<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to N/A
--- ---
Commission File No. 0-15766
TECHNOLOGY FUNDING SECURED INVESTORS I
----------------------------------------------------
(Exact name of Registrant as specified in its charter)
CALIFORNIA 94-2944800
------------------------------ ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2000 Alameda de las Pulgas, Suite 250
San Mateo, California 94403
- --------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(415) 345-2200
--------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
No active market for the units of limited partnership interests
("Units") exists, and therefore the market value of such Units cannot be
determined.
<PAGE>
I. FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
- --------------
<TABLE>
<CAPTION>
(unaudited)
September 30, December 31,
1996 1995
------------- -------------
<S> <C> <C>
ASSETS
Investments:
Secured notes receivable, net
(cost basis of $741,412 and
$832,586 in 1996 and 1995,
respectively) $ 295,412 577,586
Equity investments (cost basis
of $259,697 and $265,947 in
1996 and 1995, respectively) 475,361 373,835
--------- ---------
Total investments 770,773 951,421
Cash and cash equivalents 414,126 941,985
Other assets 11,677 7,565
--------- ---------
Total $ 1,196,576 1,900,971
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 66,767 30,700
Due to related parties 7,785 420,507
Other liabilities 37,349 59,181
--------- ---------
Total liabilities 111,901 510,388
Commitments and Contingencies
(Notes 2 and 7)
Partners' capital:
Limited Partners
(Units outstanding of
111,101 in both 1996 and 1995) 1,360,085 1,580,542
General Partners (45,074) (42,847)
Net unrealized fair value (decrease)
increase from cost:
Secured notes receivable (446,000) (255,000)
Equity investments 215,664 107,888
--------- ---------
Total partners' capital 1,084,675 1,390,583
--------- ---------
Total $ 1,196,576 1,900,971
========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF OPERATIONS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
----------------------------- -------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income:
Secured notes receivable interest $ 1,125 1,430 3,850 72,722
Short-term investment interest 5,546 12,774 19,871 31,327
------- --------- --------- ---------
Total income 6,671 14,204 23,721 104,049
Costs and expenses:
Management fees 5,718 9,383 19,942 31,116
Other investment expenses 29,040 -- 29,040 --
Operating expenses:
Lending operations and investment
management 4,302 19,685 12,804 67,289
Administrative and investor
services 37,212 35,580 140,550 125,675
Computer services 9,106 12,977 34,636 43,236
Professional fees 7,994 12,311 34,622 33,322
------- --------- --------- ---------
Total operating expenses 58,614 80,553 222,612 269,522
------- --------- --------- ---------
Total costs and expenses 93,372 89,936 271,594 300,638
------- --------- --------- ---------
Net operating loss (86,701) (75,732) (247,873) (196,589)
Net realized gain from sales
of equity investments -- 221,102 30,189 539,299
Realized losses from investment
write-downs -- (5,000) (5,000) (2,963,247)
Recoveries from investments previously
written off -- -- -- 58,575
------- --------- --------- ---------
Net realized (loss) income (86,701) 140,370 (222,684) (2,561,962)
Change in net unrealized
fair value:
Secured notes receivable -- 26,000 (191,000) (75,000)
Equity investments 27,856 (222,507) 107,776 2,295,782
------- --------- --------- ---------
Net loss $ (58,845) (56,137) (305,908) (341,180)
======= ========= ========= =========
Net realized (loss) income per Unit $ (1) 1 (2) (22)
======= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Nine Months Ended September 30,
--------------------------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Interest received $ 23,721 118,348
Cash paid to vendors (87,944) (61,421)
Cash received from affiliated
partnerships 3,977 1,300
Cash paid to related parties (619,126) (209,018)
Reimbursement of collection expenses
from a portfolio company 28,900 --
--------- -------
Net cash used by operating activities (650,472) (150,791)
--------- -------
Cash flows from investing activities:
Secured notes receivable issued (50,902) (178,500)
Repayments of secured notes receivable 142,076 202,150
Proceeds from sales of equity
investments 31,439 554,330
Recoveries from investments previously
written off -- 58,575
Purchase of equity investments -- (960)
--------- -------
Net cash provided by investing
activities 122,613 635,595
--------- -------
Cash flows from financing activities:
Repurchase of limited partnership
interest -- (5,472)
--------- -------
Net cash used by financing activities -- (5,472)
--------- -------
Net (decrease) increase in cash and cash
equivalents (527,859) 479,332
Cash and cash equivalents at beginning
of year 941,985 534,644
--------- --------
Cash and cash equivalents at
September 30 $ 414,126 1,013,976
========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (unaudited) (continued)
- -----------------------------------------------
<TABLE>
<CAPTION>
For the Nine Months Ended September 30,
--------------------------------------
1996 1995
---- ----
<S> <C> <C>
Reconciliation of net loss
to net cash used by
operating activities:
Net loss $ (305,908) (341,180)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Net realized gain from
sales of equity investments (30,189) (539,299)
Recoveries from investments
previously written off -- (58,575)
Realized losses from investment
write-downs 5,000 2,963,247
Change in net unrealized fair value:
Secured notes receivable 191,000 75,000
Equity investments (107,776) (2,295,782)
Amortization of discount related
to warrants -- (3,583)
Changes in:
Accounts payable and accrued expenses 36,067 (15,843)
Due to/from related parties (412,722) (1,259)
Other liabilities (21,832) (2,370)
Other assets (4,112) 49,245
Other changes, net -- 19,608
--------- ---------
Net cash used by operating activities $ (650,472) (150,791)
========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (unaudited)
- ----------------------------------------
1. General
-------
In the opinion of the Managing General Partner, the Balance Sheets as of
September 30, 1996, and December 31, 1995, and the related Statements of
Operations for the three and nine months ended September 30, 1996 and
1995, and Statements of Cash Flows for the nine months ended September
30, 1996 and 1995, reflect all adjustments which are necessary for a
fair presentation of the financial position, results of operations and
cash flows for such periods. These statements should be read in
conjunction with the Annual Report on Form 10-K for the year ended
December 31, 1995. The following notes to financial statements for
activity through September 30, 1996, supplement those included in the
Annual Report on Form 10-K. Certain 1995 balances have been
reclassified to conform with the 1996 financial statement presentation.
Allocation of income and loss to Limited and General Partners is based
on cumulative income and loss. Adjustments, if any, are reflected in
the current quarter balances.
2. Related Party Transactions
--------------------------
Related party costs are included in costs and expenses shown on the
Statements of Operations. Related party costs for the nine months ended
September 30, 1996 and 1995, were as follows:
<TABLE>
<S> <C> <C>
1996 1995
---- ----
Management fees $ 19,942 31,116
Reimbursable operating expenses 186,462 176,643
</TABLE>
Certain reimbursable expenses have been allocated and accrued based upon
interim estimates prepared by the Managing General Partner and are
adjusted to actual costs periodically. At September 30, 1996, and
December 31, 1995, due to related parties totaled $7,785 and $420,507,
respectively.
Within the normal course of business, the Partnership participates with
affiliated partnerships in secured notes receivable issued to
nonaffiliated borrowing companies. The Partnership may also
reparticipate such secured notes receivable amongst affiliated
partnerships to meet business needs. At December 31, 1995, the amount
due from affiliated partnerships was $3,977 (included in other assets).
This amount was received from such affiliated partnerships in the
following quarter.
3. Net Realized Income (Loss) Per Unit
-----------------------------------
Net realized income (loss) per Unit is calculated by dividing total net
realized income (loss) allocated to the Limited Partners by the weighted
average number of Limited Partner Units outstanding for the nine months
ended September 30, 1996 and 1995, of 111,101 and 115,445, respectively.
4. Equity Investments
------------------
A complete listing of the Partnership's equity investments at December
31, 1995, is included in the 1995 Annual Report. Activity from January
1 through September 30, 1996, consisted of
<TABLE>
<CAPTION>
January 1 -
September 30, 1996
------------------
Investment Cost Fair
Industry/Company Date Position Basis Value
- ---------------- ---------- -------- ----- -----
<S> <C> <C> <C> <C>
Balance at January 1, 1996 $ 265,947 373,835
--------- -------
Significant changes:
WARRANTS:
Biotechnology
- -------------
Hybridon, Inc. 03/91 3,572 Common
shares at $3.50;
exercised 01/96 (1,250) (16,074)
Medical
- -------
Hemocleanse, Inc. 01/92 47,526 Common
shares at $.50;
expiring 01/97 0 118,815
STOCKS:
Industrial/Business Automation
- ------------------------------
Cyclean, Inc. 09/94- 51,024 Series D
04/96 Preferred shares 0 (124,791)
Cyclean of Los 03/95 Class A LLC Unit-
Angeles, LLC 11% ownership 0 (2,816)
Medical
- -------
Hemocleanse, Inc. 03/95 20,999 Common
shares 0 43,677
Microelectronics
- ----------------
Celeritek, Inc. 05/94 13,847 Common
shares 0 65,453
Retail/Consumer Products
- ------------------------
S-TRON 05/93 Subordinated note,
$390,000 principal
amount (0) (0)
S-TRON 05/93 390,000 Common
shares (0) (0)
S-TRON 05/93 3,237,000 Series
1 & 2 Preferred
shares (0) (0)
--------- -------
Total significant changes (1,250) 84,264
Other changes, net (5,000) 17,262
--------- -------
Total equity investments at September 30, 1996 $ 259,697 475,361
========= =======
</TABLE
Marketable Equity Securities
- ----------------------------
At September 30, 1996, and December 31, 1995, marketable equity
securities had aggregate costs of $101,591 and $78,845, respectively,
and aggregate market values of $282,370 and $145,132, respectively. The
unrealized gains at September 30, 1996, and December 31, 1995, did not
include any gross losses.
Celeritek, Inc.
- ---------------
The Partnership recorded an increase in fair value of $65,453 to reflect
the unrestricted market price at September 30, 1996.
Cyclean, Inc./Cyclean of Los Angeles, LLC
- -----------------------------------------
During the second quarter of 1996, the Partnership received a stock
dividend of 6,297 Series D Preferred shares. Subsequently, the Managing
General Partner determined that the fair value of the Partnership's
investment has declined and accordingly, the Partnership recorded a
$127,607 decrease in fair value at September 30, 1996.
Hemocleanse, Inc.
- -----------------
The Partnership recorded a total increase in fair value of $162,492 for
its warrant and common stock investment, based on the valuation set at
the most recent round of financing in which third parties participated.
Hybridon, Inc.
- --------------
In January of 1996, Hybridon, Inc., completed its initial public
offering. The Partnership exercised its warrant holdings without cash
and received 2,532 shares of common stock, which were subsequently sold
for total proceeds of $22,549. The total realized gain from these
transactions was $21,299.
S-TRON
- ------
The company was unsuccessful in its efforts to obtain a major government
contract; as a result, company operations ceased during March of 1996.
This investment, which had previously been written off, is no longer
held by the Partnership.
Other Equity Investments
- ------------------------
In May of 1996, the Partnership sold 6,773 Photon Dynamics common shares
borrowed from an outside brokerage firm and subsequently closed its open
position with purchases on the open market. These transactions resulted
in a realized gain of $8,890 and the Partnership maximized its gain
based upon an evaluation of the prevailing market conditions.
5. Secured Notes Receivable, Net
-----------------------------
Activity from January 1, 1996, through September 30, 1996, consisted of:
</TABLE>
<TABLE>
<S> <C>
Balance at January 1, 1996 $ 577,586
1996 activity:
Secured notes receivable issued 50,902
Repayment of secured notes receivable (142,076)
Increase in allowance for loan losses (191,000)
-------
Total secured notes receivable, net,
at September 30, 1996 $ 295,412
=======
</TABLE>
The Partnership had no accrued interest at September 30, 1996, and
December 31, 1995.
Changes in the allowance for loan losses were as follows:
<TABLE>
<S> <C>
Balance at January 1, 1996 $255,000
Change in net unrealized fair value
of secured notes receivable 191,000
-------
Balance at September 30, 1996 $446,000
=======
</TABLE>
The allowance for loan losses is adjusted quarterly based upon changes
to the portfolio size and risk profile. Although the allowance is
established by evaluating individual debtor repayment ability, the
allowance represents the Managing General Partner's assessment of the
portfolio as a whole.
Secured notes receivable of $741,412 and $832,586 were on nonaccrual
status due to uncertainty of certain borrowers' financial conditions at
September 30, 1996, and December 31, 1995, respectively. The Managing
General Partner continues to monitor the progress of these companies.
The fair value at September 30, 1996, reflected the Managing General
Partner's estimate of collectibility of these notes.
During the first quarter of 1996, the Partnership received approximately
$41,000 from a portfolio company in the medical industry to pay off its
principal balance. In addition, the Partnership was reimbursed $28,900
for legal, consulting, and other costs incurred in prior periods in the
defense of the Partnership's secured note rights through bankruptcy
court. The reimbursement was recorded as a reduction to lending
operations and investment management expense.
All notes are secured by specific assets of the borrowing company. The
interest rates on notes issued during the nine months ended September
30, 1996, ranged from 12% to 14%.
6. Cash and Cash Equivalents
-------------------------
At September 30, 1996, and December 31, 1995, cash and cash equivalents
consisted of:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Demand and brokerage accounts $ 2,401 --
Money market accounts 411,725 941,985
------- -------
Total $414,126 941,985
======= =======
</TABLE>
7. Commitments and contingencies
-----------------------------
The Partnership is a party to financial instruments with off-balance-
sheet risk in the normal course of its business. Generally, these
instruments are equipment financing commitments or accounts receivable
lines of credit that are outstanding but not currently fully utilized by
a borrowing company. As they do not represent current outstanding
balances, these unfunded commitments are properly not recognized in the
financial statements. At September 30, 1996, the Partnership had
unfunded commitments of $4,500 related to term note financing to an
existing borrowing company.
During the third quarter of 1996, the lawsuit discussed below was
dismissed. Other investment expenses of $29,040 recorded in the third
quarter of 1996 reflected the participated costs incurred by the
Partnership related to this legal action.
In June of 1996, a lawsuit was filed by a third party in the Los Angeles
County Superior Court against an affiliated partnership, the Managing
General Partner and certain of its officers, and Cyclean, Inc., a
portfolio company in the industrial/business automation industry. The
Partnership participated in investments to the portfolio company with
the affiliated partnership. The third party asserted claims for
interference with contractual relations against the defendants. The
plaintiff further alleged that the affiliated partnership agreed to
purchase its interest in an entity partially owned by the plaintiff and
sought unspecified damages against the affiliated partnership and its
affiliates.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations
-------------------------
Liquidity and Capital Resources
- -------------------------------
During the nine months ended September 30, 1996, net cash used by
operating activities totaled $650,472. The Partnership paid management
fees of $19,942 to the Managing General Partner, reimbursed related
parties for operating expenses of $599,184, and received $3,977 from
affiliated partnerships for net loan participations. Other operating
expenses of $87,944 were paid and interest income of $23,721 was
received. In addition, the Partnership received a collection expense
reimbursement of $28,900 from a portfolio company.
During the nine months ended September 30, 1996, the partnership issued
$50,902 in secured notes receivable mostly to portfolio companies in the
computers and computer equipment industry. Repayments of notes
receivable provided cash of $142,076 and proceeds from investment sales
totaled $31,439. As of September 30, 1996, the Partnership was
committed to fund $4,500 related to term note financing to an existing
borrowing company.
Each June, Limited Partners may tender their Units for repurchase by the
Partnership. The price paid for any Units tendered is subject to the
restrictions stated in the Partnership Agreement. As of September 30,
1996, requests to repurchase approximately 1,200 Units had been
received. The amount to be offered for the Unit repurchases is $10 per
Unit and will be paid in the fourth quarter of 1996.
Cash and cash equivalents at September 30, 1996, were $414,126.
Distributions will fluctuate in the future based upon loan payoffs
received and expected cash needed by the Partnership. Operating cash
reserves combined with interest income received on short-term
investments, proceeds from investment sales, and repayments of secured
notes receivable are expected to be sufficient to fund Partnership
operations through the next twelve months.
Results of Operations
- ---------------------
Current quarter compared to corresponding quarter in the preceding year
- -----------------------------------------------------------------------
Net losses were $58,845 and $56,137 for the three months ended September
30, 1996 and 1995, respectively. The slight change was substantially
due to a $221,102 decrease in net realized gain from sales of equity
investments, offset by an increase of $250,363 in net unrealized fair
value of equity investments.
No realized gain from sales of equity investments was recorded during
the three months ended September 30, 1996. During the same period in
1995, the Partnership recorded a net realized gain of $221,102 related
to the sale of its 3Com Corporation stock.
During the quarter ended September 30, 1996, the $27,856 increase in the
equity investment fair value was mainly due to portfolio companies in
the microelectronics and telecommunication industries. During the same
period in 1995, the $222,507 decrease was primarily due to sales of 3Com
Corporation stock as gains were realized.
Total operating expenses were $58,614 and $80,553 for the three months
ended September 30, 1996 and 1995, respectively. The decrease was
primarily attributable to lower lending operations and investment
management expenses as a result of lower overall portfolio activity.
Given the inherent risk associated with the business of the Partnership,
the future performance of the borrowing companies may significantly
impact the Partnership's future operations.
Current nine months compared to corresponding nine months in the
- ----------------------------------------------------------------
preceding year
- --------------
Net losses for the nine months ended September 30, 1996 and 1995, were
$305,908 and $341,180, respectively. The decrease in net loss was
primarily attributable to a $2,958,247 decrease in realized losses from
investment write-downs, mostly offset by a $2,188,006 decrease in the
change in net unrealized fair value of equity investments, a $509,110
decrease in net realized gain from sales of equity investments, and a
$116,000 decrease in the change in net unrealized fair value of secured
notes receivable.
During the nine months ended September 30, 1996, the $107,776 increase
in equity investment fair value was primarily due to increases in the
medical and microelectronics industries, partially offset by decreases
in industrial/business automation industry. In 1995, the $2,295,782
increase was primarily due to the write-downs of $2,963,247, mostly
related to portfolio companies in the medical and retail/consumer
product industries as these investments had been reflected with a fair
value less than cost.
During the nine months ended September 30, 1996, the Partnership
realized a gain of $30,189 mainly from the sale of Hybridon, Inc., and
the closed Photon Dynamics short sale. In 1995, the realized gain of
$539,299 primarily related to the sale of equity investments in IKOS
Systems, Inc., and 3Com Corporation.
The Partnership recorded decreases of $191,000 and $75,000 in the fair
value of secured notes receivable in 1996 and 1995, respectively, based
upon the levels of loan loss reserves deemed adequate by the Managing
General Partner at the respective quarter ends.
In 1996, secured notes receivable interest income was $3,850, compared
to $72,722 in 1995, which included nonrecurring warrant income of
$45,000 from the Integrated Network Corporation warrant redemption. The
1995 secured notes receivable interest income would have been $27,722
without such income. The decrease from $27,722 was primarily due to
lower interest-bearing notes receivable balances.
Total operating expenses were $222,612 and $269,522 for the nine months
ended September 30, 1996 and 1995, respectively. As explained in Note 5
to the financial statements, the 1996 operating expenses were reduced by
a $28,900 reimbursement of prior period collection expenses from a
portfolio company in the medical industry. Had the reimbursement not
been received, total operating expense in 1996 would have been $251,512.
The decrease from $251,512 was primarily due to lower lending operations
and investment management expenses from reduced overall portfolio
activities.
II. OTHER INFORMATION
Item 1. Legal Proceedings
As disclosed in Note 7 to the financial statements, the legal action
previously reported in the second quarter, 1996, Form 10-Q has been
dismissed.
Item 6. Exhibits and Reports on Form 8-K
(a) No reports on Form 8-K were filed by the Partnership during the
quarter ended September 30, 1996.
(b) Financial Data Schedule for the nine months ended and as of
September 30, 1996 (Exhibit 27).
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
TECHNOLOGY FUNDING SECURED INVESTORS I
By: TECHNOLOGY FUNDING INC.
Managing General Partner
Date: November 8, 1996 By: /s/Debbie A. Wong
-----------------------------------
Debbie A. Wong
Controller
<TABLE> <S> <C>
<ARTICLE>6
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FORM 10-Q AS OF SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER>1
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<PERIOD-TYPE> 9-MOS
<INVESTMENTS-AT-COST> 1,001,109
<INVESTMENTS-AT-VALUE> 770,773
<RECEIVABLES> 0
<ASSETS-OTHER> 11,677
<OTHER-ITEMS-ASSETS> 414,126
<TOTAL-ASSETS> 1,196,576
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 111,901
<TOTAL-LIABILITIES> 111,901
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,315,011
<SHARES-COMMON-STOCK> 111,101
<SHARES-COMMON-PRIOR> 111,101
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (230,336)
<NET-ASSETS> 1,084,675
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 23,721
<OTHER-INCOME> 0
<EXPENSES-NET> 271,594
<NET-INVESTMENT-INCOME> (247,873)
<REALIZED-GAINS-CURRENT> 25,189
<APPREC-INCREASE-CURRENT> (83,224)
<NET-CHANGE-FROM-OPS> (305,908)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (305,908)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 19,942
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 325,898
<AVERAGE-NET-ASSETS> 1,237,629
<PER-SHARE-NAV-BEGIN> 14
<PER-SHARE-NII> (2)
<PER-SHARE-GAIN-APPREC> 0 <F1>
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12
<EXPENSE-RATIO> 22
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>
A zero value is used since the change in net unrealized fair value is
not allocated to General Partners and Limited Partners as it is not
taxable. Only taxable gains or losses are allocated in accordance with
the Partnership Agreement.
</FN>
</TABLE>
