FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ending March 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ______________
Commission file number 0-22618
Venture Lending & Leasing, Inc.
-------------------------------
(Exact Name of Registrant as specified in its charter)
Maryland 13-3775187
------------------- -------------------
(State or other jurisdiction of incorporation or (I.R.S. Employer
or organization) Identification No.)
2010 North First Street, Suite 310, San Jose, CA 95131
------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(408) 436-8577
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant has (i) filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (ii) has been subject to such
filing requirements for the past 90 days.
Yes[X] No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Class Outstanding as of May 13, 1998
------------------------------------
Common Stock, $.001 par value 48,318.58
Page 1 of 15; Exhibit Index appears on Page 14
VENTURE LENDING & LEASING, INC.
INDEX
Page Number
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Statement of Financial Position (Unaudited) 3
March 31, 1998 and June 30, 1997
Statement of Operations (Unaudited) 4
Nine Months Ended March 31, 1998 and
March 31, 1997
Statement of Operations (Unaudited) 5
Three Months Ended March 31, 1998 and
March 31, 1997
Statement of Changes in Shareholders Equity (Unaudited) 6
Nine Months Ended March 31, 1998 and
Year Ended June 30, 1997
Statement of Cash Flows (Unaudited) 7
Nine Months Ended March 31, 1998 and
March 31, 1997
Notes to Financial Statements 8 - 11
Item 2. Management's Discussion and Analysis of Financial 12 - 14
Condition and Results of Operations
PART II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits 14
SIGNATURES 15
VENTURE LENDING & LEASING, INC.
Statement of Financial Position (Unaudited)
- -------------------------------------------------------------------------------
March 31 June 30
1998 1,997
Assets
Loans and leases, net of unearned income, fees $84,450,061 $64,365,197
and allowance for credit losses of $100,000
Cash and cash equivalents ..................... 4,435,004 3,946,955
Investments:
Warrants .................................. 2,216,581 2,282,242
Common and preferred stock ................ 1,699,483 1,171,957
Deferred assets ............................... 257,282 79,234
Accounts receivable ........................... 195,497 3,174
----------- -----------
Total assets ......................... 93,253,908 71,848,759
----------- -----------
Liabilities & Shareholders' Equity
Liabilities
Bank loans .................................... 40,209,975 30,000,000
Accounts payable .............................. 685,340 649,655
Interest payable .............................. 49,461 435,052
Commitment fees ............................... 179,800 260,000
Deferred gain on securities ................... 55,300 48,500
----------- ---------
Total liabilities .................... 41,179,876 31,393,207
---------- ----------
Shareholders' Equity
Common stock, $.001 par value; 100,000,000
shares authorized; issued and outstanding,
48,318.58 and 39,054.38 sh 48 40
Capital in excess of par value ..................46,641,052 37,479,287
Distributions ..................................(13,032,162) (5,990,796)
Accumulated earnings ........................... 18,465,094 8,967,021
------------ ------------
Total shareholders' equity ........... 52,074,032 40,455,552
------------ ------------
Total liabilities & shareholders' $ 93,253,908 $ 71,848,759
equity ============ ============
3
<PAGE>
VENTURE LENDING & LEASING, INC.
Statement of Operations (Unaudited)
- -------------------------------------------------------------------------------
For the Nine Months Ended
March 31 March 31
1998 1997
Investment income:
Interest on loans and leases ..... $9,369,552 $5,117,477
Interest on short-term investments 302,567 174,921
---------- ----------
Total investment income .... 9,672,119 5,292,398
---------- ----------
Expenses:
Interest expense ................. 2,294,947 992,561
Management fee ................... 1,748,193 1,054,168
Legal fees ....................... 129,657 62,939
Bank loan facility fee ........... 114,556 54,989
Directors' fees and expenses ..... 24,397 23,500
Amortization of
organizational expenses .......... 22,431 22,480
Audit fees ....................... 18,703 11,453
Custody and accounting fees ...... 18,039 13,513
Regulatory reporting ............. 8,591 18,847
Transfer agency fees ............. 5,469 5,182
Other operating expenses ......... 36,992 9,793
---------- ----------
Total expenses ............. 4,421,975 2,269,425
---------- ----------
Net investment income ................. 5,250,144 3,022,973
Net change in unrealized gain from
investment transactions ............... 40,333 1,125,681
Net gain on sale of securities ........ 4,207,596 958,497
---------- ----------
Net income ........................ $9,498,073 $5,107,151
========== ==========
Basic earnings per share .............. $ 201.94 $ 181.72
========== ==========
Diluted earnings per share ............ $ 201.94 $ 181.72
========== ==========
Weighted average shares outstanding ... 47,034 28,105
========== ==========
4
<PAGE>
VENTURE LENDING & LEASING, INC.
Statement of Operations (Unaudited)
- --------------------------------------------------------------------
For the Three Months Ended
March 31 March 31
1998 1997
Investment income:
Interest on loans and leases .... $ 3,395,265 $ 1,831,754
Interest on temporary investments 97,869 37,039
----------- -----------
Total investment income ... 3,493,134 1,868,793
----------- -----------
Expenses:
Management fee .................. 578,605 400,582
Interest expense ................ 694,774 410,738
Other expenses .................. 204,753 87,540
----------- -----------
Total expenses ............ 1,478,132 898,860
----------- -----------
Net investment gain ................ 2,015,002 969,933
Net change in unrealized gain
from investment transactions ....... 908,301 (638,175)
Net realized gain from
investment transactions ............ 1,822,117 958,497
----------- -----------
Net income ..................... $ 4,745,420 $ 1,290,255
=========== ===========
Basic earnings per share ........... $ 98.21 $ 43.26
=========== ===========
Diluted earnings per share ......... $ 98.21 $ 43.26
=========== ===========
Average shares outstanding ......... 48,319 29,823
=========== ===========
5
<PAGE>
VENTURE LENDING & LEASING, INC.
Statement of Changes in Sharelolders' Equity (Unaudited)
- -------------------------------------------------------------------------------
Common Stock Capital in
Excess of Accumulated
Shares Amount Par Value Distributions Earnings Total
------------------------------------------------------------------
Balance,
July 1, 1996 20,594.74 $20 $18,669,745 ($1,262,256) $2,535,854 $19,943,363
Shares sold . 18,459.64 20 18,647,537 -- -- 18,647,557
Distributions -- -- -- (4,566,535) -- (4,566,535)
Net income .. -- -- -- -- 6,431,167 6,431,167
--------- ----- ----------- ------------ ----------- -----------
Balance
June 30, 1997 39,054.38 40 37,317,282 (5,828,791) 8,967,021 40,455,552
Shares sold .. 9,264.20 8 9,323,770 -- -- 9,323,778
Distributions -- -- -- (7,203,371) -- (7,203,371)
Net income ... -- -- -- -- 9,498,073 9,498,073
--------- ----- ------------ ----------- ----------- -----------
Balance
March 31,1998 48,318.58 $48 $46,641,052 ($13,032,162)$18,465,094 $52,074,032
========= ==== =========== ============ ============ ==========
6
<PAGE>
VENTURE LENDING & LEASING, INC.
Statement of Cash Flows (Unaudited)
- --------------------------------------------------------------------------------
For the Nine Months Ended
March 31 March 31
1998 1997
Cash flows from operating activities:
Net income .......................................$9,498,073 $5,107,151
Adjustments to reconcile net investment income
to net cash provided by operating activities:
Gain on sale of securities .......................(4,207,596) (958,497)
Decrease (increase) in deferred assets ........... (178,048) 29,011
Increase in accounts payable ..................... 35,685 200,979
Increase (decrease) in interest payable .......... (385,591) 344,550
Increase (decrease) in commitment fees ........... (80,200) 24,765
Increase in unrealized gain
from investment transactions ..................... (40,333) (1,125,681)
Increase in accounts receivable .................. (192,323) (93,266)
Increase in deferred gain on securities ......... 6,800 --
Increase in other assets ........................ -- (10,040)
----------- ------------
Net cash provided by operating activities ....... 4,456,467 3,518,972
----------- ------------
Cash flows from investing activities:
Acquisition of loans and leases ............... (39,642,239) (39,152,426)
Principal payments on loans and leases ........ 19,557,375 9,288,213
Proceeds from prepayment of loan .............. -- 4,047,955
Acquisition of warrants and common stock ...... (403,475) (519,001)
Proceeds from sale of securities .............. 4,189,539 958,497
------------ ------------
Cash used in investing activities ............. (16,298,800) (25,376,762)
------------ ------------
Cash flows from financing activities:
Sales of common stock, net .................... 9,323,778 9,323,779
Distributions to shareholders ................. (7,203,371) (2,628,047)
Loan from bank ................................ 15,000,000 17,791,403
Principal payments on bank loan ............... (4,790,025) (2,529,863)
------------ ------------
Net cash provided by financing activities ..... 12,330,382 21,957,272
------------ ------------
Net increase in cash and cash equivalents ..... 488,049 99,482
------------ ------------
Cash and cash equivalents --
beginning of period ........................ 3,946,955 4,683,671
------------ ------------
Cash and cash equivalents --
end of period .............................. $4,435,004 $4,783,153
============ ============
7
<PAGE>
VENTURE LENDING & LEASING, INC.
Notes to Financial Statements - March 31, 1998 (Unaudited)
- -------------------------------------------------------------------------------
1. Organization and Operations of the Company:
Venture Lending & Leasing, Inc. (the "Fund") was incorporated in Maryland on
September 29, 1993 as a non-diversified, closed-end management investment
company electing status as a business development company under the Investment
Company Act of 1940. Prior to commencing its operations on July 5, 1994 the Fund
had no operations other than the sale to Mitchell Hutchins Institutional
Investors, Inc. ("Mitchell Hutchins"), which is an indirect wholly owned
subsidiary of PaineWebber Group Inc., of one share of Common Stock, $.001 par
value ("common stock"), for $1,000. As of March 31, 1998 the Fund meets the
requirements, to qualify as a regulated investment company ("RIC") under the
Internal Revenue Code of 1986.
Costs incurred in connection with the organization of the Fund were paid
initially by Mitchell Hutchins and Westech Investment Advisors, Inc. ("Westech
Advisors") (collectively, the Managers); however, the Fund reimbursed the
Managers $150,000 of such costs. This amount has been deferred and is being
amortized on the straight-line method over a period of 60 months from the date
the Fund commenced operations. During the 1996 fiscal year, the management
contract of the Fund was assigned from Mitchell Hutchins to Siguler Guff
Advisers, L.L.C.
2. Summary of Significant Accounting Policies:
Basis of Accounting --- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts and revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Valuation of Investments --- The Fund anticipates that substantially all of its
portfolio investments (other than short-term investments) will consist of
securities that at the time of acquisition are subject to restrictions on sale
and for which no ready market will exist. Venture loans and leases are privately
negotiated transactions, and there is no established trading market in which
such loans or leases can be sold. Substantially all the Fund's investments are
restricted securities that cannot be sold publicly without prior agreement with
the issuer to register the securities under the 1933 Act, or by selling the
securities under Rule 144 or other rules under the 1933 Act which permit only
limited sales under specified conditions.
Investments in loans and leases are valued at their original purchase price less
amortization of principal unless, pursuant to procedures established by the
Fund's Board of Directors, the Fund's Managers determine that amortized cost
does not represent fair value. Short-term debt instruments with 60 days or less
remaining to maturity are valued by the amortized cost method. The Fund does not
hold any short-term debt instruments that have a period of maturity exceeding 60
days.
Warrants that are received in connection with loan and lease transactions
generally are valued at a nominal value assigned at the time of acquisition,
which generally occurs at the first drawdown under the commitment. Thereafter,
warrants with readily ascertainable market values will be assigned a fair value
based on the difference, if any, between the exercise price of the warrant and
the market value of the equity securities for which the warrant may be
exercised, adjusted for illiquidity.
8
<PAGE>
2. Summary of Significant Accounting Policies (continued):
Allowance for Credit Losses --- The allowance for credit losses is based upon
management's estimates of potential loan and lease losses and is maintained at a
level considered adequate for losses that can be reasonably estimated. The
allowance is increased by provisions charged to expense and reduced by net
charge-offs. In evaluation of the adequacy of the allowance balance, the Fund
considers its past loan and lease loss experience, the inherent risks in the
portfolio, adverse situations that may affect the borrowers ability to repay,
the estimated value of any underlying collateral, and other relevant factors.
The allowance for credit losses is based on estimates, and ultimate losses may
vary from current estimates.
Cash & Cash Equivalents --- Cash & cash equivalents consist of cash on hand,
demand deposits in banks and repurchase agreements with original maturities of
ninety days or less.
Loans & Leases --- Unearned income and commitment fees on loans and leases are
recognized using the effective interest method over the term of the loan or
lease. Commitment fees represent fees received for commitments upon which no
drawdowns have yet been made. The fee is included in unearned income and
recognized as described above.
Federal Tax Status --- As long as the Fund qualifies as a RIC, it will not pay
any federal or state corporate income tax on income that is distributed to
shareholders (pass-through status). Should the Fund lose its qualification as a
RIC it could be taxed as an ordinary corporation on its taxable income for that
year (even if that income is distributed to its shareholders), and all
distributions out of its earnings and profits will be taxable to shareholders as
ordinary income.
3. Summary of Loans and Leases:
Loans and leases generally are made to borrowers pursuant to commitments whereby
the Fund commits to finance assets up to a specified amount for the term of the
commitments, upon the terms and subject to the conditions specified by such
commitment. As of March 31, 1998, the Fund had commitments to borrowers of
$177.2 million of which $129.7 million has been disbursed, and $84.5 million
remains outstanding.
The Fund provides asset-based financing primarily to start-up and emerging
growth venture-capital-backed companies. As a result, the Fund is subject to
general credit risk associated with such companies.
4. Warrants:
At March 31, 1998, the Fund held 0.4 million warrants to purchase common and
preferred shares of 8 publicly traded companies. The quoted market value of the
stock underlying the warrants issued by these companies is $4.5 million. The
exercise cost of these warrants is $1.9 million, with a potential gain of $3.0
million. Because of the illiquid nature of these warrants, the Fund is carrying
the public companies at a discounted value of $1.2 million.
The warrants issued by private companies did not have a readily ascertainable
market value and were assigned a minimal value at the time of acquisition. These
warrants had a value of $1.0 million at March 31, 1998.
9
<PAGE>
5. Common Stock:
As of March 31, 1998 the Fund held 0.5 million shares of common stock of four
publicly traded companies which were received when the Fund exercised its
warrants in the companies which cost $267 thousand. The market value is $2.0
million and is carried at $1.6 million adjusted for illiquidity.
Restricted equity securities for which a public market exists are valued with
reference to the market price for unrestricted equity securities of the same
issuers, taking into consideration various factors as applicable, including the
nature of the market in which the securities are traded, the amount of the
public float, the existence and terms of any registration rights, the proportion
of the issuer's securities held by the Fund, the price at which the securities
in question were acquired relative to the market price for unrestricted
securities at the time of issuance, changes in the issuer's financial conditions
or prospects, and other factors that may affect their fair value. Restricted
securities for which an established market exists are valued at a discount from
their value determined by the foregoing methods, with the amount of the discount
decreasing as the restriction period decreases.
6. Long - Term Debt Facility:
The Fund has in place a $45 million term debt facility to finance the
acquisition of asset-based loans and leases. The principal balance is a 39 month
term loan. At March 31, 1998 there was $38.5 million outstanding under this
facility. Additionally the Fund has a $15 million warehousing line of credit
with $1.7 million outstanding on March 31, 1998. The rate on the warehousing
line is LIBOR plus 1.15%. The Fund has entered into an interest rate swap
agreement on $39 million. The effect of the swap is to convert the variable
LIBOR rate into a fixed rate on the contract notional value.
Borrowings under the facility are collateralized by the equipment financed by
the Fund under loans and leases with assignment to the financial institution,
plus other assets of the Fund. The amortization schedule for each borrowing
under the loan is expected to correspond to the amortization of the loans and
leases acquired with the proceeds of each borrowing.
7. Capital Stock:
There are 100,000,000 shares of $.001 par value common stock authorized. As of
March 31, 1998, 48,318.58 shares are issued and outstanding.
The Fund has subscription agreements in effect with its shareholders under which
shareholders will purchase shares of the Fund, up to their full committed
capital amount, upon capital calls delivered at least fifteen days before
payment is due. As of March 31, 1998, there are no unfunded or uncalled capital
commitments remaining outstanding.
10
<PAGE>
8. Management:
Westech Advisors serves as the Fund's Investment Manager and Siguler Guff
Advisers, L.L.C. serves as its Fund Manager. As compensation for their services
to the Fund, the Managers receive a management fee computed and paid at the end
of each quarter, at an annual rate of 2.5% of the Fund's committed equity
capital for the first two years following the first closing of the Fund's
initial private offering; and at an annual rate of 2.5% of the Fund's total
assets (including amounts derived from borrowed funds) as of the last day of
each fiscal quarter thereafter.
The Managers will also receive an aggregate annual incentive fee equal to 20% of
all amounts available for distribution to investors after investors have
received cash distributions equal to 100% of all amounts paid for the purchase
of shares plus a preferred return calculated at a cumulative non - compounded
annual rate of 8%. To date, the Managers have earned no incentive fee.
11
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
Venture Lending & Leasing, Inc. ("Fund") is a closed-end,
non-diversified management investment company electing status as a business
development company under the Investment Company Act of 1940 ("1940 Act"). The
Fund's investment objective is to achieve a high total return. The Fund will
provide asset-based financing to carefully selected venture capital-backed
companies, in the form of secured loans, installment sales contracts or
equipment leases. The Fund generally will receive warrants to acquire equity
securities in connection with its portfolio investments.
The Fund's shares of Common Stock, $.001 par value ("Shares") were sold
to subscribers pursuant to several capital calls made from the Fund's inception
until August 8, 1997, for a total of $46.6 million.
Results of Operations -- Nine Months Ended March 31, 1998 and March 31, 1997
Total investment income for the nine months ending March 31, 1998 and
1997 was $9.7 million and $5.3 million, respectively, of which $9.4 million and
$5.1 million, respectively, consisted of interest on venture loans outstanding
during the period. Remaining income consisted of interest on the temporary
investment of cash, pending investment in venture loans and leases or
application to the Fund's expenses. The increase in investment income reflects
the increase in capital called from investors from approximately $27.9 million
as of March 31, 1997 to approximately $46.6 million as of March 31, 1998, and
the investment of that capital (together with amounts derived from bank
borrowings) in venture loans and leases.
Expenses for the nine months ending March 31, 1998 and 1997 were $4.4
million and $2.3 million, respectively. Net income for the nine months ended
March 31, 1998 and 1997 was $9.5 million and $5.1 million and includes net
change in realized and unrealized gains of $4.2 million and $2.1 million. On a
per share basis, for the nine months ending March 31, 1998 and 1997 net income
was $202 and $182.
There were several factors that contributed to the increase in net
income for the nine months ending March 31, 1998 over the corresponding prior
year period. Net investment income increased from $3.0 million as of March 31,
1997 to $5.3 million as of March 31, 1998, reflecting the increase in loans
outstanding. The net change in realized and unrealized gain of $4.2 million was
a significant factor affecting net income for the nine months ending March 31,
1998. Also impacting net income was interest expense on the Fund's borrowings
during the nine months ended March 31, 1998, at $2.3 million.
12
<PAGE>
The Fund's policy is to place a loan on non-accrual status when either
principal or interest has become past due for 90 days or more. When a loan is
placed on non-accrual status, all interest previously accrued but not collected
is reversed. As of March 31, 1998, the Fund had loan balances outstanding of
$2.5 million to two borrowers that were carried on a non-accrual basis. The
amount that the Fund will ultimately recover on these loans cannot be determined
with certainty.
Results of Operations -- Three Months Ended March 31, 1998 and March 31, 1997
Total investment income for the three months ending March 31, 1998 and
1997 was $3.5 million and $1.9 million, respectively, of which $3.4 million and
$1.8 million, respectively, consisted of interest on venture loans outstanding
during the period. Remaining income consisted of interest on the temporary
investment of cash, pending investment in venture loans and leases or
application to the Fund's expenses. The increase in investment income reflects
the increase in capital called from investors from approximately $27.9 million
as of March 31, 1997 to approximately $46.6 million as of March 31, 1998, and
the investment of that capital (together with amounts derived from bank
borrowings) in venture loans and leases.
Expenses for the three months ending March 31, 1998 and 1997 were $1.5
million and $0.9 million, respectively. Net income for the three months ended
March 31, 1998 and 1997 was $4.7 million and $1.3 million and includes net
change in realized and unrealized gains of $2.7 million and $0.3 million. On a
per share basis, for the three months ending March 31, 1998 and 1997 net income
was $98 and $43.
Liquidity and Capital Resources -- March 31, 1998 and 1997
Total capital committed to the purchase of shares pursuant to
subscription agreements was approximately $46.6 million at March 31, 1998 and
1997. As of March 31, 1998 and 1997, 100% and 60%, respectively, of this
committed capital was called to fund investments in venture loans and leases and
to meet the Fund's expenses.
The Fund has in place a $45 million term debt facility to finance the
acquisition of asset-based loans and leases. The principal balance is a 39 month
term loan. The Fund pays a liquidity commitment fee of 0.65%. At March 31, 1998
there was $38.5 million outstanding under this facility. Additionally the Fund
has a $15 million warehousing line of credit with $1.7 million outstanding on
March 31, 1998. The rate on the warehousing line is LIBOR plus 1.15%. The Fund
has entered into an interest rate swap agreement on $39 million. The effect of
the swap is to convert the variable LIBOR rate into a fixed rate on the contract
notional value.
Borrowings under the facility are collateralized by the equipment financed by
the Fund under loans and leases with assignment to the financial institution,
plus other assets of the Fund. The amortization schedule for each borrowing
under the loan is expected to correspond to the amortization of the loans and
leases acquired with the proceeds of each borrowing.
13
<PAGE>
The Fund continued to invest its assets in venture loans and leases
during the quarter. Amounts disbursed under the Fund's loan commitments
increased by approximately $39.6 million during the nine months ended March 31,
1998, and net loan amounts outstanding after amortization increased
approximately $20.0 million.
Amounts committed but undrawn decreased by approximately $23.2 million.
================================================================================
Amount Disbursed Principal Net Amount Committed but
Amortization Undrawn
================================================================================
March 31, 1998 $129.7 million $45.2 million $84.5 million $47.5 million
================================================================================
June 30, 1997 $90.1 million $25.6 million $64.5 million $68.7 million
================================================================================
Because venture loans and leases are privately negotiated transactions,
investments in these assets are relatively illiquid.
The Fund seeks to meet the requirements to qualify for the special
pass-through status available to "regulated investment companies" ("RICs") under
the Internal Revenue Code, and thus to be relieved of federal income tax on that
part of its net investment income and realized capital gains that it distributes
to shareholders. To qualify as a RIC, the Fund must distribute to its
shareholders for each taxable year at least 90% of its investment company
taxable income (consisting generally of net investment income and net short-term
capital gain) ("Distribution Requirement"). To the extent that the terms of the
Fund's venture loans provide for the receipt by the Fund of additional interest
at the end of the loan term or the terms of venture leases provide for the
receipt by the Fund of a purchase price for the asset at the end of the lease
term ("residual income"), the Fund would be required to accrue such residual
income over the life of the loan or lease, and to include such accrued income in
its gross income for each taxable year even if it receives no portion of such
residual income in that year. Thus, in order to meet the Distribution
Requirement and avoid payment of income taxes or an excise tax on undistributed
income, the Fund may be required in a particular year to distribute as a
dividend an amount in excess of the total amount of income it actually receives.
Those distributions will be made from the Fund's cash assets, from amounts
received through amortization of loans or leases or from borrowed funds.
14
<PAGE>
PART II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 6. Exhibits
Ex 27.1 Financial Data Schedule
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 duly authorized.
Venture Lending & Leasing, Inc.
Registrant
Date: May 13, 1998
Ronald W. Swenson
Chairman
[Chief Executive Officer]
Date: May 13, 1998
Salvador O. Gutierrez
President & Treasurer
[Chief Financial Officer]
15
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000913570
<NAME> Venture Lending & Leasing, Inc.
<SERIES>
<NUMBER> 01
<NAME> Venture Lending & Leasing, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> Mar-31-1998
<INVESTMENTS-AT-COST> 86,105
<INVESTMENTS-AT-VALUE> 88,366
<RECEIVABLES> 195
<ASSETS-OTHER> 4,693
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 93,254
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 40,210
<OTHER-ITEMS-LIABILITIES> 970
<TOTAL-LIABILITIES> 41,180
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 46,641
<SHARES-COMMON-STOCK> 48
<SHARES-COMMON-PRIOR> 40
<ACCUMULATED-NII-CURRENT> 1,511
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,822
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,262
<NET-ASSETS> 52,074
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,672
<OTHER-INCOME> 0
<EXPENSES-NET> 4,422
<NET-INVESTMENT-INCOME> 5,250
<REALIZED-GAINS-CURRENT> 4,208
<APPREC-INCREASE-CURRENT> 40
<NET-CHANGE-FROM-OPS> 9,498
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,250
<DISTRIBUTIONS-OF-GAINS> 4,208
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 11,618
<ACCUMULATED-NII-PRIOR> 460
<ACCUMULATED-GAINS-PRIOR> 505
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,748
<INTEREST-EXPENSE> 2,295
<GROSS-EXPENSE> 4,422
<AVERAGE-NET-ASSETS> 48,585
<PER-SHARE-NAV-BEGIN> 1,035.88
<PER-SHARE-NII> 111.62
<PER-SHARE-GAIN-APPREC> 90.32
<PER-SHARE-DIVIDEND> 109.12
<PER-SHARE-DISTRIBUTIONS> 87.08
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1,077.72
<EXPENSE-RATIO> 0.058
<AVG-DEBT-OUTSTANDING> 38,177
<AVG-DEBT-PER-SHARE> 811.70
</TABLE>
