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 ended September 30, 2006



[  ]

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 814-00640



Venture Lending & Leasing IV, Inc.

(Exact Name of Registrant as specified in its charter)

|Maryland                                                        | 20-0372373                          
|--------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or  organization) | (I.R.S. Employer 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 (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesxNo ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filerx

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ̈Nox

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.Yes ̈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 November 8, 2006

Common Stock, $.001 par value

100,000





VENTURE LENDING & LEASING IV, INC.



INDEX



PART I -- FINANCIAL INFORMATION



Item 1.

Financial Statements



Condensed Statements of Assets and Liabilities (Unaudited)



As of September 30, 2006 and December 31, 2005



Condensed Statements of Operations (Unaudited)



For the three and nine months ended September 30, 2006 and 2005



Condensed Statements of Changes in Net Assets (Unaudited)



For the three and nine months ended September 30, 2006 and 2005



Condensed Statements of Cash Flows (Unaudited)



For the nine months ended September 30, 2006 and 2005



Notes to Condensed Financial Statements (Unaudited)





Item 2.

Management's Discussion and Analysis of Financial



Condition and Results of Operations





Item 3.      Quantitative & Qualitative Disclosures About Market Risk



Item 4.

Disclosure Controls and Procedures





PART II -- OTHER INFORMATION

Item 1.

Legal Proceedings



Item 1A.

Risk Factors





Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds





Item 3.

Defaults Upon Senior Securities





Item 4.

Submission of Matters to a Vote of Security Holders





Item 5.

Other Information





Item 6.

Exhibits





SIGNATURES











VENTURE LENDING & LEASING IV, INC.



CONDENSED STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)

AS OF SEPTEMBER 30, 2006 AND DECEMBER 31, 2005



|                                                                     |  | September 30, 2006 |  | December 31, 2005
|-------------------------------------------------------------------- |  | ------------------ |  | -----------------
|ASSETS                                                               |  |                    |  |                  
|Loans at estimated fair value                                        |  |                    |  |                  
|(Cost of $368,670,944 and $250,865,135)                              |  | $366,610,944       |  | $250,865,135     
|Cash and cash equivalents                                            |  | 16,504,282         |  | 20,798,146       
|Other assets                                                         |  | 5,323,760          |  | 4,405,964        
|                                                                     |  |                    |  |                  
|Total assets                                                         |  | 388,438,986        |  | 276,069,245      
|                                                                     |  |                    |  |                  
|LIABILITIES                                                          |  |                    |  |                  
|Borrowings under debt facility                                       |  | 184,615,512        |  | 117,415,512      
|Accrued management fees                                              |  | 2,427,744          |  | 1,562,500        
|Accounts payable and other accrued liabilities                       |  | 2,157,290          |  | 1,342,820        
|                                                                     |  |                    |  |                  
|Total liabilities                                                    |  | 189,200,546        |  | 120,320,832      
|                                                                     |  |                    |  |                  
|Net assets                                                           |  | $199,238,440       |  | $155,748,413     
|                                                                     |  |                    |  |                  
|Analysis of Net Assets:                                              |  |                    |  |                  
|                                                                     |  |                    |  |                  
|Capital paid in on shares of capital stock                           |  | $199,525,000       |  | $155,525,000     
|Tax return of capital distributions                                  |  | (1,629,686)        |  | (1,629,686)      
|Distributable earnings                                               |  | 1,343,126          |  | 1,853,099        
|Net assets (equivalent to $1,992.38 and $1,557.48 per share based on |  |                    |  |                  
|100,000 shares of capital stock outstanding - See Note 4)            |  | $199,238,440       |  | $155,748,413     
|                                                                     |  |                    |  |                  
|                                                                     |  |                    |  |                  
|                                                                     |  |                    |  |                  
|                                                                     |  |                    |  |                  
|                                                                     |  |                    |  |                  









See Notes to Condensed Financial Statements

















VENTURE LENDING & LEASING IV, INC.



CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005



|                                                                             |  | For the Three Months  Ended |  | For the Three Months  Ended |  | For the Nine
Months Ended |  | For the Nine
Months Ended
|---------------------------------------------------------------------------- |  | --------------------------- |  | --------------------------- |  | ------------------------- |  | -------------------------
|                                                                             |  | September 30, 2006          |  | September 30, 2005          |  | September 30, 2006        |  | September 30, 2005       
|                                                                             |  |                             |  |                             |  |                           |  |                          
|                                                                             |  |                             |  |                             |  |                           |  |                          
|INVESTMENT INCOME:                                                           |  |                             |  |                             |  |                           |  |                          
|Interest on loans                                                            |  | $11,733,036                 |  | $6,622,961                  |  | $31,962,925               |  | $14,536,601              
|Interest on short-term investments                                           |  |                             |  |                             |  |                           |  |                          
|and other income                                                             |  | 310,223                     |  | 179,633                     |  | 910,245                   |  | 440,984                  
|Total investment income                                                      |  | 12,043,259                  |  | 6,802,594                   |  | 32,873,170                |  | 14,977,585               
|                                                                             |  |                             |  |                             |  |                           |  |                          
|EXPENSES:                                                                    |  |                             |  |                             |  |                           |  |                          
|Management fees                                                              |  | 2,427,744                   |  | 1,562,500                   |  | 5,768,857                 |  | 4,687,500                
|Interest expense                                                             |  | 2,423,317                   |  | 973,069                     |  | 6,159,553                 |  | 2,008,752                
|Banking and legal fees                                                       |  | 396,770                     |  | 304,135                     |  | 1,141,886                 |  | 1,049,497                
|Other operating expenses                                                     |  | 66,267                      |  | 57,290                      |  | 187,139                   |  | 139,466                  
|Total expenses                                                               |  | 5,314,098                   |  | 2,896,994                   |  | 13,257,435                |  | 7,885,215                
|Net investment income                                                        |  | 6,729,161                   |  | 3,905,600                   |  | 19,615,735                |  | 7,092,370                
|                                                                             |  |                             |  |                             |  |                           |  |                          
|Net change in unrealized gain (loss) from investments and hedging activities |  | (1,798,593)                 |  | 423,470                     |  | (2,345,112)               |  | 409,473                  
|Net increase in net assets                                                   |  |                             |  |                             |  |                           |  |                          
|resulting from operations                                                    |  | $4,930,568                  |  | $4,329,070                  |  | $17,270,623               |  | $7,501,843               
|Net increase in net assets                                                   |  |                             |  |                             |  |                           |  |                          
|resulting from operations per share                                          |  | $49.31                      |  | $43.29                      |  | $172.71                   |  | $75.02                   
|Weighted average shares outstanding                                          |  | 100,000                     |  | 100,000                     |  | 100,000                   |  | 100,000                  
|                                                                             |  |                             |  |                             |  |                           |  |                          
|                                                                             |  |                             |  |                             |  |                           |  |                          







See Notes to Condensed Financial Statements















VENTURE  LENDING & LEASING IV, INC.



CONDENSED STATEMENTS OF CHANGES IN NET ASSETS  (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005







|                                       |  | For the Three
Months Ended |  | For the Three
Months Ended |  | For the Nine
Months Ended |  | For the Nine
Months Ended
|-------------------------------------- |  | -------------------------- |  | -------------------------- |  | ------------------------- |  | -------------------------
|                                       |  | September 30, 2006         |  | September 30, 2005         |  | September 30, 2006        |  | September 30, 2005       
|                                       |  |                            |  |                            |  |                           |  |                          
|                                       |  |                            |  |                            |  |                           |  |                          
|Increase in net assets from operations |  |                            |  |                            |  |                           |  |                          
|Net investment income                  |  | $6,729,161                 |  | $3,905,600                 |  | $19,615,735               |  | $7,092,370               
|Net unrealized loss from investing     |  |                            |  |                            |  |                           |  |                          
|and hedging activities                 |  | (1,798,593)                |  | 423,470                    |  | (2,345,112)               |  | 409,473                  
|                                       |  |                            |  |                            |  |                           |  |                          
|Net increase in net assets resulting   |  |                            |  |                            |  |                           |  |                          
|from operations                        |  | 4,930,568                  |  | 4,329,070                  |  | 17,270,623                |  | 7,501,843                
|                                       |  |                            |  |                            |  |                           |  |                          
|Distributions of income to shareholder |  | (5,848,500)                |  | (3,349,563)                |  | (17,780,596)              |  | (4,286,201)              
|Capital transactions                   |  | 19,000,000                 |  | 4,000,000                  |  | 44,000,000                |  | 26,000,000               
|Total increase                         |  | 18,082,068                 |  | 4,979,507                  |  | 43,490,027                |  | 29,215,642               
|                                       |  |                            |  |                            |  |                           |  |                          
|Net assets                             |  |                            |  |                            |  |                           |  |                          
|Beginning of period                    |  | 181,156,372                |  | 103,085,741                |  | 155,748,413               |  | 78,849,606               
|                                       |  |                            |  |                            |  |                           |  |                          
|End of period                          |  | $199,238,440               |  | $108,065,248               |  | $199,238,440              |  | $108,065,248             
|                                       |  |                            |  |                            |  |                           |  |                          
|                                       |  |                            |  |                            |  |                           |  |                          
|                                       |  |                            |  |                            |  |                           |  |                          
|                                       |  |                            |  |                            |  |                           |  |                          
|                                       |  |                            |  |                            |  |                           |  |                          
|                                       |  |                            |  |                            |  |                           |  |                          
|                                       |  |                            |  |                            |  |                           |  |                          
|                                       |  |                            |  |                            |  |                           |  |                          
|                                       |  |                            |  |                            |  |                           |  |                          
|                                       |  |                            |  |                            |  |                           |  |                          









See Notes to Condensed Financial Statements





VENTURE LENDING & LEASING IV, INC.



CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005



|                                                                                                                        |  | For the Nine Months Ended September 30, 2006 |  | For the Nine Months Ended September 30, 2005 |  |  | 
|----------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------- |  | -------------------------------------------- |  |  | 
|                                                                                                                        |  |                                              |  |                                              |  |  | 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                   |  |                                              |  |                                              |  |  | 
|Net increase in net assets resulting from operations                                                                    |  | $17,270,623                                  |  | $7,501,843                                   |  |  | 
|Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities: |  |                                              |  |                                              |  |  | 
|Net change in unrealized gain (loss) from investment and hedging activities                                             |  | 2,345,112                                    |  | (409,473)                                    |  |  | 
|Amortization of deferred costs                                                                                          |  | 179,089                                      |  | 167,063                                      |  |  | 
|Net increase in other assets                                                                                            |  | (1,354,622)                                  |  | (1,321,931)                                  |  |  | 
|Net increase in accounts payable, accrued liabilities, and accrued management fees                                      |  | 1,679,714                                    |  | 589,644                                      |  |  | 
|Acquisition of loans                                                                                                    |  | (222,065,747)                                |  | (151,378,866)                                |  |  | 
|Principal payments on loans                                                                                             |  | 103,870,938                                  |  | 33,123,041                                   |  |  | 
|Acquisition of equity securities                                                                                        |  | (3,791,596)                                  |  | (1,952,250)                                  |  |  | 
|Net cash used in operating activities                                                                                   |  | (101,866,489)                                |  | (113,680,929)                                |  |  | 
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                   |  |                                              |  |                                              |  |  | 
|Deemed distribution to shareholder                                                                                      |  | -                                            |  | (33,951)                                     |  |  | 
|Cash distribution to shareholder                                                                                        |  | (13,600,000)                                 |  | (2,300,000)                                  |  |  | 
|Borrowings under debt facility                                                                                          |  | 72,200,000                                   |  | 69,965,318                                   |  |  | 
|Repayment of debt facility                                                                                              |  | (5,000,000)                                  |  | -                                            |  |  | 
|Payment of bank facility fees, costs, and other prepayments                                                             |  | (27,375)                                     |  | (20,085)                                     |  |  | 
|Cash contributions from shareholder                                                                                     |  | 44,000,000                                   |  | 26,000,000                                   |  |  | 
|Net cash provided by financing activities                                                                               |  | 97,572,625                                   |  | 93,611,282                                   |  |  | 
|Net decrease in cash and cash equivalents                                                                               |  | (4,293,864)                                  |  | (20,069,647)                                 |  |  | 
|                                                                                                                        |  |                                              |  |                                              |  |  | 
|CASH AND CASH EQUIVALENTS:                                                                                              |  |                                              |  |                                              |  |  | 
|Beginning of period                                                                                                     |  | 20,798,146                                   |  | 25,031,477                                   |  |  | 
|End of period                                                                                                           |  | $16,504,282                                  |  | $4,961,830                                   |  |  | 
|CASH PAID DURING THE PERIOD FOR:                                                                                        |  |                                              |  |                                              |  |  | 
|Interest                                                                                                                |  | $5,869,507                                   |  | $1,830,212                                   |  |  | 
|NON-CASH ACTIVITIES:                                                                                                    |  |                                              |  |                                              |  |  | 
|Receipt of stock as repayment of loan                                                                                   |  | $389,000                                     |  | $-                                           |  |  | 
|Distributions of investment securities to shareholder                                                                   |  | $4,180,596                                   |  | $1,952,250                                   |  |  | 
|                                                                                                                        |  |                                              |  |                                              |  |  | 
|                                                                                                                        |  |                                              |  |                                              |  |  | 

See Notes to Condensed Financial Statements





VENTURE LENDING & LEASING IV, INC.



NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)



1.

ORGANIZATION AND OPERATIONS OF THE FUND

Venture Lending & Leasing IV, Inc., (the Fund), was incorporated in Maryland on October 31, 2003 as a nondiversified closed-end management investment company electing status as a business development company (BDC) under the Investment Company Act of 1940 and is managed by Westech Investment Advisors, Inc. (Manager or Management).  One hundred percent of the stock of the Fund is held by Venture Lending & Leasing IV, LLC (the Company).  Prior to commencing its operations on May 28, 2004, the Fund had no operations other than the sale to the Company of 100,000 shares of common stock, $0.001 par value for $25,000 in November 2003.  This issuance of stock was a requirement in order to apply for a finance lender's license from the California Commissioner of Corporations.



In the Manager's opinion, the accompanying financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of financial position and results of operations for interim periods. Certain information and note disclosures normally included in audited annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted; however, the Fund believes that the disclosures made are adequate to make the information presented not misleading.  The interim results for the three and nine months ended September 30, 2006 are not necessarily indicative of what the results would be for a 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 on Form 10-K for the year ended December 31, 2005.



2. SUMMARY OF INVESTMENTS



Loans generally are made to borrowers pursuant to commitments whereby the Fund agrees to finance assets and provide working capital up to a specified amount for the term of the commitments, upon the terms and subject to the conditions specified by such commitment. As of September 30, 2006, the Fund's investments in loans are primarily to companies based within the United States and are diversified among borrowers in the industries shown below.  The percentage of 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).



Loan balances are summarized by borrower.   Typically a borrower's balance will be composed of several loans drawn under a commitment made by the Fund.  As each loan drawn under a commitment has a different maturity date and amount, the interest rate for the borrower changes each month.  For the three and nine month period ended September 30, 2006, the weighted average interest rate on performing loans was 13.6% and 14.0%, respectively.  For the three and nine month period ended September 30, 2005, the weighted average interest rate on performing loans was 15.2% and 14.1%, respectively.  Interest is calculated using the effective interest method, and rates earned by the Fund will fluctuate based on many factors including volatility, early payoffs, and recovery of interest from non-performing assets.



Valuation Procedures



1) The Fund is a fair value reporter and therefore accounts for investment securities at fair value in accordance with the Valuation Methods below.  All valuations are determined under the direction of the Manager, in accordance with this Policy.



2) The Funds assets are valued in connection with the issuance of its periodic financial statements, the issuance or repurchase of a Funds shares at a price equivalent to the current net asset value per share, and at such other times as required by law.  On a quarterly basis, Management will submit to the Board of Directors (Board) a Valuation Report, which details the rationale for the valuation of investments.









Valuation Methods



1) Venture loans are generally held to maturity as there is no secondary market for the loans.  In the absence of a secondary market, venture loans are valued at their original purchase price less amortization of principal, unless Management determines that amortized cost does not represent fair value.  Management determines whether to adjust the value of a loan based on a credit analysis of the borrower, which generally includes consideration of several factors, including but not limited to the borrowers payment history, available cash and burn rate, revenues, net income or loss, the likelihood that the borrower will be able to secure additional financing in the future, as well as an evaluation of the general interest rate environment.    The amount of any valuation adjustment is determined based upon an analysis of the expected recovery from the borrower, including consideration of factors such as the nature and quality of the Funds security interests in collateral, the estimated value of the Funds collateral, the size of the loan, and the estimated time that will elapse before the Fund achieves a recovery.



2) Warrants and equity securities are generally assigned an estimated fair value as determined by Management at the time of acquisition.  Thereafter all warrants and equity securities are immediately distributed to the shareholder.



3)  Money market funds and debt instruments held as Cash and Cash Equivalents are valued at their most recently posted net asset value, if available, or at amortized cost, provided such amount is not materially different from quoted price.



4) Debt securities held as Short-term Investments are valued based on current bid quotations of recognized dealers or, when market quotations are not readily available, based on appraisals received from a pricing service using a computerized matrix system, or based upon appraisals derived from information concerning the securities or similar securities received from recognized dealers in the securities.  Notwithstanding the foregoing, debt securities with remaining maturities of ninety (90) days or fewer generally are valued by amortizing the difference between their last available fair value and their par value, provided such amount is not materially different from quoted price.





Loans as of September 30, 2006 are in non-affiliates and consist of the following:







|                      | Percentage of | Estimated Fair | Par Value     | Final        
|--------------------- | ------------- | -------------- | ------------- | -------------
|Borrower              | Net Assets    | Value 9/30/06  | Value 9/30/06 | Maturity Date
|Biotechnology         |               |                |               |              
|Athersys              |               | $3,992,628     | $3,992,628    | 6/1/08       
|Miikana               |               | 992,482        | 992,482       | 10/1/07      
|Raven Biotechnologies |               | 3,085,272      | 3,085,272     | 6/1/08       
|Serenex               |               | 1,961,882      | 1,961,882     | 8/1/08       
|Subtotal:             | 5.0%          | $10,032,264    | $10,032,264   |              
|                      |               |                |               |              
|Carrier Networking    |               |                |               |              
|Actelis               |               | $4,043,316     | $4,043,316    | 12/1/08      
|Caspian Networks      |               | 291,613        | 291,613       | *            
|Ellacoya Networks     |               | 5,412,730      | 5,412,730     | 4/1/09       
|OnSite Systems        |               | 651,182        | 651,182       | 12/1/08      
|OpVista               |               | 6,150,336      | 6,150,336     | 6/1/09       
|Overture Networks     |               | 1,927,500      | 1,927,500     | 10/1/09      





|Telsima               |       | 1,600,302   | 1,600,302   | 9/1/08 
|--------------------- | ----- | ----------- | ----------- | -------
|World Wide Packets    |       | 5,792,639   | 5,792,639   | 12/1/09
|Subtotal:             | 13.0% | $25,869,618 | $25,869,618 |        
|                      |       |             |             |        
|Computers & Storage   |       |             |             |        
|Calista Technologies  |       | $150,743    | $150,743    | 9/1/09 
|CloudShield           |       | 3,860,880   | 3,860,880   | 9/1/09 
|Kashya                |       | 708,451     | 708,451     | 8/1/08 
|Layered Media         |       | 1,959,900   | 1,959,900   | 6/1/09 
|OQO                   |       | 4,909,789   | 4,909,789   | 4/1/09 
|Panta Systems         |       | 2,276,586   | 2,276,586   | 3/1/08 
|Powerfile             |       | 2,084,217   | 2,084,217   | 6/1/08 
|Prostor Systems       |       | 1,827,050   | 1,827,050   | 7/1/08 
|Sanrad                |       | 2,703,525   | 2,703,525   | 12/1/08
|Sierra Logic          |       | 3,104,409   | 3,104,409   | 12/1/08
|Voyence               |       | 2,941,815   | 2,941,815   | 6/1/09 
|Subtotal:             | 13.3% | $26,527,365 | $26,527,365 |        
|                      |       |             |             |        
|Enterprise Networking |       |             |             |        
|Envivio               |       | $2,612,250  | $2,612,250  | 5/1/09 
|Informative           |       | 954,669     | 954,669     | 3/1/09 
|NeoPath Networks      |       | 3,722,661   | 3,722,661   | 9/1/09 
|NextHop Technologies  |       | 2,145,600   | 2,145,600   | 6/1/08 
|The Return Exchange   |       | 237,124     | 237,124     | 6/1/08 
|Subtotal:             | 4.9%  | $9,672,304  | $9,672,304  |        
|                      |       |             |             |        
|Internet              |       |             |             |        
|Accelovation          |       | $479,714    | $479,714    | 6/1/09 
|Aggregate Knowledge   |       | 135,548     | 135,548     | 2/1/10 
|Cyclone Commerce      |       | 1,003,127   | 1,003,127   | 12/1/07
|Digital Railroad      |       | 1,536,617   | 1,536,617   | 4/1/09 
|FaceBook              |       | 2,517,091   | 2,517,091   | 11/1/08
|Feedster              |       | 1,353,165   | 1,353,165   | 11/1/09
|Genius Incorporated   |       | 1,954,745   | 1,954,745   | 5/1/09 
|Goodmail Systems      |       | 3,141,556   | 3,141,556   | 2/1/09 
|Koders                |       | 308,156     | 308,156     | 7/1/09 
|Kosmix                |       | 1,068,376   | 1,068,376   | 9/1/08 
|Plaxo                 |       | 1,123,683   | 1,123,683   | 11/1/08
|Radar Networks        |       | 76,090      | 76,090      | 7/1/09 
|Return Path           |       | 2,916,476   | 2,916,476   | 8/1/09 
|Riya                  |       | 1,625,141   | 1,625,141   | 8/1/09 
|SciQuest              |       | 1,385,113   | 1,385,113   | 10/1/07
|Sharpcast             |       | 732,492     | 732,492     | 9/1/09 
|SnapJot               |       | 220,007     | 220,007     | 7/1/08 





|StumbleUpon                   |       | 278,742     | 278,742     | 2/1/10 
|----------------------------- | ----- | ----------- | ----------- | -------
|TravelPost.com                |       | 462,506     | 462,506     | 2/1/09 
|Tribe.net                     |       | 595,038     | 1,195,038   | *      
|Turn                          |       | 2,393,477   | 2,393,477   | 3/1/09 
|Vast.com                      |       | 313,381     | 313,381     | 12/1/08
|Zinio Systems                 |       | 1,625,090   | 1,625,090   | 3/1/09 
|Subtotal:                     | 13.7% | $27,245,331 | $27,845,331 |        
|                              |       |             |             |        
|Medical Devices               |       |             |             |        
|Ablation Frontiers            |       | $1,485,452  | $1,485,452  | 8/1/08 
|Ample Medical                 |       | 383,400     | 383,400     | 9/1/07 
|Aspire Medical                |       | 1,299,905   | 1,299,905   | 6/1/08 
|Cardio Focus                  |       | 1,408,363   | 1,408,363   | 7/1/08 
|Cardiva Medical               |       | 913,315     | 913,315     | 11/1/07
|Emergent Respiratory Products |       | 383,995     | 383,995     | 6/1/08 
|EnteroMedics                  |       | 5,066,291   | 5,066,291   | 4/1/09 
|Evalve                        |       | 5,825,336   | 5,825,336   | 4/1/09 
|Inogen                        |       | 2,971,521   | 2,971,521   | 7/1/09 
|LipoScience                   |       | 2,014,376   | 2,014,376   | 10/1/07
|MicroMed Technology           |       | 674,939     | 674,939     | 2/1/07 
|Oculus Innovative Sciences    |       | 3,967,329   | 3,967,329   | 4/1/09 
|Scandius BioMedical           |       | 1,837,137   | 1,837,137   | 1/1/09 
|SenoRx                        |       | 1,374,514   | 1,374,514   | 10/1/07
|VeinRx                        |       | 795,488     | 795,488     | 9/1/07 
|Volcano Corporation           |       | 909,555     | 909,555     | 2/1/08 
|Subtotal:                     | 15.7% | $31,310,916 | $31,310,916 |        
|                              |       |             |             |        
|Other Healthcare              |       |             |             |        
|Chakshu Research              |       | 1,414,112   | 1,414,112   | 8/1/09 
|Mdeverywhere                  |       | 841,319     | 841,319     | 8/1/08 
|MedManage Systems             |       | 1,181,073   | 1,181,073   | 1/1/08 
|Pharmacy TV Network           |       | 427,933     | 427,933     | 7/1/08 
|Skylight Healthcare Systems   |       | 3,182,934   | 3,182,934   | 4/1/09 
|Subtotal:                     | 3.5%  | $7,047,371  | $7,047,371  |        
|                              |       |             |             |        
|Other Technology              |       |             |             |        
|EoPlex                        |       | $382,361    | $382,361    | 7/1/08 
|Nanoconduction                |       | 1,288,140   | 1,288,140   | 6/1/09 
|Nanosolar                     |       | 1,453,706   | 1,453,706   | 5/1/10 
|NeoConix                      |       | 389,694     | 389,694     | 9/1/07 
|Paxera                        |       | 532,585     | 532,585     | 7/1/08 
|Triformix                     |       | 725,670     | 725,670     | 8/1/07 
|Subtotal:                     | 2.4%  | $4,772,156  | $4,772,156  |        
|                              |       |             |             |        





|Security                      |       |             |             |        
|----------------------------- | ----- | ----------- | ----------- | -------
|Apere                         |       | $685,558    | $685,558    | 5/1/09 
|Assurz                        |       | 849,890     | 849,890     | 5/1/09 
|BigFix                        |       | 2,045,812   | 2,045,812   | 5/1/08 
|BorderWare                    |       | 2,276,636   | 2,276,636   | 7/1/08 
|Counterpane Internet Security |       | 3,435,659   | 3,435,659   | 12/1/08
|Dragnet Solutions             |       | 251,697     | 251,697     | 4/1/09 
|Green  Border Technologies    |       | 2,236,738   | 2,236,738   | 1/1/09 
|Lancope                       |       | 1,901,847   | 1,901,847   | 10/1/08
|Mi5                           |       | 289,044     | 289,044     | 7/1/09 
|Safend                        |       | 541,871     | 541,871     | 5/1/08 
|Secure Elements               |       | 839,536     | 839,536     | 10/1/08
|Sentinel Vision               |       | 538,256     | 538,256     | 12/1/08
|SNOCAP                        |       | 6,971,775   | 6,971,775   | 8/1/09 
|Vericept                      |       | 1,206,347   | 1,206,347   | 6/1/09 
|Voltage Security              |       | 6,855,625   | 6,855,625   | 6/1/09 
|Subtotal:                     | 15.5% | $30,926,291 | $30,926,291 |        
|                              |       |             |             |        
|Semiconductors & Equipment    |       |             |             |        
|Aeluros                       |       | $2,460,590  | $2,460,590  | 10/1/08
|Andigilog                     |       | 3,595,711   | 3,595,711   | 12/1/08
|Aristos Logic                 |       | 1,020,588   | 1,020,588   | 5/1/09 
|Celestial Semiconductor       |       | 2,428,575   | 2,428,575   | 6/1/09 
|Crimson Microsystems          |       | 3,283,317   | 3,283,317   | 2/1/09 
|Cswitch                       |       | 1,097,487   | 1,097,487   | 6/1/09 
|Discera                       |       | 1,225,902   | 1,225,902   | 10/1/08
|Enigma Semiconductor          |       | 2,237,104   | 2,237,104   | 6/1/08 
|InSilica                      |       | 1,376,379   | 1,376,379   | 2/1/08 
|Integrated Materials          |       | 713,157     | 713,157     | 8/1/08 
|Intelleflex                   |       | 1,388,567   | 1,388,567   | 11/1/08
|InvenSense                    |       | 2,556,369   | 2,556,369   | 6/1/09 
|KeyEye Communications         |       | 2,772,732   | 2,772,732   | 7/1/09 
|Luxtera                       |       | 1,655,665   | 1,655,665   | 3/1/09 
|Mistletoe Technologies        |       | 5,872,560   | 5,872,560   | 3/1/09 
|Molecular Imprints            |       | 2,032,337   | 2,032,337   | 1/1/08 
|Montalvo Systems              |       | 2,001,019   | 2,001,019   | 8/1/08 
|Netxen                        |       | 4,655,763   | 4,655,763   | 5/1/09 
|Oraxion Diagnostics           |       | 579,287     | 1,179,287   | *      
|Raza Microelectronics         |       | 3,262,435   | 3,262,435   | 11/1/07
|Silicon Optix                 |       | 4,759,472   | 4,759,472   | 4/1/09 
|Tak Imaging                   |       | 1,206,760   | 1,206,760   | 6/1/08 
|Teknovus                      |       | 3,237,057   | 3,237,057   | 9/1/09 
|Subtotal:                     | 27.8% | $55,418,833 | $56,018,833 |        
|                              |       |             |             |        





|Software                             |       |             |             |        
|------------------------------------ | ----- | ----------- | ----------- | -------
|5SquareSystems                       |       | $1,656,948  | $1,656,948  | 7/1/09 
|Above All Software                   |       | 3,349,460   | 3,349,460   | 10/1/08
|Aceva                                |       | 1,375,607   | 1,375,607   | 5/1/07 
|Adomo                                |       | 3,036,950   | 3,036,950   | 6/1/09 
|Agistics                             |       | 227,455     | 227,455     | 4/1/09 
|Akimbo Systems                       |       | 1,610,991   | 1,610,991   | 2/1/09 
|Arena Solutions                      |       | 2,919,344   | 2,919,344   | 9/1/09 
|Athena Design Systems                |       | 1,252,097   | 1,252,097   | 9/1/08 
|Avamar Technologies                  |       | 4,242,790   | 4,242,790   | 3/1/09 
|Biz360                               |       | 926,886     | 926,886     | 10/1/07
|BlueRoads                            |       | 2,452,622   | 2,452,622   | 7/1/09 
|Business Engine                      |       | 2,225,742   | 2,225,742   | 10/1/08
|Cloudmark                            |       | 3,701,523   | 3,701,523   | 1/1/09 
|CoWare                               |       | 4,502,669   | 4,502,669   | 12/1/07
|Enigma Information Retrieval Systems |       | 2,111,727   | 2,111,727   | 11/1/08
|Enkata Technologies                  |       | 1,343,475   | 1,343,475   | 11/1/08
|Epiance                              |       | 155,077     | 155,077     | 8/1/08 
|Everdream                            |       | 2,525,192   | 2,525,192   | 8/1/09 
|FilmLoop                             |       | 783,953     | 783,953     | 1/1/09 
|firstRain                            |       | 2,704,876   | 2,704,876   | 12/1/08
|KonaWare                             |       | 310,824     | 310,824     | 4/1/08 
|MetaCarta                            |       | 2,921,010   | 2,921,010   | 9/1/09 
|nLayers                              |       | 2,051,775   | 2,051,775   | 11/1/08
|Nusym Technologies                   |       | 203,410     | 203,410     | 12/1/08
|Perquest                             |       | 489,047     | 489,047     | 3/1/09 
|Pilot Software                       |       | 2,045,533   | 2,045,533   | 6/1/08 
|Platform Solutions                   |       | 6,122,007   | 6,122,007   | 5/1/09 
|PolyServe                            |       | 3,417,326   | 3,417,326   | 1/1/09 
|QLIKKIT                              |       | 827,906     | 827,906     | 8/1/08 
|Resolution EBS                       |       | 197,642     | 817,642     | *      
|Sabrix                               |       | 1,293,258   | 1,293,258   | 3/1/08 
|SeeControl                           |       | 335,577     | 335,577     | 7/1/08 
|SOA Software                         |       | 3,020,965   | 3,020,965   | 9/1/08 
|SoundFlavor                          |       | 471,147     | 471,147     | 4/1/09 
|Steelwedge                           |       | 1,499,007   | 1,499,007   | 11/1/08
|Traiana                              |       | 3,585,111   | 3,585,111   | 12/1/08
|Universal Ad                         |       | 372,364     | 372,364     | 3/1/09 
|W&W Communications                   |       | 589,797     | 589,797     | 12/1/08
|Subtotal:                            | 36.6% | $72,859,090 | $73,479,090 |        
|                                     |       |             |             |        
|Technology Services                  |       |             |             |        
|EchoPass                             |       | $2,550,611  | $2,550,611  | 6/1/09 
|Fusepoint                            |       | 3,635,467   | 3,635,467   | 10/1/08





|Jacent Technologies           |        | 1,659,933    | 1,659,933    | 3/1/09 
|----------------------------- | ------ | ------------ | ------------ | -------
|Neutral Tandem                |        | 11,725,113   | 11,725,113   | 12/1/09
|OpSource                      |        | 2,878,491    | 2,878,491    | 9/1/09 
|Subtotal:                     | 11.3%  | $22,449,615  | $22,449,615  |        
|                              |        |              |              |        
|Wireless                      |        |              |              |        
|AeroScout                     |        | $2,425,503   | $2,425,503   | 6/1/08 
|Blaze Entertainment           |        | 1,128,930    | 1,368,930    | *      
|Digital Bridges               |        | 8,752,286    | 8,752,286    | 12/1/08
|Magnolia Broadband            |        | 3,919,596    | 3,919,596    | 7/1/09 
|Meru Networks                 |        | 2,378,250    | 2,378,250    | 12/1/07
|OOMA                          |        | 1,237,092    | 1,237,092    | 11/1/08
|Pontis                        |        | 1,307,539    | 1,307,539    | 6/1/09 
|Quickoffice                   |        | 2,943,397    | 2,943,397    | 3/1/09 
|ScanR                         |        | 1,227,791    | 1,227,791    | 8/1/09 
|Siimpel                       |        | 5,807,875    | 5,807,875    | 5/1/09 
|SmartDrive                    |        | 912,108      | 912,108      | 6/1/09 
|TeleCIS Wireless              |        | 911,399      | 911,399      | 11/1/07
|Traq Wireless                 |        | 1,662,769    | 1,662,769    | 8/1/09 
|Vivotech                      |        | 3,349,528    | 3,349,528    | 8/1/09 
|Wavion                        |        | 2,942,626    | 2,942,626    | 3/1/09 
|WiSpry                        |        | 1,573,101    | 1,573,101    | 9/1/09 
|Subtotal:                     | 21.3%  | $42,479,790  | $42,719,790  |        
|                              |        |              |              |        
|                              |        |              |              |        
|Total (Cost of $368,670,040): | 184.0% | $366,610,944 | $368,670,944 |        





*As of September 30, 2006 loans with a cost basis of $4,852,510 and a fair market value of $2,792,510 have been classified as non-accrual.





Loans as of December 31, 2005 are in non-affiliates and consist of the following:



|                       |               |                |             |               
|---------------------- | ------------- | -------------- | ----------- | --------------
|                       | Percentage of | Estimated Fair | Par Value   | Final Maturity
|Borrower               | Net Assets    | Value 12/31/05 | 12/31/05    | Date          
|                       |               |                |             |               
|Biotechnology          |               |                |             |               
|Athersys               |               | $5,376,741     | $5,376,741  | 6/1/08        
|Miikana                |               | 1,552,202      | 1,552,202   | 10/1/07       
|Raven Biotechnologies  |               | 4,192,548      | 4,192,548   | 6/1/08        
|Serenex                |               | 2,455,392      | 2,455,392   | 8/1/08        
|Subtotal:              | 8.7%          | $13,576,883    | $13,576,883 |               
|                       |               |                |             |               
|Carrier Networking     |               |                |             |               
|Arroyo Video Solutions |               | $1,196,952     | $1,196,952  | 7/1/08        
|Caspian Networks       |               | 868,495        | 868,495     | 11/1/08       
|OnSite Systems         |               | 853,841        | 853,841     | 12/1/08       
|OpVista                |               | 5,179,494      | 5,179,494   | 12/1/08       
|Skystream Networks     |               | 2,609,282      | 2,609,282   | 2/1/08        
|Subtotal:              | 6.9%          | $10,708,064    | $10,708,064 |               
|                       |               |                |             |               
|Computers & Storage    |               |                |             |               
|CloudShield            |               | $3,603,037     | $3,603,037  | 1/1/08        
|Kashya                 |               | 982,186        | 982,186     | 8/1/08        
|Panta Systems          |               | 2,944,705      | 2,944,705   | 3/1/08        
|Powerfile              |               | 2,782,699      | 2,782,699   | 6/1/08        
|Prostor Systems        |               | 2,459,036      | 2,459,036   | 7/1/08        
|Sanrad                 |               | 2,943,436      | 2,943,436   | 12/1/08       
|Sierra Logic           |               | 3,974,880      | 3,974,880   | 12/1/08       
|Subtotal:              | 12.6%         | $19,689,979    | $19,689,979 |               
|                       |               |                |             |               
|Enterprise Networking  |               |                |             |               
|Envivio                |               | $1,635,102     | $1,635,102  | 6/1/08        
|NextHop Technolgies    |               | 2,933,141      | 2,933,141   | 6/1/08        
|Tasman Networks        |               | 4,651,028      | 4,651,028   | 6/1/08        
|The Return Exchange    |               | 309,598        | 309,598     | 6/1/08        
|Subtotal:              | 6.1%          | $9,528,869     | $9,528,869  |               
|                       |               |                |             |               
|Internet               |               |                |             |               
|Cosmix                 |               | $504,498       | $504,498    | 8/1/08        
|Cyclone Commerce       |               | 1,552,367      | 1,552,367   | 12/1/07       
|Feedster               |               | 1,115,683      | 1,115,683   | 5/1/09        
|Goodmail Systems       |               | 1,160,627      | 1,160,627   | 7/1/08        
|Ojos                   |               | 253,537        | 253,537     | 10/1/08       





|Omni-Explorer Technologies    |       | 336,064     | 336,064     | 12/1/08
|----------------------------- | ----- | ----------- | ----------- | -------
|Plaxo                         |       | 1,421,323   | 1,421,323   | 11/1/08
|Return Path                   |       | 3,450,783   | 3,450,783   | 5/1/08 
|Rojo Network                  |       | 202,442     | 202,442     | 12/1/08
|SciQuest                      |       | 2,202,846   | 2,202,846   | 10/1/07
|SnapJot                       |       | 292,620     | 292,620     | 7/1/08 
|TheFaceBook                   |       | 3,243,765   | 3,243,765   | 11/1/08
|Subtotal:                     | 10.1% | $15,736,555 | $15,736,555 |        
|                              |       |             |             |        
|Medical Devices               |       |             |             |        
|Ablation Frontiers            |       | $1,886,322  | $1,886,322  | 8/1/08 
|Ample Medical                 |       | 604,765     | 604,765     | 9/1/07 
|Aspire Medical                |       | 1,932,403   | 1,932,403   | 6/1/08 
|Cardio Focus                  |       | 1,967,606   | 1,967,606   | 7/1/08 
|Cardiva Medical               |       | 1,386,022   | 1,386,022   | 11/1/07
|Emergent Respiratory Products |       | 515,103     | 515,103     | 6/1/08 
|EnteroMedics                  |       | 3,024,749   | 3,024,749   | 12/1/08
|Inogen                        |       | 2,630,757   | 2,630,757   | 9/1/08 
|LipoScience                   |       | 3,069,582   | 3,069,582   | 10/1/07
|MicroMed Technology           |       | 1,424,734   | 1,424,734   | 2/1/07 
|SenoRx                        |       | 2,075,884   | 2,075,884   | 10/1/07
|Vascular Architects           |       | 2,967,542   | 2,967,542   | *      
|VeinRx                        |       | 1,297,901   | 1,297,901   | 9/1/07 
|Volcano Corporation           |       | 1,343,776   | 1,343,776   | 2/1/08 
|Subtotal:                     | 16.8% | $26,127,146 | $26,127,146 |        
|                              |       |             |             |        
|Other Healthcare              |       |             |             |        
|Mdeverywhere                  |       | $707,402    | $707,402    | 12/1/07
|MedManage Systems             |       | 1,689,203   | 1,689,203   | 1/1/08 
|Pharmacy TV Network           |       | 560,149     | 560,149     | 7/1/08 
|Skylight Systems              |       | 2,662,253   | 2,662,253   | 9/1/08 
|Subtotal:                     | 3.6%  | $5,619,007  | $5,619,007  |        
|                              |       |             |             |        
|Other Technology              |       |             |             |        
|EoPlex                        |       | $574,152    | $574,152    | 7/1/08 
|Nanoconduction                |       | 765,617     | 765,617     | 12/1/08
|Nanosolar                     |       | 906,584     | 906,584     | 10/1/09
|NeoConix                      |       | 670,492     | 670,492     | 9/1/07 
|Triformix                     |       | 1,184,378   | 1,184,378   | 8/1/07 
|Subtotal:                     | 2.6%  | $4,101,223  | $4,101,223  | 8/1/07 
|                              |       |             |             |        
|Security                      |       |             |             |        
|BigFix                        |       | $2,793,884  | $2,793,884  | 5/1/08 
|BorderWare                    |       | 2,912,328   | 2,912,328   | 7/1/08 





|Counterpane Internet Security |       | 5,080,387   | 5,080,387   | 12/1/08
|----------------------------- | ----- | ----------- | ----------- | -------
|Lancope                       |       | 2,207,609   | 2,207,609   | 10/1/08
|Safend                        |       | 751,222     | 751,222     | 5/1/08 
|Secure Elements               |       | 968,284     | 968,284     | 10/1/08
|Sentinel Vision               |       | 585,400     | 585,400     | 12/1/08
|SNOCAP                        |       | 2,739,051   | 2,739,051   | 3/1/08 
|Subtotal:                     | 11.6% | $18,038,165 | $18,038,165 |        
|                              |       |             |             |        
|Semiconductors & Equipment    |       |             |             |        
|Aeluros                       |       | $2,945,214  | $2,945,214  | 10/1/08
|Andigilog                     |       | 1,864,128   | 1,864,128   | 12/1/07
|Aristos Logic                 |       | 363,084     | 363,084     | 9/1/08 
|Crimson Microsystems          |       | 1,930,437   | 1,930,437   | 11/1/08
|Cswitch                       |       | 315,642     | 315,642     | 4/1/08 
|Discera                       |       | 1,825,426   | 1,825,426   | 10/1/08
|Enigma Semiconductor          |       | 1,389,836   | 1,389,836   | 6/1/08 
|Fyre Storm                    |       | 1,717,373   | 1,717,373   | 1/1/08 
|InSilica                      |       | 1,943,579   | 1,943,579   | 2/1/08 
|Integrated Materials          |       | 1,057,390   | 1,057,390   | 8/1/08 
|InvenSense                    |       | 577,472     | 577,472     | 12/1/08
|Luxtera                       |       | 1,361,811   | 1,361,811   | 11/1/08
|Molecular Imprints            |       | 3,424,573   | 3,424,573   | 1/1/08 
|Montalvo Systems, Inc.        |       | 2,675,443   | 2,675,443   | 8/1/08 
|Oraxion Diagnostics           |       | 1,415,480   | 1,415,480   | 6/1/08 
|Raza Microelectronics         |       | 5,397,113   | 5,397,113   | 11/1/07
|Reflectivity                  |       | 2,767,633   | 2,767,633   | 12/1/08
|Tak Imaging                   |       | 1,631,824   | 1,631,824   | 6/1/08 
|Universal Network Machines    |       | 3,260,180   | 3,260,180   | 5/1/08 
|Subtotal:                     | 24.3% | $37,863,638 | $37,863,638 |        
|                              |       |             |             |        
|Software                      |       |             |             |        
|Accruent                      |       | $213,044    | $213,044    | 12/1/07
|Aceva                         |       | 2,489,323   | 2,489,323   | 5/1/07 
|Adomo                         |       | 4,150,675   | 4,150,675   | 6/1/09 
|Akimbo Systems                |       | 1,515,300   | 1,515,300   | 12/1/08
|Arena Solutions               |       | 1,709,537   | 1,709,537   | 9/1/07 
|Athena Design Systems         |       | 1,055,362   | 1,055,362   | 6/1/08 
|Avamar Technologies           |       | 4,289,955   | 4,289,955   | 1/1/09 
|Biz360                        |       | 1,498,322   | 1,498,322   | 10/1/07
|Business Engine               |       | 3,010,260   | 3,010,260   | 10/1/08
|CoWare                        |       | 7,050,495   | 7,050,495   | 12/1/07
|Enkata Technologies           |       | 1,824,159   | 1,824,159   | 11/1/08
|Epiance                       |       | 1,209,993   | 1,209,993   | 8/1/08 
|FilmLoop                      |       | 456,871     | 456,871     | 12/1/08





|firstRain                      |        | 2,955,000    | 2,955,000    | 12/1/08
|------------------------------ | ------ | ------------ | ------------ | -------
|KonaWare                       |        | 442,776      | 442,776      | 4/1/08 
|MetaCarta                      |        | 2,134,802    | 2,134,802    | 4/1/08 
|nlayers                        |        | 2,456,980    | 2,456,980    | 11/1/08
|Pilot Software                 |        | 2,801,358    | 2,801,358    | 6/1/08 
|Platform Solutions             |        | 4,337,148    | 4,337,148    | 3/1/08 
|PolyServe                      |        | 3,903,015    | 3,903,015    | 11/1/08
|Resolution EBS                 |        | 842,966      | 842,966      | 5/1/08 
|Sabrix                         |        | 1,782,321    | 1,782,321    | 3/1/08 
|SeeControl                     |        | 267,254      | 267,254      | 5/1/08 
|SOA Software                   |        | 4,099,227    | 4,099,227    | 9/1/08 
|Steelwedge                     |        | 1,917,197    | 1,917,197    | 11/1/08
|Valchemy                       |        | 1,188,953    | 1,188,953    | 10/1/08
|Subtotal:                      | 38.3%  | $59,602,293  | $59,602,293  |        
|                               |        |              |              |        
|Technology Services            |        |              |              |        
|EchoPass                       |        | $2,448,541   | $2,448,541   | 9/1/07 
|Jacent Technologies            |        | 442,407      | 442,407      | 4/1/08 
|Neutral Tandem                 |        | 6,806,646    | 6,806,646    | 11/1/08
|Subtotal:                      | 6.2%   | $9,697,594   | $9,697,594   |        
|                               |        |              |              |        
|Wireless                       |        |              |              |        
|AeroScout                      |        | $894,701     | $894,701     | 5/1/08 
|Digital Bridges                |        | 7,312,537    | 7,312,537    | 12/1/08
|Ethertronics                   |        | 359,067      | 359,067      | 3/1/08 
|IXI Mobile                     |        | 1,568,754    | 1,568,754    | 4/1/07 
|Kayak Interactive              |        | 2,144,606    | 2,144,606    | 9/1/07 
|Meru Networks                  |        | 3,741,643    | 3,741,643    | 12/1/07
|Siimpel Corporation            |        | 1,134,746    | 1,134,746    | 5/1/09 
|TeleCIS Wireless               |        | 1,465,918    | 1,465,918    | 11/1/07
|Traq Wireless                  |        | 1,383,320    | 1,383,320    | 7/1/08 
|WiSpry                         |        | 570,427      | 570,427      | 11/1/08
|Subtotal:                      | 13.2%  | $20,575,719  | $20,575,719  |        
|                               |        |              |              |        
|Total:  (Cost of $250,865,135) | 161.1% | $250,865,135 | $250,865,135 |        





*As of December 31, 2005 loans with a cost basis of $2,967,542 and a fair market value of $2,967,542 have been classified as non-accrual.

The Fund provides asset-based financing primarily to start-up and emerging growth venture-capital-backed companies.  These loans are generally secured by assets of the borrowers.  As a result, the Fund is subject to general credit risk associated with such companies. At September 30, 2006, the Fund had unexpired unfunded commitments to borrowers of $182.9 million.





3.

EARNINGS PER SHARE

Basic earnings per share are computed by dividing net increase in net assets resulting from operations by the weighted average common shares outstanding.  Diluted earnings per share are computed by dividing net increase in net assets resulting from operations by the weighted average common shares outstanding, including the dilutive effects of potential common shares (e.g., stock options).  The Fund has no instruments that would be potential common shares; thus, reported basic and diluted earnings per share are the same.

4.  CAPITAL STOCK

As of September 30, 2006 and December 31, 2005, there were 10,000,000 shares of $0.001 par value common stock authorized, and 100,000 shares issued and outstanding.  Total committed capital of the Company is $250.0 million.  Total contributed capital to the Company through September 30, 2006 and December 31, 2005 was $212.5 million and $162.5 million, respectively, of which $199.5 million and $155.5 million, respectively, was contributed to the Fund.

The chart below shows the distributions of the Fund for the nine months ended September 30, 2006 and 2005.

|                                   |             |  |           
|---------------------------------- | ----------- |  | ----------
|                                   | 2006        |  | 2005      
|Cash distributions                 | $13,600,000 |  | $2,300,000
|Deemed distributions               | -           |  | 33,951    
|Distributions of securities        | 4,180,596   |  | 1,952,250 
|                                   |             |  |           
|Total distributions to shareholder | $17,780,596 |  | $4,286,201





5.   RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In December 2003, FASB issued FASB Interpretation No. 46R,Consolidation of Variable Interest Entities, an interpretation of ARB No. 51 (FIN 46R).  The effective date of FIN 46R for non-registered investment companies (such as the Fund) has been deferred pending a decision by the FASB concerning whether to exempt such entities from applying the provisions of FIN 46R.

In June 2006, FASB issued Interpretation, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  This interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.  FIN 48 is effective for fiscal years beginning after December 15, 2006. The Fund does not expect the adoption of this interpretation to have a material impact on its financial statements.





In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157), which is effective for fiscal years beginning January 1, 2008. This statement defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements. The adoption of SFAS No. 157 is not expected to have a material impact on the Funds financial position or results of operations

6.

FINANCIAL HIGHLIGHTS

Accounting principles generally accepted in the United States of America require disclosure of financial highlights of the Fund for the periods presented, the three and nine months ended September 30, 2006 and 2005.  The total rate





of return is defined as the return based on the change in value during the period of a theoretical investment made at the beginning of the period. The total rate of return assumes a constant rate of return for the Fund during the period reported and weights each cash flow by the amount of time held in the Fund. This required methodology differs from an internal rate of return.

The ratios of expenses and net investment income to average net assets, calculated below, are annualized and are computed based upon the aggregate weighted average net assets of the Fund for the periods presented.  Net investment income is inclusive of all investment income net of expenses, and excludes realized or unrealized gains and losses.

Beginning and ending net asset values per share are based on the beginning and ending number of shares outstanding. Other per share information is calculated based upon the aggregate weighted average net assets of the Fund for the periods presented.

The following per share data and ratios have been derived from the information provided in the financial statements:

|                                     | For the Three Months Ended September 30, 2006 |  | For the Three Months Ended September 30, 2005 |  |  | For the Nine
Months Ended
September 30, 2006 |  | For the Nine
Months Ended September 30, 2005
|------------------------------------ | --------------------------------------------- |  | --------------------------------------------- |  |  | -------------------------------------------- |  | --------------------------------------------
|                                     |                                               |  |                                               |  |  |                                              |  |                                             
|                                     |                                               |  |                                               |  |  |                                              |  |                                             
|Total return*                        | 10.37%                                        |  | 16.84%                                        |  |  | 13.99%                                       |  | 11.10%                                      
|                                     |                                               |  |                                               |  |  |                                              |  |                                             
|Per share amounts:                   |                                               |  |                                               |  |  |                                              |  |                                             
|Net asset value, beginning of period | $1,811.56                                     |  | $1,030.86                                     |  |  | $1,557.48                                    |  | $788.50                                     
|Net investment income                | 67.29                                         |  | 39.06                                         |  |  | 196.16                                       |  | 70.92                                       
|Net change in unrealized gain        | (17.98)                                       |  | 4.23                                          |  |  | (23.45)                                      |  | 4.10                                        
|Total income                         | 49.31                                         |  | 43.29                                         |  |  | 172.71                                       |  | 75.02                                       
|Capital contributions                | 190.00                                        |  | 40.00                                         |  |  | 440.00                                       |  | 260.00                                      
|Income distributions to shareholder  | (58.49)                                       |  | (33.50)                                       |  |  | (177.81)                                     |  | (42.87)                                     
|                                     |                                               |  |                                               |  |  |                                              |  |                                             
|Net asset value, end of period       | $1,992.38                                     |  | $1,080.65                                     |  |  | $1,992.38                                    |  | $1,080.65                                   
|                                     |                                               |  |                                               |  |  |                                              |  |                                             
|Net assets, end of period            | $199,238,440                                  |  | $108,065,248                                  |  |  | $199,238,440                                 |  | $108,065,248                                
|                                     |                                               |  |                                               |  |  |                                              |  |                                             
|Ratios to average net assets:        |                                               |  |                                               |  |  |                                              |  |                                             
|                                     |                                               |  |                                               |  |  |                                              |  |                                             
|Expenses*                            | 10.96%                                        |  | 11.11%                                        |  |  | 10.09%                                       |  | 11.81%                                      
|Net investment income*               | 13.88%                                        |  | 14.98%                                        |  |  | 14.92%                                       |  | 10.62%                                      
|*  Annualized                        |                                               |  |                                               |  |  |                                              |  |                                             
|                                     |                                               |  |                                               |  |  |                                              |  |                                             
|                                     |                                               |  |                                               |  |  |                                              |  |                                             
|                                     |                                               |  |                                               |  |  |                                              |  |                                             
|                                     |                                               |  |                                               |  |  |                                              |  |                                             
|                                     |                                               |  |                                               |  |  |                                              |  |                                             
|                                     |                                               |  |                                               |  |  |                                              |  |                                             









| | 
| | 
| | 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations





General



Venture Lending & Leasing IV, Inc, (the Fund) is 100% owned by Venture Lending & Leasing IV, LLC (the Company).  The Fund's shares of Common Stock, $.001 par value were sold to its shareholder under a stock purchase agreement.  The Fund has issued 100,000 of the Funds 10,000,000 authorized shares. The Fund's shareholder may make additional capital contributions to the Fund.



In addition to the historical information contained herein, this Quarterly Report on Form 10-Q 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. 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.





Overview



The Fund is a financial services company primarily providing financing and advisory services to a variety of carefully selected venture-backed companies primarily throughout the United States with a focus on growth oriented companies.   The Funds portfolio is well diversified and consists of companies in the communications, information services, media, and technology, including software and technology-enabled business services, bio-technology, and medical devices industry sectors, among others. The Funds capital is generally used by our portfolio companies to finance acquisitions of fixed assets and/or for working capital. On May 28, 2004, the Fund completed its first closing of capital, made its first investments, and became a non-diversified, closed-end investment company that elected to be treated as a business development company under the Investment Company Act of 1940. The Fund elected to be treated for federal income tax purposes as a regulated investment company under the Internal Revenue Code with the filing of its federal corporate income tax return for 2004. Pursuant to this election, the Fund generally will not have to pay corporate-level taxes on any income it distributes to the stockholder as dividends, allowing the Funds shareholder to substantially reduce or eliminate its corporate-level tax liability.



The Fund will seek to meet the ongoing requirements, including the diversification requirements, to qualify as a Regulated Investment Company (RIC) under the Internal Revenue Code.  If the Fund fails to meet these requirements, it will be taxed as an ordinary corporation on its taxable income for that year (even if that income is distributed to the Company) and all distributions out of its earnings and profits will be taxable to the Members of the Company as ordinary income; thus, such income will be subject to a double layer of tax. There is no assurance that the Fund will meet the ongoing requirements to qualify as a RIC for tax purposes.



The Fund's investment objective is to achieve a high total return. The Fund seeks to achieve its investment objective by providing debt financing to portfolio companies.   Since inception, the Fund's investing activities have focused primarily on private debt securities.  The Fund generally receives warrants to acquire equity securities in connection with its portfolio investments.  The Fund generally distributes these warrants to its shareholder upon receipt.  The Fund also has guidelines for the percentages of total assets which will be invested in different types of





assets.



The portfolio investments of the Fund consist of debt financing to early and late stage venture capital backed technology companies.  The borrowers ability to repay its loans may be adversely impacted by a number of factors, and as a result, the loan may not fully be repaid.  Furthermore, the Funds security interest in any collateral over the borrowers assets may be insufficient to make up any shortfall in payments.



Critical Accounting Policies



We identified the most critical accounting principles upon which our financial statements depend and determined the critical accounting principles by considering accounting policies that involve the most complex or subjective decisions or assessments. The only critical accounting policy we identified was related to the valuation of loans.



Loans are held at estimated fair value as determined by management, in accordance with the valuation methods described in the valuation of loans section of Note 2 of the Funds Annual Report on Form 10-K for the year ended December 31, 2005 (Summary of Significant Accounting Policies). Critical factors in determining the fair value of a loan include payment history, collateral position, financial strength of the borrower, prospects for the borrower's raising future equity rounds, likelihood of sale or acquisition of the borrower, and length of expected holding period of the loan, as well as an evaluation of the general interest rate environment.  The actual value of the loans may differ from management's estimates which would affect net income as well as net assets.



Results of Operations For the three and nine months ended September 30, 2006 and 2005



Total investment income for the three months ended September 30, 2006 and 2005 was $12.0 million and $6.8 million, respectively, of which $11.7 million and $6.6 million consisted of interest on venture loans outstanding during the period.  Total investment income for the nine months ended September 30, 2006 and 2005 was $32.9 million and $15.0 million, respectively, of which $32.0 million and $14.5 million consisted of interest on venture loans outstanding during the period.   The remaining income related to interest income from short-term investment of cash as well as other income from commitment fees and warrants received for loans that will never fund.   As additional loans are funded, investment income continues to increase as does the outstanding balance of loans.  Performing loans rose from $201.2 million as of September 30, 2005 to $247.9 million as of December 31, 2005 and $363.8 million as of September 30, 2006. This was partially offset by decreasing interest rates, as average interest rates declined from 15.2% and 14.1%, respectively for the three and nine months ended September 30, 2005 to 13.6% and 14.0%, respectively, for the three and nine months ended September 30, 2006.  Interest is calculated using the effective interest method, and rates earned by the Fund will fluctuate based on many factors including volatility, early payoffs, and recovery of interest from non-performing assets.  General interest rates started to flatten or even decline during the period.  This combined with a very competitive environment caused the average interest rates to decline slightly for the periods reported.





Management fees for the three months ended September 30, 2006 and 2005, were $2.4 million and $1.6 million, respectively.    Management fees for the nine months ended September 30, 2006 and 2005, were $5.8 million and $4.7 million, respectively.  Management fees were based on committed capital of the Company until the second anniversary which occurred in May, 2006, at which time they became based on assets under management.  Management fees increased as assets under management exceeded committed capital as of September 30, 2006.



Total interest expense was $2.4 million and $1.0 million for the three months ended September 30, 2006 and 2005, respectively.  Interest expense was $6.2 million and $2.0 million for the nine months ended September 30, 2006 and 2005, respectively.  Interest expense increased for the period because average borrowings outstanding under the debt facility increased from $86.4 million and $62.5 million for the three and nine months ended





September 30, 2005 to $170.9 million and $152.0 million for the three and nine months ended September 30, 2006.  Additionally, weighted average interest rates increased from 4.5% and 4.3% to 5.7% and 5.4% for that same period as interest rates in general continued to rise.



Net investment income for the three and nine months ended September 30, 2006 was $6.7 million and $19.6 million, respectively.  Net investment income for the three and nine months ended September 30, 2005 was $3.9 million and $7.1 million, respectively.



Total unrealized loss for the three and nine months ended September 30, 2006 was $1.8 million and $2.3 million respectively.  Total unrealized gain for the three and nine months ended September 30, 2005 was $0.4 million.  The unrealized loss for the three and nine months ended September 30, 2006 was the result of a $0.8 million and $2.1 million reserve, respectively, taken against loans and a loss from the Funds hedging activities of $1.0 million and $0.3 million, respectively.  The unrealized gain for the three and nine months ended September 30, 2005 was  entirely the result of the Funds hedging transactions.



Net increase in net assets resulting from operations for the three and nine months ended September 30, 2006 was $4.9 million and $17.3 million, respectively.  Net increase in net assets resulting from operations for the three and nine months ended September 30, 2005 was $4.3 million and $7.5 million, respectively    On a per share basis, net increase in net assets resulting from operations was $49.31 and $172.71 for the three and nine months ended September 30, 2006, respectively. On a per share basis, net increase in net assets resulting from operations was $43.29 and $75.02 for the three and nine months ended September 30, 2005, respectively.



Liquidity and Capital Resources  September 30, 2006 and December 31, 2005



Total capital contributed to the Fund was $199.5 million and $155.5 million at September 30, 2006 and December 31, 2005, respectively.  Committed capital to the Company at September 30, 2006 and December 31, 2005 was $250.0 million, of which $212.5 million and $162.5 million, respectively has been called and received.  The remaining $37.5 million in committed capital as of September 30, 2006 is due to expire in May 2009 as the five year anniversary will have passed, at which time no further capital can be called.



On October 14, 2004, the Fund entered into agreements with Société Générale and Rabobank International that established a debt facility to provide the Fund up to $125.0 million of financing.  On November 22, 2005, this facility was increased to $200.0 million.  Borrowings by the Fund are collateralized by receivables from loans advanced by the Fund in its ordinary course of business.  The Fund pays interest on its borrowings based on the secured facilitys cost of issuing commercial paper obligations.  The Fund typically will enter into hedge transactions to limit its interest rate risk, and thus the net interest expense will be based in a large part on the fixed rate negotiated on these transactions.  The facility terminates in May 2009, but can be accelerated under an event of default such as failure by the Fund to make timely interest or principal payments.  The first draw against this direct financial obligation of the Fund took place in October, 2004.  As of December 31, 2004, fees of $1,074,250 were incurred in order to procure the facility.  Additionally $17,000 was incurred in March, 2005 and $50,000 was incurred in November 2005 in conjunction with the facility.  Legal costs of $287,050 were incurred in negotiation of the facility.  An additional $27,375 was incurred during the first quarter of 2006. Both the bank fees and legal costs have been capitalized and are being amortized over the expected life of the facility.



At September 30, 2006 and December 31, 2005 the Fund had interest rate swap transactions outstanding with a total notional principal amount of $182.2 million and $117.4 million.  The effect of these swap transactions is to convert the floating rate bank debt 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 supporting each borrowing.







As of September 30, 2006 and December 31, 2005, 4% and 8%, respectively, of the Fund's assets consisted of cash and cash equivalents.  The Fund continued to invest its assets in venture loans during the nine months ended September 30, 2006. Amounts disbursed under the Fund's loan commitments totaled approximately $222.1 million during the period from January 1, 2006 through September 30, 2006. Net loan amounts outstanding after amortization and reserves increased by approximately $115.7 million for the same period. Unexpired, unfunded commitments totaled approximately $182.9 million as of September 30, 2006.





|As of              | Amount Disbursed | Principal Reductions and Reserves | Balance Outstanding  Fair Value | Unexpired Unfunded Commitments
|------------------ | ---------------- | --------------------------------- | -------------------------------- | ------------------------------
|September 30, 2006 | $529.3 million   | $162.7 million                    | $366.6 million                   | $182.9 million                
|December 31, 2005  | $307.2 million   | $56.3 million                     | $250.9 million                   | $166.7 million                





Venture loans are privately negotiated transactions.  Investments in these assets are relatively illiquid.





Item 3.  Quantitative and Qualitative Disclosures About Market Risk



The Fund's business activities contain elements of risk. The Fund considers the principal types of market risk to be interest rate risk and credit risk. The Fund considers the management of risk essential to conducting its business and to maintaining profitability. Accordingly, the Fund's risk management procedures are designed to identify and analyze the Fund's risks, to set appropriate policies and limits and to continually monitor these risks and limits by means of reliable administrative and information systems and other policies and programs.



The Fund anticipates managing its credit risk by maintaining a portfolio that is diverse by industry, size of investment, stage of development, and borrower.  The Fund has limited exposure to public market price fluctuations as the Fund primarily invests in private business enterprises and the Fund generally distributes all equity securities upon receipt to the Company.



The Fund enters into interest rate swap transactions to hedge its interest rate on its bank loans. The net interest received or paid on the transactions is included in interest expense. The fair value of the swap is recorded in other assets or other liabilities and the change in the fair value is recorded as a change in unrealized gain (loss) from investment transactions.





The Fund's sensitivity to changes in interest rates is regularly monitored and analyzed by measuring the characteristics of assets and liabilities. The Fund utilizes various methods to assess interest rate risk in terms of the potential effect on interest income net of interest expense, the value of net assets and the value at risk in an effort to ensure that the Fund is insulated from any significant adverse effects from changes in interest rates.



Based on the model used for the sensitivity of interest income net of interest expense, if the balance sheet were to remain constant and no actions were taken to alter the existing interest rate sensitivity, a hypothetical immediate 100 basis point change in interest rates would have affected net income by less than $0.1 million.  This translates to less than 1% for the three months ended September 30, 2006. Although management believes that this measure is indicative of the Fund's sensitivity to interest rate changes, it makes estimates to adjust for potential changes in credit quality, size and composition of the balance sheet and other business developments that could affect net income.  Accordingly, no assurances can be given that actual results would not differ materially from the potential outcome simulated by these estimates.







ITEM 4.   Disclosure Controls and Procedures



Evaluation of Disclosure Controls and Procedures



As of the end of the period covered by this quarterly report on Form 10-Q, the Fund's chief executive officer and chief financial officer conducted an evaluation of the Fund's disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934). Based upon this evaluation, the Fund's chief executive officer and chief financial officer concluded that the Fund's disclosure controls and procedures were effective in timely alerting them of any material information relating to the Fund that is required to be disclosed by the Fund in the reports it files or submits under the Securities Exchange Act of 1934.



Changes in Internal Controls:



There were no significant changes in the Fund's internal controls or in other factors that could significantly affect these controls during the period covered by this quarterly report on Form 10-Q.



PART II -- OTHER INFORMATION



Item 1.   Legal Proceedings



The Fund may become party to certain lawsuits from time to time in the normal course of business.  While the outcome of these legal proceedings cannot at this time be predicted with certainty, the Fund does not expect these proceedings will have a material effect upon the Fund's financial condition or results of operation.



Item 1A.

Risk Factors



GENERAL



Reliance on Management. The Fund is wholly dependent for the selection, structuring, closing and monitoring of its investments on the diligence and skill of the Manager, acting under the supervision of the Fund's board of directors. Although the principals of the Manager have over 30 years' of combined experience in investing in venture lending transactions and equity investments, there can be no assurance that the Fund will attain its investment objective. Furthermore, the Manager does not have substantial experience investing in special situations such as convertible and subordinated debt of public and late-stage private companies. The officers of the Manager have primary responsibility for the selection of the companies in which the Fund invests, the negotiation of the terms of such investments and the monitoring of such investments after they are made. Although the officers of the Manager intend to devote such time as is necessary to the affairs of the Fund, they are not required to devote full time to the management of the Fund. Furthermore, there can be no assurance that any officer will remain associated with the Manager or that, if an officer ceased to be associated with the Manager, the Manager would be able to find a qualified person or persons to fill their positions.



Long-Term Investment. After the fourth anniversary following the first closing of the Company's offering of membership interests, the Fund will cease to make new equity investments as well as investments in venture loans (except pursuant to commitments made before such fourth anniversary) and will distribute the proceeds of repayment, prepayment or sale of its investments, net of any principal repayments on borrowings, reserves, expenses or other obligations of the Fund, amounts paid on exercise of warrants and certain other amounts paid to protect the value of existing investments (including pay-to-play provisions). The Fund's Articles of Incorporation provide that, on December 31, 2012, the Fund automatically will be dissolved without any action by its shareholders. From and after such dissolution, the Fund's activities will be limited to the winding-up of its affairs, the liquidation of its remaining assets and the distribution of the net proceeds thereof to its shareholders. Although the Fund generally would not invest in any loan with a maturity date later than December 31, 2012, it is possible that, due to a default





by a borrower or a transaction restructuring due to a borrower's financial difficulties, the Fund will not fully realize on a loan by the original maturity date. Furthermore, the Fund may not be able to sell warrants it receives from borrowers, or the equity securities (including those received upon exercise of warrants or conversion of debt instruments), to the extent those investments were retained by the Fund and not distributed earlier to its shareholders, for a significant period of time due to legal or contractual restrictions on resale or the absence of a liquid secondary market. As a result, the liquidation process might not be completed for a significant period after the Fund's dissolution. In addition, it is possible that, if certain of the Fund's assets are not liquidated within a reasonable time after the Fund's dissolution, the Fund may elect to make a distribution in kind of all or part of such assets to its shareholders. In such case, the shareholders would bear any expenses attendant to the liquidation of such assets.



Competition. Other entities and individuals compete for investments similar to those made by the Fund, some of whom, with respect to investments in the form of loans, and many of whom, with respect to the equity investments and convertible and subordinated debt, have greater resources than the Fund. Furthermore, the Fund's need to comply with provisions of the Investment Company Act of 1940 Act (the 1940 Act) pertaining to BDCs and, if the Fund qualifies as a RIC, 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 companies in which it makes equity investments more attractive terms than otherwise might be the case.



Convertible Debt. Convertible debt instruments issued by public and late-stage private companies comprise some of the special situations in which the Fund invests. Convertible debt generally offers lower interest yields than non-convertible debt of similar quality. The market value of convertible debt tends to decline as interest rates increase and, conversely, to increase as interest rates decline. However, the market value of convertible debt often reflects the market price of common stock of the issuing company when that stock price is greater than the conversion price of the convertible debt. The conversion price is the predetermined price at which the debt instrument could be exchanged for the associated stock. As the market price of the underlying common stock declines, the price of the convertible debt tends to be influenced more by the yield of the debt instrument. Thus, it may not decline in price to the same extent as the underlying common stock.



Subordinated Debt. Part of the special situations in which the Fund invests consist of subordinated debt instruments, which tend to be predominantly high-yield non-convertible debt securities. Investments in high-yield securities involve substantial risk of loss. Sub-investment grade non-convertible debt securities, or comparable unrated securities, are commonly referred to as "junk debt" and are considered speculative with respect to the issuer's ability to pay interest and principal, and are susceptible to default or decline in market value due to adverse economic or business developments. The market values for high-yield securities tend to be very volatile, and these securities are less liquid than investment grade debt securities.



Leverage. The Fund has borrowed and intends to continue to borrow money from and issue debt securities to banks, insurance companies and other lenders to obtain additional funds to originate venture loans. 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%. "Asset Coverage" means the ratio which the value of the Fund's total assets, less all liabilities not represented by (i) the borrowings and (ii) 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 1940 Act also requires that, if the Fund borrows money, provision be made to prohibit the declaration of any dividend or other distribution on the shares (other than a dividend payable in shares), or the repurchase by the Fund of shares, if, after payment of such dividend or repurchase of shares, the Asset Coverage of such borrowings would be below 200%. If the Fund is unable to pay dividends or distributions in the amounts required under the Internal Revenue Code, it might not be able to qualify as a RIC or, if qualified, to continue to so qualify.







The use of leverage increases investment risk. The Fund's use of leverage is premised upon the expectation that the Fund's borrowing costs will be lower than the return the Fund achieves on its investments. To the extent the income or capital gains derived from investments purchased with borrowed funds exceeds the cost of borrowing, the Fund's return will be greater than if leverage had not been used. Conversely, if the income or capital gain from the investments purchased with borrowed funds is not sufficient to cover the cost of borrowing, or if the Fund incurs capital losses, the return to the Fund will be less than if leverage had not been used, and therefore the amount available for distribution will be reduced or potentially eliminated. Furthermore, since the investment management fee paid to the Manager is a percentage of the managed assets, such fee will be higher if the Fund utilizes leverage than if no borrowings were incurred. Lenders have required that the Fund pledge portfolio assets as collateral for loans, and have required that the Company provide guarantees or other credit enhancement. If the Fund is unable to service the borrowings, the Fund may risk the loss of such pledged assets.



Lenders have also required 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 provide for acceleration of the maturity of the indebtedness if certain financial tests are not met. To minimize risks associated with lending money at fixed rates, the Fund enters into interest rate hedging transactions with respect to all or any portion of the Fund's investments. There can be no assurance that such interest rate hedging transactions will be available in forms acceptable to the Fund. In addition, entering into interest rate hedging transactions raises costs to the Fund. Finally, it is possible that the Fund could incur losses from being "overhedged," which would result if the loan that was hedged is repaid faster than expected.



Regulation. The Fund has elected to be treated as a BDC under the Small Business Incentive Act of 1980, which modified the 1940 Act. Although BDCs are now exempt from registration under the 1940 Act and are relieved from compliance with many provisions of the 1940 Act, there are now greater restrictions in some respects on permitted types of investments for BDCs. Moreover, the applicable provisions of the 1940 Act continue to impose numerous restrictions on the activities of the Fund, including restrictions on leverage and on the nature of its investments. While the Fund is not aware of any judicial rulings under, and is aware of only a few administrative interpretations of, the Small Business Incentive Act of 1980, there can be no assurance that such Act will be interpreted or administratively implemented in a manner consistent with the Fund's objectives or manner of operation.



Litigation. The Fund could be subject to litigation by borrowers, based on theories of "lender liability" or otherwise, in connection with the exercise of its rights as lender. The defense of such a lawsuit, even if ultimately determined to be without merit, could be costly and time-consuming.



Tax Status. The Fund must meet a number of requirements, described under "Federal Income Taxation," to qualify as a RIC and, if qualified, to continue to so qualify. For example, the Fund must meet specified asset diversification standards under the Internal Revenue Code which might be difficult to meet if the borrowers under some loans draw down their committed financing at a faster rate than other borrowers, particularly during the early periods of the Fund's operations. If the Fund experiences difficulty in meeting the diversification requirement for any fiscal quarter, it might accelerate capital calls or borrowings in order to increase the portion of the Fund's total assets represented by cash, cash items and U.S. government securities as of the close of the following fiscal quarter and thus attempt to meet the diversification requirement. However, the Fund would incur additional interest and other expenses in connection with any such accelerated borrowings, and increased investments by the Fund in cash, cash items and U.S. government securities (whether the funds to make such investments are derived from called equity capital or from accelerated borrowings) are likely to reduce the Fund's return. Furthermore, there can be no assurance that the Fund would be able to meet the diversification requirements through such actions. Failure to qualify as a RIC would deny the Fund pass-through status and, in a year in which the Fund has taxable income, would have a significant adverse effect on the return of the Fund.



Allocation of Expenses. Because the Fund qualifies as a RIC, individuals and certain other persons who are members of the Company are required to include in their gross income an amount of certain Fund expenses relating to the production of gross income that are allocable to the Company. These Members, therefore, are deemed to receive





gross income from the Fund in excess of the distributions they actually receive. Such allocated expenses may be deductible by an individual Member as a miscellaneous itemized deduction, subject to the limitation on miscellaneous itemized deductions not exceeding 2% of adjusted gross income.



INVESTMENT RISKS



Credit Risks. Most of the companies with which the Fund enters into financing transactions have not achieved profitability, experience substantial fluctuations in their operating results or, in some cases, do not have significant operating revenues. The ability of these companies to meet their obligations to the Fund, therefore, depends to a significant extent on the willingness of a borrower's equity venture capital investors or outside investors to provide additional equity financing, which in turn depends on the borrower's success in meeting its business plan, the market climate for venture capital investments generally and many other factors. The companies to which the Fund provides financing frequently engage in the development of new products or technologies, and the success of these efforts, or the ability of the companies to successfully manufacture or market products or technologies developed, cannot be assured. These companies frequently face intense competition, including competition from companies with greater resources, and may face risks of product or technological obsolescence or rapidly changing regulatory environments which could adversely affect their prospects. The success of such companies often depends on the management talents and efforts of one person or small group of persons whose death, disability or resignation would adversely affect the company.



Remedies Upon Default. In the event of a default on a loan, the available remedies to the Fund include legal action against the borrower and foreclosure or repossession of collateral given by the borrower, including the equipment or other assets being financed. The Fund can experience significant delays in exercising its rights as a secured lender and may incur substantial costs in taking possession of and liquidating its collateral and in taking other steps to protect its investment. Furthermore, the requirements under the laws of the various jurisdictions for creating and perfecting security interests in the varied types of collateral securing a loan are technical and complex, and even minor deviations from the required procedures could impair the Fund's security interest in the underlying assets. On occasion, the Fund makes loans to a borrower that has one or more other secured lenders. In such circumstances, the Fund may share its collateral with the other lender(s) and enter into intercreditor agreements which could limit the Fund's flexibility in pursuing its remedies as a secured creditor, and reduce the proceeds realized from foreclosing or taking possession of the collateral. The Fund generally requires that it have a first priority security interest in any equipment of borrower financed with the proceeds of the Fund's loans, although that security interest may extend to the borrower's other assets in which another lender might have a senior or parity security interest.



The Fund utilizes certain of its funds in investments that involve the financing of equipment assets. Equipment assets are often subject to rapid depreciation or obsolescence such that it is likely the value of the assets underlying a loan to finance such assets will depreciate during the term of the loan transaction below the amount of the borrower's obligations. In addition, although borrowers are required under the transaction documents to provide customary insurance for the assets underlying a loan, and are prohibited from disposing of the assets without the Fund's consent, compliance with these covenants cannot be assured and, in the event of non-compliance, the assets could become unavailable to the Fund due to destruction, theft, sale or other circumstances. The Fund's ability to obtain payment beyond the assets underlying the loan from the borrower might be limited by bankruptcy or similar laws affecting creditors' rights. Therefore, there can be no assurance that the Fund would ultimately collect the full amount owed on a defaulted loan.



Emerging Company Risks. The possibility that the companies in which the Fund invests will not be able to commercialize their technology or product concept presents significant risk to the Fund. Additionally, although some of such companies may already have a commercially successful product or product line at the time of investment, technology products and services often have a more limited market or life span than products in other industries. Thus, the ultimate success of these companies may depend on their ability to continually innovate in increasingly competitive markets. Most of the companies in which the Fund invests will require substantial additional equity financing to satisfy their continuing working capital requirements. Each round of venture financing





is typically intended to provide a company with enough capital to reach the next stage of development. The circumstances or market conditions under which such companies will seek additional capital is unpredictable. It is possible that one or more of such companies will not be able to raise additional financing or may be able to do so only at a price or on terms which are unfavorable.



Privately-held Company Risks. The Fund invests primarily in privately-held companies. Generally, very little public information exists about these companies and the Fund is required to rely on the ability of the Manager to obtain adequate information to evaluate the potential returns from investing in these companies. Moreover, these companies typically depend upon the management talents and efforts of a small group of individuals and the loss of one or more of these individuals could have a significant impact on the investment returns from a particular company. Also, these companies frequently have less diverse product lines and smaller market presence than larger companies. They are thus generally more vulnerable to economic downturns and may experience substantial variations in operating results.



Global Economic Risks. The ability of the Fund to provide an acceptable return may be adversely affected by economic and business factors to which the U.S. marketplace is subject. These factors, which generally are beyond the control of the Investment Manager, include: general economic conditions, such as inflation and fluctuations in general business conditions; the impact of further terrorist attacks against the United States; the effects of strikes, labor disputes and foreign political unrest; and uncertainty of the recovery of the U.S. economy.



Speculative Nature of Warrants and Equity Investments. The value of the warrants that the Fund generally receives in connection with its financing investments is dependent on the value of the equity securities for which the warrants can be exercised. The value of such warrants, direct equity investments, and equities received upon conversion of debt instruments is dependent primarily on the success of the company's business strategy and the growth of its earnings, but also depends on general economic and equity market conditions. The prospects for achieving consistent profitability in the case of many companies in which the Fund invests are speculative. The warrants, equity securities for which the warrants can be exercised, direct equity investments, and equities received upon conversion of debt instruments generally are restricted securities that cannot readily be sold for some period of time. If the value of the equity securities underlying a warrant does not increase above the exercise price during the life of the warrant, the Fund would permit the warrant to expire unexercised and the warrant would then have no value.



Illiquidity of Investments. Substantially all of the Funds portfolio investments (other than short-term investments) consist of securities that, at the time of acquisition, are subject to restrictions on sale and for which no ready market will exist. Restricted securities cannot be sold publicly without prior agreement with the issuer to register the securities under the Securities Act of 1933 (the 1933 Act), or by selling such securities under Rule 144 or other provisions of the 1933 Act which permit only limited sales under specified conditions. Venture loans and equity investments are privately negotiated transactions, and there is no established trading market in which such loans and equity investments can be sold. Convertible and subordinated debt investments may also be privately negotiated transactions. In the case of warrants or equity securities, the Fund generally will realize the value of such securities only if the issuer is able to make an initial public offering of its shares, or enters into a business combination with another company which purchases the Fund's warrants or equity securities or exchanges them for publicly-traded securities of the acquiror. The feasibility of such transactions depends upon the entity's financial results as well as general economic and equity market conditions. Furthermore, even if the restricted warrants or equity securities owned become publicly-traded, the Fund's ability to sell such securities may be limited by the lack (or limited nature) of a trading market for such securities. When restricted securities are sold to the public, the Fund, under certain circumstances, may be deemed an "underwriter" or a controlling person with respect thereto for the purposes of the 1933 Act, and be subject to liabilities as such under that Act.





Because of the illiquidity of the Fund's investments, a substantial portion of its assets are carried at fair value as determined by the Manager in accordance with the Funds policy as approved by the board of directors. This value will not necessarily reflect the value of the assets which may be realized upon a sale.



Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds



Prior to the Funds commencement of operations on May 28, 2004, the Fund sold 100,000 shares to the Funds sole shareholder, Venture Lending & Leasing IV, LLC for $25,000 in November 2003.  No other shares of the Fund have been sold; however the Fund received an additional $199.5 million of paid in capital during the period from May 28, 2004 through September 30, 2006 which is expected to be used to acquire venture loans and fund operations.



Item 3.   Defaults Upon Senior Securities



Not applicable



Item 4.

Submission of Matters to a Vote of Security Holders



None



Item 5.  Other Information



None



Item 6.  Exhibits



|Exhibit Number | Description                                                                                                                                                                                                                  
|-------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3(i)           | Articles of Amendment and Restatement as filed with the Maryland Secretary of State on October 14, 2004, incorporated by reference to the Funds Form 10-Q filed with the Securities and Exchange Commission on May 13, 2005.
|3(ii)          | Bylaws of the Fund as of October 31, 2003, incorporated by reference to the Funds Registration Statement on Form 10 filed with the Securities and Exchange Commission on December 10, 2003.                                 
|4.1            | Form of Purchase Agreement between the Fund and the Company, incorporated by reference to the Funds Registration Statement on Form 10 filed with the Securities and Exchange Commission on December 10, 2003.               
|31.1  32.2    | Certifications Pursuant to 18 U.S.C. Section 1350                                                                                                                                                                            











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 IV, INC.

(Registrant)



By:

/S/ Ronald W. Swenson

By:

/S/ Martin D. Eng



Ronald W. Swenson

Martin D. Eng

Chairman and Chief Executive Officer

Chief Financial Officer

Date:

November 10, 2006

Date:

November 10, 2006





Exhibit 31.1

CERTIFICATION PURSUANT TO 
18 U.S.C. SECTION 1350, 
AS ADOPTED PURSUANT TO 
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002



I, Martin D. Eng certify that:



1. I have reviewed this quarterly report on Form 10-Q of Venture Lending & Leasing IV, Inc.;



2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;



3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;



4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:



a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;



b) evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and



c) disclosed in this report any change in the registrants internal control over financial reporting that occurred during the period covered by the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and



5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions):



a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and



b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.



Date: November 10,  2006



/S/ Martin D. Eng



Martin D. Eng

Chief Financial Officer





Exhibit 31.2

CERTIFICATION PURSUANT TO 
18 U.S.C. SECTION 1350, 
AS ADOPTED PURSUANT TO 
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002



I, Ronald W. Swenson, certify that:



1. I have reviewed this quarterly report on Form 10-Q of Venture Lending & Leasing IV, Inc.;



2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;



3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;



4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:



a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;



b) evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and



c) disclosed in this report any change in the registrants internal control over financial reporting that occurred during the period covered by the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and



5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions):



a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and



b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.



Date: November 10, 2006



/S/ Ronald W. Swenson



Ronald W. Swenson

Chief Executive Officer





Exhibit 32.1

CERTIFICATION PURSUANT TO 
18 U.S.C. SECTION 1350, 
AS ADOPTED PURSUANT TO 
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Venture Lending & Leasing IV, Inc. (the "Fund") on Form 10-Q for the period ending September 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Ronald W. Swenson, Chief Executive Officer of the Fund, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Fund.



/S/ Ronald W. Swenson



Ronald W. Swenson
Chief Executive Officer
November 10, 2006









Exhibit 32.2



CERTIFICATION PURSUANT TO 
18 U.S.C. SECTION 1350, 
AS ADOPTED PURSUANT TO 
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Venture Lending & Leasing IV, Inc. (the "Fund") on Form 10-Q for the period ending September 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Martin D. Eng, Chief Financial Officer of the Fund, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Fund.



/S/ Martin D. Eng



Martin D. Eng

Chief Financial Officer
November 10, 2006