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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTIONS 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended October 31, 2004

OR

For the transition period from              to             

Commission file number: 000-22277

EXCELSIOR PRIVATE EQUITY FUND II, INC.

(Exact Name of Registrant as Specified in Its Charter)

225 High Ridge Road

Stamford, CT 06905

(Address of Principal Executive Offices)

Registrant’s telephone number, including area code: (203) 352-4400

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act:

COMMON STOCK $0.01 PAR VALUE PER SHARE

(Title of Class)

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  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

The registrant’s common stock is not listed on any exchange nor does it trade on any established securities market or other market.

As of December 31, 2004 there were 195,730 shares outstanding of the registrant’s common stock.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement for the Annual Meeting of Shareholders to be held on March 23, 2005 are incorporated by reference into Part III (Items 10, 11 and 12) to this Form 10-K.

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FACTORS THAT MAY AFFECT FUTURE RESULTS

The Company’s prospects are subject to certain uncertainties and risks. This Annual Report on Form 10-K contains certain forward-looking statements within the meaning of the federal securities laws that also involve substantial uncertainties and risks. The Company’s future results may differ materially from its historical results and actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors. Readers should pay particular attention to the considerations described in the section of this report entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Readers should also carefully review the risk factors described in the other documents the Company files, or has filed, from time to time with the Securities and Exchange Commission.

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PART I

ITEM 1. BUSINESS.

Overview

Excelsior Private Equity Fund II, Inc. (the “Company” or the “Fund”) is a Maryland corporation organized on March 20, 1997. The Company is a non-diversified, closed-end management investment company operating as a business development company (“BDC”) under the Investment Company Act of 1940 (“Investment Company Act”), as amended, and, in connection with its initial offering of shares, registered said offering of shares under the Securities Act of 1933, as amended. BDCs are a special type of investment company, as defined and regulated by the Investment Company Act, which focus primarily on investing in the privately issued securities of eligible portfolio companies, as defined by the Investment Company Act. A BDC must also make available significant managerial assistance to such companies. The Company’s investment objective is to achieve long-term capital appreciation by investing in private later-stage venture capital and private middle-market companies and in certain venture capital, buyout and private equity funds that the Managing Investment Adviser (defined herein) believes offer significant long-term capital appreciation.

U.S. Trust Company, N.A., acting through its registered investment advisory division, U.S. Trust Company, N.A. Asset Management Division serves with United States Trust Company of New York, acting through its registered investment advisory division, U.S. Trust – New York Asset Management Division (each an “Investment Adviser” and together, the “Managing Investment Adviser” or “U.S. Trust”) provide investment management services to the Company pursuant to a management agreement dated July 18, 2000 (the “Management Agreement”). U.S. Trust Company, N.A. and United States Trust Company of New York are each a wholly-owned subsidiary of U.S. Trust Corporation, a registered bank holding company. U.S. Trust Corporation is an indirect wholly-owned subsidiary of The Charles Schwab Corporation. All officers of the Company are employees and/or officers of the Managing Investment Adviser. The Managing Investment Adviser is responsible for performing the management and administrative services necessary for the operation of the Company.

Pursuant to a Registration Statement on Form N-2 (File No. 333-23811) which was declared effective on June 2, 1997, the Company publicly offered up to 200,000 shares of common stock at $1,000 per share. The Company held its initial and final closings on October 8, 1997 and November 19, 1997, representing over $155.5 million and $40.2 million, respectively. The Company sold a total of 195,730 shares in the public offering for gross proceeds totaling $195,730,000 (including one share purchased for $1,000 on March 20, 1997, by Douglas A. Lindgren, the Company’s Co-Chief Executive Officer and Chief Investment Officer). Shares of the Company were made available through UST Financial Services Corp. (the “Selling Agent”) to clients of U.S. Trust and its affiliates who met the Company’s investor suitability standards.

In connection with the public offering of the Company’s shares, the Managing Investment Adviser paid to the Selling Agent a commission totaling $60,000. The Company incurred offering costs associated with the public offering totaling $367,154. Net proceeds to the Company from the public offering, after offering costs, totaled $195,362,846.

The Company’s Articles of Incorporation provide that the duration of the Company will be ten years from the final closing of the sale of the shares, subject to the rights of the Managing Investment Adviser and the investors to extend the term of the Company.

The following is a summary of the Company’s investment portfolio.

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INVESTMENTS HELD—PRIVATE

Description: Extends enterprise systems value with proven Supply Chain Execution (SCE) and Collaborative Supply Management (CSM) software solutions. Our unique approach allows customers to fully leverage their investment in enterprise applications. ClearOrbit customers enhance the functionality of their procurement, manufacturing and warehousing/distribution systems through the automation of internal business processes and by incorporating their trading partners into extended supply chain execution processes.

2004 Activity: 2004 was ClearOrbit’s tenth year in operation. License revenues, maintenance renewals, new customer acquisition and new product launches all increased for the year; in particular, software license revenues were up over seventy percent over the fiscal year ending June 30, 2003. In addition, the company standardized its technology on the J2EE platform, which is consistent with how enterprise customers are developing new software applications.

Investment: The Fund originally invested $5 million in ClearOrbit, and the investment is currently being held at a cost of $5.0 million.

Description: A pioneer in the commercial oligo synthesis field and has purchased or licensed more than 45 patents in the field of pico-scale synthesis and related applications. Metrigen was founded by a group of professionals from Operon, Stanford, and Protogene.

2004 Activity: Metrigen launched a Web site with pricing in November 2004 and began receiving online orders. Metrigen believes that its early customers are at the “cusp” of the new “Synthetic Biology” industry. In addition, Metrigen received notice that its long DNA synthesis (Gene Synthesis) patent is pending issue. This patent covers gene synthesis with oligos that have been removed from a microarray, as well as microarrays that are used for gene synthesis.

Investment: In December 2002, Protogene Laboratories, Inc., a former Fund portfolio company investment, negotiated a transaction in which it sold substantially all of its assets. In exchange for its Protogene ownership, the Fund received $0.1 million in cash, a $0.5 million promissory note and warrants in Metrigen, Inc. The investment is currently valued at $.05 million.

Description: For-profit provider of public school education management services. The Company’s schools are publicly-funded, receiving per-student capitalization rates generally consistent with those received by other schools in the district.

2004 Activity: Mosaica is currently operating 27 charter schools in Michigan, Cloriado, Arizona and Washington, D.C. The academic performance of its students continues to be strong relative to comparable public school demographics (geography, socioeconomics, etc.)

Investment: The Fund invested in Advantage Schools, Inc., which manages charter schools in troubled urban school districts in cooperation with local partners. The Fund originally invested $7.1 million in Advantage Schools. In August 2001, Mosaica Education, Inc. a privately held operator of charter schools acquired Advantage, forming Mosaica Advantage. The Fund received 75,059 shares of preferred stock in Mosaica Education, Inc. and promissory notes in the principal amount of $2.0 million from the acquisition of Advantage. As of October 31, 2004, the investment was valued at $5.5 million.

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INVESTMENTS HELD—THIRD-PARTY INVESTMENT FUNDS

Advanced Technology Ventures V, LP (“ATV”) is an early-stage focused fund targeting information technology and health care markets. ATV has drawn all of the Fund’s $3 million commitment. At October 31, 2004, the total value (fair market value plus distributions) of this investment was $1.0 million.

Brand Equity Ventures I, LP (“Brand Equity”) is focused on investing broadly across the consumer sector, particularly in branded opportunities within e-commerce, retailing, and direct response markets. Brand Equity has drawn all of the Fund’s $2.5 million commitment. At October 31, 2004, the total value (fair market value plus distributions) of this investment was $1.3 million.

Brentwood Associates III, LP (“Brentwood”) is focused on middle-market buyouts and consolidations. Brentwood’s strategy is to identify industries with consolidation characteristics, develop a strategy for implementation and recruit management to execute that strategy. Brentwood has drawn all of the Fund’s $5 million commitment. At October 31, 2004, the total value (fair market value plus distributions) of this investment was $5.7 million.

Broadview Capital Partners, LP (“Broadview”) is focused on buyouts, recapitalizations and growth financings within the technology sector. Broadview has drawn all of the Fund’s $5 million commitment. At October 31, 2004, the total value (fair market value plus distributions) of this investment was $3.1 million.

Commonwealth Capital Ventures II, LP (“Commonwealth”) invests in early to later-stage information technology companies in the New England region. Commonwealth maintains a particular focus on communications technology, Internet software and services, and e-commerce companies. Commonwealth has drawn all of the Fund’s $4 million commitment. At October 31, 2004, the total value (fair market value plus distributions) of this investment was $3.5 million.

Communications Ventures III, LP (“CommVentures”) targets early-stage companies exclusively in the communications sector. CommVentures has drawn all of the Fund’s $5 million commitment. At October 31, 2004 the total value (fair market value plus distributions) of this investment was $1.3 million.

Friedman, Fleischer & Lowe, LP (“Friedman”) is a fund focused exclusively on participation in middle-market buyouts. Friedman distributed a return of capital to the Fund in January 2001. Friedman has drawn all of the Fund’s $5 million commitment. At October 31, 2004, the total value (fair market value plus distributions) of this investment was $11.4 million.

Mayfield X, LP (“Mayfield”) invests in early-stage information technology and healthcare companies, primarily located in Silicon Valley. Mayfield has drawn all of the Fund’s $5 million commitment. At October 31, 2004, the total value (fair market value plus distributions) of this investment was $1.0 million.

Mayfield X Annex, LP (“Annex Fund”) invests follow-on capital in select Mayfield portfolio companies. The Annex Fund has drawn all of the Fund’s $250,000 commitment. As of October 31, 2004, the total value (fair market value plus distributions) of this investment was $0.2 million.

Mid-Atlantic Venture Fund III, LP (“MAVF”) invests in early and expansion-stage companies throughout the Mid- Atlantic region of the United States. MAVF has drawn all of the Fund’s $5 million commitment. As of October 31, 2004, the total value (fair market value plus distributions) of this investment was $2.0 million.

Morgenthaler Venture Partners V, LP (“Morgenthaler”) is primarily an early-stage venture fund, investing largely in information technology and healthcare companies but also invests in buyouts of basic businesses. Morgenthaler has drawn all of the Fund’s $8 million commitment. As of October 31, 2004, the total value (fair market value plus distributions) of this investment was $5.5 million.

Quad-C Partners V, LP (“Quad C”) is focused on taking controlling positions in leveraged acquisitions and recapitalizations of middle-market companies. Quad C has drawn all of the Fund’s $5 million commitment. As of October 31, 2004, the total value (fair market value plus distributions) of this investment was $7.3 million.

Sevin Rosen Fund VI, LP (“Sevin Rosen”) invests in early-stage technology companies, focusing specifically on companies in communications and eBusiness infrastructure and solutions, as well as those companies with Internet-enabled business models. Sevin Rosen has drawn all of the Fund’s $2.5 million commitment. As of October 31, 2004, the total value (fair market value plus distributions) of this investment was $4.7 million.

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Trinity Ventures VI, LP (“Trinity”) is an early to later-stage fund, which invests in the software, communications and electronic commerce sectors. Trinity has drawn all of the Fund’s $3 million commitment. As of October 31, 2004, the total value (fair market value plus distributions) of this investment was $2.4 million.

For additional information concerning the Company’s investments see the financial statements beginning on page 11 of this report.

Competition

The Company encounters competition from other entities and individuals having similar investment objectives. Primary competition for desirable investments comes from investment partnerships, venture capital affiliates of large industrial and financial companies, investment companies and wealthy individuals. Some of the competing entities and individuals have investment managers or advisers with greater experience, resources and managerial capabilities than the Company and may therefore be in a stronger position than the Company to obtain access to attractive investments. To the extent that the Company can compete for such investments, it may not be able to do so on terms as favorable as those obtained by larger, more established investors.

Employees

At October 31, 2004, the Company had no full-time employees. All personnel of the Company are employed by and compensated by the Managing Investment Adviser pursuant to the Management Agreement.

ITEM 2. PROPERTIES.

The Company does not own or lease any physical properties.

ITEM 3. LEGAL PROCEEDINGS.

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The Annual Meeting of Shareholders of the Company was held at the offices of United States Trust Company 114 West 47th Street, New York, New York 10036 at 10:00 a.m. (New York time) on March 26, 2004 (the “Meeting”). Of the 195,730 shares outstanding as of January 30, 2004, the record date for the Meeting, 113,847 were present or represented by proxy at the Meeting. The shareholders of the Company approved the following matter: to elect each of Mr. Hover, Mr. Bernstein, Mr. Murphy and Mr. Imbimbo as Directors of the Company. The results of the voting for this proposal were as follows:

1. Election of Directors:

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Market Information

The Company has 200,000 authorized shares. As of December 31, 2004, 195,730 shares were issued and outstanding. There is no established public trading market for the Company’s shares.

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Holders

There were 2,167 holders of the Company’s shares as of December 31, 2004.

Dividends and Distributions

Fiscal Year Ended October 31, 2004. There were no dividends or distributions paid during fiscal year 2004.

Fiscal Year Ended October 31, 2003. On October 30, 2003, the Company paid a distribution of $65.00 per share of return of capital.

For additional information concerning the payment of dividends, see “Significant Accounting Policies” in the notes to the financial statements of the Company included in Item 8 hereof.

ITEM 6. SELECTED FINANCIAL DATA.

($ in 000’s except for per share data)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Liquidity and Capital Resources

The Company has focused its investments in the private equity securities of expansion and later-stage venture capital companies and middle-market companies that 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 pending distributions to shareholders or to provide the liquidity necessary to make portfolio investments as investment opportunities arise.

At October 31, 2004, the Company held $328,296 in cash and $13,051,488 in short-term investments as compared to $2,852,110 in cash and $1,887,983 in short-term investments at October 31, 2003. The change in cash and short-term investments from October 31, 2003 was primarily the result of proceeds received from (i) sales of Curon Medical, Inc. common shares, and (ii) cash distributions received from the Company’s private investment funds. Subsequent to the fiscal year ended October 31, 2004, on December, 9, 2004, the Company paid a dividend of $11,761,416, or $60.09 per share, to shareholders of record as of December 6, 2004. In connection with the Company’s commitments to private investment funds, a total of $58,250,000 has been contributed by the Company through October 31, 2004. The Company has no additional capital commitment obligations to the private investment funds. The Company made no follow-on investments in its private company investments during the fiscal year ended October 31, 2004.

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The Company believes that its liquidity and capital resources are adequate to satisfy its operational needs.

Results of Operations

Investment Income and Expenses

For the fiscal year ended October 31, 2004, the Company had investment income of $182,061 and net operating expenses, net of expenses reimbursed by the Managing Investment Adviser, of $800,665, resulting in a net investment loss of ($618,604). For the fiscal year ended October 31, 2003, the Company had investment income of $239,388 and operating expenses, net of expenses reimbursed by the Managing Investment Adviser, of $860,783, resulting in a net investment loss of ($621,395). For the fiscal year ended October 31, 2002, the Company had investment income of $1,477,513 and operating expenses, net of expenses reimbursed by the Managing Investment Adviser, of $1,505,909, resulting in a net investment loss of ($28,396). The Company’s investment income was down from the fiscal year ended October 31, 2003 to the fiscal year ended October 31, 2004 due to lower balances of interest-bearing short-term securities. The reduced level of the Company’s investment income from the fiscal year ended October 31, 2002 to the fiscal year ended October 31, 2003 is due primarily to declining balances of interest-bearing short-term securities resulting from the investments in the private investment funds, as well as distributions to shareholders. During the fiscal year ended October 31, 2002, the Company maintained larger balances in short-term securities due to the sale of several of its public positions and merger proceeds received from one private company investment. Proceeds from the sale of these securities and distributions received from private investment funds were part of a distribution paid to shareholders on October 31, 2002.

Because the Company is in the process of harvesting its portfolio investments and distributing proceeds, there is a trend toward a reduced level of net assets that would result in reinvestment in interest-bearing investments and therefore, a decrease in interest income. During the fiscal year ended October 31, 2002, however, there was an increase in investment income over fiscal 2001 because the Company received redemption proceeds on its Cardiac Science, Inc. senior secured notes. The reinvestment of sales proceeds in interest-bearing securities, as well as interest earned on the senior secured notes, contributed to an increase in interest income over the previous year. The decrease in net operating expenses from fiscal year 2002 through fiscal year 2004 is primarily attributable to the decrease in managing investment adviser fees as a result of the decline in the net assets upon which fees are charged.

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. The management fee is determined and payable quarterly. For the fiscal years ended October 31, 2004, 2003 and 2002, the Managing Investment Adviser earned $673,403, $721,837, and $1,214,443 in management fees, respectively. The decrease in the fees earned by the Managing Investment Adviser over time can be attributed to the decrease in the Company’s net assets. The Managing Investment Adviser has voluntarily agreed to waive or reimburse other operating expenses of the Company, exclusive of management fees, to the extent they exceed 0.25% of the Company’s average net assets. During fiscal years ended October 31, 2004, 2003 and 2002, respectively, the Managing Investment Adviser reimbursed other operating expenses of the Company, in the amount of $223,870, $322,717, and $243,246 as a result of expenses incurred in excess of those permitted pursuant to the Company’s prospectus. This reimbursement has increased from fiscal 2002 to fiscal 2003 as a result of the decrease in net assets, and therefore, a reduced threshold upon which to calculate the maximum allowable expenses. In fiscal 2004, the reimbursement decreased as a result of an increase in the maximum allowable expenses as well as a reduction in other operating expenses. With the exception of legal fees, the Company’s other operating expenses tend to be more fixed in nature. In addition, for the fiscal year ended October 31, 2002, the change in allowance for the management incentive fee was $1,356,372, resulting in receivable to the Company. The Company received payment of the management fee receivables of $1,356,372 during the fiscal year ended October 31, 2003. As of October 31, 2004 and October 31, 2003, there was no incentive fee receivable from the Managing Investment Adviser or payable by the Company.

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Net Assets

For the fiscal year ended October 31, 2004, the Company’s net assets were $51,717,554, or a net asset value per common share of $264.23. This represents an increase of $2,001,366, or $10.23 per share, from net assets of $49,716,188, or a net asset value per common share of $254.00, at October 31, 2003. The increase was driven by an increase in unrealized appreciation of $6,889,598, or $35.20 per share, principally from the Company’s private investment funds. This was offset by a decresase in net assets resulting from a realized loss on investments in the amount of ($4,269,628), or ($21.81) per share, primarily from the Company’s sale of Curon Medical, Inc. and operating expenses exceeding investment income by ($618,604), or ($3.16) per share.

For the fiscal year ended October 31, 2003, the Company’s net assets were $49,716,188, or a net asset value per common share of $254.00. This represents a decrease of ($7,967,654), or ($40.71) per share, from net assets of $57,683,842, or a net asset value per common share of $294.71, at October 31, 2002. The decline is a combination of a return of capital distribution of ($12,722,250) or ($65.00) per share paid to shareholders on October 30, 2003, partially offset by an increase resulting from investment income and net gain on investments exceeding operating expenses by $4,754,796 or $24.29 per share. This net operating increase is comprised primarily of: 1) net realized loss on portfolio transactions totaling ($13,516,857) and 2) total net unrealized gain on portfolio investments in the amount of $18,893,048, totaling $5,376,191 or $27.46 per share.

Realized and Unrealized Gains and Losses from Portfolio Investments

For the fiscal year ended October 31, 2004, the Company had a net realized loss on security transactions of ($4,269,628) and a net change in unrealized appreciation on investments of $6,889,598. The net realized loss for the fiscal year was primarily the result of the sale of the Company’s shares of Curon Medical, Inc. common stock. The net change in unrealized appreciation for the fiscal year ended October 31, 2004 was principally the result of increases in the valuations of the Company’s private invetment funds.

For the fiscal year ended October 31, 2003, the Company had a net realized loss on security transactions of ($13,516,857) and a net change in unrealized appreciation/(depreciation) on investments of $18,893,048. The net realized loss for the fiscal year was primarily the result of (i) the conclusion of the assignment for the benefit of creditors of ReleaseNow, Inc., resulting in a realized loss of ($7,890,854). ReleaseNow, Inc. a private company investment, transferred ownership of its assets for liquidation; the liquidation concluded and the Company received $65,850 as a pro rata distribution of claims against the assets, and (ii) the acquisition of the assets of Protogene Laboratories, Inc. by Metrigen, Inc., resulting in a realized loss of ($7,262,497). The Company, in concluding its sale of shares of common stock of Cardiac Science, Inc. and Concur Technologies, Inc., also recorded realized gains of $538,331 and $1,099,061 during the period, respectively.

The net change in unrealized appreciation for the fiscal year ended October 31, 2003 was principally the result of a reclassification of ReleaseNow, Inc. and Protogene Laboratories, Inc. from unrealized depreciation to realized loss, thereby increasing unrealized appreciation/(depreciation). In addition to these increases, the Company’s position in Curon Medical, Inc. increased in value by $3,314,474.

For the fiscal year ended October 31, 2002, the Company had a ($31,468,519) net realized and unrealized loss from investments, comprised of a ($9,382,815) net realized loss on investments and a ($22,085,704) net change in unrealized depreciation of investments as compared to a ($132,793,435) net realized and unrealized loss from investments, comprised of a ($9,042,377) net realized loss on investments and a ($123,751,058) net change in unrealized depreciation on investments for the fiscal year ended October 31, 2001. The net unrealized depreciation on investments for the fiscal year ended October 31, 2002 is primarily the result of depreciation on a number of the Company’s private investment funds as well as write-downs taken during the year on MarketFirst Software, Inc. (aka Pivotal Corporation) and Captura Software, Inc. (aka Concur Technologies, Inc.). The net realized loss on investments for the fiscal year ended October 31, 2002 is the result of the sales/mergers of several companies collectively. The Company shares in PowerSmart, Inc., a private company, were sold as part of a merger agreement between PowerSmart, Inc. and Microchip Technology, Inc. The Company also sold the majority of its holding of Cardiac Science, Inc., a public company, at a gain. On the other hand, the Company sold its shares in Cross Media Marketing Corp., a public company, at a loss and recorded realized losses on Concur Technologies, Inc. and Pivotal Corporation due to merger transactions.

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Application of Critical Accounting Policies

Under the supervision of the Company’s Valuation and Audit Committees, consisting of the independent directors of the Company, the Managing Investment Adviser makes certain critical accounting estimates with respect to the valuation of private portfolio investments. These estimates could have a material impact on the presentation of the Company’s financial condition because in total, they currently represent 74.1% of the Company’s net assets at October 31, 2004. For the private investments held at October 31, 2004 changes to these estimates, i.e. changes in the valuations of these private investments, resulted in a $5.0 million increase in net asset value.

The value for securities for which no public market exists is difficult to determine. Generally speaking, such investments will be valued on a “going concern” basis without giving effect to any disposition costs. There is a range of values that is reasonable for such investments at any particular time. Because of the inherent uncertainty of valuation, the estimated values may differ significantly from the values that would have been used had a ready market for the securities existed, and the differences could be material.

Initially, direct private company investments are valued based upon their original cost until developments provide a sufficient basis for use of a valuation other than cost. Upon the occurrence of developments providing a sufficient basis for a change in valuation, direct private company investments will be valued by the “private market” or “appraisal” methods of valuation. The private market method shall only be used with respect to reliable third party transactions by sophisticated, independent investors. The appraisal method shall be based upon such factors affecting the company such as earnings, net worth, reliable private sale prices of the company’s securities, the market prices for similar securities of comparable companies, an assessment of the company’s future prospects or, if appropriate, liquidation value. The values for the investments referred to in this paragraph will be estimated regularly by the Managing Investment Adviser or a committee of the Board, both under the supervision of the Board, and, in any event, not less frequently than quarterly. However, there can be no assurance that such value will represent the return that might ultimately be realized by the Company from the investments.

The valuation of the Company’s private funds is based upon its pro-rata share of the value of the assets of a private fund as determined by such private fund, in accordance with its partnership agreement, constitutional or other documents governing such valuation, on the valuation date. If such valuation with respect to the Company’s investments in private funds is not available by reason of timing or other event on the valuation date, or are deemed to be unreliable by the Managing Investment Adviser, the Managing Investment Adviser, under supervision of the Board, shall determine such value based on its judgment of fair value on the appropriate date, less applicable charges, if any.

The Managing Investment Adviser also makes estimates regarding discounts on market prices of publicly traded securities where appropriate. For securities which have legal, contractual or practical restrictions on transfer, a discount of 10% to 40% from the public market price will be applied.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The following discussion includes forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements.

Equity Price Risk

A majority of the Company’s investment portfolio consists of equity securities in private companies and private investment funds, representing 74.1% of the Company’s net assets, which are not publicly traded. These investments are recorded at fair value as determined by the Managing 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 normally associated with public equity markets. Nevertheless, the Company was exposed to equity price risk through its investment in the equity securities of one public company, Curon Medical, Inc. (NASDAQ: CURN) at October 31, 2003. At October 31, 2003, this publicly traded equity security was valued at $4,243,099, representing 8.5% of the net assets. 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, representing a decrease in the value of these securities of $424,309. In July and August, 2004, the Company liquidated all of its shares of Curon Medical Inc. common stock and therefore, at October 31, 2004, the Company was not subject to equity price risk normally associated with public equity markets, except to the extent that the private investment funds that the Company has invested in has, from time to time, interests in securities which may be publicly traded.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Report of Independent Registered Public Accounting Firm

Portfolios of Investments at October 31, 2004 and October 31, 2003

Statements of Assets and Liabilities at October 31, 2004 and October 31, 2003

Statements of Operations for the years ended October 31, 2004, October 31, 2003 and October 31, 2002

Statements of Changes in Net Assets for the years ended October 31, 2004, October 31, 2003 and October 31, 2002

Statements of Cash Flows for the years ended October 31, 2004, October 31, 2003 and October 31, 2002

Financial Highlights — Selected Per Share Data and Ratios for the years ended October 31, 2004, October 31, 2003, October 31, 2002, October 31, 2001 and October 31, 2000

Notes to Financial Statements

Note - All other schedules are omitted because of the absence of conditions under which they are required or because the required information is included in the financial statements or the notes thereto.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

Excelsior Private Equity Fund II, Inc.

We have audited the accompanying statement of assets and liabilities of Excelsior Private Equity Fund II, Inc. (the “Fund”), including the portfolio of investments, as of October 31, 2004 and 2003, and the related statements of operations, cash flows, changes in net assets and financial highlights for each of the years then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The statements of operations, changes in net assets and cash flows for the year ended October 31, 2002 and the financial highlights for each of the years in the three year period ended October 31, 2002 were audited by other auditors whose report, dated December 17, 2002, expressed an unqualified opinion on such statements and financial highlights.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2004 and 2003, by correspondence with the custodian and the management of the private investment funds; where replies were not received for the private investment funds, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 1(a), the financial statements include investment securities valued at $38,327,198 and $40,786,051 as of October 31, 2004 and 2003, respectively, representing 74.11% and 82.04%, respectively, of net assets, whose values have been estimated by the Managing Investment Advisor, under the supervision of the Board of Directors, in the absence of readily ascertainable market values. We have reviewed the procedures used by the Managing Investment Advisor in preparing the valuations of investment securities and have inspected the underlying documentation, and in the circumstances we believe the procedures are reasonable and the documentation appropriate. However, in the case of those securities with no readily ascertainable market value, because of the inherent uncertainty of valuation, the Managing Investment Advisor’s estimate of values may differ significantly from the values that would have been used had a ready market existed for the securities and the differences could be material.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Excelsior Private Equity Fund II, Inc. as of October 31, 2004 and 2003, the results of its operations, its cash flows, changes in its net assets and the financial highlights for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ DELOITTE & TOUCHE LLP

New York, New York

December 28, 2004

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Table of Contents

Excelsior Private Equity Fund II, Inc.

Portfolio of Investments October 31, 2004