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, 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 July 31, 1997, there were 40,463 shares of the Registrant's Common
Stock, $.001 par value, outstanding.
<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 July 31, 1997 (Unaudited) and
October 31, 1996.
Statement of Assets and Liabilities as of July
31, 1997 (Unaudited) and October 31, 1996.
Statement of Operations for the three month period ended July 31,
1997 (Unaudited) and the three month period ended July 31, 1996
(Unaudited).
Statement of Changes in Net Assets for the three month period
ended July 31, 1997 and the three 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
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
<PAGE>
Part I. Financial Information
Item 1. Financial Statements.
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<CAPTION>
UST Private Equity Investors Fund, Inc. Fiscal Year End: October 31, 1997
Portfolio of Investments Quarter Ended: July 31, 1997
- ------------------------------------------------------------------------------------------------------------------------
July 31, 1997 October 31, 1996
------------------------------ --------------------------------
PORTFOLIO STRUCTURE (Unaudited)
<S> <C> <C> <C> <C>
PORTFOLIO COMPANIES $ 28,280,519 62.74% $ 8,789,423 20.58%
PRIVATE FUNDS 4,342,633 9.63% 2,151,372 5.04%
SHORT-TERM INVESTMENTS:
Commercial Paper 5,543,004 12.30% 13,599,186 31.83%
Corporate Bonds 489,705 1.08% 9,937,594 23.26%
U.S. Government & Agency 2,734,944 6.07% 5,483,053 12.83%
Obligations
Repurchase Agreement 2,451,000 3.44% -- --
Other Short-term Investments 1,066,825 2.37% 2,802,551 6.56%
--------- ----- --------- -----
TOTAL INVESTMENTS 44,908,630 99.63% 42,763,179 100.10%
OTHER ASSETS & LIABILITIES (NET) 166,369 0.37% (43,559) -0.10%
------- ----- -------- ------
NET ASSETS $ 45,074,999 100.00% $ 42,719,620 100.00%
=========== ======= =========== =======
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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: July 31, 1997
- --------------------------------------------------------------------------------------------------------------------------------
ASSETS July 31, 1997 October 31, 1996
- ----------------------------------------------------------------------
(unaudited)
<S> <C> <C>
Investment Securities, at Cost $ 41,191,133 $ 41,484,579
====================== ========================
Investment Securities, at Value 44,908,630 42,763,179
Cash 239,948 101
Receivables:
Interest 69,685 514,760
For Investments Sold 121,348 --
Prepaid Assets 55,979 37,029
Unamortized Organization Costs 18,001 22,480
---------------------- ------------------------
TOTAL ASSETS 45,413,591 43,337,549
---------------------- ------------------------
LIABILITIES
- ----------------------------------------------------------------------
Payable for Investments Purchased -- 477,950
Managing Investment Advisory Fees Payable 244,428 36,658
Administration & Shareholder Servicing Fees Payable 14,924 14,695
Directors Fees Payable 22,438 30,000
Accrued Expenses and Other Payables 56,802 58,626
---------------------- ------------------------
TOTAL LIABILITIES 338,592 617,929
---------------------- ------------------------
NET ASSETS $ 45,074,999 $ 42,719,620
====================== ========================
NET ASSETS CONSIST OF
- ----------------------------------------------------------------------
Accumulated Undistributed Net Investment Income 241,169 1,283,634
Accumulated Net Realized Gain (Loss) on Investments 1,115,071 43,640
Net Unrealized Appreciation/(Depreciation) of Investments 3,717,497 1,278,600
Allowance for Management Incentive (116,847) (4,363)
Par Value 405 405
Paid In Capital in Excess of Par Value 40,117,704 40,117,704
---------------------- ------------------------
TOTAL NET ASSETS $ 45,074,999 $ 42,719,620
====================== ========================
Shares of Common Stock Outstanding 40,463 40,463
---------------------- ------------------------
NET ASSET VALUE PER SHARE $1,113.98 $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: July 31, 1997
- ---------------------------------------------------------------------------------------------------------------------------------
Fiscal Prior Fiscal
Quarter Ended Year To Date Quarter Ended Year To Date
INVESTMENT INCOME July 31, 1997 July 31, 1997 July 31, 1996 July 31, 1996
<S> <C> <C> <C> <C>
Interest Income $ 191,471 $ 797,416 $ 485,066 $ 1,558,130
Dividend Income 120,606 120,606 -- --
--------------- --------------- ---------------- ---------------
TOTAL INCOME 312,077 918,022 485,066 1,558,130
--------------- --------------- ---------------- ---------------
EXPENSES
Management Investment Advisory Fees 158,862 421,670 90,756 243,571
Administrative Fees & Shareholder Servicing Fees 15,169 45,011 12,645 37,992
Custodial Fees 2,274 6,483 1,031 3,046
Legal Fees 22,388 81,223 25,198 46,146
Audit and Other Professional Service Fees 7,033 20,767 6,073 18,927
Directors' Fees and Expenses 7,562 22,438 7,540 22,459
Shareholder Reports -- 5,951 2,737 9,041
Organization Expenses 1,511 4,483 1,511 4,499
Insurance Expense 18,954 56,246 18,954 56,349
Miscellaneous Expenses -- -- -- 251
--------------- --------------- ---------------- ---------------
TOTAL EXPENSES 233,753 664,272 166,445 442,281
Fees Waived and Reimbursed by Advisor (32,047) (133,577) (59,235) (159,906)
--------------- --------------- ---------------- ---------------
NET EXPENSES 201,706 530,695 107,210 282,375
--------------- --------------- ---------------- ---------------
NET INVESTMENT INCOME $ 110,371 $ 387,327 377,856 1,275,755
--------------- --------------- ---------------- ---------------
REALIZED AND UNREALIZED GAIN/( LOSS)
ON INVESTMENTS
Net Realized Gain (Loss) on Security Transactions $ 1,127,119 $ 1,115,071 $ -- $ (521)
Change in Unrealized Appreciation / (Depreciation)
on Investments 794,231 2,438,897 2,554 (33,203)
--------------- --------------- ---------------- ---------------
NET REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS 1,921,350 3,553,968 2,554 (33,724)
Change in Management Incentive Fee (113,688) (112,484) -- --
--------------- --------------- ---------------- ---------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 1,918,033 $ 3,828,811 $ 380,410 $ 1,242,031
=============== =============== ================ ===============
</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: July 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Fiscal Prior Fiscal
Quarter Ended Year To Date Quarter Ended Year To Date
July 31, 1997 July 31, 1997 July 31, 1996 July 31, 1996
<S> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 110,371 $ 387,327 $ 377,856 $ 1,275,755
Net Realized Gain (Loss) on Investments 1,127,119 1,115,071 -- (521)
Change in Unrealized Appreciation / (Depreciation)
on Investments 794,231 2,438,897 2,554 (33,203)
Change in Allowance for Management Incentive Fee (113,688) (112,484) -- --
---------------- ---------------- ----------------- ------------------
Net Increase in Net Assets
Resulting From Operations 1,918,033 3,828,811 380,410 1,242,031
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 1,918,033 2,355,379 380,410 852,579
NET ASSETS:
Beginning of Period 43,156,966 42,719,620 40,624,608 40,152,439
---------------- ---------------- ----------------- -----------------
End of Period $ 45,074,999 $ 45,074,999 $ 41,005,018 41,005,018
================ ================ ================= =================
</TABLE>
<PAGE>
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 July
31, 1997, excluding short-term investments, for the Company aggregated
$7,053,818 and $3,666,988, respectively. At July 31, 1997, the Company had
outstanding investment commitments totaling $8,157,367.
<PAGE>
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations.
Results of Operations
- ---------------------
THREE-MONTH PERIOD ENDED JULY 31, 1997 AS COMPARED TO THE SIMILAR PERIOD IN 1996
The Company's net asset value per common share was $1,113.98 at July 31, 1997,
up $47.40 per share from the net asset value per common share of $1,066.58 at
April 30, 1997. This increase was primarily the result of appreciation on two
companies, Corsair Corporation and Rental Services Corp. On July 30, 1997
Corsair completed an initial public offering priced at $15.00 per share, closed
at 19-13/16 per share on July 31 and is valued at 20% discount ($15.80 per
share) reflecting a six month underwriting lock-up agreement. The Company's
adjusted cost basis, post stock split, is $8.25 per share. Rental Services is
once again valued at a 10% discount ($23.51 per share) reflecting an
underwriters lock-up agreement signed as the result of the Company's
participation in a secondary offering. The Company's net asset value per common
share was $1013.40 at July 31, 1996, up $9.41 per share from the net asset value
per common share of $1,003.99 at April 30, 1996.
Realized and Unrealized Gains and Losses from Portfolio Investments
- -------------------------------------------------------------------
For the three months ended July 31, 1997 and 1996, the Company had a net
realized gain/(loss) from investments of $1,127,119 and $0, respectively. For
the three months ended July 31, 1997 and 1996, the Company had a net change in
unrealized appreciation/(depreciation) on investments of $794,231 and $2,554,
respectively. The realized gains were primarily the result of the sale of 95,103
shares of Rental Services. The unrealized gains resulted from the appreciation
of Rental Services and Corsair.
Investment Income and Expenses
- ------------------------------
For the three months ended July 31, 1997, the Company had interest income of
$191,471, dividend income of $120,606, and net operating expenses of $201,706,
resulting in net investment income of $110,371 as compared to interest income of
$485,066, and net operating expenses of $107,210, resulting in net investment
income of $377,856 for the quarter ended July 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. Dividend income represents distributions from 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 quarters ended July 31, 1997 and 1996, the Managing
Investment Adviser earned $158,862, and $90,756 in management fees,
respectively. In addition, for the quarter ended July 31, 1997, the change in
allowance for the Management Incentive Fee was $113,688. For the same periods,
the Managing Investment Adviser reimbursed other operating expenses of the
Company in the amount of $32,047 and $59,235 as a result of expenses incurred
in excess of those permitted pursuant to the Company's Prospectus.
Net Assets
- ----------
At July 31, 1997, the Company's net assets were $45,074,999, an increase of
$1,918,033 from net assets of $43,156,966 at April 30, 1997. The Company's net
assets at July 31, 1996 were $41,005,018, up $380,410 from net assets of
$40,624,608 at April 30, 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 of marketable securities to
provide the liquidity necessary to make portfolio investments as investment
opportunities arise.
During the quarter ended July 31, 1997, the Company invested $2,000,000 in
Series C Convertible Preferred Party Stores Holdings, Inc. (d/b/a The Party
Experience), a northeastern based party superstore chain; $1,249,500 in Series F
Convertible Preferred in Logicvision, a developer of built-in semi-conductor
testing products; $2,000,000 in Series A Redeemable Preferred and Warrants in P3
Inc. (d/b/a Plynetics Experience), a provider of rapid phototyping and rapid
tooling servicer; and $500,000 in Series V Convertible Preferred Neo-Vista
Software, Inc., a developer of data mining tools and applications for the
financial services and retail sectors.
At July 31, 1997, the Company held $239,948 in cash and $44,908,630 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 July 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 $4,342,633 representing capital calls,
has been paid by the Company through July 31, 1997.
On December 20, 1996, the Company distributed $1,429,792 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.
<PAGE>
There are no legal proceedings pending or, to the Company's best
knowledge, 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.
(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 July 31, 1997:
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.
Date: September 12, 1997 /s/ David I. Fann
------------------------------------------
By: David I. Fann
President and Principal Executive Officer
Date: September 12, 1997 /s/ Brian Schmidt
-----------------------------------------
By: Brian Schmidt
Treasurer and Principal Financial and
Accounting Officer
<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, 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>
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