<PAGE>
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 July 31, 1996
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from ___________ to ___________
Commission file number: 0-24856
UST PRIVATE EQUITY INVESTORS FUND, INC.
______________________________________________________________________________
(Exact Name of Registrant as Specified in its Charter)
Maryland 13-3786385
_____________________________________________________________________________
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
114 West 47th Street
New York, New York 10036-1332
- -----------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (212) 852-1000
Not applicable
_____________________________________________________________________________
Former name, former address and former fiscal year, if changed since last
report
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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 the number of shares outstanding of each of Registrant's classes of
common stock as of the latest practicable date. 40,463 shares of common
stock.
<PAGE>
INDEX
UST PRIVATE EQUITY INVESTORS FUND, INC.
PART I FINANCIAL INFORMATION
- ---------------------------------
Item 1. Financial Statements (Unaudited).
Portfolio of Investments as of July 31, 1996 (Unaudited) and
October 31, 1995.
Statement of Assets and Liabilities as of July 31, 1996
(Unaudited) and October 31, 1995.
Statement of Operations for the three month period ended July 31,
1996 (Unaudited) and the nine month period ended July 31, 1996
(Unaudited).
Statement of Changes in Net Assets for the nine month period
ended July 31, 1996 (Unaudited).
Notes to Financial Statements (Unaudited).
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PART II OTHER INFORMATION
- -----------------------------
Item 1. Legal Proceedings.
Item 2. Changes in Securities.
Item 3. Defaults upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
---------------------------------
<PAGE>
UST Private Equity Investors Fund, Inc. Fiscal Year End: October 31, 1996
Portfolio of Investments Quarter Ended: July 31, 1996
- ------------------------------------------------------------------------------
July 31, 1996
(Unaudited) October 31, 1995
------------- ----------------
PORTFOLIO STRUCTURE
- -------------------
PORTFOLIO COMPANIES $3,485,000 8.50% $ -- --
PRIVATE FUNDS 1,787,376 4.36% -- --
SHORT-TERM INVESTMENTS:
Commercial Paper 14,156,412 34.53% 9,399,238 23.41%
Corporate Bonds 12,110,792 29.53% 4,905,479 12.22%
U.S. Government & Agency
Obligations 7,337,044 17.89% 993,890 2.48%
Certificates of Deposit -- -- 7,000,000 17.43%
Repurchase Agreement -- -- 3,646,000 9.08%
Bank Notes -- -- 992,428 2.47%
Other Short-term Investments 1,891,370 4.61% 2,619,371 6.52%
---------- ------- ---------- -------
TOTAL INVESTMENTS 40,767,994 99.42% 29,556,406 73.61%
OTHER ASSETS & LIABILITIES (NET) 237,024 0.58% 10,596,033 26.39%
---------- ------- ---------- -------
NET ASSETS $41,005,018 100.00% $40,152,439 100.00%
========== ======= ========== =======
<PAGE>
UST Private Equity Investors Fund, Inc. Fiscal Year End: October 31, 1996
Statement of Assets and Liabilities Quarter Ended: July 31, 1996
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ASSETS July 31, 1996
- -------------------------------------- (Unaudited) October 31, 1995
------------- ----------------
Investment Securities, at Cost $40,808,157 $29,563,366
========== ==========
Investment Securities, at Value (Note 1) 40,767,944 29,556,406
Cash 151 10,977,421
Interest Receivable 318,623 332,614
Receivable from Managing Investment Advisor -- 104,101
Prepaid Assets 61,844 37,133
Unamortized Organization Costs 18,130 28,489
---------- ----------
TOTAL ASSETS 41,166,742 41,036,164
---------- ----------
LIABILITIES
- --------------------------------------
Payable for Dividends Declared -- 333,081
Managing Investment Advisory Fees Payable 31,718 --
Administration & Shareholder Servicing Fees
Payable 50,118 7,541
Directors Fees Payable 22,459 30,000
Payable for Offering and Organizational Costs -- 407,748
Accrued Expenses and Other Payables 57,429 105,355
------- -------
TOTAL LIABILITIES 161,724 883,725
------- -------
NET ASSETS $ 41,005,018 $ 40,152,439
============ ============
NET ASSETS CONSIST OF
- -------------------------------------
Accumulated Undistributed Net Investment
Income $ 929,105 $ 42,802
Accumulated Net Realized Loss on Investments (521) --
Net Unrealized Depreciation of Investments (40,163) (6,960)
Par Value 405 405
Paid In Capital in Excess of Par Value 40,116,192 40,116,192
------------ ------------
TOTAL NET ASSETS $41,005,018 $40,152,439
============ ============
Shares of Common Stock Outstanding; par value
$.01; 100,000 shares authorized
40,463 40,463
------------ ------------
NET ASSET VALUE PER SHARE $1,013.40 $992.32
============ ============
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UST Private Equity Investors Fund, Inc. Fiscal Year End: October 31, 1996
Statement of Operations (Unaudited) Quarter Ended: July 31, 1996
- ------------------------------------------------------------------------------
Quarter Ended November 1, 1995 to
INVESTMENT INCOME July 31, 1996 July 31, 1996
------------- -------------------
Interest Income $ 485,066 $ 1,558,130
-------------- ----------------
TOTAL INCOME 485,066 1,558,130
-------------- ----------------
EXPENSES
Management Investment Advisory Fees 90,756 243,571
Administrative Fees & Shareholder
Servicing Fees 12,645 37,992
Custodial Fees 1,031 3,046
Legal Fees 25,198 46,146
Audit and Other Professional
Service Fees 6,073 18,927
Directors' Fees and Expenses 7,540 22,459
Shareholder Reports 2,737 9,041
Organization Expenses 1,511 4,499
Insurance Expense 18,954 56,349
Miscellaneous Expenses -- 251
--------- --------
TOTAL EXPENSES 166,445 442,281
Fees Waived and Reimbursed by Advisor (59,235) (159,906)
--------- --------
NET EXPENSES 107,210 282,375
--------- --------
NET INVESTMENT INCOME 377,856 1,275,755
--------- ---------
REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS
Net Realized Gain/(Loss) on Security
Transactions $ 0 $ (521)
Change in Unrealized Appreciation /
(Depreciation) on Investments 2,554 (33,203)
---------- ------------
NET REALIZED AND UNREALIZED GAIN /
(LOSS) ON INVESTMENTS 2,554 (33,724)
---------- ------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 380,410 $ 1,242,031
========== ==========
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UST Private Equity Investors Fund, Inc. Fiscal Year End: October 31, 1996
Statement of Changes in Net Assets (Unaudited) Quarter Ended: July 31, 1996
=============================================================================
Quarter Ended November 1, 1995
July 31, 1996 to July 31, 1996
------------- ----------------
OPERATIONS:
Net Investment Income $ 377,856 $ 1,275,755
Net Realized Gain/(Loss)
on Investments 0 (521)
Change in Unrealized Appreciation/
(Depreciation) on Investments 2,554 (33,203)
--------------- ------------
Net Increase in Net Assets Resulting
From Operations 380,410 1,242,031
DISTRIBUTIONS TO SHAREHOLDERS:
From Net Investment Income -- (389,452)
--------------- -------------
NET INCREASE IN NET ASSETS 380,410 852,579
NET ASSETS:
Beginning of Period 40,624,608 40,152,439
--------------- ------------
End of Period (including
accumulated undistributed
net investment income of
$929,105 and $929,105) $ 41,005,018 $ 41,005,018
<PAGE>
UST PRIVATE EQUITY INVESTORS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
UST Private Equity Investors Fund, Inc. ("the Company") was incorporated
under the laws of the State of Maryland on September 16, 1994 and is
registered under the Securities Act of 1933, as amended, as a non-diversified,
closed-end management investment company which has elected to be treated as a
business development company under the Investment Company Act of 1940, as
amended. The Company commenced operations on August 1, 1995.
Certain information and footnote disclosures normally included in the
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. Reference is made to the Company's
annual report included in Form 10-K as filed with the Securities and Exchange
Commission for the notes to the Financial Statements that remain unchanged.
The following is a summary of the Company's significant accounting
policies.
(a) Portfolio valuation:
The Company values portfolio securities quarterly and at other such
times as in the Board of Directors' view, as circumstances warrant.
Investments in securities that are traded on a recognized stock exchange or
on the national securities market are valued at the last sale price for such
securities on the valuation date. Short-term debt instruments with remaining
maturities of 60 days or less are valued at amortized cost, which approximates
market value. Securities and other assets for which market quotations are not
readily available are valued, pursuant to guidelines adopted by the Investment
Advisor, under the supervision of the Board of Directors.
(b) Federal income taxes:
It is the policy of the Company to continue to qualify as a "regulated
investment company" under Subchapter M of the Internal Revenue Code and
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income or excise tax provision is required.
2. Purchases and Sales of Securities
Purchases of securities for the nine month period ended July 31, 1996
excluding short-term investments, for the Company aggregated $13,101,949.
There were no long-term sales. As of quarter-end, the Company has committed
to purchase an additional $10,212,624 in long-term securities consisting of
portfolio companies and private funds.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
---------------------------------------------------------------
Results of Operations
- ---------------------
UST Private Equity Investors Fund, Inc.'s (the "Company") net asset value per
common share was $1,013.40 at July 31, 1996, up $21.08 per share from the net
asset value per common share of $992.32 at October 31, 1995. This increase is
primarily the result of interest income earned by the Company net of
depreciation of its short-term securities holdings and expenses of the Company.
Realized and Unrealized Gains and Losses from
Portfolio Investments
- ---------------------------------------------
For the three months ended July 31, 1996, the Company had a $2,554 net realized
and unrealized gain from investments, comprised of $0 net realized gain on
security transactions related to short-term investments and a $2,554 increase
in net unrealized appreciation on investments. For the nine months ended July
31, 1996, the Company had a $33,724 net realized and unrealized loss from
investments, comprised of $521 net realized loss on security transactions
related to short-term investments and a $33,203 increase in net unrealized
depreciation on investments.
Investment Income and Expenses
- ------------------------------
The Company earned net investment income totaling $377,856 and $1,275,755 for
the three month and nine month periods ended July 31, 1996, respectively. The
Company's net investment income for the three month and nine month periods
ended July 31, 1996 were primarily the result of interest from portfolio
investments net of operating expenses.
United States Trust Company of New York (the "Managing Investment Adviser")
provides investment management and administrative services required for the
operation of the Company. In consideration of the services rendered by the
Managing Investment Adviser, the Company pays a management fee based upon a
percentage of the net assets of the Company invested or committed to be
invested in certain types of investments and an incentive fee based in part on
a percentage of realized capital gains of the Company. Such fee is determined
and payable quarterly. For the three month and nine month periods ended July
31, 1996, the Managing Investment Adviser earned $90,756, and $243,571 in
management fees, respectively. For the same periods, the Managing Investment
Adviser reimbursed other operating expenses of the Company in the amount of
$59,235 and $159,906 as a result of expenses incurred in excess of those
permitted pursuant to the Company's Prospectus.
<PAGE>
Net Assets
- ----------
At July 31, 1996, the Company's net assets were $41,005,018, an increase of
$852,579 from net assets of $40,152,439 at October 31, 1995. The net asset
value per share of common stock was $1013.40, up $21.08 from $992.32 per share
at October 31, 1995.
Liquidity and Capital Resources
- -------------------------------
The Company focuses its investments in the private equity securities of
later-stage venture capital companies and middle-market companies which the
Company believes offer significant long-term capital appreciation. The
Company may offer managerial assistance to certain of these companies. The
Company invests its available cash in short-term investments and marketable
securities to provide the liquidity necessary to make portfolio investments
as investment opportunities arise.
On July 31, 1996, the Company held cash of $151 and $35,495,618 in short-term
investments, compared to $10,977,421 in cash and $29,556,406 in short-term
investments at October 31, 1995. These changes from October 31, 1995 were
primarily the result of the Company's investment activities for the nine
months ended July 31, 1996.
During the quarter ended July 31, 1996, the Company made no direct investments.
During the quarter ended April 30, 1996, the Company invested $1,500,000 in a
combination of redeemable and convertible preferred stock of Comm Site
International, Inc. (a private venture capital company engaged in the business
of providing site acquisition and site management services to the wireless
telecommunications industry). During the quarter ended January 31, 1996, the
Company invested $1,985,000 in a combination of preferred and common stock of
Rental Service Corporation (a private middle-market company engaged in the
equipment rental business in the southern United States).
During the quarter ended July 31, 1996, the Company committed to invest
$2,000,000 in a private fund: Vanguard V Venture Partners (an early-stage
focused venture capital fund with offices in California and Texas). In
addition, during the quarter ended April 30, 1996, the Company also committed
to invest in two private funds: Lawrence Smith Horey III (a middle to late
stage venture capital fund based in New York, New York); and Sevin Rosen V (an
early stage venture capital fund with offices in Dallas, Texas and Palo Alto,
California) in the amounts of $2,000,000 each. During the quarter ended
January 31, 1996, the Company also committed to invest in three private funds:
Brentwood Associates Buyout Fund II, L.P. (a Los Angeles-based private equity
investment firm); Bruckmann, Rosser & Sherrill & Co., L.P. (a New York-based
buyout fund); and Morgenthaler Venture Partners IV (a Cleveland-based venture
capital/buyout firm) in the amounts of $2,000,000 each. In connection with
the Company's commitments to private funds in the amount of $12,000,000, a
total of $1,787,376, representing capital calls, was paid by the Company;
comprised of $587,405 for the quarter ended July 31, 1996, $943,058 for the
quarter ended April 30, 1996 and $256,913 for the quarter ended January 31,
1996.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
-----------------
The Company is not party to any material pending legal proceedings.
Item 2. Changes in Securities.
---------------------
Not applicable.
Item 3. Defaults Upon Senior Securities.
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
No matter was submitted to a vote of security-holders during the
quarter covered by this report.
Item 5. Other Information.
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits.
(27) Financial Data Schedule
(b) Reports on Form 8-K.
None.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
UST PRIVATE EQUITY INVESTORS FUND, INC.
By: /s/ David I. Fann,
-----------------------------
David I. Fann,
President
(Principal Executive Officer)
By: /s/ Brian Schmidt,
------------------------------
Brian Schmidt
Treasurer
(Principal Financial and Accounting Officer)
Date: September 12, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM UST PRIVATE EQUITY
INVESTORS FUND, INC.'S FORM 10-Q FOR THE PERIOD ENDED JULY 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000930454
<NAME> UST PRIVATE EQUITY INVESTORS FUND, INC.
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