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 September 30, 1999
[ ] 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 O 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 October 15, 1999
- ----------------------------------- ------------------------------------------
Common Stock, $.001 par value 48,318.58
Page 1 of 17; Exhibit Index appears on Page 16
1
<PAGE>
VENTURE LENDING & LEASING, INC.
INDEX
Page Number
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Statement of Financial Position 3
September 30, 1999 (Unaudited) and June 30, 1999
Statement of Operations (Unaudited) 4
Three Months ended September 30, 1999 and
September 30, 1998
Statement of Changes in Shareholders Equity 5
Three Months ended September 30, 1999 (Unaudited)
and the Year Ended June 30, 1998
Statement of Cash Flows (Unaudited) 6
Three Months ended September 30, 1999 and
September 30, 1998
Notes to Financial Statements 7 - 11
Item 2. Management's Discussion and Analysis of Financial 12 - 15
Condition and Results of Operations
PART II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 6. Exhibits 16
SIGNATURES 17
2
<PAGE>
VENTURE LENDING & LEASING, INC.
Statement of Financial Position (unaudited)
- --------------------------------------------------------------------------------
September 30, June 30,
1999 1999
Assets
Loans and leases, at estimated fair value
(cost of $45,821,185 and $54,069,547) ........... $ 41,819,962 $50,068,324
Investments in securities, at estimated fair value
(cost of $1,858,345 and $1,749,365) ............. 53,985,464 29,767,030
Cash and cash equivalents ........................ 10,744,689 1,748,410
Receivable - Procceds from sale of securities .... 10,660,264 --
Other assets ..................................... 84,059 121,936
------------- -----------
Total assets ........................ 117,294,438 81,705,700
------------- -----------
Liabilities & Shareholders' Equity
Liabilities
Bank loans ....................................... 18,858,568 22,894,335
Management fees payable .......................... 729,015 517,719
Accounts payable and other accrued liabilities ... 641,148 239,662
------------- -----------
Total liabilities ................... 20,228,731 23,651,716
------------- -----------
Shareholders' Equity
Common stock, $.001 par value;
100,000,000 shares authorized;
issued and outstanding, 48,318.58 shares ...... 49 49
Capital in excess of par value ................... 46,641,051 46,641,051
Distributions .................................... (51,150,209)(43,050,082)
Accumulated earnings ............................. 101,574,816 54,462,966
------------- -----------
Total shareholders' equity ............ 97,065,707 58,053,984
------------- -----------
Total liabilities & shareholders'equity$117,294,438 $81,705,700
============= ===========
3
<PAGE>
VENTURE LENDING & LEASING, INC.
Statement of Operations (unaudited)
- --------------------------------------------------------------------------------
For the Three Months Ended
September 30, June 30,
1999 1999
Investment income:
Interest on loans and leases ................ $ 1,817,832 $ 3,281,955
Interest on short-term investments .......... 36,062 45,516
----------- -----------
Total investment income ............... 1,853,894 3,327,471
----------- -----------
Expenses:
Management fee .............................. 729,015 514,712
Interest expense ............................ 373,565 633,602
Other operating expenses .................... 326,447 147,405
----------- -----------
Total expenses ........................ 1,429,027 1,295,719
----------- -----------
Net investment income ............................... 424,867 2,031,752
Net change in unrealized gain (loss)
from investment transactions ...................... 24,109,454 (1,105,401)
Net realized gain (loss) from investment transactions 22,577,529 (129,699)
----------- -----------
Net income ...................................... $47,111,850 $ 796,652
=========== ===========
Basic earnings per share ............................ $ 975.02 $ 16.49
=========== ===========
Weighted average shares outstanding ................. 48,319 48,318
=========== ===========
4
<PAGE>
VENTURE LENDING & LEASING, INC.
Statement of Changes in Shareholders' Equity (unaudited)
- --------------------------------------------------------------------------------
For the Year Ended June 30, 1999 and
the Three Months Ended September 30, 1999
Commom Stock Capital in
--------------- Excess of Accumulated
Shares Amount Par Value Distributions Earnings Total
-------------------------------------------------------------------
Balance,
June 30,1998.. 48,318.58 $49 $46,641,051 ($16,871,073) $21,293,223 $51,063,250
Distributions .... -- -- -- (26,179,009) -- (26,179,009)
Net income ....... -- -- -- -- 33,169,743 33,169,743
-------------------------------------------------------------------
Balance,
June 30, 1999 48,318.58 49 46,641,051 (43,050,082) 54,462,966 58,053,984
Distributions .. -- -- -- (8,100,127) -- (8,100,127)
Net income ....... -- -- -- -- 47,111,850 47,111,850
-------------------------------------------------------------------
September 30,
1999 48,318.58 $49 $46,641,051 ($51,150,209) $101,574,816 $97,065,707
====================================================================
5
<PAGE>
VENTURE LENDING & LEASING, INC.
Statement of Cash Flows (unaudited)
- --------------------------------------------------------------------------------
For the Three For the Three
Months Ended Months Ended
September 30, September 30,
1999 1998
Cash flows from operating activities:
Net income ............................ $47,111,850 796,652
Adjustments to reconcile
net investment income
to net cash provided
by operating activities:
Amortization of organizational expenses -- 7,561
Amortization of bank loan expenses .... 16,787 16,787
Net realized (gain) loss
from investment transactions ......... (22,577,529) 129,699
Increase in unrealized loss (gain)
from investment transactions ......... (24,109,454) 1,105,401
Increase in other assets
and receivable ....................... (10,639,174) (801,119)
Increase (decrease)
in management fees payable ........... 211,296 (46,109)
Increase (decrease ) in accounts
payable and other accrued liabilities 401,486 (372,536)
------------ ------------
Net cash provided by
(used in) operating activities ........ (9,584,738) 836,336
------------ ------------
Cash flows from investing activities:
Acquisition of loans and leases ....... (632,154) (1,967,596)
Principal payments
on loans and leases .................. 8,880,516 7,056,282
Net acquisition of
warrants and common stock ............ (417,556) (43,522)
Proceeds from sale of securities ...... 22,886,105 755,425
------------ ------------
Cash provided by investing activities . 30,716,911 5,800,589
------------ ------------
Cash flows from financing activities:
Distributions to shareholders ......... (8,100,127) (5,302,966)
Loan from bank ........................ -- 4,500,000
Repayment of bank loan ................ (4,035,767) (5,800,808)
------------ ------------
Net cash used in financing activities . (12,135,894) (6,603,774)
------------ ------------
Net increase in cash
and cash equivalents ................. 8,996,279 33,151
----------- ------------
Cash and cash equivalents
-- beginning of period ............... 1,748,410 2,301,753
------------ ------------
Cash and cash equivalents
-- end of period ..................... $ 10,744,689 2,334,904
============ ============
6
<PAGE>
VENTURE LENDING & LEASING, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION:
The accompanying condensed financial statements have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission (SEC) and in
Management's opinion, include all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of results for such
interim periods. Certain information and note disclosures normally included in
annual financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to SEC rules or regulations;
however, the Fund believes that the disclosures made are adequate to make the
information presented not misleading. The interim results for the three months
ended September 30, 1999 and 1998, are not necessarily indicative of results for
the full year. It is suggested that these financial statements be read in
conjunction with the financial Statements and the notes included in the Fund's
Annual Report for the year ended June 30, 1999.
2. SUMMARY OF INVESTMENTS:
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. The Fund's investments in loans and leases are entirely within the
United States and are diversified among the following industries. The percentage
of shareholders' equity (net assets) that each industry group represents is
shown with the industry totals below. (The sum of the percentages does not equal
100 percent because the percentages are based on net assets as opposed to total
loans and leases. Also, the sum of the percentages of net assets is greater than
100 percent due to the Fund's use of leverage (debt) as a means of financing
investments.)
The percentage of shareholders' equity that each industry group represents is
shown below with the industry totals:
Outstanding
Borrower September 30, 1999
Biotechnology:
Biosys, Inc. $1,411,463
Ceres, Inc. 1,081,427
Desmos, Inc. 63,162
Gene Logic, Inc. 577,527
Protien Delivery, Inc. 164,491
Regen Biologics, Inc. 471,312
Telek, Inc. 462,839
----------------------
Total biotechnology (4.4%) 4,232,221
----------------------
7
<PAGE>
Communications:
AUnet Corporation 340,387
Brocade Communications, Inc. 573,971
Cerent Corporation 2,862,003
Digital Generation Systems, Inc. 2,395,357
Exodus Communications, Inc. 2,287,558
Optimal Networks Corporation 198,541
Optivision, Inc. 244,421
Silicon Wireless, Inc. 1,118,561
Wink Communications, Inc. 469,013
Yago Systems, Inc. 149,254
----------------------
Total communications (11.0%) 10,639,066
----------------------
Computers and peripherals:
Headway Technologies, Inc. 3,979,649
Aptix Corporation 450,143
Neomagic Corporation 169,807
----------------------
Total computers and peripherals (4.7%) 4,599,599
----------------------
Internet:
Active Software, Inc. 135,581
Adforce, Inc. 1,101,417
Inverse Network Technology 213,018
Keynote Systems Incorporated 318,864
Netratings, Inc. 146,570
----------------------
Total Internet (2.0%) 1,915,450
----------------------
Medical devices:
Ciphergen Biosystems 97,586
eMed 84,917
Encelle, Inc. 153,381
Heartstent Corporation 110,522
Integ Incorporated 3,150,527
Aerogen, Inc. 179,318
Intratherapeutics, Inc. 676,445
Myelotec, Inc. 192,097
Oratec Interventions, Inc. 88,693
Spinal Concepts, Inc. 187,606
Survivalink Corporation 403,821
----------------------
Total medical devices (5.5%) 5,324,913
----------------------
8
<PAGE>
Semiconductors and equipment:
Abpac, Inc. 1,184,099
Dynachip Corporation 1,007,549
Equator Technologies, Inc. 1,221,657
iCompression, Inc. 125,265
I-Cube, Inc. 604,655
Lightwave Microsystems Corporation 394,763
Poseidon Technology, Inc. 433,126
Quantum3D, Inc. 78,452
SiRF Technology 525,555
Telecruz Technology, Inc. 395,185
Transmeta Corporation 2,432,422
O-In Design Automation 250,047
----------------------
Total semiconductors and equipment (8.9%) 8,652,775
----------------------
Software:
Calico Technology, Inc. 295,841
Commerce One, Inc. 179,801
Comps Infosystems, Inc. 1,406,346
Documentum 170,070
Mineshare Corpration 293,002
Personic Software Inc. 318,978
Persistence Software, Inc. 92,178
Perspecta, Inc. 121,560
Release Software Corporation 163,232
Rightpoint Software, Inc. 286,583
Solopoint, Inc. 48,409
Tenth Planet Exploration, Inc. 82,158
----------------------
Total software (3.6%) 3,458,158
----------------------
Other:
Larex, Inc. 746,814
Uniax Corporation 691,305
Volumetrics Medical Imaging Inc. 317,870
Webvan-Bay Area, Inc. 1,241,791
----------------------
Total other (3.1%) 2,997,780
----------------------
Total $41,819,962
======================
9
<PAGE>
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. At September 30, 1999, the
Fund has unfunded commitments to borrowers of $37.5 million.
The Fund's investments in stocks and warrants are entirely within the United
States. The percentage of shareholders' equity that each industry group
represents is shown below with the industry totals:
Industry Stock and Percentage of
Warrant Value Shareholders' Equity
- --------------------------------------------------------------------------------
Biotechnology $140,643 0.14%
Communications 29,402,159 30.29%
Communications equipment 18,516,030 19.08%
Computer and peripherals 138,272 0.14%
Internet 2,685,485 2.77%
Medical devices 157,800 0.16%
Semiconductor 273,438 0.28%
Software 2,611,637 2.69%
60,000 0.06%
----------------------------------------
Total stock and warrants $53,985,464 55.61%
========================================
The Fund's investment in common stock at September 30, 1999 consists of
investments in twelve securities within the United States and is diversified
among the software, computer and peripherals and communications industries.
These investments have a carrying value of $51.8 million and represents 53.41
percent of the Fund's shareholders' equity.
At September 30, 1999, the Fund held 0.6 million warrants to purchase the common
and preferred shares of 9 publicly traded companies. Because of the illiquid
nature of these warrants, the Fund is carrying the public companies at a
discounted value of $1.4 million. The warrants issued by private companies do
not have a readily ascertainable market value and were assigned a minimal value
at the time of acquisition. These warrants had a value of $0.7 million at
September 30, 1999.
3. EARNINGS PER SHARE:
The Fund adopted Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings per Share," effective December 31, 1997. SFAS No. 128 replaces primary
and fully diluted earnings per share with basic and diluted earnings per share
calculations. Basic earnings per share are computed by dividing net income, less
dividends on preferred stock, by the weighted average common shares outstanding.
Diluted earnings
10
<PAGE>
3. EARNINGS PER SHARE (continued):
per share are computed by dividing net income, less dividends on preferred
stock, by the weighted average common shares outstanding, including the dilutive
effects of potential common shares (e.g., stock options). The Fund has no
preferred stock or instruments that would be potential common shares; thus,
reported basic and diluted earnings are the same.
4. FUTURE FINANCIAL ACCOUNTING STANDARDS:
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement and requires that a company formally document,
designate, and assess the effectiveness of transactions that receive hedge
accounting.
SFAS No. 133 is effective for fiscal years beginning after June 15, 2000, and
the Fund plans to adopt its provisions effective July 1, 2000. From time to
time, the Fund enters into interest rate swaps to hedge its interest rate.
Additionally, certain of its investments and long-term borrowings may have
embedded options due to call or put features that would be required to be
accounted for differently under SFAS No. 133 as compared to current accounting
principles. The Fund has not yet quantified the impact of adopting SFAS No. 133
on its financial statements; however, SFAS No. 133 could increase the volatility
of future earnings.
5. FUTURE FINANCIAL ACCOUNTING STANDARDS:
Subsequent to quarter end, Cerent Corporation, one of the Fund's portfolio
companies, merged with Cisco Corporation in a transaction that was accounted for
as a pooling of interests. The Fund exercised its warrants in Cerent and held
345,639 shares of Cerent's common stock immediately prior to the merger. The
Fund expects to realize a significant gain from this transaction.
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 non-diversified
closed-end management investment company electing status as a "business
development company" ("BDC") under the Investment Company Act of 1940 ("1940
Act") whose investment objective is to achieve a high total return. The Fund
provides 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 receives warrants to acquire equity
securities in connection with its portfolio investments. There can be no
assurance that the Fund will attain its investment objective.
The Fund's shares of Common Stock, $.001 par value (`Shares") were sold
to subscribers pursuant to capital calls made through August 1998. Total
committed capital of $46.6 million has been fully funded as of September 30,
1999. The Fund has completed its investment period and will now focus on
efficiently managing the Fund's portfolio. As of September 30, 1999, the Fund
has distributed $51.2 million to its investors, including approximately $9.9
million of committed capital.
In addition to the historical information contained herein, this
Quarterly Report contains certain forward-looking statements. The reader of this
Quarterly Report should understand that all such forward-looking statements are
subject to various uncertainties and risks that could affect their outcome. The
Fund's actual results could differ materially from those suggested by such
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, variances in the actual versus
projected growth in assets, return on assets, loan losses, expenses, rates
charged on loans and earned on securities investments and competition effects as
well as other factors. This entire Quarterly Report should be read to put such
forward-looking statements in context and to gain a more complete understanding
of the uncertainties and risks involved in the Fund's business.
Results of Operations -- Three Months Ended September 30, 1999 and 1998
Total investment income for the three months ended September 30, 1999
and 1998 was $1.9 million and $3.3 million, respectively, of which $1.8 million
and $3.3 million, respectively, consisted of interest on venture loans
outstanding. Remaining income consisted of interest on the temporary investment
of cash, pending investment in venture loans and leases, distributions to
shareholders or application to the Fund's expenses. The decrease in investment
income primarily reflects the decrease in loans & leases outstanding from
approximately $74.7 million as of September 30, 1998 to approximately $41.8
million as of September 30, 1999. On a per share basis, for the three months
ended September 30, 1999 and 1998 net income was $975 and $16, respectively.
12
<PAGE>
The most significant factor effecting net income for the three months
ended September 30, 1999 was the increase of the unrealized gain of the Fund's
publicly traded stock and warrant portfolio of $24.1 million and realized gains
from investment transactions of $22.6 million. The unrealized appreciation of
the Fund's portfolio was primarily attributable to the appreciation of the
Fund's investments in stock of Juniper Networks and Brocade Communications. The
realized gains were primarily attributable to the Fund's partial sale of its
holdings of Brocade Communications, $10.3 million, and Juniper Networks, $10.7
million.
Expenses for the three months ended September 30, 1999 and 1998 were
$1.4 million and $1.3 million, respectively, resulting in net income of $47.1
million and $0.8 million, respectively. Interest expense declined during the
three months ended September 30, 1999 primarily reflecting the decrease in bank
loans from $34.8 million on September 30, 1998 to $18.9 million on September 30,
1999. Management fees increased from $0.5 million for the three months ended
September 30, 1998 to $0.7 million for the three months ended September 30, 1999
reflecting the increased asset base upon which fees are calculated for the
period. The increase in the asset base reflected the increased value of the
Fund's publicly traded securities.
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 September 30, 1999 and 1998, the Fund had loan balances
outstanding of $3.7 million and $2.6 million to borrowers that were carried on a
non-accrual basis.
Liquidity and Capital Resources -- September 30, 1999 and June 30, 1999
Total capital committed to the purchase of shares pursuant to
subscription agreements was approximately $46.6 million at September 30, 1999.
As of September 30, 1999, 100% of 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 $30 million securitization debt facility to
finance the acquisition of asset-based loans and leases. The principal balance
is a 47-month term loan. Additional amounts can be drawn on the credit facility
by a minimum of $5 million and in $1 million increments in excess thereof. As of
September 30, 1999, $18.9 million was outstanding under this facility, compared
with $22.9 million as of June 30, 1999. The Fund enters into interest rate swap
transactions to hedge its interest rate on the debt facility. At September 30,
1999, the Fund had interest rate swap transactions outstanding with a total
notional principal amount of $31.2 million. The effect of these swap
transactions is to convert the variable LIBOR rate into a fixed rate on the
contract notional value. The amortization schedule for each borrowing under the
facility is expected to correspond to the amortization of the loans or leases
acquired with the proceeds of each borrowing.
13
<PAGE>
As of September 30, 1999, 9% of the Fund's assets consisted of cash and
cash equivalents, compared with 2% as of June 30, 1999. Cumulative amounts
disbursed under the Fund's loan commitments increased by approximately $0.7
million as of September 30, 1999 compared to June 30, 1999. Net loan amounts
outstanding after amortization decreased by approximately $8.2 million. Unfunded
commitments decreased by approximately $0.6 million.
================================================================================
As of: Amount Principal Balance Unfunded
Disbursed Amortization Outstanding Commitments
================================================================================
September 30,
1999 $143.7 million $96.3 million $43.7 million $37.5 million
================================================================================
June 30,
1999 $143.0 million $88.9 million $51.9 million $38.1 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?
Year 2000 Issue
The Fund utilizes software and related information technologies that
will be affected by the date change in the year 2000. The year 2000 issue exists
because many computer systems and applications currently use two-digit date
fields to designate a year. When the century date change occurs, certain
date-sensitive systems may recognize the year 2000 as 1900, or not at all. This
inability to recognize or properly treat the year 2000 may result in a systems
failure or cause systems to process critical financial and operational
information incorrectly. Additionally, many of the Fund's customers and service
providers use software and information technology that could also be affected by
the date change.
14
<PAGE>
Based on ongoing assessments and testing, the Fund believes that there
is no material risk of business interruption as a result of computer errors or
inefficiencies. Consequently, the Fund does not anticipate that the remediation
costs associated with the year 2000 issue will be material. The Fund is also
working with its vendors and customers to obtain reasonable assurances that they
are taking comparable steps with respect to their year 2000 exposures. However,
in the event that significant vendors or customers do not adequately address the
year 2000 issue, it could have a material adverse effect on the Fund's
operations and financial position. The Fund's contingency plan includes
switching to vendors that are year 2000 compliant and utilizing backup systems
that do not rely on computers. The steps the Fund is taking and intends to take
do not guarantee complete success or eliminate the possibility that the Fund
will not be adversely affected by the matters related to the year 2000.
15
<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
16
<PAGE>
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: November 15, 1999 _________________________
Ronald W. Swenson
Chairman
[Chief Executive Officer]
Date: November 15, 1999 _________________________
Salvador O. Gutierrez
President & Treasurer
[Chief Financial Officer]
17
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NET-CHANGE-FROM-OPS> 47,112
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 425
<DISTRIBUTIONS-OF-GAINS> 22,578
<DISTRIBUTIONS-OTHER> 3,693
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<NET-CHANGE-IN-ASSETS> 39,012
<ACCUMULATED-NII-PRIOR> (12,604)
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 729
<INTEREST-EXPENSE> 374
<GROSS-EXPENSE> 1,429
<AVERAGE-NET-ASSETS> 77,560
<PER-SHARE-NAV-BEGIN> 1,201.48
<PER-SHARE-NII> 8.80
<PER-SHARE-GAIN-APPREC> 467.28
<PER-SHARE-DIVIDEND> 552.49
<PER-SHARE-DISTRIBUTIONS> 552.49
<RETURNS-OF-CAPITAL> 76.43
<PER-SHARE-NAV-END> 2,008.87
<EXPENSE-RATIO> 5.44%
[AVG-DEBT-OUTSTANDING] 20,876
[AVG-DEBT-PER-SHARE] 432.06
</TABLE>
