10-K 1 vc6q400.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Year Ended December 31, 2000 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. 814-139 TECHNOLOGY FUNDING VENTURE CAPITAL FUND VI, LLC. ------------------------------------------------ (Exact name of Registrant as specified in its charter) Delaware 94-3266666 ------------------------------- --------------------------------- (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) (650) 345-2200 -------------------------------------------------- (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Limited Liability Company Investor shares. Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants 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. [ ] No active market for the shares of the limited liability company investor shares (Shares) exists, and therefore the market value of such Shares cannot be determined. Documents incorporated by reference: Portions of the Prospectus of Technology Funding Venture Capital Fund VI, LLC, as revised June 4, 1998 (accession number 0000950133-98-002220), forming a part of the December 5, 1997 Pre-effective Amendment No. 1 to the Form N-2 Registration Statement No. 333-23913 dated July 11, 1997, filed pursuant to Rule 424(c) of the General Rules and Regulations under the Securities Act of 1933 are incorporated by reference in Parts I and III hereof. Forward-Looking Statements -------------------------- The Private Securities Litigation Reform Act of 1995 (the Act) provides a safe harbor for forward-looking statements made by or on behalf of the Fund. The Fund and its representatives may from time to time make written or oral statements that are "forward-looking", including statements contained in this report and other filings with the Securities and Exchange Commission, and reports to the Fund's shareholders and news releases. All statements that express expectations, estimates, forecasts and projections are forward- looking statements within the meaning of the Act. In addition, other written or oral statements which constitute forward-looking statements may be made by or on behalf of the Fund. Words such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates", "projects", "forecasts", "may", "should", variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in or suggested by such forward-looking statements. The Fund undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. PART I Item 1. BUSINESS ------ -------- Technology Funding Venture Capital Fund VI, LLC (the Fund) is a limited liability company organized under the laws of the State of Delaware in February 1997. Through April 25, 2000, the Fund was offering 1,000,000 shares in an aggregate amount of up to $100,000,000. The offering commenced on January 22, 1998, (the Commencement Date). The shares were being offered and sold through Technology Funding Securities Corporation (TFSC), a wholly owned subsidiary of TFI, and a registered member of the National Association of Securities Dealers, Inc. TFSC suspended the offering of shares of the Fund on April 25, 2000 with a total of 5,157 shares sold. The Fund's original contributed capital was $516,216, consisting of $515,700 from investors and $516 from Investment Managers, Technology Funding Ltd. (TFL) and Technology Funding Inc. (TFI). The Investment Managers do not own any shares. The small size of the Fund will make it more difficult than originally anticipated to achieve the investment objectives of the Fund. Therefore, the Directors are considering the feasibility of offering all investors a refund of the greater of their original capital contributions, plus interest, or their proportionate share of the Fund's net asset value, and are exploring all available options that would allow the Fund to accomplish that goal. Certain options being explored may require the approval of the Securities and Exchange Commission. There can be no assurance that the Directors will be successful in this effort. The uncertainties arising from these circumstances raise substantial doubt about the Fund's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties. The purpose of the Fund is to make venture capital investments in emerging growth companies and preserve investor capital through risk management and active involvement with such companies as described in the "Summary of the Offering" and "Business of the Fund" sections of the Prospectus dated June 4, 1998. The Fund has elected to be a business development company under the Investment Company Act of 1940, as amended (the Act), and operates as a non- diversified investment company as that term is defined in the Act. Additional characteristics of the Fund's business are discussed in the "Risk Factors" and "Conflicts of Interest" sections of the Prospectus, which sections are also incorporated herein by reference. The Fund will continue until December 31, 2007, subject to the right of the Directors to extend the term for up to two additional two- year periods, or until dissolution prior thereto. Item 2. PROPERTIES ------ ---------- The Registrant has no material physical properties. Item 3. LEGAL PROCEEDINGS ------ ----------------- There are no material pending legal proceedings to which the Registrant is party or of which any of its property is the subject, other than routine litigation incidental to the business of the Fund. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ------ --------------------------------------------------- No matter was submitted to a vote of the holders of Shares of the Fund during 2000. PART II Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED ------ ------------------------------------------------- STOCKHOLDER MATTERS ------------------- (a) There is no established public trading market for the Shares. (b) At December 31, 2000, there were 153 shareholders of record. (c) The Registrant, does not pay dividends. Distributions of cash and securities, however, may be made to the investors in the Fund pursuant to the Registrant's Operating Agreement. Item 6. SELECTED FINANCIAL DATA ------ -----------------------

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ------ ------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS ----------------------------------- Technology Funding Securities Corporation suspended the offering of shares of the Fund on April 25, 2000. The small size of the Fund will make it more difficult than originally anticipated to achieve the investment objectives of the Fund. Therefore, the Fund Directors are considering the feasibility of offering all Fund investors a refund of the greater of their original capital contributions, plus interest, or their proportionate share of the Fund's net asset value, and are exploring all available options that would allow the Fund to accomplish that goal. Certain options being explored may require the approval of the Securities and Exchange Commission. There can be no assurance that the Directors will be successful in this effort. The uncertainties arising from these circumstances raise substantial doubt about the Fund's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties. Financial Condition, Liquidity and Capital Resources ---------------------------------------------------- The fund operates as a business development company under the Investment Company Act of 1940 and makes venture capital investments in new and developing companies. The Fund's financial condition is dependent upon the success of the portfolio companies. There is no ready market for many of the Fund's investments. It is possible that some of its venture capital investments may be a complete loss or may be unprofitable and that others will appear likely to become successful, but may never realize their potential. The valuation of the Fund's investments in securities for which there are no available market quotes is subject to the estimate of the Directors of the Fund in accordance with the valuation guidance described in Note 1 to the financial statements. In the absence of readily obtainable market values, the estimated fair value of the Fund's investments may differ significantly from the values that would have been used had a ready market existed. For the year ended December 31, 2000, net cash used by operating activities totaled $33,202. The Fund received advances from the Investment Managers for operating expenses totaling $152,580 and paid $47,358 in compensation to Independent Directors. Payments to vendors for operating expenses totaled $138,424. During 2000, the Fund purchased equity investments of $31,613 in companies in the communications and medical/biotechnology industries. The Fund received proceeds of $70,100 from sales of investor shares and $65 from Investment Managers' capital contributions and paid $1,087 for organizational and distribution costs. Net funds released from restricted cash totaled $23,500. The Fund received advances of $16,700 from the Investment Managers for investment purchases. Cash and cash equivalents at December 31, 2000, were $55,292. The Investment Managers have made loans to the Fund to finance its recurring losses from on-going operations. The Fund has very limited cash resources and primarily illiquid assets. The Investment Managers are under no obligation to continue financing the Fund's operation and may elect to discontinue such support at any time during the remaining life of the Fund. Results of Operations --------------------- 2000 compared to 1999 --------------------- The net decrease in members' equity resulting from operations for the years ended December 31, 2000 and 1999, was $620,729 and $222,805, respectively. The increased loss is primarily due to an increase in the net unrealized depreciation of equity investments, an increase in realized losses from impairment write-downs on investments and increased operating expenses. Unrealized depreciation on equity investments was $177,161 at December 31, 2000, compared to unrealized appreciation on equity investments of $67,209 at December 31, 1999. During the year ended December 31, 2000, the $244,370 decrease in unrealized appreciation of equity investments was primarily attributable to a $170,721 decrease in fair value of equity investments to reflect the revisions to the valuation methodology discussed in Note 1 to the financial statements. The remaining decrease is due to unfavorable events and market conditions for portfolio companies in the communications and information technology industries. During 1999, the $67,209 increase in unrealized appreciation of equity investments was due to increases in portfolio companies in the communications and information technology industries. During 2000, the Fund recorded realized losses from impairment write-downs on investments of $59,997, which represents the Fund's total investment in Biex, Inc. Biex, Inc. suspended operations in November 2000 after it was unable to obtain additional financing. Operating expenses totaled $255,886 and $203,397 for the years ended December 31, 2000 and 1999, respectively. The increase is primarily due to increased professional fees. Given the inherent risk associated with the business of the Fund, the future sale of Fund shares and the performance of portfolio company investments may significantly impact future operations. 1999 compared to 1998 --------------------- The net decrease in members' equity resulting from operations for the years ended December 31, 1999 and 1998, was $222,805 and $96,994, respectively. The increased loss is primarily due to an increase in operating expenses and a charge for the cumulative effect of a change in accounting for organizational costs, partially offset by an increase in the net unrealized appreciation of equity investments. Operating expenses totaled $203,397 and $40,477 for the years ended December 31, 1999 and 1998, respectively. The Fund commenced investment operations in March 1999 and, accordingly, began to incur related investment monitoring and administrative costs. Professional fees and computer services also increased commensurate with the Fund's investing and operating activities. As explained in Note 3 to the financial statements, the Fund adopted SOP 98-5 as of January 1, 1999. This adoption resulted in a $40,000 charge in the first quarter of 1999 to write off previously capitalized organizational costs in accordance with SOP 98-5. During 1999, the $67,209 increase in unrealized appreciation of equity investments was due to portfolio companies in the communications and information technology industries. Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK ------- ---------------------------------------------------------- The Fund is subject to financial market risks, including changes in interest rates with respect to its investments in debt securities and interest bearing cash equivalents as well as changes in marketable equity security prices. The Fund does not use derivative financial instruments to mitigate any of these risks. The return on the Fund's investments is generally not affected by foreign currency fluctuations. The Fund does not have a significant exposure to modest public market price fluctuations as the Fund primarily invests in private business enterprises. However, should significant changes in market equity prices occur, there could be a longer-term effect on valuations of private companies, which could affect the carrying value and the amount and timing of gains realized on these investments. Since there is typically no public market for the Funds's investments in private companies, the valuation of the investments is subject to the estimate of the Fund's Directors. In the absence of a readily ascertainable market value, the estimated value of the Fund's investments in private companies may differ significantly from the values that would be placed on the portfolio if a ready market existed. The Fund's portfolio also includes common stocks in publicly traded companies. These investments are directly exposed to equity price risk, in that a hypothetical ten percent change in these equity prices would result in a similar percentage change in the fair value of these securities. The Fund's investments also include some debt securities. Since the debt securities are generally priced at a fixed rate, changes in interest rates do not directly impact interest income. The Fund's debt securities are generally held to maturity or converted into equity securities of private companies. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ------ ------------------------------------------- The financial statements of the Registrant are set forth in Item 14. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ------ ------------------------------------------------ ACCOUNTING AND FINANCIAL DISCLOSURE ----------------------------------- None PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ------- -------------------------------------------------- The Directors are responsible for the management and administration of the Fund. The Directors consist of three Independent Directors and a representative from each of Technology Funding Ltd., a California limited partnership (TFL), and its wholly owned subsidiary, Technology Funding Inc., a California corporation (TFI). TFL and TFI are the Investment Managers. The Fund has no executive officers. Information concerning the ownership of TFL and the business experience of the key officers of TFI, the partners of TFL and the Independent Directors is incorporated by reference from the sections entitled "Management of the Fund-The Investment Managers", "Management of the Fund-Key Personnel of the Investment Managers" and "Management of the Fund-The Fund Directors" on pages 23 to 25 of the Prospectus as revised June 4, 1998 (accession number 0000950133-98-002220), forming a part of the December 5, 1997 Pre-effective Amendment No 1 to the Form N-2 Registration Statement No 333- 23913 dated July 11, 1997. Item 11. EXECUTIVE COMPENSATION ------- ---------------------- The Registrant has no officers. The Fund pays the Investment Managers a management fee for supervising the venture capital operations of the Fund. In 2000, the Fund incurred $13,118 in management fees. As compensation for their services, the Independent Directors each receive $10,000 annually beginning on the Commencement Date as defined in the Partnership Agreement, $1,000 and related expenses for each attended meeting of the Directors and $1,000 and related expenses for each attended committee meeting unless such committee meeting is held on the same day as a meeting of the Directors. For the year ended December 31, 2000, $47,358 of such fees were incurred. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND ------- --------------------------------------------------- MANAGEMENT ---------- Not applicable. No investor beneficially holds more than 5% of the aggregate number of shares offered for sale, and neither the Investment Managers nor any of their officers, directors or partners own any shares. None of the Independent Directors own any shares. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ------- ---------------------------------------------- The Registrant, has engaged in no transactions with the Investment Managers or their officers and partners other than as described above, in the notes to the financial statements, or in the Fund's Operating Agreement. Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON ------- ------------------------------------------------------- FORM 8-K -------- (a) List of Documents filed as part of this Annual Report on Form 10-K (1) Financial Statements - the following financial statements are filed as a part of this Report: Report of Independent Public Accountants as of and for the year ended December 31, 2000 Independent Auditors' Report as of December 31, 1999 and for the years ended December 31, 1999 and 1998 Balance Sheets as of December 31, 2000 and 1999 Statements of Investments as of December 31, 2000 and 1999 Statements of Operations for the years ended December 31, 2000, 1999 and 1998 Statements of Members' Equity for the years ended December 31, 2000, 1999 and 1998 Statements of Cash Flow for the years ended December 31, 2000, 1999 and 1998 Notes to Financial Statements (2) Financial Statement Schedules All schedules have been omitted because they are not applicable or the required information is included in the financial statements or the notes thereto. (3) Exhibits Registrant's Operating Agreement (incorporated by reference to Exhibit A to Registrant's Prospectus dated June 4, 1998 (accession number 0000950133-98- 002220), forming a part of the December 5, 1997 pre-effective Amendment No. 1 to the Form N-2 Registration Statement No. 333-23913 dated July 11, 1997 filed pursuant to Rule 424(b) of the General Rules and Regulations under the Securities Act of 1933). (b) Reports on Form 8-K A report on Form 8-K was filed by the Registrant on November 13, 2000 to report the appointment of Arthur Andersen LLP as the Fund's independent public accountants. No financial statements were filed. (c) Financial Data Schedule for the year ended and as of December 31, 2000 (Exhibit 27). REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ---------------------------------------- To the Members of Technology Funding Venture Capital Fund VI, LLC: We have audited the accompanying balance sheet of Technology Funding Venture Capital Fund VI, LLC (a Delaware limited liability company) (the Fund), including the statement of investments, as of December 31, 2000, and the related statements of operations, members' equity, and cash flows for the year then ended. 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 audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included physical inspection of securities owned as of December 31, 2000. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Technology Funding Venture Capital Fund VI, LLC as of December 31, 2000, and the results of its operations, changes in members' equity and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States. The accompanying financial statements have been prepared assuming that the Fund will continue as a going concern. As discussed in Note 1 to the financial statements, the small size of the Fund and the suspension of further offering of shares raise substantial doubt about its ability to continue as a going concern. The Director's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Los Angeles, California /S/ARTHUR ANDERSEN LLP March 16, 2001 INDEPENDENT AUDITORS' REPORT ---------------------------- The Members Technology Funding Venture Capital Fund VI, LLC: We have audited the accompanying balance sheet of Technology Funding Venture Capital Fund VI, LLC (a Delaware limited liability company), including the statement of investments, as of December 31, 1999, and the related statements of operations, members' equity, and cash flows for the years ended December 31, 1999 and 1998. 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 auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of certain securities owned, by correspondence with the individual investee companies, and a physical examination of those securities held by a safeguarding agent as of December 31, 1999. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Technology Funding Venture Capital Fund VI, LLC as of December 31, 1999, and the results of its operations and its cash flows for the years ended December 31, 1999 and 1998, in conformity with accounting principles generally accepted in the United States of America. Albuquerque, New Mexico /S/KPMG LLP March 29, 2000 BALANCE SHEETS --------------

The accompanying notes are an integral part of these financial statements. STATEMENTS OF INVESTMENTS -------------------------

The accompanying notes are an integral part of these financial statements. STATEMENTS OF OPERATIONS ------------------------

The accompanying notes are an integral part of these financial statements. STATEMENTS OF MEMBERS' EQUITY ----------------------------

The accompanying notes are an integral part of these financial statements. STATEMENTS OF CASH FLOWS ------------------------

The accompanying notes are an integral part of these financial statements. NOTES TO FINANCIAL STATEMENTS ----------------------------- 1. General ------- Technology Funding Venture Capital Fund VI, LLC (the Fund) is a Delaware limited liability company (LLC) organized in February 1997. The Fund has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended (the Act). The Fund operates as a nondiversified investment company as defined in the Act. The Fund's investment objectives are long-term capital appreciation from venture capital investments in emerging growth companies and preservation of investor capital through risk management and active involvement with such companies. The Fund's Investment Managers are Technology Funding Ltd. (TFL) and Technology Funding Inc. (TFI), a wholly owned subsidiary of TFL. Three Independent Directors and two persons affiliated with the Investment Managers (Affiliated Directors) serve as Directors of the Fund. The Investment Managers are responsible for the Fund's investments, subject to the supervision of the Directors. From February 1997 through January 22, 1998, the Fund was inactive. The offering commenced on January 22, 1998, (the Commencement Date). Through April 25, 2000, the Fund was offering 1,000,000 shares in an aggregate amount of up to $100,000,000. The shares were being offered and sold through Technology Funding Securities Corporation (TFSC), a wholly owned subsidiary of TFI, and a registered member of the National Association of Securities Dealers, Inc. TFSC suspended the offering of shares of the Fund on April 25, 2000 with a total of 5,157 shares sold. The Fund's original contributed capital was $516,216, consisting of $515,700 from investors and $516 from Directors. The Directors do not own any shares. The small size of the Fund will make it more difficult than originally anticipated to achieve the investment objectives of the Fund. Therefore, the Directors are considering the feasibility of offering all investors a refund of the greater of their original capital contributions, plus interest, or their proportionate share of the Fund's net asset value, and are exploring all available options that would allow the Fund to accomplish that goal. Certain options being explored may require the approval of the Securities and Exchange Commission. There can be no assurance that the Directors will be successful in this effort. The uncertainties arising from these circumstances raise substantial doubt about the Fund's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties. The Fund's fiscal year-end is December 31. The Fund will continue until December 31, 2007, subject to the right of the Directors to extend the term for up to two additional two-year periods, unless dissolved prior thereto. 2. General Summary of Significant Accounting Policies -------------------------------------------------- Preparation of Financial Statements ----------------------------------- The accompanying financial statements have been prepared on the accrual basis of accounting. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Estimates include the estimate of fair value of investments, liabilities and contingencies. Because of the inherent uncertainty of valuation, the estimated fair value of investments may differ significantly from the values that would have been used had a ready market for investments existed, and the differences could be material. Valuation of Investments ------------------------- Investments are carried at fair value. Under the direction and control of the Board of Directors, the Management Committee is delegated the authority to establish valuation procedures and periodically apply such procedures to the Fund's investment portfolio. In fulfilling this responsibility, the Management Committee periodically updates and revises the valuation procedures used to determine fair value in order to reflect new events, changing market conditions, more experience with investee companies, or additional information, any of which may require the revision of previous estimating procedures. The valuation procedures were revised and updated by the Management Committee in the year ended December 31, 2000. Unrestricted publicly traded securities are valued at the closing sales price or bid price that is available on a national securities exchange or over-the-counter market. Valuation discounts of 5% to 50% are applied to public traded securities subject to resale restrictions resulting from Rule 144 or contractual lock-ups, such as those commonly associated with underwriting agreements or knowledge of material non-public information. The fair value of all other investments is determined in good faith by the Management Committee under the delegated authority of the Board of Directors after consideration of available relevant information. There is no ready market for the Fund's investments in private companies or unregistered securities of public companies. Fair value is generally defined as the amount the Fund could reasonably expect to receive for an investment in an orderly disposition based on a current sale. Significant factors considered in the estimation of fair value include the inherent illiquidity of and lack of marketability associated with venture capital investments in private companies or unregistered securities, the investee company's enterprise value established in the last round of venture financing, changes in market conditions since the last round of venture financing or since the last reporting period, the value of a minority interest in the investee company, contractual restrictions on resale typical of venture financing instruments, the investee company's financial position and ability to obtain any necessary additional financing, the investee company's performance as compared to its business plan, and the investee company's progress towards initial public offering. The values determined for the Fund's investments in these securities are based upon available information at the time the good faith valuations are made and do not necessarily represent the amount which might ultimately be realized which could be higher or lower than the reported fair value. In connection with the proposed transaction described in Note 1, the Management Committee engaged an independent third party to value the Fund's investments as of September 1, 2000. The valuation report was received on October 11, 2000 and the information therein was utilized by the Management Committee in the determination of fair value. The valuation report's estimated total fair value of investments at September 1, 2000 of $180,709 exceeds the fair value of investments determined in good faith by the Management Committee at December 31, 2000, of $42,432. The difference primarily results because of changes in market conditions between the valuation dates and because the valuation report's estimates for two portfolio companies were based in part upon proposed rounds of financing at higher valuations. In accordance with the valuation procedures established by the Board of Directors, financing rounds at higher valuations must be finalized with evidence of new third party participation before they can be reflected in fair value for financial reporting purposes. At December 31, 2000 and December 31, 1999, the investment portfolio included investments totaling $40,388 and $249,641, respectively, whose fair values were established in good faith by the Management Committee in the absence of readily ascertainable market values. Investments in publicly traded securities which have been subjected to a discount for legal or contractual restrictions as determined by the Management Committee amounted to $65,545 at December 31, 1999; there were no restrictions on publicly traded securities held at December 31, 2000. Because of the inherent uncertainty in the valuation, the values may differ significantly from the values that would have been used had a ready market for the securities existed, and the differences could be material. In the case of an other than temporary decline in value below cost basis, an appropriate reduction in the cost basis is recognized as a realized loss with the new cost basis being adjusted to equal the fair value of the investment. Cost basis adjustments are reflected as "Realized losses from impairment write-downs" on the Statements of Operations. Sales of equity investments are recorded on the trade date. The basis on which cost is determined in computing realized gains or losses is specific identification. Cash and Cash Equivalents ------------------------- Cash and cash equivalents are principally comprised of cash invested in demand accounts and money market instruments and are stated at cost plus accrued interest. The Fund considers all money market and short-term investments with an original maturity of three months or less to be cash equivalents. Deferred Distribution Costs --------------------------- The Fund reimburses the Investment Managers and Distributors for distribution costs. Distribution costs were charged to the Fund to the extent capital was raised; such costs charged by related parties were $70,100 and $74,600 in the years ended December 31, 2000 and 1999, respectively, and $515,700 since inception of the Fund. However, as described in Note 1, the Fund's offering has been suspended and the Directors have no immediate plans to file a new registration statement. Distribution costs payable to the Investment Managers and Distributors are limited to 10.5% of the offering proceeds. Accordingly, distribution costs charged to the Fund were reduced by $461,550 subsequent to the suspension of the offering since the Directors do not currently expect additional proceeds to be raised. Distribution costs paid by the Fund in excess of the limitation totaling $65,852 have been repaid to the Fund. As discussed in Note 9, additional distribution costs have been, and may be, incurred by the Distributors, and would be payable by the Fund if additional investor capital were raised. Distribution costs payable were $0 and $325,600 at December 31, 2000 and 1999, respectively. Provision for Income Taxes -------------------------- No provision for income taxes has been made by the Fund as the Fund has elected to be treated as a partnership for income tax purposes, and, therefore, the Fund is not directly subject to taxation. The Fund members are to report their respective shares of Fund income or loss on their individual tax returns. The accompanying financial statements are prepared using accounting principles generally accepted in the United States which may not equate to tax accounting. The cost of investments on a tax basis at December 31, 2000 and 1999, was $219,593 and $247,977, respectively. At December 31, 2000 and 1999, gross unrealized appreciation and depreciation on investments based on cost for federal income tax purposes were as follows:

Net Increase (Decrease) in Members' Equity Resulting from ---------------------------------------------------------- Operations Per Share -------------------- Net increase (decrease) in members' equity resulting from operations per share is calculated by dividing the weighted average number of investor shares outstanding for the years ended December 31, 2000, 1999 and 1998, of 5,065, 4,043 and 2,481 shares, respectively, into total net increase (decrease) in members' equity resulting from operations allocated to investors. The Investment Managers contributed an amount equal to 0.1% of investors' capital contributions and did not receive any shares. 3. Change in Accounting Principle for Organizational Costs ------------------------------------------------------- Effective January 1, 1999, the Fund adopted the provisions of the American Institute of Certified Public Accountants' Statement of Position 98-5, "Reporting on the Costs of Start-up Activities" (SOP 98-5.) SOP 98-5 specifies that organizational costs should be expensed as incurred rather than capitalized and subsequently amortized. The effect of adopting SOP 98-5 on net loss before the cumulative effect of the change in accounting principle for the year ended December 31, 1999 was to reduce the loss by $10,000, or $2.45 per Share. The effect on net loss (including a non-cash charge of $40,000, or $9.79 per share, for the cumulative effect as of January 1, 1999) was an increase of $30,000, or $7.34 per Share. The cumulative effect of this change on the Fund's balance sheet as of January 1, 1999 was to reduce organizational costs by $40,000. The pro forma effect of retroactive application of this accounting principle would have resulted in net loss for the year ended December 31, 1999, of $182,805 and net loss per Share of $44.77. 4. Related Party Transactions -------------------------- Related party costs are included in costs and expenses shown on the Statement of Operations. Related party costs were as follows:

Management fees are equal to 2% of total investor capital contributions for each of the years of Fund operation during the offering period. In subsequent years, the management fee will be 2% of the cost basis of Fund assets. Management fees compensate the Investment Managers solely for Investment Manager Overhead (as defined in the Operating Agreement) incurred in supervising the investment operations of the Fund. Pursuant to the Operating Agreement, a full first-year fee is paid to the Investment Managers as each additional investor is admitted to the Fund, regardless of the date the investor is admitted. Management fees due to the Investment Managers and were $30,942 and $17,824 and were included in due to related parties at December 31, 2000 and 1999, respectively. Pursuant to the Operating Agreement, the Fund shall reimburse the Investment Managers for operational costs incurred by the Investment Managers in conjunction with the business of the Fund. Amounts due to related parties for operational costs and cash advances for investment purchases were $528,410 and $301,031 at December 31, 2000 and 1999, respectively. The Fund reimburses the Investment Managers and Distributors for distribution costs. Distribution costs were charged to the Fund to the extent capital was raised; such costs charged by related parties were $70,100 and $74,600 in the years ended December 31, 2000 and 1999, respectively, and $515,700 since inception of the Fund. However, as described in Note 1, the Fund's offering has been suspended and the Directors have no immediate plans to file a new registration statement. Distribution costs payable to the Investment Managers and Distributors are limited to 10.5% of the offering proceeds. Accordingly, distribution costs charged to the Fund were reduced by $461,550 subsequent to the suspension of the offering since the Directors do not currently expect additional proceeds to be raised. Distribution costs paid by the Fund in excess of the limitation totaling $65,852 have been repaid to the Fund. As discussed in Note 9, additional distribution costs have been, and may be, incurred by the Distributors, and would be payable by the Fund if additional investor capital were raised. Distribution costs payable were $0 and $325,600 at December 31, 2000 and 1999, respectively. As compensation for their services, the Independent Directors each receive $10,000 annually beginning on the Commencement Date plus $1,000 for each of the Directors meetings attended. For the periods ended December 31, 2000 and 1999, such fees incurred by the Fund were $47,358 and $37,526, respectively. The Investment Managers contribute capital equal to 0.1% of total capital contributions made by the investors, payable as capital contributions are made by such investors. Through December 31, 2000, the Investment Managers contributed capital of $516. Effective November 1, 1997, TFL assigned its California office lease to Technology Funding Property Management LLC (TFPM), an entity that is affiliated to the Investment Manager. Effective December 31, 1998, TFPM was acquired by TFL. Under the terms of a rent agreement, TFL charges the Fund for its share of office rent and related overhead costs on a cost recovery basis. In 2000 and 1999 these costs totaled $10,607 and $9,608, respectively, and are included in administrative and investor service costs. Under the terms of a computer service agreement, Technology Administrative Management, a division of TFL, charges the Fund for its share of computer support costs. These amounts are included in computer services expenses. 5. Allocation of Profits and Losses -------------------------------- Net profits and losses of the Fund are allocated as follows: (a) Profits i) First, to those investors and Investment Managers with deficit capital account balances until the deficits have been eliminated; then, ii) Second, to those investors and Investment Managers as necessary to offset net loss previously allocated under (b)(ii) below; then, iii) Third, 80% to the investors in proportion to capital account balances, and 20% to the Investment Managers. (b) Losses i) First, to the investors and Investment Managers as necessary to offset net profit previously allocated to the investors under (a)(iii) above; then, ii) Second, 99% to the investors and 1% to the Investment Managers. Losses allocable to investors in excess of their capital account balances are allocated to investors that have positive balances in their capital accounts in proportion to the respective amounts of such positive balances until all such balances have been reduced to zero and thereafter solely to the Investment Managers. Net profit thereafter otherwise allocable to the investors will be allocated to the Investment Managers to the extent of such allocated losses. In no event shall the Investment Managers be allocated less than 1% of the net profit of the Fund, plus their pro rata share based on capital contributed. 6. Equity Investments ------------------ All investments are valued at fair value as determined in good faith by the Investment Managers. See Note 2-Valuation of Investments. Restricted Securities --------------------- At December 31, 2000 and 1999, restricted securities had aggregate market values of $40,388 and $249,641, respectively, representing 8.4% and 77.6%, respectively, of the net liabilities of the Fund. Significant purchases and realized losses during 2000 are as follows: Biex, Inc. ---------- The company was unable to complete a round of financing in November 2000 and, as a result, suspended operations and laid off all employees. As a result, the Fund recorded a realized loss from impairment write-downs on investments of $59,997, its entire investment in the company. As of January 2001, an offer to purchase the company was being negotiated; however, proceeds from the sale were expected to satisfy only a majority of the company's creditors with nothing remaining for equity investors. Resolution Sciences Corporation ------------------------------- In February 2000, the Fund purchased 15,000 Series C Preferred shares for $30,000. This purchase was funded, in part, by cash advances from the Investment Managers. Women.com Networks, Inc. ------------------------ In December 2000, the Fund purchased 3,297 Common shares for $1,613. Other Equity Investments ------------------------ Other significant changes reflected above relate to market value fluctuations for publicly traded portfolio companies or changes in the fair value of private companies as determined in accordance with the policy described in Note 2 to the financial statements. 7. Net Increase (Decrease) in Unrealized Appreciation (Depreciation) ---------------------------------------------------------------- of Equity Investments --------------------- In accordance with the accounting policy as stated in Note 1, the Statements of Operations includes a line item entitled "Net increase (decrease) in unrealized appreciation (depreciation) of equity investments." The table below discloses details of the changes:

8. Cash and Cash Equivalents ------------------------- Cash and cash equivalents at December 31, 2000 and 1999 consisted of:

As of December 31, 2000, the Fund's monies were on deposit at a single financial institution. 9. Commitments and Contingencies ----------------------------- The Fund reimburses the Distributors for distribution costs incurred in connection with the offering of its shares. The Distributors expect the Fund to reimburse these costs to the extent capital has been raised. The Fund's distribution costs, however, are limited to 10.5% of the total proceeds raised in this offering. At December 31, 2000, the Distributors had incurred distribution costs totaling $3,297,509, of which $54,148 has been paid based upon the 10.5% limitation, with the remaining portion of $3,243,361 payable to the Distributors in the unlikely event that additional capital is raised (see Note 1.) Additional distribution costs may be incurred and would be payable by the Fund if additional capital were raised. The Fund reports the distribution costs as a deduction from Members' equity. The Fund is involved in various claims and legal actions incident to its operations, which in the opinion of Investment Managers, based upon advice of counsel, will not materially affect the financial position or results of operations of the Fund. 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 VENTURE CAPITAL FUND VI, LLC By: TECHNOLOGY FUNDING INC. Investment Manager Date: March 30, 2001 By: /s/Charles R. Kokesh -------------------------------- Charles R. Kokesh President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report on Form 10-K 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/Charles R. Kokesh President, Chief March 30, 2001 ------------------------ Executive Officer, Charles R. Kokesh Chief Financial Officer and Chairman of Technology Funding Inc. and Managing General Partner of Technology Funding, Ltd. The above represents a majority of the Board of Directors of Technology Funding Inc. and the General Partners of Technology Funding Ltd.

TECHNOLOGY FUNDING VENTURE CAPITAL FUND VI LLC 10-K