| FAIR VALUE MEASUREMENT AND DISCLOSURES |
| 4. |
FAIR VALUE MEASUREMENT AND DISCLOSURES |
The following table summarizes the valuation of
Series II’s investments and derivatives instruments in the fair value hierarchy levels as of June 30, 2026:
| Description | |
Level I | | |
Level II | | |
Level III | | |
Total | |
| Investments and derivative instruments at fair value | |
| | | |
| | | |
| | | |
| | |
| Equity Investments | |
$ | - | | |
$ | - | | |
$ | 312,005,843 | | |
$ | 312,005,843 | |
| Debt Investments | |
| - | | |
| - | | |
| 19,890,343 | | |
| 19,890,343 | |
| Derivative Liabilities | |
| - | | |
| (24,605 | ) | |
| - | | |
| (24,605 | ) |
| Total Investments and derivative instruments at fair value | |
$ | - | | |
$ | (24,605 | ) | |
$ | 331,896,186 | | |
$ | 331,871,581 | |
As of June 30, 2026, cash and cash equivalents
at Series II include a money market fund balance of $22,654,461, which is considered a Level I asset.
The following table summarizes the valuation of
Series II’s investments in the fair value hierarchy levels as of December 31, 2025:
| Description | |
Level I | | |
Level II | | |
Level III | | |
Total | |
| Investments at fair value | |
| | | |
| | | |
| | | |
| | |
| Equity Investments | |
$ | - | | |
$ | - | | |
$ | 167,053,547 | | |
$ | 167,053,547 | |
| Debt Investments | |
| - | | |
| - | | |
| 16,126,398 | | |
| 16,126,398 | |
| Total Investments at fair value | |
$ | - | | |
$ | - | | |
$ | 183,179,945 | | |
$ | 183,179,945 | |
As of December 31, 2025, cash and cash equivalents
at Series II included a money market fund balance of $2,180,513, which is considered a Level I asset.
The following table provides a reconciliation
of the beginning and ending balances for investments that use Level III inputs for the six months ended June 30, 2026.
| Description | |
Amount | |
| Balance as of December 31, 2025 | |
$ | 183,179,945 | |
| Purchases of investments | |
| 142,275,836 | |
| Return of capital | |
| (8,151,373 | ) |
| Net change in unrealized gain (loss) on investments | |
| 14,591,778 | |
| Transfers out of Level III | |
| - | |
| Transfers into Level III | |
| - | |
| Balance as of June 30, 2026 | |
$ | 331,896,186 | |
Transfers of investments between levels, if any,
are recorded at the end of the period.
The net change in unrealized gain (loss) on investments
included in the Unaudited Consolidated Statements of Operations for the six months ended June 30, 2026 attributable to Level III assets
still held at June 30, 2026 for Series II was $14,591,778.
There were no investments held for the period from the Funding Date
to June 30, 2025.
The following table provides quantitative measures used to determine
the fair values of Level III assets as of June 30, 2026:
| Level III Assets | | Fair Value | | | Valuation
Methodology
& Inputs | | Unobservable
Input(s)(1) | | Weighted
Average(2) | | | Range | | | Impact to
Valuation
from an
Increase in
Input (3) | | Equity Investments | | $ | 294,005,843 | | | Discounted Cash Flow | | Discount Rate | | | 12.9 | % | | | 11.5% - 17.3% | | | Decrease | | | | | | | | Discounted Cash Flow | | Exit Multiple | | | 8.5 | x | | | 5.0x - 16.5x | | | Increase | | Debt Investments | | | 13,819,312 | | | Discounted Cash Flow | | Discount Rate | | | 10.3 | % | | | 9.5% - 10.8% | | | Decrease |
Investments with fair value of $24,071,031 are omitted from the above
fair value table. Quantitative unobservable inputs were not used to determine the fair value of Substantial
HoldCo Limited and ISQ Orchid Fund, L.P., as these investments have been valued based on an expected transaction and a recent purchase
price, respectively.
The following table provides quantitative measures used to determine
the fair values of Level III assets as of December 31, 2025:
| Level III Assets | | Fair Value | | | Valuation
Methodology
& Inputs | | Unobservable
Input(s)(1) | | Weighted
Average(2) | | | Range | | | Impact to
Valuation
from an
Increase in
Input (3) | | Equity Investments | | $ | 167,053,547 | | | Discounted Cash Flow | | Discount Rate | | | 12.3 | % | | | 11.5% - 17.3% | | | Decrease | | | | | | | | Discounted Cash Flow | | Exit Multiple | | | 7.4 | x | | | 5.0x -15.0x | | | Increase | | Debt Investments | | | 16,126,398 | | | Discounted Cash Flow | | Discount Rate | | | 10.4 | % | | | 9.0% - 13.0% | | | Decrease |
| (1) |
In determining the inputs, management evaluates a variety of factors including economic conditions, industry and market developments, market valuations of comparable companies, and company-specific developments including exit strategies and realization opportunities. The Manager has determined that market participants would take these inputs into account when valuing the investments. |
| (2) |
Inputs are weighted based on fair value of the investments included in the range. |
| (3) |
Unless otherwise noted, this column represents the directional change in the fair value of Level III assets that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant increases and decreases in these inputs in isolation could result in significantly higher or lower fair value measurements. |
|