N-CSRS

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: December 31, 2012

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, 100 F Street, NE, 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

As of and for the period from September 1, 2012 to December 31, 2012

(Unaudited)

Hatteras VC Co-Investment Fund II, LLC

(a Delaware Limited Liability Company)

Table of Contents

Schedule of Investments	1-5
Statement of Assets, Liabilities and Members’ Capital	6
Statement of Operations	7
Statements of Changes in Members’ Capital	8
Statement of Cash Flows	9
Notes to Financial Statements	10-21
Other Information	22

Hatteras VC Co-Investment Fund II, LLC

(a Delaware Limited Liability Company)

SCHEDULE OF INVESTMENTS

December 31, 2012

(Unaudited)

	Initial						% of
	Investment				Fair		Members'
Description of Investment	Date		Cost		Value		Capital
Private Company:
Alternative Energy:
Tioga Energy, Inc. a,b
San Mateo, California
363,285 shares of
Common Stock		May 2010	$	150,000	$	-		0.00	%
Tioga Energy, Inc. b
San Mateo, California
Junior Bridge Financing Note
Principal of $56,457,
8.00%, 6/29/2013		Jul. 2011		56,457		-		0.00	%
Tioga Energy, Inc. b
San Mateo, California
Junior Bridge Financing Note
Principal of $150,000,
8.00%, 6/29/2013		Nov. 2011		150,000		-		0.00	%
Tioga Energy, Inc. b
San Mateo, California
Senior Bridge Financing Note
Principal of $261,378,
8.00%, 6/29/2013		May 2012		261,378		675,177		6.21	%
Total Alternative Energy				617,835		675,177		6.21	%
Consumer:
Ooma, Inc. a,b
Palo Alto, California
162,287 shares of Series
Alpha Preferred Stock		Oct. 2009		371,317		598,376		5.51	%
Sonim Technologies, Inc. a,b
San Mateo, California
180,208 shares of
Series B Preferred Stock		Nov. 2009		167,180		174,160		1.60	%
								(continued)

See notes to financial statements.

ONE

Hatteras VC Co-Investment Fund II, LLC

(a Delaware Limited Liability Company)

SCHEDULE OF INVESTMENTS

December 31, 2012

(Unaudited)

	Initial						% of
	Investment				Fair		Members’
Description of Investment	Date		Cost		Value		Capital
Consumer (continued):
Sonim Technologies, Inc. a,b
San Mateo, California
440,312 shares of
Series A Preferred Stock		Nov. 2012	$	174,794	$	177,121		1.63	%
Total Consumer				713,291		949,657		8.74	%
Healthcare:
Clinipace, Inc. a,b
Raleigh, North Carolina
3,816,881 shares of
Series C Preferred Stock		Sep. 2011		500,000		824,408		7.59	%
Information Technology:
Stoke, Inc. a,b
Santa Clara, California
76,453 shares of
Series E Preferred Stock		Nov. 2010		250,001		129,097		1.19	%
Medical Technology:
Anulex Technologies, Inc. a,b
Minnetonka, Minnesota
150,000 shares of
Series E Preferred Stock		May 2010		150,000		90,987		0.84	%
Lineagen, Inc. b
Salt Lake City, Utah
Convertible Promissory Note
Principal of $300,000,
5.25%, 12/31/2012		Jul. 2011		300,000		323,229		2.97	%
Total Medical Technology				450,000		414,216		3.81	%
Semiconductor:
GainSpan Corporation a,b
San Jose, California
312,500 shares of
Series C Preferred Stock		Sep. 2011		250,000		281,250		2.59	%
								(continued)

See notes to financial statements.

TWO

Hatteras VC Co-Investment Fund II, LLC

(a Delaware Limited Liability Company)

SCHEDULE OF INVESTMENTS

December 31, 2012

(Unaudited)

	Initial						% of
	Investment				Fair		Members’
Description of Investment	Date		Cost		Value		Capital
Semiconductor (continued):
GainSpan Corporation a,b
San Jose, California
156,292 shares of
Series D Preferred Stock		Jun. 2012	$	140,663	$	140,663		1.29	%
Luxtera, Inc. a,b
Carlsbad, California
2,203,310 shares of
Series C Preferred Stock		Apr. 2012		301,413		301,413		2.77	%
Magnum Semiconductor, Inc. a,b
Milpitas, California
134,219 shares of
Series E-1 Preferred Stock		Jun. 2010		161,063		201,329		1.85	%
Quantenna Communications, Inc. a,b
Fremont, California
1,893,223 shares of
Series D Preferred Stock		Apr. 2010		150,000		293,156		2.70	%
Quantenna Communications, Inc. a,b
Fremont, California
673,734 shares of
Series E Preferred Stock		Oct. 2010		75,000		104,324		0.96	%
Quantenna Communications, Inc. a,b
Fremont, California
256,158 shares of
Series F-1 Preferred Stock		Nov. 2011		39,084		39,665		0.37	%
Total Semiconductor				1,117,223		1,361,800		12.53	%
Software:
Clustrix, Inc. a,b
San Francisco, California
248,663 shares of
Series B Preferred Stock		Dec. 2010		250,001		250,001		2.30	%
								(continued)

See notes to financial statements.

THREE

Hatteras VC Co-Investment Fund II, LLC

(a Delaware Limited Liability Company)

SCHEDULE OF INVESTMENTS

December 31, 2012

(Unaudited)

	Initial						% of
	Investment				Fair		Members’
Description of Investment	Date		Cost		Value		Capital
Software (continued):
KnowledgeTree, Inc. a,b
Raleigh, North Carolina
35,817 shares of
Series B Preferred Stock		Jun. 2012	$	150,001	$	150,001		1.38	%
Kontiki, Inc. a,b
Sunnyvale, California
45,670 shares of
Common Stock		Jan. 2012		-		-		0.00	%
Kontiki, Inc. a,b
Sunnyvale, California
333,334 shares of
Series B Preferred Stock		Jul. 2010		250,001		250,001		2.30	%
Kontiki, Inc. a,b
Sunnyvale, California
234,522 shares of
Series C Preferred Stock		Jan. 2012		91,464		114,329		1.05	%
Posit Science Corporation a,b
San Francisco, California
2,415,460 shares of
Common Stock		Dec. 2009		200,000		34,759		0.32	%
Posit Science Corporation a,b
San Francisco, California
642,875 shares of
Series AA Preferred Stock		Sep. 2010		11,893		11,893		0.11	%
Sailthru, Inc. a,b
New York, New York
57,047 shares of
Series A Preferred Stock		Sep. 2011		299,999		460,301		4.24	%
SugarSync, Inc. a,b
San Mateo, California
278,500 shares of
Series BB Preferred Stock		Dec. 2009		150,000		326,945		3.01	%
								(continued)

See notes to financial statements.

FOUR

Hatteras VC Co-Investment Fund II, LLC

(a Delaware Limited Liability Company)

SCHEDULE OF INVESTMENTS

December 31, 2012

(Unaudited)

	Initial						% of
	Investment				Fair		Members’
Description of Investment	Date		Cost		Value		Capital
Software (continued):
SugarSync, Inc. a,b
San Mateo, California
579,375 shares of
Series CC Preferred Stock		Feb. 2011	$	350,000	$	718,106		6.61	%
SugarSync, Inc. a,b
San Mateo, California
73,119 shares of
Series DD Preferred Stock		Dec. 2011		68,000		114,457		1.05	%
Univa Corporation a,b
Austin, Texas
939,541 shares of
Series I Preferred Stock		Oct. 2010		432,114		836,619		7.70	%
Total Software				2,253,473		3,267,412		30.07	%
Total Private Company				5,901,823		7,621,767		74.14	%
Short-Term Investments:
Federated Prime Obligations Fund #10, 0.10% c				3,224,578		3,224,578		29.67	%
Total Short-Term Investments				3,224,578		3,224,578		29.67	%
Total Investments (United States)				9,126,401		10,846,345		99.81	%
Other Assets in Excess of Liabilities						20,535		0.19	%
Members' Capital					$	10,866,880		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 December 31, 2012.

The cost and fair value of restricted private company investments are $5,901,823 and $7,621,767, respectively.

See notes to financial statements.

FIVE

Hatteras VC Co-Investment Fund II, LLC

(a Delaware Limited Liability Company)

STATEMENT OF ASSETS, LIABILITIES AND MEMBERS’ CAPITAL

December 31, 2012

(Unaudited)

Assets
Investments in private companies, at fair value (cost $5,901,823)	$	7,621,767
Short-term investments, at fair value (cost $3,224,578)		3,224,578
Receivable for investment sold		115,829
Interest receivable		315
Total assets		10,962,489
Liabilities and members’ capital
Management fee payable		61,033
Professional fees payable		22,169
Accounting and administration fees payable		10,000
Custodian fees payable		940
Other expenses payable		1,467
Total liabilities		95,609
Members’ capital		10,866,880
Total liabilities and members’ capital	$	10,962,489
Components of members’ capital:
Capital contributions	$	10,514,912
Accumulated net investment loss		(1,367,976	)
Accumulated net unrealized appreciation on investments		1,719,944
Members’ capital	$	10,866,880

Net asset value per unit	$	94.76
Number of authorized units		Unlimited
Number of outstanding units		114,678.93

See notes to financial statements. 

SIX

Hatteras VC Co-Investment Fund II, LLC

(a Delaware Limited Liability Company)

STATEMENT OF OPERATIONS

For the period from September 1, 2012 to December 31, 2012

(Unaudited)

Investment income
Interest	$	2,333
Total investment income		2,333
Operating expenses
Management fee		71,409
Professional fees		32,349
Managers’ fees		11,667
Accounting and administration fees		11,334
Custodian fees		1,833
Total operating expenses, before management fee waiver		128,592
Management fee waived		10,376
Net investment loss		(115,883	)
Net change in unrealized appreciation on investments in private companies
Net change in unrealized appreciation on investments in private companies		1,052,709
Net change in unrealized appreciation on investments in private companies		1,052,709
Net increase in members’ capital resulting from operations	$	936,826

See notes to financial statements. 

SEVEN

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 December 31, 2012 and the year ended August 31, 2012

(Unaudited)

	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		(115,883	)
Net change in unrealized appreciation on investments in private companies		1,052,709
Members’ capital, at December 31, 2012	$	10,866,880

See notes to financial statements. 

EIGHT

Hatteras VC Co-Investment Fund II, LLC

(a Delaware Limited Liability Company)

STATEMENT OF CASH FLOWS

For the period from September 1, 2012 to December 31, 2012

(Unaudited)

Cash flows from operating activities:
Net increase in members’ capital resulting from operations	$	936,826
Adjustments to reconcile net increase in members’ capital resulting from operations to net cash used in operating activities:
Net purchases of investments		(224,068	)
Net purchases of short-term investments		(31,461	)
Net change in unrealized appreciation on investments in private companies		(1,052,709	)
Decrease in receivable for investment sold		378,994
Decrease in interest receivable		91
Increase  in management fee payable		16,718
Decrease in professional fees payable		(26,501	)
Increase in accounting and administration fees payable		3,333
Increase in custodian fees payable		56
Decrease in other expenses payable		(1,279	)
Net cash from operating activities		-
Net change in cash		-
Cash at beginning of period		-
Cash at end of period	$	-

See notes to financial statements. 

NINE

Hatteras VC Co-Investment Fund II, LLC

(a Delaware Limited Liability Company)

NOTES TO FINANCIAL STATEMENTS

As of and for the period ended December 31, 2012

(Unaudited)

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 the 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”).

TEN

Hatteras VC Co-Investment Fund II, LLC

(a Delaware Limited Liability Company)

NOTES TO FINANCIAL STATEMENTS

As of and for the period ended December 31, 2012

(Unaudited) (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 December 31, 2012, 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 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), and (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). 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.

ELEVEN

Hatteras VC Co-Investment Fund II, LLC

(a Delaware Limited Liability Company)

NOTES TO FINANCIAL STATEMENTS

As of and for the period ended December 31, 2012

(Unaudited) (CONTINUED)

2. Significant Accounting Policies (CONTINUED)

c. Valuation of Portfolio Investments (Continued)

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

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

Valuation of Investments

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

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

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

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 December 31, 2012:

	Level 1		Level 2		Level 3		Total
Private Company1
Bridge Financing Notes	$	-	$	-	$	675,177	$	675,177
Convertible Promissory Note		-		-		323,229		323,229
Preferred Stock		-		-		6,588,602		6,588,602
Common Stock		-		-		34,759		34,759
Total Private Company		-		-		7,621,767		7,621,767
Short-Term Investments		3,224,578		-		-		3,224,578
Total	$	3,224,578	$	-	$	7,621,767	$	10,846,345

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.

The Fund adopted the Financial Accounting Standards Board (“FASB”) amendments to authoritative guidance which require the Fund to disclose details of transfers in and out of Level 1 and Level 2 measurements and Level 2 and Level 3 measurements and the reasons for the transfers. There were no transfers among

TWELVE

Hatteras VC Co-Investment Fund II, LLC

(a Delaware Limited Liability Company)

NOTES TO FINANCIAL STATEMENTS

As of and for the period ended December 31, 2012

(Unaudited) (CONTINUED)

2. Significant Accounting Policies (CONTINUED)

c. Valuation of Portfolio Investments (Continued)

Levels 1, 2 and 3 during the period ended December 31, 2012. 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 Note		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 Gain (Loss)		-			-		-		-			-
Change in Unrealized
Appreciation/(Depreciation)		(325,989	)		5,481		1,383,778		(10,561	)		1,052,709
Gross Purchases		-			-		224,068		-			224,068
Gross Sales		-			-		-		-			-
Balance as of December 31, 2012	$	675,177		$	323,229	$	6,588,602	$	34,759		$	7,621,767

Change in unrealized appreciation included in the statement of operations attributable to Level 3 investments held as of the reporting date is $1,052,709.

Accounting Standards Update (“ASU”) No. 2011-04 “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”)” (“ASU 2011-04”) includes common requirements for measurement of and disclosure about fair value between U.S. GAAP and IFRS. ASU 2011-04 requires reporting entities to disclose quantitative information about the unobservable inputs used in the fair value measurements categorized within Level 3 of the fair value hierarchy. In addition, ASU 2011-04 requires reporting entities to make disclosures about amounts and reasons for all transfers in and out of Levels 1 and 2 of the fair value hierarchy.

THIRTEEN

Hatteras VC Co-Investment Fund II, LLC

(a Delaware Limited Liability Company)

NOTES TO FINANCIAL STATEMENTS

As of and for the period ended December 31, 2012

(Unaudited) (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 December 31, 2012:

Type of Investment		Fair Value as of December 31, 2012	Valuation Technique	Unobservable Input	Range
Bridge Financing	$	675,177	Privately Negotiated Transaction	Private Financing	N/A
Notes
Convertible		323,229	Most Recent Capitalization	Private Financing	N/A
Promissory Note				Discount Rate	0%
Preferred Stock		3,277,810	Market Comparable Companies	Forward Revenue Multiple	0.61x-2.18x
				Discount Rate	15%
		3,310,792	Most Recent Capitalization	Private Financing	N/A
Common Stock		34,759	Market Comparable Companies	Forward Revenue Multiple	0.17x
				Discount Rate	15%
		-	Most Recent Capitalization	Private Financing	N/A
		-	Privately Negotiated Transaction	Private Financing	N/A
Total Investments	$	$7,621,767

The significant unobservable inputs used in the fair value measurement of the Fund's bridge financing notes and the convertible promissory note 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 December 31, 2012, all interest was deemed collectable. Disbursements received from investments in private companies are ordinarily accounted for as a reduction of cost. Investments in short-term investments are recorded on a trade-date basis. Investments in private companies are recorded on a subscription effective date basis, which is generally the first day of the calendar month in which the investment is effective. Realized gains and losses are determined on a specific identified cost basis.

FOURTEEN

Hatteras VC Co-Investment Fund II, LLC

(a Delaware Limited Liability Company)

NOTES TO FINANCIAL STATEMENTS

As of and for the period ended December 31, 2012

(Unaudited) (CONTINUED)

2. Significant Accounting Policies (CONTINUED)

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.

The Fund has reviewed any potential tax positions as of December 31, 2012 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 ended December 31, 2012, 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 2009, 2010 and 2011.

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.

FIFTEEN

Hatteras VC Co-Investment Fund II, LLC

(a Delaware Limited Liability Company)

NOTES TO FINANCIAL STATEMENTS

As of and for the period ended December 31, 2012

(Unaudited) (CONTINUED)

2. Significant Accounting Policies (CONTINUED)

i. Recent Accounting Pronouncement

In December 2011, the FASB issued ASU No. 2011-11 related to disclosures about offsetting assets and liabilities (“ASU 2011-11”). 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. Management does not believe that ASU 2011-11 will have a material impact on the financial statement disclosures.

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 ended December 31, 2012 was $71,409. For the period ended December 31, 2012, the Adviser waived $10,376 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 ended December 31, 2012, retainers to the Independent Managers totaled $11,667 and are included in the statement of operations under Managers’ fees.

SIXTEEN

Hatteras VC Co-Investment Fund II, LLC

(a Delaware Limited Liability Company)

NOTES TO FINANCIAL STATEMENTS

As of and for the period ended December 31, 2012

(Unaudited) (CONTINUED)

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 ended December 31, 2012, the total accounting and administration fee was $11,334, and is included in the statement of operations under accounting and administration fees.

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 December 31, 2012 amounted to $224,068. There were no sales of investments in private companies for the period ended December 31, 2012. 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 December 31, 2012.

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 December 31, 2012, the Fund had an outstanding investment commitment to private companies totaling approximately $100,000.

SEVENTEEN

Hatteras VC Co-Investment Fund II, LLC

(a Delaware Limited Liability Company)

NOTES TO FINANCIAL STATEMENTS

As of and for the period ended December 31, 2012

(Unaudited) (CONTINUED)

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.

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 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.

EIGHTEEN

Hatteras VC Co-Investment Fund II, LLC

(a Delaware Limited Liability Company)

NOTES TO FINANCIAL STATEMENTS

As of and for the period ended December 31, 2012

(Unaudited) (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		(1.01	)
Net change in unrealized appreciation on investments in private companies		9.18
Total from investment operations		8.17
Net Asset Value, December 31, 2012	$	94.76

NINETEEN

Hatteras VC Co-Investment Fund II, LLC

(a Delaware Limited Liability Company)

NOTES TO FINANCIAL STATEMENTS

As of and for the period ended December 31, 2012

(Unaudited) (CONTINUED)

9. FINANCIAL HIGHLIGHTS (CONTINUED)

		For the period from September 1, 2012 to December 31, 2012*		For the years ended August 31,						For the period from September 1, 2009 (commencement of operations) to August 31,
		(Unaudited)		2012			2011			2010
Total return 1		9.44% 3		0.05	%		(1.55	)%		(12.09	)%
Members’ capital, end of period (000’s)	$	10,867	$	9,930		$	9,925		$	10,081
Portfolio turnover		0.00% 3		8.00	%		0.00	%		0.00	%
Net investment loss:
Before reimbursement of placementagent fees		(3.36)% 4		(3.15	)%		(3.84	)%		(13.76	)%
After reimbursement of placement  agent fees		(3.36)% 4		(3.15	)%		(3.84	)%		(13.34	)%
Total operating expenses 2:
Before reimbursement of placement agent fees		3.43% 4		3.29	%		3.94	%		13.92	%
After reimbursement of placement agent fees		3.43% 4		3.29	%		3.94	%		13.50	%

* At a Board meeting held on August 23, 2012, the Board approved the change in fiscal year-end for the Fund from August 31 to the 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 December 31, 2012.

¹ Internal rate of return since inception: as of December 31, 2012 was (1.60%); As of August 31, 2012
was (4.69%); As of August 31, 2011 was (6.97%).

² Total operating expenses before and after waiver of the management fee for the period ended December 31, 2012 were 3.73% and 3.43%, respectively. Total operating expenses before and after waiver of the management fee for the year ended August 31, 2012 were 3.46% and 3.29%, respectively. Total operating 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 Annualized.

TWENTY

Hatteras VC Co-Investment Fund II, LLC

(a Delaware Limited Liability Company)

NOTES TO FINANCIAL STATEMENTS

As of and for the period ended December 31, 2012

(Unaudited) (CONCLUDED)

10. Subsequent Events

Subsequent to the end of the reporting period, on January 31, 2013, the Fund guaranteed a $78,500 pro-rata share of a $1,750,000 secured loan for Univa Corporation which was used to refinance debt and provide additional working capital for the company.  As part of the guarantee, the Fund is required to hold cash in reserves of 2.5 times the outstanding balance of the guarantee. 

TWENTY-ONE

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.

TWENTY-TWO

ITEM 2. CODE OF ETHICS.

Not applicable to semi-annual reports.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

Not applicable to semi-annual reports.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Not applicable to semi-annual reports.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

Not applicable to semi-annual reports.

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 members filed under Item 1 of this form.

(b) The registrant did not need to divest itself of securities in accordance with Section 13(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), following the filing of its last report on Form N-CSR and before filing of the current report.

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

Not applicable to semi-annual reports.

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

Not applicable to semi-annual reports.

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 members 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, 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 (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) Not applicable.

(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.

(b) 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
	--------------------------------------------------------------------

	(Signature and Title)*
By	/s/ David B. Perkins
	-------------------------------------------------------
	David B. Perkins, President
	(principal executive officer)
Date	March 8, 2013
	-------------------------------------------------------

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.

	(Signature and Title)*
By	/s/ David B. Perkins
	-------------------------------------------------------
	David B. Perkins, President
	(principal executive officer)
Date	March 8, 2013
	-------------------------------------------------------
	(Signature and Title)*
By	/s/ R. Lance Baker
	-------------------------------------------------------
	R. Lance Baker, Treasurer
	(principal financial officer)
Date	March 8, 2013
	-------------------------------------------------------

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

EX-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:  March 8, 2013	/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:  March 8, 2013	/s/ R. Lance Baker
---------------------	------------------------------------------
	R. Lance Baker, Treasurer
	(principal financial officer)