**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**





**WASHINGTON,
      D.C. 20549**





**FORM
      10-K**





ý **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF
      1934**





**For
      the fiscal year ended December 31, 2006**


**or**


o **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. 000-51268**





**RIDGEWOOD
      ENERGY M FUND, LLC**


(Exact
      name of registrant as specified in its charter)





**Delaware**
              (State
                or other jurisdiction of
              incorporation
                or organization)
            
            **13-4285167**
              ****(I.R.S.
                Employer
              Identification
                No.)





**1314
      King Street, Wilmington, Delaware 19801**


(Address
      of principal executive offices) (Zip code)





**(302)
      888-7444**


(Registrant’s
      telephone number, including area code)





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


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





Shares
      of
      LLC Membership Interest





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


Yes o No ý





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or 15(d) of the Act. Yes o No ý





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 ý No o





Indicate
      by check mark if the disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained herein, to
      the
      best of the 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.  ý





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of "accelerated
      filer and large accelerated filer" in Rule 12b-2 of the Act. (Check
      one):





Large
      accelerated filer o Accelerated filer o Non-accelerated filer ý





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Act). Yes o No ý








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
      10,
      2007 was approximately $78.9 million and as of that date there are 535.6818
      Shares outstanding.












**2006
                  Annual Report on Form 10-K****Table
                  of Contents****Part
                  I**
              
              
              
              PageItem
                  1
              
              Business
              
              7Item
                  1A
              
              Risk
                  Factors
              
              19Item
                  1B
              
              Unresolved
                  Staff Comments
              
              28Item
                  2
              
              Properties
              
              29Item
                  3
              
              Legal
                  Proceedings
              
              30Item
                  4
              
              Submission
                  of Matters to a Vote of Security Holders
              
              30**Part
                  II**Item
                  5
              
              Market
                  for Registrant's Common Equity, Related Security Holder Matters,
                  and
                  Issuer Purchases ofEquity
                  Securities
              
              31Item
                  6
              
              Selected
                  Financial Data
              
              34Item
                  7
              
              Management's
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              
              35Item
                  7A
              
              Quantitative
                  and Qualitative Disclosures about Market Risk
              
              44Item
                  8
              
              Financial
                  Statements and Supplementary Data
              
              44Item
                  9
              
              Changes
                  in and Disagreements with Accountants on Accounting and Financial
                  Disclosure
              
              45Item
                  9A
              
              Controls
                  and Procedures
              
              45Item
                  9B
              
              Other
                  Information
              
              46**Part
                  III**Item
                  10
              
              Directors,
                  Executive Officers and Corporate Governance
              
              47Item
                  11
              
              Executive
                  Compensation
              
              48Item
                  12
              
              Security
                  Ownership of Certain Beneficial Owners and Management and Related
                  Security
                  Holder Matters
              
              49Item
                  13
              
              Certain
                  Relationships and Related Transactions and Director
                  Independence
              
              50Item
                  14
              
              Principal
                  Accountant Fees and Services
              
              51**Part
                  IV**Item
                  15
              
              Exhibits
                  and Financial Statement Schedules
              
              52Signatures
              
              53Exhibit
                  Index






2


**CAUTIONARY
      STATEMENT REGARDING FORWARD-LOOKING STATEMENTS**





Certain
      statements in this Annual Report on Form 10-K (“Annual Report”) and the
      documents the Fund has incorporated by reference into this Annual
      Report ,
      includes “forward-looking” statements within the meaning of Section 27A of the
      Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the
      Securities Exchange Act of 1934, as amended, and the Private Securities
      Litigation Reform Act of 1995, and the “safe harbor” provisions thereof. These
      forward-looking statements are usually accompanied by the words “anticipates,”
“believes,” “plan,” “seek,” “expects,” “intends,” “estimates,” “projects,”
“will,” “would,” “will likely result,” “will continue,” “future” and similar
      terms and expressions. The forward-looking statements in this Form 10-K reflect
      the current views of the management of Ridgewood Energy M Fund, LLC (the “Fund”)
      with respect to future events and financial performance. These forward-looking
      statements are subject to certain risks and uncertainties, including, among
      other things, the high-risk nature of oil and natural gas exploratory
      operations, the fact that the Fund’s drilling activities are managed by third
      parties, the volatility of oil and natural gas prices and extraction, and those
      other risks and uncertainties discussed in this report and in the Fund’s
      registration statement on Form 10, as amended, filed with the United States
      Securities and Exchange Commission (the “SEC”), that could cause actual results
      to differ materially from historical results or those anticipated. A
      detailed discussion of these and other risks and uncertainties that could cause
      actual results and events to differ materially from such forward-looking
      statements is included in Item 1A. “Risk Factors” beginning on page 21 of
      this Annual Report. You
      are
      urged to carefully consider all such factors.





In
      light
      of these risks and uncertainties, there can be no assurance that the
      forward-looking information contained in this Annual Report will in fact occur
      or prove to be accurate. Readers should not place undue reliance on the
      forward-looking statements contained herein, which speak only as of today’s
      date. We undertake no obligation to publicly revise these forward-looking
      statements to reflect events or circumstances that may arise after today. All
      subsequent written or oral forward-looking statements attributable to the Fund
      or persons acting on the Fund’s behalf are expressly qualified in their entirety
      by this section.








**AVAILABLE
      INFORMATION**





The
      Fund’s registered shares are under Section 12(g) of the Exchange Act. The Fund
      must therefore comply with, among other things, the periodic reporting
      requirements of Section 13(a) of the Exchange Act. As a result, the Fund
      prepares and files annual reports with the SEC on Form 10-K, q uarterly
      reports on Form 10-Q and, from time to time, current reports on Form 8-K.
      Moreover, the Manager maintains a website at http://www.ridgewoodenergy.com
      that
      contains important information about the Manager, including biographies of
      key
      management personnel, as well as information about the oil and natural gas
      investments made by the Fund and the other investment programs managed by the
      Manager. Such information includes, without limitation, a map of the Gulf of
      Mexico that provides the location of every well and project managed by the
      Manager along with information as to whether the project is exploratory, in
      completion or producing. This information is publicly available (i.e., not
      password protected) and is updated regularly.


3


**REPORTS
      TO SHAREHOLDERS**





The
      Fund
      does not anticipate providing annual reports to shareholders but will make
      available upon request copies of the Fund's periodic reports to the SEC on
      Form
      10-K and on Form 10-Q.








**WHERE
      YOU CAN GET MORE INFORMATION**





The
      Fund
      files annual, quarterly and current reports and certain other information with
      the SEC. Persons may read and copy any documents the Fund files at the SEC’s
      public reference room at 100 F Street, NE, Washington D.C. 20549. You may obtain
      information on the operation at the public reference room by calling the SEC
      at
      1-800-SEC-0330. The SEC maintains an internet site that contains reports, proxy
      and information statements, and other information regarding issuers that file
      electronically with the SEC at http://www.sec.gov. A copy of any such filings
      will be provided free of charge to any shareholder upon written request to
      the
      Fund at its business address 947 Linwood Avenue, Ridgewood, New Jersey 07450,
      ATTN: General Counsel.




4


**Commonly
      Used Oil and Gas Terms**


Below
      are
      explanations of some commonly used terms in the oil and gas
      business.





**AFE.** Authorization
      for expenditures.


**Barrel
      (Bbl.)** A
      standard measure of volume for crude oil and liquid petroleum products. One
      barrel equals 42 U.S. gallons liquid volume, used herein in reference to crude
      oil or condensate.


**Bcf.** Billion
      cubic feet.


**Bcfe.** Billion
      cubic feet equivalent, determined using the ratio of six Mcf gas to one Bbl
      of
      crude oil or condensate.


**Btu.** British
      thermal unit, which is the heat required to raise the temperature of a one
      pound
      mass of water from 58.5 to 59.5 degrees Fahrenheit.


**Completion.** The
      installation of permanent equipment for the production of oil or natural gas
      from a recently drilled well.


**Deep
      shelf.** Structures
      located on the Outer Continental Shelf at depths generally greater than 14,000
      feet in over pressured horizons where there has been limited or no production
      from deeper stratigraphic zones.


**Deepwater.** Generally
      considered to be water depths in excess of 1,000 feet.


**Development
      well.** A
      well
      drilled within the proved area of an oil or natural gas field to the depth
      of a
      stratigraphic horizon known to be productive, including a well drilled to find
      and produce probable reserves.


**Dry-hole.** A
      well
      found to be incapable of producing hydrocarbons in sufficient or commercial
      quantities such that proceeds from the sale of such production exceed production
      expenses and taxes.


**Exploration
      or exploratory well.** A
      well
      drilled to find and produce oil or natural gas reserves in an unproved
      area.


**FERC.** The
      Federal Energy Regulatory Commission.


**Field.** An
      area
      consisting of a single reservoir or multiple reservoirs all grouped on or
      related to the same individual geological structural feature or stratigraphic
      condition.


**MBbls.** One
      thousand barrels of crude oil or other liquid hydrocarbons.


**Mcf.** The
      standard measure of volume for natural gas, one thousand cubic
      feet.


**Mcfe.** One
      thousand cubic feet equivalent, determined using the ratio of six Mcf of natural
      gas to one Bbl of crude oil or condensate.


**MMS.** The
      Minerals Management Service of the United States Department of the
      Interior.


**MMBbls.** One
      million barrels of crude oil or other liquid hydrocarbons.


**MMBTU.** Million
      British Thermal Units.


**MMcf.** One
      million cubic feet.


**MMcfe.** One
      million cubic feet equivalent, determined using the ratio of six Mcf of natural
      gas to one Bbl of crude oil or condensate.


**Non-Consent.** The
      option to elect not to participate in a well or project.


**NYMEX.** The
      New
      York Mercantile Exchange.


**OCS.** The U.S.
      Outer Continental Shelf of the Gulf of Mexico. Water depths generally range
      from
      50 feet to 1,000 feet.


**Overriding
      Interest.** The
      seller of ownership interest may retain a right for some period of time to
      payments from the sale of oil and natural gas production from a well or
      project.


**Probable
      reserves.** Reserves
      which analysis of drilling, geological, geophysical and engineering data does
      not demonstrate to be proved under current technology and existing economic
      conditions, but where such analysis suggests the likelihood of their existence
      and future recovery.




5


**Productive
      well.** A
      well
      that is found to be capable of producing hydrocarbons in sufficient quantities
      such that proceeds from the sale of such production exceed production expenses
      and taxes.


**Promote.** The
      payment of a larger portion of the costs than ownership interest would
      require.


**Proved
      developed reserves.** Proved
      reserves that can be expected to be recovered from existing wells with existing
      equipment and operating methods.


**Proved
      developed nonproducing reserves.** Proved
      developed reserves expected to be recovered from zones behind casing in existing
      wells.


**Proved
      reserves.** The
      estimated quantities of crude oil or natural gas that geological and engineering
      data demonstrate with reasonable certainty to be recoverable in future years
      from known reservoirs under existing economic and operating
      conditions.


**Proved
      undeveloped reserves.** Proved
      reserves that are expected to be recovered from new wells on undrilled acreage
      or from existing wells where a relatively major expenditure is required for
      recompletion.


**SEC** .
      United
      States Securities and Exchange Commission.


**Working
      interest.** The
      operating interest that gives the owner the right to drill, produce and conduct
      operating activities on the property and a share of production.


**Workover.** Operations
      on a producing well to restore or increase production.


6


**PART
      I**





**ITEM
      1. BUSINESS**





**General
      Overview**


Ridgewood
      Energy M Fund, LLC (the “Fund”) is a Delaware limited liability company and was
      formed on August 2, 2004 to acquire interests primarily in oil and natural
      gas
      projects located in the U.S. waters of the Gulf of Mexico. Ridgewood Energy
      Corporation ("Ridgewood Energy" or the “Manager”), a Delaware corporation, is
      the Manager. As the Manager, Ridgewood Energy has direct and exclusive control
      over the management and control of Fund operations. The Fund is engaged in
      the
      acquisition, development and production of oil and natural gas projects in
      the
      Gulf of Mexico. To date, the Fund has focused primarily on acquiring oil and
      natural gas projects in the shallow waters of the Gulf of Mexico in locations
      with access to existing gathering and processing infrastructure or where such
      infrastructure can be constructed economically and efficiently.





The
      Fund
      initiated its private placement offering on September 7, 2004, selling whole
      and
      fractional shares of membership interests primarily at $150 thousand per share.
      There is no public market for these shares and one is not likely to develop.
      In
      addition, the shares are subject to severe restrictions on transfer and resale
      and cannot be transferred or resold except in accordance with the Fund's limited
      liability company operating agreement (“LLC agreement”) and applicable federal
      and state securities laws. The offering was terminated on November 4, 2004.
      The
      Fund raised $78.9 million. After payment of $12.2 million in offering fees,
      commissions and investment fees, the Fund had $66.7 million for investments
      and
      operating expenses. As of April 10, 2007 the Fund had 946
      shareholders.





**Manager**


Ridgewood
      Energy was founded in 1982 by Robert E. Swanson. As the Manager, Ridgewood
      Energy has direct and exclusive control over the management of the Fund's
      operations. With respect
      to project investment, Ridgewood Energy locates potential projects, conducts
      appropriate due diligence and negotiates and completes the transactions in
      which
      the investments are made. This includes not only review of existing title
      documents, reserve information, and other technical specifications regarding
      a
      project, but also the review and preparation of participation agreements and
      other agreements relating to an investment.





In
      addition, Ridgewood Energy performs (or arranges for the performance of) the
      management and administrative services required for Fund operations. Among
      other
      services, Ridgewood Energy administers the accounts and handles relations with
      the shareholders, including tax and other financial information. In addition,
      Ridgewood Energy provides the Fund with office space, equipment and facilities
      and other services necessary for its operation. Finally, Ridgewood Energy
      manages and conducts the Fund's relations with custodians, depositories,
      accountants, attorneys, broker-dealers, corporate fiduciaries, insurers, banks
      and others, as required.




The
      Fund
      is required to pay all other expenses it incurs, including expenses of preparing
      and printing periodic reports for shareholders and the United States Securities
      and Exchange Commission (the “SEC”), commission fees, taxes, outside legal,
      accounting and consulting fees, litigation expenses and other expenses, if
      any,
      properly payable by the Fund. The Fund is required to reimburse the Manager
      for
      all such Fund expenses paid by it.





As
      compensation for its management services, the Manager is entitled to (i) an
      annual management fee, payable monthly, equal to 2.5% of the total capital
      contributions made by our shareholders and (ii) a 15% interest in the cash
      distributions made to the Fund’s shareholders. In January 2007, the Manager
      changed its policy regarding the 2.5% annual management fee. Effective January
      1, 2007, the annual management fee, payable monthly, will be equal to 2.5%
      of
      total shareholder capital contributions, net of cumulative dry-hole expenses
      incurred by the Fund. As set forth in Item 7. Management's Discussion and
      Analysis, the Manager received from the Fund for the years ended December 31,
      2006 and 2005 and for the period August 2, 2004 (Inception) through December
      31,
      2004 approximately $1.9 million, $2.0 million and $0.5 million, respectively,
      for its management services. Additionally, for the years ended December 31,
      2006
      and 2005, and for the period August 2, 2004 (Inception) through December 31,
      2004, the Manager received approximately $0.8 million, nil and nil,
      respectively, representative of the 15% interest of cash
      distributions.





**Business
      Strategy**


The
      Fund’s primary investment objective is to generate cash flow from the
      acquisition, exploration, production and sale of crude oil and natural gas
      from
      oil and natural gas projects. The Fund has invested and participates in
      exploration and production projects located in the waters of the Gulf of Mexico
      offshore Texas, Louisiana and Alabama on the Outer Continental Shelf (“OCS”).
      These activities are governed by the Outer Continental Shelf Lands Act (“OCSLA”)
      enacted in 1953 and administered by the Minerals Management Service of the
      Department of the Interior (“MMS”). The Fund generally looks to invest in
      projects that have been proposed by larger independent oil and natural gas
      companies seeking to minimize their risks by selling a portion of their interest
      in a project. These investments may require the Fund to pay a disproportionate
      part of the drilling costs on the exploratory well of a project than its
      ownership interest would otherwise require. This is called a promote and is
      common in the oil and natural gas exploration industry. In addition,
      notwithstanding the sale of an interest to the Fund, the seller may retain
      a
      right for some period of time to payments from sales of oil and natural gas
      production from a well or project. This is called an overriding interest which
      is also relatively common in this industry. Notwithstanding any such promote
      or
      overriding interest, the Fund has tried to invest in projects that it believes
      contain sufficient commercial quantities of oil or natural gas and which are
      near (i) existing oil or natural gas gathering and processing infrastructure
      and
      (ii) developed markets where the Fund can sell its oil or natural
      gas.





The
      Fund
      tries to focus on projects that have significant reserve potential and which
      are
      projected to have the shortest time period from investment to first production.
      However, the Fund does not operate these projects, and although it has a vote,
      it is not in control of the schedule pursuant to which its projects are
      developed and completed. Moreover, when performing due diligence with respect
      to
      a project, the Fund must rely on the independent reservoir engineers who are
      hired and paid, in most cases, by the operator. The Fund does engage certain
      consultants to examine and review such reserve estimates and seismic information
      on its behalf.





7


**Manager’s
      Investment Committee and Investment Criteria**


The
      New
      Jersey office has four executives on the investment committee, three of whom
      have been working together at Ridgewood Energy for 20 years. The Houston office,
      which opened in 2003, has five executives on the investment committee who
      provide operational, scientific and technical oil and natural gas expertise.





In
      considering projects, the Manager and investment committee investigates each
      such project against a list of factors that it believes will result in the
      selection of those projects that have the highest probability of success. These
      factors, in no particular order, include, but are not limited to, the following
      (i) targeting projects that have or are expected to have operators with
      significant resources and experience in oil and natural gas exploration; (ii)
      targeting projects that have or are expected to have partners that also have
      significant resources and experience in oil and natural gas exploration; (iii)
      technical quality of the project including its geology, seismic profile,
      locational trends, and whether the project has potential for multiple prospects;
      (iv) oil or natural gas reserve potential; (v) whether and the extent to which
      the operator participates as a working interest owner in the project; (vi)
      economic factors, such as potential revenues from the project, the rate of
      return, and estimated time to first production; (vii) risk factors associated
      with exploration, as more fully described in this filing; (viii) existence
      of
      drilling rigs, platforms and other infrastructure, at or nearby the project;
      (ix) proposed drilling schedule; (x) terms of the proposed transaction,
      including contractual restrictions and obligations and lease term; and (xi)
      overall cost of the project.





**Working
      Interest in Oil and Natural Gas Leases**


Existing
      projects, and future projects, if any, are expected to be, located in the waters
      of the Gulf of Mexico offshore from Texas, Louisiana and Alabama on the OCS.
      The
      OCSLA, which was enacted in 1953, governs certain activities with respect to
      working interests and the exploration of oil and natural gas in the
      OCS.





Under
      OCSLA, the United States federal government has jurisdiction over oil and
      natural gas exploration and development on the OCS. As a result, the United
      States Secretary of the Interior is empowered to sell exploration, development
      and production leases of a defined submerged area of the OCS, or a block,
      through a competitive bidding process. Such activity is conducted by the MMS,
      an
      agency of the United States Department of Interior. As part of the leasing
      activity and as required by the OCSLA, the leases auctioned include specified
      lease terms such as the length of the lease, the amount of royalty to be paid,
      lease cancellation and suspension, and, to a degree, the planned activities
      of
      exploration and production to be conducted by the lessee. In addition, the
      OCSLA
      grants the Secretary of the Interior continuing oversight and approval authority
      over exploration plans throughout the term of the lease.





The
      winning bidder(s) at the lease sale, or the lessee(s), are given a lease by
      the
      MMS that grants such lessee(s) the exclusive right to conduct oil and natural
      gas exploration and production activities within a specific lease block, or
      working interest. Leases in the OCS are generally issued for a primary lease
      term of 5, 8 or 10 years depending on the water depth of the lease block. The
      5-year lease term is for blocks in water depths generally less than 400 meters,
      8 years for depths between 400 meters to 800 meters and 10 years for depths
      in
      excess of 800 meters. During this primary lease term, except in limited
      circumstances, lessees are not subject to any particular requirements to conduct
      exploratory or development activities. However, once a lessee drills a well
      and
      begins production, the lease term is extended for the duration of commercial
      production.





8


The
      lessee of a particular block, for the term of the lease, has the right to drill
      and develop exploratory wells and conduct other activities throughout the block.
      If the initial well on the block is successful, a lessee (or third-party
      operator for a project) may conduct additional geological studies and may
      determine to drill additional or development wells. If a development well is
      to
      be drilled in the block, each lessee owning working interests in the block
      must
      be offered the opportunity to participate in, and cover the costs of, the
      development well up to that particular lessee's working interest ownership
      percentage.





Generally,
      working interests in an offshore gas lease under the OCSLA pay a 16.67% royalty
      to the MMS. Therefore, the net revenue interest of the holders of 100% of the
      working interest in the projects in which the Fund will invest is approximately
      83.33% of the total revenue of the project, and, is further reduced by any
      other
      royalty burdens that apply to a lease block. However, as described below, the
      MMS has adopted royalty relief for existing OCS leases for those who drill
      deep
      oil and natural gas projects.





**Mineral
      Management Services Deep Natural Gas Royalty Incentive**


On
      January 26, 2004, the MMS promulgated a rule providing incentives for companies
      to increase deep oil and natural gas production in the Gulf of Mexico (the
      "Royalty Relief Rule"). Under the Royalty Relief Rule, lessees will be eligible
      for royalty relief on their existing leases if they drill and perforate wells
      for new and deeper reserves at depths greater than 15,000 feet subsea. In
      addition, an even larger royalty relief would be available for wells drilled
      and
      perforated deeper than 18,000 feet subsea. It should be noted that the Royalty
      Relief Rule does not extend to deep waters of the Gulf of Mexico off the
      continental shelf nor does it apply if the price of natural gas exceeds $9.91
      Million British Thermal Units (“mmbtu”) adjusted annually for inflation. The
      Royalty Relief Rule is limited to leases in a water depth less than 656 feet,
      or
      200 meters.





**Oil
      and Natural Gas Agreements**


We
      have
      entered into a short-term month to month agreement with Energy Upgrade Inc.
      who
      is currently marketing and selling the Fund's proportionate share of the
      gas to the public market. The Fund is receiving market prices for such
      natural gas. The Manager believes however, that it is likely that oil and
      natural gas from  the Fund's other projects, will also have access to
      pipeline transportation and can be marketed in a similar fashion. As
      mentioned above in Manager’s Investment Committee and Investment Criteria, as
      part of the Manger’s review of a potential project, access to existing
      transportation infrastructure is an extremely important factor as the existence
      of such infrastructure enables production from a successful well to get to
      market quickly.





**Operator**


The
      projects in which the Fund has invested are operated and controlled by
      unaffiliated third-party entities acting as operators. The operator is
      responsible for drilling, administration and production activities for leases
      jointly owned by working interest owners and acts on behalf of all working
      interest owners under the terms of the applicable offshore operating agreements.
      In certain circumstances, operators will enter into agreements with independent
      third-party subcontractors and suppliers to provide the various services
      required for operating leases. Currently, the Fund's projects are operated
      by
      BHP Billiton (“BHP”), Devon Energy (“Devon”), El Paso (“El Paso”), ENI Petroleum
      (currently known as Woodside Energy) (“Woodside”), LLOG Exploration Company
      (“LLOG”), and Newfield Exploration (“Newfield”).





9


Because
      the Fund does not operate any of the projects in which it has acquired an
      interest, shareholders must not only bear the risk that the Manager will be
      able
      to select suitable projects, but also that, once selected, such projects will
      be
      managed prudently, efficiently and fairly by the operators.





**Insurance**


The
      Manager has obtained hazard, property, general liability and other insurance
      in
      commercially reasonable amounts to cover the projects, as well as general
      liability and similar coverage for its business operations. However, there
      is no
      assurance that such insurance will be adequate to protect the Fund from material
      losses related to the projects. In addition, the Manager's past practice has
      been to obtain insurance as a package that is intended to cover most, if not
      all, of the funds under its management. These projects are owned by affiliates
      of the Fund. While the Manager believes it has obtained adequate insurance
      in
      accordance with customary industry practices, the possibility exists, depending
      on the extent of the incident, that insurance coverage may not be sufficient
      to
      cover all losses. In addition, depending on the extent, nature, and payment
      of
      any claims to the Fund’s affiliates, yearly insurance limits may become
      exhausted and be insufficient to cover a claim made by the Fund in that
      year.





**Salvage
      Fund**


As
      to
      projects in which the Fund owns a working interest, the Fund deposits in a
      separate interest-bearing account, or a salvage fund, which is in the nature
      of
      a sinking fund, money to help provide for the Fund’s proportionate share of the
      cost of dismantling production platforms and facilities, plugging and abandoning
      the projects, and removing the platforms, facilities and projects in respect
      of
      each of such projects after their useful life, in accordance with applicable
      federal and state laws and regulations. There is no assurance that the salvage
      fund will have sufficient assets to meet these requirements and any unfunded
      expenses, and the Fund may be liable for such expenses. The Fund has deposited
      approximately $1.0 million from capital contributions into a salvage fund which
      the Fund estimates to be sufficient to meet its potential requirements. If
      management later determines the deposit and earned interest is not enough to
      cover the Fund’s proportionate share of expense, the Fund will deposit payments
      from operating income to make up any differences. Any portion of a salvage
      fund
      that remains after the Fund pays its share of the actual salvage cost will
      be
      distributed to the shareholders. There are no legal restrictions on the
      withdrawal of the salvage fund.




**Seasonality**


Generally,
      the Fund's business operations are not subject to seasonal fluctuations in
      the
      demand for oil and natural gas  that
      would result in more of the Fund's oil and natural gas being sold, or likely
      to
      be sold, during one or more particular months or seasons. Once a project is
      drilled and reserves of oil and natural gas are determined to exist, the
      operator of the project extracts such reserves throughout the year. Oil and
      natural gas, once extracted, can be sold at any time during the
      year.





10


However,
      the Fund's drilling, production and transportation operations are subject to
      seasonal risks, such as hurricanes, that may affect our ability to bring such
      oil or natural gas to the market and, consequently, affect the price for such
      oil and natural gas. The National Hurricane Center defines hurricane season
      in
      the Atlantic Region, Caribbean, and Gulf of Mexico to be from June 1 through
      November 30. During hurricane season, the number and intensity of and resulting
      damage from hurricanes in the Gulf of Mexico region could affect the gathering
      and processing infrastructure, drilling platforms or the availability or price
      of repair or replacement equipment. As a result, these factors may affect the
      supply and, consequently, the price of oil and natural gas resulting in an
      increase in price if supplies are reduced. However, even if commodity prices
      increase because of weather related shortages, the Fund may not be in a position
      to take immediate advantage of any such price increase if, as a result of such
      weather related incident, damage occurred to its projects, the gathering
      infrastructure or in the transportation network.





The
      Manager has experienced the range of possible interruptions in operations due
      to
      hurricanes from as little as no damage and insignificant or no interruptions
      to
      significant damage and extended interruptions. However, it is of course
      impossible to predict whether and to what extent hurricanes and damage may
      occur
      and to what projects.





**Customers**


All
      of
      the oil and natural gas production from the Fund’s producing properties is sold
      by a third
      party on the Fund’s behalf. As
      a
      result, the Fund did not contract to sell oil and natural gas to third parties.
      Therefore, the Fund had no customers or any one customer upon which the Fund
      depends for more than ten percent (10%) of its revenues.





**Energy
      Prices**


Historically,
      the markets for crude oil and natural gas have been extremely volatile, and
      they
      are likely to continue to be volatile in the future. This volatility is caused
      by numerous factors and market conditions which the Fund cannot control or
      influence. Therefore, it is impossible to predict the future price of crude
      oil
      and natural gas with any certainty. Low commodity prices could have an adverse
      affect on the Fund’s future profitability. Also, the Fund has not engaged in any
      price risk management programs or hedges to date and does not anticipate
      engaging in those types of transactions in the future.





**Competition**


Strong
      competition exists in the acquisition of oil and natural gas leases and in
      all
      sectors of the oil and natural gas exploration and production industry. Although
      the Fund does not compete for the acquisition of working interests from the
      MMS,
      it does compete with other companies for the acquisition of percentage ownership
      interests in oil and natural gas working interests in the secondary
      market.





In
      many
      instances, the Fund competes for projects with large independent oil and natural
      gas producers who generally have significantly greater access to capital
      resources, have a larger staff, and more experience in oil and natural gas
      exploration and production than the Fund. As a result, these larger companies
      are in a position that they could outbid the Fund for a project. However,
      because these companies are so large and have such significant resources, they
      tend to focus more on projects that are larger, have greater reserve potential,
      but cost significantly more to explore and develop. These larger projects
      increasingly tend to be projects in the deepwater areas of the Gulf of Mexico




11


and
      the
      North Sea off the coast of Great Britain. However, the focus of these companies
      on larger projects does not necessarily mean that they will not investigate
      and/or acquire smaller projects in shallow waters for which the Fund competes.
      Many of these larger companies have participated in the auctions for lease
      blocks directly from the U.S. Government. In such cases, these companies obtain
      from the U.S. Government 100% of the leasehold of a particular lease block
      in
      the Gulf of Mexico. In order to obtain even more resources to invest in other
      larger and more expensive projects, they diversify current holdings, including
      projects they own in the shallow waters of the Gulf of Mexico, by selling off
      percentage interests in these lease blocks. As a result, very good projects
      in
      the shallow waters of the Gulf of Mexico become available. The Fund, therefore,
      has opportunities to acquire interests in these smaller, yet economically
      attractive projects.





**Employees**


The
      Fund
      has no employees as the Manager operates and manages the Fund.





**Offices**


The
      Manager’s principal executive offices are located at 947 Linwood Avenue,
      Ridgewood, NJ 07450, and its phone number is 800-942-5550. The Manager also
      leases additional office space at 11700 Old Katy Road, Houston, TX
      77079.





**Regulation**


Oil
      and
      natural gas exploration, development and production activities are subject
      to
      extensive federal and state laws and regulations. Regulations governing
      exploration and development activities require, among other things, our
      operators to obtain permits to drill projects and to meet bonding, insurance
      and
      environmental requirements in order to drill, own or operate projects. In
      addition, the location of projects, the method of drilling and casing projects,
      the restoration of properties upon which projects are drilled and the plugging
      and abandoning of projects are also subject to regulations.





***Outer
      Continental Shelf Lands Act***


The
      Fund’s projects are located in the offshore waters of the Gulf of Mexico on the
      OCS. The Fund’s operations and activities, therefore, are governed by, among
      other things, the OCSLA.





Under
      OCSLA, the United States federal government has jurisdiction over oil and
      natural gas development on the OCS. As a result, the United States Secretary
      of
      the Interior is empowered to sell exploration, development and production leases
      of a defined submerged area of the OCS, or a block, through a competitive
      bidding process. Such activity is conducted by the MMS, an agency of the United
      States Department of Interior. The MMS administers federal offshore leases
      pursuant to regulations promulgated under the OCSLA. Lessees must obtain MMS
      approval for exploration, development and production plans prior to the
      commencement of offshore operations. In addition,




12


approvals
      and permits are required from other agencies such as the U.S. Coast Guard,
      the
      Army Corps of Engineers and the Environmental Protection Agency. Offshore
      operations are subject to numerous regulatory requirements, including stringent
      engineering and construction specifications related to offshore production
      facilities and pipelines and safety-related regulations concerning the design
      and operating procedures of these facilities and pipelines. MMS regulations
      also
      restrict the flaring or venting of production and proposed regulations would
      prohibit the flaring of liquid hydrocarbons and oil without prior
      authorization.





The
      MMS
      has also imposed regulations governing the plugging and abandonment of wells
      located offshore and the installation and removal of all production facilities.
      Under certain circumstances, the MMS may require operations on federal leases
      to
      be suspended or terminated. Any such suspension or termination could adversely
      affect our operations and interests.





The
      MMS
      conducts auctions for lease blocks of submerged areas offshore. As part of
      the
      leasing activity and as required by the OCSLA, the leases auctioned include
      specified lease terms such as the length of the lease, the amount of royalty
      to
      be paid, lease cancellation and suspension, and, to a degree, the planned
      activities of exploration and production to be conducted by the lessee. In
      addition, the OCSLA grants the Secretary of the Interior continuing oversight
      and approval authority over exploration plans throughout the term of the
      lease.





***Sales
      and Transportation of Natural Gas/Oil***


The
      Fund
      expects to sell its proportionate share of oil and natural gas to the market
      and
      to receive market prices from such sales. These sales are not currently subject
      to regulation by any federal or state agency. However, in order for the Fund
      to
      make such sales the Fund is dependent upon unaffiliated pipeline companies
      whose
      rates, terms and conditions of transport are subject to regulation by the
      Federal Energy Regulatory Commission (“FERC”). The rates, terms and conditions
      are regulated by FERC pursuant to a variety of statutes including the OSCLA,
      the
      Natural Gas Policy Act and the Energy Policy Act of 1992. Generally, depending
      on certain factors, pipelines can charge rates that are either market-based
      or
      cost-of-service. In some circumstances, rates can be agreed upon pursuant to
      settlement. Thus, the rates that pipelines charge us, although regulated, are
      beyond our control. Nevertheless, such rates would apply uniformly to all
      transporters on that pipeline and, as a result, the impact to the Fund of any
      changes in such rates, terms or conditions would not impact its operations
      differently in any material way than the impact upon other oil or natural gas
      producers and marketers.





**Environmental
      Matters and Regulation**


The
      Fund’s operations are subject to pervasive environmental laws and regulations
      governing the discharge of materials into the air and water and the protection
      of aquatic species and habitats. However, although the Fund shares the liability
      along with its other working interest owners for any environmental damage,
      most
      of the activities to which these environmental laws and regulations apply are
      conducted by the operator on the Fund’s behalf. Nevertheless, environmental laws
      and regulations to which its operations are subject may require the Fund, or
      the
      operator, to acquire permits to commence drilling operations, restrict or
      prohibit the release of certain materials or substances into the environment,
      impose the installation of certain environmental control devices, require
      certain remedial measures to prevent pollution and other discharges such as
      the
      plugging of abandoned projects and, finally, impose in some instances severe
      penalties, fines and liabilities for the environmental damage that is caused
      by
      our projects.





Some
      of
      the environmental laws that apply to oil and natural gas exploration and
      production are:





13


***The
      Oil Pollution Act.*** The Oil
      Pollution Act (“OPA”) amends Section 311 of the Federal Water Pollution Act (the
“Clean Water Act”) and was enacted in response to the numerous tanker spills,
      including the Exxon Valdez that occurred in the 1980s. Among other things,
      the
      OPA clarifies the federal response authority to and increases penalties for
      spills. The OPA establishes a new liability regime for oil pollution incidents
      in the aquatic environment. Essentially, the OPA provides that a responsible
      party for a vessel or facility from which oil is discharged or which poses
      a
      substantial threat of a discharge could be liable for certain specified damages
      resulting from a discharge of oil, including clean-up and remediation, loss
      of
      subsistence use of natural resources, real or personal property damages, as
      well
      as certain public and private damages. A responsible party includes a lessee
      of
      an offshore facility.





The
      OPA
      also requires a responsible party to submit proof of its financial
      responsibility to cover environmental cleanup and restoration costs that could
      be incurred in connection with an oil spill. Under the OPA, parties responsible
      for offshore facilities must provide financial assurance of at least $35 million
      to address oil spills and associated damages. In certain limited circumstances,
      that amount may be increased to $150 million. As indicated earlier, the Fund
      has
      not been required to make any such showing to the MMS as the operator is
      responsible for such compliance. However, notwithstanding the operator's
      responsibility for compliance, in the event of an oil spill, the Fund, along
      with the operator and other working interest owners, could be liable under
      the
      OPA for the resulting environmental damage.





***Federal
      Water Pollution Act/Clean Water Act.*** Generally, the Federal Water Pollution Act/Clean Water Act imposes liability
      for
      the unauthorized discharge of petroleum products into the surface and coastal
      U.S. waters except in strict conformance with discharge permits issued by the
      federal (or state if applicable) agency. Regulations governing water discharges
      also impose other requirements, such as the obligation to prepare spill response
      plans. Again, the Fund’s operators are responsible for compliance with the Clean
      Water Act although the Fund may be liable for any failure of the operator to
      do
      so.





***Federal
      Clean Air Act.*** The
      Federal Clean Air Act restricts the emission of certain air pollutants. Prior
      to
      constructing new facilities, permits may be required before work can commence
      and existing facilities may be required to incur additional capital costs to
      add
      equipment to ensure and maintain compliance. As a result, the Fund’s operations
      may be required to incur additional costs to comply with the Clean Air
      Act.





***Other
      Environmental Laws*** *.* In
      addition to the above, the Fund’s operations may be subject to the ***Resource
      Conservation and Recovery Act*** *,* which
      regulates the generation, transportation, treatment, storage, disposal and
      cleanup of certain hazardous wastes, as well as the ***Comprehensive
      Environmental Response, Compensation and Liability Act*** which
      imposes joint and several liability without regard to fault or legality of
      conduct on classes of persons who are considered responsible for the release
      of
      a hazardous substance into the environment.





The
      above
      represents a brief outline of the major environmental laws that may apply to
      the
      Fund’s operations. The Fund believes that its operators are in compliance with
      each of these environmental laws and the regulations promulgated there
      under.





14


**Potential
      Tax Benefits**


The
      following discussion is a summary of the primary tax benefits of ownership
      of a
      membership interest in the Fund and does not include all possible tax benefits
      or other tax implications of such ownership.





***Deduction
      of Intangible Drilling and Development Costs***


Section
      263(c) of the Internal Revenue Code of 1986, as amended (the “Code”) authorizes
      an election by the Fund to deduct as expenses intangible drilling and
      development costs incurred in connection with oil and natural gas properties
      at
      the time such costs are incurred in accordance with the Fund's method of
      accounting, provided that the costs are not more than would be incurred in
      an
      arm's length transaction with an unrelated drilling contractor. Such costs
      include, for example, amounts paid for labor, fuel, wages, repairs, supplies
      and
      hauling necessary to the drilling of the project and preparation of the project
      for production. Generally, this election applies to items that in themselves
      do
      not have salvage value. Alternatively, each Fund shareholder may elect to
      capitalize their share of the intangible drilling and development costs and
      amortize them ratably over a 60-month period.





The
      Fund
      may enter into carried interest arrangements whereby the Fund would purchase
      interests in certain leases and agree to pay a disproportionate part of the
      costs of drilling the first project thereon. In such situations, the party
      who
      is paying more than their share of costs of drilling may not deduct all such
      costs as intangible drilling and development costs unless their percentage
      of
      ownership of the lease is not reduced before they have recovered from the first
      production of the project an amount equal to the cost they incurred in drilling,
      completing, equipping and operating the project. The Fund may not have this
      right in certain of the transactions of this type in which it may engage. If
      circumstances permit, however, the Fund will adopt the position that all of
      the
      intangible drilling and development costs incurred are deductible (even though
      such costs may be disproportionate to its ownership of the lease) on the basis
      that such arrangements constitute partnerships for federal income tax purposes
      and that the excess intangible drilling and development costs are specifically
      allocable to the Fund. There can be no assurance that this position would
      prevail against challenge by the Internal Revenue Service (the “IRS”).





In
      the
      case of a shareholder who constitutes an integrated oil company, 30% of the
      amount otherwise allowable as a deduction for intangible drilling costs under
      Section 263(c) must be capitalized and deducted ratably over a 60-month period
      beginning with the month the costs are paid or incurred. This provision does
      not
      apply to nonproductive projects. For this purpose, an integrated oil company
      is
      generally defined as an individual or entity with retail sales of oil and
      natural gas aggregating more than $5 million and refining more than 50,000
      barrels per day for the taxable year.





To
      the
      extent that drilling and development services were performed for the Fund in
      2006, amounts incurred pursuant to bona fide arm's-length drilling contracts
      and
      constituting intangible drilling and development costs were deductible by the
      Fund in 2006. To the extent that such services are performed in 2007, however,
      the Fund will only be allowed to deduct for the year 2007 amounts that
      are:





15


·
            incurred
                pursuant to bona fide arm's-length drilling contracts which provide
                for
                absolute noncontingent liability for payment,
                and





·
            attributable
                to wells spud within 90 days after December 31,
                2006.





Sections
      461(h)(1) and 461(i)(2) of the Code provide, in relevant part:





...in
      determining whether an amount has been incurred with respect to any item during
      any taxable year, the all events tests shall not be treated as met any earlier
      than when economic performance with respect to such item occurs.





*
      *
      *





...economic
      performance with respect to the act of drilling an oil or natural gas well
      shall
      be treated as having occurred within a taxable year if drilling of the well
      commences before the close of the 90th day after the close of a taxable
      year.





The
      clear
      implication of these provisions is that an amount incurred during a taxable
      year
      for drilling or completion services which could otherwise be accrued for federal
      tax purposes will not be disqualified as a deduction merely because the services
      are performed during the subsequent taxable year (provided that the services
      commence within the first 90 days of such subsequent year).





Consequently,
      intangible drilling and development costs meeting the above criteria were
      deducted by the Fund in 2006 even though a portion of such costs are
      attributable to services performed during 2007.





Each
      shareholder, however, may deduct their share of amounts paid in 2006 for
      services performed in 2007 only to the extent of their cash basis in the Fund
      as
      of the end of 2006. For this purpose, a taxpayer's cash basis in a tax shelter
      which is taxable as a partnership (such as the Fund) is the taxpayer's basis
      in
      the Fund determined without regard to any amount borrowed by the taxpayer with
      respect to the Fund which (a) is arranged by the Fund or by any person who
      participated in the organization, sale or management of the Fund (or any person
      related to such person within the meaning of Section 461(b)(3)(c)) of the Code,
      or (b) is secured by any asset of the Fund. Inasmuch as cash basis excludes
      borrowing arranged by an extremely broad group of persons who could be related
      to a person who participated in the organization, sale or management of the
      Fund, it is not possible to express an opinion as to whether each shareholder
      of
      the Fund will be allowed to deduct their allocable share of any prepaid drilling
      expenses to the extent that they exceed their actual cash investment in the
      Fund.





***Depletion
      Deductions***


Subject
      to the limitations discussed hereafter, the shareholders will be entitled to
      deduct, as allowances for depletion under Section 611 of the Code, their share
      of percentage or cost depletion, whichever is greater, for each oil and natural
      gas producing project owned by the Fund.





16


Cost
      depletion is computed by dividing the basis of the project by the estimated
      recoverable reserves to obtain a unit cost, then multiplying the unit cost
      by
      the number of units sold in the current year. Cost depletion cannot exceed
      the
      adjusted basis of the project to which it relates. Thus, cost depletion
      deductions are limited to the capitalized cost of the project, while percentage
      depletion may be taken as long as the project is producing income. The depletion
      allowance for oil and natural gas production will be computed separately by
      each
      shareholder and not by the Fund. The Fund will allocate to each shareholder
      their proportionate share of production and the adjusted basis of each Fund
      project. Each shareholder must keep records of their share of the adjusted
      basis
      and any depletion taken on the project and use their adjusted basis in the
      computation of gain or loss on the disposition of the project by the
      Fund.





Percentage
      depletion with respect to production of oil and natural gas is available only
      to
      those qualifying for the independent producer's exemption, and is limited to
      an
      average of 1,000 barrels per day of domestic oil production or 6,000,000 cubic
      feet per day of domestic natural gas production. The applicable rate of
      percentage depletion on production under the independent producer exemption
      is
      15% of gross income from oil and natural gas sales. The depletion deduction
      under the independent producer exemption may not exceed 65% of the taxpayer's
      taxable income for the year, computed without regard to certain deductions.
      Any
      percentage depletion not allowed as a deduction due to the 65% of adjusted
      taxable income limitation may be carried over to subsequent years subject to
      the
      same annual limitation. For a shareholder that is a trust, the 65% limitation
      shall be computed without deduction for distributions to beneficiaries during
      the taxable year.





The
      determination of whether a shareholder will qualify for the independent producer
      exemption will be made at the shareholder level. A shareholder who qualifies
      for
      the exemption, but whose average daily production exceeds the maximum number
      of
      barrels on which percentage depletion can be computed for that year, will have
      to allocate their exemption proportionately among all of the properties in
      which
      they have an interest, including those owned by the Fund. In the event
      percentage depletion is not available, the shareholder would be entitled to
      utilize cost depletion as discussed above.





The
      independent producer exemption is not available to a taxpayer who refines more
      than 50,000 barrels of oil on any one day in a taxable year or who directly
      or
      through a related person sells oil or natural gas or any product derived
      therefrom (i) through a retail outlet operated by them or a related person
      or
      (ii) to any person who occupies a retail outlet which is owned and controlled
      by
      the taxpayer or a related person. In general, a related person is defined by
      Section 613A of the Code as a corporation, partnership, estate, or trust in
      which the taxpayer has a 5% or greater interest. For the purpose of applying
      this provision: (a) bulk sales of oil or oil and natural gas to commercial
      or
      industrial users are excluded from the definition of retail sales; (b) if the
      taxpayer or a related person does not export any domestic oil or natural gas
      production during the taxable year or the immediately preceding year, retail
      sales outside the U.S. are not deemed to be disqualifying sales; and (c) if
      the
      taxpayer's combined receipts from disqualifying sales do not exceed $5 million
      for the taxable year of all retail outlets taken into account for the purpose
      of
      applying this restriction, such taxpayer will not be deemed a
      retailer.





17


***Depreciation***


Costs
      of
      equipment, such as casing, tubing, tanks, pumping units, pipelines, production
      platforms and other types of tangible property and equipment generally cannot
      be
      deducted currently, but may be eligible for accelerated cost recovery. All
      or
      part of the depreciation claimed may be subsequently recaptured upon disposition
      of the property by the Fund or of a share by any shareholder.





In
      addition, the Code provides for certain uniform capitalization rules which
      could
      result in the capitalization rather than deduction of Fund management fee and
      administration costs.


18


**ITEM
      1A. RISK FACTORS**





In
      addition to the other information set forth elsewhere in this report, you should
      carefully consider the following factors when evaluating the Fund:








**RISKS
      INHERENT IN THE FUND’S BUSINESS**





***The
      Fund’s exploration and production activities are subject to risks that it cannot
      control and it may have insufficient insurance to cover these risks. To the
      extent the Fund is not covered by insurance, it could incur losses and
      liabilities that could reduce revenues, increase costs or eliminate dollars
      available for future exploration and development
      projects.***


Costs
      of
      drilling, completing and operating projects are often uncertain and drilling
      operations may be curtailed, delayed or canceled as a result of a variety of
      factors including:





·
            Fires,
                explosions, blowouts and cratering


·
            Equipment
                failures, casing collapse, pipe and cement
                failures


·
            Marine
                risks such as capsizing or
                collisions


·
            Adverse
                weather conditions, including
                hurricanes


·
            Shortages
                or delays in the delivery of
                equipment


·
            Acts
                of terrorism


·
            Environmental
                hazards


·
            Pipeline
                ruptures and discharge of toxic
                gases





Many
      of
      the above-mentioned risks could result in damage to life and / or property,
      or
      cause sustained interruption of production.


There
        is
        no guarantee that future such costs will be covered by insurance. In such
        instances, the cost for repairs would have to be covered by the Fund and,
        if the
        Fund is unable to pay for such costs, its interest in the particular
        well or project could be forfeited as a non-consent interest, which means
        that
        the Fund will have lost its right to participate in, but not ownership of,
        the
        well for certain period of time while and until the non-consent owner earns
        a
        generally stated amount of return from the well or project.





Insurance
      to cover certain of these risks may be prohibitively expensive or unavailable,
      particularly with respect to acts of terrorism. Additionally, insurance coverage
      may not be sufficient to cover certain catastrophic events. The Fund could
      be
      liable for costs in excess of its insurance coverage.





In
      addition, it is significantly less costly for insurance to be acquired and
      maintained by the Manager as a package that covers all of the oil and natural
      gas projects under its management. The majority of these projects are owned
      by
      other entities that are likewise managed by Ridgewood Energy. As a result,
      given
      insurance limits, if significant damage occurs to other projects owned by other
      investment vehicles managed by the Manager in any given year, the amount of
      insurance available to cover any damage to the Fund's projects could be
      significantly reduced.





***The
      Fund’s investment activities may result in unsuccessful
      projects.***


There
      is
      always significant risk that a project will not have commercially productive
      oil
      or natural gas reservoirs. In other words, the well may be a dry-hole. The
      successful acquisition of producing properties requires assessment of reserves,
      seismic and other engineering information, future commodity prices, operating
      costs and potential environmental liabilities. The Fund’s assessment of these
      factors may not be successful.




19


***The
      Fund has already experienced dry-holes and further dry-holes will adversely
      impact the fund’s profitability and returns.***


The
      Fund
      has had four dry-holes, Eugene Island 357, East Breaks 157, Main Pass 155,
      and
      Vermilion 7/8. Cumulative dry-hole costs to the Fund for the years ended
      December 31, 2006 and 2005 and for the period August 2, 2004 (Inception) through
      December 31, 2004 totaled approximately $6.4 million, $4.1 million and $3.9
      million, respectively. With respect to the dry-holes, the Fund does not
      anticipate incurring any significant future costs as all the wells have been
      plugged and abandoned. However, given that the Fund’s capital is limited to the
      amount it raised (less various fees) in the offering of its shares, the
      aforementioned dry-holes, and every other dry-hole that the Fund may experience,
      has the effect of reducing the limited capital available for investment. In
      addition, because dry-holes reduce the capital available for additional
      investment, a significant number of dry-holes will reduce the returns of the
      Fund because the remaining capital, even if invested in successful wells, may
      not generate enough cash for investors to realize significant or positive
      returns on their investments.





***The
      actual costs to drill a well, or dry-hole costs, can materially exceed estimates
      due to cost overruns. In such event, the risks associated with the well
      increase.***


When
      the
      Fund invests in a particular project the operator will generally provide what
      is
      referred to as an AFE or authorization for expenditures. The AFE(s) for a
      particular project generally represent the dry-hole costs associated with that
      project and not the development costs should the project be successful. Dry-hole
      costs are generally an estimate made by the Operator after considering numerous
      factors, such as water depth, drilling depth, seismic information, and equipment
      costs and availability. Notwithstanding the Operator’s best estimates of
      drilling cost, the actual drilling of the well may result in cost overruns
      that
      materially increase the costs of the drilling the project. The cost overrun
      can
      occur for any number of reasons including but not limited to, weather delays,
      equipment unavailability, pressure or irregularities in formations and other
      risks identified herein. The Fund has little choice but to pay these costs
      overruns or potentially lose its right to participate in the well by going
      non-consent. Significant cost overruns will increase the risk associated with
      the project as additional Fund capital that would otherwise be used for other
      projects is being allocated to cover the overruns.





***The
      Fund’s reserve estimates are inherently uncertain and may be inaccurate and if
      so, may adversely affect the Fund’s revenue and
      profitability.***


Once
      reserves are proved, there are many uncertainties inherent in estimating
      quantities of proved reserves and in projecting future rates of production
      and
      timing of development expenditures, including many factors beyond the Fund’s
      control. Estimates of reserves by necessity are projections based on engineering
      and geological data, including but not limited to volumetrics, reservoir size,
      reservoir characteristics, the projection of future rates of production and
      the
      timing of future expenditures. The accuracy of any reserve estimate is a
      function of the amount and quality of available data and of engineering and
      geological interpretation and judgment. As a result, estimates of different
      engineers normally vary and may not be accurate. Development of the Fund’s
      reserves may not occur as scheduled and the actual results may not be as
      estimated.





In
      addition, results of drilling, testing and production subsequent to the date
      of
      an estimate may justify revision of such reserve and cost estimate upward or
      downward. Accordingly, reserve estimates are often different, sometimes
      materially, from the quantities ultimately recovered. The Manager reviews the
      reserve estimates provided by the operators of projects in which the Fund
      participates and may retain independent reserve engineers to review such




20


reserve
      estimates and/or conduct an independent review, as appropriate. Future
      performance that deviates significantly from reserve estimates could have a
      material effect (positive or negative) on the Fund’s operations, business and
      prospects, as well as on the amounts of such reserves.





Moreover,
      the Fund's estimated or proved oil and natural gas reserves and the estimated
      future net revenues from such reserves will be based upon various assumptions,
      including available geological, geophysical, engineering and production data.
      The process also requires certain economic assumptions such as oil and natural
      gas prices, drilling and operating expenses, capital expenditures, and
      availability of funds. As a result, the Fund is required to make assumptions
      and
      judgments, all of which can be wrong or inaccurate. Thus, these estimates are
      inherently imprecise and the quality and reliability of this information can
      vary, perhaps significantly, from actual results.





***The
      prices that the Fund may receive for its oil or natural gas are highly volatile
      and unpredictable and may not be sufficient to generate enough cash flow to
      make
      distributions to investors.***


When
      oil
      and natural gas production begins, the Fund's revenue, profitability and cash
      flow are highly dependent on the prices of oil and natural gas. Historically,
      the markets for crude oil and natural gas have been extremely volatile, and
      they
      are likely to continue to be volatile in the future. This volatility is caused
      by numerous factors and market conditions. Therefore, it is impossible to
      predict the future price of crude oil and natural gas with any certainty. Low
      commodity prices could have an adverse affect on the Fund’s future profitability
      and, in such an event, the Fund may be required by accounting rules to
      write-down the carrying value of its projects.





The
      Fund
      has not engaged in any price risk management programs or hedges to date and
      does
      not anticipate engaging in those types of transactions in the
      future.





***The
      Fund may be required to take write-downs if oil and natural gas prices
      decline***


The
      Fund
      may be required under successful efforts accounting rules to write-down the
      carrying value of the
      Fund’s properties
      if oil and natural gas prices decline or if the Fund has substantial downward
      adjustments to the
      Fund’s estimated
      proved reserves, increases in the
      Fund’s estimates
      of development costs or deterioration in the
      Fund’s exploration
      results.





The
      Fund
      utilizes the successful efforts method of accounting for natural gas and oil
      exploration and development activities. If the net book value of the
      Fund’s natural
      gas and oil properties exceeds the
      Fund’s undiscounted
      cash flows, principles generally accepted in the United States (“GAAP”)
      require the Fund to impair or "writedown" the book value of the
      Fund’s natural
      gas and oil properties. Depending on the magnitude of any future impairments,
      a
      writedown could significantly reduce the
      Fund’s income,
      or produce a loss. As impairment computations involve the prevailing price
      on
      the last day of the quarter, it is impossible to predict the timing and
      magnitude of any future impairment. To the extent the
      Fund’s finding
      and development costs continue to increase as the Fund expects, the Fund will
      become more susceptible to impairments in low price environments. For the years
      ended December 31, 2006 and 2005 and for the period August 2, 2004 (Inception)
      through December 31, 2004, the Fund recorded no impairment losses.





21


***The
      unavailability and cost of needed equipment may adversely affect the Fund’s
      profitability and operations.***


As
      a
      result of the increase in oil and natural gas prices, drilling activity in
      the
      Gulf of Mexico has increased significantly. Drilling rigs and other equipment
      have become harder to obtain and more costly to acquire, especially if weather
      occurrences, such as hurricanes, occur with frequency in the Gulf of Mexico.
      These circumstances could have a negative impact on the Fund's
      operations.





***The
      Fund has a limited amount of capital available to invest and therefore has
      limited ability to invest in many more projects. Further, each unsuccessful
      project erodes the Fund’s limited capital.***


The
      capital raised by the Fund in its private placement is more than likely all
      the
      capital it will be able to obtain for investments in projects. Given its
      structure, obtaining traditional financing from public markets is unlikely
      and
      it is not practical to assume the Fund can raise additional funds through a
      supplemental offering or through debt financing. As a result, it has little,
      if
      any, ability to grow its business beyond its current projects or through
      investing its available cash in new projects. In any event, the number of
      projects in which the Fund can invest will naturally be limited and each
      unsuccessful project the Fund has experienced not only reduced its ability
      to
      generate revenue, but has also exhausted its limited supply of
      capital.





***The
      Fund may incur costs to comply with the many environmental and other
      governmental regulations that apply to its operations, which may adversely
      impact its ability to generate cash flow for
      distributions.***


The
      oil
      and natural gas industry, in general, and offshore activities, in particular,
      are subject to numerous governmental laws and regulations which may affect
      the
      ongoing and future operational decisions and financial results of the Fund.
      United States legislation affecting the oil and natural gas industry is under
      constant review for amendment and expansion. Also, numerous departments and
      agencies, both federal and state, are authorized by statute to issue and have
      issued rules and regulations which, among other things, require permits for
      the
      drilling of projects, impose construction, abandonment and remediation
      requirements, prevent the waste of natural gas and liquid hydrocarbons through
      restrictions on flaring, require drilling bonds and regulate environmental
      and
      safety matters. Additionally, governmental regulations may also impact the
      demand for oil and natural gas, which could adversely affect the price at which
      oil and natural gas is sold. The regulatory burden on the oil and natural gas
      industry increases its cost of doing business and, subsequently, affects its
      profitability. Finally, as additional legislation or amendments may be enacted
      in the future, the Fund is unable to predict the ultimate cost of
      compliance.





***The
      Fund relies on third parties to operate, manage, and maintain its projects
      over
      which it has limited control. Therefore, decisions may be made by these third
      parties that adversely affect the Fund or its
      operations.***


Neither
      the Fund nor the Manager currently own or have any plans to acquire drilling
      or
      production equipment nor does the Fund or Manager maintain a staff of technical
      employees required for on-site drilling operations. Therefore,




22


the
      Fund
      must rely on unrelated third party operators to oversee and/or perform all
      drilling, completion and ongoing maintenance and production activities for
      the
      projects in which it participates. For example, lack of operating control could
      lead to higher operating costs, drilling delays, increased rig costs or labor
      issues. As such, the Fund has little or no control over the day-to-day
      operations of these projects. However, the Fund has acquired and will continue
      to seek projects, to the extent of its available capital, in which the operators
      have significant resources, are experienced in offshore operations and have
      a
      long term presence and track record of success in the Gulf of
      Mexico.





***The
      Fund owns projects jointly with other companies over whom it has no control
      and
      who may influence the manner in which the project is
      operated.***


The
      Fund
      participates in projects as a working interest owner along with other unrelated
      third party entities, including the operator. While the Manager may monitor
      and
      participate in decisions affecting exploration and development of the leases
      or
      projects in which the Fund participates, other decisions with respect to lease
      exploration and development activities may be controlled by the other
      participants and could be unfavorable to the Fund. Finally, the Fund could
      be
      held liable for the joint activity obligations or tortuous actions of the
      operator or other working interest owners. If the Fund’s co-participants fail to
      pay their portion of the drilling and completion or ongoing maintenance costs,
      the project may lack sufficient funds to perform such work. As a result, the
      Fund, as well as the remaining working interest owners, may be required to
      pay
      such additional sums in order to complete drilling or development of the
      project.





***The
      Fund faces competition from larger entities with greater capital resources
      that
      could limit the number and availability of economically attractive
      projects.***


As
      an
      independent oil and natural gas producer, the Fund faces competition in all
      aspects of its business. Many of its competitors are large, well-established
      companies that have significantly larger staffs and have greater capital
      resources. These companies may be able to pay more for a project or sustain
      losses for a longer period of time than the Fund.





***The
      Fund maintains a salvage fund that may be insufficient to cover such salvage
      costs, in which event, the Fund could be liable for any
      excess.***


The
      Fund
      has created a salvage fund to cover certain anticipated salvage costs associated
      with the Fund’s projects. The salvage fund may not have sufficient assets to
      meet salvage costs and thus the Fund may be liable for its proportionate share
      of the unfunded expenses if in excess of the salvage fund.





***The
      Fund’s projects and operations are located exclusively in the Gulf of Mexico and
      are subject to interruptions and damage from hurricanes that could adversely
      affect the Fund’s cash flow.***


The
      Fund
      has invested in projects exclusively within the Gulf of Mexico and any future
      investments by the Fund in projects will likewise be located in the Gulf of
      Mexico. As a result of such exclusivity in location, the Fund is particularly
      susceptible to hurricane risks in that the impact to the Fund’s operations of a
      severe storm or storms could be more pronounced and severe (depending on the
      storm, its path, and resulting damage) because the Fund does




23


not
      have
      projects in other areas of the globe to offset such damage. If, for example,
      the
      Fund had projects in areas not affected by hurricanes those projects could
      still
      operate and generate cash flow during the interruptions in operations in the
      Gulf of Mexico. As it is, a hurricane, or series of hurricanes in a season,
      has
      the potential of interrupting all of the Fund’s operations, at least for some
      period of time, if all of the Fund’s projects were affected. In such event, the
      Fund would not have sufficient cash flow to make distributions to investors
      and,
      additionally and as disclosed earlier, insurance may not be sufficient to cover
      all of the damages caused by the hurricanes.





***The
      Fund’s internal control over financial reporting could be adversely affected by
      material weaknesses in the Fund’s internal controls.***


In
      the
      Fund’s Form 10-K/A for the year ended December 31, 2005, filed March 27, 2007,
      the Fund reported material weaknesses with respect to its lack of technical
      accounting resources on staff and the need for additional training, formalized
      policies and procedures on documenting financial controls. These control
      deficiencies resulted in the restatement of the Fund’s Form 10-K. As
      a
      result of these material weaknesses, the Fund concluded in its Form 10-K/A
      that
      its control over financial reporting was not effective as of the end of the
      periods covered by the reports. The Fund has remediated these material
      weaknesses. Investors,
      however, should be aware that the Fund cannot guarantee that future material
      weaknesses will not develop or be identified. Any new material weaknesses
      identified could harm the Fund’s operating results, cause the Fund to fail to
      meet its reporting obligations or result in material misstatements in it
      financial statements. Any
      such
      failure also could affect the ability of management to certify
      that the Fund's internal controls are effective when it provides an
      assessment of the Fund’s internal control over financial reporting.








**RISKS
      RELATED TO THE NATURE OF THE FUND’S**  **SHARES**





***The
      Fund’s shares have severe restrictions on transferability and liquidity and
      shareholders are required to hold the shares
      indefinitely.***


The
      Fund's shares are illiquid investments. There is currently no market for these
      shares and one is not likely to develop. Because there will be a limited number
      of persons who purchase shares and because there are significant restrictions
      on
      the transferability of such shares under the Fund’s LLC agreement and under
      applicable federal and state securities laws, it is expected that no public
      market will develop. Moreover, neither the Fund nor the Manager will provide
      any
      market for the shares. Shareholders are generally prohibited from selling or
      transferring their shares except in the circumstances permitted under the LLC
      agreement and applicable law, and all such sales or transfers require the Fund's
      consent, which it may withhold at its sole discretion. Accordingly, shareholders
      have no assurance that an investment can be transferred and must be prepared
      to
      bear the economic risk of the investment indefinitely.





***Shareholders
      are not permitted to participate in the Fund’s management or operations and must
      rely exclusively on the Manager.***


Shareholders
      have no right, power or authority to participate in the Fund’s management or
      decision making or in the management of the Fund’s projects. The Manager has the
      exclusive right to manage, control and operate the Fund’s affairs and business
      and to make all decisions relating to its operation.





24


***The
      Fund’s assets are illiquid and, therefore, cash flow for distributions, if any,
      must come from operations and not dispositions of
      assets.***


The
      Fund's interest in projects is illiquid. The Fund does not anticipate selling
      any interests in the projects, or any part thereof. Even if the Fund elected
      to
      sell, it is likely that there will be little or no market for these assets.
      However, if the Fund were to attempt to sell any such interest, a successful
      sale would depend upon, among other things, the operating history and prospects
      for the project or interest being sold, proven oil and natural gas reserves,
      the
      number of potential purchasers and the economics of any bids made by them and
      the current economics of the oil and natural gas market. In addition, any such
      sale may result in adverse tax consequences to the shareholders. The Manager
      has
      full discretion to determine whether any project, or any partial interest,
      should be sold and the terms and conditions under which such project would
      be
      sold. Consequently, shareholders will depend on the Manager for the decision
      to
      sell all or a portion of a project, or retain it, for the benefit of the
      shareholders and for negotiating and completing the sale
      transaction.





***The
      Fund indemnifies its officers, as well as the Manager and its employees, for
      certain actions taken on its behalf and therefore, Fund assets may be used
      to
      reimburse such officers.***


The
      LLC
      agreement provides that the Fund's officers and agents, the Manager, the
      affiliates of the Manager and their respective directors, officers and agents
      when acting on behalf of the Manager or its affiliates on the Fund's behalf,
      will be indemnified and held harmless by the shareholders from any and all
      claims rising out of the Fund's management, except for claims arising out of
      bad
      faith, gross negligence or willful misconduct or a breach of the LLC agreement.
      Therefore, the Fund may have difficulty sustaining an action against the
      Manager, or its affiliates and their officers based on breach of fiduciary
      responsibility or other obligations to the shareholders.





***The
      Manager receives a management fee regardless of the Fund’s profitability and
      also receives cash distributions.***


The
      Manager is entitled to receive an annual management fee from the Fund regardless
      of whether the Fund is profitable in that year. The annual fee, payable monthly,
      is equal to 2.5% of total capital contributed by shareholders. In September
      2006, the Manager changed its policy regarding the 2.5% annual management fee.
      Effective September 1, 2006, the annual management fee, payable monthly,
      will be equal to 2.5% of total shareholder capital contributions, net of
      cumulative dry-hole expenses incurred by the Fund.





In
      addition to an annual management fee, the Manager, as compensation for its
      management services, receives 15% of the Fund’s cash distributions to
      shareholders although the Manager has not contributed any cash to the Fund.
      Accordingly, shareholders contribute all of the cash utilized for the Fund's
      investments and activities. If the Fund's projects are unsuccessful, the
      shareholders lose 100% of their investment while the Manager, not having
      contributed any capital, will lose nothing. For the year ended December 31,
      2006, distributions to the Manager were approximately $0.8 million. There were
      no distributions to the Manager for the year ended December 31, 2005 and for
      the
      period August 2, 2004 (Inception) through December 31, 2004.





25


Inherent
      in these fee arrangements is the possibility of conflicts between the Fund's
      interests and the best interests of the Manager. The Manager may have incentive
      to act in its best interests rather than in the Fund’s best interest by taking
      actions designed to increase its fees but with significant risk to the Fund.
      Any
      such conflict of interests will be addressed by the Manager as described in
      the
      risk factor below headed “ *Because
      the Manager manages many other oil and natural gas funds, it may have conflicts
      of interest in its management of the Fund’s operations”* .





None
      of
      the compensation to be received by the Manager has been derived as a result
      of
      arm's length negotiations.





***Under
      Delaware law, shareholders have limited access to information and therefore,
      the
      Fund and Manager can restrict certain information, including shareholder
      information, making communications with other shareholders difficult. As a
      result, the information you receive about the Fund and its activities will
      be
      limited to what the Manager chooses to provide.***


Delaware
      law permits Delaware limited liability companies to restrict access to certain
      information provided that such restricted access is set forth in the LLC
      agreement. The Fund's LLC agreement contains provisions that limit shareholder
      access to certain sensitive or confidential information such as trade secrets,
      agreements or confidential or proprietary information. Moreover, shareholder
      access to information regarding other shareholders is likewise limited and
      the
      Fund may refuse to give shareholder information, such as name and address of
      other shareholders, which could make it difficult for a shareholder to contact
      other shareholders. Nevertheless, shareholders do have access to tax, other
      financial information or any other reasonable information regarding Fund
      operations.





***Cash
      distributions are not guaranteed and may be less than anticipated or
      estimated.***


Distributions
      depend primarily on available cash from oil and natural gas operations. At
      times, distributions may be delayed to repay the principal and interest on
      fund
      borrowings, if any, or to fund other costs, although the Fund does not
      anticipate such borrowings. The Fund's taxable income will be taxable to the
      shareholders in the year earned, even if cash is not distributed.





***Because
      the Manager manages many other oil and natural gas funds, it may have conflicts
      of interest in its management of the Fund’s
      operations.***


Shareholders
      will not be involved in the management of the Fund's operations. Accordingly,
      they must rely on the Manager's judgment in such matters. Inherent with the
      exercise of its judgment, the Manager will be faced with conflicts of interest.
      While neither the Fund nor the Manager have specific procedures in place in
      the
      event of any such conflicting responsibilities, the Manager recognizes that
      it
      has fiduciary duties to the Fund in connection with its position and
      responsibilities as Manager and it intends to abide by such fiduciary
      responsibilities in performing its duties. Therefore, the Manager and its
      affiliates will attempt, in good faith, to resolve all conflicts of interest
      in
      a fair and equitable manner with respect to all parties affected by any such
      conflicts of interest. The Manager is not liable to the Fund for how conflicts
      of interest are resolved unless it has acted in bad faith, or engaged in gross
      negligence or willful misconduct.








**TAX
      RISKS ASSOCIATED WITH AN INVESTMENT IN SHARES**





The
      Fund
      is organized as a Delaware limited liability company and the Manager has
      qualified the Fund as a partnership for federal tax purposes. The principal
      tax
      risks to shareholders are that:





26


·
            The
                Fund may recognize income taxable to the shareholders but may not
                distribute enough cash to cover the income taxes on the Fund's taxable
                income.


·
            The
                allocation of Fund items of income, gain, loss, and deduction may
                not be
                recognized for federal income tax
                purposes.


·
            All
                or a portion of the Fund's expenses could be considered either investment
                expenses (which would be deductible by a shareholder only to the
                extent
                the aggregate of such expenses exceeded 2% of such shareholder's
                adjusted
                gross income) or as nondeductible items that must be
                capitalized.


·
            All
                or a substantial portion of the Fund's income could be deemed to
                constitute unrelated business taxable income, such that tax-exempt
                shareholders could be subject to tax on their respective portions
                of such
                income.


·
            If
                any Fund income is deemed to be unrelated business taxable income,
                a
                shareholder that is a Charitable Remainder Trust could have all of
                its
                income from any source deemed to be
                taxable.


·
            All
                or a portion of the losses, if any, allocated to the shareholders
                will be
                passive losses and thus deductible by the shareholder only to the
                extent
                of passive income.


·
            The
                shareholders could have capital losses in excess of the amount that
                is
                allowable as a deduction in a particular
                year.





Although
      the Fund has obtained an opinion of counsel regarding the matters described
      in
      the preceding paragraph, it will not obtain a ruling from the IRS as to any
      aspect of the Fund's tax status. The tax consequences of investing in the Fund
      could be altered at any time by legislative, judicial, or administrative
      action.





***If
      the IRS audits the Fund, it could require investors to amend or adjust their
      tax
      returns or result in an audit of their tax.*** **


The
      IRS
      may audit the Fund's tax returns. Any audit issues will be resolved at the
      Fund
      level by the Manager. If adjustments are made by the IRS, corresponding
      adjustments will be required to be made to the federal income tax returns of
      the
      shareholders, which may require payment of additional taxes, interest, and
      penalties. An audit of the Fund's tax return may result in the examination
      and
      audit of a shareholder's return that otherwise might not have occurred, and
      such
      audit may result in adjustments to items in the shareholder's return that are
      unrelated to the Fund operations. Each shareholder bears the expenses associated
      with an audit of that shareholder's return.





In
      the
      event that an audit of the Fund by the IRS results in adjustments to the tax
      liability of a shareholder, such shareholder will be subject to interest on
      the
      underpayment and may be subject to substantial penalties. In addition, a number
      of substantial penalties could potentially
      be asserted by the IRS on any such deficiencies.





27


The
      tax
      treatment of the Fund can not be guaranteed for the life of the Fund. Changes
      in
      law or regulations may adversely affect any such tax treatment.





Deductions,
      credits or other tax consequences may not be available to shareholders.
      Legislative or administrative changes or court decisions could be forthcoming
      which would significantly change the statements herein. In some instances,
      these
      changes could have substantial effect on the tax aspects of the Fund. Any future
      legislative changes may or may not be retroactive with respect to transactions
      prior to the effective date of such changes. Bills have been introduced in
      Congress in the past and may be introduced in the future which, if enacted,
      would adversely affect some of the tax consequences of the Fund.








**ITEM
      1B. UNRESOLVED STAFF COMMENTS**





Not
      applicable.










28


**ITEM
      2. PROPERTIES**





In
                  2004, the Fund acquired from BHP a 14.54% working interest in the
                  West
                  Cameron 77 #2 project of which one well has been drilled and is
                  producing. The Fund anticipates drilling a second well in the future.**Well
                  Name**
              **Operator**
              **Offshore**
              **Working
                  Interest %**
              **Costs
                  Incurred through 12/31/06**
                **(in
                  thousands)**
              **Status**West
                  Cameron 77#2
              BHP
                  Billiton
              LA
              14.54%
              $
                  9,127
              Currently
                  producingIn
                  2006, the Fund acquired Eugene Island 364 from El Paso. The well
                  was
                  deemed a success and began production in June 2006. After two months,
                  the
                  well encountered mechanical problems and has been shut in since
                  for review
                  by the partners.**Well
                  Name**
              **Operator**
              **Offshore**
              **Working
                  Interest %**
              **Costs
                  incurred through 12/31/06**
                **(in
                  thousands)**
              **Status**Eugene
                  Island 364
              El
                  Paso
              LA
              50%
              $
                  13,036
              Temporarily
                  shut in for mechanical problemsIn
                  2005, the Fund acquired Eugene Island 357 from Newfield. The well
                  was
                  deemed a dry-hole and was plugged and abandoned in March
                  2006.**Well
                  Name**
              **Operator**
              **Offshore**
              **Working
                  Interest %**
              **Costs
                  incurred through 12/31/06**
                **(in
                  thousands)**
              **Status**Eugene
                  Island 357
              Newfield
              LA
              7%
              $
                  1,707
              DRY:March
                  2006In
                  2005, the Fund acquired East Breaks 157 from ENI Petroleum (now
                  Woodside).
                  The well was deemed a dry-hole and was plugged and abandoned in
                  March
                  2006.**Well
                  Name**
              **Operator**
              **Offshore**
              **Working
                  Interest %**
              **Costs
                  incurred through 12/31/06**
                **(in
                  thousands)**
              **Status**East
                  Breaks 157
              Woodside
              TX
              18%
              $
                  4,632
              DRY:March
                  2006In
                  2005, the Fund acquired a 20% working interest in Eugene Island
                  337 from
                  Devon which was drilled in two zones, one at 12,500 feet which
                  was dry and
                  one at 7,500 feet which will be completed once a platform-based
                  rig
                  becomes available to Devon.**Well
                  Name**
              **Operator**
              **Offshore**
              **Working
                  Interest %**
              **Costs
                  incurred through 12/31/06**
                **(in
                  thousands)**
              **Status**Eugene
                  Island 337
              Devon
              LA
              20%
              $
                  5,184
              Discovery
                  July 2006: Waiting on
                  Production






29




In
                  2005, the Fund acquired a 30% working interest in Main Pass 155
                  from
                  Samson Energy ("Samson") which was drilled and deemed a dry-hole
                  in July
                  2005.**Well
                  Name**
              **Operator**
              **Offshore**
              **Working
                  Interest %**
              **Costs
                  incurred through 12/31/06**
                **(in
                  thousands)**
              **Status**Main
                  Pass 155
              Samson
              AL
              30%
              $
                  3,953
              DRY:July
                  2005In
                  2004, the Fund acquired a 26% working interest in Vermilion 7/8
                  from
                  Apache Corporation ("Apache") in 2004. The well was drilled and
                  deemed to
                  be non-commercial and in April 2005, the blocks were released back
                  to
                  Apache.**Well
                  Name**
              **Operator**
              **Offshore**
              **Working
                  Interest %**
              **Costs
                  incurred through 12/31/06**
                **(in
                  thousands)**
              **Status**Vermilion
                  7/8
              Apache
              LA
              26%
              $
                  4,069
              DRY:January
                  2005In
                  October 2006, the Fund acquired a working interest in the following
                  wells
                  operated by LLOG.**Well
                  Name**
              **Operator**
              **Offshore**
              **Working
                  Interest %**
              **Drilling
                  Risk**
                **(in
                  thousands)**
              **Status**Galveston
                  248
              LLOG
              TX
              8.75%
              $
                  800
              2nd
                  quarter 2007
                drilling
                  dateShip
                  Shoal 81
              LLOG
              LA
              8.75%
              $
                  600
              3rd
                  quarter 2007
                drilling
                  dateSouth
                  Marsh Island 111
              LLOG
              LA
              8.75%
              $
                  800
              2nd
                  quarter 2007
                drilling
                  dateVermilion
                  344
              LLOG
              LA
              8.75%
              $
                  1,100
              Successful-completion
                in
                  progressWest
                  Delta 67
              LLOG
              LA
              8.75%
              $
                  800
              2nd
                  quarter 2007
                drilling
                  dateWest
                  Delta 68
              LLOG
              LA
              8.75%
              $
                  800
              Successful-completion
                in
                  progress




**ITEM
      3. LEGAL PROCEEDINGS**





On
      August
      16, 2006, the Manager of the Fund filed a lawsuit against the former independent
      registered public accounting firm for the Fund, Perelson Weiner ("PW"), in
      New
      Jersey Superior Court, captioned Ridgewood Energy Corporation v. Perelson
      Weiner, LLP, Docket No. L-6092-06. The suit alleged professional malpractice
      and
      breach of contract in connection with audit and accounting services performed
      for the Fund by PW. Thereafter, PW filed a counterclaim against the Manager
      on
      October 20, 2006, alleging breach of contract due to unpaid invoices in the
      amount of $326,554. Discovery is ongoing and no trial date has been set.








**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**





None.


30


**PART
      II.**





**ITEM
      5. MARKET FOR REGISTANT’S COMMON EQUITY, RELATED SECURITY HOLDER MATTERS, AND
      ISSUER PURCHASES OF EQUITY SECURITIES**





**Market
      Price of Common Units, Distributions and Related Shareholder
      Matters**


There
      is
      currently no established public trading market for the shares of membership
      interest of the Fund. The Fund is not currently offering or proposing to offer
      any shares for sale to the public. There are no outstanding options or warrants
      to purchase, or securities convertible into shares and the Fund does not have
      any equity-based compensation plans. The shares are restricted as to resale.
      Shareholders wishing to transfer shares should also consider the applicability
      of state securities laws. The shares have not been registered under the
      Securities Act of 1933, as amended (the “Securities 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 shares have not been
      registered, they are restricted securities as defined in Rule 144 under the
      Securities Act. As of March 30, 2007, no shares of the Fund could be sold
      pursuant to Rule 144. The Fund has not agreed to register any shares under
      the
      Securities Act for sale by security holders.





As
      of the
      date of this filing, there were approximately 946 holders of Fund
      shares.




During
        the year ended December 31, 2006, the Fund paid $4.7 million and $0.8 million
        of
        distributions to its Shareholders and Manager, respectively. No Distributions
        were paid for the year ended December 31, 2005 and for the period August
        2, 2004
        (Inception) through December 31, 2004.


**Participation
      in Costs and Revenues**


The
      Fund’s investment objective is primarily to generate current cash flow for
      distribution to shareholders from the operation of the Fund projects to the
      extent that such distributions are consistent with the reserve requirements
      and
      operational needs of those projects. If the Fund does make distributions, this
      section describes how the Fund will:





·
            determine
                what cash flow will be available for distributions to
                Investors,


·
            distribute
                available cash flow,


·
            give
                the Manager a share of cash flow, if available,


·
            handle
                returns of capital contributions,


·
            allocate
                income and deductions for tax purposes,
                and


·
            maintain
                capital accounts for Investors.





Available
      cash determines what amounts in cash the Fund will be able to distribute in
      cash
      to Investors. There are three types of available cash as follows:





“Available
      Cash from Capital Transactions” is total cash received by the Fund from the
      proceeds of the sale or other disposition of the Fund’s property (including
      items such as insurance proceeds, refinancing proceeds, condemnation proceeds
      and other amounts received out of the ordinary course of business), but
      excluding dispositions of temporary investments of the Fund.





31


“Available
      Cash from Temporary Investments” is cash from short-term investments (i.e. U.S.
      Treasury Bills, certificates of deposits) and other interest bearing cash
      accounts.





“Available
      Cash from Operations” is all other available cash.





There
      is
      no fixed requirement to distribute available cash; instead, it will be
      distributed to shareholders to the extent and at such times as the Manager
      believes is advisable. Once the amount and timing of a distribution is
      determined, it shall be made to shareholders as described below.





**Distributions
      from Operations**


At
      various times during a calendar year, the Fund will determine whether there
      is
      enough Available Cash from Operations for a distribution to shareholders. The
      amount of Available Cash from Operations determined to be available, if any,
      will be distributed to the shareholders. At all times, the Manager will be
      entitled to 15% and shareholders will be entitled to 85% of the Available Cash
      from Operations distributed.





**Distributions
      of Available Cash from Capital Transactions**


Available
      Cash from Capital Transactions that the Fund decides to distribute will be paid
      as
      follows:





·
            Before
                shareholders have received total distributions equal to their capital
                contributions, 99% of Available Cash from Capital Transactions will
                be
                distributed to shareholders and 1% to the
                Manager.


·
            After
                shareholders have received total distributions equal to their capital
                contributions, 85% of Available Cash from Capital Transactions will
                be
                distributed to Investors and 15% to the Manager.





**General
      Distribution Provisions**


Distributions
      to shareholders under the foregoing provisions will be apportioned among them
      in
      proportion to their ownership of their shares. The Manager has the sole
      discretion to determine the amount and frequency of any distributions; provided,
      however, that a distribution may not be made selectively to one shareholder
      or
      group of shareholders but must be made ratably to all shareholders entitled
      to
      that type of distribution at that time. The Manager in its discretion
      nevertheless may credit select persons with a portion of its compensation from
      the Fund or distributions otherwise payable to the Manager.





Because
      distributions, if any, will be dependent upon the earnings and financial
      condition of the Fund, its anticipated obligations, the Manager’s discretion and
      other factors, there can be no assurance as to the frequency or amounts of
      any
      distributions that the Fund may make.





**Return
      of Capital Contributions**


If
      the
      Fund for any reason at any time does not find it necessary or appropriate to
      retain or expend all capital contributions, in its sole discretion it may return
      any or all of such excess capital contributions ratably to shareholders. A
      return of capital contributions is not treated as a distribution. The Fund
      and
      the Manager will not be required to return any fees deducted from the original
      capital contribution or any costs and expenses incurred and paid by the Fund. Any
      such
      return of capital will decrease the shareholders’ capital
      contributions.





32


**Capital
      Accounts and Allocations**


The
      tax
      consequences of an investment in the Fund to a shareholder in the event of
      dissolution depend on the shareholder’s capital account and on the allocations
      of profits and losses to that account. The Fund’s taxable profits or losses are
      allocated among the shareholders as described below and profits or losses are
      added to or subtracted from the shareholders’ capital accounts. The amounts
      allocated to each shareholder will generally not be equal to the distributions
      the shareholder receives until final liquidating distributions are made to
      shareholders.





The
      Fund
      does not currently anticipate that any contributions or distributions of
      property will be made. Certain additional adjustments to capital accounts will
      be made if necessary to account for the effects of non-recourse debt incurred
      by
      the Fund, if any, or contributions of property, if any, to the
      Fund.





The
      Fund
      issued an aggregate 535.6818 shares for gross proceeds of approximately $78.9
      million. All sales of unregistered securities relied on Section 4(2) of the
      Securities Act and Rule 506 of Regulation D promulgated thereunder. All of
      the
      sales were made without the use of an underwriter. All purchasers of shares
      represented and warranted to the Fund that they were accredited investors as
      defined in Rule 501(a) under the Securities Act and that the shares were being
      purchased for investment and not for resale.





From
      the
      amount raised, approximately $8.6 million was disbursed for commissions and
      legal syndication fees. Additionally, approximately $3.6 million was paid as
      an
      investment fee to Ridgewood Energy Corporation, the Manager, for the
      investigation and evaluation of investment property prospects. Remaining funds
      are expected to be used for exploration and development activities of oil and
      natural gas properties as well as the operation of the Fund.


33





**ITEM
      6. SELECTED FINANCIAL DATA**





The
      following table summarizes certain selected financial data for the years ended
      December 31, 2006 and 2005 and for the period August 2, 2004 (Inception) through
      December 31, 2004 and is derived from the audited financial statements included
      herein. Although the date of formation of the Fund is August 2, 2004, the Fund
      did not begin business operations until September 7, 2004 when it began its
      private offering of shares. There were no business activities prior to September
      7, 2004. The information summarized below should be read in conjunction with
      Management's Discussion and Analysis of Financial Condition and Results of
      Operations and the Fund’s audited Financial Statements and related
      Notes.


**For
                  the years ended**
                **December
                  31,**
              
              **For
                  the period**
                **August
                  2, 2004****($
                  in thousands except for share and per share
                  amount)**
              
              **2006**
              
              **2005**
              
              **(Inception)
                  through December 31,****2004****Statement
                  of Operations Data:**Revenues
              
              $
              7,780
              
              $
              -
              
              $
              -Loss
                  from operations
              
              
              (6,074
              )
              
              (6,552
              )
              
              (8,035
              )Net
                  loss
              
              
              (4,427
              )
              
              (5,259
              )
              
              (7,965
              )Net
                  loss per share
              
              $
              (9,353
              )
              $
              (9,147
              )
              $
              (14,566
              )**Statement
                  of Cash Flows Data:**Net
                  cash flows provided by (used in) operating activities
              
              $
              5,176
              
              $
              (1,372
              )
              $
              (3,887
              )Net
                  cash flows used in investing activities
              
              
              (35,543
              )
              
              (17,687
              )
              
              (3,890
              )Net
                  cash flows (used in) provided by financing activities
              
              
              (5,579
              )
              
              51
              
              
              70,239**December
                  31,****Balance
                  Sheet Data:**
              
              
              **2006**
              
              
              **2005**Cash
                  and cash equivalents
              
              $
              7,508
              
              $
              43,454Short-term
                  investment in marketable securities
              
              
              15,656
              
              
              -Salvage
                  fund
              
              
              1,060
              
              
              1,014Oil
                  and gas properties, net
              
              
              23,418
              
              
              11,883Total
                  assets
              
              
              48,157
              
              
              57,611Total
                  current liabilities
              
              
              872
              
              
              522Total
                  members' capital
              
              
              47,060
              
              
              57,066Total
                  liabilities and members' capital
              
              
              48,157
              
              
              57,611Number
                  of shares outstanding
              
              
              535.6818
              
              
              535.6818








34




**ITEM
      7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF
      OPERATIONS**





**Overview
      of Our Business**


The
      Fund
      is an independent oil and natural gas producer. The Fund’s primary investment
      objective is to generate cash flow for distribution to our shareholders through
      participation in oil and natural gas exploration and development projects in
      the
      Gulf of Mexico. The Fund began its operations by offering shares in a private
      offering on September 7, 2004. As a result of such offering, it raised
      approximately $78.9 million through the sale of 535.6818 shares of LLC
      membership interests. After the payment of approximately $12.2 million in
      offering fees, commissions and investment fees to Ridgewood Energy Corporation,
      affiliates, and broker-dealers, the Fund retained approximately $66.7 million
      available for investment. Investment fees represent a one time fee of 4.5%
      of
      initial capital contributions. The fee is payable to the Manager for the service
      of investigating and evaluating investment opportunities and affecting
      transactions.





The
      Manager performs certain duties on the Fund’s behalf including the evaluation of
      potential projects for investment and ongoing administrative and advisory
      services associated with these projects. The Fund does not currently, nor is
      there any plan, to operate any project in which the Fund participates. The
      Manager enters into operating agreements with third-party operators for the
      management of all exploration, development and producing operations, as
      appropriate. As compensation for the above duties, the Manager is paid a onetime
      investment fee (4.5% of capital contributions less dry-hole costs) for the
      evaluation of projects on the Fund’s behalf and an annual management fee (2.5%
      of capital contributions), payable monthly, for ongoing administrative and
      advisory duties as well as reimbursement of expenses. The Manager also
      participates in distributions as additional compensation for its administrative
      and management services. See also Item 1. “Business”.





**Critical
      Accounting Estimates**


The
      discussion and analysis of our financial condition and results of operations
      are
      based upon our consolidated financial statements, which have been prepared
      in
      conformity with GAAP. In preparing these financial statements, the Fund is
      required to make certain estimates, judgments and assumptions. These estimates,
      judgments and assumptions affect the reported amounts of our assets and
      liabilities, including the disclosure of contingent assets and liabilities,
      at
      the date of the financial statements and the reported amounts of the Fund’s
      revenues and expenses during the periods presented. The Fund evaluates these
      estimates and assumptions on an ongoing basis. The Fund bases its estimates
      and
      assumptions on historical experience and on various other factors that the
      Fund
      believes to be reasonable at the time the estimates and assumptions are made.




35


However,
      future events and their effects cannot be predicted with absolute certainty.
      Therefore, the determination of estimates requires the exercise of judgment.
      Actual results inevitably will differ from these estimates and assumptions
      under
      different circumstances or conditions, and such differences may be material
      to
      the financial statements. See Note 2 - Summary of Significant Accounting
      Policies of Item 8. contained in this Form 10-K for a discussion of the Fund’s
      significant accounting policies.





***Accounting
      for Exploration and Development Costs***


Exploration
      and production activities are accounted for using the successful efforts method.
      Costs of acquiring unproved and proved oil and natural gas leasehold acreage,
      including lease bonuses, brokers’ fees and other related costs are capitalized.
      Annual lease rentals, exploration expenses and exploratory dry-hole costs are
      expensed as incurred. Costs of drilling and equipping productive wells,
      including development dry holes, and related production facilities are
      capitalized.





The
      costs
      of exploratory wells that find oil and natural gas reserves are capitalized
      pending determination of whether proved reserves have been found. Exploratory
      drilling costs remain capitalized after drilling is completed if (1) the
      well has found a sufficient quantity of reserves to justify completion as a
      producing well and (2) sufficient progress is being made in assessing the
      reserves and the economic and operating viability of the project. If either
      of
      those criteria is not met, or if there is substantial doubt about the economic
      or operational viability of the project, the capitalized well costs are charged
      to expense. Indicators of sufficient progress in assessing reserves and the
      economic and operating viability of a project include: commitment of project
      personnel, active negotiations for sales contracts with customers, negotiations
      with governments, operators and contractors and firm plans for additional
      drilling and other factors.





***Proved
      Reserves***


The
      Fund’s reserves are fully engineered on an annual basis by independent petroleum
      engineers. The Fund's estimates of proved reserves are based on the quantities
      of oil and natural gas which geological and engineering data demonstrate,
      with reasonable certainty, to be recoverable in future years from known
      reservoirs under existing economic and operating conditions. However, there
      are
      numerous uncertainties inherent in estimating quantities of proved reserves
      and
      in projecting future revenues, rates of production and timing of development
      expenditures, including many factors beyond the Fund’s control. The estimation
      process is very complex and relies on assumptions and subjective interpretations
      of available geologic, geophysical, engineering and production data and the
      accuracy of reserve estimates is a function of the quality and quantity of
      available data, engineering and geological interpretation, and judgment. In
      addition, as a result of volatility and changing market conditions, commodity
      prices and future development costs will change from period to period, causing
      estimates of proved reserves to change, as well as causing estimates of future
      net revenues to change. Estimates of proved reserves are key components of
      the
      Fund’s most significant financial estimates involving the Fund’s rate for
      recording depreciation, depletion and amortization.





***Unproved
      Properties***


Unproved
      properties is comprised of capital costs incurred for undeveloped acreage,
      wells
      and production facilities in progress, wells pending determination and related
      capitalized interest. These costs are initially excluded from the




36


depletion
      base until the outcome of the project has been determined, or generally, until
      it is known whether proved reserves will or will not be assigned to the
      property. The Fund assesses all items in its unevaluated
      property balance on an ongoing basis for possible impairment or reduction in
      value. The Fund believes that substantially all of the costs included in its
      unevaluated property balance will be evaluated in the next two years.





***Asset
      Retirement Obligations***


For
      oil
      and natural gas properties, there are obligations to perform removal and
      remediation activities when the properties are retired. When a project reaches
      drilling depth and is determined to be either proved or dry, a liability is
      recognized for the fair value of legally required asset retirement obligations
      once it can be reasonably estimated. The Fund capitalizes the associated asset
      retirement costs as part of the carrying amount of the long-lived assets. Plug
      and abandonment costs associated with unsuccessful projects are expensed as
      dry-hole costs.





***Impairment
      of Long-Lived Assets***


The
      Fund
      reviews long-lived assets, including oil and natural gas fields, for impairment
      whenever events or changes in circumstances indicate that the carrying amounts
      may not be recovered. Long-lived assets are tested based on identifiable cash
      flows (the field level for oil and gas assets) and are largely independent
      of
      the cash flows of other assets and liabilities. If the carrying amounts of
      the
      long-lived assets are not expected to be recovered by undiscounted future net
      cash flow estimates, the assets are impaired and an impairment loss is recorded.
      The amount of impairment is based on the estimated fair value of the assets
      determined by discounting anticipated future net cash flows.





In
      the
      case of oil and natural gas fields, the present value of future net cash flows
      is based on management’s best estimate of future prices, which is determined
      with reference to recent historical prices and published forward prices, applied
      to projected production volumes of individual fields and discounted at a rate
      commensurate with the risks involved. The projected production volumes represent
      reserves, including probable reserves, expected to be produced based on a
      stipulated amount of capital expenditures. The production volumes, prices and
      timing of production are consistent with internal projections and other
      externally reported information. Oil and natural gas prices used for determining
      asset impairments will generally differ from those used in the standardized
      measure of discounted future net cash flows, since the standardized measure
      requires the use of actual prices on the last day of the year.








**Results
      of Operations**


The
      following review of operations and present financial condition should be read
      in
      conjunction with the Fund’s financial statements and the notes
      thereto.




***Net
      loss.*** Net loss
      for the year ended December 31, 2006 was approximately $4.4 million, a decrease
      of approximately $0.9 million, or 16% compared to a net loss of approximately
      $5.3 million for the year ended December 31, 2005.





37


Net
      loss
      for the year ended December 31, 2005 was approximately $5.3 million, a decrease
      of approximately $2.7 million, or 34% compared to a net loss of approximately
      $8.0 million for the period August 2, 2004 (Inception) through December 31,
      2004.





See
      discussion below for details regarding results.





***Oil
      and gas revenues.*** Oil and
      natural gas revenues for the year ended December 31, 2006 were approximately
      $7.8 million, an increase of approximately $7.8 million, or 100% compared to
      nil
      for the year ended December 31, 2005. This increase is the result of production
      in 2006 as compared to no production in 2005. Production volume for natural
      gas
      was approximately 890 thousand cubic feet (“MCF”) for the year ended
      December 31, 2006. Average sales price for natural gas was approximately $6.47
      per MCF for the year ended December 31, 2006. Production volume for oil was
      approximately 29 thousand barrels for the year ended December 31,
      2006. Average sales price for oil was approximately $68.76 per barrel for
      the year ended December 31, 2006.





There
      were no oil and natural gas revenues for the year ended December 31, 2005 and
      for the period August 2, 2004 (Inception) through December 31,
      2004.





***Investment
      fees.*** The
      Manager is paid a one time investment fee of 4.5% of initial capital
      contributions. The fee is payable for the service of investigating and
      evaluating investment opportunities and affecting transactions when the capital
      contributions are made. Investment fees incurred and paid for the period
      ended December 31, 2004 were
      approximately $3.6 million. There were no investment fees incurred or paid
      in
      2006 and 2005.





***Dry-hole
      costs.*** Dry-hole
      costs for the year ended December 31, 2006 were approximately $6.4 million,
      an
      increase of approximately $2.3 million, or 58% compared to approximately $4.1
      million for the year ended December 31, 2005. This increase is predominately
      the
      result of plug and abandonment expenses incurred and paid in 2006 relating
      to
      two projects determined to be dry-holes, as compared to one project that was
      determined to be a dry-hole in 2005.





Dry-hole
      costs for the year ended December 31, 2005 were approximately $4.1 million,
      an
      increase of approximately $0.2 million, or 4% compared to approximately $3.9
      million for the period August 2, 2004 (Inception) through December 31, 2004.
      Dry-hole costs in 2005 primarily related to Main Pass 155 while dry-hole costs
      in 2004 related to Vermilion 7/8.




The
      following table summarizes dry-hole costs for the years ended December 31,
      2006
      and 2005 and for the period August 2, 2004 (Inception) through December 31,
      2004.




38


**($
                  in thousands)**
              
              **For
                  the year ended December 31,**
              
              **For
                  the period August 2, 2004 (Inception) through December 31,****Dry-hole
                  Costs:**
              
              **2006**
              
              **2005**
              
              **2004**East
                  Breaks 157
              
              $
              4,632
              
              $
              -
              
              $
              -Eugene
                  Island 357
              
              
              1,707
              
              
              -
              
              
              -Main
                  Pass 155
              
              
              77
              
              
              3,876
              
              
              -Vermilion
                  7/8
              
              
              -
              
              
              179
              
              
              3,890**Total
                  Dry-hole Costs**
              
              $
              6,416
              
              $
              4,055
              
              $
              3,890




***Depletion
      and amortization.*** Depletion and amortization for the year ended December 31, 2006 was
      approximately $4.1 million, an increase of approximately $4.1 million, or 100%
      compared to nil for the year ended December 31, 2005. This increase is the
      result of production of reserve volumes in 2006 compared to no production in
      2005.





There
      was
      no depletion and amortization in 2005 and 2004.





***Lease
      operating expenses.*** Lease
      operating expenses represent the day to day cost of operating and maintaining
      wells and related facilities. For the year ended December 31, 2006 lease
      operating expenses were approximately $0.9 million, an increase of approximately
      $0.9 million, or 100% compared to approximately nil for the year ended December
      31, 2005. This increase is the result of production activity in 2006 compared
      to
      no production in 2005.





There
      were no lease operating expenses in 2005 and 2004.





***Management
      fees.*** Management fees for the year ended December 31, 2006 were approximately $1.9
      million, a decrease of approximately $0.1 million, or 6% compared to
      approximately $2.0 million for the year ended December 31, 2005. Management
      fees are charged to cover expenses associated with overhead incurred by the
      Manager for its on-going management, administrative and advisory services.
      Such
      overhead expenses include but are not limited to rent, payroll and benefits
      for
      employees of the Manager, and other administrative costs. The decrease is due
      to
      the fact that effective September 2006, the Manager changed its policy regarding
      the annual management fee. Commencing September 1, 2006, the management fee
      payable is equal to 2.5% of the total Shareholder capital contributions, net
      of
      dry-hole expenses incurred by the Fund.




Management
      fees for the year ended December 31, 2005 were approximately $2.0 million,
      an
      increase of approximately $1.5 million, or 309% compared to approximately $0.5
      million for the period August 2, 2004 (Inception) through December 31, 2004.
      This increase is a result of the Fund having fees for twelve months in 2005,
      compared to five months of fees in 2004.





**Other
      operating expenses.** Other
      operating expenses  for
      the
      year ended December 31, 2006 were
      approximately $12 thousand, primarily related to accretion expense for the
      West Cameron 77 and Eugene Island 364 properties, and geological costs of
      approximately $4 thousand.





Other
      operating expenses  for
      the
      year ended December 31, 2005 were
      approximately $310 thousand, related to geological costs and casualty loss
      of $200 thousand and $110 thousand respectively, for the
      West
      Cameron 77 #2 project .





Other
      operating expenses for the period August 2, 2004 (Inception) through December
      31, 2004 were approximately $22 thousand, related to West Cameron 77 #2
      project.





39


The
      following table summarizes other operating expenses for the years ended December
      31, 2006 and 2005 and for the period August 2, 2004 (Inception) through December
      31, 2004.





**($
                  Thousands)**
              
              **For
                  the year ended December 31,**
              
              **For
                  the period August 2, 2004 (Inception) through December 31,****Other
                  operating expenses:**
              
              **2006**
              
              **2005**
              
              **2004**Accretion
                  expense
              
              $
              8
              
              $
              -
              
              $
              -Geological
                  costs
              
              
              4
              
              
              200
              
              
              22Casualty
                  loss
              
              
              -
              
              
              110
              
              
              -**Other
                  operating expenses:**
              
              $
              12
              
              $
              310
              
              $
              22




***Other
      general and administrative expenses.*** Other
      general and administrative expenses for the year ended December 31, 2006 were
      approximately $605 thousand, an increase of approximately $390 thousand, or
      181%
      compared to approximately $215 thousand for the year ended December 31, 2005.
      This increase is predominately the result of an increase in 2006 in both
      insurance costs and accounting fees.





Other
      general and administrative expenses for the year ended December 31, 2005 were
      approximately $215 thousand, an increase of approximately $158 thousand, or
      277%
      compared to approximately $57 thousand for period August 2, 2004 (Inception)
      through December 31, 2004. This increase is predominately the result of an
      increase in 2005 in both insurance costs and accounting fees. In addition,
      this
      increase is a result of the Fund having other general and administrative
      expenses for twelve months in 2005 compared to five months in 2004.





The
      following table summarizes general and administrative expenses for the years
      ended December 31, 2006 and 2005 and for the period August 2, 2004 (Inception)
      through December 31, 2004.




**($
                  Thousands)**
              
              **For
                  the year ended December 31,**
              
              **For
                  the period August 2, 2004 (Inception) through December 31,****Other
                  general and administrative expenses:**
              
              **2006**
              
              **2005**
              
              **2004**Accounting
                  and legal fees
              
              $
              166
              
              $
              105
              
              $
              33Insurance
              
              
              409
              
              
              112
              
              
              25Trust
                  fees
              
              
              30
              
              
              -
              
              
              -Other
              
              
              -
              
              
              (2
              )
              
              (1
              )**Other
                  general and administrative expenses**
              
              $
              605
              
              $
              215
              
              $
              57


***Other
      Income.*** Other
      income is comprised of interest income on money market funds and short-term
      US
      Treasury Notes. Interest income remained consistent due to fluctuations in
      average cash balances and interest rates. Other income for the year ended
      December 31, 2006 was approximately $1.6 million, an increase of approximately
      $0.3 million, or 27% compared to approximately $1.3 million for the year ended
      December 31, 2005. This increase is the result of higher interest rates in
      2006
      compared to 2005.





40


Other
      income for the year ended December 31, 2005 was approximately $1.3 million,
      an
      increase of approximately $1.2 million, or 17% compared to approximately
      $0.1 million for the period August 2, 2004 (Inception) through December 31,
      2004. This increase is predominately the result of higher interest rates in
      2005
      compared to 2004, and the Fund earning interest income for twelve months in
      2005
      compared to five months in 2004.




**Capital
      Resources and Liquidity**





***Operating
      Cash Flows***


Cash
      flows provided by operating activities for the year ended December 31, 2006
      were
      approximately $5.2 million, primarily related to cash receipts from oil and
      natural gas production of approximately $7.3 million, partially offset by cash
      expenditures for operating expenses.





Cash
      flows used in operating activities for the year ended December 31, 2005 were
      approximately $1.4 million, primarily related to cash expenditures for
      management fees paid approximating $2.0 million and operating expenses,
      partially offset by cash receipts from interest income.





Cash
      flows used in operating activities for the period August 2, 2004 (Inception)
      through December 31, 2004 were approximately $3.9 million, primarily related
      to
      the payment of the onetime investment fee of approximately $3.6 million and
      payments for management fees, partially offset by cash receipts from interest
      income.





***Investing
      Cash Flows***


Cash
      flows used in investing activities for the year ended December 31, 2006 were
      approximately $35.5 million, primarily related to capital expenditures for
      oil
      and gas properties and investment in marketable securities offset by the
      proceeds from the sale of marketable securities and insurance. Investing
      activities for oil and gas properties relate to the actual purchase of wells,
      infrastructure and other capital items unrelated to operating activities which
      occurs after a well has begun producing.





Cash
      flows used in investing activities for the year ended December 31, 2005 were
      approximately $17.7 million, and included approximately $4.4 million which
      the
      Fund advanced to operators for working interests and expenditures, approximately
      $12.3 million used for capital expenditures for oil and gas properties and
      approximately $1.0 million for funding of the salvage fund.





Cash
      flows used in investing activities for period August 2, 2004 (Inception) through
      December 31, 2004 were approximately $3.9 million, related to capital
      expenditures for oil and gas properties.





***Financing
      Cash Flows***


Cash
      flows used in financing activities consist of distributions to shareholders
      and
      the Manager. For the year ended December 31, 2006 distributions were
      approximately $5.6 million.





41


Cash
      flows provided by financing activities for the year ended December 31, 2005
      were
      approximately $0.1 million, primarily related to the collection of subscription
      receivable of approximately $0.6 million, partially offset by syndication costs
      paid of approximately $0.5 million.





Cash
      flows provided by financing activities for the period August 2, 2004 (Inception)
      through December 31, 2004 were approximately $70.2 million, primarily related
      to
      contributions from shareholders offset by syndication costs paid of
      approximately $78.3 million and $8.1 million, respectively.





We
      expect
      to meet our cash commitments for the next twelve months from our cash and
      investments on hand.




**Estimated
      Capital Expenditures**


The
      Fund
      has entered into multiple operating agreements for the drilling and development
      of its investment properties. The estimated capital expenditures associated
      with
      these agreements can vary depending on the stage of development on a
      property-by-property basis. As of December 31, 2006, such estimated capital
      expenditures to be spent totaled approximately $21.2 million, all of which
      is
      expected to be paid out of unspent capital contributions within the following
      twelve months. Remaining unspent development capital will be reallocated to
      one
      or more new specified projects.





The
      table
      below presents exploration and development capital expenditures from inception
      as well as estimated budgeted amounts for future periods:





42


**($
                  in thousands)****Estimated
                  Capital Expenditures:****As
                  of December 31, 2006**
                **Projects**
              
              **Spent
                  through December 31, 2006**
              
              **To
                  be Spent Next 12 Months**West
                  Cameron 77 #2 (i)
              
              $
              9.1
              
              
              5.0Eugene
                  Island 364 (ii) (vii)
              
              
              13.0
              
              
              6.6Eugene
                  Island 337 (iii)
              
              
              5.2
              
              
              0.9Galveston
                  248 (iv) (vii)
              
              
              -
              
              
              1.8Ship
                  Shoal 81(v) (vii)
              
              
              -
              
              
              1.4South
                  Marsh Island 111 (iv) (vii)
              
              
              -
              
              
              1.4Vermilion
                  344 (vi)
              
              
              0.2
              
              
              1.4West
                  Delta 67 (iv) (vii)
              
              
              -
              
              
              1.3West
                  Delta 68 (vi)
              
              
              -
              
              
              1.4$
              27.5
              
              $
              21.2


(i)
              West
                  Cameron 77 #2 began production in May 2006, unspent capital at
                  December 31, 2006 relates to the addition of a second
                  well.(ii)
              Eugene
                  Island 364 began production in June 2006 and is currently shut-in
                  due to
                  mechanical problems, unspent capital represents estimated costs
                  to
                  sidetrack the well.(iii)
              Eugene
                  Island 337 discovery in July 2006, production expected in April
                  2007.(iv)
              Project
                  scheduled to begin drilling in 2nd quarter of 2007.(v)
              Project
                  scheduled to begin drilling in 3rd quarter of 2007.(vi)
              Project
                  successful during 1st quarter of 2007.(vii)
              Total
                  project costs assume that the wells are commercially successful.
                  If one of
                  the budgeted exploratory projects are unsuccesful, budgeted development
                  capital will be reallocated to one or more new unspecified
                  projects.


**Liquidity
      Needs**


The
      Fund’s primary short-term liquidity needs are to fund its 2007
      operations, including management fees and capital expenditures, with existing
      cash on-hand and income earned from its short-term investments and cash and
      cash
      equivalents. The
      Manager is entitled to receive an annual management fee from the Fund regardless
      of whether the Fund is profitable in that year. Commencing
      in September 2006, the management fee, payable will be equal to 2.5% of the
      total shareholder capital contributions, net of dry-hole expenses incurred
      by
      the Fund.




With
        respect to the payment of management fees, until one of the Fund’s projects
        begins producing, all or a portion of the management fee is paid generally
        from
        the interest or dividend income generated by the Fund’s development capital that
        has not been spent, although the management fee can be paid out of capital
        contributions. Such interest and/or dividend income is more than enough to
        cover
        Fund expenses, including the management fee. Generally, it can take anywhere
        from 18 to 24 months to bring a project to production. Once a well is on
        production, the management fee and fund expenses are paid from operating
        income.
        Over time, as a well produces, the Fund may recover some or the entire
        management fee that may have been paid out of capital contributions.


Distributions,
      if any, are funded from cash flow from operations, and the frequency and amount
      are within the Manager’s discretion subject to available cash from operations,
      reserve requirements and Fund operations.





The
      capital raised by the Fund in its private placement is more than likely all
      the
      capital that it will be able to obtain for investments in projects. The number
      of projects in which the Fund can invest will naturally be limited and each
      unsuccessful project the Fund experiences, if any, will not only reduce its
      ability to generate revenue, but also exhaust its limited supply of capital.
      Typically for a fund, the Manager seeks an investment portfolio that combines
      high and low risk exploratory projects.




When
        the
        Manager makes a decision for participation in a particular project, it assumes
        that the well will be successful and allocates enough capital to budget for
        the
        completion of that well and the additional development wells that are
        anticipated to be drilled. If the exploratory well is deemed a dry-hole or
        if it
        is un-economical, the capital allocated to the completion of that well and
        to
        the development of additional wells is then reallocated to a new project
        or used
        to make additional investments.




**Off-Balance
      Sheet Arrangements**


The
      Fund
      had no off-balance sheet arrangements as of December 31, 2006 and 2005 and
      does
      not anticipate the use of such arrangements in the future.





43





**Contractual
      Obligations**


The
      Fund
      enters into operating agreements with operators. On behalf of the Fund, an
      operator enters into various contractual commitments pertaining to exploration,
      development and production activities. The Fund does not discuss or negotiate
      any such contracts. No contractual obligations exist at December 31, 2006 and
      2005.




**ITEM
      7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**





Projects
      drilled may not have commercially productive oil and natural gas reservoirs.
      In
      such an event, the Funds' revenue, future results of operations and financial
      condition would be adversely impacted.





The
      Fund
      does not have or use, any derivative instruments nor does it have any plans
      to
      enter into such derivative arrangements. The Fund will generally invest cash
      in
      high-quality credit instruments consisting primarily of money market funds,
      bankers’ acceptance notes and government agency securities with maturities of
      six months or less. The Fund does not expect any material loss from cash
      equivalents and therefore believes its potential interest rate exposure is
      not
      material. The Fund has no plan to conduct any international activities and
      therefore believes it is not subject to foreign currency risk.





The
      principal market risks to which the Fund is exposed that may adversely impact
      the Fund's results of operations and financial position are changes in oil
      and
      natural gas prices.





Low
      commodity prices could have an adverse affect on our future profitability and,
      in such an event the Fund may be required by accounting rules to writedown
      the
      carrying value of our projects. Revenue to the Fund will be sensitive to changes
      in price to be received for oil and natural gas production. Prevailing market
      prices fluctuate in response to many factors that are outside of the Fund's
      control such as the supply and demand for oil and natural gas. Availability
      of
      alternative fuels as well as seasonal risks such as hurricanes can also impact
      the supply and demand.





High
      oil
      and natural gas prices have resulted in a strong demand for and a tight supply
      of drilling rigs necessary to drill new projects. The increased cost in daily
      rig rates could have a negative impact on the return to shareholders in the
      Fund. The shortage of drilling rigs could delay the application of capital
      to
      such projects and thus delay revenue from operations.








**ITEM
      8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**





All
      financial statements meeting the requirements of Regulation S-X and the
      supplementary financial information required by Item 302 of Regulation S-K
      are
      included in the financial statements listed in Item 15 and filed as part of
      this
      report.





44





**ITEM
      9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING FINANCIAL
      DISCLOSURE**





As
      reported on a Form 8-K filed with the SEC on June 14, 2006, the Manager of
      the
      Fund dismissed Perelson Weiner, LLP as the Fund’s independent registered public
      accountants effective June 8, 2006.




The
      Fund
      was formed on August 2, 2004 and filed its Registration Statement on Form 10
      in
      April 2005; thus, the period beginning August 2, 2004 and ended December 31,
      2004 was the Fund's first audited reporting period. Perelson Weiner's audit
      report on the financial statements of the Fund for the period August 2, 2004
      (Inception) through December 31, 2004 did not contain an adverse opinion or
      disclaimer of opinion, nor was such report qualified or modified as to
      uncertainty, audit scope or accounting principles.




From
      the
      date of inception of the Fund through June 8, 2006, there were no disagreements
      with Perelson Weiner on any matter of accounting principles or practices,
      financial statement disclosure or auditing scope or procedure, which
      disagreements, if not resolved to the satisfaction of Perelson Weiner, would
      have caused Perelson Weiner to make reference to the subject matter of the
      disagreements in their report on the Fund's financial statements for such
      period.




From
      the
      date of inception of the Fund through June 8, 2006, there were no "reportable
      events" as defined in Item 304(a)(1)(v) of Regulation S-K.




As
      reported on a Form 8-K filed with the SEC on July 13, 2006 ,
      the
      Manager of the Fund appointed Deloitte & Touche LLP (“D&T”) as the
      Fund’s independent registered public accountants effective July 12,
      2006.








**ITEM
      9A. CONTROLS AND PROCEDURES**





**Disclosure
      Controls and Procedures**


The
      Fund
      maintains "disclosure controls and procedures", as such term is defined under
      Securities and Exchange Act of 1934 (“Exchange Act”) Rule 13a-15(e), that
      are designed to ensure that information required to be disclosed in the Fund’s
      Exchange Act reports is recorded, processed, summarized and reported within
      the
      same time periods specified in the SEC's rules and forms, and that such
      information is accumulated and communicated to its management, including its
      Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
      timely decisions regarding required disclosures. In designing and evaluating
      the
      disclosure controls and procedures, the Fund’s management recognized that any
      controls and procedures, no matter how well designed and operated, can provide
      only reasonable assurance of achieving the desired control objectives and its
      management necessarily was required to apply its




45


judgment
      in evaluating the cost-benefit relationship of possible controls and procedures.
      The Fund has carried out an evaluation, as of December 31, 2006, under the
      supervision and with the participation of its management, including its Chief
      Executive Officer and Chief Financial Officer, of the effectiveness of the
      design and operation of the Fund’s disclosure controls and procedures. Based
      upon their evaluation and subject to the foregoing, such procedures were
      effective.





**Changes
      in Internal Controls over Financial Reporting**


In
      previous Exchange Act filings, the Fund has disclosed material weaknesses.
      Corrective actions have been implemented to address these material weaknesses.
      As of the period covered by this report, Management believes these material
      weaknesses have been remediated.





In
      the
      fourth quarter of 2006, the following material changes in internal control
      over
      financial reporting (as defined in Exchange Act Rule 13a-15(f)) have been
      implemented:





·
            Expansion
                of accounting and SEC reporting staff and various resources, by hiring
                five personnel with GAAP and/or SEC accounting and reporting expertise;


·
            Created
                detailed training programs, and policies and procedures surrounding
                the
                accounting for oil and natural gas projects and GAAP and SEC financial
                reporting controls; and


·
            Enhanced
                tools and added appropriate resources to perform consistent, routine
                analytical reviews of the GAAP financial results, including key balance
                sheet and income statement account
                analyses.





Because
      the Fund is not an “Accelerated Filer” as defined in Rule 12b-2 of the Exchange
      Act, the Fund is not presently required to file Management’s annual report on
      internal control over financial reporting and the Attestation report of the
      registered public accounting firm required by Item 308(a) and (b) of Regulation
      S-K promulgated under the Securities Act. Under current rules, because the
      Fund
      is neither a “large accelerated filer” nor an “accelerated filer”, the Fund is
      not required to provide management’s report on internal control over financial
      reporting until the Fund files its annual report for 2007 and compliance with
      the auditor’s attestation report requirement is not required until the Fund
      files its annual report for 2008. The Fund currently expects to comply with
      these requirements at such time as the Fund is required to do so.







**ITEM
      9B. OTHER INFORMATION**





None.





46


**PART
      III**





**ITEM
      10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
      GOVERNANCE**





The
      Fund
      has engaged Ridgewood Energy as Manager. Ridgewood Energy was founded in 1982
      and, as Manager, has very broad authority, including the authority to appoint
      the executive officers of the Fund.





Executive
      officers of Ridgewood Energy and the Fund and their ages at December 31, 2006
      are as follows:




**Name, Age and Position with Registrant****Officer Since**Robert E. Swanson, 59President and Chief Executive Officer1982W. Greg Tabor, 46Executive Vice President and Director of Business Development2004Robert L. Gold, 47Executive Vice President1987Kathleen P. McSherry, 41Senior Vice President and Chief Financial Officer2000Daniel V. Gulino, 46Senior Vice President and General Counsel2003Adrien Doherty, 54Executive Vice President2006 Set forth below is the name of and certain biographical information regarding, the executive officers of Ridgewood Energy and the Fund:


**Robert
      E. Swanson** has
      served as the President, Chief Executive Officer, sole director, and sole
      stockholder of Ridgewood Energy since its inception. Mr. Swanson is also the
      controlling member of Ridgewood Renewable Power, LLC (“Ridgewood Power”) and
      Ridgewood Capital Corporation (“Ridgewood Capital”), affiliates of Ridgewood
      Energy. Mr. Swanson has been President and registered principal of Ridgewood
      Securities Management, LLC and has served as the Chairman of the Board of
      Ridgewood Capital since its organization in 1998. Mr. Swanson is a member of
      the
      New York State and New Jersey State 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.





**Greg
      Tabor** has
      served as the Executive Vice President and Director of Business Development
      for
      Ridgewood Energy since January 2004. Mr. Tabor was senior business development
      manager for El Paso Production Company from December 2001 to December 2003.
      From
      April 2000 to December 2001, Mr. Tabor was Vice President, Business Development
      for Madison Energy Advisors. Mr. Tabor is a graduate of the University of
      Houston.





47


**Robert
      L. Gold** has
      served as the Executive Vice President of Ridgewood Energy since 1987. Mr.
      Gold
      is also Executive Vice President of Ridgewood Power. Mr. Gold has also served
      as
      the President and Chief Executive Officer of Ridgewood Capital since its
      inception in 1998. 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.





**Kathleen
      P. McSherry** has
      served as the Senior Vice President and Chief Financial Officer of Ridgewood
      Energy since 2000. Ms. McSherry has been employed by Ridgewood Energy since
      1987, first as the Assistant Controller and then as the Controller before being
      promoted to Chief Financial Officer in 2000. Ms. McSherry also serves as Vice
      President of Systems and Administration of Ridgewood Power. Ms. McSherry holds
      a
      Bachelor of Science degree in Accounting from Kean University.





**Daniel
      V. Gulino** has
      served as Senior Vice President and General Counsel of Ridgewood Energy since
      August 2003. Mr. Gulino also serves as Senior Vice President and General Counsel
      of Ridgewood Power Management, Ridgewood Power, and Ridgewood Capital and has
      done so since 2000. Mr. Gulino is a member of the New Jersey State and
      Pennsylvania State Bars. He is a graduate of Fairleigh Dickinson University
      and
      Rutgers School of Law.





**Adrien
      Doherty** has
      served as Executive Vice President of Ridgewood Energy since 2006. Mr. Doherty
      joined Ridgewood Energy after a thirty year career in investment banking, most
      recently as Head of Barclay’s Capital’s oil and gas banking effort. Mr. Doherty
      is a graduate of Amherst College and the Wharton Graduate Division of the
      University of Pennsylvania.





**Board
      of Directors and Board Committees**


The
      Fund
      does not have its own board of directors or any board committees. The Fund
      relies upon the Manager to provide recommendations regarding dispositions and
      financial disclosure. Officers of the Fund are not compensated by the Fund,
      and
      all compensation matters are addressed by the Manager, as described in Item
      11
      of this Form 10-K. Because the Fund does not maintain a board of directors
      and
      because officers of the Fund are compensated by the Manager, the Manager
      believes that it is appropriate for the Fund to not have a nominating or
      compensation committee.





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


Section
      16(a) of the Securities Exchange Act of 1934, as amended, requires the Fund’s
      executive officers and directors, and persons who own more than 10% of a
      registered class of the Fund’s equity securities, to file reports of ownership
      and changes in ownership with the SEC. Based on a review of the copies of
      reports furnished or otherwise available to the Fund, the Fund believes that
      during the year ended December 31, 2006, all filing requirements applicable
      to
      its officers, directors and 10% beneficial owners were met.








**ITEM
      11. EXECUTIVE COMPENSATION**





The
      executive officers of the Fund do not receive compensation from the Fund. The
      Manager, or its affiliates, compensates the officers without additional payments
      by the Fund. See Item 13. “Certain Relationships and Related Transactions
      and Director Independence” for more information regarding Manager compensation
      and payments to affiliated entities.





48


**Compensation
      Discussion and Analysis**


The
      executive officers of the Fund, Mr. Swanson, Mr. Tabor, Mr. Gold, Ms. McSherry,
      Mr. Gulino and Mr. Doherty, are employed by, and are executive officers of,
      the
      Manager, Ridgewood Energy, and provide managerial services to the Fund in
      accordance with the terms of the Fund’s LLC agreement. The Fund does not have
      any other executive officers. The Manager determines and pays the compensation
      of these officers. Each of the executive officers of the Fund also serves as
      an
      executive officer of each of the other funds managed by the Manager. Because
      the
      executive officers are employees of our Manager and provide managerial services
      to all of the funds managed by our Manager in the course of such employment,
      they do not receive additional compensation for providing managerial services
      to
      the Fund or to any one or more new funds established by the Manager than they
      would otherwise receive from the Manager if they did not serve in such
      capacities for the Fund or any such other funds.




The
      Manager is fully responsible for the payment of compensation to the executive
      officers. The Fund does not pay any compensation to its executive officers
      and
      does not reimburse the Manager for the compensation paid to executive officers.
      The Fund does, however, pay the Manager a management fee and the Manager may
      determine to use a portion of the proceeds from the management fee to pay
      compensation to executive officers of the Fund.








**Report
      of the Manager**





Because
      the Fund is managed by the Manager and does not have a Board of Directors or
      a
      Compensation Committee, the Manger reviewed and discussed with management the
      Compensation Discussion and Analysis included in the proxy statement. Based
      on
      such review and discussion, the Manager determined that the Compensation
      Discussion and Analysis be included in the proxy statement for filing with
      the
      Securities and Exchange Commission.





Submitted by the ManagerRobert E. Swanson,
                Chairman







**ITEM
      12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      SECURITY HOLDER MATTERS**





The
      following table sets forth information with respect to beneficial ownership
      of
      the shares as of December 31, 2006 (no person owns more than 5% of the shares)
      by:





·
            each
                executive officer (there are no directors);
                and


·
            all
                of the executive officers as a
                group.





49


Beneficial
      ownership is determined in accordance with the rules of the SEC and includes
      voting or investment power with respect to the securities. Except as indicated
      by footnote, and subject to applicable community property laws, the persons
      named in the table below have sole voting and investment power with respect
      to
      all shares shown as beneficially owned by them. Percentage of beneficial
      ownership is based on 535.6818 shares outstanding at December 31, 2006 and
      2005.
      Other than the below, no officer and director owns any of the Fund's
      shares.




Name
                  of beneficial owner
              Number
                  of shares
              
              PercentRobert
                  E. Swanson (1), President and Chief
              3.6667
              
              *Executive
                  OfficerExecutive
                    Officer as a group (1)
              3.6667
              
              *
  *
      Represents less than one percent.


(1)
      Includes shares owned by Mr. Swanson’s family members and Trusts, which he
      controls.








**ITEM
      13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE**





In
      connection with the sale of shares in 2004, Ridgewood Securities Corporation,
      an
      affiliate of the Manager, earned a placement fee and commissions totaling
      approximately $0.8 million and $0.3 million, respectively, included in
      syndication costs. The Manager earned an investment fee for the services of
      investigating and evaluating projects for future investment totaling
      approximately $3.6 million.




The
      Manager was paid approximately $2.8 million to cover legal and syndication
      fees
      for the organization, distribution and offering expenses.





The
      Manager received a management fee, payable monthly, equal to 2.5% of total
      capital contributions, for general and administrative and management services
      supplied to the Fund. Additionally, when distributions are made, the Manager
      is
      entitled to a portion of funds distributed to shareholders. In September 2006,
      the Manager changed its policy regarding the 2.5% annual management fee.
      Effective September 1, 2006, the management fee payable will be equal to 2.5%
      of
      the total shareholder capital contributions, net of dry-hole expenses incurred
      by the Fund. For the years ended December 31, 2006 and 2005 and for the period
      August 2, 2004 (Inception) through December 31, 2004 the Manager was paid
      management fees which totaled approximately $1.9 million, $2.0 million and
      $0.5
      million, respectively.





Profits
      and losses are allocated in accordance with the LLC agreement. In general,
      profits and losses in any year are allocated 85% to shareholders and 15% to
      the
      Manager. The primary exception to this treatment is that all items of expense,
      loss, deduction and credit attributable to the expenditure of shareholders'
      capital contributions are allocated 99% to shareholders and 1% to the Manager.
      For the year ended December 31, 2006, the Manager was paid distributions which
      totaled $0.8 million.  For
      the
      year ended December 31, 2005 and the period August 2, 2004 (Inception) through
      December 31, 2004, there were no distributions paid to the Manager.








50


**ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**





The
      following table presents fees and services rendered by Deloitte and Touche,
      LLP
      for the year ended December 31, 2006 and Perelson
      Weiner, LLP for
      the
      year ended December 31, 2005 and the period August 2, 2004 (Inception) through
      December 31, 2004.





**($
                  Thousands)**
              
              **For
                  the year ended December 31,**
              
              **For
                  the period August 2, 2004 (Inception) through December 31,****Accounting
                  Fees and Sevices**
              
              **2006**
              
              **2005**
              
              **2004**Audit
                  fees (1)
              
              $
              125
              
              $
              86
              
              $
              14Tax
                  fees (2)
              
              
              24
              
              
              19
              
              
              19$
              149
              
              $
              105
              
              $
              33
   (1)
              Fees
                  for audit of finanancial statements, reviews of the related quarterly
                  financial statements and reviews of documents filed with the
                  SEC.(2)
              Fees
                  related to professional services for tax compliance, tax advice
                  and tax
                  planning.





51


**PART
      IV.**




**ITEM
                  15. FINANCIAL STATEMENTS AND EXHIBITS****(a)
                  Index to Financial Statements:**Report
                  of Independent Registered Public Accounting Firm
              F-1Balance
                  Sheets as of December 31, 2006 and 2005
              F-2Statements
                  of Operations for the years ended December 31, 2006 and 2005 and
                  for the
                  period August 2, 2004
                (Inception)
                  through December 31, 2004
              F-3Statements
                  of Changes in Members' Capital for the years ended December 31,
                  2006 and
                  2005 and for the period
                August 2,
                  2004 (Inception) through December 31, 2004
              F-4Statements
                  of Cash Flows for the years ended December 31, 2006 and 2005 and
                  for the
                  period August 2, 2004
                (Inception)
                  through December 31, 2004
              F-5Notes
                  to Audited Financial Statements
              F6-14


**(b)
                    Exhibits:**Exhibits
                    required by Section 601 of Regulation
                    S-K.
  **Exhibit
                    No.**
                
                **Description**3
                (i)
                    (A)
                Articles
                    of Formation of Registrant (incorporated by reference to Exhibit
                    3.1 of
                    Registrant's Registration Statement on Form 10-12 G/A filed with
                    the
                    Commission on September 2, 2005).3
                (i)
                    (B)
                Limited
                    Liability Company Agreement of Registrant (incorporated by reference
                    to
                    Exhibit 10.1 of Registrant's Registration Statement on Form 10-12G/A
                    filed
                    with the Commission on September 2, 2005).10.1
                
                Registrant's
                    Confidential Private Offering Memorandum (incorporated by reference
                    to
                    Exhibit 10.1A of Registrant's Registration Statement on form
                    10-12G/A
                    filed with the Commission on September 2, 2005).10.2
                
                Offshore
                    Operating Agreement between Apache Corporation and Ridgewood
                    Energy
                    Corporation as Manager of the Registrant (incorporated by reference
                    to
                    Exhibit 10.2 of Registrant's Registration Statement on Form 10-12G/A
                    filed
                    with the Commission on September 2, 2005).10.3
                
                Joint
                    Development Agreement between BHP Billiton and Ridgewood Energy
                    Corporation as Manager of the Registrant for West Cameron 77
                    (incorporated
                    by reference to Exhibit 10.3 of Registrant's Registration Statement
                    on
                    Form 10-12G/A filed with the Commission on September 2,
                    2005).10.4
                
                Participation
                    Agreement between Samson and Ridgewood Energy Corporation as
                    Manager of
                    the Registrant for the Main Pass project (incorporated by reference
                    to
                    Exhibit 10.4 of Registrant’s Registration Statement on Form 10-12G/A filed
                    with the Commission on September 2, 2005).10.5
                *
                Participation
                    Agreement between Gryphon Exploration Company (Woodside) and
                    Ridgewood
                    Energy Corporation as Manager of the Registrant for East Breaks
                    157.10.6
                *
                Participation
                    Agreement between Newfield Exploration and Ridgewood Energy Corporation
                    as
                    Manager of the Registrant for Eugene Island 357.10.7
                *
                Participation
                    Agreement between Devon Energy and Ridgewood Energy Corporation
                    as Manager
                    of the Registrant for Eugene Island 337.10.8
                *
                Participation
                    Agreement between LLOG Exploration and Ridgewood Energy Corporation
                    as
                    Manager of the Registrant for Galveston 248, Ship Shoal 81, South
                    Marsh
                    111, Vermillion 344, West Delta 67 and West Delta 68.14
                
                Code
                    of Ethics, adopted on August 2, 2004 (incorporated by reference
                    to the
                    Registrant’s Form 10-K filed with the SEC on March 15, 2006).31.1
                *
                Certification
                    of Robert E. Swanson, Chief Executive Officer of the Registrant,
                    pursuant
                    to Securities Exchange Act Rule 13a-14(a).31.2
                *
                Certification
                    of Kathleen P. McSherry, Chief Financial Officer of the Registrant,
                    pursuant to Securities Exchange Act Rule 13a-14(a).32
                *
                Certifications
                    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                    906 of
                    The Sarbanes-Oxley Act of 2002, signed by Robert E. Swanson,
                    Chief
                    Executive Officer of the Registrant, and Kathleen P. McSherry,
                    Chief
                    Financial Officer of the Registrant.*
                Filed
                    herewith


52


**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





To
      the
      Shareholders and Manager of Ridgewood Energy M Fund, LLC:





We
      have
      audited the accompanying balance sheets of Ridgewood Energy M Fund, LLC (the
      “Fund”) as of December 31, 2006 and 2005, and the related statements of
      operations, changes in members’ capital, and cash flows for the years ended
      December 31, 2006 and 2005 and for the period August 2, 2004 (Inception) through
      December 31, 2004. 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 in accordance with the standards of the Public Company
      Accounting Oversight Board (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. The Fund is not required to have,
      nor were we engaged to perform, an audit of its internal control over financial
      reporting. Our audits included consideration of internal control over financial
      reporting as a basis for designing audit procedures that are appropriate in
      the
      circumstances, but not for the purpose of expressing an opinion on the
      effectiveness of the Fund’s internal control over financial reporting.
      Accordingly, we express no such opinion. An audit also includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements, assessing the accounting principles used and significant estimates
      made by management, as well as evaluating the overall financial statement
      presentation. We believe that our audits provide a reasonable basis for our
      opinion.





In
      our
      opinion, such financial statements present fairly, in all material respects,
      the
      financial position of Ridgewood Energy M Fund, LLC as of December 31, 2006
      and
      2005, and the results of its operations and its cash flows for the years ended
      December 31, 2006 and 2005 and for the period August 2, 2004 (Inception) through
      December 31, 2004, in conformity with accounting principles generally accepted
      in the United States of America.








/s/
      Deloitte & Touche LLP





April
      10,
      2007


Parsippany,
      New Jersey





F-1


**RIDGEWOOD
                  ENERGY M FUND, LLC****BALANCE
                  SHEETS****(in
                  thousands, except number of shares)****December
                  31,****2006**
              
              **2005****Assets**Current
                  Assets:Cash
                  and cash equivalents
              
              $
              7,508
              
              $
              43,454Short-term
                  investment in marketable securities
              
              
              15,656
              
              
              -Production
                  receivable
              
              
              493
              
              
              -Insurance
                  receivable
              
              
              -
              
              
              1,235Prepaid
                  expenses
              
              
              22
              
              
              25Total
                  current assets
              
              
              23,679
              
              
              44,714Salvage
                  fund
              
              
              1,060
              
              
              1,014Oil
                  and gas propertiesAdvances
                  to operators for working interests and expenditures
              
              
              -
              
              
              4,366Proved
                  properties
              
              
              22,163
              
              
              7,052Unproved
                  properties
              
              
              5,355
              
              
              465Less:
                  accumulated depletion and amortization-proved properties
              
              
              (4,100
              )
              
              -Total
                  oil and gas properties, net
              
              
              23,418
              
              
              11,883**Total
                  assets**
              
              $
              48,157
              
              $
              57,611**Liabilities
                  and Members' Capital**Current
                  Liabilities:Due
                  to operators
              
              $
              717
              
              $
              477Accrued
                  expenses payable
              
              
              155
              
              
              45Total
                  current liabilities
              
              
              872
              
              
              522Non-current
                  liabilitiesAsset
                  retirement obligations
              
              
              225
              
              
              23Total
                  non-current liabilities
              
              
              225
              
              
              23**Total
                  liabilities**
              
              
              1,097
              
              
              545Commitments
                  and contingencies (Note 8)**Members'
                  capital:**Manager:Distributions
              
              
              (837
              )
              
              -Accumulated
                  deficit
              
              
              105
              
              
              (478
              )Manager's
                  total
              
              
              (732
              )
              
              (478
              )Shareholders:Capital
                  contributions(834
                  shares authorized; 535.6818 issued andoutstanding
                  as of December 31, 2006 and 2005)
              
              
              78,887
              
              
              78,887Distributions
              
              
              (4,742
              )
              
              -Syndication
                  costs
              
              
              (8,597
              )
              
              (8,597
              )Accumulated
                  deficit
              
              
              (17,756
              )
              
              (12,746
              )Shareholders'
                  total
              
              
              47,792
              
              
              57,544**Total
                  members' capital**
              
              
              47,060
              
              
              57,066**Total
                  liabilities and members' capital**
              
              $
              48,157
              
              $
              57,611The
                  accompanying notes are an integral part of these financial
                  statements.


F-2




**RIDGEWOOD
                  ENERGY M FUND, LLC****STATEMENTS
                  OF OPERATIONS****(in
                  thousands, except per share data)****For
                  the years ended December 31,**
              
              **For
                  the period August 2, 2004 (Inception) through December 31,****2006**
              
              **2005**
              
              **2004****Revenues**Oil
                  and gas revenues
              
              $
              7,780
              
              $
              -
              
              $
              -**Expenses**Investment
                  fees to affiliate (Note 6)
              
              
              -
              
              
              -
              
              
              3,584Dry-hole
                  costs
              
              
              6,416
              
              
              4,055
              
              
              3,890Depletion
                  and amortization
              
              
              4,100
              
              
              -
              
              
              -Lease
                  operating expenses
              
              
              867
              
              
              -
              
              
              -Management
                  fees to affiliate (Note 6)
              
              
              1,854
              
              
              1,972
              
              
              482Other
                  operating expenses
              
              
              12
              
              
              310
              
              
              22Other
                  general and administrative expenses
              
              
              605
              
              
              215
              
              
              57**Total
                  expenses**
              
              
              13,854
              
              
              6,552
              
              
              8,035**Loss
                  from operations**
              
              
              (6,074
              )
              
              (6,552
              )
              
              (8,035
              )**Other
                  income**Interest
                  income
              
              
              1,647
              
              
              1,293
              
              
              70**Total
                  other income**
              
              
              1,647
              
              
              1,293
              
              
              70**Net
                  loss**
              
              $
              (4,427
              )
              $
              (5,259
              )
              $
              (7,965
              )Manager
                  - Net income (loss)
              
              $
              583
              
              $
              (359
              )
              $
              (155
              )Shareholders
                  - Net loss
              
              $
              (5,010
              )
              $
              (4,900
              )
              $
              (7,810
              )Net
                  loss per share
              
              $
              (9,353
              )
              $
              (9,147
              )
              $
              (14,566
              )The
                  accompanying notes are an integral part of these financial
                  statements.






F-3




**RIDGEWOOD
                    ENERGY M FUND, LLC****STATEMENTS
                    OF CHANGES IN MEMBERS' CAPITAL****(in
                    thousands, except for share data)**


**For
                the period August 2, 2004 (Inception) through December 31,
                2004****#
                of Shares**
            
            **Manager**
            
            **Shareholders**
            
            **Total****Balances,
                August 2, 2004 (Inception)**
            
            
            
            
            
            -
            
            $
            -
            
            $
            -
            
            $
            -Shareholders
                capital contribution
            
            
            
            
            
            536.1818
            
            
            -
            
            
            79,014
            
            
            79,014Subscriptions
                receivable
            
            
            
            
            
            -
            
            
            -
            
            
            (680
            )
            
            (680
            )Syndication
                costs
            
            
            
            
            
            -
            
            
            -
            
            
            (8,655
            )
            
            (8,655
            )Net
                loss
            
            
            
            
            
            -
            
            
            (155
            )
            
            (7,810
            )
            
            (7,965
            )**Balances,
                December 31, 2004**
            
            
            
            
            
            536.1818
            
            $
            (155
            )
            $
            61,869
            
            $
            61,714


**For
                    the year ended December 31, 2005****#
                    of Shares**
                
                **Manager**
                
                **Shareholders**
                
                **Total****Balances,
                    January 1, 2005**
                
                
                
                
                
                536.1818
                
                $
                (155
                )
                $
                61,869
                
                $
                61,714Return
                    of shareholder's capital contributions
                
                
                
                
                
                (0.5000
                )
                
                -
                
                
                (127
                )
                
                (127
                )Collection
                    of subscriptions receivable
                
                
                
                
                
                -
                
                
                -
                
                
                680
                
                
                680Syndication
                    costs recovered
                
                
                
                
                
                -
                
                
                -
                
                
                58
                
                
                58Allocation
                    of investment fees
                
                
                
                
                
                -
                
                
                36
                
                
                (36
                )
                
                -Net
                    loss
                
                
                
                
                
                -
                
                
                (359
                )
                
                (4,900
                )
                
                (5,259
                )**Balances,
                    December 31, 2005**
                
                
                
                
                
                535.6818
                
                $
                (478
                )
                $
                57,544
                
                $
                57,066




**For
                  the year ended December 31, 2006****#
                  of Shares**
              
              **Manager**
              
              **Shareholders**
              
              **Total****Balances,
                  January 1, 2006**
              
              
              
              
              
              535.6818
              
              $
              (478
              )
              $
              57,544
              
              $
              57,066Distributions
              
              
              
              
              
              -
              
              
              (837
              )
              
              (4,742
              )
              
              (5,579
              )Net
                  income (loss)
              
              
              
              
              
              -
              
              
              583
              
              
              (5,010
              )
              
              (4,427
              )**Balances,
                  December 31, 2006**
              
              
              
              
              
              535.6818
              
              $
              (732
              )
              $
              47,792
              
              $
              47,060The
                  accompanying notes are an integral part of these financial
                  statements.


F-4


**RIDGEWOOD
                ENERGY M FUND, LLC****STATEMENTS
                OF CASH FLOWS****(in
                thousands)****For
                the years ended December 31,**
            
            **For
                the period August 2, 2004
                (Inception) through December 31,****2006**
            
            **2005**
            
            **2004****Cash
                flows from operating activities**Net
                loss
            $
            (4,427
            )
            $
            (5,259
            )
            $
            (7,965
            )Adjustments
                to reconcile net income (loss) to net cashprovided
                by (used in) operating activitiesInterest
                earned on marketable securities
            
            (656
            )
            
            -
            
            
            -Dry-hole
                costs
            
            6,416
            
            
            4,055
            
            
            3,890Depletion
                and amortization
            
            4,100
            
            
            -
            
            
            -Accretion
                expense
            
            8
            
            
            -
            
            
            -Changes
                in assets and liabilitiesIncrease
                in production receivable
            
            (493
            )
            
            -
            
            
            -Decrease
                (increase) in prepaid expenses
            
            3
            
            
            10
            
            
            (34
            )Increase
                in due to operators
            
            114
            
            
            -
            
            
            -Increase
                in accrued expenses payable
            
            111
            
            
            21
            
            
            23(Decrease)
                increase in due to affiliate
            
            -
            
            
            (199
            )
            
            199Net
                cash provided by (used in) operating activities
            
            5,176
            
            
            (1,372
            )
            
            (3,887
            )**Cash
                flows from investing activities**Payments
                to operators for working interests and expenditures
            
            -
            
            
            (4,366
            )
            
            -Capital
                expenditures for oil and gas properties
            
            (21,732
            )
            
            (12,307
            )
            
            (3,890
            )Proceeds
                from insurance receivable
            
            1,235
            
            
            -
            
            
            -Funding
                of salvage fund
            
            -
            
            
            (1,000
            )
            
            -Interest
                income reinvested - salvage fund
            
            (46
            )
            
            (14
            )
            
            -Proceeds
                from the maturity of investment
            
            15,346
            
            
            -
            
            
            -Investment
                in marketable securities
            
            (30,346
            )
            
            -
            
            
            -Net
                cash used in investing activities
            
            (35,543
            )
            
            (17,687
            )
            
            (3,890
            )**Cash
                flows from financing activities**Contributions
                from shareholders
            
            -
            
            
            -
            
            
            78,334Return
                of shareholder's capital contribution
            
            -
            
            
            (127
            )
            
            -Collection
                of subscription receivable
            
            -
            
            
            680
            
            
            -Syndication
                costs paid
            
            -
            
            
            (560
            )
            
            (8,095
            )Distributions
                paid
            
            (5,579
            )
            
            -
            
            
            -Syndication
                costs recovered
            
            -
            
            
            58
            
            
            -Net
                cash (used in) provided by financing activities
            
            (5,579
            )
            
            51
            
            
            70,239Net
                (decrease) increase in cash and cash equivalents
            
            (35,946
            )
            
            (19,008
            )
            
            62,462Cash
                and cash equivalents, beginning of period
            
            43,454
            
            
            62,462
            
            
            -Cash
                and cash equivalents, end of period
            $
            7,508
            
            $
            43,454
            
            $
            62,462**Supplemental
                schedule of non-cash investing activities**Advances
                used for capital expenditures in oil and gasproperties
                reclassified to dry hole costs
            $
            4,366
            
            $
            -
            
            $
            -The
                accompanying notes are an integral part of these financial
                statements.





F-5


**RIDGEWOOD
      ENERGY M FUND, LLC**


NOTES
      TO
      AUDITED FINANCIAL STATEMENTS








**1.**
            **Organization
                and Purpose**





The
      Ridgewood Energy M Fund, LLC ("Fund"), a Delaware limited liability company,
      was
      formed on August 2, 2004 and operates pursuant to a limited liability company
      agreement ("Agreement") dated as of September 7, 2004 by and among Ridgewood
      Energy Corporation ("Manager"), and the shareholders of the Fund. Although
      the
      date of formation is August 2, 2004, the Fund did not begin business activities
      until September 7, 2004 when it began its private offering of shares. There
      were
      no business activities prior to September 7, 2004.





The
      Fund
      was organized to acquire, drill, construct and develop oil and natural gas
      properties located in the United States offshore waters of Texas, Louisiana
      and
      Alabama in the Gulf of Mexico. The Fund has devoted most of its efforts to
      raising capital and oil and natural gas exploration activities. The Fund began
      earning revenue in May 2006 from these operations and has ceased to be in the
      exploratory stage during the fourth quarter of 2006.





The
      Manager performs (or arranges for the performance of) the management,
      administrative and advisory services required for Fund operations. Such services
      include, without limitation, the administration of shareholder accounts,
      shareholder relations and the preparation, review and dissemination of tax
      and
      other financial information. In addition, the Manager provides office space,
      equipment and facilities and other services necessary for Fund operations.
      The
      Manager also engages and manages the contractual relations with outside
      custodians, depositories, accountants, attorneys, broker-dealers, corporate
      fiduciaries, insurers, banks and others as required (Notes 2, 5 and
      6).





**2.**
            **Summary
                of Significant Accounting Policies**





**Use
      of Estimates**


The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities as of the date
      of the financial statements and the reported amounts of revenues and expenses
      during the reporting period. On an ongoing basis, the Manager reviews its
      estimates, including those related to amounts advanced to and billed by
      operators, determination of proved reserves, impairment allowances and
      environmental liabilities. Actual results may differ from those estimates.





**Advances
      to Operators for Working Interests and Expenditures**


The
      Fund’s acquisition of a working interest in a well or a project requires it to
      make a payment to the seller for the Fund’s rights, title and interest. The Fund
      is required to advance its share of estimated cash outlay for the succeeding
      month’s operation. The Fund accounts for such payments as advances to operators
      for working interests and expenditures. As drilling costs are incurred, the
      advances are transferred to unproved properties.





F-6





**Oil
      and natural gas properties**


Investments
      in oil and natural gas properties are operated by unaffiliated entities
      ("Operators") who are responsible for drilling, administering and producing
      activities pursuant to the terms of the applicable operating agreements with
      working interest owners. The Fund's portion of exploration, drilling, operating
      and capital equipment expenditures relating to the wells are advanced and billed
      by Operators through authorization for expenditures.





The
      successful efforts method of accounting for oil and natural gas producing
      activities is followed. Acquisition costs are capitalized when incurred. Other
      oil and natural gas exploration costs, excluding the costs of drilling
      exploratory wells, are charged to expense as incurred. The costs of drilling
      exploratory wells are capitalized pending the determination of whether the
      wells
      have discovered proved commercial reserves. If proved commercial reserves have
      not been found, exploratory drilling costs are expensed to dry-hole expense.
      Costs to develop proved reserves, including the costs of all development wells
      and related facilities and equipment used in the production of crude oil and
      natural gas, are capitalized. Expenditures for ongoing repairs and maintenance
      of producing properties are expensed as incurred.





Upon
      the
      sale or retirement of a proved property (i.e. a producing well), the cost and
      related accumulated depletion and amortization will be eliminated from the
      property accounts, and the resultant gain or loss is recognized. On the sale
      or
      retirement of an unproved property, gain or loss on the sale is recognized.
      It
      is not the Manager’s intention to sell any of the Fund’s property interests.





Capitalized
      acquisition costs of producing oil and natural gas properties after recognizing
      estimated salvage values are depleted by the unit-of-production method.





As
      of
      December 31, 2006 and 2005, approximately $0.7 million and $0.5 million was
      recorded in due to operators, respectively, related to the acquisition of oil
      and gas property. In 2006, the Fund paid the December 31, 2005 due to operators
      balance.





**Revenue
      Recognition and Production Receivable**


Oil
      and
      natural gas sales are recognized when delivery is made by the Operator to the
      purchaser and title is transferred (i.e. production has been delivered to a
      pipeline or transport vehicle). At the time of transfer a production receivable
      is recorded. For the years ended December 31, 2006, the Fund earned revenue
      approximating $7.8 million. The Fund earned no revenue in 2005 and
      2004.





The
      volume of oil and natural gas sold on the Fund’s behalf may differ from the
      volume of oil and natural gas to which the Fund is entitled. The Fund will
      account for such oil and natural gas production imbalances by the entitlements
      method. Under the entitlements method, the Fund will recognize a receivable
      from
      other working interest owners for volumes oversold by other working interest
      owners. For volumes oversold by the Fund, a payable to other working interest
      owners will be recorded. As of December 31, 2006 and 2005, there were no
      material oil or natural gas balancing arrangements between the Fund and other
      working interest owners.





F-7


**Syndication
      Costs**


Direct
      costs associated with offering the Fund’s shares including professional fees;
      selling expenses and administrative costs relating to broker-dealer
      relationships, payable to the Manager, an affiliate of the Manager and outside
      brokers are reflected as a reduction of shareholders’ capital.





**Asset
      Retirement Obligations**


For
      oil
      and natural gas properties, there are obligations to perform removal and
      remediation activities when the properties are retired. When a project reaches
      drilling depth and is determined to be either proved or dry, an asset retirement
      obligation is incurred. Plug and abandonment costs associated with unsuccessful
      projects are expensed as dry-hole costs.





**($
                  Thousands)**
              
              **December
                  31,****Asset
                  Retirement Obligations:**
              
              **2006**
              
              **2005****Balance
                  - Beginning of period**
              
              $
              23
              
              $
              -Liabilities
                  incurred
              
              
              501
              
              
              240Liabilities
                  settled
              
              
              (307
              )
              
              (217
              )Accretion
                  expense
              
              
              8
              
              
              -**Balance
                  - End of period**
              
              $
              225
              
              $
              23


**Impairment
      of Long-Lived Assets**


In
      accordance with the provisions of SFAS No. 144, “Accounting for the Impairment
      of Long-Lived Assets”, long-lived assets, such as oil and natural gas
      properties, are evaluated when events or changes in circumstances indicate
      the
      carrying value of such assets may not be recoverable. The determination of
      whether impairment has occurred is made by comparing the carrying values
      of long-lived assets to the estimated future undiscounted cash
      flows  attributable
      to the asset. The impairment loss recognized is the excess of the carrying
      value
      over the future discounted cash flows attributable to the asset or the estimated
      fair value of the asset.  For the years ended December 31,
      2006 and 2005 and for the period August 2, 2004 (Inception) through December
      31,
      2004, the Fund had no impairments of long-lived assets.





**Depletion
      and Amortization**


Depletion
      and amortization of the cost of proved oil and natural gas properties are
      calculated using the units of production method. Proved developed reserves
      are
      used as the base for depleting the cost of successful exploratory drilling
      and
      development costs. The sum of proved developed and proved undeveloped reserves
      is used as the base for depleting (or amortizing) leasehold acquisition costs,
      the costs to acquire proved properties and platform and pipeline costs. As
      of December 31, 2006 and 2005, the Fund had recorded accumulated depletion
      and
      amortization of approximately $4.1 million and nil, respectively.





**Income
      Taxes**


No
      provision is made for income taxes in the financial statements. Because the
      Fund
      is a limited liability corporation, the income or losses are passed through
      and included in the tax returns of the individual shareholders.





F-8


**Cash
      and cash equivalents**


All
      highly liquid investments with maturities when purchased of three months or
      less
      are considered as cash and cash equivalents. At times, bank deposits may be
      in
      excess of federal insured limits. As of December 31, 2006 and December 31,
      2005,
      respectively, bank balances exceeded federally insured limits by approximately
      $7.3 million and $43.3 million, respectively. The Fund maintains bank deposits
      with accredited financial institutions to mitigate such risk.





**Salvage
      Fund**


The
      Fund
      deposits in a separate interest-bearing account, or a salvage fund, money to
      provide for dismantling production platforms and facilities, plugging and
      abandoning the wells and removing the platforms, facilities and wells after
      their useful lives, in accordance with applicable federal and state laws and
      regulations. Interest
      earned on the account will become part of the salvage fund, there are no legal
      restrictions on the withdrawal of the salvage fund.




**Short-term
      investments in marketable securities**


At
      times
      the Fund may purchase short-term investments comprised of US Treasury Notes
      with
      maturities greater than three months and as such are considered held-to-maturity
      investments. Held-to-maturity securities are those investments that the Fund
      has
      the ability and intent to hold until maturity. Held-to-maturity investments
      are
      recorded at cost plus accrued income, adjusted for the amortization of premiums
      and discounts, which approximate market value. Interest income is accrued as
      earned. Held to maturity investments of approximately $16.7 million including
      the salvage fund as of December 31, 2006 matured in February 2007. There
      were no held to maturity investments as of December 31, 2005.





**Income
      and Expense Allocation**


Profits
      and losses are to be allocated 85% to shareholders in proportion to their
      relative capital contributions and 15% to the Manager, except for certain
      expenses, such as dry-hole costs and fiduciary fees, and interest income, which
      are allocated 99% to shareholders and 1% to the Manager.




**3.**
            **Recent
                Accounting Standards**





In
      February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      159, “The Fair Value Option for Financial Assets and Financial Liabilities”
(“SFAS No. 159”), which permits entities to measure many financial instruments
      and certain other items at fair value that are not currently required to be
      measured at fair value. An entity would report unrealized gains and losses
      on
      items for which the fair value option has been elected in earnings at each
      subsequent reporting date. The objective is to improve financial reporting
      by
      providing entities with the opportunity to mitigate volatility in reported
      earnings caused by measuring related assets and liabilities differently without
      having to apply complex hedge accounting provisions. The decision about whether
      to elect the fair value option is applied instrument by instrument, with a
      few
      exceptions; the decision is irrevocable; and it is applied only to entire
      instruments and not to portions of instruments. The statement requires
      disclosures that facilitate comparisons (a) between entities that choose
      different measurement attributes for similar assets and liabilities and (b)
      between assets




F-9


and
      liabilities in the financial statements of an entity that selects different
      measurement attributes for similar assets and liabilities. SFAS No. 159 is
      effective for financial statements issued for fiscal years beginning after
      November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
      year provided the entity also elects to apply the provisions of SFAS No. 157,
      “Fair Value Measurements, (“SFAS 157”). Upon implementation, an entity shall
      report the effect of the first remeasurement to fair value as a
      cumulative-effect adjustment to the opening balance of Retained Earnings. Since
      the provisions of SFAS 159 are applied prospectively, any potential impact
      will
      depend on the instruments selected for fair value measurement at the time of
      implementation. The Fund does not believe that its financial position, results
      of operations or cash flows will be impacted by the adoption of SFAS No.
      159.





In
      September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS
      No. 157") which applies under most other accounting pronouncements that require
      or permit fair value measurements.  SFAS No. 157 provides a common
      definition of fair value as the price that would be received to sell an asset
      or
      paid to transfer a liability in a transaction between market participants.
       The new standard also provides guidance on the methods used to measure
      fair value and requires expanded disclosures related to fair value measurements.
        SFAS No. 157 is effective for financial statements issued for fiscal
      years beginning after November 15, 2007.  The Fund does not expect this
      guidance to have a material impact on the financial
      statements.





In
      September 2006, the SEC Staff issued Staff Accounting Bulletin (“SAB”) No. 108,
“Considering the Effects of Prior Year Misstatements when Quantifying
      Misstatements in Current Year Financial Statements,” (“SAB No. 108”) in an
      effort to address diversity in the accounting practice of quantifying
      misstatements and the potential for improper amounts on the balance sheet.
      Prior
      to the issuance of SAB No. 108, the two methods used for quantifying the effects
      of financial statement errors were the rollover and iron curtain methods. Under
      the rollover method, the primary focus is the income statement, including the
      reversing effect of prior year misstatements. The iron curtain method focuses
      on
      the effect of correcting the ending balance sheet, with less importance on
      the
      reversing effects of prior year errors in the income statement. SAB No. 108
      establishes a dual approach which requires the quantification of the effect
      of
      financial statement errors on each financial statement, as well as related
      disclosures. Public companies are required to record the cumulative effect
      of
      initially adopting the dual approach method in the first year ending after
      November 16, 2006 by recording any necessary corrections to asset and liability
      balances with an offsetting adjustment to the opening balance of retained
      earnings. The use of this cumulative effect transition method also requires
      detailed disclosures of the nature and amount of each error being corrected
      and
      how and when they arose. The Fund has adopted the provisions of SAB No. 108
      and
      there was no impact to its financial position, results of operations and cash
      flows as a result of this pronouncement.





**4.**
            **Unproved
                Properties - Capitalized Exploratory Well
                Costs**





Leasehold
      acquisition and exploratory drilling costs are capitalized pending determination
      of whether the well has found proved reserves. Unproved properties are assessed
      on a quarterly basis by evaluating and monitoring if sufficient progress is
      made
      on assessing the reserves. Capitalization costs are expensed as dry-hole costs
      in the event that reserves are not found or are not in sufficient quantities
      to
      complete the well and develop the field. Dry-hole costs were approximately
      $6.4
      million, $4.1 million and $3.9 million, respectively, for the years ended
      December 31, 2006 and 2005 and for the period August 2, 2004 (Inception) through
      December 31, 2004, respectively.





The
      following table reflects the net changes in unproved properties as of December
      31, 2006 and 2005. As of December 31, 2006 and 2005, the Fund had no capitalized
      exploratory well costs greater than one year.





F-10




**($
                  in thousands)**
              
              **Year
                  endedDecember 31,****Exploratory
                  Drilling Costs:**
              
              **2006**
              
              **2005****Balance
                  - Beginning of period**
              
              $
              465
              
              $
              -Additions
                  to capitalized exploratory well costs pending the
                determination
                  of proved reserves
              
              
              5,162
              
              
              7,517Reclassification
                  to proved properties based on the
                determination
                  of proved reserves
              
              
              -
              
              
              (7,052
              )Capitalized
                  exploratory well costs charged to dry-hole costs
              
              
              (272
              )
              
              -**Balance
                  - End of period**
              
              $
              5,355
              
              $
              465




**5.**
            **Distributions**





Distributions
      to shareholders are allocated in proportion to the number of shares
      held.





The
      Manager will determine whether available cash from operations, as defined in
      the
      Fund’s LLC agreement, is to be distributed. Such distribution would be allocated
      85% to the shareholders and 15% to the Manager, as defined in the Fund’s LLC
      agreement





Available
      cash from dispositions, as defined in the Fund's LLC agreement, will be paid
      99%
      to shareholders and 1% to the Manager until the shareholders have received
      total
      distributions equal to their capital contributions. After shareholders have
      received distributions equal to their capital contributions, 85% of available
      cash from dispositions will be distributed to shareholders and 15% to the
      Manager.





The
      shareholders received distributions of approximately $4.7 million for the year
      ended December 31, 2006.





The
      Manager received distributions of approximately $0.8 million for the year ended
      December 31, 2006.





There
      were no distributions in 2005 or for the period August 2, 2004 (Inception)
      through December 31, 2004.





**6.**
            **Related
                Parties**





The
      Manager was paid a one time investment fee of 4.5% of initial capital
      contributions. Fees are payable for services of investigating and evaluating
      investment opportunities and effecting transactions when the capital
      contribution is made. Investment fees of approximately $3.6 million were paid
      for the period August 2, 2004 (Inception) through December 31, 2004. There
      were
      no investment fees in 2006 and 2005.





The
      Fund’s Agreement provides that the Manager render management,
      administrative and advisory services. For such services, the Manager receives
      an
      annual management fee, payable monthly, of 2.5% of total capital contributions.
      Management fees of approximately $1.9 million, $2.0 million and $0.5 million
      were incurred and paid for the years ended December 31, 2006 and 2005 and for
      the period August 2, 2004 (Inception) through December 31, 2004, respectively. In
      September 2006, the Manager changed its policy regarding the 2.5% annual
      management fee. Effective September 1, 2006, the annual management fee,
      payable monthly, will be equal to 2.5% of total shareholder capital
      contributions, net of cumulative dry-hole expenses incurred by the
      Fund.





F-11


From
      time
      to time, short-term payables and receivables, which do not bear interest, arise
      from transactions with affiliates in the ordinary course of business. As of
      December 31, 2006 and 2005, nil was due to or from affiliates.




None
      of
      the compensation to be received by the Manager has been derived as a result
      of
      arm's length negotiations.




The
      Fund
      has working interest ownership in certain projects to acquire and develop oil
      and natural gas projects with other entities that are likewise managed by the
      Manager.





**7.**
            **Fair
                Value of Financial Instruments**





As
      of
      December 31, 2006 and 2005, the carrying value of cash and cash
      equivalents, short term investments in marketable securities, and
      salvage fund approximate fair value.





**8.**
            **Commitments
                and Contingencies**





**Environmental
      Considerations**


The
      exploration for and development of oil and natural gas involves the extraction,
      production and transportation of materials which, under certain conditions,
      can
      be hazardous or cause environmental pollution problems. The Manager and the
      Operators are continually taking action they believe appropriate to satisfy
      applicable federal, state and local environmental regulations and do not
      currently anticipate that compliance with federal, state and local environmental
      regulations will have a material adverse effect upon capital expenditures,
      results of operations or the competitive position of the Fund in the oil and
      natural gas industry. However, due to the significant public and governmental
      interest in environmental matters related to those activities, the Manager
      cannot predict the effects of possible future legislation, rule changes, or
      governmental or private claims. As of December 31, 2006  and
      2005,
      there were no known environmental issues that required the Fund to record a
      liability.





**Insurance
      Coverage**


The
      Fund
      is subject to all risks inherent in the exploration for and development of
      oil
      and natural gas. Insurance coverage as is customary for entities engaged in
      similar operations is maintained, but losses may occur from uninsurable risks
      or
      amounts in excess of existing insurance coverage. The occurrence of an event
      which is not insured or not fully insured could have an adverse impact upon
      earnings and financial position. Moreover, insurance is obtained as a package
      covering all of the Manager’s investment programs. Claims made by other such
      programs can reduce or eliminate insurance for the Fund.





The
      Fund
      records receivables for insured costs when the expected insurance proceeds
      are probable and reasonably estimable.





**9.**
            **Information
                About Oil and Natural Gas Producing
                Activities**





In
      accordance with Statement of Financial Accounting Standards No. 69,
“Disclosures About Oil and Gas Producing Activities,” this section provides
      supplemental information on oil and natural gas exploration and producing
      activities of the Fund.





The
      Fund
      is engaged solely in oil and natural gas activities, all of which are located
      in
      the United States offshore waters of Texas, Louisiana and Alabama in the Gulf
      of
      Mexico.





F-12




**Table
                  I - Capitalized Costs Related to Oil and Gas Exploration and Producing
                  Activities****(in
                  thousands)****December
                  31,****2006**
              
              **2005**Proved
                  oil and gas properties
              
              $
              22,163
              
              $
              7,052Unproved
                  oil and gas properties
              
              
              5,355
              
              
              465Advances
                  to operators for working interests and expenditures
              
              
              -
              
              
              4,366Total
                  oil and gas properties
              
              
              27,518
              
              
              11,883Accumulated
                  depletion and amortization - proved properties
              
              
              (4,100
              )
              
              -Oil
                  and gas properties - net capitalized costs
              
              $
              23,418
              
              $
              11,883
   **Table
                    II - Costs Incurred in Exploration, Property Acquisitions and
                    Development****(in
                    thousands)****For
                    the year ended December 31,**
                
                **For
                    the period August 2, 2004
                    (Inception) through December 31,****2006**
                
                **2005**
                
                **2004**Exploratory
                    drilling costs - capitalized
                
                $
                20,273
                
                $
                11,883
                
                $
                -Exploratory
                    drilling costs - expensed
                
                
                1,778
                
                
                4,055
                
                
                3,890Geological
                    costs
                
                
                5
                
                
                200
                
                
                22$
                22,056
                
                $
                16,138
                
                $
                3,912
  
 **Table
                  III - Reserve Quantity Information (Unaudited)**Oil
                  and gas reserves of the Fund have been estimated by an independent
                  petroleum engineer for the years ended December 31, 2006 and 2005.
                  The
                  Fund had no proved developed and undeveloped reserves prior to
                  2005. The
                  reserve estimates for December 31, 2006 and 2005 were based on
                  estimated
                  future reserves as of September 30, 2006 and 2005, respectively,
                  further
                  adjusted for fourth quarter production. These reserves have been
                  prepared
                  in compliance with the Securities and Exchange Commission
                  rules.Proved
                  reserves are classified as either developed or undeveloped. Proved
                  developed reserves are the quantities expected to be recovered
                  through
                  existing wells with existing equipment and operating
                  methods.


**United
                  States****For
                  the year ended December 31,****2006**
              
              **2005****Oil**
                **(BBLS)**
              
              **Gas**
                **(MCF)**
              
              **Oil**
                **(BBLS)**
              
              **Gas**
                **(MCF)****Proved
                  undeveloped reserves:****Beginning
                  of Year**
              
              
              38,890
              
              
              4,351,458
              
              
              -
              
              
              -Discoveries
              
              
              542,991
              
              
              4,524,929
              
              
              38,890
              
              
              4,351,458Revisions
                  of previous estimates (1)
              
              
              44,136
              
              
              94,226
              
              
              -
              
              
              -Production
              
              
              (28,764
              )
              
              (890,340
              )
              
              -
              
              
              -**End
                  of Year**
              
              
              597,253
              
              
              8,080,273
              
              
              38,890
              
              
              4,351,458




(1)
                    Due to the inherent uncertainties and the limited nature of recovery
                    data,
                    estimates of reserve information are subject to change as additional
                    information becomes available.
 F-13
   **Table
                    IV - Standardized Measure of Discounted Future Net Cash Flows
                    Related to
                    Proved Oil****and
                    Gas Reserves (Unaudited)****(in
                    thousands)**Summarized
                    in the following table is information for the Fund with respect
                    to the
                    standardized measure of discounted future net cash flows relating
                    to
                    proved oil and gas reserves. Future cash inflows are computed
                    by applying
                    year-end prices of oil and gas relating to the Fund's proved
                    reserves to
                    the year-end quantities of those reserves. Future production,
                    development,
                    site restoration and abandonment costs are derived based on current
                    costs
                    assuming continuation of existing economic conditions.
  **For
                    the year ended December 31,****2006**
                
                **2005**Future
                    estimated revenue
                
                $
                82,054
                
                $
                46,300Future
                    estimated production costs
                
                
                (2,670
                )
                
                (1,202
                )Future
                    estimated development costs
                
                
                (7,217
                )
                
                (3,599
                )Future
                    net cash flows
                
                
                72,167
                
                
                41,49910%
                    annual discount for estimated timing of cash flows
                
                
                (22,509
                )
                
                (14,359
                )Standardized
                    measure of discounted future estimated net cash flows
                
                $
                49,658
                
                $
                27,140
   **Table
                    V - Changes in the Standardized Measure of Discounted Future
                    Net Cash
                    Flows Related****to
                    Proved Oil and Gas Reserves (Unaudited)**The
                    changes in present values between years, which can be significant,
                    reflect
                    changes in estimated proved reserve quantities and prices and
                    assumptions
                    used in forecasting production volumes and
                    costs.
  **For
                    the year ended December 31,****2006**
                
                **2005
                    (1)**Standardized
                    measure beginning of the year
                
                $
                27,140
                
                $
                -Sales
                    of oil and gas production, net of production costs
                
                
                (6,913
                )
                
                -Net
                    changes in prices and production costs
                
                
                (11,678
                )
                
                -Extensions,
                    discoveries, and improved recovery and
                  techniques,
                    less related costs
                
                
                34,820
                
                
                26,462Development
                    costs incurred during the period
                
                
                1,966
                
                
                -Revision
                    of development costs
                
                
                -
                
                
                -Revision
                    of previous reserve quantities estimate
                
                
                886
                
                
                -Accretion
                    of discount
                
                
                2,878
                
                
                678Timing
                    and other
                
                
                559
                
                
                -Standard
                    measure end of the year
                
                $
                49,658
                
                $
                27,140
  (1)
                    Our initial standardized measure of discounted future net cash
                    flows
                    related to proved oil and gas reserves was performed as of September
                    30,
                    2005 and was adjusted for fourth quarter 2005
                    production.It
                    is necessary to emphasize that the data presented should not
                    be viewed as
                       representing the expected cash flow from, or current value
                    of, existing
                    proved reserves since the computations are based on a large number
                    of
                    estimates and arbitrary assumptions. Reserve quantities cannot
                    be measured
                    with revision and their estimation requires many judgmental determinations
                    and frequent revisions. The required projection of production
                    and related
                    expenditures over time requires further estimates with respect
                    to pipeline
                    availability, rates of demand and governmental control. Actual
                    future
                    prices and costs are likely to be substantially different from
                    the current
                    prices and costs utilized in the computation of reported amounts.
                    Any
                    analysis or evaluation of the reported amounts should give specific
                    recognition to the computational methods utilized and the limitation
                    inherent therein.


F-14





**SIGNATURES**





Pursuant
      to the requirements 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.




**RIDGEWOOD
                ENERGY M FUND, LLC**Date:
              April 10, 2007
            By:
            /s/ ROBERT
              E. SWANSONRobert E. SwansonChief
                Executive Officer
              (Principal
                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 **.**





**Signature**
            **Capacity**
            **Date**/s/
                ROBERT E. SWANSON
              Robert
                E. Swanson
            Chief
                Executive Officer
              (Principal
                Executive Officer)
            April
                10, 2007/s/
                KATHLEEN P. MCSHERRY
              Kathleen
                P. McSherry
            Senior
                Vice President and Chief Financial Officer (Principal Accounting
                Officer)
            April
                10, 2007








53