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, 1999
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 April 30, 1999, there were 40,463 shares of the Registrant's
Common Stock, $.001 par value, outstanding.
834728.3
<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, 1999 (Unaudited)
and October 31, 1998.
Statement of Assets and Liabilities as of
April 30, 1999 (Unaudited) and October 31, 1998.
Statement of Operations for the three month period
ended April 30, 1999 (Unaudited) and the three month period
ended April 30, 1998 (Unaudited).
Statement of Changes in Net Assets for the three
month period ended April 30, 1999 (Unaudited) and the three
month period ended April 30, 1998 (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
834728.3
ii
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
UST Private Equity Investors Fund, Inc. Fiscal Year End: October 31, 1999
Portfolio of Investments Quarter Ended: April 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
April 30, 1999 October 31, 1998
--------------------------------- -----------------------------
PORTFOLIO STRUCTURE
<S> <C> <C> <C> <C>
PORTFOLIO COMPANIES $ 16,998,524 49.64% $ 20,245,817 53.41%
PRIVATE FUNDS 10,948,328 31.97% 10,290,156 27.14%
SHORT-TERM INVESTMENTS:
Commercial Paper 5,000,000 14.60% 1,000,000 2.64%
Corporate Bonds 142,000 0.41% 386,917 1.02%
U.S. Government & Agency 8,996,775 26.27% 11,954,587 31.54%
Obligations
Investment Companies 1,152,383 3.37% 581,913 4.17%
-------------- ---------- ---------------- -------------
TOTAL INVESTMENTS 43,238,010 126.26% 45,459,390 119.92%
OTHER ASSETS & LIABILITIES (NET) (8,993,142) -26.26% 7,552,198 -19.92%
-------------- ---------- ---------------- -------------
NET ASSETS $ 34,244,868 100.00% $ 37,907,192 100.00%
============== ======== ================== ==============
</TABLE>
834728.3
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UST Private Equity Investors Fund, Inc. Fiscal Year End: October 31, 1999
Statement of Assets and Liabilities Quarter Ended: April 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS April 30, 1999 October 31, 1998
- ---------------------------------
<S> <C> <C>
Investment Securities, at Cost $ 46,436,605 $47,979,593
================== ============
Investment Securities, at Value 43,238,010 45,459,390
Cash 7,531 603,540
Receivables:
Interest 118,977 29,488
Prepaid Assets 12,998 19,248
------------------ -------------
TOTAL ASSETS 43,377,516 46,111,846
------------------ -------------
LIABILITIES
- ---------------------------------
Loan Payable 9,000,000 8,000,000
Managing Investment Advisory Fees Payable 73,608 91,688
Administration & Shareholder Servicing Fees
Payable 15,139 15,531
Directors Fees Payable 21,572 30,000
Accrued Expenses and Other Payables 22,329 67,435
------------------ -------------
TOTAL LIABILITIES 9,132,648 8,204,654
------------------ -------------
NET ASSETS 34,244,868 $ 37,907,192
================== =============
NET ASSETS CONSIST OF
- ---------------------------------
Accumulated Undistributed Net Investment
Income $ 308,609 $ 417,716
Accumulated Net Realized Gain (Loss) on
Investments (2,634,908) 239,917
Net Unrealized Depreciation of Investments (3,198,595) (2,520,203)
Par Value 405 405
Paid In Capital in Excess of Par Value 39,769,357 39,769,357
------------------ -------------
TOTAL NET ASSETS $ 34,244,868 $ 37,907,192
================== =============
Shares of Common Stock Outstanding 40,463 40,463
------------------ -------------
NET ASSET VALUE PER SHARE $ 846.33 $ 936.84
================== =============
</TABLE>
834728.3
<PAGE>
UST Private Equity Investors Fund, Inc. Fiscal Year End: October 31, 1999
Statement of Operations Quarter Ended: April 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fiscal Prior Fiscal
Quarter Ended Year To Date Quarter Ended Year To Date
April 30, 1999 April 30, 1999 April 30, 1998 April 30, 1998
INVESTMENT INCOME
<S> <C> <C> <C> <C>
Interest Income $ 84,356 $ 181,982 $ 208,364 $ 365,058
-------------- ----------------- ------------------ ----------------
TOTAL INCOME 84,356 181,982 208,364 365,058
-------------- ----------------- ------------------ ----------------
EXPENSES
Management Investment Advisory Fees 97,728 226,605 150,531 305,985
Administrative Fees & Shareholder Servicing Fees 14,822 30,144 14,684 29,862
Custodial Fees 1,670 3,563 2,143 4,287
Legal Fees 11,054 67,148 12,192 24,795
Audit and Other Professional Service Fees 6,340 12,893 6,340 12,893
Directors' Fees and Expenses 10,607 21,572 7,314 14,876
Shareholder Reports 1,464 2,976 1,220 2,480
Organization Expenses --- --- 14,979 16,490
Insurance Expense 3,097 6,467 3,260 6,945
Miscellaneous Expense 147 297
Interest Expense 4,068 6,719 13,917 27,689
-------------- ----------------- ------------------ ----------------
TOTAL EXPENSES 150,997 378,384 226,580 446,302
Fees Waived and Reimbursed by Advisor (25,692) (87,295) (21,415) (29,131)
-------------- ----------------- ------------------ ----------------
NET EXPENSES 125,305 291,089 205,165 417,171
-------------- ----------------- ------------------ ----------------
NET INVESTMENT INCOME (LOSS) $ (40,949) $ (109,107) $ 3,199 $ (52,113)
-------------- ----------------- ------------------ ----------------
REALIZED AND UNREALIZED GAIN/( LOSS)
ON INVESTMENTS
Net Realized Gain (Loss) on Security
Transactions $ 0 $ (2,507,388) $ 767,582 $ 992,272
Change in Unrealized Appreciation /
(Depreciation) on Investments
(3,188,561 (678,392) 1,017,538 (2,029,845)
-------------- ----------------- ------------------ ----------------
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS
(3,186,261) (3,185,780) 1,785,120 (1,037,573)
Change in Management Incentive Fee --- --- (215) (22,684)
----------------- ------------------ ------------------ ----------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS
$ (3,229,510) $ (3,294,887) $ 1,788,104 $ 1,112,370
================ =================== ================= ===============
</TABLE>
834728.3
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UST Private Equity Investors Fund, Inc. Fiscal Year End: October 31, 1999
Statement of Changes in Net Assets Quarter Ended: April 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fiscal Prior Fiscal
Quarter Ended Year To Date Quarter Ended Year To Date
April 30, 1999 April 30, 1999 April 30, 1998 April 30, 1998
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ (40,949) $ (109,107) $ 3,199 $ 52,113
Net Realized Gain (Loss) on Investments -- (2,507,388) 767,582 992,272
Change in Unrealized Appreciation / (Depreciation) 1,017,538 (2,029,845)
on Investments (3,188,561) (678,392)
Change in Allowance for Management Incentive Fee -- -- (215) (22,684)
------------ ---------------- ----------------- -----------------
Net Increase (Decrease) in Net Assets
Resulting From Operations (3,229,510) (3,294,887) 1,788,104 (1,112,370)
DISTRIBUTIONS TO SHAREHOLDERS:
From Net Investment Income -- -- -- --
From Net Realized Gain on Investments -- (367,437) -- (1,883,686)
------------ ---------------- ----------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS (3,229,510) (3,662,324) 1,788,104 (2,996,056)
NET ASSETS:
Beginning of Period 37,474,378 37,907,192 42,395,311 47,179,471
------------ ---------------- ----------------- ----------------
End of Period $ 34,244,868 $ 34,244,868 $ 44,183,415 $ 44,183,415
============ ================ ================= ================
</TABLE>
834728.3
<PAGE>
UST Private Equity Investors Fund, Inc. Fiscal Year Ended: October 31, 1999
Notes to Financial Statements Quarter Ended: April 30, 1999
- --------------------------------------------------------------------------------
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, 1999, excluding short-term investments, for the Company aggregated
$793,170 and $0, respectively. At April 30, 1999, the Company had outstanding
investment commitments totaling $2,038,769.
834728.3
<PAGE>
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations.
Results of Operations
THREE-MONTH PERIOD ENDED APRIL 30, 1999 AS COMPARED TO THE SIMILAR PERIOD
IN 1998
The Company's net asset value per common share was $846.33 at April 30, 1999,
down $79.81 per share from the net asset value per common share of $926.14 at
January 31, 1999. This decrease resulted primarily from the markdown in value of
CommSite International Inc. The Company's net asset value per common share was
$1,091.95 at April 30, 1998, up $44.19 per share from the net asset value per
common share of $1,047.76 at January 31, 1998.
Realized and Unrealized Gains and Losses from Portfolio Investments
For the three months ended April 30, 1999 and 1998, the Company had a net
realized gain on securities transactions of $0 and $767,582, respectively. For
the three months ended April 30, 1999 and 1998, the Company had a net change in
unrealized appreciation/(depreciation) on investments of $(3,188,561) and
$1,017,538, respectively. The unrealized loss resulted primarily from the
markdown in value of CommSite International Inc.
Investment Income and Expenses
For the three months ended April 30, 1999, the Company had interest income of
$84,356 and net operating expenses of $125,305 resulting in net investment
income/(loss) of $(40,949) as compared to interest income of $208,364, and net
operating expenses of $205,165, resulting in net investment income of $3,199 for
the quarter ended April 30, 1998. 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 April 30, 1999 and 1998 the Managing
Investment Adviser earned $97,728 and $150,531 in management fees, respectively.
In addition, for the quarters ended April 30, 1999 and 1998, the change in
allowance for the Management Incentive Fee was $0 and $(215), respectively. For
the same periods, the Managing Investment Adviser reimbursed other operating
expenses of the Company in the amount of $(25,692) and $(21,415), respectively,
as a result of expenses incurred in excess of those permitted pursuant to the
Company's Prospectus.
Net Assets
At April 30, 1999, the Company's net assets were $34,244,868, a decrease of
$3,229,510 from net assets of $37,474,378 at January 31, 1999. The Company's net
assets at April 30, 1998 were $44,183,415, up $1,788,104 from net assets of
$42,395,311 at January 31, 1998.
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.
At April 30, 1999, the Company held $7,531 in cash and $43,238,010 in
investments. At April 30, 1999, investments included $16,998,524 in portfolio
companies, $10,948,328 in private funds, $5,000,000 in commercial paper,
$142,000 in corporate bonds, $8,996,775 in U.S. Government and Agency
Obligations and $1,152,383 in investment companies. At January 31, 1999, the
Company held $270,420 in cash and $43,368,248 in investments. At January 31,
1999, investments included $20,207,559 in portfolio companies, $10,342,252 in
private funds, $4,994,133 in commercial paper, $386,534 in corporate bonds,
$6,001,904 in U.S. Government and Agency Obligations and $1,435,866 in
investment companies. These changes were primarily the result of the investment
activity discussed above.
In connection with the Company's commitments to private funds in the amount of
$12,000,000 since inception, a total of $9,961,231 representing capital calls,
has been paid by the Company through April 30, 1999.
834728.3
<PAGE>
Other
Year 2000:
Like other investment companies, financial and business organizations
and individuals around the world, the Company could be affected adversely if the
computer systems used by the Investment Adviser and the Company's other service
providers do not properly process and calculate date-related information and
data from and after January 1, 2000. This is commonly known as the "Year 2000
Problem." Based on the Company's current assessment, the costs of addressing
potential problems are not currently expected to have a material adverse impact
on the Company's financial position, results of operations or cash flows in
future periods. The Investment Adviser and the Company's other service providers
have informed the Company that they are taking steps to address the Year 2000
Problem with respect to the computer systems that they use. At this time,
however, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the Company as a result of the Year 2000 Problem.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
Equity Price Risk:
The majority of the Company's investment portfolio consists of
equity securities in private companies and private investment funds which are
not publicly traded. These investments are recorded at fair value as determined
by the Investment Adviser in accordance with valuation guidelines adopted by the
Board of Directors. This method of valuation does not result in increases or
decreases in the fair value of these equity securities in response to changes in
market prices. Thus, these equity securities are not subject to equity price
risk. Nevertheless, the Company is exposed to equity price risk through its
investment in the equity securities of one public company. At April 30, 1999,
these publicly traded equity securities were valued at $1,625,116. Thus, there
is exposure to equity price risk, which is estimated as the potential loss in
fair value due to a hypothetical 10% decrease in quoted market prices, and would
result in a decrease of approximately $162,512 in the value of these securities.
Actual results may differ.
834728.3
<PAGE>
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.
(a) Exhibits.
Exhibit No.
(27) Financial Data Schedule (for EDGAR filing purposes
only).
(a) The following reports on Form 8-K were filed during the
quarter ended April 30, 1999:
None.
834728.3
<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: June 11, 1999 ----------------------------------------
By: David I. Fann
President and Principal Executive
Officer
Date: June 11, 1999 ----------------------------------------
By: Brian Schmidt
Chief Financial Officer
834728.3
<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: June 12, 1999 /s/ David I. Fann
---------------------------------
By: David I. Fann
President and Principal Executive
Officer
Date: June 12, 1999 /s/ Brian Schmidt
---------------------------------
By: Brian Schmidt
Chief Financial Officer
834728.3
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM EXCELSIOR
PRIVATE EQUITY FUND II, INC.'S FORM 10-Q FOR THE PERIOD ENDED APRIL 30,
1999 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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