SEC Company Response from Firsthand Technology Value Fund, Inc. (SVVC) (CIK 0001495584) (SVVC) — Dec 4, 2013
Firsthand Technology Value Fund, Inc. (SVVC) (CIK 0001495584)
Date: Dec. 4, 2013 · CIK: 0001495584 · Accession: 0001398344-13-005686
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 333-186158, 814-00830
Letter
VIA EDGAR [CORRESPONDENCE FILING] United States Securities and Exchange Commission Division of Investment Management Washington, D.C. 20549 Re: Firsthand Technology Value Fund, Inc. Registration Statement on Form N-2 (File Nos. 333-186158 and 814-00830)
Dear Mr. Minore:
Enclosed for electronic filing via EDGAR pursuant to the Securities Act of 1933, as amended (the “Securities Act”), on behalf of our client, Firsthand Technology Value Fund, Inc. (the “Fund”), are responses to oral comments relating to Pre-Effective No. 2 to the Fund’s Registration Statement on Form N-2 filed with the U.S. Securities and Exchange Commission (the “Commission”) on November 15, 2013 ("Pre-Effective Amendment No. 2”) given by Mr. Dominic Minore of the staff of the Commission (the “Staff”) and received by John Della Grotta of Paul Hastings LLP, counsel to the Fund on November 22, 2013 (the “Staff Comments”).
The numbered italicized paragraphs below correspond to the Staff Comments. Each response to the Staff’s comment is included as a Rider to this Letter. Each Rider is as proposed to be stated in Pre-Effective Amendment No. 3 and marked against Pre-Effective Amendment No. 2.
After review and agreement by the Staff, the Fund shall file Pre-Effective Amendment No. 3 with the Commission together with an acceleration request.
Mr. Dominic Minore
Senior Counsel
U.S. Securities and Exchange Commission
December 4, 2013
Page 2
Fees and Expense Table
1. Comment: In the “Estimated Annual Expenses (as a percentage of net assets attributable to common stock)” heading of the Fees and Expenses Table, delete the word “Estimated” in front of “Annual Expenses”. In addition, under that same heading delete “(estimated)” after “Other Expenses” in line three under that “Annual Expenses (as a percentage of net assets attributable to common stock)” heading.
Response: Comment accepted. See Rider A, attached hereto.
RISK FACTORS - Risks Relating to Our Investments
2. Comment: Add a risk factor relating to the Fund’s investment of debt using PIK interest.
Response: Comment accepted. See Rider B, attached hereto.
Management’s Discussion and Analysis of Financial Condition and Results of Operations- Results of Operations – Comparison of the three months ended June 30, 2013 to the three months ended June 30, 2012 - Investment Income
3. Comment: In the third paragraph, please explain in plain English what is meant by the statement “[t]he higher level of interest income in the three months ended June 30, 2013 compared to the three month ended June ended June 30, 2012, was due to a significant increase in the principal amount of the outstanding notes with Silicon Genesis Corporation.”
Response: Comment accepted. See Rider C.
Management’s Discussion and Analysis of Financial Condition and Results of Operations- Results of Operations – Comparison of the six months ended June 30, 2013 to the six months ended June 30, 2012 - Investment Income
4. Comment: Please indicate for each period how much was PIK income. In addition, in the third paragraph under the caption “Investment Income”, please explain in plain English what is meant by the statement “[t]he higher level of interest income in the six months ended June 30, 2013 compared to the six month ended June ended June 30, 2012, was due to a significant increase in the principal amount of the outstanding notes with Silicon Genesis Corporation.”
Response: Comment accepted. See Rider D.
Mr. Dominic Minore
Senior Counsel
U.S. Securities and Exchange Commission
December 4, 2013
Page 3
Management’s Discussion and Analysis of Financial Condition and Results of Operations- Results of Operations – Comparison of the year ended December 31, 2012 to the period from April 18, 2011 - Investment Income
5. Comment: Please indicate for the period how much was PIK income. In addition, please explain in plain English what is meant by the statement “…we had interest income of $688,716 for the fiscal year ended December 31, 2012, compared to interest income of $306,547 for the fiscal year ended December 31, 2011, in each case primarily attributable to interest accrued on convertible note investments with Silicon Genesis Corporation.”
Response: Comment accepted. See Rider E.
Portfolio Companies Table
6. Comment: Please add a Subsequent Events Footnote to include the IntraOp Medical Corporation Transaction.
Response: Comment accepted. See Rider F.
INVESTMENT MANAGEMENT AGREEMENT – Investment Management Fee
7. Comment: In the second paragraph under the caption “Investment Management Fee,” please add a sentence explaining how the Fund values derivatives.
Response: Comment accepted. See Rider G.
DETERMINATION OF NET ASSET VALUE - DETERMINATION IN CONNECTION WITH OFFERINGS
8. Comment: Please explain the meaning of the last paragraph of the section, namely “[i]n determining whether to proceed with any offering described in a prospectus supplement, the Board determined that any offering below the prevailing market price of the Fund’s common stock would provide additional investments that would be in the long-term best interests of the Fund and its shareholders, but still represent a fair price for the shares purchased in the offering. In addition, explain how this statement is consistent with the 1940 Act.
Response: The Fund has deleted the text under the caption “DETERMINATION OF NET ASSET VALUE - DETERMINATION IN CONNECTION WITH OFFERINGS.” The Fund has added a disclosure regarding the requirements of the 1940 Act with respect to issuance of additional shares of common stock under the heading “DESCRIPTION OF CAPITAL STOCK.” See Rider H.
Mr. Dominic Minore
Senior Counsel
U.S. Securities and Exchange Commission
December 4, 2013
Page 4
FIRSTHAND TECHNOLOGY VALUE FUND, INC. –Statements of Operation (Unaudited)(For the Three and Six Months Ended June 30, 2013 and June 30, 2012)
9. Comment: For future filings, Under the Caption “Investment Income,” the Fund must disclose under both the unaffiliated and affiliated interest line items a break-down of cash and PIK interest.
Response: Comment accepted. For future filings, in the Fund's financial statements, in its Statement of Operations, under the caption “Investment Income,” the Fund shall disclose under both the unaffiliated and affiliated interest line items a break down of cash and PIK interest.
2012 Annual Financial Statements
In reviewing Pre-Effective Amendment No. 2, notwithstanding that the 2012 audited financial statements are referenced in the Registration Statement and the Opinion of the independent public accounting firm is also included therein, the 2012 annual audited financial statements were inadvertently excluded from the filed copy of the Form N-2, with only the six-month unaudited financials remaining. Accordingly, Pre-Effective Amendment No. 3 will include the Fund's audited financial statements of assets and liabilities, including the schedule of investments, as of December 31, 2012 and 2011, and the related statement of operations, changes in net assets, cash flows and financial highlights for the year ended December 31, 2012 and the period April 18, 2011 to December 31, 2011 of the Company, as well as the Report of Tait, Weller & Baker LLP our independent public accounting firm.
The Fund respectfully requests the Staff’s assistance in reviewing this letter and confirming that it has no further comments or, if it has further comments that such comments can be addressed in Pre-Effective Amendment No. 3 at such time when the Fund files its acceleration request. Please advise us if we can provide any further information or assistance to facilitate your review. Please direct any further comments or questions regarding this response letter to the undersigned at (714) 668-6210 or David A. Hearth of Paul Hastings LLP at (415) 856-7007.
Very truly yours,
/s/ JOHN F. DELLA GROTTA
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Unassociated Document
Law Offices of
Paul Hastings LLP
695 Town Center Drive, 17th Floor
Costa Mesa, CA 92626
Telephone (714) 668-6210
Facsimile (714) 668-6310
Internet www.paulhastings.com
December 4, 2013
VIA EDGAR [CORRESPONDENCE FILING]
Mr. Dominic Minore
Senior Counsel
United States Securities and Exchange Commission
Division of Investment Management
100 F Street, N.E.
Washington, D.C. 20549
Re:
Firsthand Technology Value Fund, Inc.
Registration Statement on Form N-2 (File Nos. 333-186158 and 814-00830)
Dear Mr. Minore:
Enclosed for electronic filing via EDGAR pursuant to the Securities Act of 1933, as amended (the “Securities Act”), on behalf of our client, Firsthand Technology Value Fund, Inc. (the “Fund”), are responses to oral comments relating to Pre-Effective No. 2 to the Fund’s Registration Statement on Form N-2 filed with the U.S. Securities and Exchange Commission (the “Commission”) on November 15, 2013 ("Pre-Effective Amendment No. 2”) given by Mr. Dominic Minore of the staff of the Commission (the “Staff”) and received by John Della Grotta of Paul Hastings LLP, counsel to the Fund on November 22, 2013 (the “Staff Comments”).
The numbered italicized paragraphs below correspond to the Staff Comments. Each response to the Staff’s comment is included as a Rider to this Letter. Each Rider is as proposed to be stated in Pre-Effective Amendment No. 3 and marked against Pre-Effective Amendment No. 2.
After review and agreement by the Staff, the Fund shall file Pre-Effective Amendment No. 3 with the Commission together with an acceleration request.
Mr. Dominic Minore
Senior Counsel
U.S. Securities and Exchange Commission
December 4, 2013
Page 2
Fees and Expense Table
1. Comment: In the “Estimated Annual Expenses (as a percentage of net assets attributable to common stock)” heading of the Fees and Expenses Table, delete the word “Estimated” in front of “Annual Expenses”. In addition, under that same heading delete “(estimated)” after “Other Expenses” in line three under that “Annual Expenses (as a percentage of net assets attributable to common stock)” heading.
Response: Comment accepted. See Rider A, attached hereto.
RISK FACTORS - Risks Relating to Our Investments
2. Comment: Add a risk factor relating to the Fund’s investment of debt using PIK interest.
Response: Comment accepted. See Rider B, attached hereto.
Management’s Discussion and Analysis of Financial Condition and Results of Operations- Results of Operations – Comparison of the three months ended June 30, 2013 to the three months ended June 30, 2012 - Investment Income
3. Comment: In the third paragraph, please explain in plain English what is meant by the statement “[t]he higher level of interest income in the three months ended June 30, 2013 compared to the three month ended June ended June 30, 2012, was due to a significant increase in the principal amount of the outstanding notes with Silicon Genesis Corporation.”
Response: Comment accepted. See Rider C.
Management’s Discussion and Analysis of Financial Condition and Results of Operations- Results of Operations – Comparison of the six months ended June 30, 2013 to the six months ended June 30, 2012 - Investment Income
4. Comment: Please indicate for each period how much was PIK income. In addition, in the third paragraph under the caption “Investment Income”, please explain in plain English what is meant by the statement “[t]he higher level of interest income in the six months ended June 30, 2013 compared to the six month ended June ended June 30, 2012, was due to a significant increase in the principal amount of the outstanding notes with Silicon Genesis Corporation.”
Response: Comment accepted. See Rider D.
Mr. Dominic Minore
Senior Counsel
U.S. Securities and Exchange Commission
December 4, 2013
Page 3
Management’s Discussion and Analysis of Financial Condition and Results of Operations- Results of Operations – Comparison of the year ended December 31, 2012 to the period from April 18, 2011 - Investment Income
5. Comment: Please indicate for the period how much was PIK income. In addition, please explain in plain English what is meant by the statement “…we had interest income of $688,716 for the fiscal year ended December 31, 2012, compared to interest income of $306,547 for the fiscal year ended December 31, 2011, in each case primarily attributable to interest accrued on convertible note investments with Silicon Genesis Corporation.”
Response: Comment accepted. See Rider E.
Portfolio Companies Table
6. Comment: Please add a Subsequent Events Footnote to include the IntraOp Medical Corporation Transaction.
Response: Comment accepted. See Rider F.
INVESTMENT MANAGEMENT AGREEMENT – Investment Management Fee
7. Comment: In the second paragraph under the caption “Investment Management Fee,” please add a sentence explaining how the Fund values derivatives.
Response: Comment accepted. See Rider G.
DETERMINATION OF NET ASSET VALUE - DETERMINATION IN CONNECTION WITH OFFERINGS
8. Comment: Please explain the meaning of the last paragraph of the section, namely “[i]n determining whether to proceed with any offering described in a prospectus supplement, the Board determined that any offering below the prevailing market price of the Fund’s common stock would provide additional investments that would be in the long-term best interests of the Fund and its shareholders, but still represent a fair price for the shares purchased in the offering. In addition, explain how this statement is consistent with the 1940 Act.
Response: The Fund has deleted the text under the caption “DETERMINATION OF NET ASSET VALUE - DETERMINATION IN CONNECTION WITH OFFERINGS.” The Fund has added a disclosure regarding the requirements of the 1940 Act with respect to issuance of additional shares of common stock under the heading “DESCRIPTION OF CAPITAL STOCK.” See Rider H.
Mr. Dominic Minore
Senior Counsel
U.S. Securities and Exchange Commission
December 4, 2013
Page 4
FIRSTHAND TECHNOLOGY VALUE FUND, INC. –Statements of Operation (Unaudited)(For the Three and Six Months Ended June 30, 2013 and June 30, 2012)
9. Comment: For future filings, Under the Caption “Investment Income,” the Fund must disclose under both the unaffiliated and affiliated interest line items a break-down of cash and PIK interest.
Response: Comment accepted. For future filings, in the Fund's financial statements, in its Statement of Operations, under the caption “Investment Income,” the Fund shall disclose under both the unaffiliated and affiliated interest line items a break down of cash and PIK interest.
2012 Annual Financial Statements
In reviewing Pre-Effective Amendment No. 2, notwithstanding that the 2012 audited financial statements are referenced in the Registration Statement and the Opinion of the independent public accounting firm is also included therein, the 2012 annual audited financial statements were inadvertently excluded from the filed copy of the Form N-2, with only the six-month unaudited financials remaining. Accordingly, Pre-Effective Amendment No. 3 will include the Fund's audited financial statements of assets and liabilities, including the schedule of investments, as of December 31, 2012 and 2011, and the related statement of operations, changes in net assets, cash flows and financial highlights for the year ended December 31, 2012 and the period April 18, 2011 to December 31, 2011 of the Company, as well as the Report of Tait, Weller & Baker LLP our independent public accounting firm.
The Fund respectfully requests the Staff’s assistance in reviewing this letter and confirming that it has no further comments or, if it has further comments that such comments can be addressed in Pre-Effective Amendment No. 3 at such time when the Fund files its acceleration request. Please advise us if we can provide any further information or assistance to facilitate your review. Please direct any further comments or questions regarding this response letter to the undersigned at (714) 668-6210 or David A. Hearth of Paul Hastings LLP at (415) 856-7007.
Very truly yours,
/s/ JOHN F. DELLA GROTTA
John F. Della Grotta
of PAUL HASTINGS LLP
cc:
Kevin M. Landis (w/encls.)
Kelvin K. Leung, Esq. (w/encls.)
David A. Hearth, Esq. (w/encls.)
Mr. Dominic Minore
Senior Counsel
U.S. Securities and Exchange Commission
December 4, 2013
Page 5
Rider A
FEES AND EXPENSES
The following table and example contains information about the costs and expenses that an investor in an offering will bear directly or indirectly. We caution you that some of the percentages indicated in the table below are estimates and may vary. The following table should not be considered a representation of our future expenses. Actual expenses may be greater or less than shown. Except where the context suggests otherwise, whenever this prospectus contains a reference to fees or expenses paid by “you,” “us,” or “SVVC,” or that “we” will pay fees or expenses, stockholders will indirectly bear such fees or expenses as investors in SVVC.
Stockholder Transaction Expenses:
Sales Load (as a percentage of offering price)
___% (1)
Offering Expenses (as a percentage of offering price)
___% (2)
Dividend Reinvestment Plan Fees
None (3)
Total Stockholder Transaction Expenses (as a percentage of offering price)
___% (4)
Annual Expenses (as a percentage of net assets attributable to common stock):
Management Fees
2.00
%(5)
Incentive Fees Payable under Investment Management Agreement (20% of “Incentive Fee Capital Gains”)
0
% (6)
Other Expenses
0.56
%
Total Annual Expenses
2.56
%
(1)
The sales load will apply only if the shares of common stock to which this prospectus relates are sold to or through underwriters. In such case, a corresponding prospectus supplement will disclose the applicable sales load.
(2)
The related prospectus supplement will disclose the estimated amount of offering expenses, the offering price and the offering expenses as a percentage of the offering price.
(3)
The expenses of administering our dividend reinvestment plan are included in “Other Expenses (estimated).” You will pay brokerage charges if you direct BNY Mellon Investment Servicing (US) Inc., as agent for our common stockholders, to sell your common stock held in a dividend reinvestment account. See “Dividend Reinvestment Plan.”
(4)
The related prospectus supplement will disclose the offering price and the total stockholder transaction expenses as a percentage of the offering price.
Mr. Dominic Minore
Senior Counsel
U.S. Securities and Exchange Commission
December 4, 2013
Page 6
Rider B
In addition, as a business development company, we are subject to special securities laws and regulations so that 70% of our total assets must be comprised of securities of “eligible portfolio companies.” In the case of the stocks of a publicly traded company, this requirement is met only if the market capitalization of that portfolio company is below $250 million at the time of our investment. Therefore, while publicly traded small-cap companies (those with a market capitalization of below $250 million) are considered eligible portfolio companies, large-cap or mid-cap companies are not.
Our investments in securities which provide for payment-in-kind, or PIK, interest may be risky and we could lose all or part of our investment.
We have invested, and may invest in the future, in securities of companies that provide for payment-in-kind,” or PIK interest. Interest payable to us under such securities is accrued and added to outstanding principal to purchase additional securities of such companies. If such companies were to default on such securities, we could lose all of our investment.
We have not yet identified all of the portfolio company investments we intend to acquire using the proceeds of an offering.
The Investment Adviser will select our investments subsequent to the closing of an offering, and our stockholders will have no input with respect to such investment decisions. These factors increase the uncertainty, and thus the risk, of investing in our shares.
Economic recessions or downturns could impair our portfolio companies and harm our operating results.
Many of our portfolio companies are susceptible to economic slowdowns or recessions and may fail or require additional capital investments from us during those periods. Therefore, our non-performing assets are likely to increase and the value of our portfolio is likely to decrease during these periods. These events could harm our operating results.
Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio.
Following an initial investment in a portfolio company, we may make additional investments in that portfolio company as “follow-on” investments, in order to:
·
increase or maintain in whole or in part our equity ownership percentage; or
·
exercise warrants, options, or convertible securities that were acquired in the original or subsequent financing.
We have the discretion to make any follow-on investments, subject to the availability of capital resources and the availability of securities in the applicable public company. We may elect not to make follow-on investments in a portfolio company and we may lack sufficient funds to make those investments. The failure to make follow-on investments may, in some circumstances, jeopardize the continued viability of a portfolio company and our initial investment, or may result in a missed opportunity for us to increase our participation in a successful operation. Even if we have sufficient capital to make a desired follow-on investment, we may elect not to make a follow-on investment because we may not want to increase our concentration of risk, because we prefer other opportunities, or because we are inhibited by compliance with business development company requirements or the desire to maintain our tax status.
We frequently do not hold controlling equity interests in our portfolio companies and we may not be in a position to exercise control over our portfolio companies or to prevent decisions by management of our portfolio companies that could decrease the value of our investments.
Although we may do so occasionally, we do not anticipate routinely taking controlling equity positions in our portfolio companies. As a result, we will be subject to the risk that a portfolio company may make business decisions with which we disagree, and the stockholders and management of a portfolio company may take risks or otherwise act in ways that are adverse to our interests. Due to the lack of liquidity for the equity investments that we will typically hold in our portfolio companies, we may not be able to dispose of our investments in the event we disagree with the actions of a portfolio company, and may therefore suffer a decrease in the value of our investments.
Mr. Dominic Minore
Senior Counsel
U.S. Securities and Exchange Commission
December 4, 2013
Page 7
Rider C
PORTFOLIO COMPOSITION
We make investments in securities of both public and private companies. Our portfolio investments consist principally of equity and equity-like securities, including common and preferred stock, warrants for the purchase of common and stock, and convertible debt. The fair value of our investment portfolio was $85.7 million as of June 30, 2013 as compared to $59.2 million as of December 31, 2012. The net asset value of our common stock was $24.80 per share as of June 30, 2013 as compared to $22.90 per share as of December 31, 2012.
The following table summarizes the fair value of our investment portfolio by industry sector as of June 30, 2013 and December 31, 2012.
June 30, 2013
December 31, 2012
Social Net