Unassociated Document
U.S.
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
APPLICATION
FOR A CERTIFICATION PURSUANT TO SECTION 851(e) OF THE
INTERNAL
REVENUE CODE OF 1986, AS AMENDED.
HARRIS
& HARRIS GROUP, INC.
111 West
57th Street
Suite
1100
New York,
NY 10019
All
Communications, Notices, and Orders to:
Daniel B.
Wolfe, President and Chief Operating Officer
Harris
& Harris Group, Inc.
111 West
57th Street
Suite
1100
New York,
NY 10019
Copy
to:
Steven
B. Boehm, Esq.
|
Sandra
M. Forman, Esq.
|
Sutherland
Asbill & Brennan LLP
|
General
Counsel
|
1275
Pennsylvania Avenue, N.W.
|
Harris
& Harris Group, Inc.
|
Washington,
D.C. 20004-2415
|
111
West 57th
Street
|
|
Suite
1100
|
|
New
York, NY 10019
|
April 29,
2009
UNITED
STATES OF AMERICA
BEFORE
THE
SECURITIES
AND EXCHANGE COMMISSION
In
the Matter of:
Harris
& Harris Group, Inc.
111
West 57th Street
Suite
1100
New
York, NY 10019
|
APPLICATION
FOR A CERTIFICATION PURSUANT TO SECTION
851(e)
OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED.
|
INTRODUCTION
Harris
& Harris Group, Inc. (“Applicant”) hereby applies to the Securities and
Exchange Commission (the “Commission”), pursuant to Section 851(e) of the
Internal Revenue Code of 1986, as amended (the “Code”), for a certification that
Applicant is principally engaged in the furnishing of capital to other
corporations which are principally engaged in the development or exploitation of
inventions, technological improvements, new processes, or products not
previously generally available.
Applicant
proposes to qualify as a “regulated investment company” under Section 851(a) of
the Code for the fiscal year ended December 31, 2008. The
certification being sought is a prerequisite to qualification, pursuant to the
provisions of Section 851(e) of the Code, as a regulated investment company
under Section 851(a).
I. GENERAL
DESCRIPTION OF APPLICANT
Applicant
was incorporated under the laws of the State of New York in August 1981 and
operates as an internally managed business development
company. Applicant’s securities were first registered with the
Commission pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended, in 1982. In 1992, Applicant registered with the Commission
as a closed-end, non-diversified management investment company under the
Investment Company Act of 1940, as amended (the “1940 Act”). On July
26, 1995, Applicant elected to become regulated as a business development
company (“BDC”) pursuant to Section 54(a) of the 1940 Act (the “BDC
election”).
Applicant’s
investment portfolio consists primarily of equity investments in early stage
companies that are principally engaged in the development, commercialization and
integration of products enabled by nanotechnology and microsystems that are
applied in industries such as computer software and hardware,
telecommunications, medical devices, pharmaceuticals, biotechnology,
electronics, semiconductors and advanced materials. Many of
Applicant’s portfolio companies are privately held, thinly capitalized, unproven
companies with no operating history. As of December 31, 2008,
Applicant had total assets of approximately $111.6 million.
The
Commission has previously issued certifications pursuant to Section 851(e) of
the Code that Applicant was, for the fiscal years ended December 31, 1997 and
December 31, 1999 through December 31, 2007, principally engaged in the
furnishing of capital to other corporations which are principally engaged in the
development or exploitation of inventions, technological improvements, new
processes, or products not previously generally available.1
1 Harris & Harris Group,
Inc., Investment Company Act Release Nos. 28294 (May 30, 2008); 27870
(June 20, 2007); 27398 (June 16, 2006); 26908 (June 15, 2005); 26467 (June 15,
2004); 25990 (Apr. 2, 2003); 25454 (Mar. 7, 2002); 24888 (Mar. 8, 2001); 24314
(Feb. 24, 2000); 23102 (Apr. 6, 1998).
II. LEGAL
ANALYSIS
A. Applicable
Law
Section
851 of the Code sets forth the general requirements a corporation must satisfy
in order to qualify for treatment as a regulated investment company under
Subchapter M of the Code (a “RIC”). A RIC is defined in Section
851(a) as “any domestic corporation . . . which, at all times during the taxable
year . . . is registered under the . . . [1940 Act] as a management company or
unit investment trust or . . . has in effect an election under such Act to be
treated as a business development company.” Section 851 also imposes
certain conditions and limitations upon entities seeking to qualify as
RICs. Section 851(b)(3)(A) provides that an investment company or BDC
seeking to qualify for treatment as a RIC must, as of the close of each quarter
of the taxable year, have at least 50 percent of the value of its total assets
represented by
cash and
cash items (including receivables), Government securities and securities of
other regulated investment companies, and . . . other securities for purposes of
this calculation limited, except and to the extent provided in subsection
[851](e), in respect of any one issuer to an amount not greater in value than 5
percent of the value of the total assets of the taxpayer and to not more than 10
percent of the outstanding voting securities of such issuer . . .
..
The 1940
Act generally imposes no similar diversification requirements.
Section
851(e) provides an exemption from the diversification requirements of Subchapter
M for certain investment companies furnishing capital to certain development
corporations. In pertinent part, Section 851(e) provides
that
[i]f the
.. . . Commission determines, in accordance with regulations issued by it, and
certifies to the Secretary not earlier than 60 days prior to the close of the
taxable year of a management company or a business development company . . .
that such investment company is principally engaged in the furnishing of capital
to other corporations which are principally engaged in the development or
exploitation of inventions, technological developments, new processes, or
products not previously generally available, such investment company may, in the
computation of 50 percent of the value of its assets under subparagraph (A) of
subsection (b)(3) for any quarter of such taxable year, include the value of any
securities of an issuer, whether or not the investment company owns more than 10
percent of the outstanding voting securities of such issuer, the basis of which,
when added to the basis of the investment company for securities of such issuer
previously acquired, did not exceed 5 percent of the value of the total assets
of the investment company at the time of the subsequent acquisition of
securities.
B. Need
for Relief
Applicant’s
board of directors has determined that it would be in the best interests of
Applicant and its shareholders for Applicant to qualify for treatment as a RIC
for the fiscal year ended December 31, 2008. Since its BDC election,
Applicant has invested a substantial percentage of its total assets in early
stage development, or start-up, companies (the portfolio companies are more
fully described below) in a broad range of industry segments that are primarily
engaged in the development, commercialization and integration of products
enabled by nanotechnology and microsystems that are applied in
industries such as computer software and hardware, telecommunications, medical
devices, pharmaceuticals, biotechnology, electronics, semiconductors and
advanced materials (each a “Portfolio Company” and together the “Portfolio
Companies”). Given the inherent nature of start-up and early stage
development companies, many of the Portfolio Companies are thinly capitalized,
unproven companies that lack management depth and have no operating
history. As a consequence, Applicant, in addition to providing
capital to the Portfolio Companies, may also assist with the development of
financial plans for the companies, recruiting and hiring management, as well as
providing management expertise. Given Applicant’s level of
involvement in many of the Portfolio Companies, Applicant may, from time to
time, own a majority of the equity securities of a given Portfolio
Company. Thus, without the relief requested, Applicant may be unable
to satisfy the requirements of Section 851(b)(3)(A). This result
would have a deleterious impact on Applicant’s shareholders by reducing
Applicant’s income without achieving any concomitant policy
objective.
1. Investment
Portfolio
As stated
above, Applicant has invested a substantial portion of its assets in early stage
companies primarily engaged in the development, commercialization and
integration of products enabled by nanotechnology and microsystems that are
applied in industries such as computer software and hardware,
telecommunications, medical devices, pharmaceuticals, biotechnology,
electronics, semiconductors and advanced materials. Applicant
believes that most of those companies satisfy the requirements of section 851(e)
of the Code. In reaching this conclusion, the Applicant generally has
relied upon information provided by the Portfolio Companies themselves and
others, including but not limited to, offering circulars, prospectuses, analyst
reports, internal company memoranda, patent applications and similar
documents. In addition, Applicant generally is represented on the
boards of directors of the Portfolio Companies through member or observer status
and also has direct access to senior management of those companies through
contractual information rights.
The
following table shows the composition of Applicant’s total assets as of the end
of each calendar quarter of 2008:
|
|
3/31/2008
|
|
|
6/30/2008
|
|
|
9/30/2008
|
|
|
12/31/2008
|
|
A. Investments
in "eligible portfolio companies" described in Section
2(a)(46)
|
|
|
|
|
|
|
|
|
|
|
|
|
of
the 1940 Act and believed by the Applicant to be engaged in
the
|
|
|
|
|
|
|
|
|
|
|
|
|
business
activities required by Section 851(e) of the Code
|
|
$ |
80,202,336 |
|
|
$ |
89,414,431 |
|
|
$ |
60,663,002 |
|
|
$ |
54,125,622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B. Investments
in "eligible portfolio companies" described in Section
2(a)(46)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
the 1940 Act and treated by Applicant as not engaged in the
business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
activities
required by Section 851(e) of the Code*
|
|
|
2,219 |
|
|
|
2,219 |
|
|
|
2,219 |
|
|
|
2,219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C. Investments
that do not qualify under Section 55(a) of the 1940 Act,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
but
as to which the issuers are believed by Applicant to be engaged in
the
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
business
activities required by Section 851(e) of the Code**
|
|
|
2,893,308 |
|
|
|
2,918,874 |
|
|
|
3,277,224 |
|
|
|
2,837,312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Investments
that do not qualify under Section 55(a) of the 1940 Act
and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
treated
by Applicant as not covered by Section 851(e) of the Code
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E. Cash,
cash items and securities as set forth in Section 55(a)(6) of the 1940
Act, collectively “Cash Equivalents”
|
|
|
53,799,254 |
|
|
|
62,113,144 |
|
|
|
57,970,695 |
|
|
|
53,676,249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Investments and Cash Equivalents
|
|
$ |
136,897,117 |
|
|
$ |
154,448,668 |
|
|
$ |
121,913,140 |
|
|
$ |
110,641,402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Assets
|
|
|
3,875,522 |
|
|
|
1,338,315 |
|
|
|
1,163,360 |
|
|
|
986,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$ |
140,772,639 |
|
|
$ |
155,786,983 |
|
|
$ |
123,076,500 |
|
|
$ |
111,627,601 |
|
*
|
As
of December 31, 2008, the sole investment in this category was Exponential
Business Development Company.
|
**
|
As
of December 31, 2008, the sole investment in this category was D-Wave
Systems Inc. |
As
demonstrated above, as of December 31, 2008, 96.57% of Applicant’s total assets
consisted of assets of the type set forth in paragraphs 1 through 6 of Section
55(a) of the 1940 Act. Such assets comprise 97.43% of Applicant’s
invested assets.
2. Portfolio
Companies
As
reflected in the table above, companies engaged in the type and degree of
business activities described in Section 851(e) of the Code, excluding the
investments in issuers described in Categories B. and D. above, (“Development
Companies”) comprised the following percentages of the total assets less Cash
Equivalents of Applicant at the end of each of the calendar quarters of
2008: March 31, 95.52%; June 30, 98.57%; September 30, 98.21%; and
December 31, 98.29%. The Development Companies are discussed
below. Unless otherwise indicated below, information is provided as
of December 31, 2008.
Adesto
Technologies Corporation (“Adesto”)(Category
A) -- Adesto develops semiconductor-related products enabled at the
nanoscale. The company's technology addresses several problems that limit
the capabilities of certain traditional electronic components including the
ability to scale the devices as standard chip dimensions shrink, the ability to
increase speed of operation and the ability to decrease
power consumption.
Percentage of Equity held by
Applicant2 -- 13.97%
Investment Value/Percentage of
Applicant’s Total Assets -- $1,100,000 / 1.0%
Date of Initial Investment --
February 20, 2007
2
Percentage of Equity for all portfolio companies held by Applicant is reported
on voting equity basis.
Ancora
Pharmaceuticals Inc. (“Ancora”)(Category
A) -- Ancora develops synthetic carbohydrates for pharmaceutical markets
and for internal drug development programs. Ancora’s scalable
technology enables rapid milligram to kilogram production of synthetic
carbohydrates for use in drug discovery and industrial
applications.
Percentage of Equity held by
Applicant -- 22.42%
Investment Value/Percentage of
Applicant’s Total Assets -- $1,200,000 / 1.1%
Date of Initial Investment --
May 3, 2007
BioVex
Group Inc. (“BioVex”)(Category
A) -- BioVex develops novel biologics for treatment of cancer and
infectious diseases. BioVex is a Phase II/III clinical-stage company
built on oncolytic virus technology that replicates and spreads within solid
tumors, causing the death of cancer cells, accompanied by the induction of a
systemic immune response.
Percentage of Equity held by
Applicant -- 3.99%
Investment Value/Percentage of
Applicant’s Total Assets -- $263,972 / less than 1%
Date of Initial Investment --
September 27, 2007
BridgeLux,
Inc. (“BridgeLux”)(Category
A) -- BridgeLux develops chips for high-power, indium gallium nitride
light emitting diodes that are used in various solid state lighting, mobile
appliance, signage and automotive applications. BridgeLux technology
permits a highly reliable epitaxy structure and a robust chip design that are
necessary for the requirement of long lumen maintenance under severe operating
conditions such as high current density and high thermal stress that adversely
affect most high-power devices.
Percentage of Equity held by
Applicant -- 6.35%
Investment Value /Percentage of Applicant’s Total
Assets -- $3,595,443 / 3.22%
Date of Initial Investment --
May 20, 2005
Cambrios
Technology Corp. (“Cambrios”)(Category
A) -- Cambrios develops materials that can be deposited from solution
onto any substrate to create flexible, transparent conductive surfaces. Metallic
nanowires are used as the conductive medium because they minimize the absorption
and scattering of visible light.
Percentage of Equity held by
Applicant -- 6.44%
Investment Value/Percentage of
Applicant’s Total Assets -- $1,297,013 / 1.16%
Date of Initial Investment --
November 9, 2004
CFX
Battery, Inc. (“CFX”)(Category A) –
CFX, formerly Lifco, Inc., is developing primary and rechargeable batteries
using a novel variation of existing battery chemistry that is enabled by
nanotechnology. The company hopes to use its proprietary
nanotechnology to deliver low-cost batteries with superior
performance, safety and weight. On February 28, 2008, Lifco merged
with CFX Battery, Inc., to form CFX Battery, Inc.
Percentage of Equity held by
Applicant -- 9.97%
Investment Value/Percentage of
Applicant’s Total Assets -- $1,473,264 / 1.32%
Date of Initial Investment --
June 21, 2007
Cobalt
Technologies, Inc. (“Cobalt”) (Category
A) -- Cobalt is developing biobutanol, a next-generation
biofuel. Cobalt's proprietary technologies in microbial physiology,
strain development, fermentation and low-energy fuel separation enable it to
produce a new generation of fuels that burn cleaner, are more cost-effective,
and enhance environmental sustainability. By optimizing productivity,
titer and yield, it is seeking to make biobutanol an affordable gasoline
substitute that can meet the immediate needs of the transportation
industry.
Percentage of Equity held by
Applicant -- 1.15%
Investment Value /Percentage of Applicant’s Total
Assets -- $187,500 / less than 1%
Date of Initial Investment --
October 7, 2008
Crystal
IS, Inc. (“Crystal IS”)(Category
A) -- Crystal IS is commercializing patented technology for the
production of single-crystal aluminum nitride substrates for the cost-effective
production of high power, high temperature, and compound semiconductor
devices. The nitride semiconductor industry provides devices that are
used in stoplights, high-storage capacity DVDs, military applications,
biotechnology, information technology, wireless communication, lighting, and
high-power microwave devices.
Percentage of Equity held by
Applicant -- 6.84%
Investment Value /Percentage of Applicant’s Total
Assets -- $332,238 / less than 1%
Date of Initial Investment --
September 21, 2004
CSwitch
Corporation (“CSwitch”)(Category
A) -- CSwitch develops next-generation
system-on-a-chip technology solutions for a wide range of communication based
platforms. The company's first product will be a configurable switch array
chip that offers the performance of an application-specific integrated circuit
and the development cost and time-to-market of a field-programmable gate
array.
Percentage of Equity held by
Applicant -- 7.24%
Investment Value /Percentage of Applicant’s Total
Assets -- $118,624 / less than 1%
Date of Initial Investment --
May 27, 2004
D-Wave
Systems, Inc. (“D-Wave”)(Category
C) -- D-Wave develops high-performance quantum computing systems for
commercial use in logistics, bioinformatics, life and physical sciences,
quantitative finance and electronic design automation.
Percentage of Equity held by
Applicant -- 3.11%
Investment Value /Percentage of Applicant’s Total
Assets -- $2,837,312 / 2.54%
Date of Initial Investment --
April 19, 2006
Ensemble
Discovery Corporation (“Ensemble”)(Category
A) -- Ensemble develops DNA Programmed Chemistry (“DPC”) for the
discovery of new classes of therapeutics and bioassays. DPC provides
unprecedented control of chemical reactivity, enabling the synthesis of diverse
libraries of compounds for use in drug discovery and biodetection.
Percentage of Equity held by
Applicant -- 5.34%
Investment Value/Percentage of
Applicant’s Total Assets -- $1,256,375 / 1.13%
Date of Initial Investment --
June 6, 2007
Innovalight,
Inc. (“Innovalight”)(Category
A) -- Innovalight develops renewable energy products based on silicon
nanotechnology. The silicon nanoparticles are synthesized using a single-step,
continuous-flow, scaleable, non-thermal plasma process. The resulting
stable and non-reactive nanoparticles permit tunable light absorption and
emission and an increase in the quantum efficiencies of solar
devices.
Percentage of Equity held by
Applicant -- 11.68%
Investment Value /Percentage of Applicant’s Total
Assets -- $5,783,838 / 5.18%
Date of Initial Investment --
April 20, 2006
Kereos,
Inc. (“Kereos”)(Category
A) -- Kereos develops targeted therapeutics and molecular imaging agents
that detect and attack cancer and cardiovascular disease. Kereos’
targeted therapeutics seek out definitive disease biomarkers and carry powerful
payloads of chemotherapeutics. The imaging agents and targeted
therapeutics are based on a proprietary ligand-targeted emulsion technology
consisting of a perfluorocarbon core surrounded by a lipid
monolayer.
Percentage of Equity held by
Applicant -- 2.13%
Investment Value /Percentage of Applicant’s Total
Assets -- $0 / 0%
Date of Initial Investment --
May 19, 2005
Kovio,
Inc. (“Kovio”)(Category A)
-- Kovio is developing a new
category of semiconductor products using printed electronics and thin film
technologies. Printed electronics enables fabrication of semiconductor devices
over large areas, on flexible substrates, and at a fraction of the cost of
conventional silicon technology. The initial target applications are
ultra-low cost RFID for the retail industry, transit tickets, library inventory
control, asset management, manufacturing, and logistics.
Percentage of Equity held by
Applicant -- 6.32%
Investment Value /Percentage of Applicant’s Total
Assets -- $4,863,503 / 4.36%
Date of Initial Investment --
November 4, 2005
Laser
Light Engines, Inc. (“LLE”) (Category A)
-- LLE seeks to manufacture solid-state light sources for digital cinema and
large-venue projection display. The company designs, develops and
manufactures ultra-high brightness, digitally controlled laser-driven light
sources for demanding illumination applications. LLE uniquely
combines laser technology, non-linear optics, specialty optical fiber, digital
control and applications knowledge to produce its laser-driven light
engines.
Percentage of Equity held by
Applicant -- 26.76%
Investment Value /Percentage of Applicant’s Total
Assets -- $2,000,000 / 1.79%
Date of Initial Investment --
May 6, 2008
Mersana
Therapeutics, Inc. (“Mersana”)(Category
A) -- Mersana is a pharmaceutical company founded to develop advanced
drug delivery systems. Mersana utilizes patented technology to
provide fully biodegradable, nanoscopic drug delivery vehicles based on
proprietary molecular constructs and “biological stealth”
materials. Mersana’s proprietary materials and molecular constructs
are essentially “biomimetic.” Mersana utilizes mechanisms employed by
the biological interface and the nutrient transport systems to transport drugs
and circumvent host defense mechanisms.
Percentage of Equity held by
Applicant -- 8.48%
Investment Value /Percentage of Applicant’s Total
Assets -- $1,176,779 / 1.05%
Date of Initial Investment --
February 12, 2002
Metabolon,
Inc. (“Metabolon”)(Category
A) -- Metabolon uses a proprietary technology platform in metabolomics to
map changes in metabolic pathways for the identification of biomarkers and the
early diagnosis of disease states. Metabolomics is the study of the repertoire
of non-proteinaceous, endogenously-synthesized small molecules present in an
organism. Metabolon uses mass-spectrometry based technologies, data integration
and propriety software to discover biomarkers.
Percentage of Equity held by
Applicant -- 13.77%
Investment Value /Percentage of
Applicant’s Total Assets -- $1,363,266 / 1.22%
Date of Initial Investment --
January 11, 2006
Molecular
Imprints, Inc. (“Molecular”)(Category
A) -- Molecular provides nanoimprint-based lithography technology and
systems for manufacturing nano scale features useful in hard disk drives,
optical components and semiconductor devices.
Percentage of Equity held by
Applicant -- 3.90%
Investment Value /Percentage of Applicant’s Total
Assets -- $2,134,583 / 1.91%
Date of Initial Investment --
March 31, 2004
Nanogram
Corporation (“Nanogram”)(Category
A) -- Nanogram uses its laser pyrolysis process technology to synthesize
high-quality silicon nanoparticles. The company plans to use this
technology to make high-efficiency, thin-film solar cells. Nanogram
is a spin-off of NeoPhotonics Corporation.
Percentage of Equity held by
Applicant -- 5.75%
Investment Value /Percentage of Applicant’s Total
Assets -- $1,471,805 / 1.32%
Date of Initial Investment --
April 30, 2003
Nanomix,
Inc. (“Nanomix”)(Category
A) -- Nanomix is developing nanoelectronic sensors that integrate carbon
nanotube electronics with silicon microstructures. Nanomix has developed a
scaleable, electronic detection platform based on the integration of proprietary
carbon nanotube growth processes to fabricate NTFETs (nanotube field effect
transistors) coupled with "recognition" layer chemistries and ultimately
integrated with traditional Si-CMOS fabrication. This general
platform is applicable to the detection of a large host of industrial gases,
medical breath tests and biomolecular species.
Percentage of Equity held by
Applicant -- 6.10%
Investment Value /Percentage of Applicant’s Total
Assets -- $30,050 / less than 1%
Date of Initial Investment --
December 20, 2004
Nanosys,
Inc. (“Nanosys”)(Category
A) -- Nanosys develops novel and patent-protected nanostructures that
integrate functional complexity directly into each individual
nanostructure. This capability enables the low cost fabrication of
revolutionary high-value, high-performance applications in a broad range of
industries including life sciences, physical sciences, information technology,
communications, renewable energy and homeland security. The initial
applications include color filters for light emitting diodes, material devices,
large-area macroelectronic devices, memory and fuel cells.
Percentage of Equity held by
Applicant -- 2.84%
Investment Value /Percentage of Applicant’s Total
Assets -- $5,370,116 / 4.81%
Date of Initial Investment --
April 7, 2003
Nantero,
Inc. (“Nantero”)(Category
A) -- Nantero is currently developing NRAMTM -- a
high-density nonvolatile random access memory chip using patented
nanotechnology. The NRAMTM design
uses carbon nanotubes as the active memory elements, and Nantero is developing a
straightforward way to manufacture the memory chip and integrate it with
standard semiconductor processes. The potential applications for the
nonvolatile memory Nantero is developing include instant-on computers,
radiation-hardened memory and memory used in devices such as MP3 players,
digital cameras, and PDAs.
Percentage of Equity held by
Applicant -- 3.50%
Investment Value /Percentage of Applicant’s Total
Assets -- $2,246,409 / 2.01%
Date of Initial Investment --
August 10, 2001
NeoPhotonics
Corporation (“NEO”) (Category A)
-- NEO uses its patented nanomaterials deposition technology to enable the true
integration of planar optical components, by developing and manufacturing planar
optical devices and components for the leading optical component
manufacturers. The company, a recognized leader in nanomaterials
synthesis processes, has developed commercial production systems for planar
deposition and optical materials integration. Its Laser Reactive
Deposition (LRD™) technology is the only commercial manufacturing process
capable of producing the full complement of active and passive glass materials
used to produce optical amplifiers, waveguide lasers, and passive planar
waveguides.
Percentage of Equity held by
Applicant -- 2.46%
Investment Value /Percentage of Applicant’s Total
Assets -- $1,634,454 / 1.46%
Date of Initial Investment --
December 5, 2003
Nextreme
Thermal Solutions, Inc. (“Nextreme”) (Category A) --
Nextreme aims to be a high-volume manufacturer of high-performance, thin-film,
thermoelectric (“TE”) devices for both discrete and integrated cooling and power
generation applications. A thermoelectric module is a semiconductor-based
electronic component that functions as a small, solid-state heat
pump. This cooling capability is ideally suited for applications
where temperature stabilization, temperature cycling, or cooling below ambient
temperatures are required. Applications of TE modules include cooling of
microprocessors, power semiconductors, medical devices and optical
communications devices as well as power generation by scavenging of waste
heat.
Percentage of Equity held by
Applicant --18.49%
Investment Value /Percentage of Applicant’s Total
Assets -- $2,202,629 / 1.97%
Date of Initial Investment --
December 7, 2004
Polatis,
Inc. (“Polatis”) (Category
A) -- Polatis, Inc., is focused on delivering tunable, low-cost photonic
switch subsystems for the instrumentation and test market. These
subsystems are enabled by the DirectLight platform, which is a proprietary,
beam-steering methodology using solid-state mechanics for precision tuning of
optics. Unique to DirectLight is the ability to provide highly integrated
optical functions, including monitoring and attenuation. The focus of
its product line is a series of non-blocking, fully transparent switches
agnostic to both bit-rate and protocol.
Percentage of Equity held by
Applicant -- 1.53%
Investment Value /Percentage of Applicant’s Total
Assets -- $0 / 0%
Date of Initial Investment --
June 24, 2002
PolyRemedy,
Inc. (“PolyRemedy”) (Category
A) -- PolyRemedy manufactures robotic systems for the on-demand
fabrication of nano and micro-fiber wound treatments at the point of
care. PolyRemedy's system produces customized wound dressings within
minutes, measured to fit the wound size and shape and fabricated with the
precise material composition necessary to optimally treat the wound at its exact
stage of healing and throughout the healing process. The system is
also designed to enable the capture and monitoring of wound treatment data with
the potential to help evaluate costs, refine clinical protocols and demonstrate
evidence-based improvements in wound management.
Percentage of Equity held by
Applicant -- 0.98%
Investment Value /Percentage of Applicant’s Total
Assets -- $122,250 / less than 1%
Date of Initial Investment --
February 8, 2008
Questech
Corporation
(“Questech”)(Category A) -- Questech has patented a light-weight,
low-cost, premium metal composite material consisting of a metal face, a polymer
core and a ceramic back. Questech manufactures and markets this
material as architectural tile and trim for the commercial and residential
architecture markets. The company holds several U.S. patents and a
Canadian patent for a product and process technology. Questech has
also developed extensive trade secrets associated with its manufacturing
process.
Percentage of Equity held by
Applicant -- 7.50%
Investment Value /Percentage of Applicant’s Total
Assets -- $128,286 / less than 1%
Date of Initial Investment --
May 26, 1994
Siluria
Technologies, Inc. (“Siluria”)(Category
A) -- Siluria develops next-generation nanomaterials using technology
spun out of a leading academic institution. This technology provides
for unique control over the structural properties and spatial arrangement of a
variety of types of nanomaterials. This control enables the
production of new classes of catalysts, optical and electronic
products.
Percentage of Equity held by
Applicant -- 6.16%
Investment Value /Percentage of Applicant’s Total
Assets -- $42,731 / less than 1%
Date of Initial Investment --
October 17, 2007
SiOnyx,
Inc.
(“SiOnyx”)(Category A) -- SiOnyx develops silicon-based optoelectronic
products enabled by its proprietary "Black Silicon." Black silicon is the result
of the interaction of a femtosecond laser pulse with silicon in the presence of
sulfur hexafluoride. Black silicon has high absorptive properties to visible
wavelengths and also absorbs in the infrared, enabling its use in
photodetectors, imaging arrays and potentially high-efficiency, thin-film solar
cells.
Percentage of Equity held by
Applicant -- 25.56%
Investment Value /Percentage of Applicant’s Total
Assets -- $3,228,463 / 2.89%
Date of Initial Investment --
May 12, 2006
Solazyme,
Inc. (“Solazyme”)(Category
A) -- Solazyme is a biotechnology company devoted to harnessing the
energy-harvesting machinery of algae to produce valuable products. The company
utilizes proprietary genetic engineering methods to develop commercially
relevant, sugar-driven biochemical pathways. As it develops its algal
biotech platform, it will begin to focus on the bioproduction of molecules for
the energy, chemical, pharmaceutical and nutraceutical industries.
Percentage of Equity held by
Applicant -- 5.77%
Investment Value /Percentage of Applicant’s Total
Assets -- $5,377,031 / 4.82%
Date of Initial Investment --
November 24, 2004
Starfire
Systems (“Starfire”)(Category
A) -- Starfire utilizes patented technology to produce ceramic forming
polymers that produce pure silicon carbide. These materials are easy
to handle and can be tailored to meet specific product or process
requirements. The products and material systems afford customers the
ability to form advanced ceramic materials for new or existing applications in
aerospace, electronics, industrial ceramics, transportation, filtration and
other industries.
Percentage of Equity held by
Applicant -- 4.02%
Investment Value /Percentage of Applicant’s Total
Assets -- $0 / 0%
Date of Initial Investment --
May 7, 2004
TetraVitae
Bioscience, Inc. (“TetraVitae”) (Category
A) -- TetraVitae is developing biobased chemicals, plastics and
fuels. Its proprietary technology and expertise in the fields of
industrial fermentations, process engineering, microbiology, and cellulosic
feedstocks may significantly lower the costs of production, allowing it to
compete with and potentially replace petroleum processes used to produce similar
products. TetraVitae's initial focus is the production of biobutanol
using a proprietary fermentation process and enhanced microorganism
platform.
Percentage of Equity held by
Applicant -- 2.02%
Investment Value /Percentage of Applicant’s Total
Assets -- $125,000 / less than 1%
Date of Initial Investment --
October 8, 2008
Xradia,
Inc. (“Xradia”)(Category
A) -- Xradia is commercializing ultra-high-resolution 3D x-ray
microscopes and fluorescence imaging systems. Xradia’s proprietary
x-ray optics enable the development of extremely high resolution x-ray
microscope systems having wide application in fields from semiconductor
development and inspection, to advanced materials, environmental science,
nanotechnology and life sciences.
Percentage of Equity held by
Applicant -- 15.16%
Investment Value /Percentage of Applicant’s Total
Assets -- $4,000,000 / 3.58%
Date of Initial Investment --
December 29, 2006
3. Existence
of Cash Positions
Applicant
is an opportunistic investor that ideally would be as fully invested as
practicable in the securities of its target portfolio companies. From
time to time, however, Applicant may maintain a substantial portion of its
assets in Cash Equivalents. Applicant does not believe it is in its
shareholders’ best interest to make investments solely for the purpose of
reducing its cash positions. Applicant invests in a highly
specialized area (nanotechnology) in which appropriate investment opportunities
are not always extant and, when identified, require significant diligence before
an investment decision can be made. In fact, in 2008, Applicant
actively reviewed over 300 potential investments.
As
evidenced in the table below, Applicant made a number of investments in 2008,
both in new portfolio companies and in the form of “follow-on” investments in
existing portfolio companies. In addition, Applicant expects
investment activity to continue in 2009, and Applicant believes that a number of
additional investments will likely be made before the end of the
year.
It is
important to note that Applicant has no motive, indeed has a great discentive,
to maintain a significant position in cash. Most notably, cash is a
very unattractive asset class in terms of investment return. The
higher the level of cash, the greater its potentially depressing impact on the
overall internal rate of return of Applicant. Thus, Applicant
believes that relying on cash as an asset class for investment returns would
ultimately have an extremely negative effect on shareholders and, thus,
ultimately on the market price of Applicant’s stock.
Applicant
raised additional capital in 2008 while it still had substantial cash on hand in
anticipation of expected investments. Applicant experienced very
strong deal flow (i.e., exposure to potential investments) in 2008 and
anticipated, in hindsight correctly, that significant attractive investment
opportunities would become available. Thus, in raising capital to
supplement the cash already on hand, Applicant was simply acting in light of
what it expected to be its needs for cash to fund the expected investment
opportunities. Applicant expects to invest or reserve for potential
follow-on investment the additional capital raised in the public market within
two years.
Harris
& Harris Group, Inc.
|
Equity
Securities - Purchases
|
Date
|
Company
|
Shares
/ Face
|
Description
|
Follow-on
|
New
|
Total
|
By
Quarter
|
01/19/08
|
D-Wave
|
678,264
|
Series
1 Class C Preferred
|
$736,019
|
|
$736,019
|
|
01/31/08
|
Nextreme
|
$377,580
|
Bridge
Note & Warrant
|
$377,580
|
|
$377,580
|
|
02/01/08
|
Phoenix
Molecular
|
$25,000
|
Bridge
Note
|
$25,000
|
|
$25,000
|
|
02/08/08
|
PolyRemedy
|
287,647
|
Series
B-1 Preferred
|
|
$244,500
|
$244,500
|
|
02/20/08
|
Adesto
|
3,131,470
|
Series
A Preferred
|
$1,052,174
|
|
$1,052,174
|
|
02/25/08
|
BridgeLux
|
666,667
|
Series
D Preferred
|
$1,000,001
|
|
$1,000,001
|
|
03/07/08
|
Solazyme
|
$2,000,000
|
Bridge
Note
|
$2
,000,000
|
|
$2
,000,000
|
|
03/25/08
|
Metabolon
|
869,565
|
Series
B-1 Preferred & Warrant
|
$1,000,000
|
|
$1,000,000
|
$6,435,274
|
05/01/08
|
Ancora
|
754,717
|
Series
B Preferred
|
$800,000
|
|
$800,000
|
|
05/06/08
|
LLE
|
7,499,062
|
Series
A Preferred
|
|
$2,000,000
|
$2,000,000
|
|
05/14/08
|
NeoPhotonics
|
2,000
|
Series
X Preferred
|
$200,000
|
|
$200,000
|
|
05/27/08
|
Nextreme
|
$200,000
|
Bridge
Note
|
$200,000
|
|
$200,000
|
|
06/04/08
|
Phoenix
Molecular
|
$25,000
|
Bridge
Note
|
$25,000
|
|
$25,000
|
|
06/25/08
|
CSwitch
|
$986,821
|
Bridge
Note & Warrant
|
$986,821
|
|
$986,821
|
|
06/27/08
|
Nextreme
|
$200,000
|
Bridge
Note
|
$200,000
|
|
$200,000
|
$4,411,821
|
07/25/08
|
Nextreme
|
1,467,351
|
Series
B Preferred
|
$800,000
|
|
$800,000
|
|
07/31/08
|
Solazyme
|
198,508
|
Series
C Preferred
|
$1,000,000
|
|
$1,000,000
|
|
08/05/08
|
Mersana
|
$200,000
|
Bridge
Note
|
$200,000
|
|
$200,000
|
|
09/11/08
|
Ensemble
|
$250,286
|
Bridge
Note & Warrant
|
$250,286
|
|
$250,286
|
|
09/30/08
|
D-Wave
|
450,450
|
Series
C Preferred
|
$487,804
|
|
$487,804
|
|
09/30/08
|
Nextreme
|
1,925,899
|
Series
B Preferred
|
$1,050,000
|
|
$1,050,000
|
$3,788,090
|
10/07/08
|
Cobalt
|
112,676
|
Series
C Preferred
|
|
$240,000
|
$240,000
|
|
10/08/08
|
TetraVitae
|
118,804
|
Series
B Preferred
|
|
$250,000
|
$250,000
|
|
10/31/08
|
CSwitch
|
$250,000
|
Bridge
Note Financing
|
$250,000
|
|
$250,000
|
|
11/07/08
|
Siluria
|
$42,042
|
Debt
Financing
|
$42,542
|
|
$42,542
|
|
11/12/08
|
BioVex
|
$200,000
|
Bridge
Note & Warrant
|
$200,000
|
|
$200,000
|
|
Harris
& Harris Group, Inc.
|
Equity
Securities – Purchases (Continued)
|
Date
|
Company
|
Shares
/ Face
|
Description
|
Follow-on
|
New
|
Total
|
By
Quarter
|
11/25/08
|
Cobalt
|
63,380
|
Series
C Preferred
|
$134,999
|
|
$134,999
|
|
12/01/08
|
CFX
|
672,389
|
Series
A Preferred
|
$526,736
|
|
$526,736
|
|
12/23/08
|
Kovio
|
1,200,000
|
Series
E Preferred
|
$1,500,000
|
|
$1,500,000
|
$3,144,278
|
|
|
|
|
$15,044,963
|
$2,734,500
|
$17,779,462
|
$17,779,462
|
C. Certification
Requested
Applicant
hereby requests, pursuant to Section 851(e) of the Code, a certification that it
is principally engaged in the furnishing of capital to other corporations that
are principally engaged in the development or exploitation of inventions,
technological improvements, new processes, or products not previously generally
available. Applicant’s board of directors has determined that it is
in the best interests of Applicant and its shareholders to qualify as a
RIC. Among other things, RIC qualification would permit Applicant to
avoid taxation at the corporate level. However, based upon the
composition of Applicant’s investment portfolio and in the absence of the
requested certification, Applicant may not satisfy the diversification
requirements of Subchapter M as set forth in Section 851(b)(3)(A) of the
Code. Thus, without the requested certification, Applicant may not be
able to qualify as a RIC.
D. Precedents
The
present request by Applicant is substantially identical to its requests for
certifications submitted for the tax years ending December 31, 1997 and December
31, 1999 through December 31, 2007, which the Commission granted.3 Moreover, the Commission has issued
certifications pursuant to Section 851(e) of the Code in the past to, among
others, Greater Washington Investors, Inc.,4 American Enterprise Development
Corp.,5 Boston Capital Corp. -- Boston Capital Small
Business Investment Corp.,6 and American Research & Development
Corp.7
4 Greater Washington
Investors, Inc. (File No. 811-1622), Investment Company Act Release No.
6604 (July 2, 1971) (certification).
5 American Enterprise
Development Corp. (File No. 811-1543), Investment Company Act Release No.
6501 (May 3, 1971) (certification).
6 Boston Capital Corp., Boston
Capital Small Business Investment Corp. (File No. 811-1650), Investment
Company Act Release No. 6054 (May 14, 1970) (certification).
7 American Research &
Development Corp. (File No. 811-4817), Investment Company Act Release No.
4817 (Jan. 12, 1967) (certification).
E. Applicant’s
Legal Arguments
Given the
nature of the companies in which Applicant has invested the majority of its
assets as well as the benefit for Applicant and its shareholders for Applicant
to be able to elect to be subject to taxation under Subchapter M, it is
appropriate for the Commission to issue the requested certification pursuant to
Section 851(e) of the Code. Section 851(e) was intended to foster the
development of companies that “are principally engaged in the development or
exploitation of inventions, technological improvements, new processes or
products not previously generally available . . . .”8 Accordingly, Section 851(e)
is available to those investment companies that are “principally engaged in the
development or exploitation of inventions, technological developments, new
processes or products not previously generally available . . . .” In
determining whether an investment company is ‘principally engaged’ in investing
in such companies, the Commission is to give
consideration
.. . . to the purpose and function of the investment company and to its
continuing over-all operation. Ordinarily, for example, it would be
requisite that a major portion of the assets of the investment company represent
securities in operating companies developing and exploiting new processes and
products.9
In the case of Applicant, as of
December 31, 2008, approximately 98.29% of its total assets less Cash
Equivalents were invested in the securities of companies engaged in the type and
degree of business activities described in Section 851(e). Applicant,
furthermore, is committed to continuing investing in such
companies.
The
Portfolio Companies are consistent with the types of companies that Congress
envisioned when it enacted Section 851(e). As noted in connection
with the enactment of Section 851(e), “[a]n operating company will not be
considered to be engaged in the development of new processes or products merely
because the process or development is new to the [operating] company.”10 Rather, the process or invention
developed by the operating company the investment company has invested in “must
represent a substantial technological improvement, or be different to a material
degree from a product previously available.”11 The investments of Applicant at
issue here fall squarely within the types of portfolio investments identified by
Congress as the intended beneficiaries of Section 851(e). The
Portfolio Companies are companies that are engaged in pioneering research into a
variety of new technical and medical advances that previously have not been
available. The advances being developed by the Portfolio Companies
range from the development of high-efficiency solar cells and renewable fuels
and chemicals to novel therapies for cancer. The technologies being
developed by each of the Portfolio Companies represent material advancements in
each of the companies’ respective industries; they do not represent mere changes
in style or new models.
Given the
composition of Applicant’s investment portfolio, Applicant may need to rely upon
the provisions of Section 851(e) in order to qualify as a
RIC. Obtaining the requested certification is a prerequisite to
relying upon Section 851(e). Moreover the Commission, and only the
Commission, has been authorized to issue such a certification. Thus,
for Applicant to rely upon Section 851(e), the Commission must issue the
requested certification.12 For the reasons set forth above,
we believe that it is appropriate in the public interest and consistent with the
best interests of Applicant’s shareholders for the Commission to issue the
requested certification pursuant to Section 851(e), and hereby request that such
certification be issued.
12
|
Applicant represents that the
limitation of Section 851(e)(2) does not apply to it. That
provision generally makes Section 851(e) unavailable to an investment
company if more than 25% of the value of its total assets is represented
by securities of issuers with respect to each of which the company holds
more than 10% of the outstanding voting securities and in respect of each
of which the company has held any security for 10 or more
years.
|
III. COMMUNICATIONS
Please
address all communications concerning this application and the Notice and Order
to:
Daniel B.
Wolfe
President
& Chief Operating Officer
Harris
& Harris Group, Inc.
111 West
57th Street
Suite
1100
New York,
NY 10019
Please
address any questions concerning this application and a copy of any
communications, Notice, or Order to:
|
|
Steven
B. Boehm, Esq.
|
Sandra
M. Forman, Esq.
|
Sutherland
Asbill & Brennan LLP
|
General
Counsel
|
1275
Pennsylvania Avenue, N.W.
|
Harris
& Harris Group, Inc.
|
Washington,
D.C. 20004-2415
|
111
West 57th
Street
|
|
Suite
1100
|
|
New
York,
NY 10019
|
IV. AUTHORIZATION
Under New
York law and the Articles of Incorporation and bylaws of Applicant, the
Applicant’s business and affairs are to be conducted by its board of
directors. In accordance with New York law and the Articles of
Incorporation and bylaws of Applicant, a resolution was adopted by Applicant’s
board of directors authorizing the appropriate officers of Applicant to prepare,
execute, and file with the Commission this Application for a certification
pursuant to Section 851(e) of the Code. A copy of the resolution is
attached hereto as Exhibit A. Accordingly, the persons signing and
filing this Application have been duly authorized to do so.
Applicant
has caused this Application to be duly signed on its behalf in the county of
New York
in the City of New York on the 29th day of April, 2009.
|
|
|
|
HARRIS
& HARRIS GROUP, INC.
|
|
|
|
|
|
|
By:
|
/s/ Daniel
B. Wolfe |
|
|
|
Daniel
B. Wolfe
President
& Chief Operating Officer
|
|
|
|
|
|
Attest:
|
/s/ Jacqueline
M. Matthews |
|
|
Jacqueline
M. Matthews
|
|
|
|
|
VERIFICATION
The
undersigned, being duly sworn, deposes and says that he has duly executed the
attached Application dated April 29, 2009, for and on behalf of Harris &
Harris Group, Inc.; that he is the President and Chief Operating Officer of
Harris & Harris Group, Inc.; and that all actions by shareholders, trustees,
and other bodies necessary to authorize deponent to execute and file this
Application have been taken. Deponent further says that he is
familiar with such instrument, and the contents thereof, and the facts set forth
are true to the best of his knowledge, information, and belief.
|
|
|
|
|
/s/ Daniel
B. Wolfe |
|
|
|
Daniel
B. Wolfe
|
|
|
|
|
|
Sworn and
subscribed to before me, a notary public, this 29th day of April,
2009.
|
|
|
|
|
/s/
Jacqueline M. Matthews |
|
|
|
Notary
Public, State of New York
No.
01MA6004743
Qualified
in New York County
Commission
Expires March 30, 2010
|
|
|
|
|
|
EXHIBIT
LIST
A Resolution
adopted by the board of directors of Harris & Harris Group,
Inc.
B Proposed
form of Certification.
HARRIS & HARRIS GROUP,
INC.
Resolution by the
Board
March 12,
2009
RESOLVED, that the
officers of the Company shall be, and each of them hereby is, authorized and
directed, by and on behalf of the Company, and in its name, to execute and cause
to be filed with the SEC any applications for exemptive relief or
certifications, or amendments thereto, or requests for no-action or interpretive
positions under the Securities Act of 1933, the Securities Exchange Act of 1934,
the Investment Company Act of 1940, or any other applicable federal or state
securities law, or applicable provisions of the Internal Revenue Code of 1986,
as amended, as such officers, in their sole discretion, deem necessary or to
effect such actions or pursue such activities or transactions of the Company as
are duly authorized; and further
RESOLVED, that all prior
actions taken by the officers of the Company in connection with the filing of
such application with the SEC are hereby approved and ratified in all
respects.
PROPOSED FORM OF
CERTIFICATION
In the
Matter of Harris & Harris Group, Inc.,
111 West
57th Street
Suite
1100
New York,
NY 10019
Admin. Proc. File
Nos. 33-_________, 814-00176
SECURITIES
AND EXCHANGE COMMISSION
INVESTMENT
COMPANY ACT OF 1940, Release No. ________
[_______],
2009
CERTIFICATE
PURSUANT TO SECTION 851(e) OF THE
INTERNAL
REVENUE CODE OF 1986, AS AMENDED
Harris
& Harris Group, Inc. (“Harris & Harris”), which has elected
to be regulated as a business development company under the Investment Company
Act of 1940 (the “1940 Act”), has filed an application for an order of the
Commission certifying to the Secretary of the Treasury, pursuant to Section
851(e) of the Internal Revenue Code of 1986, as amended (the “Code”), that, for
the year ended December 31, 2008, Harris & Harris was principally engaged in
the furnishing of capital to other corporations which are principally engaged in
the development or exploitation of inventions, technological improvements, new
processes, or products not previously generally available. The
certification requested is a prerequisite to qualification by Harris &
Harris as a “regulated investment company” under Section 851(a) of the Code,
pursuant to the provisions of Section 851(e) thereof, for the year ended
December 31, 2008.
The
following table shows the composition of Applicant’s total assets as of the end
of each calendar quarter of 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/31/2008
|
|
|
6/30/2008
|
|
|
9/30/2008
|
|
|
12/31/2008
|
|
A. Investments
in "eligible portfolio companies" described in Section
2(a)(46)
|
|
|
|
|
|
|
|
|
|
|
|
|
of
the 1940 Act and believed by the Applicant to be engaged in
the
|
|
|
|
|
|
|
|
|
|
|
|
|
business
activities required by Section 851(e) of the Code
|
|
$ |
80,202,336 |
|
|
$ |
89,414,431 |
|
|
$ |
60,663,002 |
|
|
$ |
54,125,622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B. Investments
in "eligible portfolio companies" described in Section
2(a)(46)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
the 1940 Act and treated by Applicant as not engaged in the
business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
activities
required by Section 851(e) of the Code*
|
|
|
2,219 |
|
|
|
2,219 |
|
|
|
2,219 |
|
|
|
2,219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C. Investments
that do not qualify under Section 55(a) of the 1940 Act,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
but
as to which the issuers are believed by Applicant to be engaged in
the
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
business
activities required by Section 851(e) of the Code**
|
|
|
2,893,308 |
|
|
|
2,918,874 |
|
|
|
3,277,224 |
|
|
|
2,837,312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Investments
that do not qualify under Section 55(a) of the 1940 Act
and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
treated
by Applicant as not covered by Section 851(e) of the Code
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E. Cash,
cash items and securities as set forth in Section 55(a)(6) of the 1940
Act, collectively “Cash Equivalents”
|
|
|
53,799,254 |
|
|
|
62,113,144 |
|
|
|
57,970,695 |
|
|
|
53,676,249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Investments and Cash Equivalents
|
|
$ |
136,897,117 |
|
|
$ |
154,448,668 |
|
|
$ |
121,913,140 |
|
|
$ |
110,641,402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Assets
|
|
|
3,875,522 |
|
|
|
1,338,315 |
|
|
|
1,163,360 |
|
|
|
986,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$ |
140,772,639 |
|
|
$ |
155,786,983 |
|
|
$ |
123,076,500 |
|
|
$ |
111,627,601 |
|
*
|
As
of December 31, 2008, the sole investment in this category was Exponential
Business Development Company.
|
**
|
As
of December 31, 2008, the sole investment in this category was D-Wave
Systems Inc. |
Harris
& Harris has submitted in support of its application, on which this order is
based, a detailed description of each of the companies whose securities are held
in its portfolio and which it alleges to be development
corporations. As reflected in the above table, such entities,
excluding investments in issuers described in Categories B and D, comprised the
following percentages of the total assets less cash and cash equivalents of
Harris & Harris at the end of each of the calendar quarters of
2008: March 31, 95.52%; June 30, 98.57%; September 30, 98.21%; and
December 31, 98.29%.
On the
basis of an examination of the reports and information filed by Harris &
Harris with the Commission pursuant to the provisions of the 1940 Act and the
rules and regulations promulgated thereunder, as well as the data and
information contained in the application, it appears to the Commission that,
during the twelve months ending December 31, 2008, Harris & Harris was
principally engaged in the furnishing of capital to other corporations which are
principally engaged in the development or exploitation of inventions,
technological improvements, new processes or products not previously generally
available within the intent of Section 851(e) of the Code.
IT IS
THEREFORE CERTIFIED to the Secretary of the Treasury, or his delegate, pursuant
to Section 851(e) of the Internal Revenue Code of 1986, as amended, that Harris
& Harris which has elected to be regulated as a business development company
under the 1940 Act was, for the twelve months ending December 31, 2008,
principally engaged in the furnishing of capital to other corporations which are
principally engaged in the development or exploitation of inventions,
technological improvements, new processes, or products not previously generally
available.
For the
Commission, by the Division of Investment Management, pursuant to delegated
authority.