SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

[X]

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the year ended December 31, 2005

OR

[  ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number 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)

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

Securities Registered Pursuant to Section 12(b) of the Act:

None

Securities Registered Pursuant to Section 12(g) of the Act:

Common Stock, $0.001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes __ No X   

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes __ No X

Indicate by check mark whether the registrant has (i) filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (ii) has been subject to such filing requirements for the past 90 days: Yes    X   No    

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated be reference in Part II of this Form 10-K or any amendment to this Form 10-K:     

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 (Check one):

Large accelerated filer _____

Accelerated filer _______

Non-accelerated filer   X  

Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes __ No X

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

The number of shares outstanding of each of the issuer’s classes of common stock, as of February 23, 2006 was 100,000.

Documents Incorporated by Reference

Document Description

10-K Part

Specifically Identified Portions of the Registrant’s Proxy Statement for the Annual Meeting

of Shareholders to be held May 10, 2006

III

PART I

ITEM 1.

BUSINESS.

Introduction.  

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 under the Investment Company Act of 1940 (“1940 Act”). The Fund is a wholly owned subsidiary of Venture Lending & Leasing IV, LLC, a Delaware limited liability company (the “Company”). The purpose of the Fund is to provide asset-based financing to venture-capital-backed companies, in the form of secured loans.  Additionally the Fund may provide debt financing to public and late-stage private companies. Prior to commencing its operations on May 28, 2004, the Fund had no operations other than the sale of 100,000 shares to the Company for $25,000. As of December 31, 2005, the Fund meets the requirements, including diversification requirements, to qualify as a regulated investment company (“RIC”) under the Internal Revenue Code of 1986.

The Fund’s shares of Common Stock, $.001 par value (“Shares”) are held entirely by the Company.  As capital is required to finance the acquisition of loans, additional capital is provided by the Company.

Investment Program.

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

Venture Loans.  Venture loans generally consist of a promissory note secured by the equipment or other assets of the borrower.  The Fund generally obtains a security interest in the assets financed and receives periodic payments of interest and principal, and may receive a final payment constituting additional interest at the end of the transaction's term.  The interest rate and amortization terms of venture loans are individually negotiated between the Fund and each borrower.  

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

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

Investment Policies.

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

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

To qualify as a RIC, the Fund must meet the issuer diversification standards under the Internal Revenue Code that require that, at the close of each quarter of the Fund's taxable year, (i) not more than 25% of the market value of its total assets is invested in the securities of a single issuer and (ii) at least 50% of the market value of its total assets is represented by cash, cash items, government securities, securities of other RICs and other securities (with each investment in such other securities limited so that not more than 5% of the market value of the Fund's total assets is invested in the securities of a single issuer and the Fund does not own more than 10% of the outstanding voting securities of a single issuer).  For purposes of the diversification requirements under the Internal Revenue Code, the percentage of the Fund's total assets "invested" in securities of a company will be deemed to refer, in the case of financings in which the Fund commits to provide financing prior to funding the commitment, to the amount of the Fund's total assets represented by the value of the securities issued by the borrower to the Fund at the time each portion of the commitment is funded.  

The Fund will generally invest no more than 30% of its total assets in securities of companies in any single industry.  The broad industry categories in which the Fund anticipates that most of its investments will fall (and within each of which there may be several "industries" for purposes of the industry diversification policy) include computers and storage, semiconductor and equipment, medical devices,  software, and several other categories.

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

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

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

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

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

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

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

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

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

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

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

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

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

Dividends and Distributions.  

The Fund intends to distribute to its shareholder substantially all of its net investment income and net realized capital gains, if any, as determined for income tax purposes less appropriate reserves.  Applicable law, including provisions of the 1940 Act, may limit the amount of

dividends and other distributions payable by the Fund.  Income dividends will generally be paid quarterly to shareholders of record on the last day of each preceding calendar quarter end.  Substantially all of the Fund's net capital gain (the excess of net long-term capital gain over net short-term capital loss) and net short-term capital gain, if any, will be distributed annually, or on a more frequent basis as determined by the Manager.

Until May 28, 2008, the Fund may reinvest the proceeds of matured, repaid or resold investments, net of required distributions to shareholders, principal payments on borrowings and expenses or other obligations of the Fund, in new loans.  Following that date, the Fund will begin to distribute to investors all proceeds received from principal payments and sales of investments, net of reserves and expenses, principal repayments on the Fund's borrowings, amounts required to fund financing commitments entered into before such date, and any amounts paid on exercise of warrants.  Distributions of such amounts are likely to cause annual distributions to exceed the earnings and profits of the Fund available for distribution, in which case such excess will be considered a tax free return of capital to a shareholder to the extent of the shareholder's adjusted basis in its shares and then as capital gain. The Fund may borrow money to fund shareholder distributions, to the extent consistent with the 1940 Act and a prudent capital structure.

Competition.

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

Employees.

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

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 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 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 drew 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 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 1B.  UNRESOLVED STAFF COMMENTS.

Not applicable.

ITEM 2.

PROPERTIES.

All of the Fund’s office space is provided by the Manager.

ITEM 3.

LEGAL PROCEEDINGS.

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

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of the Fund’s security holders during the last quarter of the year ended December 31, 2005.

PART II.

ITEM 5.

MARKET FOR REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.

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

The number of holders of record of the Fund’s Common Stock at February 23, 2006 was 1.

The Fund has a policy of distributing securities as acquired.  The Fund values these securities at fair value at the time of acquisition in accordance with the Fund’s policy on valuation detailed in Note 2 to the financial statements.  In addition, some expenses of the Company may be paid by the Fund, and will be deemed as distributions to the Company.  The Fund has established a policy of declaring dividends on a quarterly basis to the extent that taxable income of the fund less applicable reserves exceeds warrant distributions and deemed distributions.    As of December 31, 2005, the Fund had distributed $10.29 million to its shareholder, of which $4.90 million was in cash.

ITEM 6.

SELECTED FINANCIAL DATA.

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

	For the Year Ended	For the Year Ended	For the Period Ended
	December 31, 2005	December 31, 2004	December 31, 2003*
Statement of Operations Data:
Investment income:
Interest on loans	$21,875,022	$2,212,645	$0
Interest on short - term investments and miscellaneous income	1,438,967	284,845	-
Total investment income	23,313,989	2,497,490	-
Expenses:
Management fee to managers	6,250,000	3,707,192	-
Interest expense	3,384,093	133,752	-
Banking and legal fees	1,504,866	493,568	-
Organizational costs	-	109,153	-
Other operating expenses	178,274	119,768	-
Total expenses	11,317,233	4,563,433	-
Net investment income (loss)	11,996,756	(2,065,943)	-
Net change in unrealized gain from hedging transactions	562,213	20,235	-
Net realized loss from investment transactions	-	-	-
Net increase (decrease) in net assets resulting from operations	$12,558,969	($2,045,708)	$0
AMOUNTS PER COMMON SHARE:
Net increase (decrease) in net assets resulting from operations	$125.59	($20.46)	$0.00

Weighted Average Shares Outstanding	100,000	100,000	100,000
	As of	As of	As of
	December 31, 2005	December 31, 2004	December 31, 2003
Balance Sheet Data:
Total assets	$276,069,245	$112,499,485	$25,000
Bank loans	$117,415,512	$31,450,194	$0
*From date of formation, October 31, 2003 through December 31, 2003

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Overview

The Fund is a financial services company providing financing and advisory services to a variety of carefully selected venture-backed companies 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 working capital. On May 28, 2004, we completed our first closing of capital, made our first investment, 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 distributed to our stockholders as dividends, allowing the Fund to substantially reduce or eliminate its corporate-level tax liability.

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.   Historically, 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 their loans may be adversely impacted by a number of factors, and as a result the loan may not be fully 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

The manager of the Fund (“Manager” or “Westech”) has identified the most critical accounting estimates upon which the financial statements depend.  The Manager has determined the critical accounting estimates by considering accounting policies that involve the most complex or subjective decisions or assessments.  The only critical accounting policy is related to the valuation of loans.  

Loans are held at fair value as determined by management, in accordance with the valuation methods described in the valuation of loans section of footnote 2 to the financial statements (Summary of Significant Accounting Policies). Critical factors in determining the fair value of a loan include payment history, collateral position, financial strength of borrower, prospects for future equity rounds, likelihood of sale or acquisition of the borrower, and length of expected holding period of the loan.   The actual value of the loans may differ from management’s estimates, which would affect net income as well as assets.

Results of Operations – For the year ended December 31, 2005 and 2004 and the period ended December 31, 2003

Total investment income for the years ended December 31, 2005 and 2004 was $23.3 million and $2.5 million, respectively, of which $21.9 million and $2.2 million, respectively, consisted of interest on venture loans outstanding.  Remaining income consisted of interest and dividends on the temporary investment of cash, pending investment in venture loans or application to the Fund’s expenses and income from the forfeiture of deposits from prospective borrowers as well as income from securities received from borrowers with commitments that expired unfunded.  The increase in the investment income is primarily a result of the increased loan base on which interest is charged.  Performing loans increased from $0 in May 2004 to $85.4 million as of December 31, 2004 and  $247.9 million as of December 31, 2005.  Additionally, the Fund operated for twelve months in 2005 as opposed to a little over seven months in 2004.  Finally, the average interest rate on loans also increased from 12.4% for the year ended December 31, 2004 to 13.8% for the year ended December 31, 2005.

Expenses for the year ended December 31, 2005 and 2004 were $11.3 million and $4.6 million, respectively.  Management fees are calculated based on the Company’s committed capital for the first two years of the Fund’s life and thereafter as a percentage of Fund assets.  Management fees for the Fund were $6.3 million and $3.7 million, for the years ended December 31, 2005 and 2004 respectively.  The increase in management fees was because the Fund was only active for a little over 7 months in 2004, but was active for the full year in 2005.  Interest expense was $3.4 million and $0.1 million for the years ended December 31, 2005 and 2004, respectively.  The Fund only borrowed for two months in 2004 as opposed to the full year for 2005.  Borrowings under the debt facility increased from $0 in October 2004 to $117.4 million as of December 31, 2005.     Legal and bank related fees, were $1.5 million and $0.5 million for the years ended December 31, 2005 and 2004 respectively.  The reason for the increased costs is due to the increased activity as the Fund reached critical mass.  Additionally, 2004 was not a

full year of operations.  Organizational costs were $0 and $0.1 million for the years ended December 31, 2005 and 2004, respectively.  These costs related to forming the organization.  Other operating expenses were $0.2 million and $0.1 million, respectively, for the years ended December 31, 2005 and 2004.  These fees included director fees, audit and tax fees, and other expenses related to the operation of the Fund.  The other expenses increased because of the increased activity in 2005.

Net change in unrealized gain from hedging activities was $562 thousand and $20 thousand, respectively, for the years ended December 31, 2005 and 2004.  The unrealized gain is composed entirely from the increase in value of the interest rate swap transaction held by the Fund.

Net increase (decrease) in net assets resulting from operations for the years ended December 31, 2005 and 2004 was $12.6 million and ($2.0) million, respectively.  On a per share basis, for the years ended December 31, 2005 and 2004 there was a net increase (decrease) in net assets resulting from operations of $125.59 and ($20.46), respectively.

Prior to commencing its operations on May 28, 2004, the Fund had no operations other than the sale of 100,000 shares to the Company for $25,000.

Liquidity and Capital Resources -- December 31, 2005 and 2004

The Fund is owned entirely by the Company.   The Company is expected, but not required, to make further contributions to the capital of the Fund to the extent of the Company’s members’ capital commitment to the Company.  As of December 31, 2005 and 2004 the Company had received subscriptions for capital in the amount of $250.0 million, of which $162.5 and $87.5 million, respectively had been called and received.  As of December 31, 2005 and 2004, $87.5 million and $162.5 million, respectively, remains uncalled.    

The Fund had in place a $200.0 million and $125.0 million securitzation debt facility as of December 31, 2005 and 2004 resepctively, under which the Fund was eligible to borrow up to $200.0 million and $125.0 million, respectively.  As of December 31, 2005 and 2004,  $117.4 million and , $31.5 million were outstanding under this facility.

The required aggregate debt payments are as follows as of December 31, 2005:

Year	Principal Payments
Less than One Year	$46,474,814
One to Three Years	70,729,869
Three to Five Years	210,829
More than Five Years	-
Total	$117,415,512

The Fund entered into swap transactions to hedge its interest rate on the securitization debt facility with a total notional principal of $117.4 million and $29.6 million as of December 31, 2005 and 2004, respectively.  The fair value of the swap at December 31, 2005 and 2004 was $582.5 thousand and $20.2 thousand, respectively.  The effect of the interest rate swap transactions is to convert a variable rate obligation into a fixed rate on the contract notional value.  

As of December 31, 2005 and 2004, 8% and 22%, respectively of the Fund’s assets consisted of cash and cash equivalents. The Fund continued to invest its assets in venture loans during the year.  Amounts disbursed under the Fund’s loan commitments was $215.7 million for the year ended December 31, 2005. Net loan amounts outstanding after amortization was approximately $250.9 million as of December 31, 2005. Unexpired unfunded commitments as of December 31, 2005 were $166.7 million.  

Year Ended	Amount Disbursed	Principal Amortization	Balance Outstanding	Unexpired Unfunded Commitments
December 31, 2005	$307.2 million	$56.3 million	$250.9 million	$166.7 million
December 31, 2004	$91.5 million	$6.2 million	$85.4 million	$102.6 million

Because venture loans are privately negotiated transactions, investments in these assets are relatively illiquid.  It is the Fund’s experience that not all unfunded commitments will be used by borrowers.

The Fund seeks to meet the requirements to qualify for the special pass-through status available to RICs under the Internal Revenue Code, and thus to be relieved of federal income tax on that part of its net investment income and realized capital gains that it distributes to its shareholder.   To qualify as a RIC, the Fund must distribute to its shareholder for each taxable year at least 90% of its investment company taxable income (consisting generally of net investment income and net short-term capital gain) (“Distribution Requirement”).  To the extent that the terms of the Fund’s venture loans provide for the receipt by the Fund of additional interest at the end of the loan term or provide for the receipt by the Fund of a purchase price for the asset at the end of the loan term (“residual income”), the Fund would be required to accrue such residual income over the life of the loan, and to include such accrued income in its gross income for each taxable year even if it receives no portion of such residual income in that year.  Thus, in order to meet the Distribution Requirement and avoid payment of income taxes or an excise tax on undistributed income, the Fund may be required in a particular year to distribute as a dividend an amount in excess of the total amount of income it actually receives.  Those distributions will be made from the Fund's cash assets, from amounts received through amortization of loans  or from borrowed funds.

ITEM 7A - 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 valuation 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 manages its market 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 distributes all equity investments upon receipt.

 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 1% for the year ended December 31, 2005.

 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 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Quarterly Results

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

December 31, 2005 (Unaudited)

	Quarterly Information for the Three Months Ended
	March 31, 2005	June 30, 2005	September 30, 2005	December 31, 2005
Investment Income:
Interest on loans	$3,347,862	$4,565,778	$6,622,961	$7,338,421
Interest on short –term investments	64,915	196,436	179,633	997,983
Total investment income	3,412,777	4,762,214	6,802,594	8,336,404
Expenses:
Management fees	1,562,500	1,562,500	1,562,500	1,562,500
Interest expense	330,993	704,690	973,069	1,375,341
Banking and legal fees	446,238	299,124	304,135	455,369
Other operating expenses	48,492	33,684	57,290	38,808
Total expenses	2,388,223	2,599,998	2,896,994	3,432,018
Net investment income	1,024,554	2,162,216	3,905,600	4,904,386
Net change in unrealized gain (loss) from
hedging transactions	168,944	(182,941)	423,470	152,740
Net realized loss from investment transactions	-	-	-	-
Net increase in net assets resulting from operations	$1,193,498	$1,979,275	$4,329,070	$5,057,126
Amount per common share:
Net increase in net assets resulting from operations	$11.93	$19.79	$43.29	$50.57
Weighted average shares outstanding	100,000	100,000	100,000	100,000

December 31, 2004 (Unaudited)

	Quarterly Information for theThree Months Ended
	June 30, 2004*	September 30, 2004	December 31, 2004
Investment income:
Interest on loans	$62,168	$503,153	$1,647,324
Interest on short –term investments	-	24,528	260,317
Total investment income	62,168	527,681	1,907,641
Expenses:
Management fees	582,192	1,562,500	1,562,500
Interest expense	-	-	133,752
Banking and legal fees	44,807	72,778	375,983
Other operating expenses	134,172	48,506	46,243
Total expenses	761,171	1,683,784	2,118,478
Net investment loss	(699,003)	(1,156,103)	(210,837)
Net change in unrealized gain from hedging transactions	-	-	20,235
Net realized loss from investment transactions	-	-	-
Net decrease in net assets resulting from operations	$(699,003)	$(1,156,103)	$(190,602)
Amount per common share:
Net decrease in net assets resulting from operations	$(6.99)	$(11.56)	$(1.91)
Weighted average shares outstanding	100,000	100,000	100,000
* From commencement of operations, May 28, 2004 through June 30, 2004

* The Fund commenced operations on May 28, 2004.  No quarterly data is presented for periods prior to commencement of operations.

See Item 15 for audited financial statements.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9.A.  DISCLOSURE CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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) as of the end of the period covered by this annual report on Form 10-K. 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 fiscal quarter ended December 31, 2005.

ITEM 9.B.  OTHER INFORMATION

Not applicable.  

PART III

ITEM 10.

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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

Name and Position With Fund	Age	Occupation During Past Five Years
Ronald W. Swenson, Chairman, Director and Chief Executive Officer	61	Chairman, CEO, Director, and other positions for Westech Investment Advisors since 1994.
Salvador O. Gutierrez, Director and President	62	President, Chief Financial Officer and Director, and other positions for Westech Investment Advisors since 1994.
Brian R. Best, Vice President and Secretary	40	Vice President, Secretary and other positions for Westech Investment Advisors since 1997
Jay L. Cohan, Vice President	41	Vice President and other positions for Westech Investment Advisors since 1999
Martin D. Eng, Vice President, CFO, Treasurer, and Secretary	54	Vice President, CFO, Treasurer and Secretary for Westech Investment Advisors since 2005.  VP and Corporate Treasurer, PeopleSoft, Inc 2004-2005.  Assistant Treasurer, CNF Inc. 1998-2004.
Maurice C. Werdegar, Vice President	41	Vice President and other positions for Westech Investment Advisors since 2001, Venture Partner, Outlook Ventures 2000 – 2001; CIO and Fund Manager, MetaMarkets.com 2000

The information required by this item concerning the directors of the Fund and Section 16(a) compliance is contained in the Fund’s Proxy Statement filed in connection with the Annual Meeting of Shareholders to be held on May 10, 2006 (“Proxy Statement”) under the captions “Proposal 1 -- To Elect Seven Directors of the Fund” and “Section 16(a) Beneficial Ownership Reporting Compliance” and is incorporated herein by reference.

The Fund has adopted a Code of Ethics that is applicable to all of its officers.  A free copy of the Code of Ethics may be requested by contacting the Chief Financial Officer of the Fund.  

ITEM 11.

EXECUTIVE COMPENSATION

The information required by this item is contained in the Fund’s Proxy Statement under the caption “Proposal 1 -- To Elect Seven Directors of the Fund” and is incorporated herein by reference.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

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

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is contained in the Fund’s Proxy Statement under the captions: “Other Information -- Managers” and is incorporated herein by reference.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is contained in the Fund’s Proxy Statement under the captions: “Other Information – Independent Auditors.”

PART IV.

ITEM 15.

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

(a)

1.

Index to Financial Statements and Financial Statement Schedules

Report of Independent Registered Public Accounting Firm

Statements of Assets and Liabilities as of December 31, 2005 and 2004

Statements of Operations for the Years ended December 31, 2005 and 2004, and the Period ended December 31, 2003

Statements of Changes in Net Assets for the Years ended December 31, 2005 and 2004 and the Period ended December 31, 2003

Statements of Cash Flows for the Years ended December 31, 2005 and 2004 and the Period ended December 31, 2003

Notes to Financial Statements

Financial Statement Schedules for the Years Ended December 31, 2005 and 2004 and the period ended December 31, 2003 included in Item 15(a):

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

(a)

2.

Exhibits

Exhibit

Exhibit Title

3(i)

Articles of Incorporation of the Fund filed with the Maryland Secretary of State on 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.

3(ii)

Articles of Amendment and Restatement 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(iii)

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.

10.1

Form of Custodian Agreement between the Fund and Union Bank of California Incorporated by reference to the Fund’s Registration Statement on Form 10 filed with the Securities and Exchange Commission on December 10, 2003.

10.2

Form of Intercreditor Agreement between the Fund and Venture Lending & Leasing, Inc., Incorporated by reference to the Fund’s Registration Statement on Form 10 filed with the Securities and Exchange Commission on December 10, 2003.

10.3

Form of Management Agreement between the Fund, the Manager and the Adviser to the Manager, 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 The Sarbanes-Oxley Act of 2002

(b)

Reports on Form 8-K

On November 22, 2005 the Fund filed a report on Form 8-K with the Commission to disclose the increase of a debt facility for the Fund.  This was the only report on Form 8-K that was filed by the Fund during the fiscal quarter ended December 31, 2005.  

Signatures

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

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:   February 27, 2006

Date:     February 27, 2006

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

NAME

TITLE

DATE

By:

/S/Bernard J. Angelo

Director

February 27, 2006

Bernard J. Angelo

By:

/S/John F. Cogan

Director

February 27, 2006

John F. Cogan

By:

/S/J. Michael Egan

Director

February 27, 2006

J. Michael Egan

By:

/S/John Glynn

Director

February 27, 2006

John Glynn

By:

/S/Salvador O. Gutierrez

President & Director

February 27, 2006

Salvador O. Gutierrez

By:

/S/Michael G. McCaffery

Director

February 27, 2006

Michael G. McCaffery

By:

/S/Ronald W. Swenson

CEO & Director

February 27, 2006

Ronald W. Swenson

20

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of

Venture Lending and Leasing IV, Inc.

We have audited the accompanying statements of assets and liabilities of Venture Lending and Leasing IV, Inc. (the “Fund”) as of December 31, 2005 and 2004, and the related statements of operations, changes in net assets, and cash flows for each of the two years in the period ended December 31, 2005 and for the period from October 31, 2003 (date of formation) to December 31, 2003.  These financial statements are the responsibility of the Fund’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  Our procedures included confirmation of loans as of December 31, 2005, by corresponding with the borrowers or by other appropriate auditing procedures where replies from borrowers were not received.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the financial position of Venture Lending and Leasing IV, Inc. as of December 31, 2005 and 2004, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2005 and for the period from October 31, 2003 (date of formation) to December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.  

/S/Deloitte & Touche, LLP

San Francisco, CA

February 28, 2006

21

VENTURE LENDING & LEASING IV, INC.

Statements of Assets and Liabilities

As of December 31, 2005 and 2004

	December 31, 2005	December 31, 2004
ASSETS
Loans at estimated fair value
(Cost of $250,865,135 and $85,358,153)	$250,865,135	$85,358,153
Cash and cash equivalents	20,798,146	25,031,477
Other assets	4,405,964	2,109,855
Total assets	276,069,245	112,499,485
LIABILITIES
Borrowings under debt facility	117,415,512	31,450,194
Accrued management fees	1,562,500	1,562,500
Accounts payable and other accrued liabilities	1,342,820	637,185
Total liabilities	120,320,832	33,649,879
Net assets	$155,748,413	$78,849,606
Analysis of Net Assets:
Capital paid in on shares of capital stock	$155,525,000	$82,525,000
Tax return of capital distributions	(1,629,686)	(1,629,686)
Distributable earnings (accumulated losses)	1,853,099	(2,045,708)
Net assets (equivalent to $1,557.48 and $788.50 per share based on
100,000 shares of capital stock outstanding - See Note 7)	$155,748,413	$78,849,606

See notes to financial statements.

22

VENTURE LENDING & LEASING IV, INC.

Statements of Operations

For the Years Ended December 31, 2005 and 2004 and the Period Ended December 31, 2003*

	For the Year Ended	For the Year Ended	For the Period Ended
	December 31, 2005	December 31, 2004	December 31, 2003	*
INVESTMENT INCOME:
Interest on loans	$21,875,022	$2,212,645	$-
Interest on short-term investments
and other income	1,438,967	284,845	-
Total investment income	23,313,989	2,497,490	-
EXPENSES:
Management fees	6,250,000	3,707,192	-
Interest expense	3,384,093	133,752	-
Banking and legal fees	1,504,866	493,568	-
Organizational costs	-	109,153	-
Other operating expenses	178,274	119,768	-
Total expenses	11,317,233	4,563,433	-
Net investment income (loss)	11,996,756	(2,065,943)	-
Net change in unrealized gain from hedging activities	562,213	20,235	-
Net increase (decrease) in net assets
resulting from operations	$12,558,969	$(2,045,708)	$-
Net increase (decrease) in net assets
resulting from operations per share	$125.58	$(20.46)	$-
Weighted average shares outstanding	100,000	100,000	100,000
*  From formation, October 31, 2003 through December 31, 2003
See notes to financial statements.

23

VENTURE LENDING & LEASING IV, INC.

Statement of Changes in Net Assets

For the Years Ended December 31, 2005 and 2004 and the Period Ended December 31, 2003*

	For the Year Ended	For the Year Ended	For the Period Ended
	December 31, 2005	December 31, 2004	December 31, 2003	*
Increase (decrease) in net assets from operations
Net investment income (loss)	$11,996,756	$(2,065,943)	$-
Unrealized gain from hedging activities	562,213	20,235	-
Net increase (decrease) in net assets resulting
from operations	12,558,969	(2,045,708)	-
Distributions of income to shareholder	(8,660,162)
Tax return of capital to shareholder	-	(1,629,686)	-
Capital share transactions	73,000,000	82,500,000	25,000
Total increase	76,898,807	78,824,606	25,000
Net assets
Beginning of year	78,849,606	25,000	-
End of year	$155,748,413	$78,849,606	$25,000	`
*  From formation, October 31, 2003 through December 31, 2003

See notes to financial statements.

24

VENTURE LENDING & LEASING IV, INC.

Statements of Cash Flows

For the Years Ended December 31, 2005 and 2004 and the Period Ending December 31, 2003*

	For the Year Ended December 31, 2005		For the Year Ended December 31, 2004	For the Period Ended December 31, 2003	*
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase (decrease) in net assets resulting from operations	$12,558,969		$(2,045,708)	$-
Adjustments to reconcile net loss to net cash used in operating activities:
Net change in unrealized gain from hedging activities	(562,213)		(20,235)	-
Amortization of deferred costs	223,835		55,188	-
Net increase in other assets	(1,887,646)		(783,508)	-
Net increase in accounts payable, accrued liabilities, and accrued management fees	705,635		2,199,685	-
Acquisition of loans	(215,673,565)		(91,532,425)	-
Principal payments on loans	50,166,583		6,174,272	-
Acquisition of equity securities	(3,716,232)		(1,466,250)	-
Net cash used in operating activities	(158,184,634)	-	(87,418,981)	-
CASH FLOWS FROM FINANCING ACTIVITIES:
Deemed distribution to shareholder	(43,930)		(163,436)	-
Cash distribution to shareholder	(4,900,000)		-	-
Borrowings under debt facility	85,965,318		31,450,194	-
Payment of bank facility fees, costs, and other prepayments	(70,085)		(1,361,300)	-
Cash contributions from shareholder	73,000,000		82,500,000	25,000
Net cash provided by financing activities	153,951,303		112,425,458	25,000
Net increase (decrease) in cash and cash equivalents	(4,233,331)		25,006,477	25,000
CASH AND CASH EQUIVALENTS:
Beginning of year	25,031,477		25,000	-
End of year	$20,798,146		$25,031,477	$25,000
CASH PAID DURING THE YEAR FOR:
Interest	$3,092,601		$81,506	$-
NON-CASH ACTIVITIES:
Distributions of investment securities to shareholder	$3,716,232		$1,466,250	$-
*  From formation, October 31, 2003 through December 31, 2003

See notes to financial statements

25

VENTURE LENDING & LEASING IV, INC.

Notes to Financial Statements

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.  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.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Accounting

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

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

Valuation of Loans

Venture loans are privately negotiated transactions, and there is no established trading market in which such loans can be sold. Investments in loans are valued at their original cost less amortization of principal unless, pursuant to procedures established by the Fund’s Board of Directors, Westech Investment Advisers, Inc., the Fund’s Manager, determines that amortized cost does not represent fair value, in which case loans will be adjusted to their fair value as determined by the Manager.  Interest income on loans is recognized using the effective interest method.

Warrants and Stock

Warrants and stock that are received in connection with loan transactions generally will be assigned a fair value at the time of acquisition. Warrants are then distributed by the Fund to the Company at the assigned value.

Nonaccrual Loans

The Fund’s policy is to place a loan on nonaccrual status when the loan stops performing and management deems that it is unlikely that the loan will return to performing status.  When a loan is placed on nonaccrual status, all interest previously accrued but not collected is reversed for the quarter in which the loan was placed on nonaccrual status. Any uncollected interest related to quarters prior to when the loan was placed on nonaccrual status is added to the principal balance, and the aggregate balance of the principal and interest is evaluated in accordance with the policy for valuation of loans.

As of December 31, 2005 and 2004, loans in the amount of $3.0 million and $0, respectively, have been classified as nonaccrual.

Commitment Fees

Unearned income and commitment fees on loans are recognized using the effective-interest method over the term of the loan. Commitment fees are carried as liabilities when received for commitments upon which no draws have been made. When the first draw is made, the fee is treated as unearned income and is recognized as described above.  If a draw is never made, the commitment fee less any applicable legal costs becomes recognized as other income after the commitment expires.

Interest Rate Swaps

The Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS No. 138, establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. For investment companies such as the Fund, SFAS No. 133 requires that changes in the derivative’s fair value be recognized currently in earnings.

26

The Fund enters into interest rate swap transactions to hedge its interest rate on its borrowings under the debt facility. 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 hedging activities.  

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.

Tax Status

As long as the Fund qualifies as a Regulated Investment Company (“RIC”), it will not pay any federal or state corporate income tax on income that is distributed to its shareholder (pass-through status). Should the Fund lose its qualification as a RIC, it could be taxed as an ordinary corporation on its taxable income for that year (even if that income is distributed to its shareholder), and all distributions out of its earnings and profits will be taxable to its shareholder as ordinary income.

3.

 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 December 31, 2005, the Fund's investments in loans are to companies based within the United States and are diversified among borrowers in the industries shown below.  The percentage of net assets (shareholder's equity) 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 years ended December 31, 2005 and 2004, the weighted average interest rate on performing loans was 13.8% and 12.4%, 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 the 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.  

27

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

	Percentage of	Estimated Fair	Par Value	Final
Borrower	Net Assets	Value 12/31/05	12/31/05	Maturity 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

28

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

29

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

30

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	10/1/08
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 $3.0 million and a fair value of $3.0 million have been classified as non-accrual.  These loans have been accelerated from original maturity and are due in their entirety.

Loans as of December 31, 2004 are in non-affiliates and consist of the following:

31

	Percentage of	Estimated Fair	Par Value	Final
Borrower	Net Assets	Value 12/31/04	12/31/04	Maturity Date

Biotechnology
Athersys		$5,505,428	$5,505,428	6/1/08
Miikana		1,879,067	1,879,067	10/1/07
Raven Biotechnologies		4,826,758	4,826,758	6/1/08
Subtotal:	15.5%	$12,211,253	$12,211,253
Carrier Networking
Arroyo Video Solutions		$473,567	$473,567	1/1/08
Subtotal:	0.6%	$473,567	$473,567
Computers & Storage
Kashya		$943,407	$943,407	1/1/08
Subtotal:	1.2%	$943,407	$943,407
Internet
Cyclone Commerce		$926,281	$926,281	9/1/07
SciQuest, Inc.		2,947,884	2,947,884	9/1/07
Subtotal:	4.9%	$3,874,165	$3,874,165
Medical Devices
Ample Medical		$727,576	$727,576	9/1/07
Aspire Medical		108,044	108,044	6/1/08
Cardiva Medical		954,290	954,290	10/1/07
LipoScience		3,957,445	3,957,445	10/1/07
Micromed Technology		2,144,646	2,144,646	3/1/07
SenoRx		2,462,500	2,462,500	10/1/07
Vascular Architects		4,723,680	4,723,680	6/1/07
Volcano Therapeutics		1,356,061	1,356,061	10/1/07
Subtotal:	20.8%	$16,434,242	$16,434,242
Other Healthcare
Skylight Systems		$1,293,327	$1,293,327	9/1/07
Subtotal:	1.6%	$1,293,327	$1,293,327
Other Technology
EoPlex		$585,025	$585,025	9/1/07
Nanoconduction		232,748	232,748	12/1/07
Triformix		1,730,784	1,730,784	8/1/07
Subtotal:	3.2%	$2,548,557	$2,548,557
Security
Counterpane Internet Security		$1,620,694	$1,620,694	11/1/07
Subtotal:	2.1%	$1,620,694	$1,620,694

32

Semiconductors & Equipment
Cswitch		$129,347	$129,347	11/1/07
Discera		567,805	567,805	8/1/07
Fyre Storm		1,193,791	1,193,791	10/1/07
InvenSense		193,345	193,345	12/1/07
Luxtera		573,107	573,107	12/1/07
Molecular Imprints		3,749,544	3,749,544	11/1/07
Raza Microelectronics		4,633,720	4,633,720	10/1/07
Universal Network Machines		3,964,080	3,964,080	5/1/08
Subtotal:	19.0%	$15,004,739	$15,004,739
Software
Accruent		$282,574	$282,574	12/1/07
Aceva		2,945,471	2,945,471	5/1/07
Adomo		247,655	247,655	4/1/08
Arena Solutions		2,452,352	2,452,352	9/1/07
Biz360		1,960,007	1,960,007	10/1/07
Business Engine		4,001,961	4,001,961	5/1/08
CoWare		1,280,552	1,280,552	12/1/07
Digital Evolution		2,695,056	2,695,056	9/1/07
Trados		2,428,380	2,428,380	9/1/07
Subtotal:	23.2%	$18,294,008	$18,294,008
Technology Services
EchoPass		$1,319,427	$1,319,427	9/1/07
Neutral Tandem		5,811,962	5,811,962	3/1/08
Subtotal:	9.0%	$7,131,389	$7,131,389
Wireless
IXI Mobile		$2,631,772	$2,631,772	4/1/07
Wildseed		2,897,033	2,897,033	10/1/07
Subtotal:	7.0%	$5,528,805	$5,528,805
Total:  (Cost of $85,358,153)	108.3%	$85,358,153	$85,358,153

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 December 31, 2005 and 2004, the Fund had unfunded commitments to borrowers of $166.7 million and $102.6 million, respectively that remained unexpired.  

4.

LONG-TERM DEBT FACILITY

As of December 31, 2005 and 2004, the Fund had in place a securitization debt facility of $200.0 million and $125.0 million, respectively to finance the acquisition of asset-based loans.  As of December 31, 2005 and 2004, the Fund had borrowed $117.4 million and $31.5 million, respectively, under this facility. Loans can be drawn on the credit facility at a minimum of $5 million and in $1 million increments in excess thereof. The interest rate on this facility is the “Commercial Paper Rate” plus 0.65 percent, which at December 31, 2005, was 5.02 percent. The facility is due to expire in November 2010.

33

Borrowings under this facility are collateralized by receivables under loans advanced by the Fund with assignment to the financial institution, plus other assets of the Fund. The amortization schedule for each borrowing under the facility is expected to correspond to the amortization of the loans supporting each borrowing. The Fund pays a commitment fee of 0.30 percent (annual fee paid monthly) based on the total commitment related to the facility.

The Fund has taken out an insurance policy insuring the repayment of the loans under this facility to the banks.  The Fund pays a monthly fee based on the used and unused portion of the facility.   As of December 31, 2004 there was an annual minimum premium of $675,000 for this policy.  As of December 31, 2004 the Fund has accrued $83,355 in expenses toward this minimum fee.  In November 2005, the Fund renegotiated the facility and the fee is now based on the facility size with no minimum payment due.

Bank fees of $1,074,250 were incurred in connection with initially procuring the facility.  An additional $50,000 was incurred to increase the facility size in 2005.  Legal costs of $287,050 were incurred in negotiating the facility.  Both the bank fees and the legal costs have been capitalized and are being amortized on a straight line basis over the life of the facility (November 2010).

The required aggregate debt payments for the remaining four years of the current outstanding balance of loans are as follows:

Year	Principal            Payments
2006	$46,474,814
2007	50,475,415
2008	20,254,454
2009	210,829
	$117,415,512

5.

INTEREST RATE SWAPS

At December 31, 2005 and 2004, the Fund had an interest rate swap transaction with a notional principal amount of $117.4 million and $29.6 million, respectively, to convert floating rate liabilities to fixed rates. The Fund pays a fixed rate of 4.31 percent and receives from the counterparty a floating 30-day commercial paper rate. Payments are made monthly and terminate on May 12, 2008 The fair value of swap transactions at December 31, 2005 and 2004 was $582,848 and $20,235, respectively and is included in other assets of the Fund.

6.

 EARNINGS PER SHARE

Basic earnings per share are computed by dividing net income (loss) by the weighted average common shares outstanding.  Diluted earnings (loss) per share are computed by dividing net income (loss) 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 (loss) per share are the same.

7.  

CAPITAL STOCK

As of December 31, 2005 and December 31, 2004, 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 December 31, 2005 and December 31, 2004 was $162.5 million and $87.5 million, respectively, of which $155.5 million and $82.5 million, respectively, was contributed to the Fund.

For the years ended December 31, 2005 and 2004, distributions of $8,660,162 and $1,629,686, respectively were made to the Fund’s shareholder, and were comprised of the following:  

	2005	2004
Cash distributions	$4,900,000	$-
Deemed distributions	43,930	163,436
Distributions of securities	3,716,232	1,466,250
Total distributions to shareholder	$8,660,162	$1,629,686

34

At December 31, 2005 and 2004, distributable earnings (accumulated losses) includes unrealized appreciation of $582,848 and $20,235, respectively.

8.

MANAGEMENT

Westech Investment Advisors, Inc. (“Manager”) serves as the investment manager for the Fund. As compensation for its services to the Fund, the Manager receives a management fee (“Management Fee”) computed and paid at the end of each quarter at an annual rate of 2.5 percent of the Company’s committed equity capital (regardless of when or if the capital is called) as of the last day of each fiscal quarter in a two-year period commencing with the first capital closing, which took place on May 28, 2004. Following this two-year period, Management Fees are calculated and paid at the end of each quarter at an annual rate of 2.5 percent of the Fund’s total assets (including amounts derived from borrowed funds) as of the last day of each quarter.  Management fees of $6,250,000 and $3,707,192 were recognized as expenses for the year ended December 31, 2005 and 2004, respectively.

Certain officers and directors of the Fund also serve as officers and directors of Westech Investment Advisors, Inc..  

9.

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 years ended December 31, 2005 and 2004 and the period ended December 31, 2003.  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 Fund did not commence operations until May 28, 2004.

The ratios of expenses and net investment income to average net assets, calculated below 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 period presented.

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

	For the Year Ended December 31, 2005	For the Year Ended December 31, 2004	For the Period Ended December 31, 2003	*
Total return	12.53%	(16.70%)	0.00%
Per share amounts:
Net asset value, beginning of period	$788.50	$0.25	$0.00
Net investment income (loss)	119.97	(20.66)	-
Net change in unrealized gain	5.61	0.21	-
Total income	125.58	(20.45)	-
Capital contributions	730.00	825.00	0.25
Income distributions to shareholder	(86.60)	-	-
Tax return of capital distributions
to shareholder	-	(16.30)	-

35

Net asset value, end of period	$1,557.48	$788.50	$0.25
Net assets, end of period	$155,748,413	$78,849,606	$25,000
Ratios to average net assets:
Expenses	11.31%	23.73%	0.00%
Net investment income (loss)	11.99%	(10.74%)	0.00%
*  From formation, October 31, 2003 through December 31, 2003

36

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 annual report on Form 10-K 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: February 27, 2006

/S/ Martin D. Eng

Martin D. Eng

Chief Financial Officer

37

                      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 annual report on Form 10-K 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: February 27, 2006

/S/ Ronald W. Swenson

Ronald W. Swenson

Chief Executive Officer

38

                     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 Annual Report of Venture Lending & Leasing IV, Inc. (the "Fund") on Form 10-K for the year ending December 31, 2005 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
February 27, 2006

39

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 Annual Report of Venture Lending & Leasing IV, Inc. (the "Fund") on Form 10-K for the year ending December 31, 2005 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
February 27, 2006

40