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 April 30, 1997
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 (IRS Employer
incorporation or organization) Identification No.)
114 West 47th Street
New York, NY 10036-1332
(Address of principal executive offices, including zip code)
(212) 852-1000
(Telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No / /
As of April 30, 1997, there were 40,463 shares of the Registrant's Common Stock,
$.001 par value, outstanding.
604208.1
<PAGE>
UST PRIVATE EQUITY INVESTORS FUND, INC.
This Quarterly Report on Form 10-Q contains historical information and
forward-looking statements. Statements looking forward in time are included in
this Form 10-Q pursuant to the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. They involve known and unknown risks
and uncertainties that may cause the Company's actual results to differ from
future performance suggested herein. In the context of forward-looking
information provided in this Form 10-Q and in other reports, please refer to the
discussion of risk factors detailed in, as well as the other information
contained in, the Company's filings with the Securities and Exchange Commission
during the past 12 months.
INDEX PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
Portfolio of Investments as of April 30, 1997 (Unaudited)
and October 31, 1996.
Statement of Assets and Liabilities as of April 30, 1997
(Unaudited) and October 31, 1996.
Statement of Operations for the three month period ended
April 30, 1997 (Unaudited) and the three month period ended
April 30, 1996 (Unaudited).
Statement of Changes in Net Assets for the three month
period ended April 30, 1997 and the three month period ended
April 30, 1996 (Unaudited).
Notes to Financial Statements (Unaudited).
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
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 Securityholders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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Part I. Financial Information
Item 1. Financial Statements (Unaudited).
<TABLE>
<CAPTION>
UST Private Equity Investors Fund, Inc. Fiscal Year End: October 31, 1997
Portfolio of Investments Quarter Ended: April 30, 1997
- ---------------------------------------------------------------------------------------------------------------------------
April 30, 1997 October 31, 1996
(unaudited)
------------------------------- -----------------------------------
PORTFOLIO STRUCTURE
<S> <C> <C> <C> <C>
PORTFOLIO COMPANIES $ 21,912,336 50.77% $ 8,789,423 20.58%
PRIVATE FUNDS 3,542,017 8.21% 2,151,372 5.04%
SHORT-TERM INVESTMENTS:
Commercial Paper 9,690,064 22.46% 13,599,186 31.83%
Corporate Bonds 2,241,662 5.19% 9,937,594 23.26%
U.S. Government & Agency Obligations 996,065 2.31% 5,483,053 12.83%
Other Short-term Investments 4,329,857 10.03% 2,802,551 6.56%
---------------- ----------- ----------------- --------------
TOTAL INVESTMENTS 42,712,001 98.97% 42,763,179 100.10%
OTHER ASSETS & LIABILITIES (NET) 444,965 1.03% (43,559) -0.10%
---------------- ----------- ----------------- --------------
NET ASSETS $ 43,156,966 100.00% $ 42,719,620 100.00%
================ =========== ================= ==============
</TABLE>
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<TABLE>
<CAPTION>
UST Private Equity Investors Fund, Inc. Fiscal Year End: October 31, 1997
Statement of Assets and Liabilities Quarter Ended: April 30, 1997
- -------------------------------------------------------------------------------------------------
April 30, 1997
ASSETS (unaudited) October 31, 1996
- ------------------------------------------------------ ------------------- ----------------
<S> <C> <C>
Investment Securities, at Cost $ 39,788,735 $ 41,484,579
=============== ============
Investment Securities, at Value 42,712,001 42,763,179
Cash 327,531 101
Interest Receivable 180,643 514,760
Prepaid Assets 74,934 37,029
Unamortized Organization Costs 19,511 22,480
TOTAL ASSETS 43,314,620 43,337,549
--------------- ------------
LIABILITIES
- -------------------------------------------------
Payable for Investments Purchased -- 477,950
Managing Investment Advisory Fees Payable 86,306 36,658
Administration & Shareholder Servicing Fees Payable 15,438 14,695
Directors Fees Payable 14,877 30,000
Accrued Expenses and Other Payables 41,033 58,626
--------------- ------------
TOTAL LIABILITIES 157,654 617,929
--------------- ------------
NET ASSETS $ 43,156,966 $ 42,719,620
=============== ============
NET ASSETS CONSIST OF
- -------------------------------------------------
Accumulated Undistributed Net Investment Income $ 130,798 $ 1,283,634
Accumulated Net Realized Gain (Loss) on Investments (12,048) 43,640
Net Unrealized Appreciation/(Depreciation) of Investments 2,923,266 1,278,600
Allowance for Management Incentive (3,159) (4,363)
Par Value 405 405
Paid In Capital in Excess of Par Value 40,117,704 40,117,704
--------------- ------------
TOTAL NET ASSETS $ 43,156,966 $ 42,719,620
=============== ============
Shares of Common Stock Outstanding 40,463 40,463
--------------- ------------
NET ASSET VALUE PER SHARE $ 1,066.58 $ 1,055.77
=============== ============
</TABLE>
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<TABLE>
<CAPTION>
UST Private Equity Investors Fund, Inc. Fiscal Year End: October 31, 1997
Statement of Operations (unaudited) Quarter Ended: April 30, 1997
- -------------------------------------------------------------------------------------------------------------------------------
Fiscal Prior Fiscal
Quarter Ended Year To Date Quarter Ended Year To Date
INVESTMENT INCOME April 30, 1997 April 30, 1997 April 30, 1996 April 30, 1996
-------------------- ----------------- ----------------- --------------
<S> <C> <C> <C> <C>
Interest Income $ 251,654 $ 605,945 $ 500,610 $ 1,073,064
------------- ------------ -------------- --------------
TOTAL INCOME 251,654 605,945 500,610 1,073,064
------------- ------------ -------------- --------------
EXPENSES
Management Investment Advisory Fees 136,471 262,808 82,386 152,815
Administrative Fees & Shareholder Servicing Fees 14,674 29,842 12,383 25,347
Custodial Fees 2,109 4,209 1,002 2,015
Legal Fees 35,261 58,835 8,522 20,948
Audit and Other Professional Service Fees 6,803 13,734 5,941 12,854
Directors' Fees and Expenses 7,315 14,876 7,378 14,919
Shareholder Reports 2,926 5,951 2,676 6,304
Organization Expenses 1,461 2,972 1,476 2,988
Insurance Expense 18,337 37,292 18,493 37,395
Miscellaneous Expenses -- -- -- 251
------------- ------------ -------------- --------------
TOTAL EXPENSES 225,357 430,519 140,257 275,836
Fees Waived and Reimbursed by Advisor (53,717) (101,530) (43,823) (100,671)
------------- ------------ -------------- --------------
NET EXPENSES 171,640 328,989 96,434 175,165
------------- ------------ -------------- --------------
NET INVESTMENT INCOME $ 80,014 $ 276,956 404,176 897,899
------------- ------------ -------------- --------------
REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS
Net Realized Gain/(Loss) on Security Transactions $ -- $ (12,048) $ 121 $ (521)
Change in Unrealized Appreciation / (Depreciation)
on Investments 1,418,516 1,644,666 (57,388) (35,757)
------------- ------------ -------------- --------------
NET REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS 1,418,516 1,632,618 (57,267) (36,278)
Change in Management Incentive Fee -- 1,204 -- --
------------- ------------ -------------- --------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 1,498,530 $ 1,910,778 $ 346,909 $ 861,621
============= ============ ============== ==============
</TABLE>
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<TABLE>
<CAPTION>
UST Private Equity Investors Fund, Inc. Fiscal Year End: October 31, 1997
Statement of Changes in Net Assets (unaudited) Quarter Ended: April 30, 1997
- ----------------------------------------------------------------------------------------------------------------------------------
Fiscal Prior Fiscal
Quarter Ended Year To Date Quarter Ended Year To Date
April 30, 1997 April 30, 1997 April 30, 1996 April 30, 1996
------------------------------------------------------------------------
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income $ 80,014 $ 276,956 $ 404,176 $ 897,899
Net Realized Gain (Loss) on Investments -- (12,048) 121 (521)
Change in Unrealized Appreciation / (Depreciation)
on Investments 1,418,516 1,644,666 (57,388) (35,757)
Change in Allowance for Management Incentive Fee -- 1,204 -- --
------------ --------------- ---------------- --------------
Net Increase in Net Assets
Resulting From Operations 1,498,530 1,910,778 346,909 861,621
DISTRIBUTIONS TO SHAREHOLDERS:
From Net Investment Income -- (1,429,792) -- (389,452)
From Net Realized Gain on Investments -- (43,640) -- --
------------ --------------- ---------------- --------------
NET INCREASE IN NET ASSETS 1,498,530 437,346 346,909 472,169
NET ASSETS:
Beginning of Period 41,658,436 42,719,620 40,277,699 40,152,439
------------ --------------- ---------------- --------------
End of Period $ 43,156,966 $ 43,156,966 $ 40,624,608 40,624,608
============ =============== ================ ==============
</TABLE>
604208.1
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UST Private Equity Investors Funds, Inc. Fiscal Year Ended: October 31, 1997
Notes to Financial Statements Quarter Ended: April 30, 1997
- -------------------------------------------------------------------------------
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, circumstances warrant. Investments in
unrestricted securities that are traded on a recognized stock exchange or on the
national securities market are valued at the last sale price for such securities
on the valuation date. Short-term debt instruments with remaining maturities of
60 days or less are valued at amortized cost, which approximates market value.
Securities and other assets for which market quotations are not readily
available or that are restricted are valued, pursuant to guidelines adopted by
the Investment 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
Purchase and sales of securities for the three month period ended April 30,
1997, excluding short-term investments, for the Company aggregated $3,831,121
and $2,000,000, respectively. At April 30, 1997, the Company had outstanding
investment commitments totaling $8,457,983.
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Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations.
Results of Operations
- ---------------------
THREE-MONTH PERIOD ENDED APRIL 30, 1997 AS COMPARED
TO THE SIMILAR PERIOD IN 1996
The Company's net asset value per common share was $1,066.58 at April 30, 1997,
up $37.04 per share from the net asset value per common share of $1,029.54 at
January 31, 1997. This increase was the result of appreciation on three
companies, Corsair Corporation, Cardiopulmonary and Rental Services Corp.
Corsair and Cardiopulmonary received additional financings at higher valuations.
Rental Services' position is no longer valued at a discount now that it is
freely tradeable. The Company's net asset value per common share was $1,003.99
at April 30, 1996, up $8.57 per share from the net asset value per common share
of $995.42 at January 31, 1996.
Realized and Unrealized Gains and Losses from Portfolio Investments
- -------------------------------------------------------------------
For the three months ended April 30, 1997 and 1996, the Company had a net
realized gain/(loss) from investments of $0 and $121, respectively. For the
three months ended April 30, 1997 and 1996, the Company had a net change in
unrealized appreciation/(depreciation) on investments of $1,418,516 and
$(57,388), respectively.
Investment Income and Expenses
- ------------------------------
For the three months ended April 30, 1997, the Company had interest income of
$251,654, and net operating expenses of $171,640, resulting in net investment
income of $80,014 as compared to interest income of $500,610, and net operating
expenses of $96,434, resulting in net investment income of $404,176 for the
quarter ended April 30, 1996. The primary reason for the decline in interest
income was the decline of assets invested in short-term instruments and increase
in assets invested in private companies and private funds.
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 quarter ended April 30, 1997 and April 30, 1996, the
Managing Investment Adviser earned $136,471, and $82,386 in management fees,
respectively. For the same periods, the Managing Investment Adviser reimbursed
other operating expenses of the Company in the amount of $53,717 and $43,823 as
a result of expenses incurred in excess of those permitted pursuant to the
Company's Prospectus.
Net Assets
- ----------
At April 30, 1997, the Company's net assets were $43,156,966, an increase of
$1,498,530 from net assets of $41,658,436 at January 31, 1997. The Company's net
assets at April 30, 1996 were $40,624,608 up $364,909 from net assets of
$40,277,699 at January 31, 1996.
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
604208.1
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available cash in short-term investments of marketable securities to provide the
liquidity necessary to make portfolio investments as investment opportunities
arise.
During the quarter ended April 30, 1997, the Company invested $2.5 million in
Abtox Inc., a manufacturer of gas plasma sterilizers used in hospitals and the
medical device industry.
At April 30, 1997, the Company held $327,531 in cash and $42,712,001 in
investments as compared to $101 in cash and $42,763,179 in investments at
October 31, 1996. These changes from October 31, 1996 were primarily the result
of the Company's investment activities for the quarter ended April 30, 1997 and
payment of cash dividend in December, 1996.
In connection with the Company's commitments to private funds in the amount of
$12,000,000 since inception, a total of $3,542,017, representing capital calls,
has been paid by the Company through April 30, 1997.
On December 20, 1996, the Company distributed $1,429,791.99 in income and
$43,640 in short-term gain to shareholders of record as of December 16, 1996.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
Not Applicable.
Part II. Other Information
Item 1. Legal Proceedings.
There are no legal proceedings pending or, to the Company's best
knowledge, threatened against the Company.
Item 2. Changes in Securities.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
604208.1
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(a) Exhibits.
Exhibit No.
-----------
(27) Financial Date Schedule (for EDGAR filing purposes only).
(a) The following reports on Form 8-K were filed during the quarter ended
April 30, 1997:
None.
604208.1
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CONFORMED 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.
Date: June 13, 1997 /s/ David I Fann
-----------------------------------------------
By: David I. Fann
President and Principal Executive Officer
Date: June 13, 1997 /s/ Brian Schmidt
-----------------------------------------------
By: Brian Schmidt
Treasurer and Principal Financial and
Accounting Officer
604208.1
<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 APRIL
30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000930454
<NAME> UST PRIVATE EQUITY INVESTORS FUND, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 39,789
<INVESTMENTS-AT-VALUE> 42,712
<RECEIVABLES> 181
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 422
<TOTAL-ASSETS> 43,315
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 158
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 40,115
<SHARES-COMMON-STOCK> 40
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<REALIZED-GAINS-CURRENT> (12)
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</TABLE>
