Hatteras VC Co-Investment Fund II NPORT-P Hatteras VC Co-Investment Fund II, LLC (Sep 2020 report)

HATTERAS VC CO-INVESTMENT FUND II, LLC

(A Delaware Limited Liability Company)

SCHEDULE OF INVESTMENTS

September 30, 2020 (Unaudited)

 

Descriptions of Investment	Initial Investment Date	Cost		Fair Value		% of Members' Capital
Private Company:
Healthcare:
Clinipace, Inc. (1)(2)(3)
Raleigh, North Carolina
100,158 shares of
Series I Preferred Stock	Sep. 2011		500,000		188,487		11.32	%
Total Healthcare			500,000		188,487		11.32	%
Software:
Kollective Technology.  (1)(2)(3)
Sunnyvale, California
1,740,151 shares of
Common Stock	Jan. 2012		730,193		295,826		17.77	%
Posit Science Corporation (1)(2)(3)
San Fransisco, California
80,515 shares of
Common Stock	Dec. 2009		200,000		40,490		2.43	%
Posit Science Corporation (1)(2)(3)
San Fransisco, California
20,669 shares of
Series AA Preferred Stock	Sep. 2010		11,893		10,394		0.62	%
Total Software			942,086		346,710		20.82	%
Total Investments in Private Companies (United States)			1,442,086		535,197		32.14	%
Other Assets in excess of Liabilities					1,129,301		67.85	%
Members' Capital					1,664,498		100.00	%
(1) Non-income producing.
(2) Portfolio holdings are subject to substantial restrictions as to resale.
(3) Non-marketable securities
The cost and fair value of restricted Private Company investments are $711,893 and $535,197, respectively.
See notes to financial statements.

The Fund classifies its assets into three levels based on the lowest level of input that is significant to the fair value measurement. The three-tier hierarchy distinguishes between (1) inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Fund’s investments.

The inputs are summarized in the three broad levels listed below:

 Valuation of Investments

• Level 1 – quoted prices (unadjusted) in active markets for identical assets and liabilities

• Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

• Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

	Level 1		Level 2		Level 3		Total
Private Company1
Preferred Stock		-		-		198,881		198,881
Common Stock		-		-		336,316		336,316
Total	$	-	$	-	$	535,197	$	535,197
1 All private companies held in the Fund are level 3 securites. For a detailed break-out of private companies by industry classifications, please refer to the Schedule of Investments.

	Preferred Stock			Common Stock			Total
Balance as of July 1, 2020	$	941,342		$	45,248		$	986,590
Net Realized Gain/(Loss)		332,094			(566,003	)		(233,909	)
Change in Unrealized Appreciation/(Depreciation)		76,145			569,009			645,154
Transfers In/(Out) of Investment Categories*		(288,062	)		288,062			-
Gross Purchases		-			-			-
Gross Sales		(862,638	)		-			(862,638	)
Balance as of September 30, 2020	$	198,881		$	336,316		$	535,197
* Transfers in or out of investment categories relfect changes in investment categories and are represented by their balance at the beginning of the period.

The following is a summary of quantitative information about significant unobservable input used for Level 3 fair value measurements for investments held as of September 30, 2020.
Type of Investment	Fair Value as of September 30, 2020	Valuation Technique	Unobservable Input	Multiple Used	Discount Used	Impact to Valuation from Increase in Input
Common Stock	295,826	Discounted cash flows-M&A multiples	Discount rate	N/A	19.25%	Decrease
			Forward M&A revenue multiple	3.03x	N/A	Increase
		Discount	Discount for lack of marketability	N/A	26.50%	Decrease
Preferred Stock	188,487	Most recent transaction	Private financing	N/A	N/A	N/A
Common Stock	40,490	Market comparable companies	Forward revenue multiple	2.60x	N/A	Increase
		Discount	Discount for lack of marketability	N/A	42.41%	Decrease
Preferred Stock	10,394	Market comparable companies	Forward revenue multiple	2.60x	N/A	Increase
		Discount	Discount for lack of marketability	N/A	42.41%	Decrease
Total Investments	535,197

Investments in private companies are generally valued using most recent capitalization technique and market comparable companies techniques. The significant unobservable input used in the most recent capitalization technique is private financing. Two significant unobservable inputs used in the market comparable companies technique are the particular type of market multiple relied upon and a discount rate. Different types of multiples (e.g., forward revenue multiple) are relied upon across the Fund’s portfolio. A significant decrease in one of these multiples in isolation would result in a significantly lower fair value measurement. A significant increase in the discount rate in isolation would result in a significantly lower fair value measurement.

The significant unobservable inputs used in the fair value measurement of the Fund’s preferred and common stock are generally the financial results of privately held entities. If the financial condition of these companies were to deteriorate, or if market comparables were to fall, the value of the preferred stock or common stock in these private companies held by the Fund would be lower.

The Fund's valuation procedures have been approved by and are subject to continued oversight by the Fund's Board of Managers (the “Board”). The valuation procedures are implemented by the Adviser and the Fund's third party administrator, which report to the Board. For third-party information, the Fund's administrator monitors and reviews the methodologies of the various pricing services employed by the Fund.