Venture Lending & Leasing VI, Inc. - FORM 10-Q

Attached files

file	filename
EX-31.1 - VLL6INC 10Q 06-30-14 EXHIBIT 31.1 - Venture Lending & Leasing VI, Inc.	vll603312014ex31110qa.htm
EX-32.1 - VLL6INC 10Q 06-30-14 EXHIBIT 32.1 - Venture Lending & Leasing VI, Inc.	vll603312014ex32110qa.htm
EX-31.2 - VLL6INC 10Q 06-30-14 EXHIBIT 31.2 - Venture Lending & Leasing VI, Inc.	vll603312014ex31210qa.htm
EX-32.2 - VLL6INC 10Q 06-30-14 EXHIBIT 32.2 - Venture Lending & Leasing VI, Inc.	vll603312014ex32210qa.htm

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2014



[ ]	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 814-00799

Venture Lending & Leasing VI, Inc.

(Exact Name of Registrant as specified in its charter)



Maryland	27-1682622
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

104 La Mesa Drive, Suite 102	Portola Valley, CA 94028
(Address of principal executive offices)	(Zip Code)

(650) 234-4300

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [ ]

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



Large accelerated filer [ ]	Accelerated filer [ ]	Non-accelerated filer [x]	Smaller reporting company [ ]

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

Yes [ ] No [x]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:



Class		Outstanding as of August 8, 2014
Common Stock, $.001 par value		100,000

VENTURE LENDING & LEASING VI, INC.

INDEX



PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Statements of Assets and Liabilities (Unaudited)
	As of June 30, 2014 and December 31, 2013

	Condensed Statements of Operations (Unaudited)
	For the three and six months ended June 30, 2014 and 2013

	Condensed Statements of Changes in Net Assets (Unaudited)
	For the six months ended June 30, 2014 and 2013

	Condensed Statements of Cash Flows (Unaudited)
	For the six months ended June 30, 2014 and 2013

	Notes to Condensed Financial Statements (Unaudited)

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Item 4.	Controls and Procedures

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings

Item 1A.	Risk Factors

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

Item 3.	Defaults Upon Senior Securities

Item 4.	Mine Safety Issues

Item 5.	Other Information

Item 6.	Exhibits

SIGNATURES

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

VENTURE LENDING & LEASING VI, INC.

CONDENSED STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)

AS OF JUNE 30, 2014 AND DECEMBER 31, 2013



	June 30, 2014			December 31, 2013
ASSETS
Loans, at estimated fair value
(Cost of $283,109,656 and $305,158,484)	$	270,933,126		$	293,800,885
Cash and cash equivalents	18,093,807			35,377,189
Other assets	4,221,469			4,458,893

Total assets	293,248,402			333,636,967

LIABILITIES
Borrowings under debt facility	121,500,000			134,200,000
Accrued management fees	1,832,834			2,085,231
Accounts payable and other accrued liabilities	1,935,716			2,985,879

Total liabilities	125,268,550			139,271,110

NET ASSETS	$	167,979,852		$	194,365,857

Analysis of Net Assets:

Capital paid in on shares of capital stock	$	241,525,000		$	241,525,000
Return of capital distributions	(58,159,316		)	(32,040,189		)
Accumulated deficit	(15,385,832		)	(15,118,954		)
Net assets (equivalent to $1,679.80 and $1,943.66 per share based on 100,000 shares of capital stock outstanding - See Note 5)	$	167,979,852		$	194,365,857

See notes to condensed financial statements.

VENTURE LENDING & LEASING VI, INC.

CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013



	For the Three Months Ended June 30, 2014			For the Three Months Ended June 30, 2013			For the Six Months Ended June 30, 2014			For the Six Months Ended June 30, 2013


INVESTMENT INCOME:
Interest on loans	$	12,312,501		$	14,955,616		$	26,090,167		$	29,180,433
Other interest and other income	69,239			15,522			358,255			98,212
Total investment income	12,381,740			14,971,138			26,448,422			29,278,645

EXPENSES:
Management fees	1,832,803			2,173,816			3,802,550			4,256,927
Interest expense	1,084,899			1,234,192			2,185,440			2,404,012
Banking and professional fees	51,069			164,689			155,377			341,277
Other operating expenses	22,019			25,502			71,783			53,059
Total expenses	2,990,790			3,598,199			6,215,150			7,055,275
Net investment income	9,390,950			11,372,939			20,233,272			22,223,370

Net realized loss from investments	(680,657		)	(931,926		)	(1,989,798		)	(1,774,422		)
Net change in unrealized gain (loss) from investments	(2,005,073		)	(1,591,000		)	(818,932		)	(4,590,575		)
Net realized and change in unrealized gain (loss) from hedging activities	(5,324		)	(29,675		)	(48,433		)	(13,261		)
Net realized and change in unrealized gain (loss) from investments and hedging activities	(2,691,054		)	(2,552,601		)	(2,857,163		)	(6,378,258		)

Net increase in net assets resulting from operations	$	6,699,896		$	8,820,338		$	17,376,109		$	15,845,112
Net increase in net assets resulting from operations per share	$	67.00		$	88.20		$	173.76		$	158.45
Weighted average shares outstanding	100,000			100,000			100,000			100,000

See notes to condensed financial statements.

VENTURE LENDING & LEASING VI, INC.

CONDENSED STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013



	For the Six Months Ended June 30, 2014			For the Six Months Ended June 30, 2013
Net increase in net assets resulting from operations:
Net investment income	$	20,233,272		$	22,223,370
Net realized loss from investments	(1,989,798		)	(1,774,422		)
Net change in unrealized gain (loss) from investments	(818,932		)	(4,590,575		)
Net realized and change in unrealized gain (loss) from hedging activities	(48,433		)	(13,261		)

Net increase in net assets resulting from operations	17,376,109			15,845,112

Distributions of income to shareholder	(17,642,988		)	(19,909,954		)
Return of capital to shareholder	(26,119,126		)	(3,681,809		)
Capital contributions	—			8,000,000
Decrease in capital transactions	(43,762,114		)	(15,591,763		)

Total increase (decrease)	(26,386,005		)	253,349

Net assets
Beginning of period	194,365,857			195,928,871

End of period	$	167,979,852		$	196,182,220

See notes to condensed financial statements.

VENTURE LENDING & LEASING VI, INC.

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013



	For the Six Months Ended June 30, 2014			For the Six Months Ended June 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations	$	17,376,109		$	15,845,112
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities:
Net realized loss from investments	1,989,798			1,774,422
Net change in unrealized (gain) loss from investments	818,932			4,590,575
Net change in unrealized (gain) loss from hedging activities	(552,053		)	(525,733		)

Receipt of equity securities as payment for waiver	(327,440		)	—
Amortization of deferred costs related to borrowing facility	245,899			245,899
Net increase in other assets	(8,475		)	(332,831		)
Net increase (decrease) in accounts payable, other accrued liabilities, and accrued management fees	(750,507		)	1,238,069
Origination of loans	(62,065,000		)	(92,786,159		)
Principal payments on loans	81,030,422			79,196,145
Acquisition of equity securities	(4,541,067		)	(5,720,373		)
Net cash provided by operating activities	33,216,618			3,525,126
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distribution to shareholder	(37,800,000		)	(16,900,000		)
Contribution from shareholder	—			8,000,000
Borrowings under debt facility	—			11,800,000
Repayment of debt facility	(12,700,000		)	(400,000		)

Net cash provided by (used in) financing activities	(50,500,000		)	2,500,000
Net increase (decrease) in cash and cash equivalents	(17,283,382		)	6,025,126
CASH AND CASH EQUIVALENTS:
Beginning of period	35,377,189			16,244,714
End of period	$	18,093,807		$	22,269,840
SUPPLEMENTAL DISCLOSURES:
CASH PAID DURING THE PERIOD:
Interest	$	2,027,128		$	2,103,853
Settlement under interest rate swap agreement	$	600,487		$	538,994
NON-CASH ACTIVITIES:
Distributions of equity securities to shareholder	$	5,962,114		$	6,691,763
Receipt of equity securities as repayment of loans	$	1,093,608		$	971,390

See notes to condensed financial statements.

VENTURE LENDING & LEASING VI, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)


1.	ORGANIZATION AND OPERATIONS OF THE FUND

Venture Lending & Leasing VI, Inc. (the “Fund”), was incorporated in Maryland on January 11, 2010 as a nondiversified closed-end management investment company electing status as a business development company (“BDC”) under the Investment Company Act of 1940, as amended ("1940 Act") and is managed by Westech Investment Advisors, LLC, formerly known as Westech Investment Advisors, Inc. (“Manager” or “Management”). The Fund will be dissolved on December 31, 2020 unless an election is made to dissolve earlier by the Board of Directors of the Fund (the “Board”). One hundred percent of the stock of the Fund is held by Venture Lending & Leasing VI, LLC (the “Company”). Prior to commencing its operations on June 29, 2010, 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 January 2010. This issuance of stock was a requirement in order to apply for a finance lender's license from the California Commissioner of Corporations, which was obtained on April 13, 2010.

In the Manager's opinion, the accompanying financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of financial position and results of operations for interim periods. Certain information and note disclosures normally included in audited annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted; however, the Fund believes that the disclosures made are adequate to make the information presented not misleading. The interim results for the six months ended June 30, 2014 are not necessarily indicative of what the results would be for a full year. It is suggested that these financial statements be read in conjunction with the financial statements and the notes included in the Fund's Annual Report on Form 10-K for the year ended December 31, 2013.


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 and money market mutual funds with maturities of 90 days or less. Money market mutual funds held as cash equivalents are valued at their most recently traded net asset value.

Interest Income

Interest income on loans is recognized using the effective interest method including amounts from the amortization of discounts attributable to equity securities received as part of the loan transaction. Additionally, fees received as part of the transaction are added to the loan discount and amortized over the life of the loan.

Valuation Procedures

The Fund accounts for loans at fair value in accordance with the “Valuation Methods” below. All valuations are determined under the direction of the Manager, in accordance with these methods.

The Fund's loans 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 submits to the Board a “Valuation Report,” which details the rationale for the valuation of investments.

As of June 30, 2014 and December 31, 2013, the financial statements include nonmarketable investments of $270.9 million and $293.8 million, respectively (or approximately 92% and 88% of total assets, respectively), with fair values determined by the Manager in the absence of readily determinable market values. Because of the illiquidity of the Fund's investments, a substantial portion of its assets are carried at fair value as determined in good faith by the Manager in accordance with the Fund's policy as approved by the Board. Because of the inherent uncertainty of these valuations, estimated fair values of such investments may differ significantly from the values that would have been used had a ready market for the securities existed, and the differences could be material. Below is the information used by the Manager in making these estimates.

Loans

The Fund defines fair value as the price that would be received to sell an asset or paid to lower a liability in an orderly transaction between market participants at the measurement date. There is no secondary market for the loans made by the Fund to borrowers, hence Management determines fair value based on hypothetical markets. Venture loans are generally held to maturity and are recorded at estimated fair value. The determination of fair value is based on a number of factors including the amount for which an investment could be exchanged in a current sale, which assumes an orderly disposition over a reasonable period other than in a forced sale. Management considers the fact that no ready market exists for substantially all of the investments held by the Fund. Management determines whether to adjust the estimated fair value of a loan based on a number of 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 considers liquidation analysis and is determined based upon a credit analysis of the borrower and 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. Management has evaluated these factors and has concluded that the effect of deterioration in the quality of the underlying collateral, increase in the size of the loan and increase in the estimated time to recovery would have the effect of lowering the value of the current portfolio of loans.

Non-accrual Loans

The Fund's policy is to place a loan on non-accrual 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 non-accrual status, all interest previously accrued but not collected is reversed for the quarter in which the loan was placed on non-accrual status. Any uncollected interest related to quarters prior to when the loan was placed on non-accrual 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 in determining Management's best estimate of fair value. Interest received by the Fund on non-accrual loans will be recorded on a cash basis.

If a borrower of a non-accrual loan resumes making regular payments and Management deems that the borrower has sufficient resources that it is unlikely the loan will return to non-accrual status, the loan is re-classified back to accrual or performing status. Interest that would have been accrued during the non-accrual status will be added back to the remaining payment schedule, and thus changing the effective interest rate.

As of June 30, 2014, loans with a cost basis of $16.7 million and a fair value of $7.7 million, have been classified as non-accrual. As of December 31, 2013, loans with a cost basis of $21.0 million and a fair value of $9.9 million, have been classified as non-accrual.

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, unless a market price is available. These securities are then distributed by the Fund to the Company at the assigned value. Warrants are valued based on a modified Black-Scholes option pricing model which takes into account underlying stock value, expected term, volatility, and risk-free interest rate, among other factors.

Underlying asset value is estimated based on information available, including information regarding recent rounds of funding of the portfolio company, or the publicly-quoted stock price at the end of the financial reporting period for warrants for comparable publicly-quoted securities.

Volatility, or the amount of uncertainty or risk about the size of the changes in the warrant price, is based on an index of publicly traded companies grouped by industry and which are similar in nature to the underlying portfolio companies issuing the warrant (“Industry Index”). The volatility assumption for each Industry Index is based on the average volatility for individual public companies within the portfolio company's industry for a period of time approximating the expected life of the warrants. A hypothetical increase in the volatility calculated from the indexes used in the modified Black-Scholes option pricing model would have the effect of increasing the value of the warrants.

The remaining expected lives of warrants are based on historical experience of the average life of the warrants, as warrants are often exercised in the event of acquisitions, mergers, or initial public offerings and terminated due to events such as bankruptcies, restructuring activities, or additional financings. These events cause the expected term to be less than the remaining contractual term of the warrants. The remaining expected lives of warrants may be adjusted from time to time to reflect new facts and circumstances. For the six months ended June 30, 2014, the Fund assumed the average duration of a warrant is 3 years. A hypothetical increase in the estimated initial term of the warrants used in the modified Black-Scholes option pricing model would have the effect of increasing the value of the warrants.

The risk-free interest rate is derived from the constant maturity tables issued by the U.S. Treasury Department. The effect of a hypothetical increase in the estimated risk-free rate used in the modified Black-Scholes option pricing model would have the effect of increasing the value of the warrants.

On an annual basis, the Fund engages an independent valuation company to provide valuation assistance. This company evaluates the Fund's valuation methodology and assumptions for reasonableness from the perspective of a market participant. The independent third party also calculates several of the inputs used such as volatility and risk free rate. Upon the receipt of such data, a sample test is performed to ensure the accuracy of the third party calculations and that the source of data is reliable and consistent with the way in which the calculations were made in prior periods. Such inputs are entered into the database with a second review to ensure the accuracy of the input information. All calculations of warrant values are performed by one employee and reviewed by a second party. The inputs of the modified Black-Scholes option pricing model are reevaluated every quarter.

Other Assets and Liabilities

Other assets include costs incurred in conjunction with borrowings under the Fund's debt facility and are stated at initial cost. The costs are amortized over the term of the facility.

As of June 30, 2014 and December 31, 2013, the fair values of Other assets and liabilities are estimated at their carrying values because of the short-term nature of these assets or liabilities.

As of June 30, 2014 and December 31, 2013, based on borrowing rates available to the Fund, which are Level 2 inputs, the estimated fair values of the borrowings under the debt facility were $121.5 million and $134.2 million, respectively.

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 forfeited commitment fee less any applicable legal costs becomes recognized as other income after the commitment expires.

Interest Rate Swap Agreements

Interest rate swaps are primarily valued on the basis of quotes obtained from brokers and dealers and adjusted for counterparty risk. The valuation of the swap agreement also considers the future expected interest rates on the notional principal balance remaining which is comparable to what a prospective acquirer would pay on the measurement date. Valuation pricing models consider inputs such as forward rates, anticipated interest rate volatility relating to the reference rate, as well as time value and other factors underlying swap instruments. The contracts are recorded at fair value in either other assets or accounts payable and other accrued liabilities in the Condensed Statements of Assets and Liabilities, depending on whether the value of the contract is in favor of the Fund or the counter party. The changes in fair value are recorded in net realized and change in unrealized gain (loss) from hedging activities in the Condensed Statements of Operations. The quarterly interest paid or received on the interest rate swap contracts is also recorded in net realized and change in unrealized gain (loss) from hedging activities.

Deferred Bank Fees

Through June 30, 2014, the deferred bank fees and costs associated with the debt facility have been allocated

over the estimated life of the facility, which currently is through September 2014. The amortization of these costs is recorded as interest expense in the Condensed Statements of Operations (see Note 6).

Tax Status

The Fund has elected to be treated as a Regulated Investment Company ("RIC") under Subchapter M of the Internal Revenue Code (the "Code") and operates in a manner so as to qualify for the tax treatment applicable to RICs.

In order to qualify for favorable tax treatment as a RIC, the Fund is required to distribute annually to its shareholder at least 90% of its investment company taxable income, as defined by the Code. To avoid federal excise taxes, the Fund must distribute annually at least 98% of its ordinary income and 98.2% of net capital gains from the current year and any undistributed ordinary income and net capital gains from the preceding years. The Fund, at its discretion, may carry forward taxable income in excess of calendar year distributions and pay a 4% excise tax on this income. If the Fund chooses to do so, all other things being equal, this would increase expenses and reduce the amount available to be distributed to shareholder. The Fund will accrue excise tax on estimated undistributed taxable income as required.

Dividends from net investment income and distributions from net realized capital gains are determined in accordance with U.S. federal income tax regulations, which may differ from those amounts determined in accordance with accounting principles generally accepted in the United States of America ("GAAP"). These book/tax differences are either temporary or permanent in nature. To the extent these differences are permanent, they are charged or credited to paid-in-capital or accumulated net realized gain (loss), as appropriate, in the period that the differences arise. Temporary and permanent differences are primarily attributable to differences in the tax treatment of certain loans and the tax characterization of income and non-deductible expenses. These differences are generally determined in conjunction with the preparation of the Fund's annual RIC tax return.

Book and tax basis differences relating to shareholder dividends and distributions and other permanent book and tax differences are reclassified among the Fund's capital accounts. In addition, the character of income and gains to be distributed is determined in accordance with income tax regulations that may differ from GAAP.

The Fund may pay distributions in excess of its taxable net investment income. This excess would be a tax-free return of capital in the period and reduce the shareholder's tax basis in its shares. The cumulative amount is disclosed on the Condensed Statements of Assets and Liabilities as return of capital distributions. Cumulative return of capital distributions were $58.2 million and $32.0 million as of June 30, 2014 and December 31, 2013, respectively. As of June 30, 2014, the Fund had no uncertain tax positions.

The Fund's tax years open to examination by major jurisdictions are 2011 and forward.


3.	SUMMARY OF INVESTMENTS

Loans generally are made to borrowers pursuant to commitments whereby the Fund agrees to finance assets and/or provide working or growth capital up to a specified amount for the term of the commitment, upon the terms and subject to the conditions specified by such commitment. As of June 30, 2014, the Fund's investments in loans were primarily to companies based within the United States and were diversified among borrowers in the industry segments shown below. The percentage of net assets that each industry group represents is shown with the industry totals below (the sum of the percentages does not equal 100 percent because the percentages are based on net assets as opposed to total loans). All loans are senior to unsecured creditors except where indicated.

The Fund defines fair value as the price that would be received to sell an asset or paid to settle a liability in an orderly transaction between market participants at the measurement date; that is, an exit price. The exit price assumes the asset or liability was exchanged in an orderly transaction; it was not a forced liquidation or distressed sale.

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 with the interest rate on each loan fixed at the time each loan is funded. Each loan drawn under a commitment may have a different maturity date and amount. For the three months ended June 30, 2014 and June 30, 2013, the weighted-average interest rate on the performing loans was 18.23% and 18.89%, respectively. For the six months ended June 30, 2014 and June 30, 2013, the weighted-average interest rate on the performing loans was 18.60% and 18.92%, respectively. These rates were inclusive of both cash and non-cash interest income. For the three months ended June 30, 2014 and June 30, 2013, the weighted-average interest rate on the performing loans was 14.14% and 14.59%, respectively. For the six months ended June 30, 2014 and June 30, 2013 the weighted-average interest rate on the cash portion of the interest income was 14.27% and 14.45%, respectively. Interest is calculated using the effective interest method, and rates earned by the Fund will fluctuate based on many factors including early payoffs, volatility of values ascribed to warrants and new loans funded during the period.

The risk profile of a loan changes when events occur that impact the credit analysis of the borrower and loan as described in our loan accounting policy. Such changes result in the fair value being adjusted from par value of the individual loan. Where the risk profile is consistent with the original underwriting, which is primarily the case for this loan portfolio, the par value of the loan will approximate fair value.

All loans as of June 30, 2014 were to non-affiliates and consisted of the following:



	Percentage of	Estimated Fair	Par Value	Final
Borrower	Net Assets	Value 6/30/14	Value 6/30/14	Maturity Date
Carrier Networking
Vello Systems, Inc.		$ 1,458,279	$ 1,823,279	*
VocalNet, LLC		178,555	358,555	10/1/2016
Subtotal:	1.0%	$ 1,636,834	$ 2,181,834

Computers & Storage
Clustrix, Inc.		$ 2,352,178	$ 2,352,178	5/1/2017



Connected Data, Inc.		2,148,953	2,148,953	5/1/2017
D-Wave Systems, Inc.		1,835,430	1,835,430	2/1/2017
Gridstore, Inc.		1,390,814	1,390,814	6/1/2017
Looxcie, Inc.		595,904	595,904	12/1/2015
Veloxum, Inc.		416,093	416,093	*
Vidyo, Inc.		7,812,510	7,812,510	5/1/2016
Subtotal:	9.9%	$ 16,551,882	$ 16,551,882

Enterprise Networking
Apprion, Inc.		$ 699,859	$ 699,859	4/1/2016
BurstPoint Networks, Inc.		513,426	513,426	5/1/2016
Splashtop, Inc.		1,460,787	1,460,787	5/1/2016
Subtotal:	1.6%	$ 2,674,072	$ 2,674,072

Internet
BeachMint, Inc.		$ 4,215,440	$ 5,615,440	5/1/2016
Bee Cave Games, Inc.		140,429	140,429	2/1/2017
Better Doctor, Inc.		391,745	391,745	6/1/2016
Bot Home Automation, Inc.		214,754	214,754	10/1/2016
Byliner, Inc.		378,961	758,961	5/1/2016
Change.org, Inc.		2,331,548	2,331,548	11/1/2016
CloudTalk, Inc.		5,000	124,008	*
CustomMade, Inc.		1,900,861	1,900,861	5/1/2017
DailyFeats, Inc.		288,062	288,062	1/1/2016
Desti, Inc.		38,983	43,283	*
Digital Caddies, Inc.		803,637	803,637	6/1/2017
Direct Media Technologies, Inc.		656,399	656,399	12/1/2014
EDO Interactive, Inc.		631,439	631,439	11/1/2014
EyeView, Inc.		640,999	640,999	3/1/2015
FanBridge, Inc.		453,896	643,896	*
FanDuel, Inc.		1,736,235	1,736,235	9/1/2016
Fast Labs, Inc.		436,220	436,220	3/1/2017
Fingi, Inc.		347,073	347,073	6/1/2018
FlipTop, Inc.		584,080	584,080	6/1/2017
Giga Omni Media, Inc.		3,394,807	3,394,807	2/1/2016
Giveforward, Inc.		459,318	459,318	7/1/2017
Good Eggs, Inc.		388,272	388,272	6/1/2016
Grovo Learning, Inc.		951,831	951,831	3/1/2017
HEXAGRAM 49, Inc.		610,589	610,589	1/1/2016
Inside Vault, Inc.		233,373	233,373	1/1/2017
isocket, Inc.		286,970	286,970	1/1/2015
Jun Group, LLC		1,133,397	1,133,397	2/1/2017
KargoCard, Co.		752,618	752,618	1/1/2016
Kitsy Lane, Inc.		266,802	266,802	12/1/2016
Kiwi Crate, Inc.		1,307,885	1,307,885	10/1/2016
Komli Media, Inc.		4,510,672	4,510,672	11/1/2015
Kulbyt, Inc.		189,232	189,232	8/1/2015



Lenddo International		1,499,122	1,499,122	12/1/2015
Lightside Games, Inc.		192,230	265,230	*
LocalResponse, Inc.		481,671	481,671	3/1/2016
MassDrop, Inc.		354,409	354,409	9/1/2017
MediaSpike, Inc.		214,827	214,827	12/1/2016
MeetMe, Inc.		1,792,719	1,792,719	4/1/2016
Moda Operandi, Inc.		181,091	181,091	12/1/2015
Modasuite, Inc.		1,652,370	1,652,370	7/1/2016
Monetate, Inc.		2,266,419	2,266,419	5/1/2015
Moveline Group, Inc.		938,361	938,361	6/1/2017
Navigating Cancer, Inc.		1,303,513	1,303,513	7/1/2016
Osix Corp.		409,524	409,524	10/1/2016
PerformLine, Inc.		149,250	149,250	5/1/2015
Piryx, Inc.		1,488,391	1,488,391	6/1/2017
Pixalate, Inc.		467,184	467,184	3/1/2017
Playstudios, Inc.		2,585,789	2,585,789	9/1/2017
Pleygo, Inc.		218,595	218,595	12/1/2016
Quantcast Corp.		10,002,516	10,002,516	4/1/2017
Quri, Inc.		1,162,183	1,162,183	12/1/2017
Radius Intelligence, Inc.		1,576,940	1,576,940	10/1/2017
Relay Network, LLC		828,336	828,336	7/1/2015
Retail Innovation Group		2,043,069	2,043,069	7/1/2016
Rivet Games, Inc.		148,082	215,082	*
The SavvySource For Parents, Inc.		616,506	616,506	12/1/2016
Schooltube, Inc.		68,222	108,222	*
Session M, Inc.		1,856,468	1,856,468	2/1/2017
Smart Lunches, Inc.		195,814	195,814	6/1/2016
Sociable Labs, Inc.		402,092	402,092	7/1/2016
SocialChorus, Inc.		168,797	168,797	9/1/2014
StitchFix, Inc.		753,853	753,853	8/1/2016
TangoCard, Inc.		153,044	153,044	3/1/2015
True & Co., Inc.		901,559	901,559	10/1/2017
UserVoice, Inc.		507,378	507,378	11/1/2015
Waluzi, Inc.		99,234	99,234	8/1/2016
Weddington Way, Inc.		1,044,996	1,044,996	11/1/2016
WHI, Inc.		1,140,258	1,140,258	2/1/2017
YouDocs Beauty, Inc.		741,628	1,141,628	5/1/2018
Zazma, Inc.		1,747,513	1,747,513	5/1/2017
Subtotal:	43.5%	$ 73,035,480	$ 75,708,788

Medical Devices
Avedro, Inc.		$ 2,244,436	$ 2,244,436	10/1/2015
AxioMed, Inc.		1,861,487	2,326,487	11/1/2016
Blockade Medical LLC		452,415	452,415	9/1/2017
Cayenne Medical, Inc.		4,721,722	4,721,722	12/1/2017
Cervilenz, Inc.		2,562,848	2,562,848	4/1/2016



HourGlass Technologies, Inc.		243,560	869,560	*
MimOSA, Inc.		144,512	144,512	2/1/2015
NasoForm, Inc.		115,609	115,609	2/1/2015
Redox Biomedical		1,800,000	3,600,000	*
Sonoma Orthopedic Products, Inc.		2,342,434	2,342,434	4/1/2016
Zipline Medical, Inc.		1,377,645	1,377,645	5/1/2016
Subtotal:	10.6%	$ 17,866,668	$ 20,757,668

Other Healthcare
Cogito Health, Inc.		$ 566,992	$ 566,992	4/1/2017
Health Guru Media, Inc.		633,259	633,259	12/1/2014
Health Integrated		1,841,530	1,841,530	7/1/2017
Mulberry Health, Inc.		4,774,610	4,774,610	12/1/2017
Physician Software Systems, LLC		470,180	470,180	7/1/17
Practice Fusion, Inc.		5,717,085	5,717,085	6/1/2016
Project Healthy Living		954,249	954,249	10/1/2016
Quantia Communications, Inc.		730,159	730,159	9/1/2014
Therapydia, Inc.		428,695	428,695	4/1/2017
ZocDoc, Inc.		4,349,924	4,349,924	6/1/2017
Subtotal:	12.2%	$ 20,466,683	$ 20,466,683

Other Technology
21e6, LLC		$ 4,582,302	$ 4,582,302	4/1/2017
Automatic Labs, Inc.		930,477	930,477	12/1/2016
Beeline Bikes, Inc.		131,526	131,526	6/1/2017
Daylight Solutions, Inc.		3,349,300	3,349,300	8/1/2017
Ecologic Brands, Inc.		748,711	748,711	6/1/2017
General Assembly, Inc.		2,367,242	2,367,242	12/1/2016
InsideTrack, Inc.		609,578	609,578	3/1/2017
LanzaTech New Zealand Ltd.		10,745,618	10,745,618	7/1/2016
Lumo BodyTech, Inc.		563,617	563,617	12/1/2017
Neuehouse LLC		1,686,935	1,686,935	3/1/2017
nScaled, Inc.		552,217	552,217	1/1/2016
nWay, Inc.		687,283	687,283	3/1/2017
Pinnacle Engines, Inc.		1,023,346	1,023,346	3/1/2015
Prana Holdings, Inc.		5,847,462	5,847,462	7/1/2016
Pure Energies Group, Inc.		2,060,433	2,060,433	8/1/2016
Scoot Networks, Inc.		197,003	197,003	3/1/2017
Solaria Corp.		253,622	1,033,622	*
Sproutling, Inc.		461,027	461,027	9/1/2017
Thoughtful Media Group, Inc.		522,620	852,620	*
Tribogenics, Inc.		1,503,638	1,503,638	9/1/2016
Wallaby Financial, Inc.		120,891	120,891	8/1/2016
YPX Cayman Holdings Co.		1,389,991	1,389,991	4/1/2016
ZeaChem, Inc.		900,825	4,602,825	*
Subtotal:	24.5%	$ 41,235,664	$ 46,047,664



Security
Agari Data, Inc.		$ 1,185,651	$ 1,185,651	9/1/2017
Guardian Analytics, Inc.		2,830,728	2,830,728	1/1/2018
Kinamik, Inc.		324,867	634,867	*
Pandesa Corp.		92,246	92,246	2/1/2015
Uplogix, Inc.		2,087,777	2,087,777	5/1/2017
Venafi, Inc.		3,630,501	3,630,501	6/1/2017
Voltage Security, Inc.		2,341,142	2,341,142	9/1/2017
Subtotal:	7.4%	$ 12,492,912	$ 12,802,912

Software
3Scale, Inc.		$ 461,594	$ 461,594	6/1/2017
AcousticEye, Ltd.		222,720	222,720	12/1/2015
Appconomy, Inc.		670,362	2,683,362	*
Apportable, Inc.		942,442	942,442	3/1/2017
Artificial Solutions ASH AB		458,605	458,605	2/1/2015
Brightpearl, Inc.		586,946	586,946	6/1/2016
Ceros, Inc.		548,491	548,491	4/1/2016
ClearPath, Inc.		398,316	398,316	5/1/2016
Clypd, Inc.		698,640	698,640	11/1/2016
Corduro, Inc.		52,902	142,902	*
D Software, Inc.		262,069	262,069	6/1/2016
Dataium, LLC		191,024	383,024	3/1/2016
DropThought, Inc.		470,400	470,400	12/1/2016
eCommera, Ltd.		4,728,123	4,728,123	3/1/2017
Encoding.com, Inc.		654,004	654,004	11/1/2016
gloStream, Inc.		1,262,205	1,262,205	11/1/2016
Innerworkings Holdings, Ltd.		112,722	439,944	*
Intalio, Inc.		410,635	410,635	6/1/2015
Lulo Ventures, Inc.		1,371,075	1,371,075	9/1/2016
MediaPlatform, Inc.		739,119	739,119	9/1/2016
Nectar, Inc.		548,057	548,057	3/1/2017
Neebula Systems, Ltd.		548,999	548,999	2/1/2017
NewVoiceMedia, Ltd.		698,983	698,983	2/1/2015
OrderGroove, Inc.		1,091,513	1,091,513	12/1/2016
Palantir Technologies, Inc.		9,116,472	9,116,472	4/1/2016
Pursway, Inc.		1,575,060	1,575,060	3/1/2016
Quantisense, Inc.		626,047	626,047	6/1/2015
Riskonnect, Inc.		388,741	388,741	8/1/2015
SCVNGR, Inc.		2,241,250	2,241,250	10/1/2016
SnapLogic, Inc.		2,020,736	2,020,736	7/1/2016
SoundHound, Inc.		3,960,349	3,960,349	5/1/2017
STG-Impact Holdings Corp.		7,286,992	7,286,992	3/1/2016
StreetLight Data		700,099	700,099	4/1/2017
Superfish, Inc.		686,501	686,501	10/1/2015
The Cloudscaling Group, Inc.		1,259,987	1,259,987	9/1/2015
Top Hat Monocle Corp.		812,627	812,627	7/1/2016



Vuemix, Inc.		106,940	106,940	8/1/2015
Workspot, Inc.		201,111	201,111	9/1/2016
Xceedium, Inc.		350,720	350,720	4/1/2015
ZeroTurnaround USA, Inc.		692,617	692,617	6/1/2018
Subtotal:	29.9%	$ 50,156,195	$ 52,778,417

Technology Services
955 Dreams, Inc.		$ 691,819	$ 691,819	6/1/2017
Akademos, Inc.		858,103	858,103	6/1/2017
BidPal, Inc.		758,051	758,051	12/1/2015
Blazent, Inc.		761,803	761,803	5/1/2016
Boost Media, Inc.		815,049	815,049	11/1/2016
BountyJobs, Inc.		1,170,401	1,170,401	5/1/2017
Callisto Media, Inc.		724,392	724,392	9/1/2016
DigitalPath, Inc.		1,166,781	1,166,781	1/1/2016
FSA Store, Inc.		720,502	720,502	9/1/2017
Grassroots Unwired, Inc.		92,762	92,762	8/1/2016
Maxi Mobility, Inc.		194,323	194,323	7/1/2016
Perfect Market, Inc.		1,996,293	1,996,293	1/1/2016
Rated People, Ltd.		2,664,750	2,664,750	12/1/2016
Stackstorm, Inc.		260,298	260,298	8/1/2017
The New Orleans Exchange, Inc.		3,907,204	3,907,204	1/1/2016
TiqIQ, Inc.		237,061	237,061	7/1/2017
Subtotal:	10.1%	$ 17,019,592	$ 17,019,592

Wireless
AppStack, Inc.		$ 298,242	$ 298,242	12/1/2015
Azumio, Inc.		786,540	786,540	8/1/2015
Cellfire, Inc.		227,133	227,133	12/1/2014
Clementine, Inc.		230,907	230,907	3/1/2017
Corona Labs, Inc.		402,159	525,159	5/1/2016
Flint Mobile, Inc.		803,093	803,093	1/1/2016
GPShopper, LLC		767,395	767,395	7/1/2017
InfoReach, Inc.		462,048	462,048	3/1/2017
Meru Networks, Inc.		4,705,841	4,705,841	8/1/2015
Physical Graph Corporation		1,825,746	1,825,746	4/1/2017
Quixey, Inc.		2,708,183	2,708,183	6/1/2016
Receivd, Inc.		466,123	466,123	1/1/2017
SpiderCloud Wireless Inc.		3,779,999	3,779,999	1/1/2017
StarMaker Interactive, Inc.		136,223	136,223	2/1/2015
Zipit Wireless, Inc.		197,512	197,512	10/1/2014
Subtotal:	10.6%	$ 17,797,144	$ 17,920,144

Total (Cost of $283,109,656):	161.3%	$ 270,933,126	$ 284,909,656

*As of June 30, 2014, loans with a cost basis of $16.7 million and a fair value of $7.7 million were classified as non-accrual. These loans have been accelerated from their original maturity and are due in their entirety. During the period for which these loans have been on non-accrual status, no interest income has been recognized.

As of June 30, 2014, a number of loans represented greater than 5% of the Fund's net assets. The outstanding loan balances as of June 30, 2014 in LanzaTech New Zealand, Ltd. of $10,745,618, Palantir Technologies, Inc. of $9,116,472, and Quantcast Corp. of $10,002,516 represented 6.4%, 5.4% and 6.0% of the Fund's net assets, respectively.

All loans as of December 31, 2013 were to non-affiliates and consisted of the following:



	Percentage of	Estimated Fair	Par Value	Final
Borrower	Net Assets	Value 12/31/13	12/31/13	Maturity Date
Biotechnology
Stem CentRx, Inc.		$ 18,433	$ 18,433	1/1/2014
Subtotal:	0.0%	$ 18,433	$ 18,433

Carrier Networking
Vello Systems, Inc.		$ 2,023,248	$ 2,023,248	6/1/2016
VocalNet, LLC		271,056	376,056	10/1/2016
Subtotal:	1.2%	$ 2,294,304	$ 2,399,304

Computers & Storage
Connected Data, Inc.		$ 1,399,414	$ 1,399,414	11/1/2016
D-Wave Systems, Inc.		44,621	44,621	1/1/2014
Looxcie, Inc.		743,209	743,209	12/1/2015
Veloxum, Inc.		104,093	416,093	*
Vidyo, Inc.		9,455,897	9,455,897	5/1/2016
Subtotal:	6.0%	$ 11,747,234	$ 12,059,234

Enterprise Networking
Apprion, Inc.		$ 848,878	$ 848,878	4/1/2016
BurstPoint Networks, Inc.		594,951	594,951	5/1/2016
Splashtop, Inc.		1,657,534	1,657,534	5/1/2016
Subtotal:	1.6%	$ 3,101,363	$ 3,101,363

Internet
Beach Mint, Inc.		$ 6,615,252	$ 6,615,252	5/1/2016
Better Doctor, Inc.		472,914	472,914	6/1/2016
Blekko, Inc.		1,904,118	1,904,118	12/1/2016
Byliner, Inc.		925,175	925,175	5/1/2016
Carwoo!, Inc.		89,437	919,437	*
Central Desktop, Inc.		3,035,119	3,035,119	4/1/2016
Change.org, Inc.		2,375,933	2,375,933	11/1/2016
CloudTalk, Inc.		5,000	124,009	*
CustomMade, Inc.		1,880,757	1,880,757	5/1/2017
DailyFeats, Inc.		334,194	334,194	1/1/2016
Desti, Inc.		395,283	395,283	5/1/2016
Dezine, Inc.		0	142,590	*



Direct Media Technologies, Inc.	1,257,922	1,257,922	12/1/2014
EDO Interactive, Inc.	1,205,349	1,205,349	11/1/2014
EyeView, Inc.	1,029,314	1,029,314	3/1/2015
FanBridge, Inc.	453,896	643,896	*
FanDuel, Inc.	1,880,835	1,880,835	9/1/2016
Fast Labs, Inc.	229,448	229,448	1/1/2017
FlipTop, Inc.	549,660	549,660	6/1/2015
Giga Omni Media, Inc.	4,229,897	4,229,897	2/1/2016
Good Eggs, Inc.	452,593	452,593	5/1/2016
Grovo Learning, Inc.	701,522	701,522	3/1/2017
HEXAGRAM 49, Inc.	787,098	787,098	1/1/2016
Identified, Inc.	2,459,801	2,459,801	6/1/2016
isocket, Inc.	475,585	475,585	1/1/2015
Jarvis Labs, Inc.	234,471	234,471	10/1/2016
Jun Group, LLC	616,118	616,118	11/1/2014
Kanjoya, Inc.	149,260	149,260	4/1/2014
KargoCard, Co.	1,006,303	1,006,303	1/1/2016
Kitsy Lane, Inc.	304,957	304,957	12/1/2016
Kiwi Crate, Inc.	1,419,972	1,419,972	10/1/2016
Komli Media, Inc.	5,936,578	5,936,578	11/1/2015
Kulbyt, Inc.	263,601	263,601	8/1/2015
Lenddo International	1,917,916	1,917,916	12/1/2015
Lightside Games, Inc.	222,230	295,230	*
LocalResponse, Inc.	611,036	611,036	3/1/2016
LOLapps, Inc.	18,961	18,961	1/1/2014
MeetMe, Inc.	2,350,769	2,350,769	4/1/2016
Modasuite, Inc.	1,910,112	1,910,112	7/1/2016
ModeWalk, Inc.	191,118	239,118	1/1/2015
Mojo Motors, Inc.	45,392	45,392	6/1/2014
Monetate, Inc.	3,419,341	3,419,341	5/1/2015
Navigating Cancer, Inc.	1,625,647	1,625,647	7/1/2016
nPario, Inc.	99,940	397,940	*
Osix Corporation	498,178	498,178	10/1/2016
PerformLine, Inc.	217,734	217,734	5/1/2015
Piryx, Inc.	1,460,721	1,460,721	9/1/2016
Pixalate, Inc.	217,736	217,736	11/1/2016
Playstudios, Inc.	2,598,317	2,598,317	6/1/2017
Pleygo, Inc.	209,632	209,632	12/1/2016
Quantcast Corp.	12,639,322	12,639,322	4/1/2017
Radius Intelligence, Inc.	1,697,202	1,697,202	3/1/2016
Relay Network, LLC	1,194,015	1,194,015	7/1/2015
Retail Innovation Group	2,372,213	2,372,213	7/1/2016
Rivet Games, Inc.	226,278	293,278	*
Santa.com, Inc.	252,227	802,227	*
The SavvySource For Parents, Inc.	561,822	561,822	7/1/2015
Schooltube, Inc.	63,741	103,741	5/1/2016



Session M, Inc.		1,885,531	1,885,531	2/1/2017
Smart Lunches, Inc.		232,785	232,785	6/1/2016
Sociable Labs, Inc.		459,559	459,559	7/1/2016
SocialChorus, Inc.		485,720	485,720	9/1/2014
Spotlight Ticket Management, Inc.		340,677	340,677	9/1/2015
StitchFix, Inc.		940,043	940,043	8/1/2016
StumbleUpon, Inc.		1,073,615	1,073,615	12/1/2015
TalentBin, Inc.		228,709	228,709	7/1/2017
TangoCard, Inc.		250,039	250,039	3/1/2015
True & Co., Inc.		1,114,636	1,114,636	6/1/2016
UserVoice, Inc.		684,364	684,364	11/1/2015
Waluzi, Inc.		109,637	109,637	8/1/2016
We Heart It, Inc.		1,113,290	1,113,290	2/1/2017
Weddington Way, Inc.		1,209,857	1,209,857	11/1/2016
YouDocs Beauty, Inc.		1,192,798	1,192,798	6/1/2016
Zazma, Inc.		1,820,045	1,820,045	5/1/2017
Subtotal:	48.2%	$ 93,440,267	$ 95,797,866

Medical Devices
Avedro, Inc.		$ 3,605,194	$ 3,605,194	10/1/2015
AxioMed, Inc.		2,683,106	2,683,106	11/1/2016
Cellscape Corp.		802,598	802,598	1/1/2016
Cervilenz, Inc.		3,243,102	3,243,102	4/1/2016
ConforMIS, Inc.		950,224	950,224	5/1/2014
HourGlass Technologies, Inc.		215,448	841,448	*
MimOSA, Inc.		243,152	243,152	2/1/2015
NasoForm, Inc.		194,522	194,522	2/1/2015
Redox Biomedical		1,800,000	3,600,000	*
Sonoma Orthopedic Products, Inc.		3,022,303	3,022,303	9/1/2015
Xlumena, Inc.		153,758	153,758	5/1/2014
Zipline Medical, Inc.		1,633,730	1,633,730	5/1/2016
Subtotal:	9.5%	$ 18,547,137	$ 20,973,137

Other Healthcare
Caring.com, Inc.		$ 3,758,873	$ 3,758,873	6/1/2017
Cogito Health, Inc.		560,265	560,265	4/1/2017
Ekso Bionics, Inc.		2,029,493	2,254,493	*
Health Guru Media, Inc.		1,360,010	1,360,010	12/1/2014
Health Integrated		1,360,207	1,360,207	2/1/2017
Mulberry Health, Inc.		4,738,816	4,738,816	12/1/2017
Pathway Genomics Corp.		1,033,714	1,033,714	12/1/2014
Practice Fusion, Inc.		6,902,052	6,902,052	6/1/2016
Project Healthy Living		943,454	943,454	10/1/2016
Quantia Communications, Inc.		1,959,386	1,959,386	9/1/2014
Therapydia, Inc.		220,776	220,776	1/1/2017
Wellfount Corp.		1,409,607	1,409,607	9/1/2015
Subtotal:	13.5%	$ 26,276,653	$ 26,501,653




Other Technology
Automatic Labs, Inc.		$ 937,315	$ 937,315	12/1/2016
Daylight Solutions, Inc.		2,235,618	2,235,618	7/1/2015
Ecologic Brands, Inc.		850,527	850,527	6/1/2017
General Assembly, Inc.		2,325,684	2,325,684	12/1/2016
LanzaTech New Zealand Ltd.		13,215,013	13,215,013	7/1/2016
nScaled, Inc.		702,029	702,029	1/1/2016
Pinnacle Engines, Inc.		1,572,801	1,572,801	3/1/2015
Prana Holdings, Inc.		7,019,273	7,019,273	7/1/2016
Pure Energies Group, Inc.		1,419,062	1,419,062	6/1/2016
Solaria Corp.		580,037	1,060,037	*
Thoughtful Media Group, Inc.		547,375	1,047,375	*
Tribogenics, Inc.		1,743,238	1,743,238	9/1/2016
Wallaby Financial, Inc.		134,111	134,111	8/1/2016
YPX Cayman Holdings Co.		1,741,790	1,741,790	4/1/2016
ZeaChem, Inc.		1,223,125	4,925,125	*
Subtotal:	18.6%	$ 36,246,998	$ 40,928,998

Security
Agari Data, Inc.		$ 453,674	$ 453,674	5/1/2017
Kinamik, Inc.		312,631	622,631	*
Pandesa Corp.		191,958	191,958	2/1/2015
Uplogix, Inc.		1,618,761	1,618,761	7/1/2015
Subtotal:	1.3%	$ 2,577,024	$ 2,887,024

Software
AcousticEye, Ltd.		$ 287,569	$ 287,569	12/1/2015
Appconomy, Inc.		670,362	2,683,362	*
Apportable, Inc.		209,718	209,718	12/1/2016
Artificial Solutions ASH AB		748,467	748,467	2/1/2015
Brightpearl, Inc.		706,581	706,581	6/1/2016
Ceros, Inc.		668,612	668,612	4/1/2016
ClearPath, Inc.		706,431	706,431	5/1/2016
Clypd, Inc.		712,353	712,353	11/1/2016
Corduro, Inc.		65,238	155,238	*
D Software, Inc.		340,204	340,204	6/1/2016
Dataium, LLC		474,082	474,082	3/1/2016
eCommera LTD.		5,151,682	5,151,682	3/1/2017
Encoding.com, Inc.		714,472	714,472	11/1/2016
gloStream, Inc.		1,256,866	1,256,866	6/1/2016
Image Vision Labs, Inc.		67,450	67,450	6/1/2014
Innerworkings Holdings, Ltd.		44,867	448,867	*
Innotas, Inc.		111,293	111,293	3/1/2014
Intalio, Inc.		582,873	582,873	6/1/2015
Lex Machina, Inc.		73,779	73,779	4/1/2014
Lulo Ventures, Inc.		1,401,588	1,401,588	11/1/2016



MediaPlatform, Inc.		641,446	641,446	3/1/2016
NewVoiceMedia, Ltd.		1,381,901	1,381,901	2/1/2015
OrderGroove, Inc.		1,184,088	1,184,088	12/1/2016
Palantir Technologies, Inc.		12,294,649	12,294,649	4/1/2016
PivotLink, Inc.		2,926,468	2,926,468	11/1/2015
Pursway, Inc.		1,760,989	1,760,989	3/1/2016
Quantisense, Inc.		893,773	893,773	6/1/2015
Riskonnect, Inc.		575,426	575,426	8/1/2015
SCVNGR, Inc.		2,352,638	2,352,638	10/1/2016
SnapLogic, Inc.		2,330,274	2,330,274	7/1/2016
SoundHound, Inc.		4,180,337	4,180,337	5/1/2017
STG-Impact Holdings Corp.		8,786,785	8,786,785	3/1/2016
StreetLight Data		228,182	228,182	12/1/2016
Superfish, Inc.		970,653	970,653	10/1/2015
Target Data, Inc.		624,919	624,919	9/1/2015
The Cloudscaling Group, Inc.		1,708,603	1,708,603	9/1/2015
Top Hat Monocle Corp.		944,150	944,150	7/1/2016
Vuemix, Inc.		164,852	164,852	8/1/2015
Workspot, Inc.		213,048	213,048	9/1/2016
Xceedium, Inc.		535,145	535,145	4/1/2015
XOS Technologies, Inc.		990,373	1,100,373	*
Subtotal:	31.3%	$ 60,683,186	$ 63,300,186

Technology Services
Akademos, Inc.		$ 827,130	$ 827,130	6/1/2017
BidPal, Inc.		969,754	969,754	12/1/2015
Blazent, Inc.		927,116	927,116	5/1/2016
Boost Media, Inc.		893,456	893,456	11/1/2016
BountyJobs, Inc.		1,408,096	1,408,096	7/1/2015
Callisto Media, Inc.		831,240	831,240	9/1/2016
DigitalPath, Inc.		1,709,497	1,709,497	1/1/2016
FSA Store, Inc.		709,863	709,863	9/1/2017
Grassroots Unwired, Inc.		106,696	106,696	8/1/2016
Maxi Mobility, Inc.		222,904	222,904	7/1/2016
Perfect Market, Inc.		2,480,014	2,480,014	1/1/2016
Rated People, Ltd.		3,225,704	3,225,704	12/1/2016
The New Orleans Exchange, Inc.		4,926,946	4,926,946	1/1/2016
Subtotal:	9.9%	$ 19,238,416	$ 19,238,416

Wireless
AppStack, Inc.		$ 370,818	$ 370,818	12/1/2015
Azumio, Inc.		980,427	980,427	8/1/2015
Cellfire, Inc.		421,120	421,120	12/1/2014
Corona Labs, Inc.		490,545	613,545	2/1/2016
Flint Mobile, Inc.		1,016,916	1,016,916	1/1/2016
GPShopper, LLC		862,562	862,562	7/1/2017
July Systems, Inc.		716,551	716,551	10/1/2014



Meru Networks, Inc.		6,479,069	6,479,069	8/1/2015
Physical Graph Corporation		1,901,737	1,901,737	4/1/2017
Quixey, Inc.		3,256,074	3,256,074	6/1/2016
Receivd, Inc.		223,346	223,346	11/1/2016
SpiderCloud Wireless Inc.		2,291,176	2,291,176	12/1/2016
StarMaker Interactive, Inc.		226,525	226,525	2/1/2015
Zipit Wireless, Inc.		393,004	393,004	10/1/2014
Subtotal:	10.1%	$ 19,629,870	$ 19,752,870

Total (Cost of $305,158,484):	151.2%	$ 293,800,885	$ 306,958,484

*As of December 31, 2013, loans with a cost basis of $21.0 million and a fair value of $9.9 million were classified as non-accrual. These loans have been accelerated from their original maturity and are due in their entirety. During the period for which these loans have been on non-accrual status, no interest income has been recognized.

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. As of June 30, 2014 and December 31, 2013, the Fund had unexpired unfunded commitments to borrowers of $96.9 million and $57.4 million, respectively.

Valuation Hierarchy

The Fund categorizes its fair value measurements according to a three-level hierarchy as required by GAAP. The hierarchy prioritizes the inputs used by the Fund's valuation techniques. A level is assigned to each fair value measurement based on the lowest level input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are defined as follows:



Level 1		Unadjusted quoted prices for identical assets or liabilities in active markets that are accessible at the measurement date.
Level 2		Prices or valuations based on observable inputs other than quoted prices in active markets for identical assets and liabilities.
Level 3		Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

Transfer of investments between levels of the fair value hierarchy is recorded on the actual date of the event or

change in circumstances that caused the transfer. There were no transfers in and out of Level 1, 2, and 3 during the

period ended June 30, 2014.

The Fund's cash equivalents were valued at the traded net asset value of the money market mutual fund. As a result, these measurements are classified as Level 1. The Fund's investments in the interest rate swaps are based on quotes from the market makers and therefore, are classified as Level 2. The Fund uses estimated exit values when determining the value of its investments. Because loan transactions are individually negotiated and unique, and there is no market in which these assets trade, the inputs for these assets, which are discussed in the valuation methods listed above, are classified as Level 3.

The following tables provide quantitative information about the Fund's Level 3 fair value measurements of its investments as of June 30, 2014 and December 31, 2013. In addition to the techniques and inputs noted in the table below, the Fund may also use other valuation techniques and methodologies when determining its fair value measurements. The below table is not intended to be all-inclusive, but rather provides information on the significant Level 3 inputs as they relate to the Fund's fair value measurements.



Investment Type
Level 3	Fair Value at	Valuation Techniques/		Weighted Average/
Debt Investments Industry	6/30/2014	Methodologies	Unobservable Input	Range
Carrier and Enterprise Networking	$4,310,906	Hypothetical Market Analysis	Hypothetical Market Coupon Rate	17%
		Liquidation	Investment Collateral	$1,458,279

Computer & Storage	$16,551,882	Hypothetical Market Analysis	Hypothetical Market Coupon Rate	18%
		Liquidation	Investment Collateral	$416,093

Internet	$73,035,480	Hypothetical Market Analysis	Hypothetical Market Coupon Rate	17%
		Liquidation	Investment Collateral	$5,000 - $453,896

Medical Devices	$17,866,668	Hypothetical Market Analysis	Hypothetical Market Coupon Rate	15%
		Liquidation	Investment Collateral	$243,560-$1,800,000

Other Healthcare	$20,466,683	Hypothetical Market Analysis	Hypothetical Market Coupon Rate	15%

Other Technology	$41,235,664	Hypothetical Market Analysis	Hypothetical Market Coupon Rate	16%
		Liquidation	Investment Collateral	$253,622-$900,825

Security	$12,492,912	Hypothetical Market Analysis	Hypothetical Market Coupon Rate	16%
		Liquidation	Investment Collateral	$324,867

Software	$50,156,195	Hypothetical Market Analysis	Hypothetical Market Coupon Rate	15%
		Liquidation	Investment Collateral	$52,902-$670,362

Technology Services	$17,019,592	Hypothetical Market Analysis	Hypothetical Market Coupon Rate	16%

Wireless	$17,797,144	Hypothetical Market Analysis	Hypothetical Market Coupon Rate	16%

	$270,933,126



Investment Type
Level 3	Fair Value at	Valuation Techniques/		Weighted Average/
Debt Investments Industry	12/31/2013	Methodologies	Unobservable Input	Range
Computer & Storage	$11,747,234	Hypothetical Market Analysis	Hypothetical Market Coupon Rate	17%
		Liquidation	Investment Collateral	$104,093

Enterprise Networking	$3,101,363	Hypothetical Market Analysis	Hypothetical Market Coupon Rate	17%

Internet	$93,440,267	Hypothetical Market Analysis	Hypothetical Market Coupon Rate	17%
		Liquidation	Investment Collateral	$0-$453,896

Medical Devices	$18,547,137	Hypothetical Market Analysis	Hypothetical Market Coupon Rate	16%
		Liquidation	Investment Collateral	$215,448-$1,800,000

Other Healthcare	$26,276,653	Hypothetical Market Analysis	Hypothetical Market Coupon Rate	15%
		Liquidation	Investment Collateral	$2,029,493

Other Technology	$36,246,998	Hypothetical Market Analysis	Hypothetical Market Coupon Rate	15%
		Liquidation	Investment Collateral	$547,375 - $1,223,124.51

Security	$2,577,024	Hypothetical Market Analysis	Hypothetical Market Coupon Rate	17%
		Liquidation	Investment Collateral	$312,631

Software	$60,683,186	Hypothetical Market Analysis	Hypothetical Market Coupon Rate	16%
		Liquidation	Investment Collateral	$44,866-$990,373

Technology Services	$19,238,416	Hypothetical Market Analysis	Hypothetical Market Coupon Rate	16%

Wireless	$19,629,870	Hypothetical Market Analysis	Hypothetical Market Coupon Rate	16%

Others *	$2,312,737	Hypothetical Market Analysis	Hypothetical Market Coupon Rate	24%

	$293,800,885

* Other loans are comprised of companies in the Biotechnology and Carrier Networking industries.

The following table presents the balances of assets and liabilities as of June 30, 2014 and December 31, 2013 measured at fair value on a recurring basis:



As of June 30, 2014	Level 1		Level 2		Level 3		Total
ASSETS:
Loans*	$	—	$	—	$	270,933,126	$	270,933,126
Cash equivalents	18,093,807		—		—		18,093,807
Total	$	18,093,807	$	—	$	270,933,126	$	289,026,933

LIABILITIES:
Interest rate swap agreements	$	—	$	301,045	$	—	$	301,045
Total	$	—	$	301,045	$	—	$	301,045



As of December 31, 2013	Level 1		Level 2		Level 3		Total
ASSETS:
Loans*	$	—	$	—	$	293,800,885	$	293,800,885
Cash equivalents	35,377,189		—		—		35,377,189
Total	$	35,377,189	$	—	$	293,800,885	$	329,178,074

LIABILITIES:
Interest rate swap agreement	$	—	$	853,099	$	—	$	853,099
Total	$	—	$	853,099	$	—	$	853,099

*For a detailed listing of borrowers comprising this amount please refer to Note 3, Summary of Investments.

The following table provides a summary of changes in Level 3 assets measured at fair value on a recurring basis:



	For the Three Months Ended June 30, 2014												For the Six Months Ended June 30, 2014
	Loans			Warrants			Stock			Conv. Note			Loans			Warrants			Stock			Conv. Note
Beginning balance	$	279,801,961		$	—		$	—		$	—		$	293,800,885		$	—		$	—		$	—
Acquisitions and originations	30,235,000			2,445,094			145,663			24,770			62,065,000			5,754,527			145,663			61,924
Principal reductions	(36,418,105		)	—			—			—			(82,124,029		)	—			—			—
Distribution to shareholder	—			(2,445,094		)	(145,663		)	(24,770		)	—			(5,754,527		)	(145,663		)	(61,924		)
Net change in unrealized gain from investments	(2,005,073		)	—			—			—			(818,932		)	—			—			—
Net realized loss from investments	(680,657		)	—			—			—			(1,989,798		)	—			—			—
Ending balance	$	270,933,126		$	—		$	—		$	—		$	270,933,126		$	—		$	—		$	—
Net change in unrealized loss on investments relating to investments still held at June 30, 2014	$	(2,832,300	)										$	(2,974,522	)



	For the Three Months Ended June 30, 2013									For the Six Months Ended June 30, 2013
	For the Three Months Ended June 30, 2013									For the Six Months Ended June 30, 2013
	Loans			Warrants			Stock			Loans			Warrants			Stock
Beginning balance	$	302,657,049		$	—		$	—		$	313,848,702		$	—		$	—
Acquisitions and originations	$	66,649,072		4,606,967			262,252			92,786,159			6,429,511			262,252
Principal reductions	$	(46,680,866	)	—			—			(80,167,535		)	—			—
Distribution to shareholder	—			(4,606,967		)	(262,252		)	—			(6,429,511		)	(262,252		)
Net change in unrealized loss from investments	$	(1,591,000	)	—			—			(4,590,575		)	—			—
Net realized loss from investments	$	(931,926	)	—			—			(1,774,422		)	—			—
Ending balance	$	320,102,329		$	—		$	—		$	320,102,329		$	—		$	—
Net change in unrealized loss on investments relating to investments still held at June 30, 2013	$	(5,541,000	)							$	6,594,138


4.	EARNINGS PER SHARE

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


5.	CAPITAL STOCK

As of June 30, 2014 and December 31, 2013, 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, as of June 30, 2014, was $294.0 million. Total contributed capital to the Company through June 30, 2014 and December 31, 2013 was $279.3 million, of which $241.5 million was contributed to the Fund.

The chart below shows the distributions of the Fund for the six months ended June 30, 2014 and 2013.



	For the Six Months Ended June 30, 2014		For the Six Months Ended June 30, 2013
Cash distributions	$	37,800,000	$	16,900,000
Distributions of equity securities	5,962,114		6,691,763

Total distributions to shareholder	$	43,762,114	$	23,591,763

Final classification of the distributions as either a return of capital or a distribution of income is an annual determination made at the end of each year dependent upon the Fund's current year and cumulative earnings and profits.

6. DEBT FACILITY

The Fund has established a secured revolving loan facility in an amount of up to $160 million with Union Bank, N.A., Wells Fargo Bank, N.A. and Bank Leumi USA. Pursuant to the Loan Agreement, as amended, the Fund has the option to request that the lenders providing the facility increase the borrowing availability thereunder to no more than $170 million in the aggregate, as commitments may be obtained. Loans under the facility may be, at the option of the Fund, either Reference Rate loans (as defined in the agreement) or LIBOR loans.

The facility will terminate on September 23, 2014, but can be accelerated in the event of default, such as failure by the Fund to make timely interest or principal payments. As of June 30, 2014, $121.5 million is outstanding under the facility.

Borrowings under the 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 0.325 percent (annual fee paid quarterly) based on the total commitment related to the facility. The Fund pays interest on its borrowings and also pays a fee on the unused portion of the facility.

Bank fees of $750,000 were incurred in connection with the facility. The bank fees and other costs incurred have been capitalized and are amortized to interest expense on a straight line basis over the expected life of the facility. As of June 30, 2014, the remaining unamortized fees and costs of $245,900 were amortized over the expected life of the facility (September 2014).

The facility is revolving and as such does not have a specified repayment schedule, although advances are secured by the assets of the Fund and thus repayments will be required as assets decline. The facility contains various covenants including financial covenants related to: (i) debt to net worth ratio, (ii) minimum debt service coverage ratio, (iii) interest coverage ratio, (iv) asset coverage, (v) asset coverage under investment company act, (vi) maximum loan loss reserves, and (vii) unfunded commitment ratio. There are also various restrictive covenants, including limitations on (i) the incurrence of liens, (ii) consolidations, mergers and asset sales, and (iii) capital expenditures. As of June 30, 2014, Management believes that the Fund was in compliance with these covenants. The Fund is in the process of renewing its revolving credit line and anticipates this to close prior to the expiration of the line.

The following is the summary of the outstanding facility draws as of June 30, 2014:



Roll-Over Date	Amount		Maturity Date	Floating Interest Rate
April 15, 2014	$	121,500,000	7/16/2014*	2.98%
TOTAL OUTSTANDING	$	121,500,000

* Loan was subsequently reduced by $2.55 million and rolled for a 30-day LIBOR loan, maturing on August 16, 2014.

7. INTEREST RATE SWAP AGREEMENTS

On February 18, 2011, the Fund entered into an interest rate swap transaction with Union Bank, N.A. to convert floating rate liabilities to fixed rates. The purpose of the interest rate swap agreement is to protect the Fund against rising interest rates, as the Fund originates loans with fixed interest rates. The Fund continues to adjust the notional principal amount as the outstanding balance under the debt facility changes. As of June 30, 2014, the notional principal amount was $102 million. The Fund pays a fixed rate of 1.277 percent and receives from the counterparty a floating rate based on 90-day LIBOR. Payments are made quarterly and will terminate on September 23, 2014.

On June 26, 2012, the Fund entered into an interest rate swap transaction with Wells Fargo Bank, N.A. to convert floating rate liabilities to fixed rates. The purpose of the interest rate swap agreement is to protect the Fund against rising interest rates, as the Fund originates loans with fixed interest rates. The Fund continues to adjust the notional principal amount as the outstanding balance under the debt facility changes. As of June 30, 2014, the notional principal amount was $31.38 million. The Fund pays a fixed rate of 0.501 percent and receives from the counterparty a floating rate based on 90-day LIBOR. Payments are made quarterly and will terminate on September 23, 2014.

As of June 30, 2014, the total fair value of the interest rate swaps was $(0.3) million and is recorded in accounts payable and other accrued liabilities in the Condensed Statements of Assets and Liabilities. Change in unrealized gain from hedging activities of $0.6 million, and net realized loss from hedging activities of $0.6 million, for the six months ended June 30, 2014, were included in net realized and change in unrealized loss from hedging activities in the Condensed Statements of Operations.

As of June 30, 2014 and December 31, 2013, the fair value of the Fund's derivative financial instruments were as follows:

Liability Derivatives

June 30, 2014

December 31, 2013

Derivatives Not Designated as

Hedging Instruments:

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Interest rate swap agreements

Accounts payable and

other accrued liabilities

301,045

Accounts payable and

other accrued liabilities

853,099

For the three and six months ended June 30, 2014 and 2013, the derivative financial instruments had the following effect on the Fund's Condensed Statements of Operations:



		For the three months ended		For the six months ended
Derivatives Not Designated as Hedging Instruments:	Location of Gain (Loss) Recognized	June 30, 2014	June 30, 2013	June 30, 2014	June 30, 2013
Interest rate swap agreements	Net realized and unrealized loss from hedging activities	$(5,324)	$(29,675)	$(48,433)	$(13,261)

8. FINANCIAL HIGHLIGHTS

GAAP requires disclosure of financial highlights of the Fund for the periods presented, the three and six months ended June 30, 2014. The total rate of return is defined as the return based on the change in value during the period of a theoretical investment made at the beginning of the period. The total rate of return assumes a constant rate of return for the Fund during the period reported and weights each cash flow by the amount of time held in the Fund. This required methodology differs from an internal rate of return.

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

Beginning and ending net asset values per share are based on the beginning and ending number of shares outstanding.

Other per share information is calculated based upon the aggregate weighted average net assets of the Fund for the periods presented.

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



	For the Three Months Ended June 30, 2014			For the Three Months Ended June 30, 2013			For the Six Months Ended June 30, 2014			For the Six Months Ended June 30, 2013

Total return **	3.79		%	4.56		%	9.94		%	8.43		%

Per share amounts:
Net asset value, beginning of period	$	1,848.95		$	1,939.31		$	1,943.66		$	1,959.29
Net investment income	93.91			113.73			202.33			222.23
Net change in unrealized and realized
gain (loss ) from investment and
hedging activities	(26.91		)	(25.53		)	(28.57		)	(63.78		)
Net increase in net assets from
operations	67.00			88.20			173.76			158.45
Distributions of income to shareholder	(84.10		)	(108.87		)	(176.43		)	(199.10		)
Return of capital to shareholder	(152.05		)	(36.82		)	(261.19		)	(36.82		)
Capital contribution	—			80.00			—			80.00

Net asset value, end of period	$	1,679.80		$	1,961.82		$	1,679.80		$	1,961.82

Net assets, end of period	$	167,979,852		$	196,182,220		$	167,979,852		$	196,182,220

Ratios to average net assets:

Expenses*	6.67		%	7.35		%	6.89		%	7.29		%
Net investment income*	20.94		%	23.22		%	22.43		%	22.97		%
* Annualized
** Total return amounts presented above are not annualized.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

In addition to the historical information contained herein, the information in this Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of the securities laws. These forward-looking statements reflect the current view of Venture Lending & Leasing VI, Inc. (the “Fund”) with respect to future events and financial performance and are subject to a number of risks and uncertainties, many of which are beyond the Fund's control. All statements, other than statements of historical facts included in this report, regarding the strategy, future operations, financial position, estimated revenues, projected costs, prospects, plans and objectives of the Fund are forward-looking statements. When used in this report, the words “will”, “believe”, “anticipate”, “intend”, “estimate”, “expect”, “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. All forward-looking statements speak only as of the date of this report. The reader of this Quarterly Report should understand that all such forward-looking statements are subject to various uncertainties and risks that could affect their outcome. The Fund's actual results could differ materially from those suggested by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, variances in the actual versus projected growth in assets, return on assets, loan losses, expenses, rates charged on loans and earned on securities investments and competition. This entire Quarterly Report should be read to put such forward-looking statements in context and to gain a more complete understanding of the uncertainties and risks involved in the Fund's business. The Fund does not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

The Fund is 100% owned by Venture Lending & Leasing VI, LLC (the “Company”). The Fund's shares of Common Stock, at $0.001 par value, were sold to its shareholder, the Company, under a stock purchase agreement. The Fund has issued 100,000 of the Fund's 10,000,000 authorized shares. The Company may make additional capital contributions to the Fund.

The Fund is a financial services company primarily providing financing and advisory services to a variety of carefully selected venture-backed companies primarily located throughout the United States with a focus on growth-oriented companies. The Fund's portfolio is well diversified and consists of companies in the communications, information services, media, and technology, including software and technology-enabled business services, bio-technology, and medical devices industry sectors, among others. The Fund's capital is generally used by our portfolio companies to finance acquisitions of fixed assets and/or for working capital. On June 29, 2010, the Fund completed its first closing of capital contributions, made its first investments, and became a non-diversified, closed-end investment company that elected to be treated as a business development company under the Investment Company Act of 1940. The Fund elected to be treated for federal income tax purposes as a Regulated Investment Company ("RIC") under the Internal Revenue Code with the filing of its federal corporate income tax return for 2010. Pursuant to this election, the Fund generally will not have to pay corporate-level taxes on any income it distributes to the Company as dividends, allowing the Company to substantially reduce or eliminate its corporate-level tax liability.

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

The Fund's investment objective is to achieve superior risk adjusted investment returns. The Fund seeks to achieve its investment objective by providing debt financing to portfolio companies. Since inception, the Fund's investing activities have focused primarily on private debt securities. The Fund generally receives warrants to acquire equity securities in connection with its portfolio investments. The Fund distributes these warrants to the

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

Transactions with Venture Lending & Leasing V, Inc. (“Fund V”)

The Manager also serves as investment manager for Fund V. The Fund's Board of Directors determined that so long as Fund V has capital available to invest in loan transactions with final maturities earlier than December 31, 2015 (the date on which Fund V will be dissolved), the Fund will invest in each portfolio company in which Fund V invests (“Investments”). Initially the amount of each Investment was allocated 50% to the Fund and 50% to Fund V so long as Fund V had capital available to invest. After June 2014, the Fund is no longer permitted to enter into new commitments to borrowers; however, the Fund will be permitted to fund existing commitments. After February 2011, Fund V is no longer permitted to enter into new commitments to borrowers; however, Fund V will be permitted to fund existing commitments. While investing the Fund's capital in the same companies in which Fund V is also investing could provide the Fund with greater diversification and access to larger transactions, it could also result in a slower pace of investment than would be the case if the Fund were investing in companies by itself.

Transactions with Venture Lending & Leasing VII, Inc. (“Fund VII”)

The Manager also serves as investment manager for Fund VII. The Fund's Board of Directors determined that so long as the Fund has capital available to invest in loan transactions with final maturities earlier than December 31, 2020 (the date on which the Fund will be dissolved), the Fund will invest in each portfolio company in which Fund VII invests (“Investments”). Initially the amount of each Investment has been allocated 50% to the Fund and 50% to Fund VII so long as the Fund has capital available to invest. After June 2014, the Fund is no longer permitted to enter into new commitments to borrowers; however, the Fund will be permitted to fund existing commitments. While investing the Fund's capital in the same companies in which Fund VII is also investing could provide the Fund with greater diversification and access to larger transactions, it could also result in a slower pace of investment than would be the case if the Fund were investing in companies by itself.

Critical Accounting Policies

We identified and determined the most critical accounting principles upon which our financial statements depend by considering accounting policies that involve the most complex or subjective decisions or assessments. Such critical accounting policies relate to the valuation of loans and treatment of non-accrual loans.

Loans are held at estimated fair value as determined by Management, in accordance with the valuation methods described in the valuation of loans section of Note 2 in the Fund's 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 the borrower, prospects for the borrower raising future equity rounds, likelihood of sale or acquisition of the borrower, and length of expected holding period of the loan, as well as an evaluation of the general interest rate environment. The actual value of the loans may differ from Management's estimates, which would affect net income as well as assets.

Results of Operations - For the three and six months ended June 30, 2014 and 2013

Total investment income for the three months ended June 30, 2014 and 2013 was $12.4 million and $15.0 million, respectively, which primarily consisted of interest on the venture loans outstanding. Total investment income for the six months ended June 30, 2014 and 2013 was $26.4 million and $29.3 million, respectively, which

primarily consisted of interest on the venture loans outstanding. The remaining income consisted of interest and dividends on the temporary investment of cash, forfeited commitment fees, and fees earned from waivers to loan agreements. The decrease in investment income is due to the decrease in the average loans outstanding from $308.9 million for the three months ended June 30, 2013 to $270.2 million for the three months ended June 30, 2014, from $304.7 million for the six months ended June 30, 2013 to $275.9 million for the six months ended June 30, 2014, and the slight decrease in average interest rates from 18.89% for the three months ended June 30, 2013 to 18.23% for the three months ended June 30, 2014, from 18.92% for the six months ended June 30, 2013 to 18.60% for the six months ended June 30, 2014. Interest is calculated using the effective interest method, and rates earned by the Fund will fluctuate based on many factors including volatility of values ascribed to warrants, and new loans funded during the year and early payoffs.

Management fees for the three months ended June 30, 2014 and 2013 were $1.8 million and $2.2 million, respectively. Management fees for the six months ended June 30, 2014 and 2013 were $3.8 million and $4.3 million, respectively. Prior to June 29, 2012, management fees were calculated as 2.5 percent of the committed capital of the Company. Starting on June 29, 2012, management fees are calculated as 2.5 percent of the Fund's total assets. Management fees decreased because assets under management as of June 30, 2014 were lower than assets as of June 30, 2013.

Total interest expense was $1.1 million and $1.2 million for the three months ended June 30, 2014 and 2013, respectively. Total interest expense was $2.2 million and $2.4 million for the six months ended June 30, 2014 and 2013, respectively. Interest expense decreased primarily due to the decreased average borrowings, which decreased from $142.8 million for the three months ended June 30, 2013 to $122.6 million for the three months ended June 30, 2014, from $139.0 million for the six months ended June 30, 2013 to $125.9 million for the six months ended June 30, 2014.

Total banking and professional fees were less than $0.1 million and $0.2 million for the three months ended June 30, 2014 and 2013, respectively. Total banking and professional fees were $0.2 million and $0.3 million for the six months ended June 30, 2014 and 2013, respectively. The banking and professional fees were comprised of legal, audit, banking and other professional fees. These fees decreased in 2014 primarily because of decreased legal fees.

Total other operating expenses were less than $0.1 million for the three and six months ended June 30, 2014 and 2013.

Net investment income for the three months ended June 30, 2014 and 2013, was $9.4 million and $11.4 million, respectively. Net investment income for the six months ended June 30, 2014 and 2013, was $20.2 million and $22.2 million, respectively.

Total net realized loss from investments was $0.7 million and $0.9 million for the three months ended June 30, 2014 and 2013, respectively. Total net realized loss from investments was $2.0 million and $1.8 million for the six months ended June 30, 2014 and 2013, respectively.

Net change in unrealized gain (loss) from investments was $2 million and $1.6 million for the three months ended June 30, 2014 and 2013, respectively. Net change in unrealized loss from investments was $0.8 million and $4.6 million for the six months ended June 30, 2014 and 2013, respectively. The unrealized loss consists of fair market value adjustments to loans.

Net change in realized and unrealized gain (loss) from hedging activities was less than ($0.1 million) for the three and six months ended June 30, 2014 and 2013. The realized and unrealized loss consists of the unrealized losses from hedging activities and the net interest received or paid on the interest rate swap transaction. The Fund entered into interest rate swap transactions with Union Bank, N.A and Wells Fargo Bank, N.A. to convert floating rate liabilities to fixed rates (see Note 7 in the Fund's financial statements).

Net increase in net assets resulting from operations for the three months ended June 30, 2014 and 2013 was $6.7 million and $8.8 million, respectively. Net increase in net assets resulting from operations for the six months ended June 30, 2014 and 2013 was $17.4 million and $15.8 million, respectively. On a per share basis, the net increase in net assets resulting from operations was $67.00 and $88.20 for the three months ended June 30, 2014 and 2013, respectively. On a per share basis, the net increase in net assets resulting from operations was $173.76 and $158.45 for the six months ended June 30, 2014 and 2013, respectively.

Liquidity and Capital Resources – June 30, 2014 and December 31, 2013

Total capital contributed to the Fund was $241.5 million, prior to distribution of capital, as of June 30, 2014. Committed capital to the Company at June 30, 2014 was $294.0 million, of which $279.3 million had been called. The remaining $14.7 million in committed capital as of June 30, 2014 is due to expire in June 2015 as the five year anniversary will have passed, at which time no further capital can be called.

The Fund has established a secured revolving loan facility in an amount of up to $160 million with Union Bank, N.A., Wells Fargo Bank, N.A. and Bank Leumi USA. Pursuant to the Loan Agreement, as amended, the Fund has the option to request that the lenders providing such facility increase the borrowing availability thereunder to no more than $170 million in the aggregate, as commitments may be obtained. Loans under the facility may be, at the option of the Fund, either Reference Rate loans (as defined in the agreement) or LIBOR loans.

The facility will terminate on September 23, 2014, but can be accelerated under an event of default such as failure by the Fund to make timely interest or principal payments. As of June 30, 2014 and December 31, 2013, outstanding balance under the facility are $121.5 million and $134.2 million, respectively. The Fund is in the process of renewing its revolving credit line and anticipates this to close prior to the expiration of the line.

As of June 30, 2014 and December 31, 2013, 6% and 11%, respectively, of the Fund's assets consisted of cash and cash equivalents. The Fund invested its assets in venture loans during the six months ended June 30, 2014. Amounts disbursed under the Fund's loan commitments totaled approximately $62.0 million during the six months ended June 30, 2014. Net loan amounts outstanding after amortization and fair market adjustment decreased by approximately $22.9 million for the same period. Unexpired, unfunded commitments totaled approximately $96.9 million as of June 30, 2014.



As of	Cumulative Amount Disbursed	Principal Reductions and Fair Market Adjustments	Balance Outstanding - Fair Value	Unexpired Unfunded Commitments
June 30, 2014	$669.5 million	$398.6 million	$270.9 million	$96.9 million
December 31, 2013	$607.5 million	$313.7 million	$293.8 million	$57.4 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 the Company. To qualify as a RIC, the Fund must distribute to the Company 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 3. Quantitative and Qualitative Disclosures About Market Risk

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

The Fund 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 to the Company.

The Fund's investments are subject to market risk based on several factors, including, but not limited to, the

investment's credit history, available cash, support of the borrower's underlying investors, available liquidity, "burn

rate", revenue income, security interest, secondary markets for collateral, the size of the loan, and term of the loan.

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 increase in net assets resulting from operations by less than 1% for the six months ended June 30, 2014.

Although management believes that this measure is indicative of the Fund's sensitivity to interest rate changes, it makes estimates to adjust for potential changes in credit quality, size and composition of the balance sheet and other business developments that could affect net income. Accordingly, no assurances can be given that actual results would not differ materially from the potential outcome simulated by these estimates.

Item 4. Controls and Procedures:

Evaluation of Disclosure Controls and Procedures:

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

Changes in Internal Controls:

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

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

See item 1A - 'Risk Factors' in the Fund's 2013 Annual Report on Form 10-K for a detailed description of the risks attendant to the Fund and its business. There were no material changes to these factors during the six months ended June 30, 2014.

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

Prior to the Fund's commencement of operations on June 29, 2010, the Fund sold 100,000 shares to the Fund's sole shareholder, the Company, for $25,000 in January 2010. No other shares of the Fund have been sold; however, the Fund received an additional $241.5 million of paid in capital during the period from June 29, 2010 through June 30, 2014 which is expected to be used to acquire venture loans and fund operations.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Issues

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits



Exhibit Number	Description
3(i)	Articles of Incorporation of the Fund as filed with the Maryland Secretary of State on January 11, 2010, incorporated by reference to the Fund's Form 10 filed with the Securities and Exchange Commission on February 9, 2010.
3(ii)	Bylaws of the Fund, incorporated by reference to the Fund's Form 10 filed with the Securities and Exchange Commission on February 9, 2010.
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 February 9, 2010.
31.1-32.2	Certifications pursuant to The Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned duly authorized.

VENTURE LENDING & LEASING VI, INC.

(Registrant)



By:	/s/ Maurice C. Werdegar	By:	/s/ Martin D. Eng
Maurice C. Werdegar		Martin D. Eng
President and Chief Executive Officer		Chief Financial Officer
Date:	August 8, 2014	Date:	August 8, 2014

EXHIBIT INDEX



Exhibit Number	Description
3(i)	Articles of Incorporation of the Fund as filed with the Maryland Secretary of State on January 11, 2010, incorporated by reference to the Fund's Form 10 filed with the Securities and Exchange Commission on February 9, 2010.
3(ii)	Bylaws of the Fund, incorporated by reference to the Fund's Form 10 filed with the Securities and Exchange Commission on February 9, 2010.
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 February 9, 2010.
31.1-32.2	Certifications pursuant to The Sarbanes-Oxley Act of 2002.

Venture Lending & Leasing VI, Inc. - FORM 10-Q - August 8, 2014

Attached files

Venture Lending & Leasing VI, Inc. Reports