SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 January 31, 2000
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 |X| No |_|
As of January 31, 2000, there were 195,730 shares of the Registrant's
Common Stock, $.01 par value, outstanding.
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.
----- --------
PART I. FINANCIAL INFORMATION 1
Item 1. Financial Statements (Unaudited). 1
Portfolio of Investments as of January 31, 2000
(Unaudited) and October 31, 1999. 1
Statement of Assets and Liabilities as of January
31, 2000 (Unaudited) and October 31, 1999. 2
Statement of Operations for the three month period
ended January 31, 2000 (Unaudited), the fiscal
year to date January 31, 2000 (Unaudited), the
three month period ended January 31, 1999
(Unaudited) and the fiscal year to date January
31, 1999 (Unaudited). 3
Statement of Changes in Net Assets for the three
month period ended January 31, 2000 (Unaudited),
the fiscal year to date January 31, 2000
(Unaudited), the three month period ended January
31, 1999 (Unaudited) and the fiscal year to date
January 31, 1999 (Unaudited). 4
Notes to Financial Statements (Unaudited). 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 6
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 7
PART II. OTHER INFORMATION 7
Item 1. Legal Proceedings. 7
Item 2. Changes in Securities. 7
Item 3. Defaults upon Senior Securities. 7
Item 4. Submission of Matters to a Vote of Securityholders. 8
Item 5. Other Information. 8
Item 6. Exhibits and Reports on Form 8-K. 8
SIGNATURES
-i-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
EXCELSIOR PRIVATE EQUITY FUND II, INC. FISCAL YEAR END: OCTOBER 31, 2000
PORTFOLIO OF INVESTMENTS QUARTER ENDED: JANUARY 31, 2000
- -------------------------------------------------------------------------------------------------------------------
JANUARY 31, 2000 OCTOBER 31, 1999
--------------------------- ---------------------------
PORTFOLIO STRUCTURE
-------------------
<S> <C> <C> <C> <C>
PORTFOLIO COMPANIES $ 228,169,374 73.46% $ 102,068,711 41.64%
PRIVATE FUNDS 38,174,038 12.29% 24,103,891 9.83%
SHORT-TERM INVESTMENTS:
COMMERCIAL PAPER 61,298,663 19.74% 70,770,253 28.87%
CORPORATE BONDS -- 0.00% 1,000,526 0.41%
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 0.00% 43,900,267 17.91%
--------------- --------- -------------- --------
INVESTMENT COMPANIES 10,010,045 3.22% 12,864,651 5.25%
TOTAL INVESTMENTS 337,652,120 108.71% 254,708,299 103.91%
OTHER ASSETS & LIABILITIES (NET) (27,050,370) -8.71% $ (9,601,385) -3.91%
--------------- --------- -------------- --------
NET ASSETS $ 310,601,750 100.00% $ 245,106,914 100.00%
=============== ========= ============== ========
</TABLE>
-1-
<TABLE>
<CAPTION>
EXCELSIOR PRIVATE EQUITY FUND II, INC. FISCAL YEAR END: OCTOBER 31, 2000
STATEMENT OF ASSETS AND LIABILITIES QUARTER ENDED: JANUARY 31, 2000
- -------------------------------------------------------------------------------------------------------------------
JANUARY 31, 2000 OCTOBER 31, 1999
--------------------------- ------------------------
ASSETS
- -------------------------------
<S> <C> <C>
Investment Securities, at Cost $ 185,881,765 $ 222,252,794
=========================== ========================
Investment Securities, at Value 337,652,120 254,708,299
Cash -- 136
Receivables:
Interest 567,520 241,822
For Investments Sold 1,705,909 1,705,909
Prepaid Insurance 11,553 28,269
--------------------------- ------------------------
TOTAL ASSETS 339,937,102 256,684,435
--------------------------- ------------------------
LIABILITIES
- ---------------------------------------------
Investment Advisory Fees Payable 1,082,244 5,599,309
Deferred Incentive Fees Payable 28,161,240 5,837,077
Administration & Shareholder Servicing Fees Payable 17,810 14,499
Directors' Fees Payable 11,111 43,500
Accrued Expenses and Other Payables 62,947 83,136
--------------------------- ------------------------
TOTAL LIABILITIES 29,335,352 11,577,521
--------------------------- ------------------------
NET ASSETS $ 310,601,750 $ 245,106,914
=========================== ========================
NET ASSETS CONSIST OF
- ---------------------------------------------
Accumulated Undistributed Net Investment Income $ 5,554,703 $ 5,259,727
Accumulated Net Realized Gain/(Loss) on Investments (8,965,435) 22,825,393
Net Unrealized Appreciation of Investments 151,770,355 32,455,505
Allowance for Management Incentive Fee (33,075,719) (10,751,557)
Par Value 1,957 1,957
Paid In Capital in Excess of Par Value 195,315,889 195,315,889
--------------------------- ------------------------
TOTAL NET ASSETS $ 310,601,750 $ 245,106,914
=========================== ========================
Shares of Common Stock Outstanding 195,730 195,730
--------------------------- ------------------------
NET ASSET VALUE PER SHARE $ 1,586.89 $ 1,252.27
=========================== ========================
</TABLE>
-2-
<TABLE>
<CAPTION>
EXCELSIOR PRIVATE EQUITY FUND II, INC. FISCAL YEAR END: OCTOBER 31, 2000
STATEMENT OF OPERATIONS QUARTER ENDED: JANUARY 31, 2000
- ------------------------------------------------------------------------------------------------------------------
FISCAL FISCAL
QUARTER ENDED YEAR TO DATE QUARTER ENDED YEAR TO DATE
JANUARY 31, 2000 JANUARY 31, 2000 JANUARY 31, 1999 JANUARY 31, 1999
---------------- ---------------- ------------------ -------------------
INVESTMENT INCOME
- -----------------
<S> <C> <C> <C> <C>
Interest Income $ 1,495,292 $ 1,495,292 $ 1,794,773 $ 1,794,773
--------------- ----------------- ------------------ ------------------
TOTAL INCOME 1,495,292 1,495,292 1,794,773 1,794,773
--------------- ----------------- ------------------ ------------------
EXPENSES
Investment Advisory Fees 1,081,237 1,081,237 476,310 476,310
Administrative Fees &
Shareholder Servicing Fees 16,715 16,715 15,958 15,958
Custodial Fees 16,712 16,712 9,889 9,889
Legal Fees 46,037 46,037 51,490 51,490
Audit and Other Professional
Service Fees 7,038 7,038 6,553 6,553
Directors' Fees and Expenses 11,311 11,311 10,965 10,965
Shareholder Reports 1,508 1,508 1,639 1,639
Insurance Expense 17,818 17,818 14,777 14,777
Interest Expense -- -- 16,336 16,336
Miscellaneous Expenses 1,940 1,940 251 251
--------------- ----------------- ------------------ ------------------
TOTAL EXPENSES 1,200,316 1,200,316 604,168 604,168
Fees Waived and Reimbursed
by Advisor -- -- -- --
--------------- ----------------- ------------------ ------------------
NET EXPENSES 1,200,316 1,200,316 604,168 604,168
--------------- ----------------- ------------------ ------------------
NET INVESTMENT INCOME 294,976 294,976 1,190,605 1,190,605
--------------- ----------------- ------------------ ------------------
REALIZED & UNREALIZED
GAIN/(LOSS) ON INVESTMENTS
Net Realized Gain/(Loss) on Security
Transactions 166,845 166,845 (6,969) (6,969)
Change in Unrealized Appreciation/
(Depreciation) on Investments 119,314,850 119,314,850 (91,572) (91,572)
--------------- ----------------- ------------------ ------------------
NET REALIZED AND
UNREALIZED GAIN/(LOSS)
ON INVESTMENTS 119,481,695 119,481,695 (98,541) (98,541)
Change in Management Incentive Fee (22,324,162) (22,324,162) -- --
--------------- ----------------- ------------------ ------------------
NET INCREASE/(DECREASE) IN NET
ASSETS RESULTING
FROM OPERATIONS $ 97,452,509 $ 97,452,509 $ 1,092,064 $ 1,092,064
=============== ================= ================== ==================
</TABLE>
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<TABLE>
<CAPTION>
EXCELSIOR PRIVATE EQUITY FUND II, INC. FISCAL YEAR END: OCTOBER 31, 2000
STATEMENT OF CHANGES IN NET ASSETS QUARTER ENDED: JANUARY 31, 2000
- ---------------------------------------------------------------------------------------------------------------
FISCAL FISCAL
QUARTER ENDED YEAR TO DATE QUARTER ENDED YEAR TO DATE
JANUARY 31, 2000 JANUARY 31, 2000 JANUARY 31, 1999 JANUARY 31, 1999
------------------- ----------------- ---------------- -----------------
OPERATIONS:
- -----------
<S> <C> <C> <C> <C>
Net Investment Income $ 294,976 $ 294,976 $ 1,190,605 $ 1,190,605
Net Realized Gain/(Loss) on
Investments 166,845 166,845 (6,969) (6,969)
Change in Unrealized
Appreciation/(Depreciation)
on Investments 119,314,850 119,314,850 (91,572) (91,572)
Change in Allowance for
Management Incentive Fee (22,324,162) (22,324,162) ----- -----
------------------- ----------------- ------------- ---------------
Net Increase in Net Assets
Resulting From Operations 97,452,509 97,452,509 1,092,064 1,092,064
DISTRIBUTION TO
SHAREHOLDERS:
From Net Investment Income -- -- (7,669,460) (7,669,460)
From Net Realized Gain on
Investments (31,957,673) (31,957,673) -- --
------------------- ----------------- ------------- ---------------
NET INCREASE/(DECREASE)
IN NET ASSETS 65,494,836 65,494,836 (6,577,396) (6,577,396)
NET ASSETS:
Beginning of Period $ 245,106,914 245,106,914 202,261,263 202,261,263
------------------- ----------------- ------------- ---------------
End of Period $ 310,601,750 $ 310,601,750 $ 195,683,867 $ 195,683,867
=================== ================= ============= ===============
</TABLE>
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EXCELSIOR PRIVATE EQUITY FUND II, INC. FISCAL YEAR END: OCTOBER 31, 2000
NOTES TO FINANCIAL STATEMENTS QUARTER ENDED: JANUARY 31, 2000
- ------------------------------------------------------------------------------
(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 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
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:
Purchases and sales of securities for the three month period
ended January 31, 2000, excluding short-term investments, for the
Company aggregated $14,479,852 and $205,740, respectively. At
January 31, 2000, the Company had outstanding investment
commitments totaling $30,009,938.
-5-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
- ---------------------
THREE-MONTH PERIOD ENDED JANUARY 31, 2000 AS COMPARED TO THE SIMILAR PERIOD
IN 1999
The Company's net asset value per common share was $1,586.89 at January 31,
2000, up $334.62 per share from the net asset value per common share of
$1,252.27 at October 31, 1999. The increase resulted primarily from the
increase in value of LifeMinders.com, Inc., attributable to the company's
public offering on November 19, 1999. The Company's net asset value per
common share was $999.76 at January 31, 1999, down $33.61 per share from
the net asset value per common share of $1,033.37 at October 31, 1998.
REALIZED AND UNREALIZED GAINS AND LOSSES FROM PORTFOLIO INVESTMENTS
- -------------------------------------------------------------------
For the three months ended January 31, 2000 and 1999, the Company had a net
realized gain/(loss) on security transactions of $166,845 and ($6,969),
respectively. For the three months ended January 31, 2000 and 1999, the
Company had a net change in unrealized appreciation/(depreciation) on
investments of $119,314,850 and ($91,572), respectively.
INVESTMENT INCOME AND EXPENSES
- ------------------------------
For the three months ended January 31, 2000, the Company had interest
income of $1,495,292 and net operating expenses of $1,200,316, resulting in
net investment income of $294,976. For the three months ended January 31,
1999, the Company had interest income of $1,794,773 and net operating
expenses of $604,168, resulting in net investment income of $1,190,605. 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 "Investment Adviser") provides
investment management and administrative services required for the
operation of the Company. In consideration of the services rendered by the
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 January 31, 2000
and 1999, the Investment Adviser earned $1,082,244 and $476,310 in
management fees respectively.
NET ASSETS
- ----------
At January 31, 2000, the Company's net assets were $310,601,750, an
increase of $65,494,836 from net assets of $245,106,914 at October 31,
1999. At January 31, 1999, the Company's net assets were $195,683,867, a
decrease of $6,577,396 from net assets of $202,261,263 at October 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 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 January 31, 2000, the Company made follow-on
investments in Advantage Schools, Inc., ReleaseNow.com, Inc. and Survivalink
Corporation.
At January 31, 2000, the Company held $0 in cash and $337,652,120 in
investments. At January 31, 2000, investments included $228,169,374 in
portfolio companies, $38,174,038 in private funds, $61,298,663 in
commercial paper and $10,010,045 in investment companies. At October 31,
1999, the Company held $136 in cash and $254,708,299 in investments. At
October 31, 1999, investments included $102,068,711 in portfolio companies,
$24,103,891 in private investment funds, $12,864,651 in investment
companies, $70,770,253 in commercial paper, $1,000,256 in corporate bonds
and $43,900,267 in U.S. government and agency obligations. These changes
were primarily the result of the investment activity discussed above.
-6-
A dividend comprised of a return of capital and long-term capital gain was
payable to shareholders of record on December 14, 1999 in the amount of
$137.71 per share.
A dividend comprised of a short-term capital gain was payable to
shareholders of record on December 20, 1999 in the amount of $25.56 per
share.
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 have not had and are not expected to
have a material adverse impact on the Company's financial position, results
of operations or cash flows. The Investment Adviser and the Company's other
service providers have informed the Company that they have taken steps to
address the Year 2000 Problem with respect to the computer systems that
they use, and the Company has not been informed of any material
difficulties related to the Year 2000 Problem. 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 DISCLOSURES ABOUT MARKET RISK.
Equity Price Risk:
-----------------
A significant portion 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 January 31,
2000, this publicly traded equity security was valued at
$138,238,375. Thus, there is exposure to equity price risk,
estimated as the potential loss in fair value due to a
hypothetical 10% decrease in quoted market prices, which
would result in a decrease of approximately $13,823,838 in
the value of these securities. Actual results may differ.
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.
-7-
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.
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).
(b) The following reports on Form 8-K were filed during the
quarter ended January 31, 2000:
None.
-8-
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: March 16, 2000 /s/ David I. Fann
----------------------------------
By: David I. Fann
President and Principal Executive
Officer
Date: March 16, 2000 /s/ Brian F. Schmidt
-----------------------------------
By: Brian F. Schmidt
Treasurer and Principal Financial
and Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM EXCELSIOR
PRIVATE EQUITY FUND II, INC.'S FORM 10-Q FOR THE PERIOD ENDED
JANUARY 31, 2000 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-31-2000
<PERIOD-START> NOV-1-1999
<PERIOD-END> JAN-31-2000
<INVESTMENTS-AT-COST> 185,882
<INVESTMENTS-AT-VALUE> 337,652
<RECEIVABLES> 2,273
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<OTHER-ITEMS-ASSETS> 12
<TOTAL-ASSETS> 339,937
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</TABLE>
