UNITED STATES
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 MARCH 31, 1995
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 33-14582
PAINEWEBBER R&D PARTNERS II, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3437420
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1285 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10019
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (212) 713-2000
---------------
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
---------------
<PAGE>
PAINEWEBBER R&D PARTNERS II, L.P.
(A Delaware Limited Partnership)
FORM 10-Q
MARCH 31, 1995
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Financial Condition 2
(unaudited) at March 31, 1995 and
December 31, 1994
Statements of Operations 3
(unaudited) for the three months
ended March 31, 1995 and 1994
Statement of Changes in Partners' Capital 4
(unaudited) for the three months
ended March 31, 1995
Statements of Cash Flows 5
(unaudited) for the three months
ended March 31, 1995 and 1994
Notes to Financial Statements 6-11
(unaudited)
Item 2. Management's Discussion and Analysis of 12-13
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
All schedules are omitted either because they are not applicable or the
information required to be submitted has been included in the financial
statements or notes thereto.
<PAGE>
Page 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PAINEWEBBER R&D PARTNERS II, L.P.
(a Delaware Limited Partnership)
Statements of Financial Condition
(unaudited)
March December
31, 31,
1995 1994
- - ---------------------------------------------------------------------------
Assets:
Cash $ 5,487 $ 6,703
Marketable 1,281,998 2,308,631
securities, at
market value
Investments 11,857,043 10,327,102
Interest 4,244 7,673
receivable
Investments in 179,079 183,228
product
development
projects
Royalty income 27,731 42,472
receivable ------------- ------------
Total assets $ 13,355,582 $ 12,875,809
============ ============
Liabilities
and partners'
capital
Accrued $ 158,072 $ 151,442
liabilities
Partners' 13,197,510 12,724,367
capital
------------ ------------
Total liabilities and partners' capital $ 13,355,582 $ 12,875,809
============ ============
- - ----------------------------------------------------------------------------
See notes to financial statements.
<PAGE>
Page 3
PAINEWEBBER R&D PARTNERS II, L.P.
(a Delaware Limited Partnership)
Statements of Operations
(unaudited)
For the three
months ended
March 31, 1995 1994
- - --------------------------------------------------------------------------
Revenues:
Interest income $ 28,323 $ 29,180
Income from 27,731 50,935
product
development
projects
Unrealized
appreciation of
investments
and marketable 1,531,958 -
securities
Realized gain on - 166,841
distribution of
investment ---------- ---------
1,588,012 246,956
---------- ---------
Expenses:
Expenditures
under product
development
projects 4,149 413,548
Management fee 125,582 157,613
General and 67,694 31,210
administrative
costs ------- -------
197,425 602,371
------- -------
Net income (loss) before cumulative effect of
change in accounting method 1,390,587 (355,415)
Cumulative effect of change in
accounting method - 366,334
--------- ---------
Net income $ 1,390,587 $ 10,919
========= =========
Net income (loss) per partnership
unit before cumulative effect of
change in accounting
method:
Limited partners $ 166.73 $ (42.61)
(based on 8,257
units)
General partner $ 13,905.87 $ (3,554.15)
Cumulative effect of change in
accounting method per partnership unit:
Limited partners $ - $ 43.92
(based on 8,257
units)
General partner $ - $ 3,663.34
Net income per partnership unit:
Limited partners $ 166.73 $ 1.31
(based on 8,257
units)
General partner $ 13,905.87 $ 109.19
- - ---------------------------------------------------------------------------
See notes to financial statements.
<PAGE>
Page 4
PAINEWEBBER R&D PARTNERS II, L.P.
(a Delaware Limited Partnership)
Statement of Changes in Partners' Capital
(unaudited)
For the three
months ended
March 31, Limited General
1995 Partners Partner Total
- - -----------------------------------------------------------------------------
Balance at $ 12,594,066 $ 130,301 $ 12,724,367
December 31,
1994
Net income 1,376,681 13,906 1,390,587
Cash (908,270) (9,174) (917,444)
distribution
to partners
------------ ---------- ------------
Balance at $ 13,062,477 $ 135,033 $ 13,197,510
March 31, ============ ========== ============
1995
- - -----------------------------------------------------------------------------
See notes to financial statements.
<PAGE>
Page 5
PAINEWEBBER R&D PARTNERS II, L.P.
(a Delaware Limited Partnership)
Statements of Cash Flows
(unaudited)
For the three
months ended
March 31, 1995 1994
- - -----------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 1,390,587 $ 10,919
Adjustments to reconcile net income to
cash provided by operating activities:
Unrealized appreciation of investments
and marketable securities (1,531,958) -
Realized gain on distribution of investment - (166,841)
Cumulative effect of change in accounting - (366,334)
method
Decrease in operating assets:
Marketable securities 1,028,650 1,294,602
Investment - 22,701
Investments in product development projects 4,149 244,298
Interest receivable 3,429 3,758
Royalty income receivable 14,741 49,476
Increase (decrease) in operating liabilities:
Accrued liabilities 6,630 5,669
Liabilities under product development projects - (1,083,866)
Distributions payable - 417,020
-------- ---------
Cash provided by operating activities: 916,228 431,402
-------- ---------
Cash flows from financing activities:
Distribution to partners (917,444) (417,020)
-------- --------
Cash used for financing activities (917,444) (417,020)
-------- --------
(Decrease) increase in cash (1,216) 14,382
Cash at beginning of period 6,703 6,369
---------- ----------
Cash at end of period $ 5,487 $ 20,751
========== ==========
- - ----------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
The Partnership paid no cash for interest during the three months ended March
31, 1995 and 1994.
Supplemental schedule of non-cash activities:
For the three
months ended
March 31, 1995 1994
- - -----------------------------------------------------------------------------
Distribution of investments
to partners:
Alkermes, Inc. common stock $ - $ 1,334,728
- - ------------------------------------------------------------------------------
See notes to financial statements.
<PAGE>
Page 6
PAINEWEBBER R&D PARTNERS II, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1995 AND 1994
1. ORGANIZATION AND BUSINESS
The financial information as of and for the periods ended March 31, 1995 and
1994 is unaudited. However, in the opinion of management of PaineWebber R&D
Partners II, L.P. (the "Partnership"), such information includes all
adjustments, consisting only of normal recurring accruals, necessary for a fair
presentation. These financial statements should be read in conjunction with
the most recent annual report of the Partnership on Form 10-K for the year
ended December 31, 1994.
The Partnership is a Delaware limited partnership that commenced operations
on September 30, 1987. PWDC Holding Company (the "Manager") is the general
partner of PaineWebber Technologies II, L.P. (the "General Partner"), which is
the general partner of the Partnership. PWDC Holding Company is a wholly owned
subsidiary of PaineWebber Development Corporation ("PWDC"), an indirect wholly
owned subsidiary of Paine Webber Group Inc. ("PWG"). The Partnership had a
total of $72.0 million available for investment from all closings. The
Partnership will terminate on December 31, 2012, unless its term is extended
or reduced by the General Partner.
The principal objective of the Partnership is to provide long-term capital
appreciation to investors through investing in the development and
commercialization of new products with technology companies ("Sponsor
Companies"), which are expected to address significant market opportunities.
Once the product development phase is completed, the Sponsor Companies have the
option to license and commercialize the products resulting from the product
development project, and the Partnership has the right to receive payments
based upon the sale of such products. In connection with product development
projects (the "Projects"), the Partnership sought to obtain warrants to
purchase the common stock of Sponsor Companies. These warrants will have the
potential to provide additional capital appreciation to the Partnership which
is not directly dependent upon the outcome of the Projects (see Note 5). As a
result of restructuring some of the original projects, the Partnership also
obtained restricted common stock in some of the Sponsor Companies (see Note 3).
As such, the Partnership is engaged in diverse Projects through contracts,
participation in other partnerships and investments in securities of the
Sponsor Companies.
All distributions to limited partners of the Partnership (the "Limited
Partners") and the General Partner (collectively, the "Partners") from the
Partnership will initially be made pro rata in accordance with their respective
net capital contributions. The following table sets forth the proportion of
each distribution to be received by Limited Partners and the General Partner,
respectively:
<PAGE>
Page 7
PAINEWEBBER R&D PARTNERS II, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(NOTE 1 CONTINUED)
Limited General
Partners Partner
-------- -------
I. Until the value of the aggregate distributions for
each limited partnership unit ("Unit") equals $10,000
plus simple interest on such amount accrued at 7% per
annum for each Unit sold at the Initial Closing (6%
per annum for each subsequent Unit sold up to the
5,000th Unit and 5% per annum for each Unit sold
thereafter) ("Contribution Payout") 99% 1%
II. After Contribution Payout and until the value of the
aggregate distributions for each Unit equals
$50,000 ("Final Payout") 80% 20%
III. After Final Payout 75% 25%
At March 31, 1995 the Partnership has made cash and securities distributions
since inception of $1,565 and $5,750 per Unit, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Partnership adopted the provisions of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("Statement No. 115") for investments held as of or acquired after
January 1, 1994. In accordance with Statement No. 115, prior period financial
statements have not been restated to reflect the change in accounting method.
The cumulative effect of adopting Statement No. 115 as of January 1, 1994 was
to increase net income for the quarter ended March 31, 1994 by $366,334 or
$43.92 per Unit.
Marketable securities consist of a money market fund and common stock which
are recorded at market value. Marketable securities are not considered cash
equivalents for the Statements of Cash Flows.
Realized and unrealized gains or losses are determined on a specific
identification method and are reflected in the Statements of Operations during
the period in which the change in value occurs.
The Partnership invested in Projects, further described in Note 5, through
one of the following two vehicles:
<PAGE>
Page 8
PAINEWEBBER R&D PARTNERS II, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(NOTE 2 CONTINUED)
- Product Development Contracts
The Partnership paid amounts to Sponsor Companies under product
development contracts. Such amounts were expensed by the Partnership
when incurred by the Sponsor Companies.
- Product Development Limited Partnerships
The Partnership participated as a limited partner in product
development limited partnerships formed to develop specific products.
Such participations were accounted for using the equity method. Such
partnerships expensed product development costs when incurred.
The Partnership carries warrants at a zero value in cases where the Sponsor
Company's stock is not publicly traded or the exercise period has not been
attained. To the extent that the Partnership's warrants are currently
exercisable and the Sponsor Company's stock is publicly traded, the warrants
are carried at intrinsic value (the excess of market price per share over the
exercise price per share), which approximates fair value. Prior to 1993, the
Partnership accounted for the distribution of warrants at their carrying value
of zero.
3. MARKETABLE SECURITIES AND INVESTMENTS
MARKETABLE SECURITIES:
The money market fund consists of obligations with maturities of one year
or less that are subject to fluctuations in value.
At March 31, 1995, the Partnership held the following marketable securities:
MARKET COST
Money market fund $1,273,124 $1,273,124
Alkermes, Inc. common stock
(3,227 shares) 8,874 22,589
---------- ----------
$1,281,998 $1,295,713
========== ==========
At December 31, 1994, the Partnership held the following marketable
securities:
MARKET COST
Money market fund $2,301,774 $2,301,774
Alkermes, Inc. common stock
(3,227 shares) 6,857 22,589
---------- ----------
$2,308,631 $2,324,363
========== ==========
Alkermes, Inc. common stock had a market value of $2.75 and $2.125 per
share as of March 31, 1995 and December 31, 1994, respectively.
<PAGE>
Page 9
PAINEWEBBER R&D PARTNERS II, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(NOTE 3 CONTINUED)
INVESTMENT:
At March 31, 1995 and December 31, 1994, the Partnership's sole investment
was 1,529,941 shares of Cygnus Therapeutic Systems ("Cygnus") restricted common
stock that is the subject of a registration statement under the Securities Act
of 1933, as amended. The Partnership's carrying value of this investment at
March 31, 1995 and December 31, 1994 was $11,857,043 and $10,327,102,
respectively.
In 1994, in accordance with the adoption of Statement No. 115, the
Partnership commenced recording investments in restricted common stock (where
the restriction period expires in one year or less) at market value with
unrealized gains and losses reflected in the Statements of Operations during
the period in which the change in value occurs. Restricted common stock, with
a restriction period greater than one year, is carried at the lower of cost or
fair value. The cumulative effect at January 1, 1994 of adopting Statement No.
115 was to increase the carrying value of the Alkermes restricted stock by
$366,334. Prior to the adoption of Statement No. 115, the Partnership
accounted for its investments in restricted common stock (regardless of the
restriction period) at the lower of cost or fair value.
In December 1994, the Partnership and Cygnus entered into the GMS
Technology Purchase Agreement whereby Cygnus purchased from the Partnership the
rights to glucose monitoring system ("GMS") technology developed under product
development agreements between Cygnus and the Partnership. In exchange for its
technology rights, the Partnership received 1,529,941 shares of Cygnus common
stock valued at $8,988,403 which was based on the market price per share of
$5.875 on the date of receipt. At March 31, 1995 and December 31, 1994, the
Partnership recorded its Cygnus common stock at the closing market price of
$7.75 per share (totaling $11,857,043) and $6.75 per share (totaling
$10,327,102), respectively. Accordingly, the Partnership recognized unrealized
appreciation of $1,529,941 for the three months ended March 31, 1995 which has
been reflected in the Statements of Operations.
On January 2, 1994, 170,084 shares of Alkermes restricted common stock,
with a carrying value of $1,190,588 ($7.00 per share), became saleable without
volume limitation pursuant to Securities and Exchange Commission Rule 144. The
Partnership distributed 166,841 shares of Alkermes common stock to its Partners
on January 5, 1994. The market value of the Alkermes common stock on the date
of distribution was $1,334,728 ($8.00 per share) compared to the carrying value
of $1,167,887 ($7.00 per share). A realized gain of $166,841 was recognized
with respect to the distribution.
4. RELATED PARTY TRANSACTIONS
The Manager receives an annual management fee for management and
administrative services provided to the Partnership. The management fee is
equal to 2% of the aggregate gross proceeds received by the Partnership,
reduced by the Partnership's capital commitments in Projects that have been
concluded, and the final proceeds of which (if any) have been distributed to
the Partners of the Partnership. The management fee is payable quarterly in
advance and is adjusted annually on the first day of each fiscal year in an
amount proportionate to the increase in the prior year in the Consumer Price
Index published by the United States Department of Labor. The management fees
paid by the Partnership to the Manager were $125,582 and $157,613 for the three
months ended March 31, 1995 and 1994, respectively.
<PAGE>
Page 10
PAINEWEBBER R&D PARTNERS II, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(NOTE 4 CONTINUED)
As of January 1, 1995, the Manager had eliminated the management fee
charged for the following seven of the Partnership's Projects:
- Alkermes, Inc.
- Cadre Technologies, Inc.
- Centocor Partners, III, L.P.
- Compression Labs, Inc.
- Genentech Clinical Partners IV, L.P.
- Rogers Corporation
- Synergen Clinical Partners, L.P.
The Partnership's portfolio of a money market fund is managed by Mitchell
Hutchins Institutional Investors ("MHII"), an affiliate of PWDC. PWDC (not the
Partnership) pays MHII a fee with respect to such money management services.
PWDC and PaineWebber Incorporated ("PWI"), and its affiliates, have acted
in an investment banking capacity for several of the Sponsor Companies. In
addition, PWDC and its affiliates have direct limited partnership interests in
the same Projects as the Partnership.
The Partnership is involved in certain legal actions. The General Partner
believes these actions will be resolved without material adverse effect on the
Partnership's financial statements, taken as a whole.
5. COMMITMENTS UNDER PRODUCT DEVELOPMENT PROJECTS
The Partnership entered into ten Projects (Alkermes, Inc.; Cadre
Technologies Inc.; Centocor Partners III, L.P.; Compression Labs, Incorporated;
Cygnus Therapeutic Systems; FOCUS Surgery Inc. (formerly Focal Surgery, Inc.
(successor to Diasonics, Inc.)); Genentech Clinical Partners IV, L.P.; Genzyme
Development Partners, L.P.; Rogers Corporation; and Synergen Clinical Partners,
L.P). As of March 31, 1995, all of the Projects were fully funded.
If the Projects produce any product for commercial sale, the Sponsor
Companies have the option to enter into joint ventures or royalty agreements
with the Partnership to manufacture and market the products developed. In
addition, the Sponsor Companies have the option to purchase the Partnership's
interest in the technology. In consideration for such purchase options, the
Partnership has received warrants to purchase shares of common stock of the
Sponsor Companies. These warrants are carried at zero value as of March 31,
1995 and December 31, 1994. At March 31, 1995, the Partnership owned the
following warrants:
<PAGE>
Page 11
PAINEWEBBER R&D PARTNERS II, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS(UNAUDITED)
(NOTE 5 CONTINUED)
<TABLE>
<CAPTION>
3/31/95
Number of Shares Exercise Price Exercise Market Price
that can be Purchased per Share Period Per Share *
--------------------- -------------- -------- ------------
<S> <C> <C> <C> <C>
Cadre Technologies Inc. 625,000 $ 5.00 Current to 6/97 (A)
Centocor, Inc. 2,800 $13.33 Current to 2/96 $15.88
Cygnus Therapeutics Systems 300,000 $ 9.90 Current to 9/97 $7.75
OEC Medical Systems, Inc. (B) 200,000 $12.70 Current to 8/97 $5.88
Synergen, Inc. 28,176 $15.69 Current to 2/96 (C)
$17.69 3/96 to 2/98
</TABLE>
* The share prices of these technology companies are generally highly volatile
and the shares are often thinly traded. The market prices indicated as of March
31, 1995 may not be indicative of the ultimate values, if any, that may be
realized by the Partnership.
(A) At March 31, 1995, the common stock of Cadre Technologies Inc. was not
publicly traded.
(B) In October 1993, Diasonics, Inc. completed a major corporate restructuring
under which Diasonics,Inc. was divided into three separate publicly traded
companies: Diasonics UltraSound, Inc., FOCUS Surgery Inc. and OEC Medical
Systems, Inc. The Partnership's warrant is to purchase the stock of OEC Medical
Systems, Inc. FOCUS Surgery, Inc. will continue to develop the product for
which the Partnership has the rights.
(C) In December 1994, Amgen, Inc. acquired Synergen, Inc. ("Synergen") in a
cash tender offer of $9.25 per share of outstanding Synergen common stock.
Concurrently, the Partnership's warrant to purchase shares of Synergen common
stock was exercisable for $9.25 per share in cash, rather than common shares,
which was $6.44 and $8.44 a share below the exercise price of the
Partnership's warrant. Accordingly, the warrant was rendered valueless and
the Partnership did not exercise the warrant.
6. INCOME TAXES
The Partnership is not subject to federal, state or local income taxes.
Accordingly, the individual partners are required to report their distributive
shares of realized income and loss on their individual federal and state income
tax returns.
<PAGE>
Page 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
Partners' capital at March 31, 1995 was $13.2 million compared to $12.7
million at December 31, 1994, an increase of $0.5 million. The increase in
partners' capital was a result of net income from operations of $1.4 million
(as discussed in Results of Operations below) offset by a cash distribution to
the Partners of $0.9 million.
The Partnership's working capital is invested in marketable securities and a
money market fund. Liquid assets at March 31, 1995 were $1.3 million compared
to $2.3 million at December 31, 1994, a decrease of $1.0 million. The decrease
in liquid assets is primarily due to cash distributions to Partners of $0.9
million and the payment of management fees approximating $0.1 million. The
balance of liquid assets will be used for the payment of management fees and
administrative costs related to managing the Partnership's investments.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO THE THREE MONTHS ENDED MARCH
31, 1994:
Net income for the year ended March 31, 1995 was $1.4 million compared to
$0.01 million for the same period in 1994, a favorable variance of $1.4
million. The variance of $1.4 million was due to an increase in revenues of
$1.4 million and a decline in expenses of $0.4 million offset by the 1994
cumulative effect of a change in accounting method of $0.4 million. The
increase in revenues was due to an increase in unrealized appreciation of
investments and marketable securities of $1.6 million offset by a decrease in
realized gain on distribution of investment of $0.2 million. The favorable
variance in expenses was primarily attributable to a decrease in expenditures
under product development projects of $0.4 million.
The Partnership adopted the provisions of Statement No. 115 for investments
held as of or acquired after January 1, 1994. The cumulative effect of
adopting Statement No. 115 as of January 1, 1994 was to increase net income for
the three months ended March 31, 1994 by $0.4 million due to the difference
between the carrying value and market value of a restricted security position
as of December 31, 1993. In accordance with Statement No. 115, prior period
financial statements have not been restated to reflect the change in accounting
method.
Revenues for the three months ended March 31, 1995 were $1.6 million compared
to $0.2 million for the same period in 1994, a favorable variance of $1.4
million. The increase was primarily due to an increase in unrealized
appreciation of investments and marketable securities of $1.6 million offset by
a decrease in realized gain on distribution of investment of $0.2 million. In
December 1994, the Partnership and Cygnus entered into the GMS Technology
Purchase Agreement whereby Cygnus purchased from the Partnership the rights to
GMS technology developed under research and development agreements between
Cygnus and the Partnership. In exchange for the technology rights, the
Partnership received Cygnus common stock with a carrying value to the
Partnership of $8.9 million. At March 31, 1995, the Partnership wrote-up its
investment in Cygnus to market value resulting in unrealized appreciation of
$1.6 million. During the three months ended March 31, 1994, the Partnership
distributed 166,841 shares of Alkermes common stock to its Partners and
realized a gain of $0.2 million.
<PAGE>
Page 13
(ITEM 2 CONTINUED)
Expenses for the three months ended March 31, 1995 were $0.2 million compared
to $0.6 million for the same period in 1994, a decrease of $0.4 million. The
variance is attributable to a decrease in expenditures under product
development projects of $0.4 million. During the first quarter of 1994, the
Partnership accrued $0.2 million for payments to Cygnus and expensed $0.2
million for research and development expenditures related to Genzyme
Development Partners, L.P.
<PAGE>
Page 14
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
In November 1994, a series of purported class actions (the "New York
Limited Partnership Actions") were filed in the United States District Court
for the Southern District of New York concerning PWI's sale and sponsorship of
various limited partnership investments, including those offered by the
Partnership. The lawsuits were brought against PWI and PWG (together,
"PaineWebber"), among others, by allegedly dissatisfied investors in these
partnerships. In March 1995, after the actions were consolidated under the
title IN RE PAINEWEBBER LIMITED PARTNERSHIP LITIGATION, the plaintiffs amended
their complaint to assert claims against a variety of other defendants,
including PaineWebber Technologies II, L.P., the General Partner of the
Partnership and an affiliate of PaineWebber. Other affiliates of the General
Partner were also named in the complaint.
The amended complaint in the New York Limited Partnership Actions alleges
that, in connection with the sale of interests in the Partnership, PaineWebber
and the General Partner (1) failed to provide adequate disclosure of the risks
involved; (2) made false and misleading representations about the safety of the
investments and the Partnership's anticipated performance; and (3) marketed the
Partnership to investors for whom such investments were not suitable. The
plaintiffs, who purport to be suing on behalf of all persons who invested in
the Partnership, also allege that following the sale of the Partnership
interests, PaineWebber and the General Partner misrepresented financial
information about the Partnership's value and performance. The amended
complaint alleges that PaineWebber and the General Partner violated the
Racketeer Influenced and Corrupt Organizations Act ("RICO") and the federal
securities laws. The plaintiffs seek unspecified damages, including
reimbursement for all sums invested by them in the limited partnerships, as
well as disgorgement of all fees and other income derived by PaineWebber from
the limited partnerships. In addition, the plaintiffs also seek treble damages
under RICO. The defendants' time to move against or answer the complaint has
not yet expired.
Pursuant to provisions of the Partnership Agreement and other contractual
obligations, under certain circumstances the Partnership may be required to
indemnify the General Partner and its affiliates for costs and liabilities in
connection with this litigation. The General Partner intends to vigorously
contest the allegations of the action, and believes that the action will be
resolved without material adverse effect on the Partnership's financial
statements, taken as a whole.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS:
None
b) REPORTS ON FORM 8-K:
None
<PAGE>
Page 15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on this 12th day of May
1995.
PAINEWEBBER R&D PARTNERS II, L.P.
By: PaineWebber Technologies II, L.P.
(General Partner)
By: PWDC Holding Company
(General partner of the General Partner)
By: EUGENE M. MATALENE, JR./S/
Eugene M. Matalene, Jr.
President and Principal Executive Officer
By: PIERCE R. SMITH/S/
Pierce R. Smith
Principal Financial and Accounting Officer
* The capacities listed are with respect to PWDC Holding Company, the Manager,
as well as the general partner of the General Partner of the Registrant.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000814576
<NAME> PAINEWEBBER R&D PARTNERS II, L.P.
<S> <C>
<PERIOD-TYPE> 3-MOS
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