10-Q 1 fp0016675_10q.htm
 
 
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q  

[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period of September 30, 2015 or

[   ]
TRANSITION QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission File Number 333-168195

FIRSTHAND TECHNOLOGY VALUE FUND, INC.
(Exact Name of Registrant as Specified in Charter)  
     
MARYLAND
  
27-3008946
(State or Other Jurisdiction of
 Incorporation or Organization)
  
(I.R.S. Employer
 Identification No)
     
150 Almaden Boulevard, Suite 1250
    
San Jose, California
   95113
(Address of Principal Executive Offices)
  
(Zip Code)

Registrant's Telephone Number, Including Area Code: (408) 886-7096

Indicate by check mark whether the registrant: (1) has 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.      [X] 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 the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
 
  [   ]
Large Accelerated Filer
 [X]
Accelerated Filer
 
 [   ]
Non-accelerated Filer
 [   ]
Smaller Reporting Company
 (Do not check if 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                   [X] No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
 
Class
  
Outstanding at October 31, 2015
  
Common Stock, $0.001 par value per share
  
7,702,705
  
 
TABLE OF CONTENTS
 
PART I.
FINANCIAL INFORMATION
2
 
Item 1.
Financial Statements
2
   
Statements of Assets and Liabilities as of September 30, 2015 (Unaudited) (Consolidated) and  December 31, 2014
3
   
Statements of Operations (Unaudited) for the Three Months Ended September 30, 2015 (Consolidated), and September 30, 2014 and for the Nine Months Ended September 30, 2015 (Consolidated), and September 30, 2014
4
   
Statements of Cash Flows for the Nine Months Ended September 30, 2015 (Unaudited) (Consolidated) and the Year Ended December 31, 2014
5
   
Statements of Changes in Net Assets for the Nine Months Ended September 30, 2015 (Unaudited) (Consolidated) and the Year Ended December 31, 2014
6
   
Selected Per Share Data and Ratios for the Nine Months Ended September 30, 2015 (Unaudited) (Consolidated), for the Year Ended December 31, 2014, for the Year Ended December 31, 2013, for the Year Ended December 31, 2012, and for the Period April 18, 2011 (Commencement of Operations) Through December 31, 2011
7
   
Schedule of Investments (Unaudited) as of September 30, 2015 (Consolidated)
8
   
Notes To Financial Statements (Unaudited) (Consolidated)
11
 
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
24
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
32
 
Item 4.
Controls and Procedures
33
PART II.
OTHER INFORMATION
34
 
Item 1.
Legal Proceedings
35
 
Item 1A.
Risk Factors
35
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
35
 
Item 3.
Defaults Upon Senior Securities
35
 
Item 4.
Mine Safety Disclosures
35
 
Item 5.
Other Information
35
 
Item 6.
Exhibits
35
SIGNATURES
  
36
 
1
PART I. FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS

See accompanying notes to financial statements
2
Firsthand Technology Value Fund, Inc.
Statements of Assets and Liabilities
         
   
AS OF
SEPTEMBER 30, 2015
 (UNAUDITED)***
    
AS OF
 DECEMBER 31, 2014
  
ASSETS
        
Investment securities:
        
Unaffiliated investments at acquisition cost
  
$
97,213,290
    
$
118,567,567
  
Affiliated investments at acquisition cost
    
17,034,881
      
13,375,885
  
Controlled investments at acquisition cost
    
68,652,060
      
60,815,580
  
Total acquisition cost
  
$
182,900,231
    
$
192,759,032
  
Unaffiliated investments at market value
  
$
84,323,114
    
$
118,830,054
  
Affiliated investments at market value
    
18,900,352
      
14,916,840
  
Controlled investments at market value
    
68,243,414
      
57,918,973
  
Total market value* (Note 6)
    
171,466,880
      
191,665,867
  
Cash**
    
1,129,375
      
69,014,110
  
Receivable for securities sold
    
2,657,611
      
—
  
Receivable from dividends and interest
    
3,044,940
      
2,729,276
  
Other assets
    
261,218
      
29,993
  
Total Assets
    
178,560,024
      
263,439,246
  
LIABILITIES
                
Payable for securities purchased
    
—
      
38,253,718
  
Incentive fees payable (Note 4)
    
78,890
      
13,716,658
  
Payable to affiliates (Note 4)
    
936,770
      
1,294,481
  
Consulting fee payable
    
27,000
      
23,000
  
Accrued expenses and other payables
    
220,662
      
421,318
  
Total Liabilities
    
1,263,322
      
53,709,175
  
NET ASSETS
  
$
177,296,702
    
$
209,730,071
  
Net Assets consist of:
                
Common Stock, par value $0.001 per share 100,000,000 shares authorized
  
$
7,703
    
$
8,562
  
Paid-in-capital
    
184,982,547
      
204,981,680
  
Accumulated net investment income
    
5,549,498
      
5,832,994
  
Accumulated net realized loss from security transactions, purchased and written options
    
(1,809,695
)
    
—
  
Net unrealized depreciation on investments and warrants transactions
    
(11,433,351
)
    
(1,093,165
)
NET ASSETS
  
$
177,296,702
    
$
209,730,071
  
Shares of Common Stock outstanding
    
7,702,705
      
8,562,173
  
Net asset value per share (Note 2)
  
$
23.02
    
$
24.49
  
 
*
Includes warrants whose primary risk exposure is equity contracts.
**
Cash composed primarily of the Fidelity Institutional Money Market Treasury Portfolio which invests primarily in U.S. Treasury securities. The yield as of 09/30/15 was 0.01%. Please see https://fundresearch.fidelity.com/mutual-funds/summary/316175504 for additional information.
***
Consolidated.

See accompanying notes to financial statements
3
Firsthand Technology Value Fund, Inc.  
Statements of Operations (Unaudited)
                 
   
FOR THE THREE MONTHS ENDED
    
FOR THE NINE MONTHS ENDED
  
   
SEPT 30, 2015*
    
SEPT 30, 2014
    
SEPT 30, 2015*
    
SEPT 30, 2014
  
INVESTMENT INCOME
                
Unaffiliated dividend income
  
$
—
     $
—
    
$
148,000
     $ 
—
  
Unaffiliated interest
    
32,723
      
1,461
      
47,826
      
5,033
  
Affiliated/controlled interest
    
490,928
      
523,058
      
1,438,391
      
1,365,264
  
Royalty income
    
—
      
351,327
      
14,261
      
423,196
  
TOTAL INVESTMENT INCOME
    
523,651
      
875,846
      
1,648,478
      
1,793,493
  
EXPENSES
                                
Investment advisory fees (Note 4)
    
936,770
      
1,358,816
      
2,931,531
      
3,929,151
  
Administration fees
    
43,900
      
35,287
      
107,239
      
105,532
  
Custody fees
    
2,251
      
5,110
      
10,426
      
13,782
  
Transfer agent fees
    
8,384
      
9,132
      
26,399
      
26,684
  
Registration and filing fees
    
5,798
      
9,725
      
17,203
      
21,208
  
Professional fees
    
110,614
      
155,463
      
957,049
      
651,689
  
Printing fees
    
50,136
      
136,713
      
149,946
      
239,588
  
Trustees fees
    
25,000
      
15,000
      
75,000
      
45,000
  
Settlement fees
    
—
      
—
      
—
      
838,000
  
Miscellaneous fees
    
29,664
      
13,067
      
56,495
      
50,547
  
TOTAL GROSS EXPENSES
    
1,212,517
      
1,738,313
      
4,331,288
      
5,921,181
  
Incentive fee adjustments (Note 4)
    
(2,753,010
)
    
5,659,108
      
(2,399,314
)
    
4,226,169
  
TOTAL NET EXPENSES
    
(1,540,493
)
    
7,397,421
      
1,931,974
      
10,147,350
  
NET INVESTMENT INCOME (LOSS)
    
2,064,144
      
(6,521,575
)
    
(283,496
)
    
(8,353,857
)
Net Realized and Unrealized Gains (Losses) on Investments:
                                
Net realized gains (losses) from security transactions
                                
Non-affiliated and other assets
    
(3,725,521
)
    
26,779,485
      
(2,434,689
)
    
26,779,617
  
Net realized gains from purchased option transactions(1)
    
—
      
15,290,438
      
—
      
15,290,438
  
Net realized gains from written option transactions (1)
    
—
      
54,928
      
624,994
      
54,928
  
Net change in unrealized depreciation on investments
    
(10,093,234
)
    
(9,092,761
)
    
(10,388,120
)
    
(17,423,461
)
Net change in unrealized appreciation (depreciation) on warrants transactions (1)
    
53,706
      
4,786
      
47,934
      
(2,418,528
)
Net change in unrealized depreciation on purchased options (1)
    
—
      
(4,794,453
)
    
—
      
(1,470,000
)
Net change in unrealized appreciation on written options (1)
    
—
      
45,257
      
—
      
70,011
  
Net Realized and Unrealized Gains (Losses) on Investments
    
(13,765,049
)
    
28,287,680
      
(12,149,881
)
    
20,883,005
  
Net Increase (Decrease) In Net Assets Resulting From Operations
  
$
(11,700,905
)
   $
21,766,105
    
$
(12,433,377
)
   $
12,529,148
  
Net Increase (Decrease) In Net Assets Per Share Resulting From Operations (2)
  
$
(1.49
)
   $
2.40
    
$
(1.59
)
   $
1.38
  

(1)
Primary risk exposure is equity contracts.
(2)
Per share results are calculated based on weighted average shares outstanding for each period.
*
Consolidated.

See accompanying notes to financial statements
4
Firsthand Technology Value Fund, Inc.
Statements of Cash Flows
         
   
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 (UNAUDITED)*
    
FOR THE YEAR ENDED DECEMBER 31, 2014
  
CASH FLOWS FROM OPERATING ACTIVITIES
        
Net increase (decrease) in Net Assets resulting from operations
  
$
(12,433,377
)
  
$
15,984,110
  
                 
Adjustments to reconcile net increase (decrease) in Net Assets derived from operations to net cash provided by (used in) operating activities:
                
Purchases of investments
    
(38,491,828
)
    
(181,556,214
)
Proceeds from disposition of investments
    
47,408,157
    
181,754,896
  
Net purchases from short-term investments
    
(1,500,000
)
    
(500,000
)
Net proceeds from written options
    
624,994
      
1,964,401
  
Net proceeds from purchased options
    
—
      
15,290,438
  
Proceeds from litigation claim
    
7,783
      
18,013
  
Increase in dividends, interest, and reclaims receivable
    
(315,664
)
    
(876,157
)
Increase in receivable for investment sold
    
(2,657,611
)
    
—
  
Increase (decrease) in payable for investment purchased
    
(38,253,718
)
    
38,253,718
  
Increase (decrease) in payable to affiliates
    
(357,711
)
    
22,450
  
Increase (decrease) in incentive fees payable
    
(13,637,768
)
    
5,405,459
  
Decrease (increase) in other assets
    
(231,225
)
    
1,945
  
Decrease in accrued expenses and other payables
    
(196,656
)
    
(8,092
)
Net realized (gain) loss from investments
    
2,434,689
      
(65,088,456
)
Net realized gain from written options
    
(624,994
)
    
(1,964,401
)
Net unrealized depreciation from investments, other assets, and warrants transactions
    
10,340,186
      
40,291,286
  
Net cash provided by (used in) operating activities
    
(47,884,743
)
    
48,993,396
  
                 
CASH FLOWS FROM FINANCING ACTIVITIES
                
Proceeds from shares redeemed
    
(19,999,992
)
    
(9,999,991
)
Distributions paid from realized capital gains
    
—
      
(53,158,463
)
Net cash used by financing activities
    
(19,999,992
)
    
(63,158,454
)
                 
Net decrease in cash
    
(67,884,735
)
    
(14,165,058
)
Cash - beginning of period
    
69,014,110
      
83,179,168
  
Cash - end of period
  
$
1,129,375
    
$
69,014,110
  
 
*
Consolidated.
 
See accompanying notes to financial statements
5
Firsthand Technology Value Fund, Inc.
Statements of Changes in Net Assets
         
   
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 (UNAUDITED)*
    
FOR THE YEAR ENDED DECEMBER 31, 2014
  
FROM OPERATIONS:
        
Net investment loss
  
$
(283,496
)
   $ 
(10,777,461
)
Net realized gains (losses) from security transactions and written options and warrants transactions
    
(1,809,695
)
    
67,052,857
  
Net change in unrealized depreciation on investments and warrants transactions
    
(10,340,186
)
    
(40,291,286
)
Net increase (decrease) in net assets from operations
    
(12,433,377
)
    
15,984,110
  
                 
FROM DISTRIBUTIONS:
                
From realized gains on investments
    
—
      
(53,158,463
)
TOTAL DISTRIBUTIONS
    
—
      
(53,158,463
)
                 
FROM CAPITAL SHARE TRANSACTIONS:
                
Value of shares repurchased
    
(19,999,992
)
    
(9,999,991
)
Net decrease in net assets from capital share transactions
    
(19,999,992
)
    
(9,999,991
)
TOTAL DECREASE IN NET ASSETS
    
(32,433,369
)
    
(47,174,344
)
                 
NET ASSETS:
                
Beginning of period
    
209,730,071
      
256,904,415
  
End of period
  
$
177,296,702
    $ 
209,730,071
  
Accumulated Net Investment Income
  
$
5,549,498
     $ 
5,832,994
  
                 
COMMON STOCK ACTIVITY:
                
Shares repurchased
    
(859,468
)
    
(509,859
)
Net decrease in shares outstanding
    
(859,468
)
    
(509,859
)
Shares outstanding, beginning of period
    
8,562,173
      
9,072,032
  
Shares outstanding, end of period
    
7,702,705
      
8,562,173
  
 
*
Consolidated.
 
See accompanying notes to financial statements
6
Firsthand Technology Value Fund, Inc.
Financial Highlights
Selected per share data and ratios for a share outstanding throughout each period
                     
   
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
2015
(UNAUDITED)*
  
FOR THE YEAR ENDED DECEMBER 31, 2014
    
FOR THE YEAR ENDED DECEMBER 31, 2013
    
FOR THE YEAR ENDED DECEMBER 31, 2012
    
FOR THE PERIOD ENDED DECEMBER 31, 2011(1)
  
Net asset value at beginning of period
  
$
24.49
    
$
28.32
    
$
22.90
    
$
23.92
    
$
27.01
  
Income from investment operations:
                                        
Net investment income (loss)
    
(0.04
)(2)
    
(1.26
)
    
(1.42
)
    
(0.39
)
    
(0.41
)
Net realized and unrealized gains (losses) on investments
    
(1.55
)
    
3.04
      
7.16
      
(1.01
)
    
(2.68
)
Total from investment operations
    
(1.59
)
    
1.78
      
5.74
      
(1.40
)
    
(3.09
)
                                         
Distributions from:
                                        
Realized capital gains
    
—
      
(5.86
)
    
(0.32
)
    
—
      
—
  
                                         
Premiums from shares sold in offerings
    
—
      
—
      
—
(3)
    
0.38
      
—
  
                                         
Anti-dilutive effect from capital share transactions
    
0.12
      
0.25
      
—
      
—
      
—
  
Net asset value at end of period
  
$
23.02
    
$
24.49
    
$
28.32
    
$
22.90
     $ 
23.92
  
                                         
Market value at end of period
  
$
8.51
    
$
18.65
    
$
23.17
    
$
17.44
    $ 
14.33
  
                                         
Total return
                                        
Based on Net Asset Value
    
(6.0
)%(A)
    
12.54
%
    
25.30
%
    
(4.26
)%
    
(11.44
)%(A)
Based on Market Value
    
(54.37
)%(A)
    
4.76
%
    
34.61
%
    
21.70
%
    
(46.95
)%(A)
Net assets at end of period (millions)
  
$
177.3
    
$
209.7
    
$
256.9
    
$
195.9
    $
83.63
  
Ratio of total expenses to average net assets
    
1.35
%(B)(4)
    
5.29
%(4)
    
6.52
%(4)
    
2.56
%
    
2.76
%(B)
Ratio of total expenses to average net assets, excluding incentive fees
    
3.03
%(B)
    
3.12
%
    
2.67
%
    
2.56
%
    
2.76
%(B)
Ratio of net investment increase (loss) to average net assets
    
(0.20
)%(B)
    
(4.31
)%
    
(5.96
)%
    
(2.12
)%
    
(2.28
)%(B)
Portfolio turnover rate
    
21
%(A)
    
95
%
    
17
%
    
10
%
    
18
%(A)

(1)
For the period April 18, 2011 (inception) through December 31, 2011.
(2)
Calculated using average shares outstanding.
(3)
Less than $0.005 per share.
(4)
Amount includes the incentive fee. For the nine months ended September 30, 2015, the year ended December 31, 2014, and the year ended December 31, 2013, the ratio of the incentive fee to average net assets was (1.68)%, 2.17%, and 3.85%, respectively.
(A)
Not Annualized.
(B)
Annualized.
*
Consolidated.
 
See accompanying notes to financial statements
7
Firsthand Technology Value Fund, Inc.
Consolidated Schedule of Investments
SEPTEMBER 30, 2015 (UNAUDITED)
                 
PORTFOLIO COMPANY
(% OF NET ASSETS)
 AND INDUSTRY
  
TYPE OF INVESTMENT
  
SHARES/PAR
 VALUE ($)
     
COST BASIS
    
VALUE
  
ALIPHCOM, INC. (2.8%)
  
Common Stock *(1)
    
2,128,005
    
$
10,108,024
     $
4,921,224
  
Consumer Electronics
                            
                             
CLOUDERA, INC. (0.3%)
  
Common Stock *(1)
    
20,000
      
580,000
      
580,000
  
Software
                            
                             
GILT GROUPE
  
Common Stock *(1)
    
198,841
      
4,558,112
      
3,180,740
  
HOLDINGS, INC. (1.8%)
                            
Internet
                            
                             
HERA SYSTEMS, INC. (1.1%)
  
Preferred Stock - Series A (1)
    
3,642,324
      
2,000,000
      
2,000,000
  
Aerospace
                            
                             
HIGHTAIL, INC. (5.6%)
  
Preferred Stock - Series E *(1)
    
2,268,602
      
9,999,998
      
9,999,998
  
Cloud Computing
                            
                             
HIKU LABS, INC. (1.3%)
  
Preferred Stock - Series A (1)
    
3,280,191
      
2,124,074
      
2,280,061
  
Consumer Electronics
                            
                             
INTEVAC, INC. (0.6%)
  
Common Stock *
    
243,883
      
2,721,734
      
1,121,862
  
Other Electronics
                            
                             
INTRAOP MEDICAL CORP. (15.0%)
  
Preferred Stock - Series C *(1)(2)
    
26,856,187
      
26,299,938
      
22,655,879
  
Medical Devices
  
Term Note (1)(2)
Matures February 2016
 Interest Rate 8%
    
3,000,000
      
3,000,000
      
3,000,000
  
 
Convertible Note (1)(2)
Matures July 2016
 Interest Rate 15%
    
1,000,000
      
1,000,000
      
1,000,000
  
                         
26,655,879
  
                             
INVENSENSE, INC. (2.6%)
  
Common Stock *
    
500,000
      
8,003,882
      
4,645,000
  
Semiconductors
                            
                             
MATTSON TECHNOLOGY, INC. (4.3%)
  
Common Stock *
    
3,280,000
      
8,239,200
      
7,642,400
  
Semiconductor Equipment
                            
                             
NUTANIX, INC. (2.5%)
  
Preferred Stock - Series A *(1)
    
227,272
      
3,999,987
      
4,463,122
  
Networking
                            
See accompanying notes to financial statements
8
Firsthand Technology Value Fund, Inc.
Consolidated Schedule of Investments - continued
SEPTEMBER 30, 2015 (UNAUDITED)
                 
PORTFOLIO COMPANY
(% OF NET ASSETS)
 AND INDUSTRY
  
TYPE OF INVESTMENT
  
SHARES/PAR
 VALUE ($)
    
COST BASIS
    
VALUE
  
PHUNWARE, INC. (5.4%)
  
Preferred Stock - Series E *(1)
    
3,257,328
    
$
9,999,997
    $ 
9,615,632
  
Mobile Computing
                            
                             
PIVOTAL SYSTEMS CORP. (12.9%)
  
Preferred Stock - Series C * (1)(2)
    
2,291,260
      
2,657,862
      
2,657,862
  
Semiconductor Equipment
  
Preferred Stock - Series B *(1)(2)
    
13,065,236
      
6,321,482
      
10,538,419
  
 
  
Preferred Stock - Series A *(1)(2) 
    
11,914,217
      
6,000,048
      
9,610,007
  
                         
22,806,288
  
                             
PURE STORAGE, INC. (0.1%)
  
Common Stock - Class B * (1)
    
14,000
      
336,000
      
238,000
  
Computer Storage
                            
                             
QMAT, INC. (7.1%)
Advanced Materials
  
Preferred Stock Warrants -
 Series A *(1)(2)
    
2,000,000
      
0
      
615,800
  
 
  
Preferred Stock - Series A *(1)(2)
    
12,000,240
      
12,000,240
      
12,000,240
  
                         
12,616,040
  
                             
ROKU, INC. (1.3%)
  
Common Stock *(1)
    
1,500,000
      
2,312,500
      
2,250,000
  
Consumer Electronics
                            
                             
SILICON GENESIS CORP. (2.6%) **
  
Preferred Stock - Series 1-F *(1)(2)
    
912,453
      
583,060
      
0
  
Intellectual Property
  
Common Stock Warrants *(1)(2)
    
37,982
      
6,678
      
0
  
   
Common Stock *(1)(2)
    
921,892
      
169,045
      
0
  
   
Preferred Stock - Series 1-D *(1)(2)
    
850,830
      
431,901
      
0
  
   
Preferred Stock - Series 1-C *(1)(2)
    
82,914
      
109,518
      
0
  
   
Preferred Stock - Series 1-E *(1)(2)
    
5,704,480
      
2,946,535
      
0
  
   
Term Note (1)(2)
Matures December 2016
 Interest Rate 12%
    
3,000,000
      
3,000,000
      
2,653,447
  
   
Convertible Note (1)(2)
    
1,250,000
      
1,610,753
      
1,105,603
  
   
Common Stock Warrants *(1)(2)
    
5,000,000
      
0
      
0
  
   
Convertible Note (1)(2)
    
1,000,000
      
1,000,000
      
884,482
  
   
Common Stock Warrants *(1)(2)
    
3,000,000
      
0
      
0
  
                         
4,643,532
  
                             
SUNRUN, INC. (3.4%)
  
Common Stock *(1)
    
674,820
      
6,417,495
      
5,948,201
  
Renewable Energy
                            
                             
TAPAD, INC. (5.8%)
  
Preferred Stock - Series B-2 *(1)
    
492,244
      
7,149,992
      
7,149,992
  
Advertising Technology
  
Preferred Stock - Series B-1 *(1)
    
280,048
      
2,999,986
      
3,188,374
  
                         
10,338,366
  
See accompanying notes to financial statements
9
Firsthand Technology Value Fund, Inc.
Consolidated Schedule of Investments - continued
SEPTEMBER 30, 2015 (UNAUDITED)
                 
PORTFOLIO COMPANY
(% OF NET ASSETS)
 AND INDUSTRY
  
TYPE OF INVESTMENT
  
SHARES/PAR
 VALUE ($)
    
COST BASIS
    
VALUE
  
TELEPATHY INVESTORS, INC. (3.4%)
  
Preferred Stock - Series A *(1)(3)
    
15,238,000
    
$
3,999,999
     $ 
4,000,000
  
Consumer Electronics
  
Convertible Note (1)(3)
Matures June 2017
 Interest Rate 10%
    
2,000,000
      
2,000,000
      
2,000,000
  
                         
6,000,000
  
                             
TURN INC. (8.4%)
  
Preferred Stock - Series E *(1)
    
1,798,562
      
15,000,007
      
14,804,324
  
Advertising Technology
                            
                             
UCT COATINGS, INC. (0.2%)
  
Common Stock Warrants *(1)
    
136,986
      
0
      
27
  
Advanced Materials
  
Common Stock *(1)
    
1,500,000
      
662,235
      
294,150
  
   
Common Stock Warrants *(1)
    
2,283
      
67
      
0
  
   
Common Stock Warrants *(1)
    
33,001
      
0
      
7
  
                         
294,184
  
                             
VUFINE. INC. (0.9%)
  
Preferred Stock - Series A *(1)(2)
    
15,000,000
      
1,500,000
      
1,500,000
  
Consumer Electronics
  
Common Stock *(1)(2)
    
750,000
      
15,000
      
21,675
  
                         
1,521,675
  
                             
WRIGHTSPEED, INC. (7.3%)
  
Preferred Stock - Series C *(1)(3)
    
2,267,659
      
5,999,999
      
7,320,003
  
Automotive
  
Preferred Stock - Series D *(1)(3)
    
1,100,978
      
3,375,887
      
3,921,353
  
   
Preferred Stock - Series E *(1)(3)
    
450,814
      
1,658,996
      
1,658,996
  
                         
12,900,352
  
TOTAL INVESTMENTS
                            
(Cost $182,900,231)
                            
—96.7%
                        
171,466,880
  
                             
OTHER ASSETS IN EXCESS
                            
OF LIABILITIES — 3.3%
                        
5,829,822
  
                             
NET ASSETS — 100.0%
                      
$
177,296,702
  
 
*
Non-income producing security.
**
On February 17, 2015, Silicon Genesis Corp. filed a Voluntary Petition for Chapter 11 protection under the U.S. Bankruptcy Code. The Fund currently is the sole secured creditor of Silicon Genesis.
(1)
Restricted security. Fair Value is determined by or under the direction of the Company's Board of Directors (See note 3).
(2)
Controlled investments.
(3)
Affiliated issuer.
See accompanying notes to financial statements
10
Firsthand Technology Value Fund, Inc.  (the "Company")
Consolidated Notes to Financial Statements
SEPTEMBER 30, 2015 (UNAUDITED)

NOTE 1.  THE COMPANY

Firsthand Technology Value Fund, Inc. (the "Company," "us," "our," and "we") is a Maryland corporation and an externally managed, non-diversified, closed-end management investment company that has elected to be treated as a business development company ("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act").  The Company acquired its initial portfolio of securities through the reorganization of Firsthand Technology Value Fund, a series of Firsthand Funds, into the Company.  The reorganization was completed on April 15, 2011.  The Company commenced operations on April 18th, 2011.  Under normal circumstances, the Company will invest at least 80% of its net assets for investment purposes in technology companies, which are considered to be those companies that derive at least 50% of their revenues from products and/or services within the information technology sector or the "cleantech" sector.  Information technology companies include, but are not limited to, those focused on computer hardware, software, telecommunications, networking, Internet, and consumer electronics.  While there is no standard definition of cleantech, it is generally regarded as including goods and services designed to harness renewable energy and materials, eliminate emissions and waste, and reduce the use of natural resources.  In addition, under normal circumstances we will invest at least 70% of our total assets in privately held companies and in public companies with market capitalizations of less than $250 million.  Our portfolio is primarily composed of equity and equity derivative securities of technology and cleantech companies (as defined above).  These investments generally range between $1 million and $10 million each, although the investment size will vary proportionately with the size of the Company's capital base. The Company's shares are listed on the NASDAQ Global Market under the symbol "SVVC."

CONSOLIDATION OF SUBSIDIARY- FIRSTHAND VENTURE INVESTORS. On May 8, 2015, the Board of Directors of the Company approved the formation of a fully owned and controlled subsidiary (as defined by the 1940 Act) of the Company named Firsthand Venture Investors ("FVI"), a California general partnership formed on March 30, 2015.  After the closing of business on June 30, 2015, the Company contributed substantially all of its assets to FVI in return for a controlling general partner ownership interest in FVI.  The transaction was completed July 1, 2015.  Under this new structure, we will have all or substantially all of our investment activities conducted through our fully owned subsidiary, FVI.  As a result, the financial statements of the Company and FVI are presented in the report on a consolidated basis. 

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies followed in the preparation of the Company's financial statements included in this report:

USE OF ESTIMATES.  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period.  Actual results could differ from those estimates.

INTERIM FINANCIAL STATEMENTS.  Interim financial statements are condensed and should be read in conjunction with the Company's latest annual financial statements. Interim disclosures generally do not repeat those of the annual statements.

PORTFOLIO INVESTMENT VALUATIONS. Investments are stated at "value" as defined in the 1940 Act and in the applicable regulations of the Securities and Exchange Commission and in accordance with GAAP.  Value, as defined in Section 2(a)(41) of the 1940 Act, is (i) the market value of those securities for which a market quotation is readily available and (ii) the fair value as determined in good faith by, or under the direction of, the board of directors for all other securities and assets.  On September 30, 2015, our financial statements include venture capital investments valued at approximately $152.1 million.  The fair values of our venture capital investments were determined in good faith by, or under the direction of, the Board of Directors of the Company (the "Board" or the "Board of Directors").  Upon sale of these investments, the values that are ultimately realized may be different from what is presently estimated.  The difference could be material. Also see Note 6 regarding the fair value of the Company's investments.
11
Firsthand Technology Value Fund, Inc.
Consolidated Notes to Financial Statements - continued
SEPTEMBER 30, 2015 (UNAUDITED)

CASH AND CASH EQUIVALENTS.  The Company considers liquid assets deposited with a bank, investments in money market funds, and certain short-term debt instruments with maturities of three months or less to be cash equivalents.  These investments represent amounts held with financial institutions that are readily accessible to pay our expenses or purchase investments.  Cash and cash equivalents are valued at cost plus accrued interest, which approximates market value.

RESTRICTED SECURITIES.  At September 30, 2015, the Company held $158,057,618 in restricted securities.

INCOME RECOGNITION.  Dividend income is recorded on the ex-dividend date.  Interest income is accrued as earned.  Discounts and premiums on securities purchased are amortized over the lives of the respective securities.  Other non-cash dividends are recognized as investment income at the fair value of the property received.  When debt securities are determined to be non-income producing and non-collectible, the Company ceases accruing interest and writes off  any previously accrued interest.  These write-offs are recorded as a debit to interest income.

SHARE VALUATION.  The net asset value ("NAV")  per share of the Company is calculated by dividing the sum of the value of the securities held by the Company, plus cash or other assets, minus all liabilities (including estimated accrued expenses), by the total number of shares outstanding of the Company, rounded to the nearest cent.

REALIZED GAIN OR LOSS AND UNREALIZED APPRECIATION OR DEPRECIATION OF PORTFOLIO INVESTMENTS. A realized gain or loss is recognized when an investment is disposed of and is computed as the difference between the Company's cost basis in the investment at the disposition date and the net proceeds received from such disposition.  Unrealized appreciation or depreciation is computed as the difference between the fair value of the investment and the cost basis of such investment.

INCOME TAXES.  As we intend to continue to qualify as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), the Company does not provide for income taxes.  The Company recognizes interest and penalties in income tax expense.

FOREIGN CURRENCY TRANSLATION.   The accounting records of the Company are maintained in U.S. dollars.  All assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the rate of exchange of such currencies against U.S. dollars on the date of valuation.

SECURITIES TRANSACTIONS.   Securities transactions are accounted for on the date the transaction for the purchase or sale of the securities is entered into by the Company (i.e., trade date).

CONCENTRATION OF CREDIT RISK.  The Company places its cash and cash equivalents with financial institutions, and, at times, cash held in checking accounts may exceed the Federal Deposit Insurance Corporation insured limit.

OPTIONS. The Company is subject to equity price risk in the normal course of pursuing its investment objectives and may enter into options written to hedge against changes in the value of equities. The Company may purchase put and call options to attempt to provide protection against adverse price effects from anticipated changes in prevailing prices of securities or stock indices.  The Company may also write put and call options. When the Company writes an option, an amount equal to the premium received by the Company is recorded as a liability and is subsequently adjusted to the current fair value of the option written.

Premiums received from writing options that expire unexercised are treated by the Company on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or, if the premium is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security or currency in determining whether the Company has realized a gain or loss. The Company as writer of an option bears the market risk of an unfavorable change in the price of the security underlying the written option.
12
Firsthand Technology Value Fund, Inc.
Consolidated Notes to Financial Statements - continued
SEPTEMBER 30, 2015 (UNAUDITED)  

The Company did not have any written options as of September 30, 2015. The net realized gains/(loss) from written options and the net change in unrealized appreciation (depreciation) on written options for the quarter ended September 30, 2015 can be found on the Statement of Operations.

The number of option contracts written and the premiums received during the nine months ended September 30, 2015 were as follows:
 
   
CONTRACTS
    
RECEIVED
  
Options outstanding, beginning of year
    
—
    
$
—
  
Options written during period
    
8,100
      
1,384,952
  
Options closed during period
    
(1,000
)
    
(98,668
)
Options expired during period
    
(5,032
)
    
(541,326
)
Options exercised during period
    
(2,068
)
    
(744,958
)
Options outstanding, end of period
    
—
    
$
—
  
 
The average volume of the Fund's derivatives during the nine months ended September 30, 2015 is as follows:
   
 
        
 
  
   
Purchased Options
(Contracts)
    
Warrants (Shares)
    
Written Options
(Contracts)
  
Firsthand Technology Value Fund, Inc.
    
—
      
10,336,038
      
613
  
 
NOTE 3.  BUSINESS RISKS AND UNCERTAINTIES

We plan to invest a substantial portion of our assets in privately-held companies, the securities of which are inherently illiquid.  We also seek to invest in small publicly-traded companies that we believe have exceptional growth potential and to make opportunistic investments in publicly-traded companies, both large and small.  In the case of investments in small publicly-traded companies, although these companies are publicly traded, their stock may not trade at high volumes, and prices can be volatile, which may restrict our ability to sell our positions.  These privately held and publicly traded businesses tend to lack management depth, have limited or no history of operations and typically have not attained profitability.  Because of the speculative nature of our investments and the lack of public markets for privately held investments, there is greater risk of loss than is the case with traditional investment securities.

We do not choose investments based on a strategy of diversification.  We also do not rebalance the portfolio should one of our portfolio companies increase in value substantially relative to the rest of the portfolio.  Therefore, the value of our portfolio may be more vulnerable to events affecting a single sector, industry or portfolio company and, therefore, may be subject to greater volatility than a company that follows a diversification strategy.

Because there is typically no public or readily-ascertainable market for our interests in the small privately-held companies in which we invest, the valuation of those securities is determined in good faith by the Valuation Committee, comprised of all members of the Board who are not "interested persons" of the Company, as such term is defined in Section 2(a)(19) of the 1940 Act, in accordance with our Valuation Procedures and is subject to significant estimates and judgments.  The determined value of the securities in our portfolio may differ significantly from the values that would be placed on these securities if a ready market for the securities existed.  Any changes in valuation are recorded in our Statement of Operations as "Net increase (decrease) in unrealized appreciation on investments."  Changes in valuation of any of our investments in privately-held companies from one period to another may be volatile.

13
Firsthand Technology Value Fund, Inc.
Consolidated Notes to Financial Statements - continued
SEPTEMBER 30, 2015 (UNAUDITED)
 
The Board may, from time to time, engage an independent valuation firm to provide it with valuation assistance with respect to certain of our portfolio investments.  The Company intends to continue to engage an independent valuation firm to provide us with assistance regarding our determination of the fair value of select portfolio investments each quarter unless directed by the Board to cancel such valuation services.  The scope of the services rendered by an independent valuation firm is at the discretion of the Board.  The Board is ultimately and solely responsible for determining the fair value of the Company's investments in good faith.

With respect to investments for which market quotations are not readily available or when such market quotations are deemed not to represent fair value, the Board has approved a multi-step valuation process to be followed each quarter, as described below:
     
 
(1)
each quarter the valuation process begins with each portfolio company or investment being initially valued by the Valuation Committee of the Advisor (as defined below) (the "Adviser Valuation Committee") or the independent valuation firm;
     
 
(2)
the Valuation Committee of the Board on a quarterly basis reviews the preliminary valuation of the Adviser Valuation Committee and that of the independent valuation firms and makes the fair value determination, in good faith, based on the valuation recommendations of the Adviser Valuation Committee and the independent valuation firms; and
     
 
(3)
at each quarterly Board meeting, the Board considers the valuations recommended by the Adviser Valuation Committee and the independent valuation firms that were previously submitted to the Valuation Committee of the Board and ratifies the fair value determinations made by the Valuation Committee of the Board.
 
NOTE 4.  INVESTMENT MANAGEMENT FEE

The Company has entered into an investment management agreement (the "Investment Management Agreement") with Firsthand Capital Management, Inc. ("FCM" or the "Adviser"), pursuant to which the Company will pay FCM a fee for providing investment management services consisting of two components—a base management fee and an incentive fee.

The base management fee will be calculated at an annual rate of 2.00% of our gross assets.  For services rendered under the Investment Management Agreement, the base management fee will be payable quarterly in arrears.  The base management fee will be calculated based on the average of (1) the value of our gross assets at the end of the current calendar quarter and (2) the value of our gross assets at the end of the preceding calendar quarter; and will be appropriately adjusted for any share issuances or repurchases during the current calendar quarter.  Base management fees for any partial quarter will be pro-rated.

Instead of an incentive fee paid by the Company under the Investment Management Agreement with respect to investments held by FVI, FVI allocates 20% of its taxable income annually (or upon termination of the Investment Management Agreement) to a subsidiary of FCM, subject to the achievement of performance benchmarks.  That allocation is limited to the amount FCM would have received if the Company were to pay an incentive fee directly to FCM with respect to assets held by FVI, is based on an inception date of April 15, 2011, and equals 20% of FVI's and the Company's realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fees, but determined as of December 31, 2015, for a period of shorter than twelve calendar months to take into account any realized gains computed net of all realized capital losses and unrealized capital depreciation from inception.  As of September 30, 2015, the estimated and accrued allocation of taxable income by FVI totaled $78,890.
14
Firsthand Technology Value Fund, Inc.
Consolidated Notes to Financial Statements - continued
SEPTEMBER 30, 2015 (UNAUDITED)

NOTE 5.  DEBT

On June 29, 2015, the Company entered into a Loan Agreement with FVI, a California general partnership.   FVI is a fully owned subsidiary of the Company.  The Company loaned a principal sum of $10,000 to FVI pursuant to a loan agreement, and the Company holds a promissory note from FVI evidencing that obligation.   As of September 30, 2015, the committed amount, and amount outstanding, under the Loan Agreement was $10,000.  The annualized interest rate of 2.5% will be applied on any unpaid principal balance. The cash received by the Company and the note payable balance on FVI's records has been consolidated and eliminated on the consolidated financial statements presented herein.

NOTE 6. FAIR VALUE

Securities traded on, or quoted by, the NASDAQ Stock Market, Inc. ("NASDAQ") are valued according to the NASDAQ official closing price. Securities traded on other stock exchanges, including the New York Stock Exchange ("NYSE"), are valued at their last reported sale price as of the close of trading of that exchange (normally 4:00 P.M. Eastern Time for the NYSE). If a security is not traded that day, the security will be valued at its most recent bid price.

Securities traded in the over-the-counter market, but not quoted by NASDAQ, are valued at the last sale price (or, if the last sale price is not readily available, at the most recent closing bid price as quoted by brokers that make markets in the securities) at the close of trading on the NYSE.

Securities traded both in the over-the-counter market and on a stock exchange are valued according to the broadest and most representative market.

Securities and other assets that do not have market quotations readily available are valued at their fair value as determined in good faith by the Board in accordance with the Valuation Procedures adopted by the Valuation Committee of the Board.

In pricing illiquid, privately placed securities, the Board of Directors is responsible for (1) determining overall valuation guidelines and (2) ensuring that the investments of the Company are valued within the prescribed guidelines.

The Valuation Committee of the Board is responsible for determining the valuation of the Company's assets within the guidelines established by the Board of Directors.  The Valuation Committee of the Board receives information and recommendations from the Adviser and an independent valuation firm.

The values assigned to these investments are based on available information and do not necessarily represent amounts that might ultimately be realized when that investment is sold, as such amounts depend on future circumstances and cannot reasonably be determined until the individual investments are actually liquidated or become readily marketable.

APPROACHES TO DETERMINING FAIR VALUE.  GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).  In effect, GAAP applies fair value terminology to all valuations whereas the 1940 Act applies market value terminology to readily marketable assets and fair value terminology to other assets.

The main approaches to measuring fair value utilized are the market approach, the income approach, and the asset-based approach.  The choice of which approach to use in a particular situation depends on the specific facts and circumstances associated with the Company, as well as the purpose for which the valuation analysis is being conducted.  FCM and the independent valuation firm rely primarily on the market and income approaches. We also considered the asset-based approach in our analysis because certain of the portfolio companies do not have substantial operating earnings relative to the value of their underlying assets.
15
Firsthand Technology Value Fund, Inc.
Consolidated Notes to Financial Statements - continued
SEPTEMBER 30, 2015 (UNAUDITED)
     
 
-
Market Approach (M): The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. For example, the market approach often uses market multiples derived from a set of comparables. Multiples might lie in ranges with a different multiple for each comparable. The selection of where within the range each appropriate multiple falls requires the use of judgment in considering factors specific to the measurement (qualitative and quantitative).
     
 
-
Income Approach (I): The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present value amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. Those valuation techniques include present value techniques and the multi-period excess earnings method, which is used to measure the fair value of certain assets.
     
 
-
Asset-Based Approach (A): The asset-based approach examines the value of a company's assets net of its liabilities to derive a value for the equity holders.
 
FAIR VALUE MEASUREMENT. In accordance with the guidance from the Financial Accounting Standards Board on fair value measurements and disclosures under GAAP, the Company discloses the fair value of its investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value.  The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements).

The guidance establishes three levels of the fair value hierarchy as follows:
     
 
Level 1 -
Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the date of measurement.
     
 
Level 2 -
Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument in an inactive market, prices for similar instruments in an active or inactive market, interest rates, prepayment speeds, credit risks, yield curves, default rates, and similar data.
     
 
Level 3 -
Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Company's own assumptions about the assumptions a market participant would use in valuing the asset or liability based on the best information available.
 
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security.  To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.  Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.

The inputs used to measure fair value may fall into different levels of the fair value hierarchy.  In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
16
Firsthand Technology Value Fund, Inc.
Consolidated Notes to Financial Statements - continued
SEPTEMBER 30, 2015 (UNAUDITED)
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.  The following is a summary of the inputs used to value the Company's net assets as of September 30, 2015:
             
   
LEVEL 1 QUOTED PRICES
    
LEVEL 2 OTHER SIGNIFICANT
OBSERVABLE INPUTS
    
LEVEL 3 SIGNIFICANT
UNOBSERVABLE INPUTS
  
Assets
            
Common Stocks
            
Advanced Materials
  
$
—
    
$
—
    
$
294,150
  
Consumer Electronics
    
—
      
—
      
7,192,899
  
Computer Storage
    
—
      
—
      
238,000
  
Internet
    
—
      
—
      
3,180,740
  
Other Electronics
    
1,121,862
      
—
      
—
  
Renewable Energy
    
—
      
—
      
5,948,201
  
Semiconductor Equipment
    
7,642,400
      
—
      
—
  
Semiconductors
    
4,645,000
      
—
      
—
  
Software
    
—
      
—
      
580,000
  
Total Common Stocks
    
13,409,262
      
—
      
17,433,990
  
Preferred Stocks
                        
Advanced Materials
    
—
      
—
      
12,000,240
  
Advertising Technology
    
—
      
—
      
25,142,690
  
Automotive
    
—
      
—
      
12,900,352
  
Aerospace
    
—
      
—
      
2,000,000
  
Cloud Computing
    
—
      
—
      
9,999,998
  
Consumer Electronics
    
—
      
—
      
7,780,061
  
Medical Devices
    
—
      
—
      
22,655,879
  
Mobile Computing
    
—
      
—
      
9,615,632
  
Networking
    
—
      
—
      
4,463,122
  
Semiconductor Equipment
    
—
      
—
      
22,806,288
  
Total Preferred Stocks
    
—
      
—
      
129,364,262
  
Asset Derivatives *
                        
Equity Contracts
    
—
      
—
      
615,834
  
Total Asset Derivatives
    
—
      
—
      
615,834
  
Convertible Notes
                        
Consumer Electronics
    
—
      
—
      
2,000,000
  
Intellectual Property
    
—
      
—
      
4,643,532
  
Medical Devices
    
—
      
—
      
4,000,000
  
Total Convertible Notes
    
—
      
—
      
10,643,532
  
Total
  
$
13,409,262
    
$
—
    
$
158,057,618
  

*
Asset derivatives include warrants.

At the end of each calendar quarter, management evaluates the Level 2 and Level 3 assets and liabilities for changes in liquidity, including, but not limited to: whether a broker is willing to execute at the quoted price, the depth and consistency of prices from third-party services, and the existence of contemporaneous, observable trades in the market.  Additionally, management evaluates the Level 1 and Level 2 assets and liabilities on a quarterly basis for changes in listings or delistings on national exchanges.  Transfers in and out of the levels are recognized at the value at the end of the quarter.  There were no transfers between Levels 1 and 2 as of September 30, 2015.
17
Firsthand Technology Value Fund, Inc.
Consolidated Notes to Financial Statements - continued
SEPTEMBER 30, 2015 (UNAUDITED)

Following is a reconciliation of Level 3 assets (at either the beginning or the ending of the period) for which significant unobservable inputs were used to determine fair value.
                             
INVESTMENTS AT
FAIRVALUE USING SIGNIFICANT UNOBSERVABLE
 INPUTS (LEVEL 3)
  
BALANCE
AS OF
 12/31/14
    
NET
PURCHASES/
 CONVERSION
    
NET
SALES/
 CONVERSION
    
NET
REALIZED
GAINS/
 (LOSSES)
    
NET UNREALIZED
APPRECIATION
(DEPRECIATION)(1)
    
TRANSFERS IN (OUT)
OF LEVEL 3
    
BALANCE
AS OF
 9/30/15
  
Common Stocks
                            
Advanced Materials
  
$
607,650
    
$
—
    
$
—
    
$
—
    
$
(313,500
)
  
$
—
    
$
294,150
  
Computer Storage
    
—
      
336,000
      
—
      
—
      
(98,000
)
    
—
      
238,000
  
Consumer Electronics
    
11,820,642
      
452,500
      
—
      
—
      
(5,080,243
)
    
—
      
7,192,899
  
Internet
    
2,547,272
      
—
      
—
      
—
      
633,468
      
—
      
3,180,740
  
Renewable Energy
    
5,061,960
      
—
      
—
      
—
      
886,241
      
—
      
5,948,201
  
Software
    
—
      
580,000
      
—
      
—
      
—
      
—
      
580,000
  
Preferred Stocks                                                         
Advanced Materials
    
11,432,476
      
—
      
—
      
—
      
567,764
      
—
      
12,000,240
  
Advertising Technology
    
19,323,228
      
5,999,995
      
—
      
—
      
(180,533
)
    
—
      
25,142,690
  
Automotive
    
10,916,840
      
1,358,998
      
—
      
—
      
624,514
      
—
      
12,900,352
  
Aerospace
    
—
      
2,000,000
      
—
      
—
      
—
      
—
      
2,000,000
  
Cloud Computing
    
9,999,998
      
—
      
—
      
—
      
—
      
—
      
9,999,998
  
Consumer Electronics
    
4,000,000
      
1,500,000
      
—
      
—
      
2,280,061
      
—
      
7,780,061
  
Medical Devices
    
15,986,250
      
26,299,939
      
(20,299,940
)
    
—
      
669,630
      
—
      
22,655,879
  
Mobile Computing
    
9,999,997
      
—
      
—
      
—
      
(384,365
)
    
—
      
9,615,632
  
Networking
    
—
      
3,999,987
      
—
      
—
      
463,135
      
—
      
4,463,122
  
Semiconductor Equipment
    
18,682,483
      
2,321,483
      
—
      
—
      
1,802,322
      
—
      
22,806,288
  
Asset Derivatives                                                         
Equity Contracts
    
567,900
      
—
      
—
      
—
      
47,934
      
—
      
615,834
  
Convertible Notes                                                          
Consumer Electronics
    
500,000
      
2,100,000
      
(1,200,000
)
    
—
      
600,000
      
—
      
2,000,000
  
Intellectual Property
    
5,250,000
      
—
      
—
      
—
      
(606,468
)
    
—
      
4,643,532
  
Medical Devices
    
4,000,000
      
—
      
—
      
—
      
—
      
—
      
4,000,000
  
Semiconductor Equipment
    
2,000,000
      
—
      
(2,000,000
)
    
—
      
—
      
—
      
—
  
Total
  
$
132,696,696
    
$
46,948,902
    
$
(23,499,940
)
  
$
—
    
$
1,911,960
    
$
—
    
$
158,057,618
  
 
(1)
The net change in unrealized depreciation from Level 3 instruments held as of September 30, 2015 was $1,911,960.
18
Firsthand Technology Value Fund, Inc.
Consolidated Notes to Financial Statements - continued
SEPTEMBER 30, 2015 (UNAUDITED)
The below chart represents quantitative disclosure about significant unobservable inputs for Level 3 fair value measurements at September 30, 2015:
 
   
FAIR
VALUE AT
 9/30/15
  
VALUATION TECHNIQUES
  
UNOBSERVABLE INPUTS
  
RANGE
 (WEIGHTED AVG.)
Direct venture capital investments: Advanced Materials
  
$12.9M
  
Market Comparable Companies
Prior Transaction Analysis
  
EBITDA Multiple
  
4.7x - 6.2x
     
Revenue Multiple
  
0.8x - 1.0x
     
Volatility
  
53.77% - 58.03%
     
Risk-Free Rate
  
1.37%
     
Discount for Lack of Marketability
  
32.2% - 34.4%
Direct venture capital investments: Advertising Technology
  
$25.1M
  
Market Comparable Companies
Prior Transaction Analysis
  
Revenue Multiple
  
0.7x
     
Volatility
  
53.84% - 61.76%%
     
Risk-Free Rate
  
0.64%
     
Discount for Lack of Marketability
  
0.0%
Direct venture capital investments: Aerospace
  
$2.0M
  
Prior Transaction Analysis
  
Discount for Lack of Marketability
  
0.0%
Direct venture capital investments: Automotive
  
$12.9M
  
Prior Transaction Analysis
  
Volatility
  
65.88%
     
Risk-Free Rate
  
0.92%
     
Discount for Lack of Marketability
  
0.0%
Direct venture capital investments: Cloud Computing
  
$10.0M
  
Prior Transaction Analysis
  
Volatility
  
36.99%
     
Risk-Free Rate
  
0.33%
     
Discount for Lack of Marketability
  
11.4%
Direct venture capital investments: Computer Storage
  
$0.2M
  
Prior Transaction Analysis
  
Discount for Lack of Marketability
  
0.0%
Direct venture capital investments: Consumer Electronics
  
$17.0M
  
Prior Transaction Analysis
  
Volatility
  
45.24% 62.18%
     
Risk-Free Rate
  
0.33% 1.37%
     
Discount for Lack of Marketability
  
0.0% 29.3%
Direct venture capital investments: Intellectual Property
  
$4.6M
  
Market Comparable Companies
  
Volatility
  
55.47%
     
Risk-Free Rate
  
1.37%
     
Discount for Lack of Marketability
  
0.0%
Direct venture capital investments: Internet
  
$3.2M
  
Prior Transaction Analysis
  
Volatility
  
68.76%
     
Risk-Free Rate
  
0.33%
     
Discount for Lack of Marketability
  
20.9%
Direct venture capital investments: Medical Devices
  
$26.7M
  
Market Comparable Companies
Prior Transaction Analysis
  
Volatility
  
75.05%
     
Risk-Free Rate
  
1.15%
     
Discount for Lack of Marketability
  
0.0%
 
19
Firsthand Technology Value Fund, Inc.
Consolidated Notes to Financial Statements - continued
SEPTEMBER 30, 2015 (UNAUDITED)
 
   
FAIR
VALUE AT
 9/30/15
  
VALUATION TECHNIQUES
  
UNOBSERVABLE INPUTS
  
RANGE
 (WEIGHTED AVG.)
Direct venture capital investments: Mobile Computing
  
$9.6M
  
Market Comparable Companies
Prior Transaction Analysis
  
Volatility
  
71.55%
     
Risk-Free Rate
  
0.64%
     
Discount for Lack of Marketability
  
0.0%
Direct venture capital investments: Networking
  
$4.5M
  
Prior Transaction Analysis
  
Volatility
  
28.99%
     
Risk-Free Rate
  
0.33%
     
Discount for Lack of Marketability
  
9.0%
Direct venture capital investments: Renewable Energy
  
$6.0M
  
Prior Transaction Analysis
  
Discount for Lack of Marketability
  
15.0%
Direct venture capital investments: Semiconductor Equipment
  
$22.8M
  
Prior Transaction Analysis
  
Volatility
  
42.74%
     
Risk-Free Rate
  
0.92%
     
Discount for Lack of Marketability
  
0.0%
Direct venture capital investments: Software
  
$0.6M
  
Prior Transaction Analysis
  
Volatility
  
62.23%
     
Risk-Free Rate
  
0.33%
     
Discount for Lack of Marketability
  
19.0%
NOTE 7.  FEDERAL INCOME TAXES
The Company has elected, and intends to qualify annually, for the special tax treatment afforded RICs under the Code.  As provided in the Code, in any fiscal year in which a BDC so qualifies and distributes at least 90% of its taxable net income, the BDC (but not the shareholders) will be relieved of federal income tax on the income distributed.  Accordingly, no provision for income taxes has been made.  To avoid imposition of the excise tax applicable to regulated investment companies, the Company intends to declare as dividends in each calendar year at least 98% of its net investment income (earned during the calendar year) and 98.2% of its net realized capital gains (earned during the 12 months ended October 31) plus undistributed amounts, if any, from prior years.
The reorganization described in Note 1 (the formation of FVI as a fully owned subsidiary for investment activities) was structured to avoid any adverse tax consequences for the Company and its shareholders. The Company's engaging in investment activities through FVI does not, in our view, jeopardize the Company's ability to continue to qualify as a RIC under the Code.
The Company is subject to tax provisions that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. Taxable years ending 2012, 2013, and 2014 remain open to federal and state audit. As of December 31, 2014, management has evaluated the application of these provisions to the Company and has determined that no provision for income tax is required in the Company's financial statements for uncertain tax provisions.
20
Firsthand Technology Value Fund, Inc.
Consolidated Notes to Financial Statements - continued
SEPTEMBER 30, 2015 (UNAUDITED)

NOTE 8.  INVESTMENT TRANSACTIONS

Investment transactions (excluding short-term investments) were as follows for the nine months ended September 30, 2015.
 
PURCHASES AND SALES
    
Purchases of investment securities
  
$
38,491,828
  
Proceeds from sales and maturities of investment securities
  
$
47,408,157
  

NOTE 9.  INVESTMENTS IN AFFILIATES AND CONTROLLED INVESTMENTS

Under the 1940 Act, the Company is required to identify investments where it owns greater than 5% (but less than 25%) of the portfolio company's outstanding voting shares as an affiliate of the Company. Also, under the 1940 Act, the Company is required to identify investments where it owns greater than 25% of the portfolio company's outstanding voting shares as a controlled investment of the Company. A summary of the Company's investments in affiliates and controlled investments for the period from December 31, 2014 through September 30, 2015, is noted below:
                     
   
SHARES/PAR ACTIVITY
          
AFFILIATE/
 CONTROLLED INVESTMENT*
  
BALANCE AT 12/31/14
  
PURCHASES/
CONVERSION
  
SALES/
MATURITY/
CONVERSION
    
BALANCE AT 9/30/15
  
REALIZED GAIN (LOSS)
  
INTEREST
  
VALUE
9/30/15
  
ACQUISITION COST
  
IntraOp Medical Corp. Series A-1 Preferred*
    
6,800,000
    
—
    
(6,800,000
)
    
—
  
$
—
  
$
—
  
$
—
  
$
—
  
IntraOp Medical Corp. Series A-2 Preferred*
    
13,500,000
    
—
    
(13,500,000
)
    
—
    
—
    
—
    
—
    
—
  
IntraOp Medical Corp. Series B Preferred*
    
—
    
3,000,000
    
(3,000,000
)
    
—
    
—
    
—
    
—
    
—
  
IntraOp Medical Corp. Series C Preferred*
    
—
    
26,856,187
    
—
      
26,856,187
    
—
    
—
    
22,655,879
    
26,299,938
  
IntraOp Medical Corp. Convertible Note*
    
1,000,000
    
—
    
—
      
1,000,000
    
—
    
112,615
    
1,000,000
    
1,000,000
  
IntraOp Medical Corp. Term Note*
    
3,000,000
    
—
    
—
      
3,000,000
    
—
    
179,507
    
3,000,000
    
3,000,000
  
Pivotal Systems, Series A  Preferred*
    
11,914,217
    
—
    
—
      
11,914,217
    
—
    
—
    
9,610,007
    
6,000,048
  
Pivotal Systems, Series B  Preferred*
    
7,942,811
    
5,122,425
    
—
      
13,065,236
    
—
    
—
    
10,538,419
    
6,321,482
  
Pivotal Systems, Series C  Preferred*
    
2,291,260
    
—
    
—
      
2,291,260
    
—
    
—
    
2,657,862
    
2,657,862
  
Pivotal Systems, Convertible Note*
    
2,000,000
    
—
    
(2,000,000
)
    
—
    
—
    
109,123
    
—
    
—
  
QMAT, Preferred Stock Series A*
    
12,000,240
    
—
    
—
      
12,000,240
    
—
    
—
    
12,000,240
    
12,000,240
  
QMAT, Series A Warrant*
    
2,000,000
    
—
    
—
      
2,000,000
    
—
    
—
    
615,800
    
—
  
Silicon Genesis Corp., Common*
    
921,892
    
—
    
—
      
921,892
    
—
    
—
    
—
    
169,045
  
21
Firsthand Technology Value Fund, Inc.
Consolidated Notes to Financial Statements - continued
SEPTEMBER 30, 2015 (UNAUDITED)
                   
   
SHARES/PAR ACTIVITY
              
AFFILIATE/
CONTROLLED INVESTMENT*
  
BALANCE AT 12/31/14
  
PURCHASES/
MERGER
  
SALES/
MATURITY/
EXPIRATION
  
BALANCE AT 9/30/15
  
REALIZED GAIN (LOSS)
  
INTEREST
  
VALUE 9/30/15
  
ACQUISITION COST
  
Silicon Genesis Corp., Convertible Note*
    
1,250,000
    
—
    
—
    
1,250,000
    
—
  
$
438,630
  
$
1,105,603
  
$
1,610,753
  
Silicon Genesis Corp., Convertible Note*
    
1,000,000
    
—
    
—
    
1,000,000
    
—
    
273,379
    
884,482
    
1,000,000
  
Silicon Genesis Corp., Term Note*
    
3,000,000
    
—
    
—
    
3,000,000
    
—
    
269,581
    
2,653,447
    
3,000,000
  
Silicon Genesis Corp., Common Warrant*
    
37,982
    
—
    
—
    
37,982
    
—
    
—
    
—
    
6,678
  
Silicon Genesis Corp., Common Warrant*
    
5,000,000
    
—
    
—
    
5,000,000
    
—
    
—
    
—
    
—
  
Silicon Genesis Corp., Common Warrant*
    
3,000,000
    
—
    
—
  
 
3,000,000
  $
—
    
—
    
—
     —  
Silicon Genesis Corp., Series 1-C Preferred*
    
82,914
    
—
    
—
    
82,914
    
—
    
—
    
—
    
109,518
  
Silicon Genesis Corp., Series 1-D*
    
850,830
    
—
    
—
    
850,830
    
—
    
—
    
—
    
431,901
  
Silicon Genesis Corp., Series 1-E Preferred*
    
5,704,480
    
—
    
—
    
5,704,480
    
—
    
—
    
—
    
2,946,535
  
Silicon Genesis Corp., Series 1-F Preferred*
    
912,453
    
—
    
—
    
912,453
    
—
    
—
    
—
    
583,060
  
Telepathy Investors, Inc. Convertible Note
    
—
    
2,000,000
    
—
    
2,000,000
    
—
    
55,556
    
2,000,000
    
2,000,000
  
Telepathy Investors, Inc. Series A Preferred
    
15,238,000
    
—
    
—
    
15,238,000
    
—
    
—
    
4,000,000
    
3,999,999
  
Vufine, Inc. Series A  Preferred*
    
—
    
15,000,000
    
—
    
15,000