Concerned Firsthand Technology Value Fund Shareholders
RESOLVED: That the shareholders of SVVC assembled at the 2020 annual meeting in person and by proxy, hereby request that the Board of Directors of SVVC seek and pursue any and all measures to enhance shareholder value including: (1) orderly termination of the fund, (2) orderly liquidation of SVVC assets with distribution of available cash to shareholders, (3) tender offers for SVVC shares using available cash from any and all investment exits, (4) merger of the fund into an entity offering shareholder exits near NAV (net asset value), or (5) other measures likely to allow shareholders to exit SVVC near its NAV.
I urge shareholders to vote “Yes” to this proposal for the following reasons (based on information, belief and personal computations):
The performance of SVVC’s stock has been catastrophic relative to relevant benchmarks. The total annualized compounded market returns of SVVC and three relevant benchmarks over the life of SVVC are:
|VT1||Total stock market ETF||
|VB||Small stocks ETF||8.0%|
|SPBDCUP||S&P BDC Index||6.3%|
But that highlights the crux of the problem: SVVC’s NAV overstates its value under current management because it does not fully account for prospective fees and expenses.
SVVC’s market price does reflect the massive fees and indicates a loss of -8.8% per year. SVVC’s 2% annual management fee (on gross assets) is roughly a 7% annual fee based on the market value of the equity. SVVC’s most recent statement reports $908,003 as the quarterly management fee (which is over 50 cents per share annualized). There are additional expenses and a 20% incentive fee on realized net profits.
Accordingly, the discount of SVVC’s market price to its NAV has been very large – recently well over 50%.
The annual rate of compensation to each of the four independent directors of SVVC is $50,000 per year yet, reportedly, only one director held SVVC stock and that director held only 700 shares (see SVVC Proxy Statement 5/30/19).
Assuming that SVVC’s valuations of its private investments are reasonable, the Directors should be able to locate private equity investors enabling SVVC to be liquidated at a value near to its NAV.
– Donald Chambers
The Intelligent Investing Podcast, Don Chambers: The Proxy Battle at Firsthand Tech Value Fund
About Donald Chambers
Mr. Chambers is a part-time employee (CIO-Model Portfolios) of Biltmore Capital Advisors (BCA) which manages approximately 292,254 shares of SVVC on behalf of its clients.
Donald R. Chambers, Ph.D., CAIA has served at CAIA for ten years in curriculum and examinations including his current position as the associate director of programs. Dr. Chambers is also Emeritus Professor of Finance at Lafayette College and a CIO at Biltmore Capital Advisors. His prior academic positions were at Rochester Institute of Technology, Penn State University, University of Baltimore, and the University of North Carolina at Chapel Hill. Dr. Chambers served at The Bank of New York in risk management and at Karpus Investment Management in various roles, including director of alternative investments and director of equities. He has published articles in top finance journals including the Journal of Finance, Review of Financial Studies, Journal of Financial Economics, JFQA, Financial Analysts Journal, Journal of Portfolio Management, Journal of Derivatives, Journal of Alternative Investments, Financial Management, Financial Review, and Housing Finance Review. He is an author of numerous books including CAIA Level I: Alternative Investments 3e, Modern Corporate Finance: Theory and Practice 8e, Interest Rate Risk Measurement and Management, and Alternative Investments: A Primer for Investment Trustees. Dr. Chambers earned the CAIA Charter as a member of the first group of candidates to complete the requirements. He received a B.S. in accounting from Binghamton University and a Ph.D. in finance from the University of North Carolina at Chapel Hill.
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