1
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Quarterly report pursuant to section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period Commission file number:
ended JUNE 30, 1997 0-18016
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ALLIED CAPITAL CORPORATION II
------------------------------------------------------
(exact name of Registrant as specified in its charter)
MARYLAND 52-1628801
- ----------------------- -----------------------
(State or jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
C/O ALLIED CAPITAL ADVISERS, INC.
1666 K STREET, N.W.
9TH FLOOR
WASHINGTON, DC 20006
-------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (202) 331-1112
--------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 12 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods as 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
----- -----
On August 8, 1997 there were 7,641,342 shares outstanding of the Registrant's
common stock, $1 par value.
2
ALLIED CAPITAL CORPORATION II AND SUBSIDIARIES
FORM 10-Q INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of June 30, 1997 and December 31, 1996 . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Statement of Operations - For the Three and Six Months Ended
June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statement of Changes in Net Assets - For the Six Months
Ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statement of Cash Flows - For the Six Months Ended
June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3
PART I - Financial Information
Item 1. Financial Statements
ALLIED CAPITAL CORPORATION II AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands, except number of shares)
June 30, 1997 December 31, 1996
------------- -----------------
(unaudited)
ASSETS
Investments at value:
Loans and debt securities (cost: 1997 - $70,904; 1996 - $80,859) . . . . . $ 64,684 $ 74,505
Equity securities (cost: 1997 - $5,731; 1996 - $5,956) . . . . . . . . . . 11,044 11,613
Other investment assets (cost: 1997 - $180; 1996 - $196) . . . . . . . . . 132 148
--------- --------
Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,860 86,266
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . 19,988 18,525
U.S. government securities . . . . . . . . . . . . . . . . . . . . . . . . . 10,775 -
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,657 2,117
--------- --------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $108,280 $106,908
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Investment advisory fee payable . . . . . . . . . . . . . . . . . . . . . . $ 523 $ 576
Dividends and distributions payable . . . . . . . . . . . . . . . . . . . . - 3,379
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162 115
--------- --------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 685 4,070
--------- --------
Commitments and Contingencies
Shareholders' Equity:
Common stock, $1 par value; 20,000,000 shares authorized;
7,617,349 and 7,550,198 shares issued and outstanding at
6/30/97 and 12/31/96 . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,617 7,550
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . 100,685 99,522
Notes receivable from sale of common stock . . . . . . . . . . . . . . . . . (3,713) (5,387)
Net unrealized depreciation on investments . . . . . . . . . . . . . . . . . (955) (745)
Undistributed accumulated earnings . . . . . . . . . . . . . . . . . . . . . 3,961 1,898
--------- --------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . 107,595 102,838
--------- --------
Total liabilities and shareholders' equity . . . . . . . . . . . . $ 108,280 $ 106,908
========= ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
1
4
ALLIED CAPITAL CORPORATION II AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
For the Three Months Ended For the Six Months Ended
-------------------------- ------------------------
June 30, June 30,
-------- --------
1997 1996 1997 1996
---- ---- ---- ----
Investment income:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,712 $ 3,054 $ 5,348 $ 6,087
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,428 25 1,519 46
------ ------ ------ ------
Total investment income . . . . . . . . . . . . . . . . . . . . . 4,140 3,079 6,867 6,133
------ ------ ------ ------
Expenses:
Investment advisory fee . . . . . . . . . . . . . . . . . . . . . . 523 599 1,082 1,228
Other operating expenses . . . . . . . . . . . . . . . . . . . . . 147 250 289 377
------ ------ ------ ------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . 670 849 1,371 1,605
------ ------ ------ ------
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . 3,470 2,230 5,496 4,528
Net realized gains on investments . . . . . . . . . . . . . . . . . . 229 2,889 3,264 5,457
------ ------ ------ ------
Net investment income before net unrealized
appreciation (depreciation) on investments . . . . . . . . . . . . 3,699 5,119 8,760 9,985
Net unrealized appreciation (depreciation) on
investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,818 (2,907) (210) (1,824)
------ ------ ------ ------
Net increase in net assets resulting from operations . . . . . . . . $ 5,517 $ 2,212 $ 8,550 $ 8,161
====== ====== ====== ======
Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.72 $ 0.30 $ 1.11 $ 1.13
====== ====== ====== ======
Weighted average number of shares and share
equivalents outstanding . . . . . . . . . . . . . . . . . . . . . . 7,680 7,276 7,677 7,239
====== ====== ====== ======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
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ALLIED CAPITAL CORPORATION II AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
(in thousands, except per share amounts)
(unaudited)
For the Six Months Ended
June 30,
-------
1997 1996
---- ----
Increase in net assets resulting from operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . $ 5,496 $ 4,528
Net realized gains on investments . . . . . . . . . . . . . . . . . . 3,264 5,457
Net unrealized depreciation on investments . . . . . . . . . . . . . (210) (1,824)
-------- ---------
Net increase in net assets resulting from operations . . . . . . 8,550 8,161
-------- ---------
Distributions to shareholders . . . . . . . . . . . . . . . . . . . . . . (6,698) (4,900)
-------- ---------
Capital share transactions:
Net decrease (increase) in notes receivable from sale of common stock . 1,675 (475)
Issuance of common stock upon the exercise of stock options . . . . . . 300 800
Issuance of common stock in lieu of cash distributions . . . . . . . . 930 2,345
-------- ---------
Net increase in net assets resulting from capital share
transactions . . . . . . . . . . . . . . . . . . . . . . . . . 2,905 2,670
-------- ---------
Net increase in net assets . . . . . . . . . . . . . . . . . . . . . . . 4,757 5,931
Net assets at beginning of period . . . . . . . . . . . . . . . . . . . . 102,838 101,981
-------- ---------
Net assets at end of period . . . . . . . . . . . . . . . . . . . . . . . $107,595 $107,912
======== =========
Net asset value per share . . . . . . . . . . . . . . . . . . . . . . . . $ 14.13 $ 14.80
======== =========
Shares outstanding at end of period . . . . . . . . . . . . . . . . . . . 7,617 7,293
======== =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
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ALLIED CAPITAL CORPORATION II AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
For the Six Months Ended
June 30,
-------
1997 1996
---- ----
Cash Flows From Operating Activities:
Net increase in net assets resulting from operations . . . . . . . . . $ 8,550 $ 8,161
Adjustments to reconcile net increase in net assets resulting from
operations to net cash provided by operating activities:
Net unrealized depreciation on investments . . . . . . . . . . . . . 210 1,824
Net realized gains on investments . . . . . . . . . . . . . . . . . (3,264) (5,457)
Amortization of loan discounts and fees . . . . . . . . . . . . . . (627) (809)
Changes in assets and liabilities:
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 460 134
Investment advisory fee payable . . . . . . . . . . . . . . . . . (53) (40)
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . 47 (928)
------- -------
Net cash provided by operating activities . . . . . . . . . . . 5,323 2,885
------- -------
Cash Flows From Investing Activities:
Investments in small business concerns . . . . . . . . . . . . . . . (14,893) (4,844)
Investments in U.S. government securities . . . . . . . . . . . . . (10,686) -
Collections from loans and debt securities and other investment
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,882 12,033
Net proceeds from sale of equity securities . . . . . . . . . . . . 4,010 6,321
Collections from notes receivable from sale of common stock . . . . 1,874 25
------- -------
Net cash provided by investing activities . . . . . . . . . . . 5,187 13,535
------- -------
Cash Flows From Financing Activities:
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . 100 300
Dividends and distributions . . . . . . . . . . . . . . . . . . . . (9,147) (5,958)
------- -------
Net cash used in financing activities . . . . . . . . . . . . . (9,047) (5,658)
------- -------
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . 1,463 10,762
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . 18,525 6,227
------- -------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . $ 19,988 $16,989
====== ======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
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ALLIED CAPITAL CORPORATION II AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
NOTE 1. GENERAL
In the opinion of management, the accompanying unaudited consolidated
financial statements of Allied Capital Corporation II and subsidiaries
(the Company) contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the Company's
consolidated financial position as of June 30, 1997 and the results of
operations, changes in net assets, and cash flows for the periods
indicated. Certain information and footnote disclosures normally
included in the financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. It is suggested that these consolidated financial statements
be read in conjunction with the financial statements and notes thereto
included in the Company's December 31, 1996 Annual Report. The
results of operations for the three and six months ended June 30, 1997
are not necessarily indicative of the operating results to be expected
for the full year. Certain reclassifications have been made to the
1996 financial statements in order to conform to the 1997
presentation.
NOTE 2. DIVIDENDS
The Company's board of directors declared and paid two dividends to
shareholders totaling $0.88 per share during the six months ended June
30, 1997. The Company paid quarterly dividends equal to $0.43 per
share and $0.45 per share for the three months ended March 31, 1997
and June 30, 1997, respectively. In connection with these dividends,
the Company paid a total of $6.7 million.
NOTE 3. EARNINGS PER SHARE
In March 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No.128, "Earnings per
Share" (SFAS 128). SFAS 128 is effective for financial statements for
both interim and annual periods ending after December 15, 1997. SFAS
128 modifies the method of calculation of net income per share and
also requires a reconciliation between basic and diluted per share
amounts. Early adoption of the statement prior to the end of 1997 is
not allowed.
The following table (in thousands, except per share data) presents the
effect of SAS 128 on the Company's net income per share as if adopted
for current period disclosure:
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1997 1996 1997 1996
---- ---- ---- ----
Net Income................................. $5,517 $2,212 $8,550 $8,161
===== ====== ====== =====
Basic average shares outstanding .......... 7,612 7,215 7,598 7,179
===== ====== ====== =====
Basic net income per share................. $ 0.72 $ 0.31 $ 1.12 $ 1.14
===== ====== ====== =====
Effect of dilutive securities:
Outstanding stock options ................. 68 61 79 60
----- ------ ------ -----
Diluted average shares outstanding ........ 7,680 7,276 7,677 7,239
===== ====== ====== =====
Diluted net income per share .............. $ 0.72 $ 0.30 $ 1.11 $ 1.13
===== ====== ====== =====
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ALLIED CAPITAL CORPORATION II AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
NOTE 4. COMMITMENTS AND CONTINGENCIES
The Company had loan commitments to invest in various existing and prospective
portfolio companies, standby letters of credit and third party guarantees
outstanding equal to $3.1 million at June 30, 1997.
The Company is party to certain lawsuits. While the outcome of these legal
proceedings cannot at this time be predicted with certainty, management does
not expect that these actions will have a material effect upon the consolidated
financial position of the Company.
NOTE 5. SUBSEQUENT EVENT
On August 14, 1997, the Company announced that it has entered into an Agreement
and Plan of Merger with Allied Capital Corporation, Allied Capital Commercial
Corporation, Allied Capital Lending Corporation and Allied Capital Advisers,
Inc., pursuant to which the Company and Allied Capital Corporation, Allied
Capital Commercial Corporation, and Allied Capital Advisers, Inc. would merge
with and into Allied Capital Lending Corporation through a stock for stock
exchange. The merger is subject to the approval by at least two-thirds of the
stockholders of each of the merging companies, as well as subject to certain
regulatory approvals and other customary closing conditions. If all required
approvals are obtained, the Company anticipates the merger would be effective
on December 31, 1997.
Pursuant to the terms of the merger agreement, stockholders of the Company at
the effective time of the merger will receive 1.40 shares of the merged entity.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and notes thereto included elsewhere in this report.
RESULTS OF OPERATIONS
For the Three Months Ended June 30, 1997 and 1996.
For the three months ended June 30, 1997, net increase in net assets resulting
from operations was $5.5 million, or $0.72 per share as compared to a net
increase in net assets resulting from operations equal to $2.2 million, or
$0.30 per share for the three months ended June 30, 1996.
The comparison of earnings for the second quarter of 1997 to the same
period in 1996 is significantly effected by the timing of recognizing realized
gains and changes in valuations of portfolio investments; therefore, quarterly
earnings are not indicative of annual 1997 earnings. Realized gains and
unrealized appreciation equaled $2.0 million for the three months ended June
30, 1997, of which, $1.8 million was from net increases in the carrying values
of the Company's equity positions in certain portfolio companies (see Portfolio
Changes). For the comparable period in 1996, realized gains equaled $2.9
million and unrealized depreciation for the period equaled $2.9 million.
Net investment income increased approximately 56% to $3.5 million from $2.2
million for the three months ended June 30, 1997 and 1996, respectively. This
growth is due to an increase in other income of $1.4 million resulting from
prepayment penalties related to three portfolio investments during the second
quarter of 1997. Total interest income decreased 11% to $2.7 million in the
second quarter of 1997 from $3.1 million for the same period last year. The
decline in interest income is a function of a smaller average portfolio of
loans to small businesses in the second quarter of 1997 as compared to the
second quarter of 1996. The Company's total loans to small business concerns
at June 30, 1997 was $64.6 million as compared to $90.1 million at June 30,
1996. Since June 30, 1996 the Company has experienced significant repayment
activity in its portfolio of loans to small businesses. For the six months
ended June 30, 1997 repayments of loans to small businesses totaled $24.9
million. The Company's pace of new investment activity has been impacted by a
increasingly competitive marketplace, and a cautious investment policy to
assure that the Company is accepting appropriate levels of risk in its new
investments. New investments for the six months ended June 30, 1997 were $14.9
million.
Total expenses decreased 21% to $670,000 from $849,000 for the three months
ended June 30, 1997 and 1996, respectively. The Company's investment advisory
fee decreased $76,000 to $523,000 for the quarter ended June 30, 1997 from
$599,000 for the second quarter of 1996. Investment advisory fees were reduced
by the decline in assets invested in small business concerns. Other operating
expenses decreased approximately 41% for the three months ended June 30, 1997
as compared to the same period in 1996 as a result of lower portfolio expenses
such as legal and other expenses.
For the Six Months ended June 30, 1997 and 1996.
Net increase in net assets resulting from operations was $8.6 million, or $1.11
per share, for the six months ended June 30, 1997, compared to $8.2 million, or
$1.13 per share, for the same period in 1996. Net investment income increased
approximately 21% to $5.5 million for 1997 as compared to $4.5 million in 1996.
This increase in net investment income results primarily from the same factors
discussed above relating to interest and other income. Realized gains
decreased $2.2 million for the first half of 1997 as compared to the same
period in 1996. Unrealized depreciation for the six months ended June 30, 1997
was $210,000 as compared to $1.8 million in unrealized depreciation for the six
months ended June 30, 1996. As was described above, the Company can experience
significant fluctuations in realized and unrealized gains on a
quarter-to-quarter comparison basis, and as a result any one quarterly period
is not indicative of expected annual earnings.
Total expenses decreased 14% to $1.4 million from $1.6 million for the six
months ended June 30, 1997 and 1996, respectively. The decreases were caused
by the same factors discussed in the quarter-to-quarter comparison above.
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LIQUIDITY AND CAPITAL RESOURCES
Total assets increased $1.4 million to $108.3 million as of June 30, 1997 from
$106.9 million as of December 31, 1996. Total investments as of June 30, 1997
decreased $10.4 million from December 31, 1996.
The Company purchased $10.7 million in U.S. government securities with
maturities ranging from three months to one year in order to maximize returns
on excess cash resources. Cash, cash equivalents and investments in U.S.
government securities increased $12.2 million during the six months ended June
30, 1997.
In order to fund its investments in small businesses, the Company has cash and
an uncommitted line of credit with a commercial bank. The Company had total
cash, cash equivalents and U.S. government securities available at June 30,
1997 of $30.8 million and available credit facilities of $25 million.
At June 30, 1997, outstanding commitments for future financing by the Company
were approximately $3.1 million. Given the amount of cash, cash equivalents
and U.S. government securities available at June 30, 1997, and its available
credit facilities, the Company believes that it has adequate capital to
continue to satisfy its operating needs, commitments and other future
investment opportunities that may arise throughout 1997.
PORTFOLIO CHANGES
For the six months ended June 30, 1997, the Company's portfolio depreciated
$210,000 due to the sale of certain investments which resulted in realized
gains (losses), changes in market prices for public equity investments, and
changes in value of certain private investments.
The disposition of certain portfolio investments resulted in unrealized
appreciation (depreciation) and the recognition of realized gains (losses)
during the six months ended June 30, 1997 as follows:
Unrealized Realized
Appreciation Gain
(Depreciation) (Loss)
-------------- ------
Allied Waste Industries, Inc. $(1,548,000) $2,567,000
ASW Holding Corporation (276,000) 537,000
Colorado Prime Corporation 0 98,000
Contemporary Media, Inc. (46,000) 112,000
Enviroplan, Inc. 362,000 (405,000)
Kirker Enterprises, Inc. 0 19,000
Montgomery Tank Lines (284,000) 336,000
The Company's public equity investments which appreciated (depreciated) in
value during the six months ended June 30, 1997 were:
Unrealized
Appreciation
(Depreciation)
--------------
Au Bon Pain Co., Inc. 49,000
Brazos Sportswear, Inc. 736,000
DeVlieg-Bullard, Inc. 52,000
Esquire Communications, Ltd. 460,000
Garden Ridge Corporation 501,000
Labor Ready, Inc. (589,000)
Nobel Education Dynamics, Inc. (378,000)
The Peerless Group, Inc. 9,000
Quality Software Products Holdings, PLC 8,000
Gulf South Medical Supply, Inc. (20,000)
In addition, the Company's investments in the following private companies had
unrealized appreciation (depreciation) during the six months ended June 30,
1997 - Grant Broadcasting Systems II - $528,000; Julius Koch USA, Inc. -
8
11
$710,000; and Contemporary Industries, Inc. - ($239,000). The remaining
investment portfolio had net unrealized depreciation of $245,000.
FACTORS AFFECTING THE COMPANY'S BUSINESS
Illiquidity. Most of the Company's investments consist of securities acquired
directly from the issuers in private transactions. They are usually subject to
restrictions on resale or otherwise illiquid. There is usually no established
trading market for these securities. In addition, most of the securities are
not eligible for sale to the public without registration which would involve
delay and expense.
Competition. A large number of entities and individuals compete for the
opportunity to make the kinds of investments made by the Company. Many of
these entities and individuals have greater financial resources than the
resources of the Company. As a result of this competition, the Company may
from time to time be precluded from making otherwise attractive investments on
terms considered to be prudent in light of the risks to be assumed.
Statements included in this report concerning the Company's future prospects
are "forward looking statements" under the Federal securities laws. There can
be no assurance that future results will be achieved and actual results could
differ materially from forecasts and estimates.
9
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Part II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is party to certain lawsuits. While the outcome of these
legal proceedings cannot at this time be predicted with certainty,
management does not expect that these actions will have a material
effect upon the consolidated financial position of the Company.
Item 2. CHANGES IN SECURITIES
No material changes have occurred in the securities of the Registrant.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 2, 1997, the Company held its Annual Meeting of Shareholders in
Bethesda, Maryland. Shareholders voted on three matters; the
substance of these matters and the results of the voting of each such
matter are described below.
1. Election of Directors: Shareholders elected a total of seven
directors, which comprised the entire Board, to serve for a
one-year term. Votes were cast as follows:
FOR WITHHELD
William L. Walton 7,157,689 120,073
George C. Williams 7,164,516 113,599
Lawrence I. Hebert 7,164,216 113,549
John D. Reilly 7,164,516 113,249
Smith T. Wood 7,164,516 113,249
John D. Firestone 7,166,378 111,387
John I. Leahy 7,165,220 112,544
2. Ratification of the selection of Matthews, Carter & Boyce to
serve as independent accountants for the year ended December
31, 1997:
FOR AGAINST ABSTAIN
7,115,728 33,371 128,661
3. Amend the Company's Incentive Stock Option Plan to increase
the number of shares available under the plan and add a change
of control provision:
FOR AGAINST ABSTAIN
4,105,334 611,269 190,457
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
3 Bylaws
(a) List of Exhibits
11 Statement of Computation of Earnings Per Share
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter
ended June 30, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
ALLIED CAPITAL CORPORATION II
-----------------------------
(Registrant)
/s/ Jon A. DeLuca
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Date: August 14, 1997 Jon A. DeLuca
---------------- Principal and Chief Financial Officer
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