination of existing
power purchase contracts. The Fund believes that at or before the termination of
those  contracts  there may be  opportunities  to sell or  otherwise  dispose of
Projects at a positive return for Investors and two Prior Programs have done so.
However, any estimate at this time of potential returns is speculative.

Future Liquidity Alternatives
         Investor Shares are an illiquid investment.  However,  after the Fund's
business is  well-established,  which is anticipated to be approximately  two to
five  years  after  this  offering  terminates,  the Fund  will seek to make the
Investor  Shares more  liquid.  Among the  alternatives  that might be available
would be events  ("Liquidity  Events")  such as a change in the Fund to create a
publicly  traded  entity,  either as the result of a business  combination  with
other similar programs  sponsored by Ridgewood Power or by altering the existing
securities,  tax and  organizational  law limitations on transfer and trading of
Investor  Shares.  Because these types of changes have  significant and possibly
adverse  federal  income tax,  federal  and state  securities  law and  business
effects,  the Fund cannot and does not assure Investors that any such change can
be made and will do so only  with the  consent  of a  majority  in  interest  of
Investors.

         Ridgewood  Power  intends  that  the five  Prior  Programs  (the  prior
business trusts organized by Ridgewood Power to invest in the independent  power
industry)  will  eventually  combine  into a single  corporation  that will have
tradable shares that will be listed or quoted on a major U.S. securities market.
The combined  corporation,  which would have more equity owners,  greater assets
and  more   diversification  of  assets  than  any  single  program,   might  be
significantly  more likely to develop a market for those equity interests.  This
type of  Liquidity  Event has become a  possibility  because  of the  success of
Ridgewood  Power since 1991 in organizing  five Prior Programs with  significant
assets and investor bases that could join with the Fund. One consequence of this
type of  combination  would be that  unlike the Prior  Programs,  the  resulting
combined corporation would not be treated as a partnership for tax purposes.  As
a  result,  it would  be  taxed  as a  separate  entity  on its  income  and its
stockholders would pay income tax as well on any dividends it paid to them.

         It is thus  possible  for the  Fund at some  future  date to  merge  or
combine  with the  successor  public  corporation  to the Prior  Programs  or to
participate in the original  combination.  Ridgewood Power currently  intends to
include the Fund together with the five Prior Programs in the conversion  into a
single  corporation.  If the Fund were large  enough on its own,  the Fund might
also convert itself into a taxable  corporation with tradable  shares,  although
under current conditions this second alternative is unlikely.

         As an  alternative  Liquidity  Event,  the  Managing  Shareholders  and
Investors could amend the Declaration to permit free transferability of Investor
Shares. If the Fund is registered under the Securities  Exchange Act of 1934, as
it  anticipates,  this would allow most Investors to offer their Investor Shares
to potential purchasers under Rule 144 of the Securities and Exchange Commission
as long as the sale takes  place at least two years after  purchase  and several
prerequisites are met, or in most cases without  prerequisites three years after
purchase.  Finally,  subject to further review of legal and tax issues, the Fund
might change its structure into one that continues to be taxed as a flow-through
entity (a business  entity that is not taxed as a corporation and thus, like the
Fund currently,  avoids double taxation of amounts  distributable  to Investors)
but that permits free  transferability  of Investor Shares.  This might, but not
necessarily  would,  permit the  creation of a trading  market for the  Investor
Shares.

         Under current law and business conditions, there are significant legal,
tax and business  consequences from electing any of these alternative  Liquidity
Events and the Fund  accordingly will not do so without amending the Declaration
after soliciting and receiving the consent of the holders of at least a majority
of the Investor  Shares.  Before the Fund  undertakes  any action or change that
would result in a Liquidity  Event,  it will solicit each Investor in writing by
means of a disclosure  document  describing all material aspects of the proposed
action.

         In general,  actions that would allow Investor  Shares to be marketable
would  raise the  question  for  federal  income tax  purposes as to whether the
Investor Shares were readily  tradable on a secondary  market or its equivalent.
In that case, the Fund would be considered to be an  "association"  taxable as a
corporation.  A combination of the Fund with other programs would raise the same
tax issues as to the combined entity and its securities.

         Corporation  tax  status  might  have  adverse  effects on the net cash
return to an Investor,  in part because a  corporation's  income is taxed at the
corporate  level and  dividends  derived  from that income are then taxed at the
Investor  level.  It is also  possible,  however,  that because of  depreciation
deductions  or other tax  provisions  that the Fund  might not have  significant
taxable income so that these adverse  effects would be less  significant.  It is
impossible  to  predict  these  factors at this time.  It might be  possible  to
convert the Fund to a different  type of taxable entity that is not taxable as a
corporation,  but under  current  law it is likely that a  restructuring  of the
Fund's investments to a more passive form and reduction of the Fund's management
rights, if any, over Projects would be required.

         In  addition,  if the  Fund is to be  combined  with  other  investment
programs,  the process of combining  the  entities,  obtaining  necessary  owner
consents and making  regulatory  filings may be protracted and expensive and may
involve significant conflicts of interest between the combining programs.  These
transactions,  which are  sometimes  referred to as "rollups,"  require  special
disclosure and fairness procedures to be undertaken,  may require  supermajority
votes of  shareholders  in each  program to be obtained  for approval and can be
extremely complex.

     There are other  alternatives  that the Fund  currently  believes  are less
desirable to Investors but that might be suggested if future  market  conditions
were favorable.  The Fund might propose to the Investors that the Declaration be
amended to provide  redemption  rights to Investors.  If the  Investors  were to
approve that proposal,  the Investors would be offered the opportunity to redeem
their  Investor  Shares or to remain as equity  owners in the Fund.  Because the
Fund anticipates that most of its investments in Projects will be illiquid,  the
Fund would not be able to redeem a portion of its Investor Shares until it could
sell  Projects or  portions of  Projects.  The Fund would  confront  significant
issues of fairness between redeeming Investors and the remaining Investors if it
were to fund  redemptions by selling entire Projects.  For example,  if the most
liquid or  attractive  Project  were sold to maximize or  accelerate  returns to
redeeming Investors, the remaining Investors might be relatively  disadvantaged.
Accordingly,  the Managing  Shareholders  believe  that a  redemption  option is
currently less desirable.  If redemption  rights were  authorized,  the Managing
Shareholders  would  prefer to fund them by selling  fractional  interests in as
many Projects as possible to minimize  conflicts of interest  between  redeeming
Investors  and  remaining  Investors.   Therefore,  if  redemption  rights  were
authorized,  the  attractiveness  of this option  would depend on the market for
Projects,  and  presumably on the market at that time for minority,  non-control
interests in the Projects owned by the Fund.

         Finally, a majority of the Investor Shares may cause the dissolution of
the Fund,  either with the Managing  Shareholders'  consent or by removal of the
Managing Shareholders.  Dissolution would cause the mandatory liquidation of the
Fund's investments,  although the time constraints of a dissolution and the need
to sell all investments concurrently tend to significantly reduce total return.

         No Investor should purchase  Investor Shares with the expectation  that
the Fund will elect to take or will be able to take any steps to make the Shares
tradable  on any market or that any other  means of allowing an Investor to sell
or "cash-out" his or her investment will be available.

Potential Investments
         From time to time the Fund may identify  potential  investments for its
available funds. The Managing Shareholder  anticipates that the Fund will review
and enter into  preliminary  investigations  or  indications  of interest  for a
significant  number of potential  investments that in fact the Fund will decline
to pursue or that will not be  available  for the Fund to invest  in.  This is a
necessary part of the process of winnowing  potential  investments to those that
the Managing  Shareholder believes are the most advantageous for the Fund. Thus,
the identification of any potential investment is not an assurance that the Fund
will  acquire the  investment  or that it will even enter into  negotiations  to
effect the purchase.  Further, in Ridgewood Power's  experience,  as a result of
investigations  of the investment and the process of negotiating an acquisition,
the terms of the transaction tend to change frequently and unpredictably.  There
is no assurance that any proposed investment or any variant will occur, that the
terms of the  investment  will be the same or similar to those  proposed  by any
party from time to time or that any investment will be economically advantageous
to  the  Fund.  Investors  who  purchase  Investor  Shares  while  any  proposed
investment  transaction  is pending must do so with the  understanding  that the
final terms and conditions of the transaction may differ from those described in
this  Registration  Statement or elsewhere  and that their  purchases  cannot be
contingent upon the final terms, if any, of the transaction.

(4)      The Fund's Investments.

(i)  United Kingdom Landfill Projects

         The Fund and Power V are  participating  through a joint venture in the
United Kingdom Landfill  Projects,  which include owning five completed landfill
gas  electric  generation  plants  in  Great  Britain  and  developing  up to 20
additional sites.

         The  estimated  cost of the  package  of  completed  plants  and the 20
developmental  sites, if all the  developmental  plants are built, is $36 to $38
million.  Power V  supplied  the first $16  million  of the  purchase  price and
developmental   equity  and  the  Fund  is  supplying   the   remainder  of  the
developmental  equity.  To the extent that the Fund  supplies  capital,  it will
receive  an  undivided   interest  in  the  entire   package  of  operating  and
developmental  projects.  Power V and the Growth Fund have  organized  Ridgewood
U.K. Limited,  an English limited company ("Ridgewood U.K.") to act as a holding
company for the British projects.

The following five plants are currently in operation:

Project                   Location        Current Price per  Installed capacity
                                                kWh (US$)
Chelson Meadow ........  Devon, England          4.57       2.85 megawatts
United Mines ..........  Cornwall, England       5.26       2.85 megawatts
Whinney Hill ..........  Lancashire, England     5.28       3.10 megawatts
Bellhouse .............  Essex, England          5.28       2.85 megawatts
Summerston ............  Glasgow, Scotland       5.26       2.85 megawatts
Total capacity ........                                     14.5 megawatts

         Each British plant has a 15-year long term power purchase contract with
the Non-Fossil  Purchasing Agency Limited, a  quasi-autonomous  non-governmental
organization that purchases  electricity generated by renewable sources (such as
landfill gas power  plants) on behalf of all English  utilities in order to meet
British  environmental  protection  goals.  The  Summerston  plant has a similar
15-year contract under the Scottish Renewables Order with Scottish utilties. The
electricity  prices  will  be  increased  annually  by a  factor  equal  to  any
percentage increase in the U.K. Retail Price Index.

     The first five  projects  named above (which  include both the  electricity
generating plants and the gas collection and cleaning systems) have been or were
financed with long-term bank debt, in addition to the equity interest  purchased
by the Fund and Power V. The  loans are  non-recourse  against  Ridgewood  U.K.,
Power V, the Fund and their intermediate subsidiaries. The Fund and Power V have
also  organized  Ridgewood  CLP  Management  Limited,  an English  company  ("RW
Management"),  which will be  responsible  for operating the five plants and any
additional plants that are developed. The principal stockholders of CLP Services
Limited, a new company ("CLPS"),  organized by the stockholders of CLP, will own
non-voting stock in RW Management.  RW Management will manage the plants at cost
and will not be intended  to earn any  profit.  CLPS,  will  provide  day-to-day
services under  subcontract  to RW  Management.  CLPS will be paid a flat fee of
approximately  1.2 cents per  kilowatt-hour  for those  services  (adjusted  for
increases in the Retail Price Index) and will be eligible for bonus  payments if
a project's actual annual electricity  output exceeds 90% of its capacity.  CLPS
will also pay approximately $88,000 per year (also adjusted for increases in the
Retail Price Index) for management services for the various companies owning the
five  existing  projects.  The  gas  extraction  and  cleaning  systems  for the
landfills  will be operated by CLPS for no additional  cost.  RW Management  may
terminate  the  subcontract  with CLPS if at the end of any year the projects in
the  aggregate  have not produced at least 90% of their  capacity  (adjusted for
loss of time for scheduled downtime, catastrophic failures not caused by CLPS or
failures to receive  landfill gas not caused by CLPS),  or at any time if it can
be shown that it is physically  impossible for the plants as a whole to meet the
90% standard for the current year.

     CLPS will  proceed to develop as many of the 18  remaining  sites as may be
feasible and will bear the developmental  costs itself.  Its principal source of
funds  for  doing  so will be  approximately  $6.4  million  contributed  by its
stockholders  from the purchase price paid by Ridgewood U.K. for the five plants
described  above.  As  each  remaining  plant  is  completed  and  commissioned,
Ridgewood  U.K  expects  that  the  bank  will  provide  long-term  finance  for
approximately 55% of the plant's reasonable cost,  although the bank has not yet
committed to do so. If full bank  financing  is obtained for a plant,  Ridgewood
U.K.  will have the option to buy the  equity  interest  from CLPS.  Power V has
provided the equity  capital  necessary for Ridgewood U.K to buy and develop the
seven plants named  above.  The Fund has  committed to provide up to $24 million
additional to develop the 18 additional proposed plants through contributions of
capital to Ridgewood U.K. By doing that, the Growth Fund will obtain an economic
interest  in each of  Ridgewood  U.K.'s  plants  proportionate  to the  share of
Ridgewood  U.K.'s total capital that it contributes.  Ridgewood U.K.  expects to
contract with RW Management to operate the additional plants using CLPS on terms
similar to those for the five existing plants.

     The purchase price for the first five plants,  $15 million,  was determined
by arms-length bargaining and was paid from proceeds of the Fund's prior private
placement  offering.  The price  reflected the estimated  value of the cash flow
from the five plants, assuming production meets the 90% standard, plus estimated
adjustments for the current assets acquired by Ridgewood U.K,  interest at 5.25%
per year on those amounts from an assumed  purchase  date of April 1, 1999,  and
retention  amounts held against amounts due for completion of the Chelson Meadow
and Summerston plants. The purchase price was adjusted to reflect actual results
for the April - June 1999 period.

     The Fund will invest in  Ridgewood  U.K.  from  proceeds of its offering of
Investor Shares.

         (ii) Egyptian Projects

     In late 1998,  the  Managing  Shareholders  organized  the  predecessor  of
Ridgewood International  Development LLC ("RIDCo") to be a project developer for
the Fund and the Growth  Fund.  RIDCo is owned by Robert E.  Swanson  and family
trust of Mr.  Swanson's and he is the sole manager of RIDCo.  Like RPMCo,  RIDCo
acts on behalf of the Fund,  hires  personnel for Projects and is reimbursed for
its costs and allocable  overhead.  The President and chief operating officer of
RIDCo,  beginning in January 1999, is Donald Stewart,  who from May 1994 through
December 1998 acted as an  acquisition  consultant to the Managing  Shareholder.
Mr. Stewart is reimbursed for his expenses but does not draw a salary.  Instead,
upon successful  completion of a development  Project,  he receives a commission
based on Project cost.

     Mr.  Stewart has over 25 years of  experience  in the field of  independent
power  generation  and  finance.  Mr.  Stewart  spent the first ten years of his
business   career  as  a  Certified   Public   Accountant  with  KPMG,  a  major
international  accounting  firm.  He also  served as  Chairman  of  Vermont  Gas
Systems,  a  regulated  public  utility;  Vice-Chairman  of  Consolidated  Power
Company,  a developer  of large scale  co-generation  projects;  and Chairman of
Hercules  Engines,  Inc., a  manufacturer  of industrial  engines and electrical
generation equipment.

     Mr. Stewart holds a Bachelor of Science  degree in Engineering  from Lehigh
University.

     In the third  quarter of 1999,  the Fund and the Growth Fund  organized  an
Egyptian  development company and have loaned approximately $10.6 million to the
company,  secured by the company's stock. The Fund and the Power V have supplied
this capital and as soon as governmental  formalities  are completed,  they will
exchange the loans for all of the equity in the development company.

     The capital has been used to complete one infrastructure  project at the Le
Meridien Hotel in Hurghada,  Egypt.  Hurghada is a developing  tourist resort on
the  western  shore  of the Red Sea in  southeastern  Egypt  distant  from  most
population  centers.  RIDCo  has  entered  into an  agreement  with the hotel to
provide an electricity and desalination  plant with a capacity of five megawatts
and  142,000  gallons  of fresh  water per day and to  operate  the plant for 10
years.  The hotel pays for electricity at a variable rate tied to fuel costs and
pays for  distilled  water at a flat rate per gallon,  escalated  for  inflation
annually. Total investment in the plant, which began operation in March 2000, is
approximately $8.25 million.

     RIDCo is also developing  five  additional  Projects or groups of Projects.
One  Project  is being  constructed  to  supply  electricity  only (8  megawatts
capacity)  at  the El  Malha  Touristic  Association,  a  group  of  hotels  and
developers  building  a resort  community  approximately  50 miles  south of the
Egyptian-Israeli  border on the Gulf of Aqaba.  Estimated cost is $6 million and
operations  are scheduled to begin in April 2000. A second project is located at
the tip of the Sinai Peninsula at  Sharm-el-Sheikh,  for desalinating  water for
three hotels.  Its estimated cost is $3.2 million and estimated capacity will be
3 million gallons per day. These projects are expected to be in operation by the
end of 2000.

     A third group of Projects will also be located at Hurghada.  Two generating
stations will provide 5.8 megawatts of electricity  to two hotels,  and a series
of  desalination  facilities  will provide up to 3.4 million  gallons per day of
water to those two hotels and three others.  Estimated cost will be $8.5 million
and completion is expected in 2000.

     The  remaining two projects are to be located at Ras Sidr and Marsa Alam on
the western shore of the Red Sea. The Ras Sidr project is for desalinating water
only while the Marsa  Alam  project  will  provide  both water and  electricity.
Estimated  costs are $2.9 million and $3 million,  respectively.  These Projects
are  in  due  diligence  and  it is  uncertain  whether  they  will  proceed  to
completion.  The  additional  $23.6  million  of  capital  needed to fund  these
commitments  will be  provided  by the  Fund  and  Trust  V.  The El  Malha  and
Sharm-el-Sheikh  projects are supported by contracts with associations of resort
hotels  organized under Egyptian law to develop new resort sites. The members of
each  association  are jointly  responsible for the  association's  obligations,
which  include  amounts  owed to the projects for  electricity  and water.  Each
contract with the  associations is for 10 years on terms similar to those of the
Le Meridien Hotel project.

     The Fund's  equity in the net losses of the Egyptian  Projects for 1999 was
$198,000.

(iii)    Mediterranean Fiber Optic Project

         In  September 1999, the Fund and the Growth  Fund  organized  Ridgewood
MedFiber LLC and each of them  contributed  $1.5 million to the joint venture on
equal terms.  Ridgewood  MedFiber  then  invested the $3 million in a 25% equity
interest in Global Fiber Group, a newly organized  developer  ("GFG"),  which is
exploring a proposal to construct a 3,600 kilometer (2,200 mile) long underwater
fiber optic cable among Spain,  Southern France and Italy via the  Mediterranean
Sea.  Ridgewood MedFiber or its designees have first refusal rights to invest in
future telecommunications facilities developed by GFG. GFG's original management
was comprised of former executives of AT&T Corp.'s underwater cable division.

         In  February 2000, the  original  management,  which had been unable to
obtain additional equity financing for the Project,  agreed to withdraw from the
venture.  Ridgewood MedFiber informally agreed with the managers to provide some
compensation for their interest, contingent upon completion of financing for the
Project. Ridgewood MedFiber has searched for other equity investors to allow the
Project to proceed, but to date has been unsuccessful. There is a high risk that
it will be unable  to find  additional  equity  investors  and that the  Project
therefore  will not be  developed,  in which  case the Fund will lose its entire
investment.

         GFG had entered into an agreement with Alcatel Submarine Networks, SARL
("ASN"),  a  subsidiary  of Alcatel  SA, a major  European  telephone  equipment
manufacturer.  Each of GFG and ASN owns one-half of a joint venture to construct
the  Project.   The  joint  venture  was  organized  to  enter  into  a  turnkey
construction contract with ASN and to have ASN operate and market the Project.

         The estimated cost of the Project is  approximately  $500 million.  The
joint  venture  had  obtained a  commitment  from a major  European  bank and an
investment bank to sell a  approximately  $350 million of senior secured debt in
the  Project.   The  remaining   $150  million  was  to  be  equity   financing.
Approximately  60% of that  equity  financing  would be  provided as a preferred
("mezzanine")  equity  interest in the joint  venture and the remaining 40% ($60
million) would be provided by GFG and ASN as common equity.  Each of GFG and ASN
would also receive an  unspecified  amount of common equity in the joint venture
as developers' compensation.

     The Fund and Power V had tentatively  budgeted an additional  investment of
$18 million through Ridgewood  MedFiber in the Project for the second quarter of
2000.  That  would be used to  provide  part of the $30  million  common  equity
investment  by GFG.  The  Managing  Shareholder  expects  that  decisions  about
financing  and whether to proceed  with the  Project  will be made by the end of
April 2000. Intensive  negotiations are in progress with regard to the financing
and  operation  of  the  Project  and  there  may  be  material  changes  to the
arrangements described here.

         There  are  no  current  commitments  or  agreements  to  purchase  the
communications  capacity or  facilities  that the  Project  would  provide.  The
Project would be developed to meet the anticipated  demand for high-speed global
communications  links,  but there is no assurance  that there will be sufficient
demand to make it  profitable,  that other  cables,  wireless  links,  satellite
communications   or  landlines  will  not  be  developed  under  more  favorable
conditions  or that the  developers  and  investors  of this  Project  will have
sufficient  resources  to  complete  it if there  are cost  overruns,  delays or
unanticipated events. The Project is thus highly speculative.

(iv)     ZAP Power Systems, Inc.

     The Fund  invested  $2,050,000  in  Ridgewood  ZAP,  LLC in March 1999 as a
holding company for its investments in  ZAPWORLD.COM,  Inc.  (formerly Zap Power
Systems, Inc.) ("ZAP"). ZAP is headquartered in Sebastopol, California, north of
San Francisco.  ZAP designs,  assembles,  manufactures and distributes  electric
bicycle power kits,  electric  bicycles and tricycles,  electric  scooters,  and
other electric transportation  vehicles. ZAP's common stock is quoted on the OTC
Bulletin Board under the symbol "ZAPP".

     Because ZAP's  management  believed that the primary  barrier to widespread
use of  electric  vehicles  was their high cost,  its  activity  and revenue was
initially  derived from development  contracts from a foreign private entity and
from domestic  government  agencies.  These contracts were set up to develop low
cost Zero Air Pollution (or ZAP) type electric vehicles.  Now ZAP is focusing on
the manufacturing and distribution of these electric vehicle products.

     ZAP  manufactures  an  electric  motor  system  that is sold as a kit to be
installed  by the  customer  on their own  bicycle.  The system was  designed to
assist the rider  during  more  difficult  riding  situations,  rather than as a
replacement  for  pedaling.  ZAP also  installs  the motor  system on  specially
designed  bicycles  that  the  Company  has  manufactured  under  contract.  The
completed bicycles, with motor, are then sold to the customer. Additionally, ZAP
produces an electric scooter,  known as the ZAPPY(TM),  which is manufactured by
the Company, using parts manufactured by various subcontractors.  ZAP also is an
U.S. distributor of the Electricycle(TM) scooter that is imported from China and
is a distributor of an electric motorcycle.

     Further information on ZAP is contained in its Annual Report on Form 10-KSB
and Quarterly  Reports on Form 10-QSB,  filed with the  Securities  and Exchange
Commission.

     On March 30, 1999,  Ridgewood  ZAP, LLC purchased  678,808  shares of ZAP's
common stock for a total  purchase  price of  $2,050,000  ($3.02 per share) in a
private placement.

     As part of the  transaction,  Ridgewood  ZAP,  LLC was granted a warrant to
purchase  additional  shares of Common Stock of ZAP,  which was exercised in May
1999 after the Fund  contributed to Ridgewood ZAP, LCC the $2,000,000  necessary
to do so. The total  exercise  price under the warrant  was  $2,000,000  and the
exercise  price per  share was 85% of the  average  daily  closing  price of the
Common Stock over the 20 day period prior to the date of exercise,  but not more
than  $4.50 per share and not less than  $3.50 per  share.  Ridgewood  ZAP,  LLC
acquired 571,249 shares of ZAP Common Stock on exercise.

     Ridgewood  ZAP,  LLC and ZAP entered into four  agreements  as of March 30,
1999: a Stock and Warrant Purchase Agreement, a Common Stock Purchase Warrant, a
letter  agreement  regarding  exercise of the warrant and an  Investor's  Rights
Agreement. The Stock and Warrant Purchase Agreement provided for the purchase of
the Common  Stock and the  issuance of the warrant  and  contained  conventional
representations  and  warranties  by the  parties.  The  warrant  and the letter
agreement contained the warrant provisions described above.

     The Investor's  Rights  Agreement  grants  Ridgewood ZAP, LLC the following
rights:  two demand  registrations  (provided that each  registration  is for at
least $7.5 million of Common Stock), piggyback registration rights and S-3 shelf
registration  rights. ZAP has the right to prohibit demand  registrations within
specified   periods  of  its  own  registrations  and  to  delay  or  limit  any
registration  under certain  conditions.  The Investor's  Rights  Agreement also
requires ZAP to provide  Ridgewood ZAP, LLC with quarterly and annual  financial
information,   an  annual   financial   plan,   audit   information  and  public
announcements.  Ridgewood  ZAP, LLC is also granted first refusal rights similar
to preemptive  rights (except for stock  issuances in connection with mergers or
acquisitions,  loan or lease transactions,  employee benefit plans, stock splits
or dividends, or registered public offerings of $7.5 million or more). The first
refusal  rights expire on the earliest of a registered  public  offering of $7.5
million or more, an acquisition of ZAP or March 30, 2003.

     The  Investor's  Rights  Agreement  generally  terminates  at such  time as
Ridgewood ZAP, LLC owns less than 5% of ZAP's Common Stock. Ridgewood ZAP, LLC's
rights also relate to Common Stock that it may transfer to its affiliates.

     ZAP's two largest  shareholders have agreed with Ridgewood ZAP that as long
as Ridgewood ZAP, LLC owns at least 5% of ZAP's voting stock,  the  shareholders
will vote their  shares in favor of up to two  directors  nominated by Ridgewood
ZAP, LLC. Ridgewood ZAP, LLC has nominated two directors,  Robert E. Swanson and
Douglas Wilson (who are officers of the Fund and Ridgewood  Power, see Item 5(b)
Directors and Executive Officers of the Registrant - Managing Shareholder), both
of whom have been elected to ZAP's Board of Directors.

     The Fund's major investment  focus will be the independent  power industry,
as shown by its  commitment to invest in landfill gas power plants in the United
Kingdom,  in  electric  and  water  facilities  in  Egypt  and in the  Synergics
acquisition.  The U.K. plants, however, have long-term,  formula price contracts
for their output.  Other small independent power plants and similar  investments
may also have  long-term  contracts.  While  purchasing  Projects with long-term
contracts may reduce the anticipated volatility of the Fund's earnings, it means
that  there  is not  much  potential  for  earnings  growth  beyond  the rate of
inflation.  The Fund therefore made a relatively  small  investment in ZAP Power
Systems. Although this investment is highly risky, if it is successful, it would
have the potential for  significant  capital  appreciation.  This  addresses the
Fund's primary objective, noted above, for providing capital appreciation.

         The  investment  in ZAP Power  Systems  has a  significantly  different
risk-return  profile from those of independent  electric power plants or similar
investments.  ZAP's  products are purchased  primarily by consumers and are thus
subject to fluctuations in demand caused by publicity,  fads,  consumer  tastes,
general economic conditions and other factors. Customer relationships tend to be
single sale transactions through retail franchisees and distributors rather than
repeated long term sales under contracts or sales through a power exchange.  For
these  reasons and others ZAP's  revenues are expected to be much more  volatile
than those of independent power plants or similar  investments  purchased by the
Fund.  Further, as the maker of a consumer product ZAP is subject to liabilities
to consumers for  defectively  designed or produced  products.  Thus, the Fund's
investment in ZAP may be more risky than its other planned investments and there
may be a higher risk of a total loss. Conversely, the Fund believes that the ZAP
investment has a higher long-term potential payoff.

     Mr.  Swanson has purchased a franchise to distribute  ZAP's  products.  See
Item  12 --  Certain  Relationships  and  Related  Transactions  for  additional
information.

 (v)  Proposed Investment in Small Hydroelectric Projects.

     The Fund and Power V are in  negotiations  with  Synergics  Corporation  of
Annapolis,  Maryland  for the  purchase  of a  minority  interest  in 10  small,
operating,  hydroelectric  Projects  located in the United States.  The Projects
have a total  generating  capacity  of 21  megawatts  and  each is a  Qualifying
Facility with a long-term  Power  Contract.  The proposed  purchase price is $30
million.  The Fund and Power V would each provide $10 million and the  remaining
$10 million would be obtained from a long-term  loan from the principal  bank of
the  Fund and  Ridgewood  Power.  The  Fund  expects  that a final  decision  on
purchasing the Projects will be made by the end of April 2000.

         The Fund is actively seeking additional Projects for investment, either
by itself or in  conjunction  with  other  programs  sponsored  by the  Managing
Shareholder if such programs are authorized to do so.

         Ridgewood Power is also the managing  shareholder of the Prior Programs
(Power I,  Power II,  Power  III,  Power IV and Power V),  which  have  business
objectives  similar  to  those  of the  Fund.  In the  future,  Ridgewood  Power
anticipates that it will continue to sponsor other  investment  programs similar
or  identical in objective  to that of the Fund.  Further,  it is possible  that
affiliates  of  Ridgewood  Power will  sponsor,  manage or advise other types of
investment  programs.  Ridgewood  Capital,  which is under  common  control with
Ridgewood  Power and the Fund, is currently  sponsoring two investment  programs
that are making venture capital investments in a variety of industries.  In this
discussion the Prior Programs,  the Fund, and any other investment programs that
are sponsored by Ridgewood  Power,  Ridgewood  Capital or their  Affiliates  are
referred to as "Ridgewood Programs."

     These  relationships  could result in  conflicts  of interest  arising from
competing demands of the Fund and other Ridgewood  Programs on Ridgewood Power's
management  resources,  those of RPMCo  or  those  of other  Ridgewood  Managing
Persons.  However, as required under the Declaration,  the Managing  Shareholder
will  devote  as  much  attention  to the  Fund's  activities  as is  reasonably
necessary to manage the Fund.

     The Managing  Shareholders of the Fund will use its best efforts to conduct
Fund affairs for the benefit of the  Investors.  However,  the  interests of the
Fund, its officers and agents, the Managing Shareholder,  the Corporate Trustee,
the  affiliates  of the Managing  Shareholder  and their  respective  directors,
officers and agents when acting for the Managing Shareholder or their affiliates
on behalf of the Fund (collectively,  "Ridgewood Managing Persons"),  as well as
those of the Prior Programs,  any future investment programs affiliated with the
Fund,  and the  Investors  may be subject to a variety of  potential  conflicts,
including but not limited to the following.

Co-Investment and Similar Conflicts
     A conflict of interest  might arise if at any given time an  opportunity to
invest in a Project would be suitable for more than one program,  thus requiring
Ridgewood  Power to choose among the  suitable  programs.  It is also  possible,
though unlikely,  that in a future competitive electricity sales market programs
would be competing  against each other for sales of power or that an opportunity
to dispose of Projects would be suitable for more than one program. Finally, the
Managing Shareholder may determine that more than one program should invest in a
Project or Projects, in which case those programs will be co-owners.

     If the Fund and another  program with similar  investment  objectives  have
funds available at the same time for investment in the same or similar Projects,
and a  conflict  of  interest  thus  arises  as to which  program  will make the
investment,  the Managing  Shareholder  will review the investment  portfolio of
each  program.  They  will  make the  investment  decision  on the basis of such
factors,  among others, as the effects of the investment on the  diversification
of each program's  portfolio,  potential  alternative  investments,  the effects
investment by either  program would have on the program's  risk-return  profile,
the estimated tax effects of the investment on each program, the amount of funds
available and the length of time those funds have been available for investment.
If more than one  program has funds  available  for  investment  and the factors
discussed  above  and  other  considerations   indicate  that  the  Project  has
approximately  equal benefit for each Program,  Ridgewood  Power will  generally
allocate  the  opportunity  first  to  the  Ridgewood  Program  that  was  first
organized,  to the extent of its funds that can be  prudently  invested  in that
opportunity.  In general Ridgewood Power will seek to apply all uninvested funds
of that program to the  opportunity,  unless doing so would cause the program to
be  significantly   over-committed  to  a  Project.   Any  remaining  investment
opportunity  would then be offered  successively  to  later-organized  Ridgewood
Programs on the same basis. A similar  process would be followed for divestiture
opportunities or competitive electricity sales.

         Ridgewood  Power  will seek to allow  Ridgewood  Programs  that  invest
concurrently  to  participate  on similar  terms in a Project,  but reserves the
ability to have programs  participate on dissimilar terms in order to meet their
investment objectives or to conform to transactional requirements. Further, if a
Ridgewood Program is only able to invest in a particular  Project at a different
time  than do  other  Ridgewood  Programs  because  of  legal  or  transactional
requirements  or  because  the  Program  has a  delayed  availability  of funds,
considerations of equity between  Ridgewood  Programs and the structuring of the
transaction may cause the Ridgewood Programs to invest on differing terms.

         A similar  conflict could arise where the entities make  investments in
different forms, which would be the case where one entity's  investment took the
form of equity and the other's took the form of debt. The Managing  Shareholders
believe that in most cases these potential conflicts of interest are unlikely to
cause material  adverse effects on the Fund. In cases where the Fund and another
Ridgewood  Program invest  concurrently in a Project,  the material terms of the
transaction  normally are the product of arm's  length  dealing with the seller,
creditors and other interested parties or regulators.  Because in such instances
the Ridgewood  Programs normally invest on the same terms and take proportionate
interests in the Project, conflicts between them are effectively limited only to
determining how much of the Project will be bought by each, as described  above.
In cases where other Ridgewood Programs and the Fund were to invest at differing
times or on  different  terms,  the Fund would face more  difficult  conflict of
interest questions. The Managing Shareholders, if practicable,  would attempt to
resolve  these  issues by  reference  to the terms  negotiated  by other debt or
equity participants in the Project or similar Projects,  by reference to similar
transactions,  or by  reference  to current  interest  rates and other  measures
relating to the time value of money or to risk/reward  considerations.  Finally,
in any material co-investment transaction,  the transaction would be a Ridgewood
Program  Transaction  that would be  reviewed  by the Panel and  approved  by it
before consummation.  Although the Managing Shareholders believe these practices
may  reduce  potential  conflicts  of  interest  of this  type,  there can be no
assurance that the interests of the entities will not diverge.

Dispositions of Assets
         If the Managing  Shareholders take on the responsibility of acting as a
broker or finder at the time the Fund decides to dispose of a property and if no
third  person  is  retained  by  the  Fund  for  those  purposes,  the  Managing
Shareholders  are entitled to receive  (but may waive) a brokerage  fee from the
proceeds  of  successful  dispositions  of  Fund  property  only.  The  Managing
Shareholders believe that any potential conflict of interest in this event would
be minimal,  because  the  Managing  Shareholders  have  incentives  to maximize
returns to the Fund  (including  but not limited to the  Managing  Shareholders'
interest in the proceeds of the  disposition)  and because any fee so earned may
not exceed 2% of gross proceeds.

Additional Investments in Projects
         As  a  Project  in  which  the  Fund  has  participated  continues  its
development or expands its operations, or if a Prior Program offers its interest
in a  Project  to the  Fund,  the Fund may be  requested  or may wish to  commit
additional  funds to the Project or the purchase.  If the Managing  Shareholders
determine  in  their  sole  discretion  that the Fund  will  participate  in the
opportunity,  it may determine to apply the Fund's funds  available at that time
to the Project or the purchase,  seek to raise additional Fund capital or borrow
the necessary funds. If the Managing  Shareholders  determine that the Fund will
not participate  and applicable  regulatory  requirements  are met, the Managing
Shareholders  may make or cause  another  Ridgewood  Managing  Person or another
program to make the additional commitment of funds, which might be on terms that
are  different  from  those  of the  Fund's  prior  investment  in the  Project.
Ridgewood Power  accordingly may have potential  conflicting  duties to the Fund
and to those other entities in determining  whether the Fund will participate in
the  opportunity or waive or assign rights to contribute  additional  capital to
the Project.

Other Potential Conflicts of Interest
         The Fund  will  reimburse  RPMCo  for the  Fund's  share  of the  costs
incurred by RPMCo in managing  Projects.  This may create  conflicts of interest
among the Fund and other  programs as to the allocation of costs and between the
Managing  Shareholder and RPMCo, on the one hand, and the Fund and the programs,
on the other, as to the services  provided by RPMCo,  the expenses of RPMCo, and
the division of  responsibilities  between RPMCo and the Managing  Shareholders.
The Managing  Shareholders  believe that any  conflicts  among  programs will be
minimized  by the method of  allocation,  which will be based where  possible on
actual  time and  expenses  incurred on behalf of the Fund and in other cases on
the relative  amount of the  investment  of each  program in the Projects  being
managed.  Conflicts  between the  interests  of RPMCo and the  programs  will be
limited by the requirement that reimbursement not exceed actual cost.

         The  Managing   Shareholders,   key  employees,   RPMCo  and  Ridgewood
Securities  are  entitled  to  the  compensation,  reimbursements  and  payments
described  below at Item 5 --  Directors  and  Officers of the  Registrant.  The
amount and terms of those  arrangements were not determined through a process of
arm's  length  bargaining  and thus do not  necessarily  reflect the fair market
value of the services to be rendered to the Fund.

     Some of the Ridgewood  Managing  Persons might have business  dealings with
institutional  investors  that may  participate in competing  Independent  Power
Projects.  The Fund might also invest in certain Projects or Project development
companies  owned,  developed or operated by a Ridgewood  Managing  Person,  or a
Ridgewood Managing Person may invest in certain Projects or Project  development
companies  in which the Fund has  participated.  In  addition,  the terms of the
agreements  governing  Ridgewood  Managing Persons  investing in the independent
power  business  may be more or less  favorable  to their  investors  than those
pertaining to Investors under the Declaration.

         The Managing  Shareholders have the discretion at any time to cause the
Fund to make  advances  of  costs  of  defense  or  settlement  to the  Managing
Shareholders,  their personnel and other Ridgewood Managing Persons,  regardless
of the existence of a conflict of interest.

         The Managing  Shareholders have provided no independent  representation
of prospective Investors in connection with this offering,  and each prospective
Investor should seek independent  advice and counsel before making an investment
in the Fund.

         While  potential  conflicts  of  interest,  including  those  described
herein,  cannot be eliminated,  the Fund believes any actual  conflicts that may
arise will not materially affect the obligations of the Managing  Shareholder to
act in the best interests of the Investors and the Fund.

(5)  Project Operation.

     No projects had material operating revenues during 1999 or 1998.

     The major costs of a Project  while in  operation  will be debt service (if
applicable), fuel, taxes, maintenance and operating labor. The ability to reduce
operating  interruptions and to have a Project's  capacity available at times of
peak demand are critical to the profitability of a Project. Accordingly, skilled
management is a major factor in the Fund's business.

     The  technology  involved  in  conventional  power plant  construction  and
operations  as well as electric  and heat energy  transfers  and sales is widely
known  throughout the world.  There are usually a variety of vendors  seeking to
supply the  necessary  equipment  for any Project.  So far as the Fund is aware,
there are no  limitations  or  restrictions  on the  availability  of any of the
components  which would be  necessary  to  complete  construction  and  commence
operations of any Project.  Generally,  working capital  requirements  are not a
significant  item in the  independent  power  industry.  The cost of maintaining
adequate supplies of fuel is usually the most significant  factor in determining
working capital needs. In order to commence operations,  most Projects require a
variety of permits,  including zoning and  environmental  permits.  Inability to
obtain such permits will likely mean that a Project will not be able to commence
operations,  and even if obtained, such permits must usually be kept in force in
order for the Project to continue its operations.

     Compliance  with  environmental  laws  is  also a  material  factor  in the
independent power industry.  The Fund believes that capital expenditures for and
other costs of environmental  protection have not materially  disadvantaged  its
activities  relative  to other  competitors  and  will not do so in the  future.
Although the capital costs and other  expenses of  environmental  protection may
constitute a  significant  portion of the costs of a Project,  the Fund believes
that those costs as imposed by current laws and  regulations  have been and will
continue to be largely  incorporated into the prices of its investments and that
it accordingly  has adjusted its investment  program so as to minimize  material
adverse effects. If future environmental  standards require that a Project spend
increased  amounts for  compliance,  such increased  expenditures  could have an
adverse effect on the Fund to the extent it is a holder of such Project's equity
securities.

(6) Trends in the Independent Power and Other Industries

         There are numerous  references for further  information on the electric
power industry.  Interested  persons may particularly  wish to refer to the U.S.
Department of Energy's Annual Energy Outlooks and special  studies,  prepared by
the department's  Energy Information  Administration  (the "EIA").  Much of this
information is available on EIA's World Wide Web site at  http://www.eia.doe.gov
under the "Electric"  heading.  Neither the Department of Energy nor EIA nor any
other agency of the United States  Government  has endorsed or approved the Fund
or the Investor Shares and the Fund takes no responsibility  for the preparation
or content of the Department of Energy's publications.

Overview

         The  independent  power  industry in the United States has evolved as a
result of  Congressional  action  to  require  electric  utilities  to  purchase
electricity  from  non-utility  generators,  the  perceived  need  for  new  and
replacement power capacity on the part of utilities and industrial customers and
regulatory and economic pressures to increase  competition in the electric power
industry.

         Although there may be a continuing  long-term need for more  investment
in U.S. Independent Power Projects, investment in new Independent Power Projects
in the United States has fluctuated  significantly in the last two decades.  The
investment  strategies of the Prior  Programs  were to take  advantage of market
trends by  acquiring  Projects  developed  in the period of rapid  growth in the
1980's and early 1990's,  purchasing interests in smaller-size Projects that are
being sold off by utilities  and  building  new capacity in niche  markets or in
foreign countries where the new pressures of competition may be less intense.

         Recently,  the  independent  electric  power  market  in the  U.S.  has
experienced  strong  trends  toward  consolidation  and  pressures  to  maximize
economies of scale. As noted below,  utility companies have tended to bid up the
prices of generating  assets in efforts to maintain their total size or increase
scale.  As a result,  the  returns  on capital on  purchased  independent  power
Projects in the United  States have  declined  sharply in the last three  years.
Accordingly,  the Fund was organized  with a broader  investment  focus than the
Prior  Projects  have  had.  The  Fund's   investments  are  focusing  on  niche
opportunities in the U.S. generating industry (Synergics),  niche markets in the
electric  generation  industry  outside the U.S.,  (U.K.  Landfill  and Egyptian
Projects),  long-term infrastructure capital projects (Mediterranean Fiber Optic
Project), and niche technology opportunities (ZAP).

         For success, among other matters discussed earlier in this Registration
Statement,  these  strategies  will  require  that  the  Fund  and the  Managing
Shareholders be able to identify attractive Projects, to negotiate  advantageous
terms, and in many cases to operate the acquired  Projects more efficiently than
before.  There can be no assurance  that all of these  conditions  can be met or
that other factors will not prevent success.

Recent U.S. Industry Trends
         As a consequence  of federal and state moves to deregulate  large areas
of the electric power industry and the existence,  spurred by PURPA,  of private
competitors to electric  utilities in the market for generating  electricity,  a
number of interrelated trends are occurring.

Continued  Deregulation of the Generating Market and Transmission  Resources The
Comprehensive  Energy  Policy Act of 1992 (the  "1992  Energy  Act")  encourages
electric  utilities to expand their  wholesale  generating  capacity by removing
some,  but not all, of the  limitations  on their  ownership  of new  generating
facilities that qualify as "exempt wholesale  generators" ("EWG's") and on their
ability to  participate  in  Independent  Power  Projects.  Many state  electric
utility  regulators are implementing  plans to further  encourage  investment in
wholesale  generators and to facilitate  utility decisions to spin off or divest
generating  capacity from the  transmission  or  distribution  businesses of the
utilities.  apacity and independent  generators spun off or otherwise  separated
from their parent utilities.  In addition, FERC is requiring utilities and power
pools to provide  nationwide access to transmission  facilities to all wholesale
power generators.

     State  public  utility  regulatory  agencies  must also  review and approve
certain   aspects   of   wholesale   power   deregulation   (including   certain
determinations  under the 1992 Energy Act as to fairness of transactions between
exempt wholesale generators and affiliated utilities, as described below at Item
1(c)(7) - Regulatory  Matters - The 1992 Energy Act, and other matters described
below at Item 1(c)(7) - Regulatory Matters - State  Regulation).  Those agencies
are currently holding proceedings and making determinations.

         In  addition  to the FERC order or other  Congressional  or  regulatory
actions that may result in freer  access to  transmission  capacity,  agreements
with Canada,  and to a lesser extent with Mexico,  are leading toward access for
those  countries'  generators  to  U.S.  markets.  As a  result,  there  is  the
possibility that a North American wholesale market will develop for electricity,
with additional competitive pressures on U.S. generators.

Proposals to Modify PURPA and Existing Power Contracts
         The small-scale  segment of the independent power industry in which the
Fund is likely  to invest  remains a  creature  of PURPA in many  respects.  The
prospects  of  increased  competition  to supply  electricity,  availability  of
wheeling of  wholesale  power,  supply  alternatives  through  the  conservation
initiative  described above and reduced rates of increase in electricity  demand
have caused many  electric  utilities and other  industry  observers to advocate
repeal or  modification  of PURPA and, in a few cases,  to  advocate  changes to
existing long-term Power Contracts with Independent Power Projects.

         To date, FERC has rejected proposals to modify existing Power Contracts
(except for contracts entered into under state regulations  mandating payment of
prices  greater  than  utility  avoided  costs at the time  the  contracts  were
executed),  and FERC's rulemaking proposals are expressly based on the principle
that  existing  Power  Contracts  that  comply  with  current  law should not be
modified by FERC.  Although  proposals have been introduced in Congress to amend
or repeal PURPA, no such proposal has yet been reported.  However,  there can be
no  assurance  that  FERC or the  Congress  will not take  action  to  reduce or
eliminate  the  benefits or PURPA for  Independent  Power  Projects or that they
would not take action purporting to change or cancel existing Power Contracts or
that  they  would  not  take  action  making  compliance  with  those  contracts
economically or practically infeasible. If any such action were to be taken, the
value of existing  Independent  Power  Projects with long-term  Power  Contracts
might be significantly  impaired or even  eliminated.  If such action were to be
proposed with any significant prospect of adoption,  the consequent  uncertainty
might have similar effects.

Price and Cost Pressures
         The  pricing  pressures  that  retail and  wholesale  deregulation  are
bringing are expected to decrease the marginal cost of electricity.  Competition
will force utilities and generators to reduce overhead and administrative costs,
to trim  operation and  maintenance  costs and to more  efficiently  buy and use
fuel. Further, wholesale and retail deregulation and new generating technologies
discussed below are expected to significantly reduce capital costs.

         As these trends  continue,  high-cost  generators will be disadvantaged
and may fail. If the Fund were to invest in small-scale  generating  plants that
in the past have tended to have higher  per-kilowatt  hour costs than new, large
scale generating plants, it may have difficulty  competing.  The Fund recognizes
these pressures and intends to invest only in facilities  that have  competitive
costs of fuel,  capital  and  operation  or  facilities  that offer  significant
opportunities  for  improvement.  The  Fund  will  also  attempt  to  invest  in
facilities,  such as landfill gas power plants,  that have tax or  environmental
advantages  that offset price  pressures  or that are located  abroad where such
pressures may be less.

Renewable Power
         The pressures of competition are expected to harm the "renewable power"
segment  of the  industry.  "Renewable  power" is a  catchphrase  that  includes
Projects (such as solar,  wind, biomass and landfill-gas) that do not use fossil
fuels or nuclear fuels and, in some cases, some other types of small Independent
Power Plants that are Qualifying Facilities (such as small hydroelectric plants,
cogeneration  plants and small  fossil  fuel  plants).  Renewable  power  plants
typically have high capital costs and often have total costs that are well above
current  costs for new  gas-turbine  production.  Many  observers  believe  that
renewable  power plants  without  existing  Power  Contracts  (with the possible
exception of biomass plants with very low fuel costs) will be non-competitive in
the new  markets  unless  they are given  governmental  protection.  A number of
states are requiring that retailers of  electricity  purchase a certain  minimum
amount  of  electricity  (often  5% to 10% of  their  total  requirements)  from
renewable power sources and the Clinton  Administration  has proposed a national
7.5% minimum  requirement.  Although this will tend to protect  renewable  power
Projects,  unless  there  is  a  shortage  of  renewable  capacity  these  state
requirements  will still make low total cost an essential  if a renewable  power
Project is to have any ability to succeed.

Initial Effects of Trends
         With  these   conditions  in  mind,  many  observers  see  two  primary
strategies  for  Independent  Power  Projects  to succeed in the United  States:
first, Projects that have existing,  firm, long-term Power Contracts may do well
so long as  regulatory  or  legislative  actions do not abrogate the  contracts.
Second,  Projects  that are  low-cost  producers  of  electricity,  either  from
efficiencies  or good  management  or as the result of  successful  cogeneration
technologies,  will have advantages in the market.  The Fund intends to focus on
both possibilities and to maintain a focus on  medium-to-long-term  results.  It
also  will  consider  Projects  selling  power to  large  retail  users  such as
industries rather than utilities.

         Finally,  there have been industry-wide  moves toward  consolidation of
participants  and  divestiture of Projects.  A number of utilities and equipment
suppliers  have  proposed or entered  into joint  ventures  to reduce  risks and
mobilize  additional  capital for the more competitive  environment,  while many
electric  utilities  are in the  process  of  combining,  either  as a means  of
reducing costs and capturing  efficiencies,  or as a means of increasing size as
an organizational  survival tactic.  One recent observer has described the drive
by electric  utilities to sell their  existing  plants and  purchase  comparable
plants from other  utilities in areas  outside  their  historic  service  areas,
combined with frequent  mergers,  as an industry game of "musical  chairs." This
consolidation tends to create additional  competitive  pressures in the electric
power industry,  to increase the price of power plants and thus to depress short
and mid-term  returns on capital;  however,  this trend is also  encouraging the
divestiture of smaller  Projects or Projects that are deemed less central to the
operations of large, consolidated businesses.  This may make attractive Projects
available for investment by the Fund.

Foreign Opportunities

     Because yields on U.S.  Independent Power Projects are currently depressed,
the Fund has  committed  a large  amount of its  capital  to  Independent  Power
Projects in the United  Kingdom  and in Egypt.  The  electricity  markets in the
United Kingdom were fully deregulated several years before deregulation began in
the U.S.  Accordingly,  the Fund, through Ridgewood U.K., will invest in a niche
area, landfill gas power plants. The Prior Programs already own interests in two
large  landfill  gas  power  plants  in  Rhode  Island  and  California  and the
technology and business are familiar to Ridgewood Power. Further, because of the
ecological  benefits of  landfill  gas power  plants,  the U.K.  government  has
required  utilities  to enter into 15 year Power  Contracts  at premium  prices,
through the Non-Fossil Fuels Purchasing  Agency.  The U.K. Landfill Gas Projects
enjoy a status similar to qualifying facilities in the U.S. with long-term Power
Contracts. They enjoy a guaranteed price and market for their output and are not
subject to price  fluctuations  for their  fuel.  The major  business  risks and
considerations  are keeping  operating  costs at a minimum  through good design,
preventative  maintenance  and  attention to fuel quality,  governmental  policy
changes and exchange rate fluctuations affecting the pound-denominated  revenues
from the Projects.  Thus the Fund believes  that these  investments  in a stable
Western  European  country  with a  guaranteed  market for the  output  have the
potential for long-term,  stable income. Because Ridgewood U.K. is not providing
any capital for  development  and buys  Projects  only after they  receive  bank
financing,  most development  risk is avoided.  Ridgewood Power is investigating
hedging and other strategies to reduce exchange rate risk when revenues from the
U.K.  Landfill  Gas  Projects  become  large  enough  to make  these  strategies
practical.

     The Egypt  Projects are  substantially  riskier.  These  projects are being
developed  at remote  resort  hotel sites on the Red Sea which are distant  from
other electric and water sources.  RIDCo is developing the Projects itself using
local engineering personnel and contractors. Environmental, construction, legal,
labor and geologic  requirements are often unclear and can change  unpredictably
at any time.  RIDCo may find it difficult to enforce  contracts  and other legal
obligations  against  local  suppliers  or  customers.  RIDCo has not engaged in
substantial  development  work either in the U.S.  or outside  the U.S.  and has
little experience in developing foreign Projects. There are no backup facilities
to provide  electricity  or water if the  Projects  fail or are unusable for any
period  of  time.   Specifications   for  Projects  have  changed  suddenly  and
unpredictably  and in some cases it has been  necessary  for RIDCo to  construct
additional infrastructure.  Cultural, language and political differences between
Egypt and the U.S. may impair  communication  with  personnel,  cause errors and
possibly cause hostile  action  against the Projects by employees,  residents or
governmental  agencies.  There have been occasional terrorist incidents in Egypt
directed against Western tourists and tourist facilities. Further such incidents
might deter tourism and make the host hotel resorts  unprofitable  or might even
be directed against the Egypt Projects or their personnel.

         The Projects burn light fuel oil in diesel engines, which is brought in
by tanker  truck.  Supply  interruptions,  oil  spills  or fires  are  possible.
Although the Projects  are exposed to world oil price  variations,  this risk is
mitigated because the Power Contracts contain price adjustments tied to fuel oil
prices that should substantially transfer the risk to the customers.

     The  customers of most of the Egypt  Projects are  governmentally-sponsored
associations of resort hotels under 10-year  long-term Power Contracts with each
Project.  Each  Project  provides  electricity  or water  or both to the  entire
association and bills the association for the aggregate amount.  The association
in turn bills its member hotels for their  consumption and their share of common
consumption for services such as street lighting, residential services for hotel
employees,  and  services  such as  security.  The  associations  may  not  have
substantial  assets  and thus may depend on prompt  payment by their  members in
order to meet their obligations to the Project. Their ability to enforce payment
obligations may be limited, and although the Project has the ability to shut off
water  or  power  to a  defaulting  association  member,  it may be  practically
difficult to do so over resistance by a major employer.  It is possible that the
associations would fail to bill members appropriately, that disputes between the
associations  and members for other reasons might result in a failure to pay the
associations,  or that the associations for political, economic or other reasons
would fail to meet their  obligations  to the Project.  It is also possible that
adverse  events  in the  tourist  industry,  such  as  labor  disputes,  airline
problems,  shortages  of  personnel,  changes in customer  taste,  environmental
problems,  overbuilding  and  international  political or cultural  developments
could depress tourist trade to the point that the hotels or  associations  would
be unable to pay.  Other risks  include  currency  conversion  and  repatriation
risks, exchange rate fluctuations, taxation disputes, international hostilities,
arbitrary governmental action,  religious tensions,  anti-foreign sentiments and
legal  changes.  In one current case, an Egypt Project will serve a single hotel
under a 40 year  contract.  Although risks caused by having an association as an
intermediary do not apply to this Project,  the other risks discussed here will.
Further, by serving a single hotel, there is less diversification of risk.

         Because of these risks and difficulties, it has been difficult to raise
capital  for  these  Projects  and there is a great  local  demand  for  similar
Projects.  The prices for the  electricity  and water  provided by the  Projects
reflect  these risks and others.  The Managing  Shareholders  believe that these
risks are acceptable,  because the Fund has been organized with the intention to
have a somewhat  diversified  portfolio of investments and because the Fund will
be investing in  lower-risk,  lower-return  foreign and U.S.  power  Projects as
well.

Other Infrastructure Technology Opportunities

         The Fund has also  considered  the rapidly  growing  telecommunications
industry as an alternative to investing in independent  power  Projects.  Demand
for high-speed data links for Internet use and private  business use is high and
fiber  optic  cables  are  currently  the  highest-capacity  and  most  reliable
alternative for these communications,  although alternatives such as satellites,
land-based   microwave   transmission,   and  co-axial  cable  exist.  Like  the
independent  power  industry,  these  facilities  require  substantial  up-front
capital  investments,  supply  an  essential  service,  and may  have  long-term
contracts with their customers. Unlike the independent power industry, demand is
growing rapidly. In addition to typical business risks,  however, the Fund faces
risks caused by its management's  lack of experience in  telecommunications.  So
far, the Fund's only investment in this area has been a $1.5 million exploratory
investment in the Mediterranean Fiber Optic Project.

Niche Technology Opportunities

         Ridgewood  Capital,  which is an affiliate of Ridgewood Power, has been
organized  to sponsor  venture  capital  funds  investing  in Internet and other
electronics  technology  ventures and other high-growth  areas. In the course of
its   investigation  it  is  possible  that  Ridgewood  Capital  would  identify
investments  in these  areas  that are  suitable  for the Fund.  If a  Ridgewood
Capital  fund were not to take such an  opportunity,  it might be offered to the
Fund.  At this  time,  no such  opportunity  has been  identified  by  Ridgewood
Capital.

(7).  Competition

     The U.K. Landfill Projects sell their output to a government agency and are
not subject to  competition.  Currently,  the  Egyptian  Projects are located in
remote coastal areas that are not linked to the national  electric power network
and thus are not subject to substantial  competition for providing  electricity.
The water Projects do not face  substantial  competition  except from trucked-in
water.  This also means that there is no substantial  backup for the Projects if
they  cannot  operate for any reason.  It is possible  that in future  years the
national  network may extend to some or all of the Project sites,  in which case
there might be competition.

     There are a large number of participants in the independent power industry.
Several  large  corporations  specialize in  developing,  building and operating
independent power plants. Equipment manufacturers, including many of the largest
corporations in the world,  provide  equipment and planning services and provide
capital through finance affiliates. Many regulated utilities are preparing for a
competitive  market,  and a  significant  number of them already have  organized
subsidiaries  or affiliates to  participate in  unregulated  activities  such as
planning,  development,  construction and operating services or in owning exempt
wholesale  generators or up to 50% of  independent  power  plants.  In addition,
there are many  smaller  firms whose  businesses  are  conducted  primarily on a
regional or local basis.  Many of these companies  focus on limited  segments of
the cogeneration and independent  power industry and do not provide a wide range
of products and services.  There is significant  competition  among  non-utility
producers,  subsidiaries of utilities and utilities themselves in developing and
operating  energy-producing projects and in marketing the power produced by such
projects.

     The Fund is unable to  accurately  estimate the number of  competitors  but
believes that there are many competitors at all levels and in all sectors of the
industry.  Many of those  competitors,  especially  affiliates  of utilities and
equipment manufacturers, may be far better capitalized than the Fund.

(8).  Regulatory Matters.

         Projects are subject to energy and  environmental  laws and regulations
at the federal, state and local levels in connection with development, ownership
and operation. Federal laws and regulations developed by administrative agencies
govern  transactions  with  utility  companies,  the types of fuel  which may be
utilized by a Project, the type of energy which may be produced by a Project and
the ownership of a Project.  State utility  regulatory  commissions must approve
the rates and, in some  instances,  other terms and  conditions  on which public
utilities  purchase  electric power from Projects.  Under certain  circumstances
where specific  exemptions are otherwise  unavailable,  state utility regulatory
commissions may have broad jurisdiction over Projects. Projects are also subject
to federal, state and local laws and administrative regulations which govern the
emissions  and  other  substances  produced  by a Project  and the  geographical
location,  zoning,  land use and  operation  of a  Project.  Applicable  federal
environmental laws typically have state and local enforcement and implementation
provisions.  These  environmental laws and regulations  generally require that a
wide variety of permits and other approvals be obtained before the  commencement
of  construction  or  operation  of an  energy-producing  facility  and that the
facility then operate in compliance with such permits and approvals.

Energy Regulation
         PURPA.  The enactment in 1978 of PURPA and the adoption of  regulations
thereunder by FERC  provided  incentives  for the  development  of  cogeneration
facilities and small power production facilities meeting certain criteria.

         Qualifying  Facilities  under  PURPA  are  generally  exempt  from  the
provisions  of the Holding  Company Act, the Federal  Power Act, as amended (the
"FPA"),  and, except under certain limited  circumstances,  state laws regarding
rate  or  financial  regulation.  In  order  to  be  a  Qualifying  Facility,  a
cogeneration  facility must (i) produce not only  electricity but also a certain
quantity of heat energy (such as steam or hot water) which is used for a purpose
other than power generation,  (ii) meet certain energy efficiency standards when
natural gas or oil is used as a fuel source and (iii) not be  controlled or more
than 50% owned by an electric utility or electric utility holding company. Other
types  of  Independent   Power  Projects,   known  as  "small  power  production
facilities," can be Qualifying  Facilities if they meet  regulations  respecting
maximum size (in certain  cases),  primary energy source and utility  ownership.
Recent  federal  legislation  has eliminated  the maximum size  requirement  for
solar, wind, waste and geothermal small power production facilities (but not for
hydroelectric or biomass) for a fixed period of time.

         PURPA provides three primary benefits to Qualifying Facilities.  First,
Qualifying  Facilities are relieved of compliance with extensive federal,  state
and local  regulation which control not only the development and operation of an
energy-producing  Project,  but also the prices and terms on which energy may be
sold by the Project. A Project that is not a Qualifying Facility will be subject
to the extensive  regulatory  requirements  of the FPA,  other federal and state
utility legislation and regulation,  and possibly the Holding Company Act. These
requirements  can  delay  or  even  preclude  development  of  a  non-Qualifying
Facility.

         Second,  PURPA requires that electric  utilities  purchase  electricity
generated by Qualifying  Facilities at a price equal to the purchasing utility's
full "avoided  costs."  Avoided  costs are defined by PURPA as the  "incremental
costs to the electric  utility of electric energy or capacity or both which, but
for the purchase from the  Qualifying  Facility or Qualifying  Facilities,  such
utility  would  generate  itself or  purchase  from  another  source."  The FERC
regulations  also  permit  Qualifying  Facilities  and  utilities  to  negotiate
agreements  for utility  purchases  of power at rates other than the  purchasing
utility's  avoided  cost.  While public  utilities  are not required by PURPA to
enter into long-term Power Contracts to meet their  obligations to purchase from
Qualifying Facilities, until recently utilities and regulators encouraged use of
long-term Power Contracts.

         Third,  PURPA  requires that each electric  utility  interconnect  with
Qualifying  Facilities  and that the utility sell backup or standby power to the
Qualifying Facility on a non-discriminatory basis. This requirement enhances the
reliability   of  Qualifying   Facilities   and  is  especially   important  for
inside-the-fence  facilities,  whose  customers  would otherwise be left without
power in the event that the facility required off-line maintenance or repair.

         The exemptions from extensive federal and state regulation  afforded by
PURPA to Qualifying  Facilities  are important to the Fund and its  competitors.
The  Fund  expects  that  most of the  Projects  in  which  it  invests  will be
Qualifying Facilities.  Although some Projects may not be Qualifying Facilities,
the Fund intends to participate  only in Projects that avoid the restrictions of
the Holding Company Act and most state regulation.

         The Holding Company Act.
         Under  the  Holding   Company  Act,  any  person  (defined  to  include
corporations  and  partnerships and other legal entities) which owns or controls
10% or more of the outstanding  voting  securities of a "public utility company"
or a company  which is a "holding  company"  of a "public  utility  company"  is
subject to  registration  with the Commission  and regulation  under the Holding
Company Act. A holding  company of a public  utility  company is required by the
Holding Company Act to limit its operation to a single integrated utility system
and to divest any other operations not functionally  related to the operation of
that  utility  system.  Under  PURPA,  Qualifying  Facilities  are  exempt  from
regulation  under  the  Holding  Company  Act,  and the  Fund  anticipates  that
substantially all of its investments will be in Qualifying Facilities.

         Structuring  the  Fund's  own  activities  to  ensure  that it is not a
"holding company" of a "public utility company" under the Holding Company Act is
also important in providing financing and financial reporting flexibility to the
Fund. If the Fund pursues the  development  of Exempt  Wholesale  Generators (as
defined  below) or other  Independent  Power Projects which will not qualify for
the benefits  provided by PURPA and which  ordinarily  would subject the Fund to
the  provisions  of the Holding  Company Act, it intends to do so in a manner to
qualify  for  exemptions  under the  Holding  Company  Act or certain  no-action
positions taken by the Commission.  Such a structure could, for example, consist
of the Fund's holding a limited partner interest in a limited  partnership which
owns a non-Qualifying Facility.

         The 1992 Energy Act.
         The  Comprehensive  Energy  Policy Act of 1992 (the "1992  Energy Act")
empowered  FERC  to  require   electric   utilities  to  make  available   their
transmission  facilities to and wheel power for Independent Power Projects under
certain  conditions  and created an exemption for electric  utilities,  electric
utility  holding  companies and other  independent  power producers from certain
restrictions  imposed by the Holding Company Act. The  transmission and wheeling
provisions  of the act were  described  above  at Item  1(c)(6).  The  exemptive
provisions are described below.

         The 1992 Energy Act created an  additional  exemption  from the Holding
Company Act for EWG's, which are defined basically as entities certified by FERC
as  engaged  exclusively  in the  business  of  owning  and  operating  electric
generation  facilities  which  generate  electricity  for resale.  EWG's  remain
subject to rate and tariff regulation by FERC and by state regulators.  Further,
EWG's may not sell  electricity to electric  utilities  affiliated or associated
with them unless state regulators  approve,  and state regulators must determine
whether  purchases by electric  utilities  from EWG's are fair to consumers  and
utilities and affect utility reliability.

         One set of primary  beneficiaries  of the EWG's category is expected to
be electric  utilities  and their  holding  companies,  which are released  from
Holding Company Act restrictions on owning interests in wholesale generators and
Qualifying  Facilities  (but which  will  still be  subject  to certain  Holding
Company Act restrictions on financing EWG's and PURPA  restrictions on ownership
in Qualifying Facilities). The other primary beneficiaries of the EWG provisions
of the 1992 Energy Act are expected to be developers  and Project  Sponsors that
wish to construct  Independent Power Projects that are not Qualifying Facilities
(often because the fuel,  heat energy,  production or ownership  requirements of
PURPA are  impractical to meet).  By releasing them from the Holding Company Act
regulatory environment, these developers and Project Sponsors may be better able
to proceed and in particular to enlist electric  utilities and holding companies
as  co-venturers.  By exempting  electric  utilities,  electric  utility holding
companies, and other developers from certain restrictions imposed by the Holding
Company Act, the 1992 Energy Act has expanded the potential  pool of Projects in
which they are able to invest.  Although the Fund  believes  that the  exemptive
provisions of the 1992 Energy Act will not materially  and adversely  affect its
business  plan,  it may result in increased  competition  from such  entities to
develop  promising  Projects  and  in  increased  competition  in  the  sale  of
electricity by Independent Power Projects.

         Regulations  under the 1992  Energy Act have  clarified  the ability of
electric  utilities and holding  companies to invest in EWG's and electric power
plants outside the United States.

         Federal   Power  Act.  The  FPA  grants  FERC   exclusive   rate-making
jurisdiction over wholesale sales of electricity in interstate commerce. The FPA
provides  FERC with ongoing as well as initial  jurisdiction,  enabling  FERC to
revoke  or  modify  previously  approved  rates.  Such  rates  may be based on a
cost-of-service   approach  or  determined   through   competitive   bidding  or
negotiation.  While  Qualifying  Facilities  under  PURPA  are  exempt  from the
rate-making and certain other provisions of the FPA,  non-Qualifying  Facilities
are subject to the FPA and to FERC rate-making jurisdiction.  Although EWG's are
subject to FERC ratemaking  jurisdiction,  their owners do not by virtue of that
ownership come under FERC jurisdiction.

         Companies whose  facilities are subject to regulation by FERC under the
FPA  because  they do not  meet the  requirements  of PURPA  may be  limited  in
negotiations  with power purchasers.  However,  since such projects would not be
bound by PURPA's heat energy use requirement for cogeneration  facilities,  they
may have greater  latitude in site  selection and facility size. Any Projects in
which the Fund may participate that are  non-Qualifying  Facilities are expected
to comply with the FPA.

         Fuel Use Act.  Projects may also be subject to the Fuel Use Act,  which
limits the ability of power  producers  to burn  natural  gas in new  generation
facilities  unless such  facilities  are also coal capable within the meaning of
the Fuel Use Act.  The Fund  anticipates  that  natural  gas-fired  cogeneration
Projects in which it may  participate  will be coal capable and thus qualify for
exemption from the Fuel Use Act.

         State   Regulation.   State  public  utility   commissions  have  broad
jurisdiction over Independent Power Projects which are not Qualifying Facilities
under PURPA,  and which are  considered  public  utilities in many states.  Such
jurisdiction  results in state  requirements  to obtain  certificates  of public
convenience and necessity to construct a facility and could result in regulation
of  organizational,  accounting,  financial  and other  corporate  matters on an
ongoing basis. Although FERC generally has exclusive jurisdiction over the rates
charged by a non-Qualifying  Facility to its wholesale  customers,  state public
utility commissions have the practical ability to influence the establishment of
such rates by asserting  jurisdiction  over the purchasing  utility's ability to
pass through the resulting cost of purchased power to its retail  customers.  In
addition,  states may assert  jurisdiction  over the siting and  construction of
non-Qualifying  Facilities  and,  among other  things,  issuance of  securities,
related party  transactions and sale and transfer of assets. The actual scope of
jurisdiction over  non-Qualifying  Facilities by state public utility regulatory
commissions varies from state to state.

         In recent  years,  many states have  required  or  encouraged  electric
utilities to undertake least cost utility  planning and demand-side  management.
Utilities engaging in least cost utility planning consider the costs, advantages
and  disadvantages  of multiple  means of meeting  electricity  demand,  such as
purchasing  electric power from  Independent  Power Projects or other utilities,
efficiency and conservation  investments,  load management,  renewable resources
such as hydroelectric,  solar and wind power and conventional  generation by the
utility, all with a view toward determining the least-cost mix of supplies. Rate
requests and accounting are to treat the  alternatives  on an equally  favorable
basis. The 1992 Energy Act and related statutes do not compel least cost utility
planning but require it to be considered and require periodic  updating of plans
adopted andpublic access to the planning process.

         Demand-side  management involves  cooperative efforts between utilities
and large customers to change the customers' patterns of demand for electricity.
Because demand for electricity  changes  substantially  according to the time of
day or the season,  utilities  must  maintain  large amounts of capacity to meet
peak loads that may only occur for a portion of the day or  occasionally  during
the year.  Utilities can thus save  significant  capital and operating  costs if
large  customers  can move their demand to off-peak  times,  or restrict  demand
during peak periods, or otherwise conserve electricity.  Demand-side  management
has the  effect  of  reducing  utility  needs  for  capacity  generally  and for
purchasing  electricity  to meet peak loads at premium  prices from  Independent
Power Projects.

Environmental Regulation
         The  construction  and operation of energy and fuel producing  projects
and the  exploitation  of natural  resource  properties are subject to extensive
federal,  state and local laws and  regulations  adopted for the  protection  of
human  health  and the  environment  and to  regulate  land  use.  The  laws and
regulations  applicable  to the  Fund  and  Projects  in  which  it will  invest
primarily  involve the  discharge  of  emissions  into the water and air and the
disposal  of  waste,  but can  also  include  wetlands  preservation  and  noise
regulation.  These  laws and  regulations  in many cases  require a lengthy  and
complex process of obtaining licenses, permits and approvals from federal, state
and local agencies.  Obtaining  necessary  approvals  regarding the discharge of
emissions  into the air is critical to the  development  of a Project and can be
time-consuming  and difficult.  Each Project requires  technology and facilities
which comply with federal,  state and local requirements and sometimes extensive
negotiations  with  regulatory  agencies.   Meeting  the  requirements  of  each
jurisdiction  with authority  over a Project may delay or sometimes  prevent the
completion of a proposed Project, as well as require extensive  modifications to
existing Projects.

         The Clean Air Act Amendments of 1990 contain  provisions which regulate
the amount of sulfur  dioxide and oxides of  nitrogen  which may be emitted by a
Project.  These emissions may be a cause of "acid rain."  Qualifying  Facilities
are  currently  exempt from the acid rain  control  program of the Clean Air Act
Amendments.  However, other Independent Power Projects will require "allowances"
to emit  sulfur  dioxide  after  the year  2000.  Under  the  Amendments,  these
allowances may be purchased from utility  companies then emitting sulfur dioxide
or from the  Environmental  Protection  Agency.  Further,  an Independent  Power
Project subject to the  requirements  has a priority over utilities in obtaining
allowances directly from the Environmental  Protection Agency if (i) it is a new
facility or unit used to generate electricity, (ii) 80% or more of its output is
sold at wholesale; (iii) it does not generate electricity sold to affiliates (as
determined  under the Holding Company Act) of the owner or operator  (unless the
affiliate   cannot  provide   allowances  in  certain  cases)  and  (iv)  it  is
"nonrecourse  project-financed." A Project is nonrecourse project-financed if it
is 100% equity  financed  or if only its assets and part or all of its  revenues
from power sales contracts  serve as collateral for the Project's  financing and
if the  providers of financing do not have the legal right to pursue an electric
utility, the assets of other Projects,  or owners or other participants for loan
repayments.

         The market price of an allowance  cannot be predicted with certainty at
this time and  there is no  assurance  that a market  for such  allowances  will
develop.  Projects  fueled by  natural  gas are not  expected  to be  materially
burdened by the acid rain provisions of the Clean Air Act Amendments.

         Title  IV  of  the  Clean  Air  Act  Amendments  requires   significant
reductions  in nitrogen  oxide  emissions  from power  plants.  The first set of
standards became applicable in 1996 for large-scale steam boilers and large coal
and oil-fired plants. The standards require reductions of 25% to 50% in nitrogen
oxide emissions. Standards for other large generating plants become effective in
2000 and would  require 40% to 50%  reductions.  States are imposing  additional
restrictions.   Nitrogen  oxide  emissions  can  be  particularly  difficult  or
expensive to reduce  because  nitrogen  oxides are produced at higher  operating
temperatures,   while  plant   efficiencies  tend  to  increase  with  operating
temperatures.   The  Fund  anticipates  that  nitrogen  oxide  regulations  will
materially  increase the operating  costs of generating  plants and will tend to
disadvantage  small Projects using internal  combustion  engines and fossil fuel
boilers,  but that the expected costs will not cause many Projects that the Fund
will invest in to become unprofitable.

         Based  on  current  trends,  the  Managing   Shareholder  expects  that
environmental  and land use regulation will become more stringent.  The Fund and
the  Managing  Shareholder  have  not  developed  expertise  and  experience  in
obtaining  necessary  licenses,   permits  and  approvals,  which  will  be  the
responsibility of each Project's  managers and Project  Sponsors.  The Fund will
rely upon qualified environmental consultants and environmental counsel retained
by it or by  developers  of  Projects  to assist  in  evaluating  the  status of
Projects regarding such matters.

Potential Legislation and Regulation
         All federal,  state and local laws and  regulations,  including but not
limited to PURPA, the Holding Company Act, the 1992 Energy Act, the FPA, and the
Clean Air Act Amendments are subject to amendment or repeal.  Future legislation
and regulation is uncertain, and could have material effects on the Fund.

         It is likely  that the  federal  government  and a number of states may
consider  schemes of  environmental  taxation that will penalize  carbon dioxide
emissions or other environmental detriments.  These proposals, if enacted, could
impose  additional costs on the operation of the Fund's  Projects.  Although the
President  and Vice  President  have  announced  that the  United  States  will,
together with other nations, reduce greenhouse gas emissions  significantly,  it
is  extremely  unclear  whether  or how this  initiative  will be adopted by the
Congress. If greenhouse gas emissions were penalized, landfill gas, cogeneration
and  biomass  Projects  of the types  owned by the Prior  Programs  might have a
relative advantage because they reduce methane or carbon dioxide emissions.

Impact of Energy Price Changes
         Market prices for natural gas, oil and, to a lesser  extent,  coal have
fluctuated significantly over the last few years. Such fluctuations may directly
inhibit  the  development  of  Projects  because of the  anticipated  effects on
Project  profitability  and may deter  lenders to  Projects  or result in higher
costs of financing.

         In recent years there have been extraordinary fluctuations in the price
of crude  oil.  Because  natural  gas is  substitutable  for  crude  oil and oil
products under certain  conditions and in certain  applications,  oil prices are
capable of  affecting  natural  gas  prices.  It is  impossible  at this time to
determine if the fluctuations  will have further effects on the supply and price
of petroleum products.

         Natural  Gas.  The  price of  natural  gas is  subject  to  significant
fluctuation for reasons that are not yet fully understood. Nonetheless, over the
last few years the price of natural  gas has  frequently  been low  relative  to
other  fuels,  although  there can be no  assurance  that any these  trends will
continue.  The effect of fluctuating natural gas prices on Projects will vary on
a Project-by-Project basis depending on the customer to which the electric power
is being sold, the terms of the Power Contracts and steam contracts (in the case
of  cogeneration  facilities)  for the  Project,  the price of natural gas to be
purchased  by the Project and the effect of any  long-term  commitments  for the
purchase of natural gas by the Project's  customers.  In general,  cogeneration,
due to its higher  efficiency,  tends to be relatively more profitable as energy
costs  (including  natural gas) increase and relatively  less profitable as such
costs  decrease.  Projects which use natural gas as a fuel source may attempt to
reduce the risk of gas price  fluctuations  adversely  affecting their economics
through long-term gas purchase arrangements and possibly acquiring gas reserves.

         Crude Oil.  Fluctuations  in the price of crude oil are not expected to
affect the cost of  operations  of  cogeneration  Projects  directly  since such
Projects  are usually  based on energy  sources  other than crude oil.  However,
gas-fired  cogeneration  Projects typically use distillate oil as a back-up fuel
at times  when gas is not  available.  Certain  Projects  use  surplus  fuels or
wastes.  The prices for these fuels and wastes are affected by  fluctuations  in
primary fuel prices but tend to be less volatile.

         Coal. Traditionally, coal prices have been more stable than oil and gas
prices  due,  in part,  to the fact that coal is usually  sold  under  long-term
contracts to utilities.  During the 1980's coal prices trended lower as a result
of the surplus of crude oil and lower oil prices.  The Clean Air Act Amendments,
which are expected to be fully  implemented  as to most coal  burning  plants by
1996, may cause prices for lower sulfur coal to increase in the future. The Fund
believes,  however,  that future coal prices will generally  remain  competitive
with the price of crude oil and natural gas and should  continue to be available
to Independent Power Projects under long-term contracts.

     (d) Financial  Information about Foreign and Domestic Operations and Export
Sales.

         The Fund received no revenues from foreign sources in 1999.

Long-lived  assets  indirectly owned by the Fund, as of December 31, 1999, is as
follows: indirectly owned

                                                              Value as stated
Country                    Description of asset          in financial statements

United States              Investment in ZAP                    3,442,000
                           Investment in Global Fiber
                                     Group                      1,498,000(a)
Egypt                      Investment in Egyptian Projects      4,736,000

(a)  Represents  investment in early  development of  Mediterranean  Fiber Optic
Project principally expended for U.S. goods and services.

Projects or  investments  located in one country do not have material  customers
from any other country.

Disclosures  of risks  associated  with  these  investments  are  found at Items
1(c)(3) - Business - Risk  Considerations  and 1(c)(6) Trends in the Independent
Power and Other Industries.

(e)  Employees.

     The  Fund  has no  employees.  The  persons  described  below  at  Item 5 -
Directors and Executive  Officers of the Registrant serve as executive  officers
of the Fund and have  the  duties  and  powers  usually  applicable  to  similar
officers of a Delaware corporation in carrying out the Fund business.  RIDCo has
approximately 10 employees located in Egypt.

Item 2.  Properties.

     Pursuant to the  Management  Agreement  between  the Fund and the  Managing
Shareholders  (described at Item 10(c)),  Ridgewood Power provides the Fund with
office space at the Managing  Shareholders'  principal  offices at The Ridgewood
Commons, 947 Linwood Avenue, Ridgewood, New Jersey 07450.

     The following  table shows the material  properties  (relating to Projects)
owned or leased by the Fund's subsidiaries.

                                                     Approximate
                                                       Square
                     Ownership  Ground   Approximate  Footage of   Description
                     Interests  Lease      Acreage    Project          of
Projects   Location  in Land  Expiration   of Land    (Actual        Project
                                                     or Projected)

Egyptian five sites Leased by     n/a       less than      n/a    Electric gen-
          in Egypt   joint                    10 acres              erating or
                    venture*                                      water desali-
                                                                  nation facil-
                                                                       ties
*Joint venture equally owned by the Fund and Power V.

The Fund  believes  that these  properties  are  currently  adequate for current
operations at those sites.

Item 3.  Legal Proceedings.

         There are no material legal proceedings involving the Fund.

Item 4.  Submission of Matters to a Vote of Security Holders.

     The Fund has not  submitted  any matters to a vote of its security  holders
during the fourth quarter of 1999.

PART II

Item 5.  Market for Registrant's Common Equity and Related
Stockholder Matters.

     As of  April  13,  2000  the  Fund had  sold  642,942  Investor  Shares  of
beneficial interest in the Fund in its ongoing private placement offering, which
is  scheduled  to end in the  second  quarter  of 2000.  There is  currently  no
established  public trading market for the Investor Shares and the Fund does not
intend  to allow a public  trading  market  to  develop.  As of the date of this
Annual Report on Form 10-K,  all such  Investor  Shares have been issued and are
outstanding.  There are no  outstanding  options or  warrants  to  purchase,  or
securities convertible into, Investor Shares.

     Investor Shares are restricted as to transferability under the Declaration,
as well as under  federal and state laws  regulating  securities.  The  Investor
Shares have not been and are not expected to be registered  under the Securities
Act of 1933, as amended (the "1933 Act"),  or under any other similar law of any
state  (except for  certain  registrations  that do not permit  free  resale) in
reliance  upon what the Fund  believes to be  exemptions  from the  registration
requirements  contained  therein.  Because  the  Investor  Shares  have not been
registered,  they are  "restricted  securities" as defined in Rule 144 under the
1933 Act. As of the date of this Annual Report,  no Investor Shares are sellable
under Rule 144 because the requirements of Rule 144(c) have not been met.

     The Managing Shareholder is considering the possibility of a combination of
the Fund and the five Prior  Programs  sponsored by Ridgewood  Power  (Ridgewood
Electric Power Trusts I, II, III, IV and V) into a publicly traded entity.  This
would require the approval of the  Investors in the Fund and the other  programs
after proxy  solicitations  complying  with  requirements  of the Securities and
Exchange  Commission,  compliance  with the "rollup" rules of the Securities and
Exchange  Commission and other  regulations,  and a change in the federal income
tax status of the combined  entity from a  partnership  (which is not subject to
tax) to a corporation.  The process of considering  and effecting a combination,
if the  decision is made to do so, will be very  lengthy.  There is no assurance
that the Managing  Shareholder will recommend a combination,  that the Investors
of the Fund or other  programs will approve it, that economic  conditions or the
business results of the participants  will be favorable for a combination,  that
the combination  will be effected or that the economic results of a combination,
if effected, will be favorable to the Investors of the Fund or other programs.

(b)  Holders

     As of the date of this Annual Report on Form 10-K, there are 1,143 record
holders of Investor Shares.

(c)  Dividends

     The Fund made distributions as follows in 1999:


                                      Year ended December 31,
                                            1999
Total distributions to Investors        $  924,760
Distributions per Investor Share             1,642 (a)
Distributions to Managing Shareholder        9,341

(a) Approximate.  Distributions  varied based on number of shares and payment of
Early Investor Incentive.

     Distributions  are made on a quarterly  basis.  The Fund's  ability to make
future  distributions  to Investors and their timing will depend on the net cash
flow of the Fund and retention of reasonable  reserves as determined by the Fund
to cover its  anticipated  expenses.  Because all Ridgewood  Power programs have
converted  their  distribution  schedule  to a  quarterly  basis,  the Fund will
continue  quarterly  distributions  rather  than  moving to a  monthly  basis as
previously expected.

     Beginning in 2000, the Fund will begin making  distributions at the rate of
4.2% per year. It does not  anticipate  that  distributions  during most of 2000
will be at a substantially higher rate. This is because the Fund does not expect
to receive revenue from any U.K. Projects until late in 2000 and does not expect
to receive  large amounts of revenue from the Egyptian  Projects  until more are
completed.  ZAP is  being  held  for  capital  appreciation  and  does  not  pay
dividends.

     Occasionally,  distributions  may include funds derived from the release of
cash from operating or debt service reserves.  Further, the Declaration of Trust
authorizes  distributions to be made from cash flows rather than income, or from
cash reserves in some instances.  For purposes of generally accepted  accounting
principles,  amounts  of  distributions  in excess of  accounting  income may be
considered to be capital in nature.  Investors  should be aware that the Fund is
organized to return net cash flow rather than accounting income to Investors.

Item 6.  Selected Financial Data.

     The following data is qualified in its entirety by the financial statements
presented elsewhere in this Annual Report on Form 10-K.

                                          As of and for the
                                       Period from Commencement
                                         of Share Offering
                                         (February 9, 1998)
                                               through             Year ended
                                         December 31, 1998    December 31, 1999

Interest income ........................       $    494,002     $  1,447,920
Total revenue ..........................            494,002          561,083
Net income (loss) ......................           (851,745)        (980,540)
Net assets (shareholders'
  equity) ..............................         24,354,681       45,657,426
Total assets ...........................         25,733,430       45,881,708
Long-term obligations ..................                  0                0
Per Share of Trust
 Interest:
  Revenues .............................              1,664              996
  Net income (loss) ....................             (2,869)          (1,741)

  Net asset value ......................             82,035           81,074
Distributions to Investors .............                  0            1,642(F1)

(F1) Approximate.  Distributions varied based on number of shares and payment of
Early Investor Incentive.


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

Introduction

The following  discussion and analysis  should be read in  conjunction  with the
Fund's  financial  statements  and the notes  thereto  presented  below.  Dollar
amounts in this  discussion  are generally  rounded to the nearest  $1,000.  The
financial statements include only the accounts of the Fund.

The Fund  uses the  equity  method  of  accounting  for its  investments  in the
ZapWorld.com,   the  Egyptian  Projects  and  the   Mediterranean   Fiber  Optic
Project/GFG.

Zap World.com,  a  publicly-traded  California based  corporation,  sells a wide
range of  electric  scooters,  bicycles  and  vehicles.  The  Growth  Fund  owns
approximately 27% of the common stock of Zap World.com.

The Fund and Power V are  developing  several  projects that will sell power and
potable  water to hotels in Egypt.  The projects  will have  contracts  with the
hotels with terms of 10 to 40 years.  The first of these projects is expected to
begin operation in the first half of 2000.

The Fund and Power V also purchased a 25% interest in GFG. GFG expects to be the
co-developer of a large  Mediterranean fiber optic project scheduled to close in
the second  quarter of 2000.  The Fund and Power V expect to fund  approximately
$18 million of this Mediterranean Fiber Optic project when it closes.

Results of Operations

The year ended December 31, 1999 compared to the period from February 9, 1998 to
December 31, 1998

Interest income increased from $494,000 during 1998 to $1,448,000 as a result of
the Fund's higher average cash  balances.  In 1999, the Fund recorded a $640,000
loss from its  investment  in  ZapWorld.com.  In 1999,  The Fund  also  recorded
$198,000 of losses in 1999  related to its 50%  interest  in the Egypt  projects
that are under  development.  These projects are expected to begin  operation in
the first  half of 2000.  In 1999,  The Fund also  recorded a loss of $49,000 in
1999 related to its investment in  Mediterranean  Fiber Optic Project / GFG. The
Fund and Power V own a 25% interest in GFG which expects to be the  co-developer
of a large  Mediterranean  fiber optic project  scheduled to close in the second
quarter of 2000. The Fund and Power V expect to fund  approximately  $18 million
of the Mediterranean Fiber Optic when it closes.

In 1999, the Fund had expenses of $1,542,000 compared to $1,346,000 in 1998. The
increase is primarily a result of an increase of $160,000 in due diligence costs
on potential projects that were ultimately rejected.

Liquidity and Capital Resources

As of December 31, 1999, the Fund had $35,733,000 of cash on hand. The Fund used
$1,626,000 of cash in operations  compared to receiving $431,000 from operations
in 1998.  The change is  primarily  a result of changes in working  capital;  at
December 31, 1998 the Fund had incurred a significant amount of liabilities that
were paid in 1999. The Fund used  $10,181,000  of cash in investing  activities,
primarily the purchase of its interest in the  ZapWorld.com,  the Egypt Projects
and the Mediterranean Fiber Optic Project/GFG.

During 2000, the Fund  anticipates  making  additional  investments in the Egypt
Projects  and the  Mediterranean  Fiber Optic  Project/GFG.  Power V,  through a
subsidiary, purchased five landfill gas fired plants in the United Kingdom which
have contracts to sell the  electricity to a quasi  autonomous  non-governmental
organization  an  inflation  adjusted  price for 15 years.  The  Growth  Fund is
expected to provide  additional  funds to the  subsidiary to acquire  additional
plants as they are developed. To the extent that the Growth Fund provides funds,
it will receive an undivided interest in the entire package of plants.

Other than  investments of available  cash in Projects,  obligations of the Fund
are or will be  generally  limited to payment  of  Project  operating  expenses,
payment of a management  fee to the Managing  Shareholder,  payments for certain
accounting and legal services to third persons and distributions to shareholders
of available operating cash flow generated by the Fund's investments. The Fund's
policy is to distribute as much cash as is prudent to Shareholders. Accordingly,
the Fund has not found it  necessary  to  retain a  material  amount of  working
capital.

The Fund  anticipates  that,  during  2000,  its cash flow from  operations  and
unexpended offering proceeds will be adequate to fund its obligations.

Financial instruments

The Fund's  investments in financial  instruments are short-term  investments of
working capital or excess cash. Those short-term  investments are limited by its
Declaration  of Trust to  investments  in United  States  government  and agency
securities  or to  obligations  of banks  having at least $5  billion in assets.
Currently  the Fund invests only in bank  obligations.  Because the Fund invests
only in short-term  instruments  for cash  management,  its exposure to interest
rate changes is low.

Year 2000 Remediation

     The  Managing  Shareholder  and its  affiliates  began year 2000 review and
planning  in  early  1997.  After  initial  remediation  was  completed,  a more
intensive review discovered additional issues and the Managing Shareholder began
a formal  remediation  program in late 1997.  All  remediation  and testing were
completed by October 31, 1999 and no material  malfunctions have been discovered
through the date of this report.

     The accounting,  network and financial packages for the Ridgewood companies
are basically  off-the-shelf packages that were remediated,  where necessary, by
obtaining patches or updated versions.  The Managing Shareholder  estimates that
the Fund's  allocable  portion  of the cost of  upgrades  that were  accelerated
because of the Year 2000 problem was less than $1,000.

     The Managing  Shareholder  has two major  systems  affecting the Trust that
rely  on  custom-written  software,  the  subscription/investor   relations  and
investor  distribution  systems,  which maintain individual investor records and
effect  disbursement  of  distributions  to Investors.  These were remediated in
1999,  including the elements of those systems used to generate  internal  sales
reports  and  other  internal  reports.   Although  these  were  not  designated
mission-critical,  they were also  successfully  remediated by October 31, 1999.
Some subsystems are being remediated using the "sliding  window"  technique,  in
which two digit  years less than a  threshold  number  are  assumed to be in the
2000's and higher two digit  numbers are  assumed to be in the 1900's.  Although
this will allow  compliance  for several years beyond the year 2000,  eventually
those  systems  will  have to be  rewritten  again  or  replaced.  The  Managing
Shareholder expects that the ordinary course of system upgrading will eventually
cure this problem.

     The Fund's share of the incremental  cost for Year 2000 remediation of this
custom  written  software  and  related  items  for 1998  and  prior  years  was
approximatley $12,250 and was approximately $11,500 for 1999.

     Each of the Fund's  Projects  was  reviewed in 1999 by RPMCo  personnel  to
determine if its electronic  control systems contained  software affected by the
Year 2000 problem or contain  embedded  components that contain Year 2000 flaws.
To date the Fund has discovered no systems  having a material  impact on output,
environmental  compliance,  recordkeeping or any other material impact that have
Year 2000 concerns.  The management of ZAP has informed the Managing Shareholder
that its  equipment,  products and programs are year-2000  compliant and that it
and its  customers  and suppliers  have not  experienced  any material year 2000
malfunctions.

     The Managing  Shareholder and its affiliates do not  significantly  rely on
computer input from  suppliers and customers and thus are not directly  affected
by other  companies'  Year 2000  compliance.  No material  adverse  effects from
customers' or suppliers' Year 2000 problems have occurred.

     Based on its internal  evaluations and the risks and contexts identified by
the  Commission  in its rules and  interpretations,  the Fund believes that Year
2000  issues  relating  to its assets and  remediation  program  will not have a
material effect on its facilities,  financial  position or operations,  and that
the costs of addressing the Year 2000 issues will not have a material  effect on
its future  consolidated  operating results,  financial condition or cash flows.
However,  this  belief is based upon  current  information,  and there can be no
assurance that unanticipated problems will not occur or be discovered that would
result in material adverse effects on the Fund.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

     Qualitative Information About Market Risk.

     The Fund's investments in financial instruments are short-term  investments
of working capital or excess cash. Those  short-term  investments are limited by
its  Declaration of Trust to investments in United States  government and agency
securities  or to  obligations  of banks  having at least $5  billion in assets.
Because the Fund invests only in short-term instruments for cash management, its
exposure to interest rate changes is low. The Fund has limited exposure to trade
accounts  receivable and believes that their carrying  amounts  approximate fair
value.

     The Fund's  primary  market  risk  exposure is limited  interest  rate risk
caused  by  fluctuations  in  short-term  interest  rates.  The  Fund  does  not
anticipate  any changes in its primary market risk exposure or how it intends to
manage it. The Fund does not trade in market risk sensitive instruments.

     Quantitative Information About Market Risk

         This table provides information about the Fund's financial  instruments
that are  defined by the  Securities  and  Exchange  Commission  as market  risk
sensitive instruments.  These include only short-term U.S. government and agency
securities and bank  obligations.  The table  includes  principal cash flows and
related weighted average interest rates by contractual maturity dates.

                                          December 31, 1999
                                        Expected Maturity Date
                                                2000
                                               (U.S. $)

Bank Deposits and Commercial
  Paper                                    $35,732,660
Average interest rate                              5.6%


Item 8.  Financial Statements and Supplementary Data.

Index to Financial Statements
Report of Independent Accountants .............................      F-2
Consoldiated Balance Sheets at December 31, 1999 and 1998 .....      F-3
Consolidated Statement of Operations for Year Ended
  December 31, 1999 and Period from February 9,
  1998 through December 31, 1998 ..............................      F-4
Consolidated Statement of Changes in  Shareholders'  Equity
for Year Ended  December 31, 1999
  and Period from February 9, 1998
through December 31, 1998 F-5
Consolidated Statement  of Cash  Flows for Year  Ended  December
 31,  1999 and  Period  from
  February 9, 1998 through December 31, 1998 ..................      F-6
Notes to Consolidated Financial Statements ....................      F-7 to F-17

Financial Statements for Zapworld.com

     All schedules are omitted  because they are not  applicable or the required
information is shown in the financial statements or notes thereto.

     The  financial  statements  are  presented  in  accordance  with  generally
accepted accounting principles for operating companies,  using consolidation and
equity method accounting  principles.  This differs from the basis used by three
prior independent power programs  sponsored by the Managing  Shareholder,  which
present the Fund's  investments  in Projects on the estimated  fair value method
rather than the consolidation and equity accounting method.

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

     Neither  the Fund nor the  Managing  Shareholders  have had an  independent
accountant  resign  or  decline  to  continue  providing  services  since  their
respective inceptions and neither has dismissed an independent accountant during
that period.  During that period of time no new independent  accountant has been
engaged by the Fund or the Managing Shareholders, and the
Managing  Shareholders'  current accountants,  PricewaterhouseCoopers  LLP, have
been engaged by the Fund.

PART III

Item 10.  Directors and Executive Officers of the Registrant.

(a)      General.

         As Managing Shareholders of the Fund, Ridgewood Power (and Power VI Co,
if Ridgewood Power turns over management  rights to it) has direct and exclusive
discretion in management and control of the affairs of the Fund. The Independent
Panel  Members  only  review  certain  transactions  between  the Fund and other
investment  programs  sponsored by Ridgewood  Power or  affiliates  of Ridgewood
Power.  The  Managing  Shareholder  will  be  entitled  to  resign  as  Managing
Shareholder  of the Fund only (i) with cause  (which  cause does not include the
fact or  determination  that  continued  service  would be  unprofitable  to the
Managing  Shareholder)  or (ii) without  cause with the consent of a majority in
interest  of the  Investors.  It may be removed  from its  capacity  as Managing
Shareholder as provided in the Declaration.

     The purpose for having two Managing Shareholders, Ridgewood Power and Power
VI Co,  was to have  continuity  of  management.  When the  Fund was  organized,
Ridgewood  Power was  considering  that it might  cause the five Prior  Programs
(Power I through  Power V) to combine  into a  publicly  traded  business.  That
process  might  require  Ridgewood  Power to be a part of the  combination,  and
management fees paid by the Fund to the Managing  Shareholder  might pass to the
combined five Prior Programs in a way that might benefit the shareholders of the
five Prior Programs while leaving fewer  resources for the managers of the Fund.
Therefore,  when it organized  the Fund,  Ridgewood  Power created Power VI Co's
predecessor as a stand-in entity that could replace Ridgewood Power.

     Ridgewood  Power now expects  (although no assurance can be given) that the
Fund would also join any combination of the five Prior Programs. Accordingly, it
currently  seems unlikely that it will be necessary to activate Power VI Co as a
Managing Shareholder, if a combination were to occur.

(b)      Managing Shareholder.

     Ridgewood Power Corporation was incorporated in February 1991 as a Delaware
corporation  for the  primary  purpose  of acting as a managing  shareholder  of
business trusts and as a managing general partner of limited  partnerships which
are organized to participate in the  development,  construction and ownership of
Independent  Power  Projects.  It  organized  the  Fund and  acted  as  managing
shareholder  until April 1999. On or about April 21, 1999 it was merged into the
current  Managing  Shareholder,  Ridgewood  Power LLC.  Ridgewood  Power LLC was
organized  in early  April 1999 and has no  business  other  than  acting as the
successor to Ridgewood Power Corporation.

         At the same time,  Ridgewood Power VI Corporation,  which was the other
Managing  Shareholder,  was  merged  into  Ridgewood  Power VI LLC, a New Jersey
limited liability company designated as Power VI Co in this Annual Report. Power
VI Co was  also  newly  organized  and has no  business  other  than  being  the
successor to the dormant Ridgewood Power VI Corporation.

     Robert  E.  Swanson  has  been  the  President,   sole  director  and  sole
stockholder of Ridgewood Power  Corporation since its inception in February 1991
and is now the  controlling  member,  sole manager and President of the Managing
Shareholders.  All of the equity in the  Managing  Shareholders  is owned by Mr.
Swanson or by family trusts. Mr. Swanson has the power on behalf of those trusts
to vote or dispose of the membership equity interests owned by them.

     Ridgewood Power has also organized Ridgewood Electric Power Trust I ("Power
I"),  Ridgewood  Electric Power Trust II ("Power II"),  Ridgewood Electric Power
Trust III ("Power  III"),  Ridgewood  Electric  Power Trust IV ("Power  IV") and
Ridgewood  Electric  Power Trust V ("Power V") as  Delaware  business  trusts to
participate in the independent  power industry.  Ridgewood Power LLC is now also
their  managing  shareholder.  The business  objectives of these five trusts are
similar to those of the Fund.

     A number of other  companies are  affiliates  of Mr.  Swanson and Ridgewood
Power.  Each of these also was organized as a corporation  that was wholly-owned
by Mr. Swanson.  In April 1999, most of them were merged into limited  liability
companies  with  similar  names and Mr.  Swanson  became  the sole  manager  and
controlling  owner of each  limited  liability  company.  For  convenience,  the
remainder of this Memorandum will discuss each limited liability company and its
corporate predecessor as a single entity.

     The   Managing    Shareholders   are   affiliates   of   Ridgewood   Energy
Corporation("Ridgewood  Energy"),  which has  organized  and operated 48 limited
partnership  funds and one  business  trust  over the last 17 years (of which 25
have  terminated)  and which had total capital  contributions  in excess of $190
million.  The  programs  operated by Ridgewood  Energy have  invested in oil and
natural  gas  drilling  and  completion  and  other  related  activities.  Other
affiliates of the Managing Shareholders include Ridgewood Securities Corporation
("Ridgewood Securities"),  an NASD member which has been the placement agent for
the private  placement  offerings  of the six trusts  sponsored  by the Managing
Shareholders  and the funds  sponsored by Ridgewood  Energy;  Ridgewood  Capital
Management  LLC  ("Ridgewood  Capital"),  which assists in offerings made by the
Managing Shareholders and which is the sponsor of four privately offered venture
capital funds (the  Ridgewood  Capital  Venture  Partners and Ridgewood  Capital
Venture Partners II funds);  and RPMCo. Each of these companies is controlled by
Robert E. Swanson, who is their sole director or manager.

      Set forth below is certain  information  concerning  Mr. Swanson and other
executive officers of the Managing Shareholder.

     Robert E.  Swanson,  age 53, has also served as President of the Fund since
its  inception in November  1992 and as  President of RPMCo,  Power I, Power II,
Power III, Power IV and Power V, since their respective inceptions.  Mr. Swanson
has been President and registered  principal of Ridgewood  Securities and became
the Chairman of the Board of Ridgewood  Capital on its  organization in 1998. He
also is Chairman of the Board of the Ridgewood Capital Venture Partners I and II
venture  capital  funds.  In  addition,  he  has  been  President  and  sole  or
controlling owner of Ridgewood Energy since its inception in October 1982. Prior
to forming Ridgewood Energy in 1982, Mr. Swanson was a tax partner at the former
New York and Los  Angeles  law firm of Fulop & Hardee and an officer in the Fund
and Investment  Division of Morgan  Guaranty Trust Company.  His specialty is in
personal tax and financial planning,  including income, estate and gift tax. Mr.
Swanson is a member of the New York State and New Jersey bars,  the  Association
of the Bar of the City of New York and the New York State Bar Association. He is
a graduate of Amherst College and Fordham University Law School.

     Robert L. Gold,  age 41,  has served as  Executive  Vice  President  of the
Managing  Shareholders,  the Fund, RPMCo, Power I, Power II, Power III, Power IV
and Power V since their respective  inceptions,  with primary responsibility for
marketing and acquisitions. He has been President of Ridgewood Capital since its
organization in 1998. As such, he is President of the Ridgewood  Capital Venture
Partners I and II funds.  He has served as Vice President and General Counsel of
Ridgewood Securities  Corporation since he joined the firm in December 1987. Mr.
Gold has also served as  Executive  Vice  President  of  Ridgewood  Energy since
October 1990. He served as Vice President of Ridgewood Energy from December 1987
through  September 1990. For the two years prior to joining Ridgewood Energy and
Ridgewood Securities  Corporation,  Mr. Gold was a corporate attorney in the law
firm of Cleary, Gottlieb, Steen & Hamilton in New York City where his experience
included mortgage finance,  mergers and acquisitions,  public offerings,  tender
offers,  and other business legal matters.  Mr. Gold is a member of the New York
State bar. He is a graduate of Colgate University and New York University School
of Law.

     Thomas R. Brown,  age 45, joined Ridgewood Power in November 1994 as Senior
Vice President and holds the same position with the Fund,  RPMCo and each of the
other trusts sponsored by the Managing  Shareholders.  He became Chief Operating
Officer of Ridgewood Power,  RPMCo and the Ridgewood Power I through V trusts in
October 1996, and is the Chief Operating Officer of the Fund. Mr. Brown has over
20 years'  experience in the  development  and operation of power and industrial
projects.  From 1992 until joining the Managing  Shareholder  he was employed by
Tampella  Services,  Inc.,  an affiliate of Tampella,  Inc.,  one of the world's
largest  manufacturers of boilers and related  equipment for the power industry.
Mr. Brown was Project Manager for Tampella's Piney Creek project, a $100 million
bituminous waste coal fired circulating  fluidized bed power plant. Between 1990
and 1992 Mr. Brown was Deputy Project  Manager at  Inter-Power of  Pennsylvania,
where he successfully developed a 106 megawatt coal fired facility. Between 1982
and 1990 Mr. Brown was employed by Pennsylvania  Electric Company, an integrated
utility, as a Senior Thermal Performance Engineer.  Prior to that, Mr. Brown was
an Engineer  with  Bethlehem  Steel  Corporation.  He has an Bachelor of Science
degree in Mechanical  Engineering from Pennsylvania  State University and an MBA
in  Finance  from the  University  of  Pennsylvania.  Mr.  Brown  satisfied  all
requirements to earn the Professional Engineer designation in 1985.

     Martin V. Quinn,  age 52, assumed the duties of Chief Financial  Officer of
the  Managing  Shareholder,  the Fund,  the prior five trusts  organized  by the
Managing Shareholders and RPMCo in November 1996 under a consulting arrangement.
He became a full-time  officer of Ridgewood Power and RPMCo in April 1997. He is
also the Chief Financial  Officer of Ridgewood  Capital and of Ridgewood Capital
Venture Partners, LLC and Ridgewood Institutional Venture Partners, LLC.

     Mr. Quinn has 31 years of experience in financial  management and corporate
mergers and acquisitions,  gained with major,  publicly-traded  companies and an
international  accounting  firm. He formerly served as Vice President of Finance
and Chief Financial Officer of NORSTAR Energy, an energy services company,  from
February 1994 until June 1996.  From 1991 to March 1993,  Mr. Quinn was employed
by  Brown-Forman  Corporation,  a  diversified  consumer  products  company  and
distiller, where he was Vice President-Corporate Development. From 1981 to 1991,
Mr. Quinn held various  officer-level  positions with NERCO,  Inc., a mining and
natural  resource  company,  including  Vice  President-  Controller  and  Chief
Accounting  Officer  for  his  last  six  years  and  Vice   President-Corporate
Development.  Mr.  Quinn's  professional  qualifications  include his  certified
public  accountant  qualification in New York State,  membership in the American
Institute of Certified  Public  Accountants,  six years of  experience  with the
international  accounting  firm of  PricewaterhouseCoopers,  and a  Bachelor  of
Science degree in Accounting and Finance from the University of Scranton (1969).

     Mary Lou  Olin,  age 47,  has  served  as Vice  President  of the  Managing
Shareholder,  RPMCo,  Ridgewood Capital, the Fund, Power I, Power II, Power III,
Power IV and Power V since their respective  inceptions.  She has also served as
Vice President of Ridgewood Energy since October 1984, when she joined the firm.
Her primary areas of responsibility are investor  relations,  communications and
administration.  Prior to her  employment  at Ridgewood  Energy,  Ms. Olin was a
Regional  Administrator  at McGraw-Hill  Training Systems where she was employed
for two years. Prior to that, she was employed by RCA Corporation.  Ms. Olin has
a Bachelor of Arts degree from Queens College.

(c)  Management Agreement.

     The  Fund  has  entered  into a  Management  Agreement  with  the  Managing
Shareholders  detailing how the Managing  Shareholders  will render  management,
administrative  and investment  advisory services to the Fund under the terms of
the  Declaration.  Specifically,  the  Managing  Shareholders  will  perform (or
arrange for the  performance  of) the  management  and  administrative  services
required  for the  operation  of the  Fund.  Among  other  services,  they  will
administer the accounts and handle  relations  with the  Investors,  provide the
Fund with office space,  equipment and facilities  and other services  necessary
for  its  operation   and  conduct  the  Fund's   relations   with   custodians,
depositories,   accountants,   attorneys,   brokers   and   dealers,   corporate
fiduciaries,  insurers, banks and others, as required. The Managing Shareholders
will also be responsible for making investment and divestment  decisions (except
that  Ridgewood  Program  Transactions  require the approval of the  Independent
Panel Members as described below).

     The Managing  Shareholders will be obligated to pay the compensation of the
personnel and all  administrative  and service expenses necessary to perform the
foregoing  obligations.  The  Fund  will pay all  other  expenses  of the  Fund,
including  transaction  expenses,  valuation  costs,  expenses of preparing  and
printing  periodic  reports for Investors and the  Commission,  postage for Fund
mailings,  Commission fees,  interest,  taxes, legal,  accounting and consulting
fees, litigation expenses,  expenses of operating Projects and costs incurred by
the Managing Shareholders in so doing and other expenses properly payable by the
Fund.  The Fund will reimburse the Managing  Shareholders  for all such Fund and
other expenses paid by it.

     As  compensation  for the  Managing  Shareholders'  performance  under  the
Management  Agreement,  the  Fund is  obligated  to pay  Power  VI Co an  annual
management fee,  beginning on the  Termination  Date of the offering of Investor
Shares  as  described  below  at Item 7 --  Certain  Relationships  and  Related
Transactions.

     The  responsibilities  of  the  Managing  Shareholders  and  the  fees  and
reimbursements  of expenses  it is  entitled to are set out in the  Declaration.
Each  Investor  consented  to the terms and  conditions  of the  Declaration  by
subscribing to acquire Investor Shares in the Fund.

     The Fund has relied and will continue to rely on the Managing  Shareholders
and engineering,  legal,  investment banking and other professional  consultants
(as needed) and to monitor and report to the Fund  concerning  the operations of
Projects in which it invests, to review proposals for additional  development or
financing,  and to represent  the Fund's  interests.  The Fund will rely on such
persons to review proposals to sell its interests in Projects in the future.

(d) Executive Officers of the Fund.

     Pursuant  to  the  Declaration,  the  Managing  Shareholder  has  appointed
officers of the Fund to act on behalf of the Fund and sign  documents  on behalf
of the Fund as  authorized  by the Managing  Shareholder.  Mr.  Swanson has been
named the President of the Fund and the other executive officers of the Fund are
identical to those of the Managing Shareholder.

     The  officers  have the  duties and powers  usually  applicable  to similar
officers  of a Delaware  business  corporation  in carrying  out Fund  business.
Officers  act under the  supervision  and control of the  Managing  Shareholder,
which is entitled to remove any officer at any time. Unless otherwise  specified
by the Managing Shareholder,  the President of the Fund has full power to act on
behalf of the Fund. The Managing  Shareholder expects that most actions taken in
the  name of the  Fund  will be taken by Mr.  Swanson  and the  other  principal
officers in their  capacities as officers of the Fund under the direction of the
Managing Shareholder rather than as officers of the Managing Shareholder.

(e)  The Independent Panel Members.

     The  Declaration  provides for an  Independent  Review Panel (the "Panel"),
with   responsibility   for  independently   reviewing  and  approving  material
transactions  ("Ridgewood Program  Transactions") between the Fund and any other
investment  programs  sponsored by the Managing  Shareholder  or its  Affiliates
("Ridgewood Programs").

     All Ridgewood  Program  Transactions  (which include material  transactions
between  the Fund or entities in which the Fund  invests,  on the one hand,  and
other  Ridgewood  Programs or entities in which they invest or have control,  on
the other),  must be  approved by a majority of the Panel  Members (if there are
only two Panel Members, both must approve) or by a Majority of the Investors. In
reviewing and approving a Ridgewood Program  Transaction,  the Panel Members are
be guided by the  provisions of Delaware law regarding the  responsibilities  of
directors  of a  business  corporation  who  pass  upon a  transaction  with  an
affiliated corporation.  In so doing, the Panel Members are subject to duties of
loyalty to the Fund and its Investors and care in reviewing the transaction, and
are obligated to consider the entire  fairness of the  transaction  to the Fund.
There is no requirement,  however,  that the Fund participate in the transaction
on identical terms with the other Ridgewood Programs. The Declaration specifies,
in  addition,  that the Panel  Members  will be entitled to the  benefits of the
"business  judgment rule" of Delaware law, which exonerates  directors for their
negligence or mistaken  decisions in the absence of bad faith or clear conflicts
of interest.

     The Independent Review Panel provisions were included in the Declaration in
recognition  that  the  Fund's  investment   program   anticipates   significant
co-investment  by the Fund in Projects in which other  Ridgewood  Programs  will
invest. The Managing Shareholder concluded that given the potential conflicts of
interest and the additional  complexities and responsibilities that characterize
co-investment  decisions,  the Fund should  create a mechanism  for  independent
review and approval of co-investments.

     The Managing  Shareholder  has  designated the initial Panel of three Panel
Members. A majority of the incumbent Panel Members must consent for the Panel to
take action.  A majority of the Managing  Shareholder  and the  incumbent  Panel
Members,  acting together, may authorize an increase to no more than eight Panel
Members  (or a  decrease  to not fewer than two) and may fill  vacancies  on the
Panel within 180 days. If there is no incumbent Panel Member, however, vacancies
must be filled by the  Managing  Shareholder  with the approval of a Majority of
the Investors. A Panel Member may not be an Affiliate of the Fund and may not be
an investment advisor or underwriter for the Fund, a person  beneficially owning
five  percent  or more of the  Investor  Shares,  an  entity  in which  the Fund
beneficially owns five percent or more of the outstanding equity securities,  an
agent or employee  of the Fund or its  subsidiaries,  a member of the  immediate
family of any  individual  described  above,  or a person who served at any time
after the beginning of the second-to-last full calendar year as legal counsel to
the Fund or the  Managing  Shareholder,  or a partner,  principal or employee of
that legal counsel.

     The Panel is not required to review other  transactions  that might involve
the Managing  Shareholder or its Affiliates and the Fund, such as the Management
Agreement or  temporary  advances of funds by the  Managing  Shareholder  to the
Fund. The Managing  Shareholder,  in its sole  discretion,  may refer such other
transactions to the Panel for advice, and the Panel, in its sole discretion, may
elect  to  review  and  report  to the  Managing  Shareholder  on  the  referred
transaction,  or to decline to review it. Neither the Managing  Shareholder  nor
the Panel Members shall incur  liability to the Fund or any Shareholder by their
decisions  to  refer  or not to  refer,  or to  review  or  not to  review,  any
transaction that is not a Ridgewood Program Transaction.

     The Panel Members are not trustees of the Fund,  have no general  fiduciary
responsibility for the Fund's investments or operations,  and have no continuing
oversight responsibilities for the Fund. The Panel meets only on the call of the
Managing  Shareholder.  Panel  Members may resign and may be removed  either for
cause by action of at least two-thirds of the remaining Panel Members or for any
reason by action of the holders of at least two-thirds of the Investor Shares.

     Compensation  of the Panel Members is set in the  Declaration at $5,000 per
year,  plus  out-of-pocket  expenses  incurred..  If  the  Managing  Shareholder
certifies in the Fund's records that there is no reasonable probability that the
Fund will engage in further  Ridgewood Program  Transactions,  the Panel will be
suspended  and will  take no  further  action.  During  that  period,  the Panel
Members'  compensation  will cease.  A suspended  Panel may be reinstated by the
Managing Shareholder at any time.

     John C. Belknap, age 52, has been chief financial officer of three national
retail  chains and their  parent  companies.  In  February  2000,  he joined Dr.
Propper's consulting firm, RP Associates,  as a consultant.  From September 1999
through  February 2000, he was an independent  financial  consultant.  From July
1997 through August 1999, he was Executive  Vice  President and Chief  Financial
Officer of Richfood Holdings,  Inc., a Virginia-based  food  manufacturer.  From
December 1995 to June 1997 Mr.  Belknap was Executive  Vice  President and Chief
Financial Officer of OfficeMax,  Inc., an office products superstore chain. From
February 1994 to February  1995,  Mr.  Belknap was Executive  Vice President and
Chief Financial Officer of Zale Corporation,  a retail jewelry store chain. From
January  1990 to January  1994 and from  February  1995 to  December  1995,  Mr.
Belknap was an independent financial  consultant.  From January 1989 through May
1993 he also served as a director of and consultant to Finlay Enterprises, Inc.,
an  operator of leased  fine  jewelry  departments  in major  department  stores
nationwide. He also serves as an Independent Trustee of Power I and Power IV.

     Dr. Richard D. Propper,  age 48,  graduated from McGill  University in 1969
and received his medical  degree from Stanford  University in 1972. He completed
his internship  and residency in Pediatrics in 1974,  and then attended  Harvard
University  for  post  doctoral  training  in   hematology/oncology.   Upon  the
completion of such training,  he joined the staff of the Harvard  Medical School
where he served as an assistant  professor until 1983. In 1983, Dr. Propper left
academic  medicine  to found  Montgomery  Medical  Ventures,  one of the largest
medical  technology  venture  capital firms in the United  States.  He served as
managing  general  partner of Montgomery  Medical  Ventures  until 1993. He also
serves as an Independent Trustee of Power I and of Power IV.

     Dr. Propper is currently a consultant to a variety of companies for medical
matters,  including  international  opportunities in medicine.  In June 1996 Dr.
Propper agreed to an order of the  Commission  that required him to make filings
under  Sections  13(d)  and (g) and 16 of the 1934 Act and that  imposed a civil
penalty of $15,000.  In entering into that agreement,  Dr. Propper did not admit
or deny any of the alleged  failures to file recited in that order.  Dr. Propper
is also an acquisition  consultant for Ridgewood Capital Venture  Partners,  LLC
and Ridgewood Institutional Venture Partners, LLC, the two venture capital funds
sponsored by Ridgewood  Capital.  He receives a fixed  consulting fee from those
funds and contingent  compensation from Ridgewood Capital.  He also serves as an
Independent Trustee of Power I and of Power IV.

     Seymour (Si) Robin,  age 72, has been the Executive  Vice President and CEO
of Sensor Systems, Inc., an antenna manufacturing company located in Chatsworth,
California.  He has held this position  since 1972.  From 1949 to 1953, he owned
and operated United  Manufacturing  Company,  which  specialized in aircraft and
missile antennas.  From 1953 to 1957, he managed Bendix Antenna Division,  which
specialized in aircraft and space antennas and avionics. In 1957, he started SRA
Antenna  Company  as  a  manufacturer  and  technical  consultant  to  worldwide
manufacturers  or  commercial  and  military  aircraft  and space  vehicles.  He
remained at SRA Antenna  Company until 1971,  at which time he became  Executive
Vice President and CEO of Sensor Systems, Inc.

         Mr. Robin holds degrees in mechanical and electrical  engineering  from
Montreal  Technical   Institute  and  U.C.L.A.  He  is  an  FAA-certified  pilot
(multi-engine, instrument, land and sea ratings) since 1966. He has received the
AMC Airline  Voltaire  Award for the Most  Outstanding  Contribution  to Airline
Avionics in the Past 50 Years. He also owns significant  interests in commercial
and  residential  real estate in the southwest  U.S. Mr. Robin was elected as an
Independent  Trustee by the two other  Independent  Trustees and Mr.  Swanson in
January 2000. He also serves as an  Independent  Trustee of Power I and of Power
IV.

 (f)  Corporate Trustee

     The Corporate Trustee of the Fund is Ridgewood Holding. Legal title to Fund
property is now and in the future will be in the name of the Fund,  if possible,
or Ridgewood Holding as trustee. Ridgewood Holding is also a trustee of Power I,
Power II,  Power III,  Power IV,  Power V and of an oil and gas  business  trust
sponsored by Ridgewood  Energy and is expected to be a trustee of other  similar
entities  that may be organized by Ridgewood  Power and  Ridgewood  Energy.  The
President,  sole director and sole stockholder of Ridgewood Holding is Robert E.
Swanson;  its other  executive  officers are  identical to those of the Managing
Shareholder.  The principal office of Ridgewood  Holding is at 1105 North Market
Street, Suite 1300, Wilmington, Delaware 19899.

(g) Fiduciary Responsibilities of Managing Shareholders and Others

         The Investors and the Fund may have a number of legal remedies  against
the Managing  Shareholders  in the event they were to breach their  duties.  The
Declaration  expressly  states  that each  Managing  Shareholder  is jointly and
severally  liable for all debts and  obligations  of the Fund. The intent of the
Declaration  is to subject  the  Managing  Shareholders  to the  liabilities  of
general  partners of a Delaware  limited  partnership as if the Fund were such a
partnership.  The Declaration  does so by including the liability  provisions of
the Delaware Uniform  Partnership Law as Sections 3.2 of the Declaration.  Under
the law of Delaware,  such general  partners are  accountable as fiduciaries and
must  exercise  the utmost  good faith and  integrity  in  handling  partnership
affairs.  In  managing  the  Fund,  however,  it is  likely  that  the  Managing
Shareholders and the Corporate  Trustee would be entitled to the benefits of the
"business  judgment  rule" of Delaware law,  which provides that the courts will
not hold the manager of a business  entity liable for its negligence or mistaken
decisions in the absence of bad faith or clear  conflict of interests.  Further,
the Declaration of Trust  expressly  states that the Managing  Shareholders  and
other  Ridgewood  Managing  Persons have no liability  for their conduct if they
determined  in good  faith  that it was in the  Fund's  best  interests  and the
conduct was neither  reckless  nor  willful  misconduct.  See ARTICLE III OF THE
DECLARATION OF TRUST.

         The Declaration imposes the responsibilities of directors of a Delaware
corporation  on Panel  Members  to the  extent  that  they  review  and  approve
Ridgewood Program Transactions.  See Item 5(e) -INDEPENDENT REVIEW PANEL, ABOVE.
The Panel  Members  have no  responsibility  or  fiduciary  duty as to any other
aspect of the Fund  except to the  limited  extent  that they may  report to the
Managing Shareholder on matters expressly referred to them. There is no Delaware
statute or case law addressing the extent to which approval of Ridgewood Program
Transactions or other matters by the Independent  Review Panel would protect the
Managing  Shareholders  or other  persons  from  liabilities  to the Fund or the
Investors. As mentioned in the preceding paragraph,  the Declaration states that
Ridgewood Managing Persons acting in good faith and without recklessness are not
liable for their conduct. The Managing Shareholders believe that approval by the
Independent Review Panel ordinarily should establish such good faith and lack of
recklessness. Further, Section 3.5(b) of the Declaration states that

No act of the Fund shall be affected or  invalidated by the fact that a Managing
Person may be a party to or has an interest in any  contract or  transaction  of
the Fund if . . . [it] (iii) is a Ridgewood Program Transaction authorized under
Section  12.14(d) [by vote of the  Independent  Panel  Members] or (iv) has been
approved  by the vote of an  Independent  Panel or (v) has been  approved by the
vote of a Majority of Voting Shares.

         The Delaware Act expressly  provides  that a  Shareholder  may bring an
action in the right of the Fund (i.e., a derivative  action) to recover  damages
from any person (which may include the Managing  Shareholders,  their manager or
officers, or others) if the Corporate Trustee has refused to bring the action or
an effort to cause the Trustee to do so is not likely to succeed.  The  Delaware
Act contains certain limitations and rights regarding the prosecution of a trust
derivative action.  The common or statutory law of other  jurisdictions may also
grant  rights to bring a  derivative  action.  The  common or  statutory  law of
Delaware  or other  jurisdictions  may also  grant to an  Investor  the right to
institute  legal  action  on his own  behalf  and  that of all  other  similarly
situated  Investors  (i.e.,  a class  action) to  recover  damages  against  the
Managing  Shareholders,  the  Corporate  Trustee,  the  officers  of the Fund or
others.
         Under the common law as in effect in many  jurisdictions,  an equitable
action for an accounting by a trustee and  beneficiaries of a trust (such as the
Shareholders)  is  available.  In addition,  the equity powers of a court may be
invoked in proper cases to direct a trustee's  actions,  to replace a trustee or
to reform a trust  instrument.  As permitted by the Delaware Act,  however,  the
Declaration provides that no person will be entitled to require an accounting at
any  time or to  elect  a  judicial,  administrative  or  executive  supervisory
proceeding that is applicable to non-business trusts. The applicability of these
common law remedies to a Delaware  business  trust's  operations in light of the
Declaration  is  extremely  uncertain  and  there can be no  assurance  that the
Declaration's limitations of remedies would be recognized in full.

         The Managing  Shareholders are not trustees of the Fund,  although they
have complete and exclusive power to direct the Corporate  Trustee and to direct
the  management  of the Fund and although  they may take action on behalf of the
Fund.  Under the Delaware  Act,  neither the existence of these powers nor their
exercise  causes the Managing  Shareholders to be deemed trustees in the absence
of a provision in the Declaration to that effect.  No such provision is included
in the  Declaration.  Accordingly,  the  Managing  Shareholders  are not express
trustees  of the  Fund and if there  were  legal  remedies  that  could  only be
obtained  against  a  trustee  by the  Investors  those  remedies  would  not be
available to the Investors against the Managing Shareholders.  The Fund does not
know of any  such  remedy,  other  than  actions  for an  accounting  and  other
supervisory proceedings, which are barred by the Declaration.

         The  Declaration  states  that each  Investor is entitled to obtain the
following  information from the Fund upon reasonable  written demand stating the
purpose of the  demand  (which  must be  reasonably  related  to the  Investor's
interest  in the  Fund):  (i) true and full  information  regarding  the  Fund's
business and financial  condition and the contributions to the Fund; (ii) copies
of tax returns,  the Declaration  and the certificate of trust, as amended;  and
(iii) other  reasonable  information  regarding the Fund. The Fund may establish
reasonable  standards and limitations on disclosures of information and costs of
providing that information will be borne by the requesting Investor.

(h)  RPMCo.

     RPMCo is wholly owned by Robert E. Swanson. For Projects for which the Fund
decides to take operating  responsibility itself, the Fund will cause the Fund's
subsidiary  that owns the Project to enter into an "Operation  Agreement"  under
which RPMCo, under the supervision of the Managing Shareholder, will provide the
management,  purchasing,  engineering,  planning and administrative services for
the Project.  RPMCo will charge the Fund at its cost for these  services and for
the Fund's allocable  amount of certain  overhead items.  RPMCo shares space and
facilities with the Managing Shareholder and its affiliates.  To the extent that
common expenses can be reasonably  allocated to RPMCo, the Managing  Shareholder
may, but is not required to, charge RPMCo at cost for the allocated  amounts and
such  allocated  amounts  will be borne by the Fund and other  programs.  Common
expenses that are not so allocated will be borne by the Managing Shareholder.

     The Fund does not currently  own any  Independent  Power  Projects or other
facilities managed by RPMCo and accordingly no Operation Agreement is in effect.
The Fund has not made any material payments to RPMCo.

     Initially,  the Managing Shareholder does not anticipate charging RPMCo for
the full amount of rent,  utility  supplies  and office  expenses  allocable  to
RPMCo.  As a  result,  both  initially  and on an  ongoing  basis  the  Managing
Shareholder  believes  that  RPMCo's  charges  for its  services to the Fund are
likely to be materially  less than its economic  costs and the costs of engaging
comparable third persons as managers. RPMCo will not receive any compensation in
excess of its costs.

     Allocations  of costs  will be made  either  on the  basis of  identifiable
direct costs,  time records or in proportion to each  program's  investments  in
Projects managed by RPMCo;  and allocations will be made in a manner  consistent
with generally accepted accounting principles.

     RPMCo will not provide any services  related to the  administration  of the
Fund, such as investment,  accounting, tax, investor communication or regulatory
services,  nor will it  participate  in  identifying,  acquiring or disposing of
Projects. RPMCo will not have the power to act in the Fund's name or to bind the
Fund,  which  will  be  exercised  by the  Managing  Shareholder  or the  Fund's
officers.

     The Operation  Agreements will not have a fixed term and will be terminable
by RPMCo,  by the Managing  Shareholder  or by vote of a majority in interest of
Investors,  on 60 days' prior notice. The Operation Agreements may be amended by
agreement of the Managing  Shareholder  and RPMCo;  however,  no amendment  that
materially  increases the obligations of the Fund or that  materially  decreases
the  obligations  of RPMCo shall become  effective  until at least 45 days after
notice of the amendment,  together with the text thereof,  has been given to all
Investors.

     The  executive  officers  of RPMCo are Mr.  Swanson  (President),  Mr. Gold
(Executive Vice President), Mr. Brown (Senior Vice President and Chief Operating
Officer),  Mr. Quinn (Senior Vice President and Chief Financial Officer) and Ms.
Olin (Vice President).  Douglas V. Liebschner, Vice President - Operations, is a
key employee.

     Douglas V. Liebschner,  age 51, joined RPMCo in June 1996 as Vice President
of  Operations.  He has  over  27  years  of  experience  in the  operation  and
maintenance of power plants.  From 1992 until joining RPMCo,  he was employed by
Tampella  Services,  Inc.,  an affiliate of Tampella,  Inc.,  one of the world's
largest  manufacturers of boilers and related  equipment for the power industry.
Mr. Liebschner was Operations  Supervisor for Tampella's Piney Creek project,  a
$100 million bituminous waste coal fired circulating fluidized bed ("CFB") power
plant.  Between 1989 and 1992,  he  supervised  operations  of a waste to energy
plant  in  Poughkeepsie,  N.Y.  and  an  anthracite-waste-coal-burning   CFB  in
Frackville,  Pa.  From 1969 to 1989,  Mr.  Liebschner  served in the U.S.  Navy,
retiring  with the rank of  Lieutenant  Commander.  While in the Navy, he served
mainly in billets  dealing with the  operation,  maintenance  and repair of ship
propulsion plants,  twice serving as Chief Engineer on board U.S. Navy combatant
ships.  He has a  Bachelor  of  Science  degree  from  the U.S.  Naval  Academy,
Annapolis, Md.

(i)  Section 16(a) Beneficial Ownership Reporting Compliance

     All individuals  subject to the requirements of Section 16(a) have complied
with those reporting requirements during 1999.

Item 11.  Executive Compensation.

     The  Fund  reimburses  RPMCo  at cost  for  services  provided  by  RPMCo's
employees  and  reimburses  the  Managing  Shareholders  at  allocated  cost for
services outside the scope of the Management  Agreement;  no such  reimbursement
per  employee  exceeded  $60,000  in 1998 or  1999.  Information  as to the fees
payable to the Managing Shareholders and certain affiliates is contained at Item
13 Certain Relationships and Related Transactions.

     As  compensation  for  services  rendered  to  the  Fund,  pursuant  to the
Declaration,  each  Independent  Panel Member is entitled to be paid by the Fund
the sum of $5,000 annually and to be reimbursed for all reasonable out-of-pocket
expenses  relating to attendance at Board  meetings or otherwise  performing his
duties to the Fund.  Accordingly  in January 1999 and  following  years the Fund
paid each  Independent  Panel Member  $5,000 for his services.  The  Independent
Panel  Members  and  the  Managing  Shareholders  are  entitled  to  review  the
compensation  payable to the Independent  Panel Members annually and increase or
decrease  it as they see  reasonable.  The  consent of a  majority  of the Panel
Members and the consent of the Managing  Shareholders  is necessary for a change
in compensation.  The Fund is not entitled to pay the Independent  Panel Members
compensation for consulting  services  rendered to the Fund outside the scope of
their duties to the Fund without similar approval.

     Ridgewood  Holding,  the Corporate  Trustee of the Fund, is not entitled to
compensation for serving in such capacity,  but is entitled to be reimbursed for
Fund  expenses  incurred  by  it  which  are  properly  reimbursable  under  the
Declaration.

     For information concerning the Fund's Key Employee Incentive Plan, see Item
11(j)  of  the  Fund's   Registration   Statement  on  Form  10.  No  awards  or
determinations of eligibility have been made under the Plan.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

     Ridgewood Power purchased for cash one full Investor Share (as of April 13,
2000, .156%). By virtue of its purchase of an Investor Share, Ridgewood Power is
entitled to the same  ratable  interest in the Fund as all other  purchasers  of
Investor Shares.  Except for Mr. Robin, who owns 10 Investor Shares (1.56%),  no
other Trustees or executive officers of the Fund acquired Investor Shares in the
Fund's offering. No person beneficially owns 5% or more of the Investor Shares.

     The  Managing  Shareholder  was  issued  one  Management  Share in the Fund
representing  the  beneficial  interests and  management  rights of the Managing
Shareholder in its capacity as the Managing Shareholder  (excluding its interest
in the Fund  attributable to Investor  Shares it acquired in the offering).  The
management  rights of the Managing  Shareholder  are described in further detail
above  at Item 1 -  Business  and  below  in Item 10.  Directors  and  Executive
Officers of the Registrant. Its beneficial interest in cash distributions of the
Fund and its allocable  share of the Fund's net profits and net losses and other
items attributable to the Management Share are described in further detail below
at Item 13 -- Certain Relationships and Related Transactions.

Item 13.  Certain Relationships and Related Transactions.

     The  Declaration  provides  that  cash flow of the  Fund,  less  reasonable
reserves which the Fund deems necessary to cover  anticipated Fund expenses,  is
to be  distributed  to the  Shareholders  from  time to time as the  Fund  deems
appropriate.  The  allocation  of  distributions  between the  Investors and the
Managing  Shareholder is described at Item 11(a) - Description  of  Registrant's
Securities to be Registered - Distribution and Dissolution Rights.

     The Fund made distributions in 1999 to Power VI Co totalling $9,300. or any
other person. The Fund paid fees to the Managing Shareholders and its affiliates
as follows:

Fee                    Paid to        1998          1999

Investment fee        Ridgewood
                      Power          $577,813    $560,650
Placement agent fee   Ridgewood
 and sales commis-    Securities
 sions                Corporation     304,031     188,842
Organizational,       Ridgewood
 distribution and     Power
 offering fee                       1,776,189   1,698,842
Due diligence         Ridgewood
 Expenses(a)          Power           868,208     708,658

(a)      Includes reimbursement for fees and expenses of third parties.

     The  investment  fee equaled 2% of the proceeds of the offering of Investor
Shares and was payable for the Managing  Shareholder's services in investigating
and evaluating investment  opportunities and effecting investment  transactions.
The placement agent fee (1% of the offering proceeds) and sales commissions were
also paid from proceeds of the offering, as was the organizational, distribution
and offering fee (5% of offering  proceeds) for legal,  accounting,  consulting,
filing, printing,  distribution,  selling, closing and organization costs of the
offering.

     In addition to the foregoing,  the Fund reimbursed the Managing Shareholder
and RPMCo at cost for expenses and fees of  unaffiliated  persons engaged by the
Managing  Shareholder  for Fund  business  and for certain  expenses  related to
management of Projects.

     Other  information in response to this item is reported in response to Item
12. Executive Compensation,  which information is incorporated by reference into
this Item 13.

     Mr.  Swanson is a director  of ZAP.  In  September  1999,  he  purchased  a
franchise to distribute ZAP's products on eastern Long Island, in New York State
and paid $10,000 to ZAP for the franchise and $18,747 for inventory during 1999.

     Mr.  Swanson  also  received a warrant to  purchase an  additional  100,000
shares of ZAP's  common  stock at a price of $6.25,  expiring in December  2002.
This warrant was granted to him in  consideration  of his services as a director
of ZAP.  Mr.  Swanson has  assigned  the warrant to  Ridgewood  Zap, LLC without
consideration.  In so doing, he does not represent that he acts as a director on
behalf of  Ridgewood  Zap, LLC or the Fund or that he is obligated to assign any
compensation he receives from ZAP.

         Other  information  in response to this item is reported in response to
Item 12. Executive Compensation,  which information is incorporated by reference
into this Item 13.

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

 (a)  Financial Statements.

     See the Index to Financial Statements in Item 8 hereof.

 (b) Reports on Form 8-K.

     No Form 8-K was filed  with the  Commission  by the  Registrant  during the
quarter ending December 31, 1999.

 (c)  Exhibits

      3.A. Certificate of Trust of the Registrant.  Incorporated by reference to
the same Exhibit in the Registrant's Registration Statement on Form 10.

     3.B. Amendment No. 1 to Certificate of Trust.  Incorporated by reference to
the same Exhibit in the Registrant's Registration Statement on Form 10.

     3.C.  Declaration of Trust of the Registrant.  Incorporated by reference to
the same Exhibit in the Registrant's Registration Statement on Form 10.

     10.A.  Stock and Warrant  Purchase  Agreement for ZAP Power  Systems,  Inc.
Incorporated by reference to the same Exhibit in the  Registrant's  Registration
Statement on Form 10.

     10.B.  Warrant for  Purchase  of Common  Stock of ZAP Power  Systems,  Inc.
Incorporated by reference to the same Exhibit in the  Registrant's  Registration
Statement on Form 10.

     10.C Investors' Rights Agreement with ZAP Power Systems,  Inc. Incorporated
by reference to the same Exhibit in the Registrant's  Registration  Statement on
Form 10.

     10.D. Milestone letter agreement with ZAP Power Systems,  Inc. Incorporated
by reference to the same Exhibit in the Registrant's  Registration  Statement on
Form 10.

     10.E. Letter agreement re board representation with ZAP Power Systems, Inc.
Incorporated by reference to the same Exhibit in the  Registrant's  Registration
Statement on Form 10.

     10.F.  Management  Agreement  between  the Fund and  Managing  Shareholders
Incorporated by reference to the same Exhibit in the  Registrant's  Registration
Statement on Form 10.

     10.G. Key Employees' Incentive Plan.  Incorporated by reference to the same
Exhibit in the Registrant's Registration Statement on Form 10.


     10.H. Agreement of Merger between Ridgewood Power Corporation and Ridgewood
Power LLC.  Incorporated  by reference  to the same Exhibit in the  Registrant's
Registration Statement on Form 10.

     24.   Powers of Attorney                           Page

     27.   Financial Data Schedule                      Page





<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, thereunto duly authorized.

Signature                     Title                          Date



THE RIDGEWOOD POWER GROWTH FUND (Registrant)

By:/s/ Robert E. Swanson    President and Chief     April 14, 2000
       Robert E. Swanson     Executive Officer

        Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the dates indicated.

By:/s/ Robert E. Swanson    President and Chief    April 14, 2000
       Robert E. Swanson     Executive Officer

By:/s/ Martin V. Quinn      Senior Vice President and
       Martin V. Quinn    Chief Financial Officer  April 14, 2000

By:/s/ Christopher Naunton    Director of Finance  April 14, 2000
       Christopher Naunton   and Chief Accounting Officer

RIDGEWOOD POWER LLC  Managing Shareholder  April 14, 2000

By:/s/ Robert E. Swanson    President
       Robert E. Swanson

 /s/ Robert E. Swanson  *   Independent Trustee    April 14, 2000
       John C. Belknap

 /s/ Robert E. Swanson  *   Independent Trustee    April 14, 2000
      Richard D. Propper

 /s/ Robert E. Swanson*     Independent Trustee    April 14, 2000
         Seymour Robin

  As attorney-in-fact for the Independent Trustee
<PAGE>
                         The Ridgewood Power Growth Fund

                        Consolidated Financial Statements

                           December 31, 1999 and 1998
<PAGE>

                      Report of Independent Accountants


To the Shareholders and Trustees of
The Ridgewood Power Growth Fund:

In our opinion,  the  accompanying  consolidated  balance sheets and the related
consolidated  statements of operations,  changes in shareholders'  equity and of
cash flows present fairly, in all material  respects,  the financial position of
The Ridgewood  Power Growth Fund (the "Fund") and its  subsidiaries  at December
31, 1999 and 1998, and the results of their  operations and their cash flows for
the year ended December 31, 1999 and the period  February 9, 1998  (commencement
of share  offering)  through  December 31, 1998, in conformity  with  accounting
principles  generally accepted in the United States.  These financial statements
are the  responsibility  of the  Fund's  management;  our  responsibility  is to
express  an  opinion  on these  financial  statements  based on our  audits.  We
conducted our audits of these  statements in accordance with auditing  standards
generally accepted in the United States,  which 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,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe  that our audits  provide a reasonable  basis for the opinion  expressed
above.



PricewaterhouseCoopers LLP
New York, NY
March 24, 2000
<PAGE>

The Ridgewood Power Growth Fund
Consolidated Balance Sheet
--------------------------------------------------------------------------------

                                                       December 31,
                                               ----------------------------
                                                   1999             1998
                                               ------------    ------------
Assets:
Cash and cash equivalents ..................   $ 35,732,660    $ 25,256,560
Due from affiliates ........................        316,833           9,330
Other current assets .......................        156,644          86,348
                                               ------------    ------------
  Total current assets .....................     36,206,137      25,352,238

Investment in:
Zap World.com ..............................      3,441,809            --
Egypt Projects .............................      4,736,092            --
Mediterranean Fiber Optic Project/GFG ......      1,497,670            --

Deferred due diligence costs ...............           --           381,192
                                               ------------    ------------
  Total assets .............................   $ 45,881,708    $ 25,733,430
                                               ------------    ------------

Liabilities and shareholders' equity:

Liabilities:
Accounts payable and accrued expenses ......   $    216,795    $    264,620
Due to affiliates ..........................          7,487       1,114,129
                                               ------------    ------------
  Total current liabilities ................        224,282       1,378,749
                                               ------------    ------------
Commitments and contingencies

Shareholders' equity:
Shareholders' equity (563.16 and
 296.8815 investor shares issued and
 outstanding at December 31, 1999 and
 1998, respectively) .......................     46,548,589      24,388,198
Subscriptions receivable ...................       (863,500)        (25,000)
                                               ------------    ------------
  Shareholders' equity, net ................     45,685,089      24,363,198
Managing shareholders' accumulated
 deficit (1 management share issued and ....        (27,663)         (8,517)
                                               ------------    ------------
  Total shareholders' equity ...............     45,657,426      24,354,681
                                               ------------    ------------
  Total liabilities and shareholders' equity   $ 45,881,708    $ 25,733,430
                                               ------------    ------------











        See accompanying notes to the consolidated financial statements.

<PAGE>

The Ridgewood Power Growth Fund
Consolidated Statement of Operations
--------------------------------------------------------------------------------

                                                     Commencement
                                                     of Share Offering
                                For the Year Ended   (February 9, 1998) Through
                                 December 31, 1999    December 31, 1998
                                       -----------    -----------

Revenue:
Interest income ....................   $ 1,447,920    $   494,002
Equity interest in loss of:
 Zap World.com .....................      (639,915)          --
 Egypt Projects ....................      (197,759)          --
 Mediterranean Fiber Optic/GFG .....       (49,163)          --
                                       -----------    -----------
 Total revenue .....................       561,083        494,002
                                       -----------    -----------

Expenses:
 Investment fee paid to the managing
  shareholders .....................       560,650        577,813
 Project due diligence costs .......       868,208        708,658
 Accounting and legal fees .........        39,878         31,000
 Other expenses ....................        72,887         28,276
                                       -----------    -----------

 Total expenses ....................     1,541,623      1,345,747
                                       -----------    -----------

 Net loss ..........................   $  (980,540)   $  (851,745)
                                       -----------    -----------


















        See accompanying notes to the consolidated financial statements.

<PAGE>

The Ridgewood Power Growth Fund
Consolidated Statement of Changes in Shareholders' Equity
For  The  Year  Ended  December  31,  1999  and  the  Period  February  9,  1998
(Commencement of Share Offering) To December 31, 1998
--------------------------------------------------------------------------------
<TABLE>
<S>                                   <C>             <C>             <C>            <C>


                                                          Subscriptions   Managing
                                          Shareholders     Receivable    Shareholders       Total
                                          ------------    ------------   ------------    ------------

Initial capital contributions, net
   (296.8815 investor shares and 1
   management share) ..................   $ 25,231,426    $    (25,000)   $       --      $ 25,206,426

Net loss for the period ...............       (843,228)           --            (8,517)       (851,745)
                                          ------------    ------------    ------------    ------------

Shareholders' equity, December 31, 1998
   (296.8815 investor shares and 1
   management share) ..................     24,388,198         (25,000)         (8,517)     24,354,681

Capital contributions, net (266.2785
   investor shares) ...................     24,055,886        (838,500)           --        23,217,386

Distributions .........................       (924,760)           --            (9,341)       (934,101)

Net loss ..............................       (970,735)           --            (9,805)       (980,540)
                                          ------------    ------------    ------------    ------------

Shareholders' equity, December 31, 1999
   (563.16 investor shares and 1
   management share) ..................   $ 46,548,589    $   (863,500)   $    (27,663)   $ 45,657,426
                                          ------------    ------------    ------------    ------------


</TABLE>







        See accompanying notes to the consolidated financial statements.


<PAGE>




The Ridgewood Power Growth Fund
Consolidated Statement of Cash Flows
--------------------------------------------------------------------------------

                                                           Commencement of Share
                                                             Offering (February
                                        For The Year Ended    9, 1998) Through
                                         December 31, 1999    December 31, 1998
                                              ------------    ------------

Cash flows from operating
 activities:
Net loss ..................................   $   (980,540)   $   (851,745)
                                              ------------    ------------
Adjustments to reconcile
 net loss to net cash flows
 from operating activities:
 Equity interest in loss of
 Zap World.com ............................        639,915            --
 Equity interest in loss of
 Egypt Projects ...........................        197,759            --
 Equity interest in loss of
 Mediterranean Fiber Optic/GFG ............         49,163            --
 Changes in assets and
  liabilities:
  Increase in due from affiliates .........       (307,503)         (9,330)
  Increase in other current
   assets .................................        (70,296)        (86,348)
  (Decrease) increase in
   accounts payable and
   accrued expenses .......................        (47,825)        264,620
  (Decrease) increase in due
   to affiliate ...........................     (1,106,642)      1,114,129
                                               ------------   ------------
    Total adjustments .....................       (645,429)      1,283,071
                                              ------------    ------------

Net cash (used in) provided
 by operating activities ..................     (1,625,969)        431,326
                                              ------------    ------------
Cash flows from investing
 activities:
Investment in Zap World.com ...............     (4,081,724)           --
Investment in Egypt Projects ..............     (4,933,851)           --
Investment in Mediterranean
 Fiber Optic/GFG ..........................     (1,546,833)           --
Decrease (increase) in
 deferred due diligence costs .............        381,192        (381,192)
                                              ------------    ------------
Net cash used in investing
 activities ...............................    (10,181,216)       (381,192)
                                              ------------    ------------
Cash flows from financing activities:
Proceeds from shareholders' contributions .     27,458,014      29,613,468
Selling commissions and offering costs paid     (4,240,628)     (4,407,042)
Cash distributions to shareholders ........       (934,101)           --
                                              ------------    ------------
Net cash provided by financing
 activities ...............................     22,283,285      25,206,426
                                              ------------    ------------

Net increase in cash and
 cash equivalents .........................     10,476,100      25,256,560

Cash and cash equivalents,
 beginning of period ......................     25,256,560            --
                                              ------------    ------------

Cash and cash equivalents,
 end of period ............................   $ 35,732,660    $ 25,256,560
                                              ------------    ------------






        See accompanying notes to the consolidated financial statements.

<PAGE>

The Ridgewood Power Growth Fund
Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------


1.       Organization and Purpose

The Ridgewood  Power Growth Fund (the "Fund") was formed as a Delaware  business
trust in February 1997 by Ridgewood  Energy  Holding  Corporation  acting as the
Corporate Trustee. The managing shareholders of the Fund are Ridgewood Power LLC
("RPC",  formerly  Ridgewood  Power  Corporation)  and  Ridgewood  Power  VI LLC
("RP6C",  formerly  Ridgewood  Power VI  Corporation).  The Fund began  offering
shares  on  February  9, 1998 and may  issue up to a  maximum  of 1,000  shares.
Ridgewood Capital Management LLC ("RCC", formerly Ridgewood Capital Corporation)
provides most services  required to support the offering.  RPC, RP6C and RCC are
related  through  common  ownership.  The  Fund had no  operations  prior to the
commencement of the share offering.

The Fund has been organized to invest primarily in independent  power generation
facilities and other capital  facilities.  These  independent  power  generation
facilities will include cogeneration facilities,  which produce both electricity
and heat energy and other power  plants that use various  fuel  sources  (except
nuclear).

2.       Summary of Significant Accounting Policies

Principles of consolidation and accounting for investments
The  consolidated  financial  statements  include the accounts of the Fund and a
wholly-owned  affiliate.  All  material  intercompany   transactions  have  been
eliminated.

The Trust uses the equity method of accounting for its investments in affiliates
in which the Trust has the ability to exercise  significant  influence  over the
operating  and  financial  policies  of the  affiliate  but does not control the
affiliate.  The Trust's  share of the earnings of the  affiliates is included in
the consolidated results of operations.

Use of estimates
The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the  reported  amounts  of assets  and  liabilities,  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from the estimates.

Cash and cash equivalents
The Fund considers all highly liquid  investments with maturities when purchased
of three months or less as cash and cash equivalents.  Cash and cash equivalents
consist of funds deposited in bank accounts.

Income taxes
No provision is made for income taxes in the accompanying  financial  statements
as the income or losses of the Fund are passed  through and  included in the tax
returns of the individual shareholders of the Fund.

Offering costs
Costs  associated with offering Fund shares (selling  commissions,  distribution
and offering  costs) are reflected as a reduction of the  shareholders'  capital
contributions.

Due diligence costs relating to potential power projects
Costs  relating  to the due  diligence  performed  on  potential  power  project
investments  are  initially  deferred,  until  such time as the Fund  determines
whether or not it will make an  investment  in the  project.  Costs  relating to
completed  projects are capitalized and costs relating to rejected  projects are
expensed at the time of rejection.

These costs consist of payments for consultants and other  unaffiliated  parties
performing financial,  engineering, legal and other due diligence procedures and
negotiations.  It also includes travel and other out-of-pocket costs incurred by
employees of affiliates  of the managing  shareholders  investigating  potential
project investments.

Subscriptions receivable
Capital contributions are recorded upon receipt of the appropriate  subscription
documents.  Subscriptions  receivable  from  shareholders  are  reflected  as  a
reduction of shareholders' equity.

Reclassification
Certain items in previously  issued financial  statements have been reclassified
for comparative purposes.

3.       Investments

The Trust has the following investments:

                                        Accounting   Investment at December 31,
                                                        ------------------
               Project Name               Method           1999      1998
-------------------------------------   -------------   ----------   -----

ZAP World.com .......................   Equity Method   $3,441,809   $--
Egypt Projects ......................   Equity Method    4,736,092    --
Mediterranean Fiber Optic Project/GFG   Equity Method    1,497,670    --
                                                        ----------   -----
                                                        $9,675,571   $---
                                                        ----------   -----

ZAP World.com
On March 30,  1999,  the  Fund,  through a wholly  owned  subsidiary,  purchased
678,808  shares of common stock of ZAP World.com  ("ZAP") for  $2,050,000.  ZAP,
headquartered in Sebastopol,  California,  designs, assembles,  manufactures and
distributes  electric  power bicycle kits,  electric  bicycles and tricycles and
electric scooters.  ZAP's common stock is quoted on the OTC Bulletin Board under
the symbol  "ZAPP".  The Fund also  received a warrant  to  purchase  additional
shares of ZAP's common stock at a price between  $3.50 and $4.50 per share.  The
Fund exercised the warrant in June 1999 and purchased 571,249  additional shares
for $2,000,000.  The Fund owns approximately 27% of the outstanding common stock
of ZAP. In December  1999, the Fund received a warrant to purchase an additional
100,000  shares of ZAP at a price of $6.25 per share  which  expires in December
2002.

The  Fund's  investment  in ZAP is  accounted  for  using the  equity  method of
accounting.  Accordingly,  the accompanying statement of operations includes the
Fund's  interest in ZAP's results of  operations  since the  acquisition  of the
shares.

The  following pro forma  information  presents the results of operations of the
Fund as if the purchases had occurred on January 1, 1999:

                             For the Year Ended
                              December 31, 1999
                      Revenue           $     433,989
                      Net income           (1,108,354)

These  unaudited pro forma results have been prepared for  comparative  purposes
only and do not  purport to be  indicative  of the results of  operations  which
would have actually  occurred had the purchases  occurred on January 1, 1999, or
of future results.

Summarized financial information for ZAP is as follows:

Balance Sheet Information

                                                        December 31, 1999
                                               ----------------------------

Current assets                                                 $ 5,418,000
Non-current assets                                               2,141,900
                                               ----------------------------
Total assets                                                   $ 7,559,900
                                               ----------------------------

Liabilities                                                    $ 1,172,100
Shareholders' equity                                             6,387,800
                                               ----------------------------
Liabilities and shareholders' equity                            $7,559,900
                                               ----------------------------

Statement of Operations Information

                                               For the Year Ended December
                                                         31, 1999
                                               ----------------------------

Revenues                                                       $6,437,200
Expenses                                                        8,223,400
                                               ----------------------------
Net loss                                                     $ (1,786,200)
                                               ----------------------------

Egypt Projects
In 1999,  the Fund and  Ridgewood  Electric  Power  Trust V ("Trust  V") jointly
formed a company to develop  electric  power and water  purification  plants for
resort hotels in Egypt.  The first  projects are expected to begin  operation in
the first  half of 2000.  The Fund and Trust V own  undivided  interests  in the
Egyptian  projects  in  proportion  to the  capital  they  contributed.  Through
December 31, 1999, the Fund and Trust V each contributed $4,933,851 to the Egypt
Projects.

The Fund's  investment  in the Egypt  Projects is accounted for under the equity
method of  accounting.  The Fund's equity in the loss of the Egypt  Projects has
been included in the financial statements since the inception of the projects.

Summarized financial information for the Egypt Projects is as follows:

Balance Sheet Information

                                                 December 31, 1999
                                            ----------------------------

Current assets                                               $  719,794
Non-current assets                                            9,567,984
                                            ----------------------------
Total assets                                               $ 10,287,778
                                            ----------------------------

Liabilities                                                  $  815,592
Shareholders' equity                                          9,472,186
                                            ----------------------------
Liabilities and shareholders' equity                       $ 10,287,778
                                            ----------------------------

Statement of Operations Information

                                            For the Year Ended December
                                                       31, 1999
                                            ----------------------------

Interest income                                               $  7,794
Expenses                                                       403,312
                                            ----------------------------
Net loss                                                    $ (395,518)
                                            ----------------------------

Mediterranean Fiber Optic Project/GFG
In September 1999, the Fund and Trust V made a joint investment of $3,000,000 in
Global Fiber Group ("GFG"),  which is in the process of developing an underwater
fiber optic cable in the Western  Mediterranean (the "Mediterranean  Fiber Optic
Project").  The  investment,  which was funded  equally by the Fund and Trust V,
provides for a 25% ownership interest in GFG and the right to invest in projects
developed by GFG. The Fund and Trust V anticipate equally funding an $18,000,000
joint venture investment in the Mediterranean  Fiber Optic Project in the second
quarter of 2000.

The Fund's investment in the Mediterranean  Fiber Optic Project/GFG is accounted
for under the equity method of accounting.  The Fund's equity in the loss of the
Mediterranean  Fiber  Optic  Project/GFG  has  been  included  in the  financial
statements since the inception of the projects.

Summarized financial information for GFG is as follows:

Balance Sheet Information

                                                         December 31, 1999
                                               ----------------------------

Current assets                                                   $  90,030
Non-current assets                                               2,826,128
                                               ----------------------------
Total assets                                                   $ 2,916,158
                                               ----------------------------

Shareholders' equity                                           $ 2,916,158
                                               ----------------------------

Statement of Operations Information

                                               For the Three Months Ended
                                                     December 31, 1999
                                               ----------------------------

Revenues                                                        $ 346,059
Expenses                                                          430,001
                                               ----------------------------
Net loss                                                        $ (83,942)
                                               ----------------------------

4.       Fair Value of Financial Instruments

At December 31, 1999 and 1998,  the  carrying  value of the Fund's cash and cash
equivalents and accounts payable approximated their fair value.

5.       Transactions With Managing Shareholders and Affiliates

The Fund pays RCC an  organizational,  distribution and offering fee up to 6% of
each capital contribution made to the Fund. This fee is intended to cover legal,
accounting,  consulting,  filing,  printing,  distribution,  selling and closing
costs for the offering of the Fund. For the year ended December 31, 1999 and the
period from February 9, 1999 to December 31, 1998,  the Fund paid fees for these
services  to RCC of  $1,698,451  and  $1,776,189,  respectively.  These fees are
recorded as a reduction in the shareholders' capital contribution.

The Fund also pays to RPC, one of the managing  shareholders,  an investment fee
up to 2% of each capital  contribution  made to the Fund.  The fee is payable to
RPC for its services in investigating  and evaluating  investment  opportunities
and effecting  transactions  for investing the capital of the Fund. For the year
ended  December  31, 1999 and the period from  February 9, 1999 to December  31,
1998, the Fund paid investment fees to the managing  shareholder of $560,650 and
$577,813, respectively.

The Fund  entered  into a management  agreement  with RP6C,  one of the managing
shareholders,  under which RP6C renders certain  management,  administrative and
advisory services and provides office space and other facilities to the Fund. As
compensation  to the  RP6C  for  such  services,  the  Fund  pays  it an  annual
management  fee equal to 2.5% of the  total  capital  contributions  to the Fund
payable  monthly  upon the  closing  of the Fund.  The Fund is not closed and no
management  fees were paid through  December 31, 1999.  The amount of the annual
management  fee will be  determined  when the Fund closes and the total  capital
contributions  are known.  If the Fund were to have closed on December 31, 1999,
the annual management fee would have been $1,340,400.

The Fund  reimburses the managing  shareholders  and affiliates for expenses and
fees of  unaffiliated  persons  engaged by the  managing  shareholders  for fund
business.  The managing  shareholders or affiliates  originally paid all project
due diligence  costs,  accounting and legal fees and other expenses shown in the
statement of operation and were reimbursed by the Fund.

Under the  Declaration of Fund,  RP6C is entitled to receive each year 1% of all
distributions made by the Fund (other than those derived from the disposition of
Fund property) until the shareholders  have been distributed each year an amount
equal to 12% of their  equity  contribution.  Thereafter,  RP6C is  entitled  to
receive 25% of the distributions for the remainder of the year. RP6C is entitled
to receive 1% of the proceeds from  dispositions  of Fund  properties  until the
shareholders  have received  cumulative  distributions  equal to their  original
investment  ("Payout").  After  Payout,  RP6C is  entitled to receive 25% of all
remaining distributions of the Fund.

Income  is  allocated  to the  managing  shareholders  until the  profits  equal
distributions  to the managing  shareholders.  Then,  income is allocated to the
investors,  first among  holders of  Preferred  Participation  Rights until such
allocations equal distributions from those Preferred  Participation  Rights, and
then among Investors in proportion to their ownership of investor shares. If the
Fund has net losses for a fiscal  period,  the losses are  allocated  99% to the
Investors and 1% to the managing shareholders.

Where permitted, in the event the managing shareholders or an affiliate performs
brokering  services  in  respect of an  investment  acquisition  or  disposition
opportunity for the Fund, the managing shareholders or such affiliate may charge
the Fund a brokerage  fee.  Such fee may not exceed 2% of the gross  proceeds of
any such  acquisition  or  disposition.  No such fees  have  been  paid  through
December 31, 1999.

The corporate  trustee of the Fund,  Ridgewood  Energy Holding  Corporation,  an
affiliate of the managing  shareholders  through common  ownership,  received no
compensation from the Fund.

Amounts  due to and from  affiliates  are  non-interest  bearing and are usually
settled  within  thirty  days.  Such amounts  arise from the delay  between when
expenses are paid by the Fund or affiliates and when reimbursement occurs.

RPC  purchased  one  investor  share of the Fund for  $83,000  in 1998.  Through
December 31, 1999,  commissions  and  placement  fees of $492,873 were earned by
Ridgewood Securities Corporation, an affiliate of the managing shareholders.

6.       Preferred Participation Rights

Preferred Participation Rights were given to each shareholder whose subscription
was fully  completed and paid for and accepted prior to December 31, 1998.  Each
Preferred  Participation Right entitled the holder to an aggregate  distribution
priority of $1,000.  The number of  Preferred  Participation  Rights  earned per
investor  share was equal to the number of whole or partial months from the date
of the  acceptance  of the  subscription  to  December  31,  1998,  except  that
subscriptions from December 1 through December 31, 1998 were treated on the same
basis as  subscriptions  received in November  1998. A total of 1,890  Preferred
Participation Rights were issued.

During 1999, cash distributions were first allocated 99% to holders of preferred
participation  rights and 1% to the  managing  shareholders  until  shareholders
receive distributions equal to $1,000 for each Right earned.

7.       Management Share

The  Fund  granted  the  managing   shareholders  a  single   Management   Share
representing  the  managing  shareholders'   management  rights  and  rights  to
distributions of cash flow.

8.       Key Employees Incentive Agreement

The Key  Employees  Incentive  Plan  (the  "Plan")  was  adopted  by the Fund in
February 1998 and permits the managing  shareholders to designate key executives
and  employees  of the Fund and its  operating  companies  to receive  Incentive
Shares.

The managing  shareholders  and persons granted  Incentive Shares under the Plan
are entitled to receive a portion of the Fund's cash flow as follows:

                             Prior to Payout                    After Payout

Net Operating              Managing Shareholders         Managing Shareholders.
Cash Flow                              Up to 20%                            20%
after Investors
obtain 12%                     Plan Participants              Plan Participants
cumulative                              Up to 5%                             5%
return

Net Cash                  Managing Shareholders          Managing Shareholders
Flow from                                    1%                             20%
Dispositions                  Plan Participants               Plan Participants
                                          Zero                               5%

The managing shareholders and Plan participants will be entitled to cash flow on
a proportionate  basis,  meaning that if the cash flow allocable to them is less
than the  maximum  percentages  stated  in the  table,  that  cash  flow will be
distributed pro rata between the managing shareholders and Plan participants.

At the closing of the private  placement  offering of Investor Shares,  the Fund
will create a number of  Incentive  Shares  equal to 1/15 of the total number of
Investor Shares sold in the offering. Each Incentive Share will be entitled to a
pro-rata share of the cash flow  distributable to Plan participants in the table
above.

Until Incentive Shares are actually issued, the cash flow, if any, distributable
to those Shares will be distributed to the managing  shareholders.  No Incentive
Shares have been issued by the managing shareholders.

Each  issued and  outstanding  Incentive  Share has voting  rights  equal to one
Investor Share.

9.  Potential Investment in UK Landfill Gas Plants

On June 30,  1999,  Trust V entered into  agreements  with the  stockholders  of
Combined  Landfill  Projects Limited ("CLP"),  of London,  England,  for a $16.1
million  purchase  of 100% of the  equity  interest  in six  landfill  gas power
plants,  as well as the rights to develop and construct  another 20 landfill gas
plants in Great Britain.  The estimated cost of the package of completed  plants
and the 20 developmental  sites, if all the  developmental  plants are built, is
$36 to $38  million.  Trust V supplied  the first $16.1  million of the purchase
price and  developmental  equity and the Fund will supply the  remainder  of the
developmental  equity.  To the extent that the Fund  supplies  capital,  it will
receive  an  undivided   interest  in  the  entire   package  of  operating  and
developmental projects.



<PAGE>
                Report of Independent Certified Public Accountant





To the Board of Directors and Stockholders
ZAPWORLD.COM

We have audited the accompanying consolidated balance sheet for ZAPWORLD.COM and
subsidiaries as of December 31, 1999, and the related consolidated statements of
operations,  stockholders'  equity  and cash  flows for each of the years in the
two-year  period ended  December 31, 1999.  These  financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 our audits provided a reasonable basis for our opinion.

In our opinion,  the financial statements referred to above represent fairly, in
all material respects,  the consolidated  financial position of ZAPWORLD.COM and
subsidiaries  as of December 31,  1999,  and the  consolidated  results of their
operations  and their  cash  flows for each of the years in the two year  period
ended  December 31, 1999, in conformity  with  accounting  principles  generally
accepted in the United States.

GRANT THORNTON, LLP



San Francisco, California
March 1, 2000

<PAGE>


                          ZAPWORLD.COM and Subsidiaries
                           Consolidated Balance Sheet
                                December 31, 1999
                                   (Hundreds)

                                     ASSETS

CURRENT ASSETS
   Cash ....................................................   $3,183,900
   Accounts receivable, less  allowance
    for doubtful accounts of $35,000 .......................      352,700
   Inventories .............................................    1,725,100
   Note receivable .........................................       20,000
   Prepaid expenses and other assets .......................      303,000
                                                               ----------

     Total current assets ..................................    5,584,700

PROPERTY AND EQUIPMENT - less accumulated depreciation .....      350,300
                                                               ----------

OTHER ASSETS
   Patents & Trademarks, less accumulated amortization .....    1,176,100
   Goodwill ................................................      112,200
   Advance to retail stores and technology companies .......      478,800
   Deposits ................................................       24,500
                                                               ----------

         Total other assets ................................    1,791,600

         Total assets ......................................   $7, 726,600
                                                               ==========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Accounts payable ........................................   $  742,200
   Accrued liabilities .....................................      367,900
   Current maturities of long-term debt ....................       15,300
   Current maturities of obligations under capital leases ..        9,000
                                                               ----------

         Total current liabilities .........................    1,134,400

OTHER LIABILITIES
   Long-term debt, less current maturities .................       24,200
   Obligations under capital leases, less current maturities       13,500

         Total other liabilities ...........................       37,700

STOCKHOLDERS' EQUITY
   Preferred  stock,   authorized
   10,000,000   shares;  no  shares
   issued  or outstanding  Common  stock,
   authorized  20,000,000  shares of
   no par  value; issued and outstanding 5,109,180 ..........  12,053,200
   Accumulated deficit  .....................................  (5,118,100)
   Unearned compensation  ...................................    ( 95,800)
                                                                ---------
                                                                6,839,300
   Less: notes receivable from shareholders .................    (284,800)
         Total stockholders' equity..........................   6,554,500

Total liabilities and stockholders' equity ..................  $7,726,600




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

                                                         3


<PAGE>



                          ZAPWORLD.COM and Subsidiaries
                      Consolidated Statements of Operations
                      Year ended December 31, 1998 and 1999
                     (Hundreds, except shares and per share
                                    amounts)

                                             1999           1998
                                             -----          ----

NET  SALES ...........................   $ 6,437,200    $ 3,518,600

COST OF GOODS SOLD ...................     4,446,400      2,391,300
                                         -----------    -----------

              GROSS PROFIT ...........     1,990,800      1,127,300

OPERATING EXPENSES
    Selling ..........................       967,700      1,186,700
    General and administrative .......       979,200      1,945,000
    Research and development .........       202,600        364,600
                                           3,496,300      2,149,500

LOSS FROM OPERATIONS .................    (1,505,500)    (1,022,200)
                                         -----------    -----------

OTHER INCOME (EXPENSE)

    Interest expense .................      (100,300)      (267,300)
    Other income .....................        81,000           --
    Miscellaneous ....................          --           13,900
                                          -----------    -----------
                                            (186,300)       (86,400)

              LOSS BEFORE INCOME TAXES    (1,691,800)    (1,108,600)
                                         -----------    -----------

PROVISION FOR INCOME TAXES                       800            800
                                         -----------    -----------

              NET LOSS ...............   $(1,692,600)   $(1,109,400)
                                         ============   ============

NET LOSS PER COMMON SHARE
    Basic and diluted                     $   (0.43)      $   (0.42)
                                          =========       =========

SHARES USED IN CALCULATION OF
 NET LOSS PER SHARE                       3,927,633       2,614,563
                                          =========       =========






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

                                        4

<PAGE>
                                           ZAPWORLD.COM and Subsidiaries
                                  Consolidated Statement of Stockholders' Equity
                                      Years Ended December 31, 1998 and 1999
<TABLE>
<CAPTION>
                                       Common Stock      Accumulated     Unearned        Note
                                                                                    Receivable
                                   Shares       Amount     Deficit     Compensation     From         Total
                                                                       and services   Shareholder
  (Hundreds, except shares)
<S>                          <C>          <C>          <C>           <C>           <C>           <C>

Balance, January 1, 1998        2,542,700    $3,168,900   $(2,316,100)   $            $             $852,800

Issuance of common stock
 in connection with direct
 public offering at $6 per
 share, net of expenses of
 $91,000                           78,800       383,300            -                                 383,300

Fair value of stock options
 granted to non-employees                        17,600            -                                  17,600

Exercise of stock options          15,000        15,000            -                                  15,000

Conversion of notes payable
 and accrued interest into
 common stock at $5.25              2,700        14,300            -                                  14,300

Issuance of warrants in
 connection with debt
 payment                                         61,800            -                                  61,800

Stock issued for current
 and future services               25,500       150,300            -                                 150,300

Net loss                                -             -    (1,109,400)                            (1,109,400)
                                   -------------------------------------------------------------------------

Balance, December 31, 1998      2,664,700     3,811,200    (3,425,500)           -           -       385,700

Issuance of common stock:
 Cash                              29,833       177,900                                              177,900
 Private placement, net
  of expenses of  $613,547        746,119     1,720,600                                            1,720,600

 Acquisitions                     279,600     2,264,100                                            2,264,100
 Advance to retail stores
  & technology co.'s               57,803       406,300                                              406,300
 Employee stock purchase plan       1,139         5,600                                                5,600
 Repurchase of shares              (1,785)      (10,700)                                             (10,700)
 Services                          27,479       140,900                                              140,900
 Litigation settlement              8,666        50,000                                               50,000
 Conversion of debt               165,111       664,700                                              664,700

 Exercise of employee stock
  options                         559,086       423,400                                              423,400
 Exercise of non-employee
 stock options                    571,429     2,000,000                                            2,000,000

Fair value of stock options
 issued to employees                    -         1,700                                                1,700

Fair value of stock options
 and warrants issued  to
 non-employees                          -       135,000                                              135,000

Stock options and warrants
 issued for future compensation
 and services                           -       262,500                   (95,800)                   166,700

Note receivable from shareholders                                                   (284,800)       (284,800)

Net loss                                -             -    (1,692,600)       -           -        (1,692,600)
                                ----------------------------------------------------------------------------
Balance, December 31, 1999      $5,109,180   12,053,200   $(5,118,100)   $(95,800) $(284,800)     $6,554,500
                                ============================================================================
</TABLE>
   The accompanying notes are an integral part of the consolidated financial
                                  statements.
                                                         6
<PAGE>

                          ZAPWORLD.COM and Subsidiaries
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                          Years ended December 31, 1999
                                   (Hundreds)
                                                   1999              1998
                                                -----------    -----------
Cash flows from operating activities:
 Net loss ...................................   $(1,692,600)   $(1,109,400)
 Adjustments to reconcile net loss to net
  cash used in operating activities:
   Depreciation and amortization ............       124,000         86,500
   Allowance for doubtful accounts ..........          --          (30,000)
   Issuance of common stock for services
    rendered ................................       140,900        150,300
   Issuance of common stock for litigation
    settlement ..............................        50,000           --
   Issuance of stock options for services
    rendered ................................       136,700         17,600
   Noncash charges & settlement of debt .....       154,200           --
   Amortization of fair value of warrants ...        30,900         30,900
   Changes in:
       Accounts receivable ..................       (68,900)      (192,100)
       Inventories ..........................      (877,700)      (366,600)
       Prepaid expenses and other assets ....        24,100        (32,200)
       Deposits .............................       (12,600)         1,600
       Accounts payable .....................       312,400        172,600
       Accrued liabilities and customer
        deposits ............................       217,200        (36,600)
                                                -----------    -----------
Net cash used in operating activities .......    (1,461,400)    (1,307,400)
Cash flows from investing activities:
 Purchases of property and equipment ........      (188,100)       (97,800)
 Purchase of American Scooter and
  Cycle Rental ..............................       (70,000)          --
 Purchase of Big Boy Bicycles ...............       (15,200)          --
 Proceeds from emPower acquisition ..........     1,033,000           --
 Payment advances for acquisitions ..........       (72,500)          --
 Issuance of note receivable ................       (20,000)
 Purchase of intangibles ....................       (66,200)       (64,100)
                                                -----------      ---------
Net cash provided by (used in) investing ....       601,000       (161,900)
Cash flows from financing activities:
 Sale of common stock, net of stock
  offering costs ............................     1,812,500           --
 Issuance of common stock under
  employee purchase plan ....................         5,600           --
 Proceeds from issuance of long-term debt ...      (361,900)     1,280,800
 Proceeds from exercise of stock options ....     2,423,400        (10,700)
 Repurchase of common stock .................       (10,700)       (16,000)
 Advances on notes receivable to
  shareholders ..............................      (284,800)
                                                -----------   ------------
 Payments on obligations under capital leases       (15,100)          --
                                                -----------   -----------
Net cash provided by financing activities ...     3,569,000      1,254,100
                                                -----------    -----------
 NET INCREASE/(DECREASE) IN CASH ............     2,708,600       (215,200)
Cash, beginning of year .....................       475,300        690,500
                                                -----------    -----------
Cash, end of year ...........................   $ 3,183,900    $   475,300
                                                ===========    ===========


                                                         7

<PAGE>



                          ZAPWORLD.COM and Subsidiaries
                 CONSOLIDATED STATEMENTS OF CASH FLOWS (contd.)
                          Years ended December 31, 1999

                                                         1999            1998
                                                         ----            ----
Supplemental cash flow information: Cash paid
 during the year for:
Interest ............................................ $115,200       $ 69,400
Income taxes .......................................       800            800


 Non-cash investing and financing activities:
Conversion of debt into common stock ...............   475,400
Conversion of accounts payable into common stock ...    35,100
Equipment acquired through capital lease obligations    26,700
Notes payable used to exercise stock options .......    32,300

Issuance of common stock upon acquisition of
 American Scooter and Cycle Rental, Big Boy Bicycles,
 and emPower Corporation ..........................  2,311,700

Assets and  liabilities  recognized upon
 acquisition of American  Scooter and
 Cycle Rental, Big Boy Bicycles, and empower
 Corporation

Cash .............................................   1,033,000
Inventories ......................................     213,500
Prepaid expenses and other ........................     56,400
Property and equipment ...........................      70,000
Patent ...........................................   1,154,600
Accounts payable .................................     130,600


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























                                        8

<PAGE>


                          ZAPWORLD.COM and Subsidiaries
                 Notes to the Consolidated Financial Statements
                           December 31, 1999 and 1998

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

o        Nature of Operations

       ZAPWORLD.COM  (the "Company" or "ZAP") was  incorporated in California in
       September, 1994 under its original name "Zap Power Systems". The name was
       changed on May 16,  1999.  ZAP  designs,  manufactures,  and  distributes
       electric bicycle power kits,  electric bicycles and tricycles,  and other
       personal  electric  transportation  vehicles.  Company  products are sold
       directly to end-users and to  distributors  throughout  the United States
       and the world.


o        Principles of Consolidation

       The accompanying  consolidated  financial statements include the accounts
       of the Company, ZAPWORLD Stores, Inc., and emPower Corporation.  ZAPWORLD
       Stores, Inc. and emPower Corporation are 100% owned by ZAPWORLD.COM.  All
       significant inter-company transactions and balances have been eliminated.

o        Revenue Recognition

        The Company recognizes income when products are shipped.

o        Inventories

       Inventories  consist  primarily of raw  materials,  work-in-process,  and
       finished goods and are carried at the lower of cost (first-in,  first-out
       method) or market.

o        Property and Equipment

       Property  and  equipment  are  stated  at  cost  and  depreciated   using
       straight-line  and accelerated  methods over the assets' estimated useful
       lives.  Costs of  maintenance  and  repairs  are  charged  to  expense as
       incurred. Significant renewals and betterments are capitalized. Estimated
       useful lives are as follows:

                 Machinery and equipment               7 years
                 Equipment under capital leases        5 years
                 Demonstration bicycles                2 years
                 Office furniture and equipment        7 years
                 Vehicle                               5 years
                 Leasehold improvements               15 years or life of lease,
                                                       whichever is shorter
o        Patents & Trademarks

       Patents & Trademarks consist of costs expended to perfect certain patents
       and trademarks acquired in the emPower  acquisition.  These costs will be
       amortized over an estimated useful life of ten years.

o        Goodwill

        Goodwill consists of the excess consideration paid over net assets. This
        asset will be amortized using the  straight-line  method over a ten-year
        period.

o        Income Taxes

       The Company uses an asset and liability approach to financial  accounting
       and  reporting  for  income  taxes.   Deferred   income  tax  assets  and
       liabilities are computed  annually for differences  between the financial
       statement  and tax bases of assets and  liabilities  that will  result in
       taxable or deductible amounts in the future bases on enacted tax laws and
       rates  applicable to the periods in which the differences are expected to
       affect  taxable  income.   Valuation   allowances  are  established  when
       necessary to reduce deferred tax assets to the amount

                                        9
<PAGE>

       expected  to be  realized.  Income  tax  expense  is the tax  payable  or
       refundable for the period plus or minus the change in deferred tax assets
       and liabilities during the period.

o        Use of Estimates

       The  preparation  of financial  statements in conformity  with  generally
       accepted accounting principles requires Management of the Company to make
       estimates and  assumptions  affecting the reported  amounts of assets and
       liabilities  and disclosure of contingent  assets and  liabilities at the
       date of the financial statements, as well as revenues and expenses during
       the reporting period. The amounts estimated could differ from
       actual results.

o        Fair Value of Financial Instruments

       The Company  measures its financial  assets and liabilities in accordance
       with  generally  accepted  accounting  principles.  The  fair  value of a
       financial  instrument  is the  amount  at which the  instrument  could be
       exchanged in a current transaction  between willing parties.  For certain
       of  the  Company's  financial   instruments,   including  cash,  accounts
       receivable and accounts  payable,  the carrying amount  approximates fair
       value because of the short  maturities.  The carrying  amount of the bank
       note payable and current notes payable  approximate fair value as current
       interest   rates   available   to  the  Company  for  similar   debt  are
       approximately  the  same.  The  fair  value  of  related  party  debt  is
       impracticable to determine.


o        Net Loss Per Common Share

       Net loss per common share,  basic and diluted,  has been  computed  using
       weighted  average  common shares  outstanding.  The effect of outstanding
       stock   options  and  warrants  has  been   excluded  from  the  dilutive
       computation, as their inclusion would be anti-dilutive (see note F).

o        Segment Information

       In 1999, the company adopted SFAS No.131,  "Disclosures about Segments of
       an  Enterprise  and related  Information".  The  Company  operates in one
       reportable segment, the design, assembly, manufacture and distribution of
       electric bicycle power kits,  electric  bicycles and tricycles,  electric
       scooter,  electric motorcycles and other personal electric transportation
       vehicles.

o        Reclassification
       Certain  reclassifications  have  been  made  to the  December  31,  1998
       information to conform to the December 1999 presentation.


NOTE B - INVENTORIES

         Inventories consisted of the following at December 31, 1999:

         Raw materials                                   $   661,700
         Work-in-process                                     349,200
         Finished goods                                      714,200
                                                         -----------
                                                         $ 1,725,100



                                                        10
<PAGE>

NOTE C - PROPERTY AND EQUIPMENT

    Property and equipment consist of the following at December 31, 1999:

         Machinery and equipment                                $   187,000
         Computer Equipment                                         209,600
         Demonstration bicycles                                      89,600
         Office furniture and equipment                              52,000
         Leasehold improvements                                      78,400
         Vehicle                                                     97,600
                                                                  ---------
                                                                    714,200
         Less accumulated depreciation and amortization             363,900
                                                                $   350,300


NOTE D - ADVANCE TO RETAIL STORES AND TECHNOLOGY COMPANIES

    During the year ended  December 31, 1999 the Company  issued  shares  common
    stock and paid cash as advances  toward the acquisition of retail stores and
    technology  companies.  The Company  issued 57,803 shares of common stock in
    the amount of $406,300 and paid cash in the amount of $75,500.

NOTE E - PROVISION FOR INCOME TAXES
                                              1999           1998
                                          ----------     -----------
       Current tax expense
          Federal                        $        -     $         -
          State                                  800             800
                                          ----------     -----------

                                          $      800     $       800
                                          ==========     ===========

       Significant  components  of the  Company's  net deferred tax assets as of
December 31, 1999 are as follows:

Tax loss carryforward ..........   $ 1,819,600    $ 1,263,700
Inventory capitalization .......       (99,100)       (22,000)
Other ..........................       (70,800)       (27,400)
                                   -----------    -----------
Total ..........................     1,649,700      1,214,300
Less valuation allowance .......    (1,649,700)    (1,214,300)
                                   -----------    -----------
          Net deferred tax asset   $      --      $      --
                                   ===========    ===========

    The Company has available  carry  forward of  approximately  $4,758,300  and
    $2,819,400 of federal and state net operating losses, respectively, expiring
    through 2019. The Tax Reform Act of 1986 and the  California  Conformity Act
    of 1987 impose  restrictions on the  utilization of net operating  losses in
    the event of an "ownership change" as defined by Section 382 of the Internal
    Revenue Code. There has been no determination  whether an ownership  change,
    as defined, has taken place. Therefore, the extent of any limitation has not
    been ascertained.

      A valuation  allowance is required for those  deferred tax assets that are
    not likely to be realized.  Realization  is dependent  upon future  earnings
    during the period that temporary differences and carry forwards are expected
    to  be  available.  Because  of  the  uncertain  nature  of  their  ultimate
    utilization,  a full valuation  allowance is recorded against these deferred
    tax assets. The valuation  allowance increased $435,400 in 1999 and $386,700
    in 1998.

    The difference  between the income tax expense at the federal statutory rate
    and the Company's effective tax rate is as follows:
                                              1999           1998
                                              ----           ----
  Statutory federal income tax rate            34%        34%
  State income tax rate                         6              6
  Valuation allowance                         (40)           (40)
                                              ----           ----
                                               -%             -%
                                       11

<PAGE>

NOTE F - STOCK OPTIONS AND WARRANTS

    Options to purchase common stock are granted by the Board of Directors under
    three Stock  Option  Plans,  referred  to as the 1999,  1996 and 1995 plans.
    Options granted may be incentive stock options (as defined under Section 422
    of the Internal Revenue Code) or nonstatutory  stock options.  The number of
    shares  available  for  grant  under  the  1999,  1996  and 1995  Plans  are
    1,500,000, 600,000 and 750,000, respectively. Options are granted at no less
    than fair market value on the date of grant, become exercisable as they vest
    (over a 2 or 3 year period) and expire ten years after the date of grant.


Option activity under the three plans is as follows:

                            1999 Plan           1996 Plan           1995 Plan
                                  Wtd Avg            Wtd Avg            Wtd Avg
                        Number    Exercise Number    Exercise Number    Exercise
                        of Shares Price    Of Shares Price    of Shares Price
                        -----------------  ------------------ ------------------
Outstanding at
 12/31/97                                     383,500  1.38    446,300  0.56
Granted                                        20,000  4.31         -      -
Exercised                                     (12,500) 1.00         -      -
Canceled                                      (26,500) 1.48    (27,400) 0.40

 12/31/98                      -       -      364,500  1.55    418,900   .56
Outstanding at

Granted                     481,000  6.33      35,000  4.06          -      -
Exercised                      (586) 5.00    (259,500) 1.15   (299,000)  0.40
Forfeited                    (1,000) 5.00     (14,500) 3.50    (49,900)  1.00

Outstanding at
 12/31/99                   479,414  6.34     125,500  2.85     70,000   0.93


The weighted  average fair value of all options  granted during the years ending
December 31, 1999 and 1998 was $4.33 and $3.66 respectively.


       The following  information  applies to employee  incentive  stock options
outstanding at December 31, 1999:


   Plan:                       1999                 1996                1995
Range of exercise prices   $5.00- $7.00  $1.00-$1.00   $3.68-$5.25   $1.00-$1.00
Options outstanding            70,000       479,414       47,500        78,000

Weighted average exercise
 price                         6.34          1.00          3.98          1.00
Weighted average remaining
 life (years)                  9.79          6.58          8.03          6.50
Options exercisable            46,833        47,500      140,446       70,000
Weighted average exercise
 price                         6.31          1.00          3.97          1.00


    The company  granted stock options and warrants to purchase  common stock to
    non-employees of the company.  The options and warrants have exercise prices
    ranging from $3.02 - $6.36.

    The Company  granted  671,429 in options and warrants in connection with the
    private  placement,  200,000 in  connection  with the  emPower  acquisition,
    100,000  in  connection   with   placement   fees,   and  167,000  to  other
    non-employees.
                                       12
<PAGE>

    The Company  recorded the  non-statutory  options and warrants  based on the
    grant date for value in  accordance  with FAS 123. The grant date fair value
    of each stock option was estimated  using the  Black-Scholes  option-pricing
    model.  The company  recorded  expense in the amount of $135,000 and $48,500
    for the year ended December 31, 1999 and 1998, respectively.  As of December
    31, 1999 the Company has recorded  prepaid expense in the amount of $166,700
    for future services.


    Options and warrant activity for non-employees is as follows:

                                                       Weighted
                                                          Avg.
  Outstanding at 12-31-97                  46,000        $4.33

  Granted                                  82,800         4.86
  Exercised                               (2,500)         1.00
                                     -------------   -------------
  Outstanding at 12-31-98                 126,300         4.74

  Granted                               1,138,429         4.58
  Exercised                             (571,429)         3.50
  Forfeited                              (64,300)         4.75
                                     -------------   -------------
  Outstanding at 12-31-99                 629,000         5.51
                                     =============   =============



    The Company accounted for stock options and warrants under the policy of APB
    25 "Accounting  for Stock Issued to Employees".  The Company has adopted the
    disclosure only provision of Statement of Financial Accounting Standards No.
    123, "Accounting for Stock-Based Compensation (SFAS 123)".  Accordingly,  no
    compensation  expense has been  recognized  for stock options  issued during
    1999 and 1998. Had compensation cost for the Company's options been based on
    the  fair  value  of the  awards  at the  grant  date  consistent  with  the
    provisions  of SFAS No. 123, the Company's net loss and loss per share would
    have approximated the following proforma amounts:


                                                      1999          1998
                                               -------------   -------------

          Net loss - as reported                $ (1,692,600)   $ (1,109,400)
          Net loss - pro forma                    (2,686,700)     (1,254,600)
          Loss per share - as reported                  (.43)           (.42)
          Loss per share - pro forma                    (.68)           (.48)

    The fair value of each  option and  warrant  is  estimated  on date of grant
    using   the   Black-Scholes   option-pricing   model   with  the   following
    weighted-average assumptions:

                                              1999           1998
                                         ----------     -----------

          Dividends                            None            None
          Expected volatility                86.00%            100%
          Risk free interest rate             6.00%           6.00%
          Expected life                     5 years        10 years

    In connection  with the issuance of $800,000 of notes  payable in 1998,  the
    Company issued 20,000 warrants at $4.00 per share, to purchase the Company's
    common  stock,  to an entity  that  assisted  the Company in  arranging  the
    financing.  The warrants are immediately  exercisable and expire  September,
    2001.  The fair value of warrants at the time of issuance was $61,800 and is
    being  amortized as additional  interest  expense over the term of the debt.
    Amortization expense of $30,900 was recorded for both 1998 and 1999.



                                                        13
<PAGE>

NOTE G - MAJOR CUSTOMERS and VENDORS

     During 1999,  one customer  accounted  for $680,100 or 11% of the Company's
    net sales.  During 1998, one customer accounted for $617,000 or 17.5% of the
    Company's  net sales.  The Company  ceased  selling to this customer in late
    1998.

    During  1999,  one vendor  accounted  for  $798,600 or 12% of the  Company's
    supplies  and  materials.  For the year ended  December  31, 1998 one vendor
    accounted of $440,000 or 7%,of the Companies supplies and materials.


NOTE H - COMMITMENTS

    The Company  rents  warehouses  and office space under leases that expire in
    June 2001.  The monthly rent of $24,100 is adjusted  annually to reflect the
    average percentage increase in the Consumer Price Index. An option exists to
    extend the lease for an additional five-year period. Rent expense under this
    lease was $54,100 and $52,800 in 1998 and 1997, respectively.

 Future minimum lease payments on the leases are as follows:

       Year ending December 31,

                   2000                      $320,600
                   2001                       222,600
                   2002                       138,300
                   2003                       115,200
                   2004 and thereafter         54,300
                                             --------
                   Total                     $851,000
                                             ========

NOTE I - PERFERRED STOCK

The  Board of  Directors  authorized  10,000,000  shares of  Preferred  Stock in
December 1999. No financial features (participation in dividends,  conversion to
warrants/common  stock  etc.)  have been  specified  for  these  "indeterminate"
preferred shares to date.

NOTE J - ACQUISITIONS

On December 30, 1999, the Company  purchased all of the common stock of emPower,
Inc., a designer and manufacturing  business of proprietary  electric  scooters,
for 265,676 shares of its common stock. The Company issued warrants to emPower's
shareholders to purchase an aggregate of 200,000 shares of the Company's  common
stock. The warrants expire three years after issuance.  The acquisition has been
accounted  for as a purchase at $5.75 per share.  The purchase was  allocated to
the assets acquired,  including patents,  and liabilities assumed based on their
estimated  fair values.  The  acquisition  resulted in no  goodwill.  Results of
operations  for emPower have been included with those of the company for periods
subsequent to the date of acquisition.

The purchase price of emPower was allocated as follows

          Cash .................   $ 1,033,000
          Inventories ..........        96,300
          Property and equipment        64,100
          Patents ..............     1,042,400
          Liabilities assumed ..       (54,200)
                                   -----------
                                   $ 2,181,600
          Consideration paid:
          Common stock .........   $ 2,181,600

                                                        14
<PAGE>

In  September  1999,  the Company  purchased  all assets of Big Boy Bicycles and
assumed certain liabilities. The company issued 1,000 shares of common stock and
paid $15,165 in cash.  The purchase  price was allocated to assets  acquired and
liabilities  assumed based on their estimated fair value.  Results of operations
for Big Boy  Bicycles  have been  included  with  those of the  Company  for the
periods subsequent to the date of acquisition.

The purchase price of Big Boy Bicycles was allocated as follows:

          Inventories ..........   $ 73,800
          Property and equipment      4,400
          Goodwill .............      1,300
          Expenses .............      1,900
          Liabilities assumed ..    (59,800)
                                   $ 21,600
          Consideration paid:
          Cash .................   $ 15,200
          Common stock .........      6,400
                                   $ 21,600


In  July  1999,  the  Company  purchased  certain  assets  and  assumed  certain
liabilities  of American  Scooter and Cycle  Rental.  The Company  issued 12,924
shares  of  common  stock  and paid  $70,000  in cash.  The  purchase  price was
allocated  to the  assets  acquired  and  liabilities  assumed  based  on  their
estimated  fair values.  Results of  operations  for American  Scooter and Cycle
Rental have been  included  with those of the company for periods  subsequent to
the date of acquisition.

The purchase  price of certain assets and  liabilities  of American  Scooter and
Cycle Rental were allocated as follows:

         Inventories ..........   $  43,300
         Property and equipment       1,500
         Goodwill .............     113,300
         Expenses .............       4,600
         Liabilities assumed ..     (16,600)
                                  $ 146,100
         Consideration paid:
         Cash .................   $  70,000
         Common stock .........      76,100
                                  $ 146,100

The above operations  represent 5% of total revenues for the year ended December
31, 1999.

NOTE K - SUBSEQUENT EVENTS

On January 20,  2000,  the Company  purchased  all of the common stock of Zap of
Santa Cruz, Inc. a California corporation,  for $25,000 in cash and 8,803 shares
of the  Company's  common  stock.  The  acquisition  will be accounted  for as a
purchase.  The purchase price is approximately $125,000 and will be allocated to
add the assets  acquired and  liabilities  assumed based on their estimated fair
values. The acquisition closed in the first quarter of calendar year 2000.

On February 29, 2000, the Company  purchased all of the common stock of Electric
Vehicle Systems, Inc., a California corporation,  for $20,000 in cash and 25,000
shares of the Company's common stock. The acquisition will be accounted for as a
purchase.  The purchase price is approximately $285,000 and will be allocated to
the net assets  acquired and  liabilities  assumed based on the  estimated  fair
value. The acquisition closed in the first quarter of calendar year 2000.