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 January 31, 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 (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
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 January 31, 1997 (Unaudited) and
October 31, 1996.
Statement of Assets and Liabilities as of January 31, 1997 (Unaudited)
and October 31, 1996.
Statement of Operations for the three month period ended January 31,
1997 (Unaudited) and for the three month period ended January 31, 1996
(Unaudited).
Statement of Changes in Net Assets for the three month period ended
January 31, 1997 (Unaudited) and for the three month period ended
January 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.
- 2 -
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
- 3 -
<PAGE>
<TABLE>
UST Private Equity Investors Fund, Inc. Fiscal Year End: October 31, 1997
Portfolio of Investments Quarter Ended: January 31, 1997
<CAPTION>
January 31, 1997 October 31, 1996
----------------------------
(Unaudited)
<S> <C> <C> <C> <C>
PORTFOLIO STRUCTURE
PORTFOLIO COMPANIES $17,112,454 41.08% $8,789,423 20.58%
PRIVATE FUNDS 3,104,392 7.45% 2,151,372 5.04%
SHORT-TERM INVESTMENTS:
Commercial Paper 10,069,798 24.18% 13,599,186 31.83%
Corporate Bonds 3,757,711 9.02% 9,937,594 23.26%
U.S. Government & Agency Obligations -- -- 5,483,053 12.83%
Certificates of Deposit 1,000,000 2.40% -- --
Repurchase Agreement 4,354,889 10.45% -- --
Other Short-term Investments 2,001,393 4.80% 2,802,551 6.56%
---------- --------- ---------- --------
TOTAL INVESTMENTS 41,400,637 99.38% 42,763,179 100.10%
OTHER ASSETS & LIABILITIES (NET) 257,799 0.62% (43,559) (0.10%)
----------- --------- --------- ----------
NET ASSETS $41,658,436 100.00% $42,719,620 100.00%
========== ========== ========== =======
See Notes to Financial Statements.
</TABLE>
- 4 -
<PAGE>
<TABLE>
UST Private Equity Investors Fund, Inc. Fiscal Year End: October 31, 1997
Statement of Assets and Liabilities Quarter Ended: January 31, 1997
<CAPTION>
ASSETS January 31, 1997 October 31, 1996
- ------ ---------------- ----------------
(Unaudited)
<S> <C> <C>
Investment Securities, at Cost $39,895,887 $41,484,579
========== ==========
Investment Securities, at Value (Note 1) 41,400,637 42,763,179
Cash 131,249 101
Interest Receivable 238,011 514,760
Prepaid Assets 29,641 37,029
Unamortized Organization Costs 9,403 22,480
------------- --------------
TOTAL ASSETS 41,808,941 43,337,549
------------- -------------
LIABILITIES
Payable for investment securities purchased -- 477,950
Managing Investment Advisory Fees Payable 81,809 36,658
Administration & Shareholder Servicing Fees Payable 15,329 14,695
Directors Fees Payable 7,562 30,000
Accrued Expenses and Other Payables 45,805 58,626
---------- -----------
TOTAL LIABILITIES 150,505 617,929
----------- ------------
NET ASSETS $41,658,436 $ 42,719,620
=========== ============
NET ASSETS CONSIST OF
Accumulated Undistributed Net Investment Income $ 52,296 $ 1,283,634
Accumulated Net Realized Gain (Loss) on
Investments (12,048) 43,640
Net Unrealized Appreciation (Depreciation) of
Investments 1,504,750 1,278,600
Allowance for Management Incentive fee (3,159) (4,363)
Par Value 405 405
Paid In Capital in Excess of Par Value 40,116,192 40,117,704
----------- -----------
TOTAL NET ASSETS $41,658,436 $42,719,620
=========== ===========
Shares of Common Stock Outstanding; par value
$.01; 100,000 shares authorized 40,463 40,463
------------ -------------
NET ASSET VALUE PER SHARE $1,029.54 $1,055.77
=========== ===========
See Notes to Financial Statements.
</TABLE>
- 5 -
<PAGE>
<TABLE>
UST Private Equity Investors Fund, Inc. Fiscal Year End: October 31, 1997
Statement of Operations (Unaudited) Quarter Ended: January 31, 1997
<CAPTION>
Quarter Ended Quarter Ended
INVESTMENT INCOME January 31, 1997 January 31, 1996
---------------- --------------------
<S> <C> <C>
Interest Income $ 354,291 $ 572,454
------------ --------------
TOTAL INCOME 354,291 572,454
------------ --------------
EXPENSES
Management Investment Advisory Fees 126,337 70,429
Administrative Fees & Shareholder Servicing Fees 15,168 12,964
Custodial Fees 2,100 1,013
Legal Fees 23,574 12,426
Audit and Other Professional Service Fees 6,931 6,913
Directors' Fees and Expenses 7,561 7,541
Shareholder Reports 3,025 3,628
Organization Expenses 1,511 1,512
Insurance Expense 18,955 18,902
Miscellaneous Expenses -- 251
----------- -----------
TOTAL EXPENSES 205,162 135,579
Fees Waived and Reimbursed by Advisor (47,813) (56,848)
------------ ---------
NET EXPENSES 157,349 78,731
------------ ------------
NET INVESTMENT INCOME 196,942 493,723
----------- -----------
REALIZED AND UNREALIZED GAIN /(LOSS) ON INVESTMENTS
Net Realized (Loss) on Security Transactions $ (12,048) $ (642)
Change in Unrealized Appreciation /(Depreciation)
on Investments 226,150 21,631
------------ ------------
NET REALIZED AND UNREALIZED GAIN /
(LOSS) ON INVESTMENTS 214,102 (20,989)
Change in Management Incentive Fee 1,204 --
------- ------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 412,248 $ 514,712
============= ============
See Notes to Financial Statements.
- 6 -
</TABLE>
<PAGE>
<TABLE>
UST Private Equity Investors Fund, Inc. Fiscal Year End: October 31, 1997
Statement of Changes in Net Assets (Unaudited) Quarter Ended: January 31, 1997
<CAPTION>
Quarter Ended Quarter Ended
January 31, 1997 January 31, 1996
OPERATIONS:
<S> <C> <C>
Net Investment Income $ 196,942 $ 493,723
Net Realized Gain/(Loss) on Investments (12,048) (642)
Change in Unrealized Appreciation/(Depreciation) on
Investments 226,150 21,631
-------------- -----------
Net Increase in Net Assets Resulting From Operations 412,248 514,712
DISTRIBUTIONS TO SHAREHOLDERS:
From Net Investment Income (1,429,792) (389,452)
From Net Realized Gain On Investments (43,640) --
------------- ----------
NET INCREASE/(DECREASE) IN NET ASSETS (1,061,184) 125,260
NET ASSETS:
Beginning of Period 42,719,620 40,152,439
-------------- ------------
End of Period (including accumulated undistributed
net investment income of $52,296 and $147,073) $ 41,658,436 $ 40,277,699
============== ============
See Notes to Financial Statements.
</TABLE>
- 7 -
<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, 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
Purchases and sales of securities for the three month period ended
January 31, 1997, excluding short-term investments, for the Company aggregated
$9,088,046 and $4,122,711, respectively. At January 31, 1997, the Company had
outstanding investment commitments totaling $8,895,608.
- 8 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
The Company's net asset value per common share was $1,029.54 at January 31,
1997, down $26.23 per share from the net asset value per common share of
$1,055.77 at October 31, 1996. This decrease is primarily the result of the
payment by the Company on December 20, 1996 of a dividend of $36.41 per share to
shareholders of record on December 16, 1996.
Realized and Unrealized Gains and Losses from
Portfolio Investments
For the three months ended January 31, 1997 and 1996, the Company had net
realized and unrealized losses from investments of $12,048 and $642,
respectively. For the three months ended January 31, 1997 and 1996, the Company
had a net change in unrealized appreciation on investments of $226,150 and
$21,631, respectively.
Investment Income and Expenses
For the three months ended January 31, 1997, the Company had interest income of
$354,291, and net operating expenses of $157,349, resulting in net investment
income of $196,942 as compared to interest income of $572,454, and net operating
expenses of $78,731, resulting in net investment income of $493,723 for the
quarter ended January 31, 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 January 31, 1997 and January 31, 1996,
the Managing Investment Adviser earned $126,337, and $70,429 in management fees,
respectively. For the same periods, the Managing Investment Adviser reimbursed
other operating expenses of the Company in the amount of $47,813 and $56,848 as
a result of expenses incurred in excess of those permitted pursuant to the
Company's Prospectus.
- 9 -
<PAGE>
Net Assets
At January 31, 1997, the Company's net assets were $41,658,436, a decrease of
$1,061,184 from net assets of $42,719,620 at October 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 available cash in short-term investments and marketable securities
to provide the liquidity necessary to make portfolio investments as investment
opportunities arise.
For fiscal 1996, the Company invested $8.5 million in four later stage venture
capital and private middle market companies and committed to invest another
$12.0 million in six venture capital, buyout and private equity funds. Funds
needed to cover future operating expenses and portfolio investments are obtained
from the Company's existing cash reserves, from interest income and from
proceeds received from the sale of current investments.
During the quarter ended January 31, 1997, the Company committed to invest
$3,000,000 in convertible preferred stock of Best Friends Pet Care, Inc., a
company engaged in the business of providing boarding and grooming services for
dogs and cats in the United States. The Company invested $3,000,000 in
convertible preferred stock of QuickLogic Corporation, a company engaged in
designing programmable semiconductors. The Company also invested $2,000,000 in
convertible preferred stock of Cardiopulmonary Corporation, a company which
developed a software-driven life support ventilator which is FDA approved.
During the quarter ended January 31, 1997, the Company made a follow-on
investment of $1,000,000 in convertible preferred stock of ProCommunications
Inc.
At January 31, 1997, the Company held $131,249 in cash and $41,400,637 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 January 31, 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 $3,104,392, representing capital calls,
has been paid by the Company through January 31, 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.
- 10 -
<PAGE>
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.
- 11 -
<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.
/s/ David I. Fann
---------------------------------------
By: David I. Fann, President
(Principal Executive Officer)
/s/ Brian Schmidt
---------------------------------------
By: Brian Schmidt, Treasurer
(Principal Financial and Accounting Officer)
Date: March 13, 1997
<PAGE>
<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 JANUARY 31, 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
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> JAN-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 39,896
<INVESTMENTS-AT-VALUE> 41,401
<RECEIVABLES> 238
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 170
<TOTAL-ASSETS> 41,809
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 151
<TOTAL-LIABILITIES> 151
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 40,113
<SHARES-COMMON-STOCK> 40
<SHARES-COMMON-PRIOR> 40
<ACCUMULATED-NII-CURRENT> 52
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (12)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,505
<NET-ASSETS> 41,658
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 354
<OTHER-INCOME> 0
<EXPENSES-NET> 157
<NET-INVESTMENT-INCOME> 197
<REALIZED-GAINS-CURRENT> (12)
<APPREC-INCREASE-CURRENT> 227
<NET-CHANGE-FROM-OPS> 412
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,430)
<DISTRIBUTIONS-OF-GAINS> (43)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1,061)
<ACCUMULATED-NII-PRIOR> 1,285
<ACCUMULATED-GAINS-PRIOR> 44
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 126
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 205
<AVERAGE-NET-ASSETS> 41,658
<PER-SHARE-NAV-BEGIN> 1,055.77
<PER-SHARE-NII> 4.87
<PER-SHARE-GAIN-APPREC> 5.32
<PER-SHARE-DIVIDEND> (35.34)
<PER-SHARE-DISTRIBUTIONS> (1.08)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1,029.54
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
