RAND CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED SCHEDULE OF PORTFOLIO
June 30, 2021 (Continued)
Notes to the Consolidated Schedule of Portfolio
(a) At June 30, 2021, restricted securities represented 85% of
the fair value of the investment portfolio. This includes
$10,457,991, or 18% of the portfolio, of restricted and currently
non-saleable shares of ACV
Auctions, Inc. (NASDAQ: ACVA) (“ACV”). Restricted securities are
subject to one or more restrictions on resale and are not freely
marketable. Type of investment for equity position is in the form
of shares unless otherwise noted as units or interests, i.e.,
preferred shares, common shares.
(b) The Date Acquired column indicates the date on which the
Corporation first acquired an investment.
(c) Each equity percentage estimates the Corporation’s ownership
interest in the applicable portfolio investment. The estimated
ownership is calculated based on the percent of outstanding voting
securities held by the Corporation or the potential percentage of
voting securities held by the Corporation upon exercise of warrants
or conversion of debentures, or other available data. If
applicable, the symbol “<1%” indicates that the Corporation
holds an equity interest of less than one percent.
(d) The Corporation’s investments are carried at fair value in
accordance with Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) 820 “Fair Value
Measurements and Disclosures,” which defines fair value and
establishes guidelines for measuring fair value. At June 30,
2021, ASC 820 designates 67% of the Corporation’s investments as
“Level 3” assets, and also identifies the restricted holdings
of ACVA, 18% of investments as Level 2 assets. Under the
valuation policy of the Corporation, unrestricted publicly traded
securities are valued at the average closing price for these
securities for the last three trading days of the reporting period.
Restricted securities are subject to restrictions on resale and are
valued at fair value as determined by our external investment
advisor Rand Capital Management, LLC (“RCM”) and submitted to the
Board of Directors for approval. Fair value is considered to be the
amount that the Corporation may reasonably expect to receive for
portfolio securities when sold on the valuation date. Valuations as
of any particular date, however, are not necessarily indicative of
amounts which may ultimately be realized as a result of future
sales or other dispositions of securities and these favorable or
unfavorable differences could be material. Among the factors
considered in determining the fair value of restricted securities
are the financial condition and operating results, projected
operations, and other analytical data relating to the investment.
Also considered are the market prices for unrestricted securities
of the same class (if applicable) and other matters which may have
an impact on the value of the portfolio company (see Note 3.
“Investments” to the Consolidated Financial Statements).
(e) These investments are non-income producing. All other
investments are income producing. Non-income producing investments have
not generated cash payments of interest or dividends including LLC
within the last twelve months or are not expected to do so going
forward. If a debt or a preferred equity investment fails to make
its most recent payment, then the investment will also be
classified as non-income
(f) As of June 30, 2021, the total cost of investment
securities was approximately $47.1 million. Net unrealized
appreciation was approximately $12.7 million, which was
comprised of $23.5 million of unrealized appreciation of
investment securities and ($10.8) million of unrealized
depreciation of investment securities. At June 30, 2021, the
aggregate gross unrealized gain for federal income tax purposes was
$10.1 million and the aggregate gross unrealized loss for
federal income tax purposes was ($11.3) million. The net unrealized
loss for federal income tax purposes was ($1.2) million based on a
tax cost of $40.9 million.
(g) Rand Capital SBIC, Inc. investment.
(h) Reduction in cost and value from previously reported balances
reflects current principal repayment.
(i) Represents interest due (amounts over $50,000) from investments
included as interest receivable on the Corporation’s Consolidated
Statements of Financial Position.
Investments are investments that are neither Control Investments
nor Affiliate Investments.
(k) Affiliate Investments are defined by the Investment Company Act
of 1940, as amended (“1940 Act”), as those Non-Control investments in companies in
which between 5% and 25% of the voting securities are owned by the
(l) Payment in kind (PIK) represents earned interest that is added
to the cost basis of the investment and due at maturity. The amount
of PIK earned is included in the interest rate detailed in the
“Type of Investment” column, unless it has been noted with a (+),
in which case the PIK is in addition to the face amount of interest
due on the security.
(m) Equity holdings are held in a wholly owned (100%) “blocker
corporation” of Rand Capital Corporation or Rand Capital SBIC, Inc.
for federal income tax and Regulated Investment Company (RIC)
(n) Publicly traded company.
(o) On March 24, 2021, ACV completed its initial public
offering of its Class A common stock. The closing price for
ACV’s Class A common stock was $25.63 per share on
June 30, 2021. ACV’s Class A common stock had a trading
range on Nasdaq between $22.83 to $37.04 for the period April 1
through June 30, 2021. Rand’s ACV holdings consist of 147,645
shares of Class A common stock and 442,935 shares of
Class B common stock. The Class A common stock are freely
tradable and are valued at $24.85 per share, which is the average
closing price of the Class A common stock for the last three
trading days of the quarter. The Class B restricted common
stock are nonsaleable through September 20, 2021, or earlier
if certain conditions are met, and are valued at the average
closing price of the Class A common stock for the last three
trading days of the quarter and have been discounted due to the
transfer restriction and are valued at $23.61 per share.
(p) Control Investments are defined by the 1940 Act as investments
in companies in which more than 25% of the voting securities are
owned by the Corporation or where greater than 50% of the board
representation is maintained.