SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended April 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ______ to ______
Commission File Number 0-22277
------------------------------------------
EXCELSIOR PRIVATE EQUITY FUND II, INC.
(Exact name of Registrant as specified in its charter)
MARYLAND 22-3510108
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
114 West 47th Street
New York, NY 10036-1532
(Address of principal executive offices, including zip code)
(212) 852-1000
(Telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes |_| No |X|
As of April 30, 1999, there were 195,730 shares of the Registrant's
Common Stock, $.01 par value, outstanding.
834729.3
<PAGE>
EXCELSIOR PRIVATE EQUITY FUND II, INC.
This Quarterly Report on Form 10-Q contains historical information and
forward-looking statements. Statements looking forward in time are included in
this Form 10-Q pursuant to the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. They involve known and unknown risks
and uncertainties that may cause the Company's actual results to differ from
future performance suggested herein. In the context of forward-looking
information provided in this Form 10-Q and in other reports, please refer to the
discussion of risk factors detailed in, as well as the other information
contained in, the Company's filings with the Securities and Exchange Commission
during the past 12 months.
INDEX PAGE NO.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
Portfolio of Investments as of April 30, 1999 (Unaudited) and
October 31, 1998
Statement of Assets and Liabilities as of
April 30, 1999 (Unaudited) and October 31, 1998.
Statement of Operations for the three month period ended
April 30, 1999 (Unaudited) and the three-month period ended
October 31, 1998 (Unaudited).
Statement of Changes in Net Assets for the three
month period ended April 30, 1999 (Unaudited) and the
three-month period ended October 31, 1998 (Unaudited).
Notes to Financial Statements (Unaudited).
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Securityholders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
ii
834729.3
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
Excelsior Private Equity Fund II, Inc. Fiscal Year End: October 31, 1999
Portfolio of Investments Quarter Ended: April 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
April 30, 1999 October 31, 1998
---------------------------------- -------------------------
<S> <C> <C> <C> <C>
PORTFOLIO STRUCTURE
- -------------------
PORTFOLIO COMPANIES $ 64,049,889 30.05% $ 46,144,355 22.81%
PRIVATE FUNDS 11,944,342 5.60% 4,061,440 2.01%
SHORT-TERM INVESTMENTS:
Commercial Paper 88,366,105 41.44% 56,000,000 27.69%
Corporate Bonds 10,629,461 4.99% 17,203,182 8.50%
U.S. Government & Agency Obligations 26,700,000 12.52% 74,447,794 36.81%
Investment Companies 11,347,297 5.32% 4,088,960 2.02%
------------ ------------- ---------------- ------
TOTAL INVESTMENTS 213,037,094 99.92% 201,945,731 99.84%
OTHER ASSETS & LIABILITIES (NET) 180,656 0.08% 315,532 0.16%
------------ ------------- ---------------- --------
NET ASSETS $ 213,217,750 100.00% $ 202,261,263 100.00%
============ ============= ================ ========
</TABLE>
834729.3
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Excelsior Private Equity Fund II, Inc. Fiscal Year End: October 31, 1999
Statement of Assets and Liabilities Quarter Ended: April 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS April 30, 1999 October 31, 1998
- --------------------------------------------- ------------------------ -------------------------
<S> <C> <C>
Investment Securities, at Cost $ 196,881,015 $ 201,750,317
======================= ========================
Investment Securities, at Value 213,037,094 201,945,731
Cash 263,698 20,601
Receivables:
Interest 676,008
For Investments Sold 200,189 860,744
Prepaid Assets 182 11,391
----------------------- -----------------------
TOTAL ASSETS 214,177,171 202,838,467
----------------------- ------------------------
LIABILITIES
- -------------------------------------------------------
Payable for Investments Purchased 243,750 (445,607)
Managing Investment Advisory Fees Payable 619,963
Administration & Shareholder Servicing Fees Payable 15,682 16,591
Directors Fees Payable 21,572 30,000
Accrued Expenses and Other Payables 58,454 85,006
----------------------- ------------------------
TOTAL LIABILITIES 959,421 577,204
----------------------- ------------------------
NET ASSETS $ 213,217,750 $ 202,261,263
======================= ========================
NET ASSETS CONSIST OF
- -------------------------------------------------------
Accumulated Undistributed Net Investment Income $ 1,407,098 $ 6,748,595
Accumulated Net Realized Gain/(Loss) on Investments 420,909 (592)
Net Unrealized Appreciation of Investments 16,156,079 195,414
Allowance for Management Incentive (84,182) --
Par Value 1,957 1,957
Paid In Capital in Excess of Par Value 195,315,889 195,315,889
----------------------- ------------------------
TOTAL NET ASSETS $ 213,217,750 $ 202,261,263
======================= ========================
Shares of Common Stock Outstanding 195,730 155,513
----------------------- ------------------------
NET ASSET VALUE PER SHARE $1,089.35 $1,003.45
======================= ========================
</TABLE>
834729.3
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Excelsior Private Equity Fund II, Inc. Fiscal Year End: October 31, 1999
Statement of Operations Quarter Ended: April 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Prior Fiscal Year
Quarter Ended Fiscal Year To Date Quarter Ended to Date
INVESTMENT INCOME April 30, 1999 April 30, 1999 April 30, 1998 April 30, 1998
<S> <C> <C> <C> <C>
Interest Income $ 1,752,362 $ 3,547,135 $ 2,463,374 $ 5,157,809
------------- --------------- -------------- --------------
TOTAL INCOME 1,752,362 3,547,135 2,463,374 5,157,809
------------- --------------- -------------- --------------
EXPENSES
Management Investment Advisory Fees 533,598 1,009,908 324,936 601,333
Administrative Fees & Shareholder Servicing Fees 15,438 31,396 15,293 30,522
Custodial Fees 10,400 20,289 9,423 19,333
Legal Fees 22,334 73,824 18,214 34,345
Audit and Other Professional Service Fees 6,340 12,893 6,340 12,893
Directors' Fees and Expenses 10,607 21,572 7,314 14,876
Shareholder Reports 1,585 3,224 1,219 2,480
Organization Expenses -- -- 14,056 14,811
Insurance Expense 14,458 29,235 14,295 29,565
Interest Expense -- 16,336
Miscellaneous Expenses 245 496 147 298
------------- --------------- ----------------- --------------
TOTAL EXPENSES 615,005 1,219,173 411,237 760,456
Fees Waived and Reimbursed by Advisor -- -- -- --
------------- --------------- ----------------- --------------
NET EXPENSES 615,005 1,219,173 411,237 760,456
------------- --------------- ----------------- --------------
NET INVESTMENT INCOME 1,137,357 2,327,962 2,052,137 4,397,353
------------- --------------- ----------------- --------------
REALIZED AND UNREALIZED GAIN/( LOSS)
ON INVESTMENTS
Net Realized Gain on Security Transactions 428,470 421,501 -- --
Change in Unrealized Appreciation / (Depreciation)
on Investments 16,052,238 15,960,666 70,895 111,946)
------------- --------------- ----------------- --------------
NET REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS 16,480,708 16,382,167 70,895 (111,946)
------------- --------------- ----------------- --------------
Change in Management Incentive Fee (84,182) (84,182) -- --
------------- --------------- ----------------- --------------
NET INCREASE IN NET ASSETS RESULTING $ 17,533,883 $ 18,625,947 $ 2,123,032 $ 4,285,407
FROM OPERATIONS ============= =============== ================= ==============
</TABLE>
834729.3
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Excelsior Private Equity Fund II, Inc. Fiscal Year End: October 31, 1999
Statement of Changes in Net Assets Quarter Ended: April 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Prior Fiscal Year
Quarter Ended Fiscal Year To Date Quarter Ended to Date
April 30, 1999 April 30, 1999 April 30, 1998 April 30, 1998
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income $ 1,137,357 $ 2,327,962 $ 2,052,137 $ 4,397,353
Net Realized Gain on Investments 428,470 421,501 -- --
Change in Unrealized Appreciation / (Depreciation)
on Investments 16,052,238 15,960,666 70,895 (111,946)
Change in Allowance for Management Incentive Fee (84,182) (84,182)
---------------- -------------- ------------ ------------
Net Increase in Net Assets
Resulting From Operations 17,533,883 18,625,947 2,123,032 4,285,407
DISTRIBUTIONS TO SHAREHOLDERS:
From Net Investment Income -- (7,669,460) -- (1,763,590)
From Net Realized Gain on Investments -- -- -- --
CAPITAL SHARE TRANSACTIONS*
Subscriptions -- -- -- 40,217,000
Offering costs -- -- -- (412,154)
---------------- -------------- ------------ ------------
NET INCREASE IN NET ASSETS 17,533,883 10,956,487 2,123,032 42,326,663
NET ASSETS:
Beginning of Period 195,683,867 202,261,263 196,253,172 156,049,541
---------------- -------------- ------------ ------------
End of Period $ 213,217,750 $ 213,217,750 $ 198,376,204 $ 198,376,204
================ ============== ============== =============
</TABLE>
- --------
* Secondary Offering
834729.3
<PAGE>
Excelsior Private Equity Fund II, Inc. Fiscal Year Ended: October 31, 1999
Notes to Financial Statements: Quarter Ended: April 30 1999
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Excelsior Private Equity Fund II, Inc. (the "Company") was
incorporated under the laws of the State of Maryland on March 20,
1997 and is registered under the Securities Act of 1933, as amended,
as a non-diversified, closed-end management investment company which
has elected to be treated as a business development company under the
Investment Company Act of 1940, as amended. The Company commenced
operations on October 8, 1997.
Certain information and footnote disclosures normally
included in the financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. Reference is made to the Company's annual report included in
Form 10-K as filed with the Securities and Exchange Commission for
the Notes to the Financial Statements that remain unchanged.
The following is a summary of the Company's significant accounting
policies.
(a) Portfolio valuation:
The Company values portfolio securities quarterly and at
other such times as, in the Board of Directors' view, circumstances
warrant. Investments in unrestricted securities that are traded on a
recognized stock exchange or on the national securities market are
valued at the last sale price for such securities on the valuation
date. Short-term debt instruments with remaining maturities of 60
days or less are valued at amortized cost, which approximates market
value. Securities and other assets for which market quotations are
not readily available or that are restricted are valued, pursuant to
guidelines adopted by the Managing Investment Adviser, under the
supervision of the Board of Directors.
(b) Federal income taxes:
It is the policy of the Company to continue to qualify as a
"regulated investment company" under Subchapter M of the Internal
Revenue Code and distribute substantially all of its taxable income
to its shareholders. Therefore, no federal income or excise tax
provision is required.
2. Purchases and Sales of Securities:
Purchase and sales of securities for the three month period
ended April 30, 1999, excluding short-term investments, for the
Company aggregated $13,200,789 and $311,131, respectively. At April
30, 1999, the Company had outstanding investment commitments of
$36,471,744.
834729.3
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Results of Operations
THREE-MONTH PERIOD ENDED APRIL 30, 1999 AS COMPARED TO THE SIMILAR PERIOD IN
1998
The Company's net asset value per common share was $1,089.35 at April 30, 1999,
up $89.59 per share from the net asset value per common share of $999.76 at
January 31, 1999. The increase resulted primarily from the merger of WNP
Communications, Inc. with NEXTLINK Communications Inc. in addition to a third
party financing markup in Advantage Schools. The Company's net asset value per
common share was $1,013.52 at April 30, 1998, up $10.85 per share from the net
asset value per common share of $1,002.67 at January 31, 1998.
Realized and Unrealized Gains and Losses from Portfolio Investments
For the three months ended April 30, 1999 and 1998, the Company had a net
realized gain/loss on security transactions of $428,470 and $0, respectively.
For the three months ended April 30, 1999 and 1998, the Company had a net change
in unrealized appreciation/(depreciation) on investments of $16,052,238 and
$70,895, respectively.
Investment Income and Expenses
For the three months ended April 30, 1999, the Company had interest income of
$1,752,362 and net operating expenses of $615,005, resulting in net investment
income of $1,137,357. For the three months ended April 30, 1998, the Company had
interest income of $2,463,374 and net operating expenses of $411,237, resulting
in net investment income of $2,052,137. The primary reason for the decline in
interest income was the decline of assets invested in short-term instruments and
an increase in assets invested in private companies and private funds.
United States Trust Company of New York (the "Managing Investment Adviser")
provides investment management and administrative services required for the
operation of the Company. In consideration of the services rendered by the
Managing Investment Adviser, the Company pays a management fee based upon a
percentage of the net assets of the Company invested or committed to be invested
in certain types of investments and an incentive fee based in part on a
percentage of realized capital gains of the Company. Such fee is determined and
payable quarterly. For the quarters ended April 30, 1999 and 1998, the Managing
Investment Adviser earned $533,598 and $324,936 in management fees respectively.
Net Assets
At April 30, 1999, the Company's net assets were $213,217,750, an increase of
$17,533,883 from net assets of $195,683,867 at January 31, 1999. At April 30,
1998, the Company's net assets were $198,376,204, an increase of $2,123,032 from
net assets of $196,253,172 at January 31, 1998.
Liquidity and Capital Resources
The Company focuses its investments in the private equity securities of
later-stage venture capital companies and middle-market companies which the
Company believes offer significant long-term capital appreciation. The Company
may offer managerial assistance to certain of these companies. The Company
834729.3
<PAGE>
invests its available cash in short-term investments of marketable securities to
provide the liquidity necessary to make portfolio investments as investment
opportunities arise.
During the quarter ended April 30, 1999, the Company made investments in
Broadview Capital Partners L.P., Captura Software, Inc. and LifeMinders.com Inc.
At April 30, 1999, the Company held $263,698 in cash and $213,037,094 in
investments. At April 30, 1999, investments included $64,049,889 in portfolio
companies, $11,944,342 in private funds, $88,366,105 in commercial paper,
$10,629,461 in corporate bonds, $26,700,000 in U.S. Government and agency
obligations, and $11,347,297 in investment companies. At January 31, 1999, the
Company held $3,031,183 in cash and $192,720,030 in investments. At January 31,
1999, investments included $46,279,473 in portfolio companies, $6,178,896 in
private funds, $113,082,185 in commercial paper, $3,669,474 in corporate bonds,
$0 in U.S. Government and agency obligations and $13,510,002 in investment
companies. These changes were primarily the result of the investment activity
discussed above.
Other
Year 2000:
Like other investment companies, financial and business organizations and
individuals around the world, the Company could be affected adversely if the
computer systems used by the Investment Adviser and the Company's other service
providers do not properly process and calculate date-related information and
data from and after January 1, 2000. This is commonly known as the "Year 2000
Problem." Based on the Company's current assessment, the costs of addressing
potential problems are not currently expected to have a material adverse impact
on the Company's financial position, results of operations or cash flows in
future periods. The Investment Adviser and the Company's other service providers
have informed the Company that they are taking steps to address the Year 2000
Problem with respect to the computer systems that they use. At this time,
however, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the Company as a result of the Year 2000 Problem.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
Equity Price Risk:
The majority of the Company's investment portfolio consists of equity securities
in private companies and private investment funds which are not publicly traded.
These investments are recorded at fair value as determined by the Investment
Adviser in accordance with valuation guidelines adopted by the Board of
Directors. This method of valuation does not result in increases or decreases in
the fair value of these equity securities in response to changes in market
prices. Thus, these equity securities are not subject to equity price risk.
Nevertheless, the Company is exposed to equity price risk through its investment
in the equity securities of one public company. At April 30, 1999, these
publicly traded equity securities were valued at $10,493,231. Thus, there is
exposure to equity price risk, which is estimated as the potential loss in fair
value due to a hypothetical 10% decrease in quoted market prices, and would
result in a decrease of approximately $1,049,323 in the value of these
securities. Actual results may differ.
834729.3
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
There are no legal proceedings pending or, to the Company's best
knowledge, threatened against the Company.
Item 2. Changes in Securities.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit No.
(27) Financial Data Schedule (for EDGAR filing purposes only).
(a) The following reports on Form 8-K were filed during the
quarter ended April 30, 1999:
None.
834729.3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EXCELSIOR PRIVATE EQUITY FUND II, INC.
Date: June 11, 1999 ---------------------------------------------
By: David I. Fann
President and Principal Executive Officer
Date: June 11, 1999 ---------------------------------------------
By: Brian F. Schmidt
Chief Financial Officer
834729.3
<PAGE>
CONFORMED SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EXCELSIOR PRIVATE EQUITY FUND II, INC.
Date: June 11, 1999 /s/ David I. Fann
----------------------------
By: David I. Fann
President and Principal
Executive Officer
Date: June 11, 1999 /s/ Brian F. Schmidt
----------------------------
By: Brian F. Schmidt
Chief Financial Officer
834729.3
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION FROM UST PRIVATE EQUITY INVESTORS
FUND, INC.'S FORM 10-Q FOR THE PERIOD ENDED APRIL
30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001036052
<NAME> EXCELSIOR PRIVATE EQUITY FUND II, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-1-1998
<PERIOD-END> APR-30-1999
<INVESTMENTS-AT-COST> 196,881
<INVESTMENTS-AT-VALUE> 213,037
<RECEIVABLES> 876
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 264
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<INTEREST-INCOME> 3,547
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