0001104659-14-057495.txt : 20140806 0001104659-14-057495.hdr.sgml : 20140806 20140806141618 ACCESSION NUMBER: 0001104659-14-057495 CONFORMED SUBMISSION TYPE: N-CSR/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20130630 FILED AS OF DATE: 20140806 DATE AS OF CHANGE: 20140806 EFFECTIVENESS DATE: 20140806 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Hatteras VC Co-Investment Fund II, LLC CENTRAL INDEX KEY: 0001450150 IRS NUMBER: 383792124 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-CSR/A SEC ACT: 1940 Act SEC FILE NUMBER: 811-22251 FILM NUMBER: 141019359 BUSINESS ADDRESS: STREET 1: 8540 COLONNADE CENTER DRIVE, SUITE 401 CITY: RALEIGH STATE: NC ZIP: 27615 BUSINESS PHONE: 919-846-2324 MAIL ADDRESS: STREET 1: 8540 COLONNADE CENTER DRIVE, SUITE 401 CITY: RALEIGH STATE: NC ZIP: 27615 N-CSR/A 1 a14-18437_1ncsra.htm N-CSR/A

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM N-CSR

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number

811-22251

 

HATTERAS VC CO-INVESTMENT FUND II, LLC

(Exact name of registrant as specified in charter)

 

8540 COLONNADE CENTER DRIVE, SUITE 401

RALEIGH, NORTH CAROLINA

 

27615

(Address of principal executive offices)

 

(Zip code)

 

DAVID B. PERKINS

8540 COLONNADE CENTER DRIVE, SUITE 401

RALEIGH, NORTH CAROLINA 27615

(Name and address of agent for service)

 

Registrant’s telephone number, including area code:

(919) 846-2324

 

 

Date of fiscal year end:

JUNE 30

 

 

Date of reporting period:

JUNE 30, 2013

 

 

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to  stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).  The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

 

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public.  A  registrant  is not required to respond to the  collection  of  information  contained in Form N-CSR unless the Form  displays a  currently  valid  Office of  Management  and Budget (“OMB”) control number.  Please direct comments concerning the accuracy of the information  collection  burden  estimate and any  suggestions  for reducing the burden to  Secretary,  Securities  and Exchange  Commission,  450 Fifth Street,  NW, Washington,  DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

 



 

ITEM 1. REPORTS TO STOCKHOLDERS.

 


 

 


 

Hatteras VC Co-Investment Fund II, LLC

 

(a Delaware Limited Liability Company)

 

Financial Statements

 

For the period from September 1, 2012 to June 30, 2013

 



 

Hatteras VC Co-Investment Fund II, LLC

 

(a Delaware Limited Liability Company)

 

Table of Contents

 

Report of Independent Registered Public Accounting Firm

 

1

Schedule of Investments

 

2-6

Statement of Assets, Liabilities and Members’ Capital

 

7

Statement of Operations

 

8

Statements of Changes in Members’ Capital

 

9

Statement of Cash Flows

 

10

Notes to Financial Statements

 

11-22

Board of Managers (unaudited)

 

23-24

Fund Management (unaudited)

 

25

Other Information (unaudited)

 

26-27

Privacy Policy (unaudited)

 

28-30

 



 

 

 

 

 

 

Report of Independent Registered Public Accounting Firm

 

To the Board of Managers and Members

Hatteras VC-Co Investment Fund II, LLC

New York, New York

 

We have audited the accompanying statement of assets, liabilities and members’ capital, including the schedule of investments, of Hatteras VC Co-Investment Fund II, LLC (the “Fund”) as of June 30, 2013, and the related statements of operations and cash flows for the period from September 1, 2012 to June 30, 2013 and the statements of changes in members’ capital for the period from September 1, 2012 to June 30, 2013 and the year ended August 31, 2012. These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of investments owned as of June 30, 2013 by correspondence with the custodian and the private companies which are held by the Fund. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Hatteras VC Co-Investment Fund II, LLC as of June 30, 2013, the results of its operations and its cash flows for the period from September 1, 2012 to June 30, 2013, and the changes in its members’ capital for period from September 1, 2012 to June 30, 2013 and the year ended August 31, 2012, in conformity with accounting principles generally accepted in the United States of America.

 

New York, New York

August 29, 2013

 

Member of the RSM International network of independent accounting, tax and consulting firms.

 

ONE


 


 

Hatteras VC Co-Investment Fund II, LLC

 

(a Delaware Limited Liability Company)

 

SCHEDULE OF INVESTMENTS

 

June 30, 2013

 

 

 

Initial

 

 

 

 

 

% of

 

 

 

Investment

 

 

 

Fair

 

Members’

 

Description of Investment

 

Date

 

Cost

 

Value

 

Capital

 

Private Company:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer:

 

 

 

 

 

 

 

 

 

Ooma, Inc. (a),(b)

 

 

 

 

 

 

 

 

 

Palo Alto, California

 

 

 

 

 

 

 

 

 

162,287 shares of

 

 

 

 

 

 

 

 

 

Series Alpha Preferred Stock

 

Oct. 2009

 

$

371,317

 

$

462,942

 

5.87

%

 

 

 

 

 

 

 

 

 

 

Sonim Technologies, Inc. (a),(b)

 

 

 

 

 

 

 

 

 

San Mateo, California

 

 

 

 

 

 

 

 

 

180,208 shares of

 

 

 

 

 

 

 

 

 

Series B Preferred Stock

 

Nov. 2009

 

167,180

 

174,160

 

2.21

%

 

 

 

 

 

 

 

 

 

 

Sonim Technologies, Inc. (a),(b)

 

 

 

 

 

 

 

 

 

San Mateo, California

 

 

 

 

 

 

 

 

 

440,312 shares of

 

 

 

 

 

 

 

 

 

Series A Preferred Stock

 

Nov. 2012

 

174,794

 

177,120

 

2.24

%

Total Consumer

 

 

 

713,291

 

814,222

 

10.32

%

 

 

 

 

 

 

 

 

 

 

Healthcare:

 

 

 

 

 

 

 

 

 

Clinipace, Inc. (a),(b)

 

 

 

 

 

 

 

 

 

Raleigh, North Carolina

 

 

 

 

 

 

 

 

 

3,816,881 shares of

 

 

 

 

 

 

 

 

 

Series C Preferred Stock

 

Sep. 2011

 

500,000

 

824,408

 

10.45

%

 

 

 

 

 

 

 

 

 

 

Information Technology:

 

 

 

 

 

 

 

 

 

Stoke, Inc. (a),(b)

 

 

 

 

 

 

 

 

 

Santa Clara, California

 

 

 

 

 

 

 

 

 

76,453 shares of

 

 

 

 

 

 

 

 

 

Series E Preferred Stock

 

Nov. 2010

 

250,001

 

66,350

 

0.84

%

 

 

 

 

 

 

 

 

 

 

Medical Technology:

 

 

 

 

 

 

 

 

 

Anulex Technologies, Inc. (a),(b)

 

 

 

 

 

 

 

 

 

Minnetonka, Minnesota

 

 

 

 

 

 

 

 

 

150,000 shares of

 

 

 

 

 

 

 

 

 

Series E Preferred Stock

 

May 2010

 

150,000

 

118,820

 

1.51

%

 

 

 

 

 

 

 

 

 

 

Lineagen, Inc. (b)

 

 

 

 

 

 

 

 

 

Salt Lake City, Utah

 

 

 

 

 

 

 

 

 

Convertible Promissory Note

 

 

 

 

 

 

 

 

 

Principal of $300,000,

 

 

 

 

 

 

 

 

 

5.25%, due on demand

 

Jul. 2011

 

300,000

 

 

%

Total Medical Technology

 

 

 

450,000

 

118,820

 

1.51

%

 

(continued)

 

See notes to financial statements.

 

TWO



 

 

 

Initial

 

 

 

 

 

% of

 

 

 

Investment

 

 

 

Fair

 

Members’

 

Description of Investment

 

Date

 

Cost

 

Value

 

Capital

 

Semiconductor:

 

 

 

 

 

 

 

 

 

GainSpan Corporation (a),(b)

 

 

 

 

 

 

 

 

 

San Jose, California

 

 

 

 

 

 

 

 

 

312,500 shares of

 

 

 

 

 

 

 

 

 

Series C Preferred Stock

 

Sep. 2011

 

$

250,000

 

$

281,250

 

3.56

%

 

 

 

 

 

 

 

 

 

 

GainSpan Corporation (a),(b)

 

 

 

 

 

 

 

 

 

San Jose, California

 

 

 

 

 

 

 

 

 

156,292 shares of

 

 

 

 

 

 

 

 

 

Series D Preferred Stock

 

Jun. 2012

 

140,663

 

140,663

 

1.78

%

 

 

 

 

 

 

 

 

 

 

Luxtera, Inc. (a),(b)

 

 

 

 

 

 

 

 

 

Carlsbad, California

 

 

 

 

 

 

 

 

 

2,203,210 shares of

 

 

 

 

 

 

 

 

 

Series C Preferred Stock

 

Apr. 2012

 

301,413

 

13,987

 

0.18

%

 

 

 

 

 

 

 

 

 

 

Magnum Semiconductor, Inc. (a),(b)

 

 

 

 

 

 

 

 

 

Milpitas, California

 

 

 

 

 

 

 

 

 

134,219 shares of

 

 

 

 

 

 

 

 

 

Series E-1 Preferred Stock

 

Jun. 2010

 

161,063

 

15,938

 

0.20

%

 

 

 

 

 

 

 

 

 

 

Quantenna Communications, Inc. (a),(b)

 

 

 

 

 

 

 

 

 

Fremont, California

 

 

 

 

 

 

 

 

 

1,893,223 shares of

 

 

 

 

 

 

 

 

 

Series D Preferred Stock

 

Apr. 2010

 

150,000

 

169,427

 

2.15

%

 

 

 

 

 

 

 

 

 

 

Quantenna Communications, Inc. (a),(b)

 

 

 

 

 

 

 

 

 

Fremont, California

 

 

 

 

 

 

 

 

 

673,734 shares of

 

 

 

 

 

 

 

 

 

Series E Preferred Stock

 

Oct. 2010

 

75,000

 

81,913

 

1.04

%

 

 

 

 

 

 

 

 

 

 

Quantenna Communications, Inc. (a),(b)

 

 

 

 

 

 

 

 

 

Fremont, California

 

 

 

 

 

 

 

 

 

256,158 shares of

 

 

 

 

 

 

 

 

 

Series F-1 Preferred Stock

 

Nov. 2011

 

39,084

 

42,293

 

0.54

%

Total Semiconductor

 

 

 

1,117,223

 

745,471

 

9.45

%

 

 

 

 

 

 

 

 

 

 

Software:

 

 

 

 

 

 

 

 

 

Clustrix, Inc. (a),(b)

 

 

 

 

 

 

 

 

 

San Francisco, California

 

 

 

 

 

 

 

 

 

248,663 shares of

 

 

 

 

 

 

 

 

 

Series B Preferred Stock

 

Dec. 2010

 

250,001

 

64,230

 

0.81

%

 

(continued)

 

See notes to financial statements.

 

THREE



 

 

 

Initial

 

 

 

 

 

% of

 

 

 

Investment

 

 

 

Fair

 

Members’

 

Description of Investment

 

Date

 

Cost

 

Value

 

Capital

 

Software (continued):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

KnowledgeTree, Inc. (a),(b)

 

 

 

 

 

 

 

 

 

Raleigh, North Carolina

 

 

 

 

 

 

 

 

 

59,695 shares of

 

 

 

 

 

 

 

 

 

Series B Preferred Stock

 

Jun. 2012

 

$

250,002

 

$

250,002

 

3.17

%

 

 

 

 

 

 

 

 

 

 

Kontiki, Inc. (a),(b)

 

 

 

 

 

 

 

 

 

Sunnyvale, California

 

 

 

 

 

 

 

 

 

45,670 shares of

 

 

 

 

 

 

 

 

 

Common Stock

 

Jan. 2012

 

 

3,750

 

0.05

%

 

 

 

 

 

 

 

 

 

 

Kontiki, Inc. (a),(b)

 

 

 

 

 

 

 

 

 

Sunnyvale, California

 

 

 

 

 

 

 

 

 

333,334 shares of

 

 

 

 

 

 

 

 

 

Series B Preferred Stock

 

Jul. 2010

 

250,001

 

250,001

 

3.17

%

 

 

 

 

 

 

 

 

 

 

Kontiki, Inc. (a),(b)

 

 

 

 

 

 

 

 

 

Sunnyvale, California

 

 

 

 

 

 

 

 

 

234,522 shares of

 

 

 

 

 

 

 

 

 

Series C Preferred Stock

 

Jan. 2012

 

91,463

 

133,589

 

1.69

%

 

 

 

 

 

 

 

 

 

 

Kontiki, Inc. (b)

 

 

 

 

 

 

 

 

 

Sunnyvale, California

 

 

 

 

 

 

 

 

 

Convertible Promissory Note

 

 

 

 

 

 

 

 

 

Principal of $32,847

 

 

 

 

 

 

 

 

 

8.00%, 12/31/2013

 

Mar. 2013

 

32,847

 

33,519

 

0.43

%

 

 

 

 

 

 

 

 

 

 

Kontiki, Inc. (b)

 

 

 

 

 

 

 

 

 

Sunnyvale, California

 

 

 

 

 

 

 

 

 

Convertible Promissory Note

 

 

 

 

 

 

 

 

 

Principal of $16,423

 

 

 

 

 

 

 

 

 

8.00%, 12/31/2013

 

Apr. 2013

 

16,423

 

16,640

 

0.21

%

 

 

 

 

 

 

 

 

 

 

Kontiki, Inc. (b)

 

 

 

 

 

 

 

 

 

Sunnyvale, California

 

 

 

 

 

 

 

 

 

Convertible Promissory Note

 

 

 

 

 

 

 

 

 

Principal of $41,059

 

 

 

 

 

 

 

 

 

8.00%, 12/31/2013

 

Jun. 2013

 

41,059

 

41,223

 

0.52

%

 

 

 

 

 

 

 

 

 

 

Posit Science Corporation (a),(b)

 

 

 

 

 

 

 

 

 

San Francisco, California

 

 

 

 

 

 

 

 

 

80,515 shares of

 

 

 

 

 

 

 

 

 

Common Stock

 

Dec. 2009

 

200,000

 

39,208

 

0.50

%

 

(continued)

 

See notes to financial statements.

 

FOUR



 

 

 

Initial

 

 

 

 

 

% of

 

 

 

Investment

 

 

 

Fair

 

Members’

 

Description of Investment

 

Date

 

Cost

 

Value

 

Capital

 

Software (continued):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Posit Science Corporation (a),(b)

 

 

 

 

 

 

 

 

 

San Francisco, California

 

 

 

 

 

 

 

 

 

21,429 shares of

 

 

 

 

 

 

 

 

 

Series AA Preferred Stock

 

Sep. 2010

 

$

11,893

 

$

10,435

 

0.13

%

 

 

 

 

 

 

 

 

 

 

Sailthru, Inc. (a),(b)

 

 

 

 

 

 

 

 

 

New York, New York

 

 

 

 

 

 

 

 

 

57,047 shares of

 

 

 

 

 

 

 

 

 

Series A Preferred Stock

 

Sep. 2011

 

299,999

 

460,301

 

5.83

%

 

 

 

 

 

 

 

 

 

 

SugarSync, Inc. (a),(b)

 

 

 

 

 

 

 

 

 

San Mateo, California

 

 

 

 

 

 

 

 

 

278,500 shares of

 

 

 

 

 

 

 

 

 

Series BB Preferred Stock

 

Dec. 2009

 

150,000

 

235,474

 

2.99

%

 

 

 

 

 

 

 

 

 

 

SugarSync, Inc. (a),(b)

 

 

 

 

 

 

 

 

 

San Mateo, California

 

 

 

 

 

 

 

 

 

579,375 shares of

 

 

 

 

 

 

 

 

 

Series CC Preferred Stock

 

Feb. 2011

 

350,000

 

527,815

 

6.69

%

 

 

 

 

 

 

 

 

 

 

SugarSync, Inc. (a),(b)

 

 

 

 

 

 

 

 

 

San Mateo, California

 

 

 

 

 

 

 

 

 

73,119 shares of

 

 

 

 

 

 

 

 

 

Series DD Preferred Stock

 

Dec. 2011

 

68,000

 

90,442

 

1.15

%

 

 

 

 

 

 

 

 

 

 

SugarSync, Inc. (b)

 

 

 

 

 

 

 

 

 

San Mateo, California

 

 

 

 

 

 

 

 

 

Convertible Promissory Note

 

 

 

 

 

 

 

 

 

Principal of $127,400,

 

 

 

 

 

 

 

 

 

4.00%, 11/15/2013

 

May 2013

 

127,400

 

128,031

 

1.62

%

 

 

 

 

 

 

 

 

 

 

Univa Corporation (a),(b)

 

 

 

 

 

 

 

 

 

Austin, Texas

 

 

 

 

 

 

 

 

 

939,541 shares of

 

 

 

 

 

 

 

 

 

Series I Preferred Stock

 

Oct. 2010

 

432,114

 

288,295

 

3.65

%

Total Software

 

 

 

2,571,202

 

2,572,955

 

32.61

%

 

 

 

 

 

 

 

 

 

 

Total Private Company

 

 

 

5,601,717

 

5,142,226

 

65.18

%

 

(continued)

 

See notes to financial statements.

 

FIVE



 

 

 

Initial

 

 

 

 

 

% of

 

 

 

Investment

 

 

 

Fair

 

Members’

 

Description of Investment

 

Date

 

Cost

 

Value

 

Capital

 

Short-Term Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federated Prime Obligations Fund #10, 0. 04% (c)

 

 

 

$

2,736,548

 

$

2,736,548

 

34.69

%

 

 

 

 

 

 

 

 

 

 

Total Short-Term Investments

 

 

 

2,736,548

 

2,736,548

 

34.69

%

 

 

 

 

 

 

 

 

 

 

Total Investments (United States)

 

 

 

8,338,265

 

7,878,774

 

99.87

%

 

 

 

 

 

 

 

 

 

 

Other Assets in Excess of Liabilities

 

 

 

 

 

10,167

 

0.13

%

 

 

 

 

 

 

 

 

 

 

Members’ Capital

 

 

 

 

 

$

7,888,941

 

100.00

%

 


(a)  Non-income producing.

(b)  Portfolio holdings are subject to substantial restrictions as to resale.

(c)  The rate shown is the annualized 7-day yield as of June 30, 2013.

 

The cost and fair value of restricted private company investments are $5,601,717 and $5,142,226, respectively.

 

See notes to financial statements.

 

SIX



 

Hatteras VC Co-Investment Fund II, LLC

 

(a Delaware Limited Liability Company)

 

STATEMENT OF ASSETS, LIABILITIES AND MEMBERS’ CAPITAL

 

June 30, 2013

 

Assets

 

 

 

Investments in private companies, at fair value (cost $5,601,717)

 

$

5,142,226

 

Short-term investments, at fair value (cost $2,736,548)

 

2,736,548

 

Receivable for investment sold

 

115,829

 

Interest receivable

 

107

 

Total assets

 

$

7,994,710

 

Liabilities and members’ capital

 

 

 

Management fee payable

 

$

39,643

 

Professional fees payable

 

54,387

 

Accounting and administration fees payable

 

10,000

 

Custodian fees payable

 

1,739

 

Total liabilities

 

105,769

 

 

 

 

 

Members’ capital

 

7,888,941

 

Total liabilities and members’ capital

 

$

7,994,710

 

 

 

 

 

Components of members’ capital:

 

 

 

Capital contributions

 

$

10,514,912

 

Accumulated net investment loss

 

(1,548,645

)

Accumulated net realized loss on investments

 

(617,835

)

Accumulated net unrealized depreciation on investments

 

(459,491

)

Members’ capital

 

$

7,888,941

 

 

 

 

 

Net asset value per unit

 

$

68.79

 

Number of authorized units

 

Unlimited

 

Number of outstanding units

 

114,678.93

 

 

See notes to financial statements.

 

SEVEN



 

Hatteras VC Co-Investment Fund II, LLC

 

(a Delaware Limited Liability Company)

 

STATEMENT OF OPERATIONS

 

 For the period from September 1, 2012 to June 30, 2013

 

Investment income

 

 

 

Interest

 

$

3,484

 

Total investment income

 

3,484

 

Operating expenses

 

 

 

Management fee

 

159,230

 

Professional fees

 

79,182

 

Accounting and administration fees

 

33,333

 

Managers’ fees

 

29,167

 

Custodian fees

 

11,339

 

Other expenses

 

1,120

 

Total expenses, before management fee waiver

 

313,371

 

 

 

 

 

Management fee waived

 

13,335

 

Net expenses

 

300,036

 

 

 

 

 

Net investment loss

 

(296,552

)

Net realized and unrealized loss on investments

 

 

 

Net realized loss on investments in private companies

 

(617,835

)

Net change in unrealized depreciation on investments in private companies

 

(1,126,726

)

Net loss on investments

 

(1,744,561

)

Net decrease in members’ capital resulting from operations

 

$

(2,041,113

)

 

See notes to financial statements.

 

EIGHT



 

Hatteras VC Co-Investment Fund II, LLC

 

(a Delaware Limited Liability Company)

 

STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL

 

For the period from September 1, 2012 to June 30, 2013 and the year ended August 31, 2012

 

 

 

Members’
Capital

 

Members’ capital, at August 31, 2011

 

$

9,925,408

 

Net investment loss

 

(319,008

)

Net change in unrealized appreciation on investments in private companies

 

323,654

 

Members’ capital, at August 31, 2012

 

9,930,054

 

Net investment loss

 

(296,552

)

Net realized loss on investments in private companies

 

(617,835

)

Net change in unrealized depreciation on investments in private companies

 

(1,126,726

)

Members’ capital, at June 30, 2013

 

$

7,888,941

 

 

See notes to financial statements.

 

NINE



 

Hatteras VC Co-Investment Fund II, LLC

 

(a Delaware Limited Liability Company)

 

STATEMENT OF CASH FLOWS

 

For the period from September 1, 2012 to June 30, 2013

 

Cash flows from operating activities:

 

 

 

Net decrease in members’ capital resulting from operations

 

$

(2,041,113

)

Adjustments to reconcile net decrease in members’ capital resulting from operations to net cash used in operating activities:

 

 

 

Purchases of investments

 

(541,797

)

Net proceeds on sale of short-term investments

 

456,569

 

Net realized loss on investments

 

617,835

 

Net change in unrealized depreciation on investments in private companies

 

1,126,726

 

Decrease in receivable for investment sold

 

378,994

 

Decrease in interest receivable

 

299

 

Decrease in management fee payable

 

(4,672

)

Increase in professional fees payable

 

5,717

 

Increase in accounting and administration fees payable

 

3,333

 

Increase in custodian fees payable

 

855

 

Decrease in other expenses payable

 

(2,746

)

Net cash used in operating activities

 

 

Net change in cash

 

 

 

 

 

 

Cash at beginning of period

 

 

Cash at end of period

 

$

 

 

See notes to financial statements.

 

TEN



 

Hatteras VC Co-Investment Fund II, LLC

 

(a Delaware Limited Liability Company)

 

NOTES TO FINANCIAL STATEMENTS

 

for the period from September 1, 2012 to June 30, 2013

 

1.              ORGANIZATION

 

Hatteras VC Co-Investment Fund II, LLC (the “Fund”) was organized as a limited liability company under the laws of the State of Delaware on November 7, 2008 and commenced operations on September 1, 2009.  The Fund is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a closed-end, non-diversified management investment company. The Fund is managed by Hatteras Capital Investment Management, LLC (the “Adviser”), an investment adviser registered with the Securities and Exchange Commission (the “SEC”) under the Investment Advisers Act of 1940, as amended. The Fund’s placement agent, an affiliate of the Adviser, is Hatteras Capital Distributors, LLC.  The Fund had an initial closing on September 1, 2009 (“Initial Closing”) and a final closing August 31, 2010 (“Final Closing”), as determined by the Board of Managers (the “Board”) of the Fund.  The Fund’s investment period (the “Investment Period”) is three years following the Initial Closing of the Fund.  The Fund will continue until the date that is six years from the date of the Initial Closing, unless terminated earlier pursuant to applicable terms of the Fund’s limited liability company agreement (“LLC Agreement”).  The term may be extended for two one-year periods at the discretion of the Board.

 

The Board has overall responsibility for the management and supervision of the business operations of the Fund on behalf of the members of the Fund (“Members”), subject to the laws of the State of Delaware and the Fund’s LLC Agreement, including authority to oversee and establish policies regarding the management, conduct and operation of the Fund’s business.  The Fund’s investment objective is to seek superior risk-adjusted returns by investing in venture-backed companies.  The Fund intends to achieve its investment objective by investing all or substantially all of its assets in venture-backed companies alongside of top-tier venture capital firms.

 

At a Board meeting held on August 23, 2012, the Board approved a change in fiscal year-end for the Fund from August 31 to June 30, effective as of the end of the fiscal year ended August 31, 2012.

 

2.              SIGNIFICANT ACCOUNTING POLICIES

 

The following is a summary of significant accounting and reporting policies used in preparing the financial statements.

 

a.              Basis of Accounting

 

The Fund’s accounting and reporting policies conform to accounting principles generally accepted within the United States of America (“U.S. GAAP”).

 

ELEVEN



 

Hatteras VC Co-Investment Fund II, LLC

 

(a Delaware Limited Liability Company)

 

NOTES TO FINANCIAL STATEMENTS

 

for the period from September 1, 2012 to June 30, 2013

(CONTINUED)

 

2.              SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

b.              Cash

 

Cash, if any, includes short-term interest bearing deposit accounts.  At times, such deposits may be in excess of federally insured limits.  The Fund has not experienced any losses in such accounts and does not believe it is exposed to significant credit risk on such accounts.  At June 30, 2013, the Fund held no cash balances in deposit accounts.

 

c.               Valuation of Portfolio Investments

 

All portfolio investments are recorded at fair value in accordance with the Fund’s valuation procedures. The Fund’s valuation procedures have been approved by and are subject to continued oversight by the Fund’s 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.

 

Investments in Private Companies — Investments for which observable market prices in active markets do not exist are reported at fair value, as determined in good faith by the Adviser.  Fair value is based on the best information available and is determined by reference to information including, but not limited to, the following:  projected sales, net earnings, earnings before interest, taxes, depreciation and amortization (“EBITDA”), balance sheets, public or private transactions, valuations for publicly traded comparable companies, recent rounds of financing in the company’s stock, and/or other measures, and consideration of any other pertinent information including the types of securities held and restrictions on disposition.  The amount determined to be fair value may incorporate the Adviser’s own assumptions (including appropriate risk adjustments for nonperformance and/or lack of marketability).  The methods used to estimate the fair value of private companies include:  (1) the market approach (whereby fair value is derived by reference to observable valuation measures for comparable companies or assets — e.g., multiplying a key performance metric of the investee company or asset, such as projected revenue or EBITDA, by a relevant valuation multiple observed in the range of comparable companies or transactions — adjusted by the Adviser for differences between the investment and the referenced comparables and in some instances by reference to option pricing models or other similar methods), (2) the income approach (e.g., the discounted cash flow method), (3) cost for a period of time after an acquisition (where such amount is determined by the Adviser to be the best indicator of fair value), and (4) based upon a recent round of financing, which usually includes referencing  recent or pending transactions in the same or similar securities of the issuer. These valuation methodologies involve a significant degree of judgment.  Due to the absence of readily determinable fair values and the inherent uncertainty of valuations, the estimated fair values for private companies may differ significantly from values that would have been used had a ready market for the securities existed, and the differences could be material.

 

TWELVE



 

Hatteras VC Co-Investment Fund II, LLC

 

(a Delaware Limited Liability Company)

 

NOTES TO FINANCIAL STATEMENTS

 

for the period from September 1, 2012 to June 30, 2013

(CONTINUED)

 

2.              SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

c.               Valuation of Portfolio Investments (CONTINUED)

 

Short-Term Investments - During period from September 1, 2012 to June 30, 2013, the Fund held its short-term investment in the Federated Prime Obligation Fund #10, an open-ended money market fund (the “MMF”) incorporated in the United States of America. The MMF’s objective is to seek and provide current income consistent with the stability of principal. The MMF invests in a portfolio of short-term, high-quality, fixed income securities issued by banks, corporations and the U.S. government. The MMF held by the Fund seeks to preserve a net asset value of $1.00 per share. The MMF is valued at a yield-adjusted net asset value per share, which is currently equal to $1.00 per share as represented on one or more of the U.S. national securities exchanges.

 

The Fund classifies its investments 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)

 

THIRTEEN



 

Hatteras VC Co-Investment Fund II, LLC

 

(a Delaware Limited Liability Company)

 

NOTES TO FINANCIAL STATEMENTS

 

for the period from September 1, 2012 to June 30, 2013

(CONTINUED)

 

2.              SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

c.               Valuation of Portfolio Investments (Continued)

 

The following table presents the Fund’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of June 30, 2013:

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Private Company(1)

 

 

 

 

 

 

 

 

 

Convertible Promissory Notes

 

$

 

$

 

$

219,413

 

$

219,413

 

Preferred Stock

 

 

 

4,879,855

 

4,879,855

 

Common Stock

 

 

 

42,958

 

42,958

 

Total Private Company

 

 

 

5,142,226

 

5,142,226

 

Short-Term Investments

 

2,736,548

 

 

 

2,736,548

 

Total

 

$

2,736,548

 

$

 

$

5,142,226

 

$

7,878,774

 

 


(1) All private companies held in the Fund are Level 3 securities.  For a detailed break-out of private companies by industry classification, please refer to the Schedule of Investments.

 

There were no transfers among Levels 1, 2 and 3 during the period from September 1, 2012 to June 30, 2013. Should a transfer between Levels occur, the Fund would recognize the transfer at the beginning of the reporting period following the actual date of the event or change in circumstance that caused the transfer.

 

The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value:

 

 

 

Bridge
Financing
Notes

 

Convertible
Promissory
Notes

 

Preferred
Stock

 

Common
Stock

 

Total

 

Balance as of September 1, 2012

 

$

1,001,166

 

$

317,748

 

$

4,980,756

 

$

45,320

 

$

6,344,990

 

Net Realized Loss

 

(467,835

)

 

 

(150,000

)

(617,835

)

Change in Unrealized Appreciation/(Depreciation)

 

(533,331

)

(316,064

)

(424,969

)

147,638

 

(1,126,726

)

Gross Purchases

 

 

217,729

 

324,068

 

 

541,797

 

Gross Sales

 

 

 

 

 

 

Balance as of June 30, 2013

 

$

 

$

219,413

 

$

4,879,855

 

$

42,958

 

$

5,142,226

 

 

Change in unrealized depreciation included in the statement of operations attributable to Level 3 investments held as of the reporting date is $(743,393).

 

FOURTEEN



 

Hatteras VC Co-Investment Fund II, LLC

 

(a Delaware Limited Liability Company)

 

NOTES TO FINANCIAL STATEMENTS

 

for the period from September 1, 2012 to June 30, 2013

(CONTINUED)

 

2.              SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

c.               Valuation of Portfolio Investments (CONTINUED)

 

The following is a summary of quantitative information about significant unobservable inputs used for Level 3 fair value measurements for investments held as of June 30, 2013:

 

Type of
Investment

 

Fair Value as of
June 30, 2013

 

Valuation Technique

 

Unobservable
Input

 

Weighted
Average

 

Range

 

Impact to
Valuation From
an Increase in
Input

 

Private Company :

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible Promissory Notes

 

$

219,413

 

Most Recent Capitalization

 

Private Financing

 

N/A

 

N/A

 

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock

 

2,507,722

 

Market Comparable Companies

 

Forward Revenue Multiple

 

3.12x

 

1.20x -5.24x

 

Increase

 

 

 

 

 

 

 

Discount Rate

 

15%

 

15%

 

Decrease

 

 

 

2,372,133

 

Most Recent Capitalization

 

Private Financing

 

N/A

 

N/A

 

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

42,958

 

Market Comparable Companies

 

Forward Revenue Multiple

 

2.38x

 

2.11x- 5.24x

 

Increase

 

 

 

 

 

 

 

Discount Rate

 

15%

 

15%

 

Decrease

 

Total Private Company

 

$

5,142,226

 

 

 

 

 

 

 

 

 

 

 

 

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 is 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.

 

FIFTEEN



 

Hatteras VC Co-Investment Fund II, LLC

 

(a Delaware Limited Liability Company)

 

NOTES TO FINANCIAL STATEMENTS

 

for the period from September 1, 2012 to June 30, 2013

(CONTINUED)

 

2.              SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

c.               Valuation of Portfolio Investments (CONTINUED)

 

The significant unobservable inputs used in the fair value measurement of the Fund’s bridge financing notes and the convertible promissory notes are the likelihood that cash flows or shares will not be received in the future.  Significant increases in the probability of default for these securities would result in a 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.

 

d.              Investment Income

 

Interest income is recorded when earned. Interest income is not recognized when collection is doubtful, but instead, such amounts are tracked in a memorandum account. At June 30, 2013, all interest was deemed collectible. Disbursements received from investments in private companies are ordinarily accounted for as a reduction of cost, or allocated between cost and realized gains and losses dependent upon information received from the private company. Investments in short-term investments are recorded on a trade-date basis.  Investments in private companies are recorded on a subscription effective date basis.  Realized gains and losses are determined on a specific identified cost basis.

 

e.               Fund Expenses

 

Fund expenses that are specifically attributed to the Fund are charged to the Fund and recorded on an accrual basis.  Expenses of the Fund include, but are not limited to, the following:  all costs and expenses related to portfolio transactions, legal fees, accounting, auditing, and tax preparation fees, custodial fees, fees for data and software providers, costs of insurance, registration expenses, management fee, and expenses of meetings of the Board.

 

f.                Income Taxes

 

The Fund is treated as a partnership for federal income tax purposes and therefore is not subject to U.S. federal income tax. For income tax purposes, the individual Members will be taxed upon their distributive share of each item of the Fund’s profit and loss.

 

SIXTEEN



 

Hatteras VC Co-Investment Fund II, LLC

 

(a Delaware Limited Liability Company)

 

NOTES TO FINANCIAL STATEMENTS

 

for the period from September 1, 2012 to June 30, 2013

(CONTINUED)

 

2.              SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

f.                Income taxes (CONTINUED)

 

The Fund has reviewed any potential tax positions as of June 30, 2013 and has determined that it does not have a liability for any unrecognized tax benefits. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the statement of operations.  During the period from September 1, 2012 to June 30, 2013, the Fund did not incur any interest or penalties.  The Fund files income tax returns in U.S. federal jurisdictions and various states, which remain open for examination by the tax authorities for a period of three years from when they are filed.  The tax years subject to evaluation by tax authorities are 2010, 2011 and 2012.

 

g.              Distributions

 

The Fund may make distributions to Members at least annually, or more frequently, at the Fund’s discretion, as permitted by applicable laws, rules and regulations. Amounts distributed will be intended to represent the amounts of distributions received by the Fund from underlying investments during the period since the last distribution (or from commencement of operations in the case of the first distribution). Any distributions to Members will be made pro-rata.

 

h.              Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires the Fund to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in Members’ capital from operations during the reporting period.  Actual results could differ from those estimates.

 

i.                 Recent Accounting Pronouncement

 

In December 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-11 related to disclosures about offsetting assets and liabilities. The amendments in ASU 2011-11 require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. ASU 2011-11 is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The guidance requires retrospective application for all comparative periods presented. Since the pronouncement is disclosure related, management does not believe that ASU 2011-11 will have a material impact on the financial statement disclosures.

 

SEVENTEEN



 

Hatteras VC Co-Investment Fund II, LLC

 

(a Delaware Limited Liability Company)

 

NOTES TO FINANCIAL STATEMENTS

 

for the period from September 1, 2012 to June 30, 2013

(CONTINUED)

 

3.              MANAGEMENT FEE AND RELATED PARTY TRANSACTIONS

 

The Adviser is responsible for providing day-to-day investment management services to the Fund, subject to the ultimate supervision of and subject to any policies established by the Board, pursuant to the terms of an investment management agreement with the Fund (the “Investment Management Agreement”). Under the Investment Management Agreement, the Adviser is responsible for developing, implementing and supervising the Fund’s investment program.

 

In consideration for such services, the Fund pays the Adviser a quarterly investment “management fee” equal to 2.00% on an annualized basis of the net assets of the Fund as of each quarter-end.  The Adviser has committed to waive permanently a portion of its contractual fee rate under the Investment Management Agreement as of the end of any quarter at which (or month-end during the period from the Initial Closing to the Final Closing) the cost basis of the Fund’s portfolio companies plus cash and cash equivalents, including short-term investments, is less than the Fund’s net asset value (“NAV”) as of such quarter-end (or month-end during the period from the Initial Closing to the Final Closing). When this occurs, the Adviser will waive the portion of its management fee that is in excess of the annual rate equal to 2.00% of the cost basis of the Fund’s portfolio companies plus cash and cash equivalents, including short-term investments. The management fee for the period from September 1, 2012 to June 30, 2013 was $159,230.  For the period from September 1, 2012 to June 30, 2013, the Adviser waived $13,335 of the management fee.

 

Each member of the Board who is not an “interested person” of the Fund, as defined by Section 2(a)(19) of the 1940 Act (each an “Independent Manager”), receives an annual retainer of $5,000 from the Fund for services on the Board and for services as a member of the audit committee of the Fund.  All Board members are reimbursed by the Fund for all reasonable out-of-pocket expenses incurred by them in performing their duties.  For the period from September 1, 2012 to June 30, 2013, retainers to the Independent Managers totaled $29,167 and are included in the statement of operations under Managers’ fees.

 

4.              ACCOUNTING, ADMINISTRATION, AND CUSTODIAL AGREEMENT

 

In consideration for accounting, administrative, and recordkeeping services, the Fund pays J.D. Clark & Company, a division of UMB Fund Services, Inc. (the “Administrator”) a monthly administration fee based on the month-end net asset value of the Fund.  The Administrator also provides regulatory administrative services, transfer agency functions, and Member services at an additional cost.  For the period from September 1, 2012 to June 30, 2013, the total accounting and administration fee was $33,333, and is included in the statement of operations under accounting and administration fees.

 

EIGHTEEN



 

Hatteras VC Co-Investment Fund II, LLC

 

(a Delaware Limited Liability Company)

 

NOTES TO FINANCIAL STATEMENTS

 

for the period from September 1, 2012 to June 30, 2013

(CONTINUED)

 

4.              ACCOUNTING, ADMINISTRATION, AND CUSTODIAL AGREEMENT (CONTINUED)

 

UMB Bank, n.a., an affiliate of the Administrator, serves as custodian of the Fund’s assets and provides custodial services for the Fund.

 

5.              INVESTMENT TRANSACTIONS

 

Total purchases of investments in private companies for the period ended June 30, 2013 amounted to $541,797.  There were no sales of investments in private companies for the period ended June 30, 2013.  The cost of investments in private companies for U.S. federal income tax purposes is adjusted for items of taxable income allocated to the Fund from the investments in private companies. The Fund relies upon actual and estimated tax information provided by the private companies in which it invests as to the amounts of taxable income allocated to the Fund as of June 30, 2013.

 

The Fund intends to invest substantially all of its available capital in private companies. These investments will generally be restricted securities that are subject to substantial holding periods or are not traded in public markets at all, so that the Fund may not be able to resell some of its securities holdings for extended periods.

 

6.              INDEMNIFICATIONS

 

In the normal course of business, the Fund enters into contracts that provide general indemnifications.  The Fund’s maximum exposure under these agreements is dependent on future claims that may be made against the Fund, and therefore cannot be established; however, based on experience, the risk of loss from such claims is considered remote.

 

7.              COMMITMENTS

 

As of June 30, 2013, the Fund did not have any outstanding investment commitments to private companies.

 

8.              RISK FACTORS

 

An investment in the Fund involves significant risks, including liquidity risk, non-diversification risk and economic conditions risk, that should be carefully considered prior to investing and should only be considered by persons financially able to maintain their investment and who can afford a loss of a substantial part or all of such investment.

 

NINETEEN



 

Hatteras VC Co-Investment Fund II, LLC

 

(a Delaware Limited Liability Company)

 

NOTES TO FINANCIAL STATEMENTS

 

for the period from September 1, 2012 to June 30, 2013

(CONTINUED)

 

8.              RISK FACTORS (CONTINUED)

 

Liquidity risk:  Transfer of the units of limited liability company interests (“Units”) of the Fund is subject to significant restrictions. Because of these restrictions and the absence of a public market for the Units, a Member may be unable to liquidate his, her or its investment even though his, her or its personal financial circumstances would make liquidation advisable or desirable. The Units will not be readily acceptable as collateral for loans and the Units are not permitted to be pledged as collateral for loans.  Moreover, even if a Member were able to dispose of his, her or its Units, adverse tax consequences could result.

 

Non-diversification risk:  If there is an industry in which the Fund concentrates its investments, the Fund may be subject to greater investment risk as companies engaged in similar businesses are more likely to be similarly affected by any adverse market conditions and other adverse industry-specific factors.

 

Economic risk:  The Fund’s investments expose Members to a range of potential economic risks that could have an adverse effect on the Fund. These may include, but are not limited to, declines in economic growth, inflation, deflation, taxation, governmental restrictions and/or adverse regulation.

 

9.              FINANCIAL HIGHLIGHTS

 

The financial highlights are intended to help an investor understand the Fund’s financial performance for past periods. The total return in the table represents the rate that a typical Member would be expected to have earned or lost on an investment in the Fund.

 

The ratios and total return amount are calculated based on the Member group taken as a whole. An individual Member’s results may vary from those shown below due to the timing of capital transactions.

 

The ratios are calculated by dividing total dollars of net investment income/(loss) or expenses, as applicable, by the average of total monthly Members’ capital.  The total return amount is calculated by geometrically linking returns based on the change in the net asset value during each accounting period.

 

TWENTY



 

Hatteras VC Co-Investment Fund II, LLC

 

(a Delaware Limited Liability Company)

 

NOTES TO FINANCIAL STATEMENTS

 

for the period from September 1, 2012 to June 30, 2013

(CONTINUED)

 

9.              FINANCIAL HIGHLIGHTS (CONTINUED)

 

Per Unit Operating Performance:

 

Net Asset Value, September 1, 2009

 

$

100.00

 

Income/(loss) from investment operations:

 

 

 

Net investment loss

 

(4.81

)

Net change in unrealized depreciation on investments in private companies

 

(7.28

)

Total from investment operations

 

(12.09

)

Net Asset Value, August 31, 2010

 

$

87.91

 

Income/(loss) from investment operations:

 

 

 

Net investment loss

 

(3.36

)

Net change in unrealized appreciation on investments in private companies

 

2.00

 

Total from investment operations

 

(1.36

)

Net Asset Value, August 31, 2011

 

$

86.55

 

Income/(loss) from investment operations:

 

 

 

Net investment loss

 

(2.78

)

Net change in unrealized appreciation on investments in private companies

 

2.82

 

Total from investment operations

 

0.04

 

Net Asset Value, August 31, 2012

 

$

86.59

 

Income/(loss) from investment operations:

 

 

 

Net investment loss

 

(2.59

)

Net realized loss and change and unrealized depreciation on investments in private companies

 

(15.21

)

Total from investment operations

 

(17.80

)

Net Asset Value, June 30, 2013

 

$

68.79

 

 

TWENTY-ONE



 

Hatteras VC Co-Investment Fund II, LLC

 

(a Delaware Limited Liability Company)

 

NOTES TO FINANCIAL STATEMENTS

 

for the period from September 1, 2012 to June 30, 2013

(CONCLUDED)

 

9.              FINANCIAL HIGHLIGHTS (CONTINUED)

 

 

 

For the period
from
September 1,
2012 to June

 

For the years ended August 31,

 

For the period
from
September 1,
2009
(commencement
of operations)
to August 31,

 

 

 

30, 2013*

 

2012

 

2011

 

2010

 

Total return (1)

 

(20.56

)%(3)

0.05

%

(1.55

)%

(12.09

)%

Members’ capital, end of period (000’s)

 

$

7,889

 

$

9,930

 

$

9,925

 

$

10,081

 

Portfolio turnover

 

0.00

%(3)

8.00

%

0.00

%

0.00

%

Net investment loss:

 

 

 

 

 

 

 

 

 

Before reimbursement of placement agent fees

 

(3.58

)%(4)

(3.15

)%

(3.84

)%

(13.76

)%

After reimbursement of placement agent fees

 

(3.58

)%(4)

(3.15

)%

(3.84

)%

(13.34

)%

Total expenses (2):

 

 

 

 

 

 

 

 

 

Before reimbursement of placement agent fees

 

3.62

%(4)

3.29

%

3.94

%

13.92

%

After reimbursement of placement agent fees

 

3.62

%(4)

3.29

%

3.94

%

13.50

%

 


* At a Board meeting held on August 23, 2012, the Board approved a change in fiscal year-end for the Fund from August 31 to June 30 effective as of the end of the fiscal year ended August 31, 2012; as a result, this report covers the period from September 1, 2012 to June 30, 2013.

 

(1) Internal rate of return since inception: As of June 30, 2013 was (9.30)%; As of August 31, 2012 was (4.69)%; As of August 31, 2011 was (6.97)%.

 

(2) Total expenses before and after waiver of the management fee for the period from September 1, 2012 to June 30, 2013 were 3.78% and 3.62%, respectively. Total expenses before and after waiver of the management fee for the year ended August 31, 2012 were 3.46% and 3.29%, respectively. Total expenses before and after waiver of the management fee for the period from September 1, 2010 to August 31, 2011 were 3.98% and 3.94%, respectively.  There was no management fee waived for the period from September 1, 2009 (commencement of operations) to August 31, 2010.

 

(3) Not annualized.

 

(4) Not annualized.

 

10.          SUBSEQUENT EVENTS

 

The Fund has evaluated subsequent events through the date the financial statements were issued, and determined there were no subsequent events that required disclosure in or adjustment to the financial statements.

 

TWENTY-TWO


 


 

Hatteras VC Co-Investment Fund II, LLC

 

(a Delaware Limited Liability Company)

 

BOARD OF MANAGERS

(Unaudited)

 

The identity of the Board members (each a “Manager”) and brief biographical information, as of June 30, 2013, is set forth below. The business address of each Manager is care of Hatteras Funds, 8540 Colonnade Center Drive, Suite 401, Raleigh, NC 27615. The Managers serve on the Board for terms of indefinite duration. A Manager’s position in that capacity will terminate if the Manager is removed or resigns or, among other events, upon the Manager’s death, incapacity, retirement or bankruptcy. The Fund’s Statement of Additional Information includes additional information about the Managers and may be obtained without charge by calling Hatteras at 1-866-388-6292.

 

Name and
Date of Birth

 

Position(s)
Held with
the Fund

 

Length of
Time Served

 

Principal Occupation(s) During
Past 5 Years and Other
Directorships Held by Manager

 

Number of Portfolios in
Fund Complex(1) Overseen
by Manager

INTERESTED MANAGERS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

David B. Perkins(2)
July 18, 1962

 

President and Chairman of the Board of Managers

 

Since Inception

 

Mr. Perkins has been Chairman of the Board of Directors and President of the Fund since inception. Mr. Perkins is the Chief Executive Officer of Hatteras and its affiliated entities. He founded the firm in September 2003. Prior to that, he was the co-founder and Managing Partner of CapFinancial Partners, LLC.

 

18

 

 

 

 

 

 

 

 

 

INDEPENDENT MANAGERS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

H. Alexander Holmes
May 4, 1942

 

Manager; Audit Committee Member

 

Since Inception

 

Mr. Holmes founded Holmes Advisory Services, LLC, a financial consultation firm, in 1993.

 

18

 

 

 

 

 

 

 

 

 

Steve E. Moss, CPA
February 18, 1953

 

Manager; Audit Committee Member

 

Since Inception

 

Mr. Moss is a principal of Holden, Moss, Knott, Clark & Copley, P.A. and has been a member manager of HMKCT Properties, LLC since January 1996.

 

18

 

 

 

 

 

 

 

 

 

Gregory S. Sellers
May 5, 1959

 

Manager; Audit Committee Member

 

 

 

Mr. Sellers has been the Chief Financial Officer of Imagemark Business Services, Inc., a strategic communications provider of marketing and print communications solutions, since June 2009. From 2003 to June 2009, Mr. Sellers was the Chief Financial Officer and a director of Kings Plush, Inc., a fabric manufacturer.

 

18

 


(1)  The “Fund Complex” consists of the Fund,  Hatteras Master Fund, L.P., Hatteras Core Alternatives Fund, L.P., Hatteras Core Alternatives TEI Fund, L.P., Hatteras Core Alternatives Institutional Fund, L.P., Hatteras Core Alternatives TEI Institutional Fund, L.P., Hatteras Global Private Equity Partners Institutional, LLC, Hatteras GPEP Fund II, LLC, Hatteras Alternative Mutual Funds Trust (consisting of five funds), Hatteras Variable Trust, and Underlying Funds Trust (consisting of five funds).

(2)  Mr. Perkins is deemed to be an “interested” Manager of the Fund because of his affiliations with the Adviser.

 

TWENTY-THREE



 

Hatteras VC Co-Investment Fund II, LLC

 

(a Delaware Limited Liability Company)

 

BOARD OF MANAGERS

(Unaudited)

 

Name and
Date of Birth

 

Position(s)
Held with
the Fund

 

Length of
Time Served

 

Principal Occupation(s) During
Past 5 Years and Other
Directorships Held by Manager

 

Number of Portfolios in
Fund Complex(1) Overseen
by Manager

INDEPENDENT MANAGERS (CONTINUED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Daniel K. Wilson
June 22, 1948

 

Manager; Audit Committee Member

 

Since Inception

 

Mr. Wilson was Executive Vice President and Chief Financial Officer of Parksdale Mills, Inc. from 2004 - 2008. Mr. Wilson currently is in private practice as a Certified Public Accountant.

 

18

 

 

 

 

 

 

 

 

 

Joseph E. Breslin
November 18, 1953

 

Manager; Audit Committee Member

 

Since 2012

 

Mr. Breslin is currently a private investor. Mr. Breslin has been a Director of Kinetics Mutual Funds, Inc. (mutual fund) from 2000 to Present (8 portfolios); Trustee, Kinetics Portfolios Trust (mutual fund) from 2000 to Present (8 portfolios). From 2007 to 2009, Mr. Breslin was the Chief Operating Officer of Central Park Credit Holdings, Inc. and prior to that, was the Chief Operating Officer of Aladdin Capital Management LLC, beginning in 2005.

 

18

 

 

 

 

 

 

 

 

 

Thomas Mann
February 1, 1950

 

Manager; Audit Committee Member

 

Since 2012

 

Mr. Mann is currently a private investor. From 2003 until 2012, Mr. Mann was the Managing Director and Group Head Financial Institutions Group, Société Générale, Sales of Capital Market Solutions and Products. Mr. Mann is also a Director of Virtus Global Multi-Sector Income Fund since 2011, Virtus Total Return Fund since 2012, and F-Squared Investments, Inc since January 2012.

 

18

 

TWENTY-FOUR



 

Hatteras VC Co-Investment Fund II, LLC

 

(a Delaware Limited Liability Company)

 

FUND MANAGEMENT

(Unaudited)

 

Set forth below is the name, date of birth, position with the Fund, length of term of office, and the principal occupation for the last five years, as of June 30, 2013, of each of the persons currently serving as Executive Officer.  The business address of each officer is care of Hatteras Funds, 8540 Colonnade Center Drive, Suite 401, Raleigh, NC  27615.

 

Name and
Date of Birth

 

Position(s)
Held with
the Fund

 

Length of Time
Served

 

Principal Occupation(s) During
Past 5 Years and Other
Directorships Held by Officer

 

Number of Portfolios in
Fund Complex(1) Overseen 
by Officer

OFFICERS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

J. Michael Fields
July 14, 1973

 

Secretary of each fund in the Fund Complex

 

Since Inception

 

Prior to becoming Secretary of each of the funds in the Fund Complex, Mr. Fields was Treasurer of each of the funds in the Fund Complex. Mr. Fields is Chief Operating Officer of the Adviser and its affiliates and has been employed by the Hatteras firm since its inception in September 2003.

 

N/A

 

 

 

 

 

 

 

 

 

Andrew P. Chica
September 7, 1975

 

Chief Compliance Officer of each fund in the Fund Complex

 

Since Inception

 

Mr. Chica joined Hatteras in November 2007 and became Chief Compliance Officer of each of the funds in the Fund Complex and the Adviser as of January 2008.

 

N/A

 

 

 

 

 

 

 

 

 

Robert Lance Baker
September 17, 1971

 

Treasurer of each fund in the Fund Complex

 

Since Inception

 

Mr. Baker joined Hatteras in March 2008 and became Treasurer of each of the funds in the Fund Complex in December 2008. Mr. Baker serves as the Chief Financial Officer of the Adviser and its affiliates.

 

N/A

 


(1)  The “Fund Complex” consists of the Fund,  Hatteras Master Fund L.P., Hatteras Core Alternatives Fund, L.P., Hatteras Core Alternatives TEI Fund, L.P., Hatteras Core Alternatives Institutional Fund, L.P., Hatteras Core Alternatives TEI Institutional Fund, L.P., Hatteras Global Private Equity Partners Institutional, LLC, Hatteras GPEP Fund II, LLC, Hatteras Alternative Mutual Funds Trust (consisting of five funds), Hatteras Variable Trust, and Underlying Funds Trust (consisting of five funds).

 

TWENTY-FIVE



 

Hatteras VC Co-Investment Fund II, LLC

 

(a Delaware Limited Liability Company)

 

OTHER INFORMATION

(Unaudited)

 

Proxy Voting

 

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and the Fund’s record of actual proxy votes cast is available at www.sec.gov and by calling 1-800-504-9070 and may be obtained at no additional charge.

 

Availability of Quarterly Portfolio Schedules

 

The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q.  The Fund’s Form N-Q is available, without charge and upon request, on the SEC’s website at http://www.sec.gov or may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C.

 

Annual Renewal of Investment Management Agreement

 

At a meeting of the Fund’s Board held on May 21, 2013, by a unanimous vote, the Board, including a majority of the Managers who are not “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act, approved the continuation of the Investment Management Agreement (the “Investment Management Agreement”) for an additional year.

 

In advance of the May 21, 2013 meeting, the Independent Managers requested and received extensive materials from the Adviser to assist them in considering the renewal of the Agreement.  The Independent Managers reviewed reports from the Adviser relating to the below factors. The Board did not consider any single factor as controlling in determining whether or not to approve the Agreement, nor were the items described herein all encompassing of the matters considered by the Board.

 

NATURE, EXTENT AND QUALITY OF SERVICES

 

The Board reviewed and considered the nature and extent of the investment advisory services proposed to be provided by the Adviser to the Fund under the Investment Management Agreement. The Board noted that the Fund’s investment period ended on September 1, 2012. The Adviser will continue to evaluate current additional investment opportunities that may be available with the Fund’s current investment portfolio. In doing so, the Adviser will continue to evaluate the selection of Fund investments, access to select top-tier venture capital firms for co-investment opportunities, evaluation of risk exposure and risk controls, experience and training of the Adviser’s investment professionals, and day-to-day portfolio management and general investment selection. The Board also reviewed and considered the qualifications of the portfolio managers, and other key personnel of the Adviser who provide the investment advisory and administrative services to the Fund. The Board determined that the Adviser’s portfolio managers and key personnel are well qualified by education and/or training and experience to perform the services in an efficient and professional manner. The Board also took into account the Adviser’s compliance policies and procedures, including the procedures used to determine the value of each of the Fund’s investments. The Board also reviewed and considered the nature and extent of the non-advisory, administrative services to be provided by the Adviser under the Investment Management Agreement including, among other things, providing office facilities, equipment, and personnel.

 

The Board noted that the Fund’s performance since inception and during the period ended December 1, 2012 trailed that of each of the three comparative funds selected by management. The Board noted that the Fund’s performance was not unreasonable especially given the difficulty of constructing a truly meaningful peer universe.

 

The Board concluded that the overall quality of the advisory and administrative services was satisfactory.

 

FEES AND EXPENSES RELATIVE TO COMPARABLE FUNDS MANAGED BY THE ADVISER AND OTHER ADVISERS

 

The Board reviewed the advisory fee rates and expected total expense ratio of the Fund.  The Board also noted that the Adviser committed to waive permanently a portion of its contractual advisory fee rate under the Investment Management Agreement as of the end of any quarter at which the cost basis of the Fund’s portfolio companies plus

 

TWENTY-SIX



 

Annual Renewal of Investment Management Agreement (CONTINUED)

 

cash and cash equivalents, including short-term investments, is less than the Fund’s net asset value as of such quarter-end. When this occurs, the Adviser will waive the portion of its management fee that is in excess of the annual rate equal to 2.00% of the cost basis of the Fund’s portfolio companies plus cash and cash equivalents, including short-term investments. The Board noted that the Adviser waived a portion of its management fee for the fiscal year ended August 31, 2012 and the period from September 1, 2012 to December 31, 2012.

 

The Board noted that although the Fund is closed to new investors, a placement fee described in the current Fund Prospectus, was paid to an affiliate of the Adviser. The Board noted that Hatteras Capital Distributors, LLC (the “Placement Agent”) entered into an expense reduction agreement pursuant to which it rebated to the Fund 1.00% of all investments made after the initial closing, for which the placement agent received a placement fee.  In addition, the Board considered that the Placement Agent and/or its affiliates made payments to selected affiliated or unaffiliated third parties from time to time in connection with the placement of Fund shares and/or shareholder servicing. The Board noted that these payments were made out of the Placement Agent’s and/or affiliates’ own assets and did not represent an additional charge to the Fund.

 

The Board compared the advisory fee, and total expense ratio for the Fund with various closed-end fund of funds, including funds advised by the Adviser. The Board noted that the Fund’s gross advisory fee was higher than the gross advisory fee of all five of the comparative funds.  However, the Board discussed how the Fund’s total expense ratio is within the range of the comparative funds, with four comparative funds having a lower total expense ratio and one comparative fund having a higher total expense ratio.

 

The Board also reviewed a profitability analysis and an income statement showing the Adviser’s profitability with respect to the services it provides to the Fund.  The Board did not believe that the Adviser received excessive revenues or profits.

 

The Board concluded that the advisory fees paid by the Fund and total expense ratio were reasonable and satisfactory in light of the services proposed to be provided.

 

BREAKPOINTS AND ECONOMIES OF SCALE

 

The Board reviewed the structure of the investment management fees, noting that no change in fees had been proposed.  The Board noted that the Fund is closed to new investors and believed that it was unlikely that economies of scale will be achieved. Further, the Board believed that breakpoints are not appropriate considering that the Fund is closed.

 

PROFITABILITY OF ADVISER AND AFFILIATES

 

As described above, the Board reviewed a profitability analysis and an income statement prepared by management for the period ended December 31, 2012. The analysis and income statement showed that the Adviser earned a profit margin with respect to its management of the Fund. Given the services provided to the Fund, the Board determined that the Adviser did not earn excessive profits.

 

FALL-OUT BENEFITS

 

The Board considered the placement fees earned by affiliates of the Adviser.

 

GENERAL CONCLUSION

 

Based on its consideration of all factors that it deemed material, and assisted by the advice of its counsel, the Board concluded it would be in the best interest of the Fund and its investors to approve the Investment Management Agreement for an additional one-year term.

 

TWENTY-SEVEN



 

Hatteras VC Co-Investment Fund II, LLC

 

(a Delaware Limited Liability Company)

 

PRIVACY POLICY

(Unaudited)

 

Privacy Policy

 

FACTS

WHAT DOES Hatteras Funds DO WITH YOUR PERSONAL INFORMATION?

Why?

Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.

What?

The types of personal information we collect and share depend on the product or service you have with us. This information can include:

·                                  Social Security number

·                                  account balances

·                                  account transactions

·                                  transaction history

·                                  wire transfer instructions

·                                  checking account information

When you are no longer our customer, we continue to share your information as described in this notice.

 

How?

All financial companies need to share customers' personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers' personal information; the reasons Hatteras Funds chooses to share; and whether you can limit this sharing.

 

 

 

Reasons we can share your personal information

Does Hatteras Funds
share?

Can you limit this sharing?

For our everyday business purposes –
such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus

 

Yes

No

For our marketing purposes –
to offer our products and services to you

 

No

We don’t share

For joint marketing with other financial companies

 

No

We don’t share

For our affiliates’ everyday business purposes – information about your transactions and experiences

 

Yes

No

For our affiliates’ everyday business purposes – information about your creditworthiness

 

No

We don’t share

 

 

TWENTY-EIGHT



 

Hatteras VC Co-Investment Fund II, LLC

 

(a Delaware Limited Liability Company)

 

PRIVACY POLICY

(Unaudited)

 

Privacy Policy (Continued)

 

For our affiliates to market to you

 

No

We don’t share

For non-affiliates to market to you

 

No

We don’t share

 

Questions?

Call (919) 846-2324 or go to www.hatterasfunds.com

 

 

What we do

 

Who is providing this notice?

Funds advised by Hatteras entities.  A complete list is included below.

 

How does Hatteras Funds protect my personal information?

To protect your personal information from unauthorized access and use, we use security measures that comply with federal law.  These measures include computer safeguards and secured files and buildings.

 

How does Hatteras Funds collect my personal information?

We collect your personal information, for example, when you

 

           open an account

           provide account information

           give us your contact information

           make a wire transfer

           tell us where to send the money

 

We also collect your information from others, such as credit bureaus, affiliates, or other companies.

 

Why can’t I limit all sharing?

Federal law gives you the right to limit only

 

           sharing for affiliates’ everyday business purposes – information about your creditworthiness

           affiliates from using your information to market to you

           sharing for non-affiliates to market to you

 

State laws and individual companies may give you additional rights to limit sharing.

 

 

TWENTY-NINE



 

Hatteras VC Co-Investment Fund II, LLC

 

(a Delaware Limited Liability Company)

 

PRIVACY POLICY

(Unaudited)

 

Privacy Policy (Concluded)

Definitions

 

 

Affiliates

Companies related by common ownership or control.  They can be financial and nonfinancial companies.

 

▪   Our affiliates include companies with a Hatteras name, such as Hatteras Investment Partners, LLC, Hatteras Capital Investment Management, LLC and Hatteras Alternative Mutual Funds, LLC,  registered investment advisers; Hatteras Capital Distributors, LLC, a registered broker-dealer; and unregistered funds managed by Hatteras entities such as Hatteras Core Alternatives 3(c)(1) Fund, L.P., Hatteras Core Alternatives Offshore Fund, Ltd., Hatteras GPEP Fund, L.P. and Hatteras Late Stage VC Fund I, L.P.

 

 

 

Non-affiliates

Companies not related by common ownership or control.  They can be financial and nonfinancial companies.

 

 

▪   Hatteras Funds doesn’t share with non-affiliates so they can market to you.

 

Joint marketing

A formal agreement between nonaffiliated financial companies that together market financial products or services to you.

 

▪   Hatteras Funds doesn’t jointly market.

 

List of funds providing this notice

 

Hatteras Core Alternatives Fund, L.P., Hatteras Core Alternatives TEI Fund, L.P., Hatteras Core Alternatives Institutional Fund, L.P., Hatteras Core Alternatives TEI Institutional Fund, L.P., Hatteras Global Private Equity Partners Institutional, LLC, Hatteras GPEP Fund II, LLC, Hatteras VC Co-Investment Fund II, LLC, Hatteras Alternative Mutual Funds Trust, and Underlying Funds Trust.

 

 

THIRTY



 

ITEM 2. CODE OF ETHICS.

 

(a)  The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party.

 

(c)  There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics definition enumerated in paragraph (b) of this item.

 

(d) The registrant has not granted any waivers, during the period covered by this report, including an implicit waiver, from a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this Item.

 

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

 

As of the end of the period covered by the report, the registrant’s board of managers has determined that Messrs. Steve E. Moss, H. Alexander Holmes, Gregory S. Sellers, Daniel K. Wilson, Joseph E. Breslin, and Thomas Mann are each qualified to serve as audit committee financial experts serving on its audit committee and that each is “independent,” as defined by Item 3 of Form N-CSR.

 

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

 

Audit Fees

 

(a) The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were $47,500 for 2012 and $49,500 for 2013.

 

Audit-Related Fees

 

(b)  The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for 2012 and $0 for 2013.

 

Tax Fees

 

(c)  The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were $0 for 2012 and $0 for 2013.

 



 

All Other Fees

 

(d)  The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item were $0 for 2012 and $0 for 2013.

 

(e)(1)  Disclose the audit committee’s pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.

 

The Registrant’s Audit Committee must pre-approve the audit and non-audit services of the Auditors prior to the Auditor’s engagement.

 

(e)(2)  The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows:

 

(b) 0%

 

(c) 0%

 

(d) 0%

 

(f)  The percentage of hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was less than fifty percent.

 

(g)  The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant were $0.

 

(h)  The registrant’s audit committee of the board of managers has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.

 

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

 

Not applicable.

 

ITEM 6. SCHEDULE OF INVESTMENTS.

 

(a)         Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form.

 

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

 

The Proxy Voting Policies are attached herewith.

 



 

PROXY VOTING POLICIES AND PROCEDURES

 

The Fund has delegated proxy voting responsibilities with respect to the Fund’s portfolio securities to the Adviser, subject to the Board’s general oversight and with the direction that proxies should be voted consistent with the Fund’s best economic interests. In general, the Adviser believes that voting proxies in accordance with the policies described below will be in the best interests of the Fund. If an analyst, trader or partner of the Adviser believes that voting in accordance with stated proxy-voting guidelines would not be in the best interests of a Fund, the proxy will be referred to the Adviser’s Chief Compliance Officer for a determination of how such proxy should be voted.

 

The Adviser will generally vote to support management recommendations relating to routine matters such as the election of directors (where no corporate governance issues are implicated), the selection of independent auditors, an increase in or reclassification of common stock, the addition or amendment of indemnification provisions in the company’s charter or by-laws, changes in the board of directors and compensation of outside directors. The Adviser will generally vote in favor of management or shareholder proposals that the Adviser believes will maintain or strengthen the shared interests of shareholders and management, increase shareholder value, maintain or increase shareholder influence over the company’s board of directors and management and maintain or increase the rights of shareholders.

 

On non-routine matters, the Adviser will generally vote in favor of management proposals for mergers or reorganizations, reincorporation plans, fair-price proposals and shareholder rights plans so long as such proposals are in the best economic interests of the Fund.

 

If a proxy includes a matter to which none of the specific policies described above or in the Adviser’s stated proxy-voting guidelines is applicable or a matter involving an actual or potential conflict of interest as described below, the proxy will be referred to the Adviser’s Chief Compliance Officer for a determination of how such proxy should be voted.

 

In exercising its voting discretion, the Adviser and its employees will seek to avoid any direct or indirect conflict of interest presented by the voting decision. If any substantive aspect or foreseeable result of the matter to be voted on presents an actual or potential conflict of interest involving the Adviser (or an affiliate of the Adviser), any issuer of a security for which the Adviser (or an affiliate of the Adviser) acts as sponsor, Adviser, manager, custodian, distributor, underwriter, broker or other similar capacity or any person with whom the Adviser (or an affiliate of the Adviser) has an existing material contract or business relationship not entered into in the ordinary course of business (the Adviser and such other persons having an interest in the matter being called “Interested Persons”), the Adviser will make written disclosure of the conflict to the Independent Managers of the Fund indicating how the Adviser proposes to vote on the matter and its reasons for doing so. If the Adviser does not receive timely written instructions as to voting or non-voting on the matter from the Fund’s Independent Managers, the Adviser may take any of the following actions which it deems to be in the best interests of the Fund: (i) engage an independent third party to determine whether and how the proxy should be voted and vote or refrain from voting on the matter as determined by the third party; (ii) vote on the matter in the manner proposed to the Independent Managers if the vote is against the interests of all Interested Persons; or (iii) refrain from voting on the matter.

 

The Fund will be required to file Form N-PX, with its complete proxy voting record for the twelve months ended June 30, no later than August 31 of each year. Once filed, the Fund’s Form N-PX filing will be available: (i) without charge, upon request, by calling the Fund at 800-504-9070 or (ii) by visiting the SEC’s website at www.sec.gov.

 



 

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

 

(a)(1)   Identification of Portfolio Manager(s) or Management Team Members and Description of Role of Portfolio Manager(s) or Management Team Members

 

The following table provides biographical information about the members of the Investment Committee, who are primarily responsible for the day-to-day portfolio management of the Fund as of September 9, 2013:

 

Name of
Investment
Committee
Member

 

Title

 

Length of
Time of
Service to
the Fund

 

Business Experience During the Past 5
Years

 

Role of
Investment
Committee
Member

 

 

 

 

 

 

 

 

 

David B. Perkins

 

Chief Executive Officer of the Investment Manager and President of the Fund

 

Since Inception

 

Mr. Perkins is the Chief Executive Officer of Hatteras and founded Hatteras and its affiliated entities. He founded the firm in September 2003. Prior to that, he was co-founder and Managing Partner of CapFinancial Partners, LLC.

 

Strategic Recommendations & Portfolio Oversight

 

 

 

 

 

 

 

 

 

Robert L. Worthington

 

President of the Investment Manager

 

Since January 14, 2010

 

Mr. Worthington became the President of the Investment Manager in February 2007.  Previously, Mr. Worthington was Managing Director at JPMorgan Asset Management from 2004 to 2006.  Mr. Worthington joined JPMorgan Asset Management in 2004 after its purchase of Undiscovered Managers, LLC, where he had been President from 2001 and a Managing Director for the three years prior.

 

Portfolio Management

 

 

 

 

 

 

 

 

 

J. Michael Fields

 

Chief Operating Officer of the Investment Manager

 

Since June 1, 2012

 

Mr. Fields is the Chief Operating Officer of Hatteras and its affiliates and has been employed by Hatteras since its inception in 2003.

 

Portfolio Management

 

 

 

 

 

 

 

 

 

Frank A. Burke

 

Vice President, Portfolio Management

 

Since June 1, 2012

 

Mr. Burke joined the Investment Manager in June 2011 and is currently a Vice President in the Portfolio Management Group.  Prior to joining Hatteras Funds, Mr. Burke served as a financial planner from 2008-2011.  Prior to that, he was employed at GenSpring Family Offices from 2007-2008 and was an Associate with Calibre Investment Consulting (now known as Abbott Downing) from 2003-2007.

 

Portfolio Management

 



 

(a)(2)  Other Accounts Managed by Portfolio Manager(s) or Management Team Member and Potential Conflicts of Interest

 

The following table provides information about portfolios and accounts other than the Fund for which the members of the Investment Committee of the Adviser are primarily responsible for the day-to-day portfolio management as of June 30, 2013:

 

Name of
Investment
Committee
Member

 

Type of Accounts

 

Total
Number
of
Accounts
Managed

 

Total Assets

 

Number of
Accounts
Managed
for Which
Advisory
Fee is Based
on
Performance

 

Total Assets for Which 
Advisory Fee is Based on
Performance

 

 

 

 

 

 

 

 

 

 

 

 

 

David B. Perkins

 

Registered Investment Companies

 

3

 

$

1,208,561,000

 

3

 

$

1,208,561,000

 

 

 

Other Pooled Investment Vehicles

 

2

 

$

16,141,000

 

1

 

$

2,889,000

 

 

 

Other Accounts

 

0

 

$

0

 

0

 

$

0

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert L. Worthington

 

Registered Investment Companies

 

2

 

$

25,351,000

 

2

 

$

25,351,000

 

 

 

Other Pooled Investment Vehicles

 

2

 

$

16,141,000

 

1

 

$

2,889,000

 

 

 

Other Accounts

 

0

 

$

0

 

0

 

$

0

 

 

 

 

 

 

 

 

 

 

 

 

 

J. Michael Fields

 

Registered Investment Companies

 

0

 

$

0

 

0

 

$

0

 

 

 

Other Pooled Investment Vehicles

 

1

 

$

13,252,000

 

0

 

$

0

 

 

 

Other Accounts

 

0

 

$

0

 

0

 

$

0

 

 

 

 

 

 

 

 

 

 

 

 

 

Frank A. Burke

 

Registered Investment Companies

 

0

 

$

0

 

0

 

$

0

 

 

 

Other Pooled Investment Vehicles

 

1

 

$

13,252,000

 

0

 

$

0

 

 

 

Other Accounts

 

0

 

$

0

 

0

 

$

0

 

 



 

Potential Conflicts of Interests

 

Messrs. Perkins, Worthington, Fields and Burke are responsible for managing other accounts, including proprietary accounts, separate accounts and other pooled investment vehicles, including unregistered hedge funds and funds of hedge funds.  They may manage separate accounts or other pooled investment vehicles which may have materially higher or different fee arrangements than the registrant and may also be subject to performance-based fees. The side-by-side management of these separate accounts and/or pooled investment vehicles may raise potential conflicts of interest relating to cross trading and the allocation of investment opportunities. The Adviser has a fiduciary responsibility to manage all client accounts in a fair and equitable manner. They seek to provide best execution of all securities transactions and to allocate investments to client accounts in a fair and timely manner. To this end, the Adviser developed policies and procedures designed to mitigate and manage the potential conflicts of interest that may arise from side-by-side management.

 

(a)(3)    Compensation Structure of Portfolio Manager(s) or Management Team Members

 

The compensation of the members of the Investment Committee includes a combination of the following: (i) fixed annual salary; and (ii) a discretionary bonus tied to the overall profitability of the Adviser.

 

(a)(4)    Disclosure of Securities Ownership

 

The following table sets forth the dollar range of equity securities beneficially owned by each member of the Investment Committee in the Fund as of June 30, 2013:

 

Investment Committee
Member

 

Dollar Range of Fund Shares
Beneficially Owned

 

 

 

 

 

David B. Perkins

 

$

0

 

Robert L. Worthington

 

$

0

 

J. Michael Fields

 

$

0

 

Frank A. Burke

 

$

0

 

 

(b)       Not applicable.

 

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

 

Not applicable.

 

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

 

There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant’s board of managers, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407 (c)(2)(iv) of Regulation S-K (17CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.

 



 

ITEM 11. CONTROLS AND PROCEDURES.

 

(a)  The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the 1940 Act, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).

 

(b)   There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

ITEM 12. EXHIBITS.

 

(a)(1)   Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto.

 

(a)(2)   Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.

 

(a)(3)   Not applicable.

 


 


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

(registrant)

HATTERAS VC CO-INVESTMENT FUND II, LLC

 

 

 

 

By (Signature and Title)*

/s/ David B. Perkins

 

 

David B. Perkins, President

 

 

(principal executive officer)

 

 

 

 

Date

8/6/14

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By (Signature and Title)*

/s/ David B. Perkins

 

 

David B. Perkins, President

 

 

(principal executive officer)

 

 

 

 

Date

8/6/14

 

 

 

 

 

 

 

By (Signature and Title)*

/s/ R. Lance Baker

 

 

R. Lance Baker, Treasurer

 

 

(principal financial officer)

 

 

 

 

Date

8/6/14

 

 


* Print the name and title of each signing officer under his or her signature.

 


 

EX-99.CODEETH 2 a14-18437_1ex99dcodeeth.htm EX-99.CODEETH

Exhibit 99.CODEETH

 

CODE OF ETHICS FOR PRINCIPAL EXECUTIVE

 

AND SENIOR FINANCIAL OFFICERS

 

Effective Date:  June 18, 2009

 

I.                                                                                        Covered Officers/Purpose of the Code

 

This Code of Ethics (the “Code”) for the investment companies within the Hatteras Master Fund, L.P., Hatteras Core Alternatives Fund, L.P., Hatteras Core Alternatives TEI Fund, L.P., Hatteras Core Alternatives Institutional Fund, L.P., Hatteras Core Alternatives TEI Institutional Fund, L.P., Hatteras Global Private Equity Partners Institutional, LLC, Hatteras GPEP Fund II, LLC, and the Hatteras VC Co-Investment Fund II, LLC(collectively the “Funds’ and each, a “Fund”) applies to the Funds’ Principal Executive Officer, Principal Financial Officer, and Principal Accounting Officer, if any (the “Covered Officers”) for the purpose of promoting:

 

·                  honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

 

·                  full, fair, accurate, timely and understandable disclosure in reports and documents that a Fund files with, or submits to, the Securities and Exchange commission (“SEC”), and in other public communications made by a Fund;

 

·                  compliance with applicable laws and governmental rules and regulations;

 

·                  the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and

 

·                  accountability for adherence to the Code.

 

Each Covered Officer shall adhere to a high standard of business ethics and shall be sensitive to situations that may give rise to actual or apparent conflicts of interest.

 

II.                                                                                   Administration of the Code

 

Administration.  The administration of the Code shall be supervised by the Funds’ Chief Compliance Officer.

 

Any waivers sought by the Covered Officer must be approved by each Audit Committee of the Funds (collectively, the “Audit Committee”).

 

III.                                                                              Managing Conflicts of Interest

 

Overview.  A “conflict of interest” occurs when a Covered Officer’s private interest interferes with the interests of, or his/her service to, a Fund. For example, a conflict of interest would arise if a Covered Officer, or a family member, receives improper personal benefits as a result of the Covered Officer’s position with a Fund.

 

Certain conflicts of interest arise out of the relationships between Covered Officers and a Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940, as amended (the “Company Act”), and the Investment Advisers Act of 1940, as amended (the “Advisers Act”).  For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with a Fund because of their status as “affiliated persons” of the Fund.  A Fund’s and its investment adviser’s compliance programs and procedures are designed to prevent, or identify and correct,

 



 

violations of those provisions.  This Code does not, and is not intended to, repeat or replace those programs and procedures, and such conflicts fall outside of the parameters of this Code.

 

Although typically not presenting an opportunity for improper personal benefit, conflicts may arise from, or as a result of, the contractual relationship between a Fund and its investment adviser, administrator, principal underwriter, pricing and bookkeeping agent and/or transfer agent (each, a “Service Provider”) of which the Covered Officers are also officers or employees.  As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for a Fund or for a Service Provider, or for both), be involved in establishing policies and implementing decisions that will have different effects on the Service Provider and a Fund.  The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Fund and the Service Provider and is consistent with the performance by the Covered Officers of their duties as officers of a Fund.  In addition, it is recognized by the Board that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes.

 

Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions of the Company Act and the Advisers Act.  The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive.  The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of a Fund.

 

Each Covered Officer must:

 

·                  not use personal influence or personal relationships improperly to influence investment decisions or financial reporting by a Fund whereby the Covered Officer or an immediate family member would benefit personally to the detriment of a Fund;

 

·                  not cause a Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer or an immediate family member rather than the benefit of the Fund;1

 

·                  not use material non-public knowledge of portfolio transactions made or contemplated for the Company to trade personally or cause others to trade personally in contemplation of the market effect of such transactions; and

 

·                  report at least annually his or her affiliations and other relationships on each Fund’s annual Directors and Officers Questionnaire.

 

There are some conflict of interest situations that must be approved by the Chief Compliance Officer, after consultation with the Chief Legal Officer.  Those situations include, but are not limited to:

 

·                  serve as director on the board of any public or private company;

 

·                  the receipt during any 12-month period of any gifts in excess of $100 in the aggregate from a third party that does or seeks to do business with the Funds; and

 

·                  the receipt of any entertainment from any company with which a Fund has current or prospective business dealings, unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety.

 


1  For purposes of this Code, personal trading activity of the Covered Officers shall be monitored in accordance with the Funds Code of Ethics.  Each Covered Officer shall be considered an “Access Person” under such Code.  The term “immediate family” shall have the same meaning as provided in such Code.

 



 

IV.                                                                             Disclosure and Compliance

 

Each Covered Officer shall:

 

·                  be familiar with the disclosure requirements generally applicable to the Funds;

 

·                  not knowingly misrepresent, or cause others to misrepresent, facts about any Fund to others, whether within or outside the Fund, including to the Fund’s trustees or directors and auditors, and to governmental regulators and self-regulatory organizations;

 

·                  to the extent appropriate within his/her area of responsibility, consult with other officers and employees of the Funds and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and

 

·                  promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations.

 

V.                                                                                    Reporting and Accountability

 

Each Covered Officer must:

 

·                  upon adoption of the Code (or after becoming a Covered Officer), affirm in writing to the Board that he/she has received, read and understands the Code;

 

·                  annually affirm to the Board compliance with the requirements of the Code;

 

·                  not retaliate against any other Covered Officer or any employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith;

 

·                  notify the Chief Compliance Officer promptly if he/she knows of any violation of this Code; and

 

·                  respond to questionnaires circulated periodically in connection with the preparation of disclosure documents for the Funds.

 

The Chief Compliance Officer shall maintain records of all activities related to this Code.

 

The Funds will follow the procedures set forth below in investigating and enforcing this Code:

 

·                  The Chief Compliance Officer will take all appropriate action to investigate any potential violation reported to him/her;

 

·                  If, after such investigation, the Chief Compliance Officer determines that no violation has occurred, the Chief Compliance Officer will notify the person(s) reporting the potential violation, and the Chief Compliance Officer will report his/her conclusions to the Audit Committee;

 

·                  Any matter that the Chief Compliance Officer determines may be a violation will be reported to the Audit Committee;

 



 

·                  If the Audit Committee determines that a violation has occurred, it will inform and make a recommendation to the Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to the Chief Executive Officer of the Funds; or a recommendation to sanction or dismiss the Covered Officer;

 

·                  The Audit Committee will be responsible for granting waivers in its sole discretion;

 

·                  Any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules.

 

The Chief Compliance Officer shall:

 

·                  report to the Audit Committee quarterly any approvals provided in accordance with Section III of this Code; and

 

·                  report to the Audit Committee quarterly any violations of, or material issues arising under, this Code.

 

VI.                               Other Policies and Procedures

 

This Code shall be the sole code of ethics adopted by the Funds for the purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder.  Insofar as other polices or procedures of the Funds or the Funds’ Service Providers govern or purport to govern the behavior or activities (including, but not limited to, personal trading activities) of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code.  The Funds’ and their investment advisers’ and principal underwriter’s codes of ethics under Rule 17j-1 under the Company Act and any policies and procedures of the Service Providers are separate requirements applicable to the Covered Officers and are not part of this Code.

 

VII.                          Amendments

 

All material amendments to this Code must be approved or ratified by the Board, including a majority of independent directors or trustees.

 

VIII.                     Confidentiality

 

All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly.

 

IX.                              Internal Use

 

The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Fund, as to any fact, circumstance, or legal conclusion.

 



 

CODE OF ETHICS FOR PRINCIPAL EXECUTIVE

AND SENIOR FINANCIAL OFFICERS

 

I HEREBY CERTIFY THAT:

 

(1)                                 I have read and I understand the Code of Ethics for Principal Executive and Senior Financial Officers adopted by Hatteras Master Fund, L.P., Hatteras Core Alternatives Fund, L.P., Hatteras Core Alternatives TEI Fund, L.P., Hatteras Core Alternatives Institutional Fund, L.P., Hatteras Core Alternatives TEI Institutional Fund, L.P., Hatteras Global Private Equity Partners Institutional, LLC, Hatteras GPEP Fund II, LLC, and the Hatteras VC Co-Investment Fund II, LLC(collectively the “Funds’ and each, a “Fund”) (the “Code”);

 

(2)                                 I recognize that I am subject to the Code;

 

(3)                                 I have complied with the requirements of the Code during the calendar year ending December 31,           ; and

 

(4)                                 I have reported all violations of the Code required to be reported pursuant to the requirements of the Code during the calendar year ending December 31,           .

 

Set forth below are exceptions to items (3) and (4), if any:

 

                                             

                                             

                                             

 

Name:

 

 

Date:

 

 

 


EX-99.CERT 3 a14-18437_1ex99dcert.htm EX-99.CERT

Exhibit 99.CERT

 

CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT

 

I, David B. Perkins, certify that:

 

1.              I have reviewed this report on Form N-CSR of Hatteras VC Co-Investment Fund II, LLC;

 

2.              Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.              Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

4.              The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

(a)         Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)         Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)          Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

(d)         Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.              The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)         All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

(b)         Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:

8/6/14

 

/s/ David B. Perkins

 

 

David B. Perkins, President

 

 

(principal executive officer)

 



 

CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT

 

I, R. Lance Baker, certify that:

 

1.              I have reviewed this report on Form N-CSR of Hatteras VC Co-Investment Fund II, LLC;

 

2.              Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.              Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

4.              The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

(a)         Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)         Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)          Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

(d)         Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.              The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)         All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

(b)         Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:

8/6/14

 

/s/ R. Lance Baker

 

 

R. Lance Baker, Treasurer

 

 

(principal financial officer)

 


 

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