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 fiscal year ended June 30, 1997

                                       OR

[  ]                   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             (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)

       Registrant's telephone number, including area code: (408) 436-8577

Securities Registered Pursuant to Section 12(b) of the Act:None
Securities Registered Pursuant to Section 12(g) of the Act:Common Stock 
                                                           $ 0.001 par value

     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 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 registrant's  knowledge,  in definitive proxy or information  statements
incorporated  be reference in Part II of this Form 10-K or any amendment to this
Form 10-K: ___

     As the registrant's  shares are not  publicly-traded,  the aggregate market
value of the voting stock held by  non-affiliates  of the  registrant  cannot be
determined.

     The number of shares  outstanding of each of the issuer's classes of common
stock, as of September 11, 1997 was 48,318.58.

                       Documents Incorporated by Reference
Document   Description                                               10-K Part
-----------------------                                              ---------
Specifically Identified Portions of the Registrant's Proxy Statement
for the Annual Meeting of Shareholders to be held November 19, 1997      III



-------------------------------------------------------------------------------

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<PAGE>



PART I

ITEM 1. BUSINESS.

Introduction.
-------------

        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. Westech Investment Advisors, Inc. ("Westech Advisors")
is the Fund's  Investment  Manager and Siguler Guff Advisers,  L.L.C.  ("Siguler
Guff  Advisers") is its Fund  Manager.  At a meeting held on September 26, 1995,
the Fund's shareholders approved a proposal to substitute Siguler Guff Advisers,
for the previous Fund Manager Mitchell Hutchins Institutional Investors Inc, and
Siguler Guff  Advisers  assumed  responsibility  as Fund Manager on December 22,
1995. The Investment  Manager and the Fund Manager are referred to  collectively
as the "Managers."  The Fund was  incorporated in Maryland on September 29, 1993
and commenced business on July 5, 1994.

        The Fund's  shares of Common  Stock,  par value  (`Shares")  are sold to
subscribers  pursuant to one or more capital  calls to be made from time to time
until July 5, 1998. The Fund will seek to require payment by investors  pursuant
to each capital call of only that portion of the total dollar amount  subscribed
for that the Fund expects will be needed to fund commitments entered into within
a reasonable time after such capital call. As of June 30, 1997 the Fund has made
five capital  calls since  inception  for a total of 80% of  committed  capital.
Total committed capital as of June 30, 1997 was $46.6 million;  a total of $37.3
million had been called.  Subsequent to June 30, 1997, the Fund called the final
remaining 20% of capital.

Investment Program.
-------------------

        General: As a BDC, the Fund will invest at least 70% of its total assets
("qualifying  assets") in  securities  of  companies  that  qualify as "eligible
portfolio companies." An eligible portfolio company generally is a United States
company that is not an investment  company and that (i) does not have a class of
securities  registered on an exchange or included in the Federal Reserve Board's
over-the-counter  margin list;  (ii) is actively  controlled by a BDC and has an
affiliate of a BDC on its board of directors; or (iii) meets such other criteria
as may be  established by the SEC. See  "Regulation."  The Fund may invest up to
30% of its total assets in non-qualifying  assets,  including companies that are
not eligible portfolio companies (for example,  because the company's securities
are  listed  on  the  National  Association  of  Securities  Dealers'  Automated
Quotation System) and eligible portfolio companies as to which the Fund does not
offer  to  make  available  significant  managerial  assistance.  The  foregoing
percentages are determined,  in the case of financings in which the Fund commits
to provide  financing  prior to  funding  the  commitment,  by the amount of the
Fund's total assets represented by the value of the maximum amount of securities
to be issued by the borrower or lessee to the Fund pursuant to such commitment.

        Venture  Loans  and  Leases:   Venture  loans  generally  consist  of  a
promissory  note secured by the equipment or other assets to be purchased by the
borrower.  The Fund generally obtains a security interest in the assets financed
and receives periodic payments of interest and principal, and generally receives
a final payment constituting additional interest at the end of the transaction's


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<PAGE>


term.  Venture  leases  consist  of a lease  from the Fund to the  lessee of the
assets to be financed, with periodic payments of rent and, in most cases, with a
put option to sell the assets to the borrower at the end of the lease term for a
predetermined  or formula  price.  The interest rate and  amortization  terms of
venture  loans,  the  rental  rate and put  provisions  of leases  and all other
transaction terms are individually negotiated between the Fund and each borrower
or lessee. Because the Fund seeks to qualify as a "regulated investment company"
("RIC")  under the Internal  Revenue  Code of 1986  ("Internal  Revenue  Code"),
provisions  of the Internal  Revenue Code restrict the terms upon which the Fund
may enter into  venture  leases and the  extent to which  venture  leases may be
used, and the Fund  anticipates  structuring the majority of its transactions as
venture loans.

        Typically,  loans or leases are structured as commitments by the Fund to
finance asset  acquisitions by the borrower or lessee over a specified period of
time.  The  commitment  of the Fund to  finance  future  asset  acquisitions  is
typically  subject  to the  absence of any  default  under the loan or lease and
compliance  by the borrower with  requirements  relating to, among other things,
the type of assets to be  acquired.  Although the Fund's  commitments  generally
provide  that the Fund is not  required  to continue  to fund  additional  asset
purchases if there is a material  adverse  change in the  borrower's or lessee's
financial  condition,  it is possible  that a borrower's  or lessee's  financial
condition  will  not be as  strong  at the  time  the  Fund  finances  an  asset
acquisition as it was at the time the commitment was entered into.

        Warrants and Equity Securities:  The Fund generally acquires warrants to
purchase  equity  securities of the borrower or lessee in connection  with asset
financings.  The terms of the warrants,  including the expiration date, exercise
price and terms of the equity  security for which the warrant may be  exercised,
are negotiated individually with each borrower or lessee.  Substantially all the
warrants and underlying  equity  securities are restricted  securities under the
1933 Act at the time of issuance;  the Fund  generally  negotiates  registration
rights with the borrower or lessee that may provide (i) "piggyback" registration
rights, which permit the Fund under certain circumstances to include some or all
of the securities owned by it in a registration  statement filed by the borrower
or  lessee  or (ii)  under  rare  circumstances,  "demand"  registration  rights
permitting  the Fund under  certain  circumstances  to require  the  borrower or
lessee to  register  the  securities  under  the 1933 Act (in some  cases at the
Fund's expense).

Investment Policies.
--------------------

        For  purposes  of  these   investment   policies  and  unless  otherwise
specified, references to the percentage of the Fund's total assets "invested" in
securities  of a company will be deemed to refer,  in the case of  financings in
which the Fund commits to provide financing prior to funding the commitment,  to
the amount of the Fund's  total assets  represented  by the value of the maximum
amount of securities to be issued by the borrower or lessee to the Fund pursuant
to such  commitment;  the Fund will not be required to divest  securities in its
portfolio  or decline to fund an  existing  commitment  because of a  subsequent
change in the value of securities the Fund has previously  acquired or committed
to purchase.

        Diversification Standards: The Fund is classified as a "non-diversified"
closed-end  investment  company  under the 1940 Act.  However  the Fund seeks to
qualify as a RIC, and therefore must meet  diversification  standards  under the
Internal Revenue Code.

        To  qualify  as a RIC,  the Fund  must meet the  issuer  diversification
standards  under the Internal  Revenue Code that require  that,  at the close of
each  quarter of the Fund's  taxable  year,  (i) not more than 25% of the market
value of its total assets is invested in the  securities  of a single issuer and
(ii) at least 50% of the  market  value of its total  assets is  represented  by
cash,  cash items,


                                       3
<PAGE>


government  securities,  securities  of other RICs and other
securities  (with each investment in such other  securities  limited so that not
more than 5% of the market  value of the Fund's  total assets is invested in the
securities  of a single  issuer  and the Fund  does not own more than 10% of the
outstanding  voting  securities  of  a  single  issuer).  For  purposes  of  the
diversification  requirements under the Internal Revenue Code, the percentage of
the Fund's total assets  "invested" in securities of a company will be deemed to
refer, in the case of financings in which the Fund commits to provide  financing
prior to  funding  the  commitment,  to the amount of the  Fund's  total  assets
represented by the value of the  securities  issued by the borrower or lessee to
the Fund at the time each portion of the commitment is funded.

        The Fund will invest no more than 25% of its total assets in  securities
of companies in any single industry.  The broad industry categories in which the
Fund  anticipates  that most of its  investments  will fall (and  within each of
which  there  may  be  several   "industries"   for  purposes  of  the  industry
diversification    policy)   include    computer   and    semiconductor-related,
medical/biotechnology and communications.

        Investment   Guidelines:   In  selecting   investments  for  the  Fund's
portfolio,  the Managers endeavor to meet the investment guidelines  established
by the Fund's Board of Directors.  The Fund may, however,  make investments that
do not conform to one or more of these guidelines when deemed appropriate by the
Managers.  Such investments might be made if the Managers believe that a failure
to  conform  in one area is offset by  exceptional  strength  in  another  or is
compensated  for  by  a  higher  yield,  favorable  warrant  issuance  or  other
attractive transaction terms or features.

        Leverage:  The Fund is  permitted  to borrow  money  from and issue debt
securities to banks,  insurance companies and other lenders to obtain additional
funds to originate  venture  loans and leases.  Under the 1940 Act, the Fund may
not incur borrowings unless,  immediately after the borrowing is incurred,  such
borrowings would have "asset coverage" of at least 200 percent. "Asset coverage"
means the ratio which the value of the Fund's total assets, less all liabilities
not represented by the borrowings and any other liabilities constituting "senior
securities" under the 1940 Act, bears to the aggregate amount of such borrowings
and senior  securities.  The practical effect of this limitation is to limit the
Fund's  borrowings  and other senior  securities to 50% of its total assets less
its liabilities other than the borrowings and other senior securities.

        The use of  leverage  increases  investment  risk.  The  Fund's  lenders
require that the Fund pledge  portfolio  assets as collateral for loans.  If the
Fund is unable to  service  the  borrowings,  the Fund may risk the loss of such
pledged  assets.  Lenders  also  require  that the Fund agree to loan  covenants
limiting the Fund's ability to incur  additional debt or otherwise  limiting the
Fund's  flexibility,  and loan  agreements may provide for  acceleration  of the
maturity of the indebtedness if certain financial tests are not met.

     Temporary  Investments:  Pending investment in asset financing transactions
and pending distributions, the Fund invests excess cash in (i) securities issued
or guaranteed by the U.S. government,  its agencies or  instrumentalities,  (ii)
repurchase  agreements fully  collateralized  by U.S.  government  securities or
(iii) short-term  high-quality debt instruments of U.S.  corporations.  All such
investments will mature in one year or less. The U.S.  government  securities in
which the Fund may invest include U.S. government  securities backed by the full
faith and  credit of the U.S.  government  (such as  Treasury  bills,  notes and
bonds) as well as  securities  backed only by the credit of the issuing  agency.
Corporate  securities  in which the Fund may invest  include  commercial  paper,
bankers' acceptances and certificates of deposit of domestic or foreign issuers.
The Fund also may enter into repurchase agreements that are fully collateralized
by U.S.  government  securities with banks or recognized  securities dealers, in
which the Fund purchases a


                                       4
<PAGE>


U.S.  government  security from the  institution  and
simultaneously  agrees  to resell it to the  seller at an  agreed-upon  date and
price. The repurchase price is related to an agreed-upon market rate of interest
rather than the coupon of the debt security and, in that sense, these agreements
are  analogous  to  secured  loans  from  the  Fund  to the  seller.  Repurchase
agreements  carry  certain  risks not  associated  with  direct  investments  in
securities,  including  possible  declines in the market value of the underlying
securities  and  delays  and  costs  to the  Fund  if  the  other  party  to the
transaction defaults.

        Other  Investment  Policies:  The Fund will not sell  securities  short,
purchase  securities  on margin  (except  to the  extent  the  Fund's  permitted
borrowings  are deemed to  constitute  margin  purchases),  write puts or calls,
purchase or sell  commodities  or  commodity  contracts or purchase or sell real
estate.  The Fund will not underwrite the securities of other companies,  except
to the  extent the Fund may be deemed an  underwriter  upon the  disposition  of
restricted securities acquired in the ordinary course of the Fund's business.

        The Fund's  investment  objective,  investment  policies and  investment
guidelines (other than its status as a BDC) are not fundamental policies and may
be changed by the Fund's  Board of  Directors  at any time  without  shareholder
approval.

Regulation.
-----------
        Generally,  to be eligible to elect BDC status, a company must engage in
the  business  of  furnishing  capital  and  offering   significant   managerial
assistance  to  "eligible   portfolio   companies,"  as  defined   below.   More
specifically,  in order to qualify  as a BDC,  a company  must (i) be a domestic
company;  (ii) have  registered  as a class of its  securities  or have  filed a
registration  statement  with the SEC  pursuant to Section 12 of the  Securities
Exchange  Act of  1934;  (iii)  operate  for the  purpose  of  investing  in the
securities  of certain  types of  eligible  portfolio  companies;  (iv) offer to
extend significant  managerial  assistance to such eligible portfolio companies;
(v) have a majority of disinterested  directors; and (vi) file (or under certain
circumstances, intend to file) a proper notice of election with the SEC.

        "Making available  significant  managerial  assistance" is defined under
the 1940 Act, in  relevant  part,  as (i) an  arrangement  whereby the  business
development  company,  through its  officers,  directors,  employees  or general
partners, offers to provide and, if accepted, does provide, significant guidance
and counsel  concerning the management,  operations or business  objectives of a
portfolio company;  or (ii) the exercise by a business  development company of a
controlling influence over the management or polices of the portfolio company by
the  business  development  company  acting  individually  or as part of a group
acting together which controls the portfolio  company.  The officers of the Fund
intend to offer to provide managerial assistance,  including advice on equipment
acquisition and financing,  cash flow and expense management,  general financing
opportunities,  acquisition opportunities and opportunities to access the public
securities markets, to the great majority of companies to whom the Fund provides
venture loans or leases. In some instances,  officers of the Fund might serve on
the board of directors of borrowers or lessees.

        An "eligible  portfolio  company"  generally is a United States  company
that is not an  investment  company  and  that  (i)  does  not  have a class  of
securities  registered on an exchange or included in the Federal Reserve Board's
over-the-counter  margin list;  (ii) is actively  controlled by a BDC and has an
affiliate of a BDC on its board of directors; or (iii) meets such other criteria
as may be  established  by the SEC.  Control  under the 1940 Act is  presumed to
exist where a BDC owns more than 25% of the outstanding voting securities of the
eligible portfolio company.

        The 1940 Act  prohibits or restricts  companies  subject to the 1940 Act
from investing in


                                       5
<PAGE>


certain types of companies, such as brokerage firms, insurance
companies,  investment banking firms, and investment  companies.  Moreover,  the
1940 Act limits the type of assets that BDCs may  acquire to certain  prescribed
qualifying  assets and certain  assets  necessary  for its  operations  (such as
office  furniture,  equipment,  and  facilities) if, at the time of acquisition,
less  than 70% of the  value of  BDC's  assets  consist  of  qualifying  assets.
Qualifying assets include:  (i) privately acquired  securities of companies that
were  eligible  portfolio   companies  at  the  time  such  BDC  acquired  their
securities; (ii) securities of bankrupt or insolvent companies; (iii) securities
of eligible portfolio companies controlled by a BDC; (iv) securities received in
exchange for or distributed in or with respect to any of the foregoing;  and (v)
cash items, government securities and high-quality short-term debt. The 1940 Act
also places restrictions on the nature of transactions in which, and the persons
from  whom,  securities  can be  purchased  in order  for the  securities  to be
considered  qualifying assets.  Such restrictions  include limiting purchases to
transactions not involving a public offering and the requirement that securities
be  acquired  directly  from  either  the  portfolio  company  or its  officers,
directors or affiliates.

        The Fund, as a BDC, may sell its securities at a price that is below its
net asset value per share,  provided that a majority of the Fund's disinterested
directors has  determined  that such sale would be in the best  interests of the
Fund and its  shareholders and upon the approval by the holders of a majority of
its outstanding voting securities, including a majority of the voting securities
held by  non-affiliated  persons,  of such policy or practice within one year of
such sale. A majority of the disinterested directors also must determine in good
faith, in consultation  with the underwriters of the offering if the offering is
underwritten,  that the price of the  securities  being  sold is not less than a
price  which  closely  approximates  market  value of the  securities,  less any
distribution  discounts  or  commissions.  As defined in the 1940 Act,  the term
"majority of the  outstanding  voting  securities" of the Fund means the vote of
(i) 67% or more of the Fund's  Shares  present at a meeting,  if the  holders of
more than 50% of the outstanding  Shares are present or represented by proxy, or
(ii) more than 50% of the Fund's outstanding Shares, whichever is less.

        Many of the transactions involving a company and its affiliates (as well
as  affiliates  of those  affiliates)  which were  prohibited  without the prior
approval  of the SEC  under  the 1940 Act  prior  to its  amendment  by the 1980
Provisions are permissible for BDCs, including the Fund, upon the prior approval
of a  majority  of the Fund's  disinterested  directors  and a  majority  of the
directors having no financial  interest in the  transactions.  However,  certain
transactions  involving  certain  persons  related  to the Fund,  including  its
directors,  officers,  and the Managers, may still require the prior approval of
the SEC. In general, (i) any person who owns, controls,  or holds power to vote,
more than 5% of the  Fund's  outstanding  Shares  (ii) any  director,  executive
officer, or general partner of that person; and (iii) any person who directly or
indirectly  controls,  is controlled by, or is under common  control with,  that
person, must obtain the prior approval of a majority of the Fund's disinterested
directors,  and,  in some  situations,  the prior  approval  of the SEC,  before
engaging in certain transactions  involving the person or any company controlled
by the Fund. The 1940 Act generally does not restrict  transactions  between the
Fund and its eligible portfolio companies.  While a BDC may change the nature of
its business so as to cease being a BDC (and in  connection  therewith  withdraw
its election to be treated as a BDC) only if  authorized  to do so by a majority
vote  (as  defined  by the  1940  Act)  of its  outstanding  voting  securities,
shareholder  approval of changes in other fundamental  investment  policies of a
BDC is not  required (in  contrast to the general  1940 Act  requirement,  which
requires  shareholder  approval  for a  change  in  any  fundamental  investment
policy).

Dividends and Distributions.
----------------------------

        The Fund intends to distribute to shareholders  substantially all of its
net investment  income 


                                       6
<PAGE>


and net realized capital gains, if any, as determined for
income tax purposes.  Applicable law, including  provisions of the 1940 Act, may
limit the  amount of  dividends  and other  distributions  payable  by the Fund.
Income  dividends will generally be paid quarterly to  shareholders of record on
the last day of each preceding  calendar quarter end.  Substantially  all of the
Fund's net  capital  gain (the  excess of net  long-term  capital  gain over net
short-term  capital  loss) and net  short-term  capital  gain,  if any,  will be
distributed  annually with the Fund's final quarterly dividend  distribution for
the year.

        Until the fourth  anniversary  following the first closing of the Fund's
initial  offering of shares,  the Managers will seek to reinvest the proceeds of
matured,  repaid  or  resold  investments,  net  of  required  distributions  to
shareholders, principal payments on borrowings and expenses or other obligations
of the Fund, in new loans or leases.  Beginning on the fourth anniversary of the
Fund's first  closing,  the Fund will also  distribute to investors all proceeds
received from principal  payments and sales of investments,  net of reserves and
expenses,  principal  repayments on the Fund's  borrowings,  amounts required to
fund financing commitments entered into before such fourth anniversary,  and any
amounts paid on exercise of warrants.  Distributions  of such amounts are likely
to cause  annual  distributions  to exceed the  earnings and profits of the Fund
available for  distribution,  in which case such excess will be considered a tax
free  return of capital  to a  shareholder  to the  extent of the  shareholder's
adjusted basis in his shares and then as capital gain.

Competition.
------------

        Other entities and individuals  compete for investments similar to those
proposed to be made by the Fund,  some of whom may have greater  resources  than
the Fund. Furthermore, the Fund's need to comply with provisions of the 1940 Act
pertaining  to BDCs and  provisions of the Internal  Revenue Code  pertaining to
RICs might restrict the Fund's flexibility as compared with its competitors. The
need to compete for investment  opportunities may make it necessary for the Fund
to offer borrowers or lessees more attractive  transaction  terms than otherwise
might be the case.

Employees.
----------

        The  Fund  has no  employees;  all  of its  officers  are  officers  and
employees of the  Managers,  and all of its required  services are  performed by
officers and employees of the Managers.

ITEM 2. PROPERTIES.

        All of the Fund's office space is provided by the Managers.

ITEM 3. LEGAL PROCEEDINGS.

        The Fund is not a party to any material legal proceedings.

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

        No  matters  were  submitted  to a vote of the Fund's  security  holders
during the last quarter of the fiscal year ended June 30, 1997.


                                       7
<PAGE>


EXECUTIVE OFFICERS OF THE FUND

        The following are the executive officers of the Fund. All officers serve
at the pleasure of the Board.

Name and Position With  Age     Occupation During Past Five Years 
Fund   
                            
Ronald W. Swenson,      52      President  and  Director,  Westech  Investment  
Director, Chairman and          Advisors since  1994,   and  President   and  
Chief Executive Officer         Director,   Western Technology Investments since
                                1980.
   
Salvador O. Gutierrez,  54      Senior Vice President and Director,  Westech  
Director, President             Investment Advisors since 1994, and Senior Vice 
and Chief Financial             President,  Western Technology Investment since 
Officer                         1987.

George W. Siguler,      50      Managing  Director,  Siguler Guff  Advisers & 
Executive Vice Presiden         affiliates since  1995;  Managing  Director  of
President and Advisory          Mitchell  Hutchins Institutional  Investors from
Director                        1991 to 1995. Director and President, 
                                Associated  Capital  Advisers,Inc.  (investment 
                                management  firm)  from 1990 to 1991, 
                                Vice Chairman and a director of Monarch Capital 
                                Corporation  (financial services  holding  
                                company)  from  1984 to 1991.

Patricia A. Breshears,  61      Vice President,  Westech Investment Advisors 
Vice President and              since 1994; Administrator   and   Corporate  
Secretary                       Secretary,    Western Technology   Investment  
                                (venture  leasing firm) since 1984.

Donald P. Spencer,      42      Managing Director,  Siguler Guff Advisers and 
Vice President and              affiliates since   1995;   Senior   Vice   
Assistant Secretary             President   (and   other positions), 
                                Mitchell Hutchins  Institutional  Investors and 
                                affiliates from 1989 to 1995.        

PART II.

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.

        The Fund's Common Stock is not listed on any  securities  exchange,  and
all holders of the Fund's Common Stock are subject to  agreements  significantly
restricting the transferability of their shares.

        The  approximate  number of holders of record of the Fund's Common Stock
at September 12, 1997 was 52.

        The Fund has established a policy of declaring  dividends on a quarterly
basis,  with the most recent  dividend being paid on July 30, 1997 to holders of
record on June 30, 1997, in the amount of $40.00 per share.  See  "Dividends and
Distributions" under Item 1 for a description of the Fund's dividend policies.


                                       8
<PAGE>


ITEM 6. SELECTED FINANCIAL DATA.

        The following table summarizes certain financial data and should be read
in  conjunction  with the  "Management's  Discussion  and  Analysis of Financial
Condition  and Results of  Operations"  and the financial  statements  and notes
thereto  included  elsewhere in this Form 10-K. The selected  financial data set
forth below has been derived from the audited financial statements.

<TABLE>
<CAPTION>
                                                    For the Year   For the Year 
                                                       Ended           Ended    
                                                    June 30, 1996  June 30,1997
                                                    -------------- -------------
<S>                                                     <C>            <C>   
Statement of Operations Data:
Investment Income:
        Interest on Loans and Leases ...............    $3,481,702    $7,314,618
        Interest on Short - Term investments .......       351,093       268,329
                                                         ---------     ---------
           Total Investment Income .................     3,832,795     7,582,947

Expenses:

        Management Fee to Managers .................     1,159,189     1,438,118
        Interest Expense ...........................       895,269     1,701,039
        Other Expenses .............................       191,417       441,791
                                                         ---------     ---------
             Total Expenses ........................     2,245,875     3,580,948
                                                         ---------     ---------
Net Investment Income ..............................     1,586,920     4,001,999

Net Unrealized Gain From Investment Transactions ...     1,308,016       965,498
Net Realized Gain From Investment Transactions .....        22,134     1,463,670
                                                         ---------     ---------
Net Income .........................................    $2,917,070    $6,431,167
                                                        ==========    ==========

Net Income Per Share: ..............................    $      157    $      212
                                                        ==========    ==========

Average Shares Outstanding .........................        18,607        30,304
                                                        ==========    ==========


Balance Sheet Data:                                      As of           As of 
                                                        June 30,        June 30,
                                                         1996            1997
                                                      ----------     -----------

Total Assets .......................                   $35,205,347   $71,848,759
Bank Loans .........................                   $14,738,460   $30,000,000


</TABLE>


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


Results of Operations --     Years Ended June 30, 1997 and 1996

        Total  investment  income for the years ended June 30, 1997 and 1996 was
$7.6  million and $3.8  million,  respectively,  of which $7.3  million and $3.5
million,  respectively,  consisted  of  interest on venture  loans  outstanding.
Remaining  income  consisted  of interest  on the  temporary  investment  of the
proceeds of the Shares sold in the Fund's capital calls,  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  $18.7 million as of June 30, 1996 to approximately  $37.5 million
as of June 30, 1997, and the  investment of that capital  (together with amounts
derived from bank borrowings) in venture loans and leases.


                                       9
<PAGE>


        Expenses  for the years ended June 30,  1997 and 1996 were $3.6  million
and $2.2 million, respectively, resulting in net income of $6.4 million and $2.9
million  respectively.  Net income for the year  ended  June 30,  1997  includes
unrealized  gain of $1.0  million  and a  realized  gain  of $1.5  million.  The
unrealized  gain for the period  relates to  warrants  which  were  received  in
connection with loan and lease transactions. Warrants with readily ascertainable
market values are assigned a fair value based on the difference, if any, between
the  exercise  price of the warrant and the fair value of the equity  securities
for which the warrant may be exercised, adjusted for illiquidity. On a per share
basis,  for the years  ended June 30, 1997 and 1996 net income was $212 and $157
respectively.

        There were  several  factors  which  contributed  to the increase in net
income  for the year  ended June 30,  1997 over the prior  year.  As of June 30,
1997,  total assets  invested in venture  loans  increased  as a  percentage  of
committed  capital  to  154%  from  76% as of  June  30,  1996,  reflecting  the
investment of capital called and additional borrowed funds, and cash balances as
a  percentage  of total  assets were  significantly  reduced  compared  with the
corresponding  year.  Management  fees,  and certain  other  expenses,  declined
significantly  as a percentage of invested  assets for the year as compared with
the  previous  year.  From and after  the  quarter  ended  September  30,  1996,
management  fees are computed as a percentage of total assets,  rather than as a
percentage  of committed  capital.  The most  significant  factor  effecting net
income for the year ended June 30, 1997 was the  realized  gain from  investment
transactions of $1.5 million and the increase in the net unrealized appreciation
of $1.0 million in the quoted market value of the stock  underlying the warrants
issued by the publicly traded companies and investments in common stock adjusted
for  illiquidity.  Also impacting net income was interest  expense on the Fund's
borrowings during the year ended June 30, 1997, at $1.7 million.

        The Fund's  policy is to place a loan on  nonaccrual  status when either
principal  or interest  has become past due for 90 days or more.  When a loan is
placed on nonaccrual status,  all interest  previously accrued but not collected
is reversed. As of June 30, 1997, the Fund had loan balances outstanding of $3.6
million to two  borrowers  that were  carried on a  nonaccrual  basis.  Foregone
interest  income on nonaccrual  loans for the year ended June 30, 1997, was $0.3
million.

        Management  fee  and  interest  expense  declined  as  a  percentage  of
investment  income for the year ended June 30, 1997 from the year ended June 30,
1996.  Other  expenses  increased  due to the  allowance  for bad  debts of $0.1
million. Because many of these expenses are relatively fixed and do not increase
significantly  as  total  assets  increase,   these  other  expenses,  like  the
management  fee,  can be expected to  continue  to decrease as a  percentage  of
investment income as the Fund draws and invests additional capital.


Liquidity and Capital Resources --  June 30, 1997 and June 30, 1996

        Total  capital   committed  to  the  purchase  of  Shares   pursuant  to
subscription  agreements  was  approximately  $46.6 million at June 30, 1997 and
1996. As of June 30, 1997 and 1996, 80% and 40%, respectively, of this committed
capital was called to fund  investments  in venture loans and leases and to meet
the Fund's  expenses.  Additional  capital may be drawn from subscribers upon 15
days' notice.

        The Fund has in place a $45 million bank credit  facility to finance the
acquisition  of  asset-based  loans and leases.  The interest only period of the
revolving  credit  facility  expires  September 27, 1997 and then becomes a four
year loan.  The  facility  can be drawn on from time to time during the interest
only  portion of the  commitment  period.  During 1997 the Fund  entered into an
interest


                                       10
<PAGE>


rate  swap  agreement  on $30  million.  The  effect of the swap 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.  As of  June  30,  1997,  $30.0  million  was
outstanding  under this  facility,  compared  with $14.7  million as of June 30,
1996.

        As of June 30, 1997, 5% of the Fund's assets  consisted of cash and cash
equivalents, compared with 13% as of June 30, 1996. The Fund continued to invest
its assets in venture loans and leases during the year.  Amounts disbursed under
the Fund's loan commitments  increased by approximately $53.3 million during the
year ended June 30, 1997, and net loan amounts  outstanding  after  amortization
increased  approximately $35.9 million.  Amounts committed but undrawn increased
by approximately $45.2 million.


=============  ==============   ================ ==============   ==============
Year Ending        Amount           Principal      Net Amount      Committed but
                  Disbursed        Amortization                       Undrawn
=============  ==============   ================ ==============   ==============
June 30, 1997   $90.1 million   $25.6 million     $64.5 million    $68.7 million
============== ==============   ================ ==============    =============
June 30, 1996   $36.8 million   $8.2 million      $28.6 million    $23.5 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.


                                       11
<PAGE>


        This  information has been derived from unaudited  financial  statements
that, in the opinion of  management,  include all normal  recurring  adjustments
necessary for a fair presentation of such information. The operating results for
any quarter are not necessarily indicative of results for any future period.

Quarterly Results - June 30, 1996 (Unaudited)

<TABLE>
<CAPTION>

                                                Three Months Ended
                                    September   December    March        June 
                                    30, 1995    31, 1995   31, 1996    30, 1996
                                   ---------- ----------- ---------- -----------
<S>                                  <C>         <C>         <C>       <C>    
Investment Income:
  Interest on Loans 
  and Leases......                $  594,539   $ 789,160   $ 935,083  $1,162,920
  Interest on Short -Term ......      83,888      97,467      94,754      74,984
                                   ---------   ---------   ---------   ---------
Investments
  Total Investment Income .          678,427     886,627   1,029,837   1,237,904
                                   ---------   ---------   ---------   ---------
Expenses:
  Management Fee ..............      287,468     293,769     287,382     290,570
  Interest Expense ............      199,813     185,744     222,394     287,318
  Other Expense ...............       54,898      39,396      52,778      44,345
                                   ---------   ---------   ---------   ---------
      Total Expenses ..........      542,179     518,909     562,554     622,233
                                   ---------   ---------   ---------   ---------
Net Investment Income (Loss)        $136,248    $367,718    $467,283    $615,671
Net Unrealized Gain From
Investment Transactions.......        --         485,993     333,940     488,083
Net Realized Gain From 
Investment Transactions ....          --           --         22,134        --
                                   ---------   ---------   ---------   ---------
  
Net Income .................        $136,248     $853,711   $823,357  $1,103,754
                                    ========     ========   ========  ==========
                           
Net Income  Per Share ......         $    11       $   42     $   40      $   54
                                    ========     ========   ========  ==========

Average Shares Outstanding .          12,379       20,417     20,595      20,595
                                    ========     ========   ========  ==========

Quarterly Results - June 30, 1997 (Unaudited)

                                              Three Months Ended
                                  September   December      March         June 
                                  30, 1996    31, 1996     31, 1997     30, 1997
                               -----------  -----------  -----------  ----------
Investment Income:
   Interest on Loans
   and Leases ..............    $1,335,293   $1,950,430   $1,831,754  $2,197,141
   Interest on Short-Term .         69,105       68,777       37,039      93,408
                               -----------  -----------  -----------  ----------
Investments
   Total Investment Income ...   1,404,398    2,019,207    1,868,793   2,290,549
                               -----------  -----------  -----------  --------- 
Expenses:
   Management Fee .........        285,815      306,164      400,582     445,557
   Interest Expense .......        316,890      326,540      410,738     645,829
   Other Expense ..........        149,011       86,145       87,540     120,134
                               -----------  -----------  -----------  ----------
   Total Expenses ......           751,716      718,849      898,860   1,211,520
                               -----------  -----------  -----------  ----------
Net Investment Income......       $652,682   $1,300,358     $969,933  $1,079,029
Net Unrealized Gain From
Investment Transactions......    1,677,476      186,380     (638,175)  (260,183)
Net Realized Gain 
From Investment Transactions..      --            --         958,497     505,171
                               -----------  -----------  -----------  ----------
Net Income ......               $2,330,158   $1,486,738   $1,290,255  $1,324,017
                                ==========   ==========   ==========  ==========
                                        
Net Income Per Share ...........   $    94      $    50      $    43     $    36
                                   =======      =======      =======     =======
Average Shares Outstanding .....    24,707       29,823       29,823      36,721
                                   =======      =======      =======     =======
</TABLE>



                                       12
<PAGE>





                         VENTURE LENDING & LEASING, INC.

                           ANNUAL REPORT ON FORM 10-K

                   FOR THE YEARS ENDED JUNE 30, 1997 AND 1996


                                     ITEM 8

                              FINANCIAL STATEMENTS



                                       13
<PAGE>
                              



INDEX TO FINANCIAL STATEMENTS

Financial Statements Included in Item 8:

        See Item 14(a)


                                       

                                       14
<PAGE>




                      [Letterhead of ARTHUR ANDERSEN LLP]

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Shareholders of
Venture Lending & Leasing, Inc.:

We have audited the  accompanying  statements  of financial  position of Venture
Lending & Leasing,  Inc. (a Maryland  corporation) as of June 30, 1997 and 1996,
and the related  statements of operations,  changes in shareholders'  equity and
cash  flows  for the  years  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 audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  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.  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 Venture Lending & Leasing, Inc.
as of June 30,  1997 and 1996,  and the results of its  operations  and its cash
flows for the years then ended in conformity with generally accepted  accounting
principles.



/S/ Arthur Andersen LLP
San Francisco, California,
August 8, 1997


                            


                                       15
<PAGE>



                         VENTURE LENDING & LEASING, INC.

                        STATEMENTS OF FINANCIAL POSITION
                          AS OF JUNE 30, 1997 AND 1996


<TABLE>
                                                       1997            1996
                                                  -------------    ------------
                               ASSETS
<CAPTION>
<S>                                                 <C>              <C>    
Loans and leases,  net of unearned income,
  fees and allowance for credit losses
  of $100,000 and $0 at June 30, 1997 and 1996,
  respectively ..................................  $64,365,197      $28,616,626
Cash and cash equivalents .......................    3,946,955        4,683,671
Investments in warrants .........................    2,282,242        1,772,701
Investments in stocks ...........................    1,171,957                0
Deferred organizational expenses ................       60,079           90,080
Deferred bank loan expenses .....................       11,092           19,808
Accounts receivable .............................        3,174           16,545
Other assets ....................................        8,063            5,916
                                                   -----------      -----------
                                                                    
             Total assets .......................  $71,848,759      $35,205,347
                                                   ===========      ===========

                LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
  Bank loans ...............................       $30,000,000      $14,738,460
  Accounts payable .........................           649,655          358,676
  Interest payable .........................           435,052           40,113
  Commitment fees ..........................           260,000          124,735
  Deferred gain on securities ..............            48,500                0
                                                   -----------      -----------

             Total liabilities .............        31,393,207       15,261,984
                                                   -----------      -----------

Shareholders' equity:
  Common stock, $.001 par value:
    Authorized--100,000,000 shares
    Issued and outstanding--39,054.38
    shares and 20,594.74 shares as of
    June 30, 1997 and 1996, respectively .....              40               20
  Capital in excess of par value .............      37,317,282       18,669,745
  Distributions ..............................      (5,828,791)      (1,262,256)
  Accumulated earnings .......................       8,967,021        2,535,854
                                                  ------------     ------------

             Total shareholders' equity ......      40,455,552       19,943,363
                                                  ------------     ------------

             Total liabilities and
             shareholders' equity ............    $ 71,848,759     $ 35,205,347
                                                  ============     ============

</TABLE>

        The accompanying notes are an integral part of these statements.



                                       
                                       16
<PAGE>




                         VENTURE LENDING & LEASING, INC.

                            STATEMENTS OF OPERATIONS
                   FOR THE YEARS ENDED JUNE 30, 1997 AND 1996

<TABLE>
<CAPTION>
                                                        1997            1996
                                                    -----------     ------------
<S>                                                   <C>             <C>       
INVESTMENT INCOME:
  Interest on loans and leases ................     $ 7,314,618     $ 3,481,702
  Interest on short-term investments ..........         268,329         351,093
                                                    -----------     -----------

             Total investment income ..........       7,582,947       3,832,795
                                                    -----------     -----------

EXPENSES:
  Management fees to the Managers..............       1,438,118       1,159,189
  Interest expense ............................       1,701,039         895,269
  Legal fees ..................................         122,903          22,129
  Custody and accounting fees .................          15,736          17,305
  Bank loan facility fee ......................          68,535          40,310
  Amortization of organizational expenses .....          30,001          30,001
  Directors' fees and expenses ................          35,396          30,250
  Audit fees ..................................          17,000          23,252
  Transfer agency fees ........................           7,126           6,623
  Regulatory reporting ........................          27,461          10,428
  Bad debt expense ............................         100,000               0
  Other operating expenses ....................          17,633           9,519
                                                    -----------     -----------

             Total expenses ...................       3,580,948       2,244,275
                                                    -----------     -----------

             Net investment income ............       4,001,999       1,588,520

NET CHANGE IN UNREALIZED GAIN
FROM INVESTMENT TRANSACTIONS ..................         965,498       1,308,016

NET REALIZED GAIN FROM
INVESTMENT TRANSACTIONS .......................       1,463,670          22,134
                                                    -----------     -----------

             Net income before
             provision for income taxes .......       6,431,167       2,918,670

PROVISION FOR INCOME TAXES ....................               0          (1,600)
                                                    -----------     -----------

             Net income .......................     $ 6,431,167     $ 2,917,070
                                                    ===========     ===========

NET INCOME PER SHARE ..........................     $    212.22     $    156.77
                                                    ===========     ===========

WEIGHTED AVERAGE SHARES OUTSTANDING ...........          30,304          18,607
                                                    ===========     ===========

</TABLE>

        The accompanying notes are an integral part of these statements.


                                   

                                       17
<PAGE>



                         VENTURE LENDING & LEASING, INC.

                  STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                   FOR THE YEARS ENDED JUNE 30, 1997 AND 1996

<TABLE>
<CAPTION>
                                                           Retained
                  Common Stock    Capital in               Earnings
                 ---------------  Excess of 
                 Shares   Amount  Par Value  Distribution  (Deficit)     Total
<S>             <C>         <C>    <C>              <C>    <C>        <C>
                ---------------------------------------------------------------
   BALANCE,
JUNE 30, 1995   12,379.43   $12   $11,426,921       $ 0   $(381,216) $11,045,717

  Shares sold    8,215.31     8     7,242,824         0          0     7,242,832
  Distributions      0        0            0 (1,262,256)         0   (1,262,256)
  Net income         0        0            0          0  2,917,070     2,917,070
                 -------------------------------------------------------------- 

   BALANCE, 
JUNE 30, 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          0          0   18,647,557
  Distributions      0        0            0 (4,566,535)         0   (4,566,535)
  Net income         0        0            0          0  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
                 ===============================================================

</TABLE>

        The accompanying notes are an integral part of these statements.


                                    

                                       18
<PAGE>




                         VENTURE LENDING & LEASING, INC.

                            STATEMENTS OF CASH FLOWS
                   FOR THE YEARS ENDED JUNE 30, 1997 AND 1996


<TABLE>
<CAPTION>
                                                       1997             1996
                                                   ------------     ------------
<S>                                                   <C>             <C>       

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income ...................................   $  6,431,167    $  2,917,070
  Adjustments to reconcile net income
   to net cash provided by
   operating activities:
    Amortization of organizational expenses ....         30,001          30,001
    Amortization of bank loan expenses .........          8,716           8,692
    Allowance for credit losses ................        100,000               0
    Gain on sale of securities .................     (1,463,670)        (22,134)
    Increase in unrealized gain
     from investment transactions ..............       (965,498)     (1,308,016)
    Decrease in accounts receivable ............         13,371               0
    Increase in other assets ...................         (2,147)         (8,927)
    Increase in accounts payable ...............        290,979          87,121
    Increase in interest payable ...............        394,939           6,433
    Increase in commitment fees ................        135,265          57,235
    Increase in deferred gain on securities ....         48,500               0
                                                   ------------    ------------
           Net cash provided by operating activities  5,021,623       1,767,475
                                                   ------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of loans and leases ..............    (53,222,857)    (22,678,655)
  Principal payments on loans and leases .......     13,284,392       6,586,130
  Proceeds from prepayment of loan .............      4,089,895               0
  Acquisition of warrants ......................       (716,000)       (291,400)
  Proceeds from sale of securities .............      1,463,670          22,134
                                                   ------------    ------------
           Net cash used in investing activities    (35,100,900)    (16,361,791)
                                                   ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Sales of common stock, net ...................     18,647,557       7,242,832
  Distributions to shareholders ................     (4,566,535)     (1,262,256)
  Loan from bank ...............................     17,791,402      13,890,000
  Repayment of bank loan and expenses ..........     (2,529,863)     (8,728,939)
                                                   ------------    ------------
           Net cash provided by financing activities 29,342,561      11,141,637
                                                   ------------    ------------
             Net decrease in cash and cash equivalent (736,716)     (3,452,679)
CASH AND CASH EQUIVALENTS:
  Beginning of year ............................      4,683,671       8,136,350
                                                   ------------    ------------
  End of year ..................................   $  3,946,955    $  4,683,671
                                                   ============    ============
                                                  
CASH PAID DURING THE YEAR FOR:
  Taxes ........................................   $          0    $        800
  Interest .....................................      1,305,058         873,433

</TABLE>

        The accompanying notes are an integral part of these statements.


                                       

                                       19
<PAGE>





                         VENTURE LENDING & LEASING, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 1997



1.  ORGANIZATION AND OPERATIONS OF THE COMPANY:

Venture  Lending & Leasing,  Inc.  (the Fund) was  incorporated  in  Maryland on
September  29,  1993,  as a  nondiversified,  closed-end  management  investment
company electing status as a business  development  company under the Investment
Company Act of 1940. The purpose of the Fund is to provide asset-based financing
to  venture-capital-backed  companies in the form of secured loans,  installment
sales contracts or equipment leases.  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 1 share of common stock,  $.001
par value,  for $1,000.  As of June 30, 1997,  the Fund meets the  requirements,
including  diversification  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  using the  straight-line  method  over a period of 60 months from the
date the Fund commenced operations.  During fiscal 1996, 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 of 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.


                                       

                                       20
<PAGE>



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  will be assigned a minimal  value at the time of  acquisition,  which
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 fair value
of the equity  securities  for which the warrant may be exercised,  adjusted for
illiquidity.

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  borrower's  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 and Cash Equivalents

Cash and cash equivalents  consist of cash on hand, demand deposits in banks and
repurchase agreements with original maturities of 90 days or less.

Loans and 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.  When the first draw is 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.


                                     

                                       21
<PAGE>



3.  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. 
                                       
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.

The Fund's policy is to place a loan on nonaccrual  status when either principal
or interest  has become  past due for 90 days or more.  When a loan is placed on
nonaccrual  status,  all  interest  previously  accrued  but  not  collected  is
reversed.  As of June  30,  1997,  the Fund had  loan  balances  outstanding  of
$3,602,098 to two borrowers  that were carried on a nonaccrual  basis.  Foregone
interest  income on  nonaccrual  loans for the year  ended  June 30,  1997,  was
$298,141.

4.  WARRANTS AND STOCK:

At June 30, 1997, the Fund held 4,854,933  warrants to purchase shares of common
and preferred stock in 65 companies,  of which 9 companies are publicly  traded.
The quoted  market  value of the stock  underlying  the  warrants  issued by the
publicly  traded  companies,  adjusted  for  illiquidity,  was  $1,395,557.  The
following  is a  summary  of  the  activity  for  investments  in  warrants  and
investments in stocks for the year ended June 30, 1997:

Investments in warrants:

  Balance, June 30, 1996                    $1,772,701

    Acquisition of warrants                    716,000
    Conversion of warrants to stock           (956,965)
    Net change in unrealized gain              750,506
                                           ------------
                                           
  Balance, June 30, 1997                    $2,282,242
                                           ============
                                           

Investments in stocks:

  Balance, June 30, 1996                    $        0

    Conversion of warrants to stock            956,965
    Net change in unrealized gain              214,992
                                           ------------
                                           
  Balance, June 30, 1997                    $1,171,957
                                           ============

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.


                                       

                                       22
<PAGE>



The remainder of 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 $886,685 at June 30, 1997.

At June 30,  1997,  the Fund held 409,998  shares of common stock of  companies,
which were received when the Fund exercised its warrants in the companies, which
had a cost basis of $103,429. The quoted market value of the stock, adjusted for
illiquidity, was $1,171,957.

During the year,  the Fund  realized a gain of  $1,463,670 on the sale of 35,000
shares of common stock, which had a cost basis of $20,646 and an unrealized gain
of $974,017.

5.  LONG-TERM DEBT FACILITY:

The Fund has in place a $45 million bank  revolving  credit  facility to finance
the acquisition of asset-based loans and leases. The interest-only period of the
revolving  credit  facility  expires  September 27, 1997, and then the principal
balance becomes a four-year term loan. The facility can be drawn on from time to
time during the interest-only  portion of the commitment  period.  However,  the
commitment  period can be terminated  earlier by the Fund through the prepayment
of outstanding  principal balances,  provided that the lenders are given notice.
The credit  facility can be reduced by a minimum of $5,000,000 and in $1,000,000
increments  in excess  thereof.  Any  termination  or  commitment  reduction  is
permanent and  irrevocable.  Principal  payments for each  borrowing are not due
until the end of the commitment period. Afterwards, principal payments are to be
made  according  to an  amortization  schedule  set  forth by each  lender.  The
amortization  schedule  for each  borrowing  under the  facility  is expected to
correspond  to the  amortization  of the  loans  and  leases  acquired  with the
proceeds of each  borrowing.  Interest  rates are determined by the type of note
given to the Fund. The Fund can choose  between prime rate loans,  internal rate
loans and LIBOR loans.  An  applicable  margin is added to the base rate that is
determined  by each type of loan.  Currently,  all of the Fund's loans are LIBOR
loans.  The Fund pays a commitment fee of 0.25 percent  annually with respect to
this facility and is required to maintain compensating balances with the bank of
$250,000 or, in lieu  thereof,  pay a fee at the rate of prime plus 1 percent on
any  deficiencies  therein.  The Fund also pays an  agency  fee of $6,250  every
quarter.

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.

Debt outstanding under the facility at June 30, 1997, was as follows:

90-day LIBOR at 7.81 percent interest, due July 7, 1997             $16,708,597
90-day LIBOR at 7.85 percent interest, due July 28, 1997              7,291,403
60-day LIBOR at 7.75 percent interest, due August 15, 1997            6,000,000
                                                                   =============

                                                                    $30,000,000
                                                                   =============

Expenses of $35,052 were  incurred in  connection  with  procuring  the loan and
credit  facility.  These expenses have been  capitalized and are being amortized
over a period of four years, the term of the bank loan described above.


                                  

                                       23
<PAGE>



During the year, the Fund entered into three interest rate swap  agreements with
two  financial  institutions  to  hedge  its  interest  rate.  The  terms of the
agreements are as follows:

       Notional  amount of  $10,000,000  whereby the Fund pays a fixed  interest
      rate of 6.05  percent,  while the  financial  institution  pays the 90-day
      LIBOR rate.  Payments  are made  quarterly  and  terminate on December 31,
      1999.

       Notional amount of $5,000,000 whereby the Fund pays a fixed interest rate
      of 6.44  percent,  while the financial  institution  pays the 90-day LIBOR
      rate. Payments are made quarterly and terminate on December 29, 2000.

       Notional  amount of  $10,000,000  whereby the Fund pays a fixed  interest
      rate of 7.025 percent,  while the financial  institution pays the floating
      90-day LIBOR rate.  Payments are made  quarterly and terminate on December
      31, 2001.

6.  CAPITAL STOCK:

There are 100,000,000  shares of $.001 par value common stock authorized.  As of
June 30, 1997, 39,054.38 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 15 days before payment is
due.  As  of  June  30,  1997,  $9,323,778  in  unfunded  and  uncalled  capital
commitments remained outstanding.

7.  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 percent 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  percent of the Fund's
total assets (including  amounts derived from borrowed funds) as of the last day
of each fiscal  quarter  thereafter.  Fees of  $1,438,118  and  $1,159,189  were
recognized for the years ended June 30, 1997 and 1996, respectively.

The Managers  will also receive an aggregate  annual  incentive  fee equal to 20
percent of all amounts  available for  distribution to investors after investors
have  received cash  distributions  equal to 100 percent of all amounts paid for
the  purchase of shares  plus a  preferred  return  calculated  at a  cumulative
noncompounded  annual rate of 8 percent.  To date,  the Managers  have earned no
incentive fee.


                                       

                                       24
<PAGE>



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

               Not applicable.

PART III

ITEM 10.       DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        The  information  required by this item is  contained  in part under the
caption "Executive  Officers of the Fund" in Part I hereof, and the remainder is
contained in the Fund's Proxy  Statement for the Annual Meeting of  Shareholders
to be held October xx, 1997 ("1997 Proxy Statement") under the caption "Proposal
1 -- To Elect  Eight  Directors  of the  Fund"  and is  incorporated  herein  by
reference.

ITEM 11.       EXECUTIVE COMPENSATION

        The  information  required by this item is  contained in the Fund's 1997
Proxy Statement under the caption "Proposal 1 -- To Elect Eight Directors of the
Fund" and is incorporated herein by reference.

ITEM 12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The  information  required by this item is  contained in the Fund's 1997
Proxy  Statement  under the caption  "Annex A --  Beneficial  Ownership  of Fund
Shares" and is incorporated herein by reference.

ITEM 13.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        The  information  required by this item is  contained in the Fund's 1997
Proxy  Statement  under the captions:  "Other  Information -- Management" and is
incorporated herein by reference.


                                      

                                       25
<PAGE>



PART IV.

ITEM 14.       EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)            Index to Financials Statements and Financial Statement Schedules

                                                                         Page
Report of Independent Public Accountants                                  15

Statement of Financial Position as of June 30, 1997 and 1996              16

Statement of Operations for the Years Ended June 30, 1997 and 1996        17

Statement of Changes in Shareholders' Equity for the Years Ended 
June 30, 1997 and 1996                                                    18   

Statement of Cash Flows for the Years Ended June 30, 1997 and 1996        19

Notes to Financial Statements                                             20

Financial  Statement  Schedules  for the  Years  Ended  June  30,  1997 and 1996
included in Item 14(d):

No schedules are required because the required information is not present or not
present in amounts sufficient to require submission of the schedule,  or because
the required  information is included in the financial  statements and the notes
thereto.

Listing of Exhibits

3.1  Articles  of  Incorporation  --  incorporated  by  reference  to the Fund's
     Registration  Statement  on Form 10  filed  with  the  Securities  and 
     Exchange Commission ("Commission") on October 13, 1994.

3.2  By-Laws, as amended to date - incorporated by reference to the Fund's 1996 
     Form 10K

10.1 Management  Agreement,  dated as of December 22, 1995,  between the Fund on
     the one hand, and Westech Advisors and Siguler Guff Advisers,  on the other
     hand -- incorporated by reference to the Fund's 1996 Form 10K.

Reports on Form 8-K

        The Fund  filed no reports  on Form 8-K with the  Commission  during the
fiscal quarter ended June 30, 1997.


                                    

                                       26
<PAGE>



                                   Sigunatures

     Pursuant to the requirements of Section 13 or 15(d) of the Security
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

VENTURE LENDING & LEASING, INC.
(Registrant)

By: /S/ Ronald W. Swenson                   By: /S/ Salvador O. Gutierrez
--------------------------                  -----------------------------------
Ronald W. Swenson                           Salvador O. Gutierrez
Chairman and Chief Executive Officer        President, Chief Financial Officer
                                            and Chief Accounting Officer   

Date:  September _, 1997                    Date:  September _, 1997

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the 
registrant and in the capacities and on the dates indicated.

          NAME                          TITLE                        DATE 

By: /S/ John J. Cogan                 Director                September 22,1997 
-------------------------------
John J. Cogan

By: /S/ J. Michael Egan               Director                September 22,1997 
-------------------------------
J. Michael Egan

By: /S/  Salvador O. Gutierrez    President and Director      September 22,1997 
-------------------------------
Salvador O. Gutierrez

By: /S/ Scott Malpass                 Director                September 22,1997 
-------------------------------
Scott Malpass

By: /S/ Roger V. Smith                Director                September 22,1997 
-------------------------------
Roger V. Smith

By: /S/ Arthur Spinner                Director                September 22,1997 
-------------------------------
Arthur Spinner  

By: /S/ Ronald W. Swenson             Director                September 22,1997 
-------------------------------
Ronald W. Swenson 

By: /S/ George Von Gehr               Director                September 22,1997 
-------------------------------
George Von Gehr