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, 1998
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 10036-1532
(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 January 31, 1998, there were 40,463 shares of the Registrant's Common
Stock, $.001 par value, outstanding.
689276.1
<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 January 31, 1998 (Unaudited) and October
31, 1997.
Statement of Assets and Liabilities as of January 31, 1998 (Unaudited)
and October 31, 1997.
Statement of Operations for the three month period ended January 31,
1998 (Unaudited) and the three month period ended January 31, 1997
(Unaudited).
Statement of Changes in Net Assets for the three month period ended
January 31, 1998 (Unaudited) and the three month period ended January
31, 1997 (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
ii
689276.1
<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, 1998
Portfolio of Investments Quarter Ended: January 31, 1998
- - ----------------------------------------------------------------------------------------------------------------------
January 31, 1998
(unaudited) October 31, 1997
------------------------------ ------------------------------
PORTFOLIO STRUCTURE
<S> <C> <C> <C> <C>
PORTFOLIO COMPANIES $ 27,436,868 64.72% $ 30,123,440 63.85%
PRIVATE FUNDS 5,964,933 14.07% 5,312,037 11.26%
SHORT-TERM INVESTMENTS:
Commercial Paper 4,292,968 10.13% 4,497,794 8.48%
Corporate Bonds 1,465,165 3.46% 1,986,001 7.38%
U.S. Government & Agency Obligations 2,330,000 5.49% 4,049,484 6.46%
Investment Companies 502,700 1.18% 1,047,435 2.22%
----------------- --------- ----------------- ---------
TOTAL INVESTMENTS 41,992,634 99.05% 47,016,190 99.65%
OTHER ASSETS & LIABILITIES (NET) 402,677 0.95% 163,281 0.35%
----------------- --------- ----------------- ---------
NET ASSETS $ 42,395,311 100.00% $ 47,179,471 100.00%
================= ========= ================= =========
</TABLE>
689276.1
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<TABLE>
<CAPTION>
UST Private Equity Investors Fund, Inc. Fiscal Year End: October 31, 1998
Statement of Assets and Liabilities Quarter Ended: January 31, 1998
--------------------------------------------------------------------------------------------------------------------------
ASSETS January 31, 1998 October 31, 1997
(unaudited)
--------------------------------------------------
<S> <C> <C>
Investment Securities, at Cost $ 39,853,425 $ 41,829,598
=================== =========================
Investment Securities, at Value 41,992,634 47,016,190
Cash 630,104 --
Receivables:
Interest 97,915 207,725
For Investments Sold -- 348,462
Prepaid Assets 33,340 37,024
Unamortized Organization Costs 14,979 16,490
------------------- -------------------------
TOTAL ASSETS 42,768,972 47,625,891
------------------- -------------------------
LIABILITIES
--------------------------------------------------
Managing Investment Advisory and Incentive Fees Payable 293,229 258,424
Administration & Shareholder Servicing Fees Payable 15,757 15,330
Directors Fees Payable 7,562 30,000
Accrued Expenses and Other Payables 57,113 142,666
------------------- -------------------------
TOTAL LIABILITIES 373,661 446,420
------------------- -------------------------
NET ASSETS $ 42,395,311 $ 47,179,471
=================== =========================
NET ASSETS CONSIST OF
--------------------------------------------------
Accumulated Undistributed Net Investment Income $ 174,512 $ 229,824
Accumulated Net Realized Gain(Loss) on Investments 108,045 1,767,041
Net Unrealized Appreciation/(Depreciation) of Investments 2,139,209 5,186,592
Allowance for Management Incentive (144,564) (122,095)
Par Value 405 405
Paid In Capital in Excess of Par Value 40,117,704 40,117,704
------------------- -------------------------
TOTAL NET ASSETS $ 42,395,311 $ 47,179,471
=================== =========================
Shares of Common Stock Outstanding 40,463 40,463
------------------- -------------------------
NET ASSET VALUE PER SHARE $1,047.76 $1,165.99
</TABLE>
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<TABLE>
<CAPTION>
UST Private Equity Investors Fund, Inc. Fiscal Year End: October 31, 1998
Statement of Operations Quarter Ended: January 31, 1998
-------- --------------- -----------------------------------------------
Quarter Ended Quarter Ended
INVESTMENT INCOME January 31, 1998 January 31, 1997
(unaudited)
<S> <C> <C>
Interest Income $ 156,694 $ 354,291
--------------- ------------------
TOTAL INCOME 156,694 354,291
--------------- ------------------
EXPENSES
Management Investment Advisory Fees 155,454 126,337
Administrative Fees & Shareholder Servicing Fees 15,178 15,168
Custodial Fees 2,144 2,100
Legal Fees 12,603 23,574
Audit and Other Professional Service Fees 6,553 6,931
Directors' Fees and Expenses 7,562 7,561
Shareholder Reports 1,260 3,025
Organization Expenses 1,511 1,511
Insurance Expense 3,685 18,955
Interest Expense 13,772 --
--------------- ------------------
TOTAL EXPENSES 219,722 205,162
Fees Waived and Reimbursed by Advisor (7,716) (47,813)
--------------- ------------------
NET EXPENSES 212,006 157,349
--------------- ------------------
NET INVESTMENT INCOME(LOSS) $ (55,312) $ 196,942
--------------- ------------------
REALIZED AND UNREALIZED GAIN/( LOSS) ON INVESTMENTS
Net Realized Gain(Loss) on Security Transactions $ 224,690 $ (12,048)
Change in Unrealized Appreciation / (Depreciation) on Investments (3,047,383) 226,150
--------------- ------------------
NET REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS (2,822,693) 214,102
Change in Management Incentive Fee (22,469) 1,204
--------------- ------------------
NET INCREASE/DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ (2,900,474) $ 412,248
=============== ==================
- - ------------------ ------------------------------------------------- --------------- ----------- -----------------------------------
</TABLE>
689276.1
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<TABLE>
<CAPTION>
UST Private Equity Investors Fund, Inc. Fiscal Year End: October 31, 1998
Statement of Changes in Net Assets Quarter Ended: January 31, 1998
- - ------------------------------------------------------------ -----------------------------------------------------------------------
Quarter Ended Quarter Ended
January 31, 1998 January 31, 1997
(unaudited)
OPERATIONS:
<S> <C> <C>
Net Investment Income(Loss) $ (55,312) $ 196,942
Net Realized Gain(Loss) on Investments 224,690 (12,048)
Change in Unrealized Appreciation / (Depreciation) on Investments (3,047,383) 226,150
Change in Allowance for Management Incentive (22,469) 1,204
------------------ ------------------
Net Increase/(Decrease) in Net Assets
Resulting From Operations (2,900,474) 412,248
DISTRIBUTIONS TO SHAREHOLDERS:
From Net Investment Income -- (1,429,792)
From Net Realized Gain on Investments (1,883,686) (43,640)
------------------ ------------------
NET DECREASE IN NET ASSETS (4,784,160) (1,061,184)
NET ASSETS:
Beginning of Period 47,179,471 42,719,620
------------------ ------------------
End of Period $ 42,395,311 $ 41,658,436
================== ==================
</TABLE>
689276.1
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UST Private Equity Investors Funds, Inc. Fiscal Year Ended: October 31, 1998
Notes to Financial Statements Quarter Ended: January 31, 1998
- - --------------------------------------------------------------------------------
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
January 31, 1998, excluding short-term investments, for the Company aggregated
$1,189,033 and $322,989, respectively. At January 31, 1998, the Company had
outstanding investment commitments totaling $6,035,067.
689276.1
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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 JANUARY 31, 1998 AS COMPARED TO THE SIMILAR
PERIOD IN 1997
The Company's net asset value per common share was $1,047.76 at January 31,
1998, down $118.23 per share from the net asset value per common share of
$1,165.99 at October 31, 1997. The decrease resulted from the distribution of
dividends of $1,883,686, and the write-off of our original investment in Party
Experience, Inc. of approximately $2,000,000. The Company's net asset value per
common share was $1,029.54 at January 31, 1997, up $18.22 per share from the net
asset value per common share of $1,055.77 at October 31, 1996.
Realized and Unrealized Gains and Losses from Portfolio Investments
For the three months ended January 31, 1998 and 1997, the Company had a net
realized gain/(loss) from investments of $224,690 and ($12,048), respectively.
For the three months ended January 31, 1998 and 1997, the Company had a net
change in realized appreciation/(depreciation) on investments of [$3,047,383]
and $226,150, respectively. The realized gains were primarily the result of the
sale of 14,129 shares of Rental Services. The unrealized loss resulted primarily
from the write-off Party Experience, Inc.
Investment Income and Expenses
For the three months ended January 31, 1998, the Company had interest income of
$156,694 and net operating expenses of $212,006 resulting in net investment
income/(loss) of ($55,312) as compared to interest income of $354,291, and net
operating expenses of $157,349, resulting in net investment income of $196,942
for the quarter ended January 31, 1997. 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 quarters ended January 31, 1998 and 1997, the
Managing Investment Adviser earned $155,454 and $126,337 in management fees,
respectively. In addition, for the quarters ended January 31, 1998 and 1997, the
change in allowance for the Management Incentive Fee was ($22,469) and $1,204,
respectively. For the same periods, the Managing Investment Adviser reimbursed
other operating expenses of the Company in the amount of $7,716 and $47,813,
respectively, as a result of expenses incurred in excess of those permitted
pursuant to the Company's Prospectus.
Net Assets
At January 31, 1998, the Company's net assets were $42,395,311, a decrease of
$4,784,160 from net assets of $47,179,471 at October 31, 1997. The Company's net
assets at January 31, 1997 were $41,658,436, down $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 of marketable securities to
provide the liquidity necessary to make portfolio investments as investment
opportunities arise.
689276.1
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During the quarter ended January 31, 1998, the Company made follow-on
investments in the following companies: (a) Plynetics for $250,000; (b) Neovista
for $37,521; and (c) Commsite for $168,750.
At January 31, 1998, the Company held $630,104 in cash and $41,992,634 in
investments as compared to $0 in cash and $47,016,190 in investments at October
31, 1997. These changes from October 31, 1997 were primarily the result of the
Company's investment activities for the quarter ended January 31, 1998.
In connection with the Company's commitments to private funds in the amount of
$12,000,000 since inception, a total of $5,964,933 representing capital calls,
has been paid by the Company through January 31, 1998.
On December 23, 1997, the Company distributed $1,883,686 in capital gains to
shareholders of record as of December 18, 1997.
Other
In 1996, the Managing Investment Adviser established a Year 2000 Committee with
responsibility for developing an effective plan for identifying, renovating,
testing and implementing solutions for Year 2000 processing. The Managing
Investment Adviser is working with Chase Global Fund Services (as administrator
to the Company and as provider of certain of the Managing Investment Adviser's
most significant data processing systems), as well as other vendors, to ensure
compliance with required systems changes. The Managing Investment Adviser
presently believes that with modifications to existing software and compliance,
by vendors who provide significant processing systems to the Managing Investment
Adviser, the Managing Investment Adviser's systems will continue without
disruption. However, if such modifications are not made, or are not completed
timely, the Year 2000 issue could have a material impact on the operations of
the Managing Investment Adviser, and consequently, the Company. Specific factors
that might cause such a material impact include, but are not limited to the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes and similar uncertainties. The Managing
Investment Adviser's Year 2000 plan anticipates that software code remediation
and testing of all critical systems will be substantively completed by the end
of 1998. The Managing Investment Advisers's total Year 2000 project costs and
its estimated time frame to complete are based on presently available
information. However, there can be no guarantee that the systems of other
companies, on which the Managing Investment Adviser's systems rely, will be
converted timely, or that a failure to convert by another company would not have
a material adverse effect on the Managing Investment Adviser or the Company.
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.
689276.1
<PAGE>
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 January 31, 1998:
None.
689276.1
<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: March 10, 1998
---------------------------------------
By: David I. Fann
President and Principal Executive Officer
Date: March 10, 1998
----------------------------------------
By: Brian Schmidt
Treasurer and Principal Financial and
Accounting Officer
689276.1
<PAGE>
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: March 10, 1998 /s/ David I. Fann
------------------
By: David I. Fann
President and Principal Executive Officer
Date: March 10, 1998 /s/ Brian Schmidt
-----------------
By: Brian Schmidt
Treasurer and Principal Financial and
Accounting Officer
689276.1
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<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM EXCELSIOR
PRIVATE EQUITY FUND II, INC.'S FORM 10-Q FOR THE PERIOD ENDED JANUARY
31, 1998 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-31-1998
<PERIOD-START> NOV-1-1997
<PERIOD-END> JAN-31-1998
<INVESTMENTS-AT-COST> 39,854
<INVESTMENTS-AT-VALUE> 41,993
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