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, 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 July 31, 1999, there were 40,463 shares of the Registrant's
Common Stock, $.001 par value, outstanding.
869345.1
<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 July 31, 1999
(Unaudited) and October 31, 1998.
Statement of Assets and Liabilities as of July 31, 1999
(Unaudited) and October 31, 1998.
Statement of Operations for the three-month period ended July 31, 1999
(Unaudited), the fiscal year to date at July 31, 1999 (Unaudited), the
three-month period ended July 31, 1998 (Unaudited) and the prior
fiscal year to date at July 31, 1998 (Unaudited).
Statement of Changes in Net Assets for the three-month period ended
July 31, 1999 (Unaudited), the fiscal year to date at July 31, 1999
(Unaudited), the three-month period ended July 31, 1998 (Unaudited)
and the prior fiscal year to date at July 31, 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
869345.1
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<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<CAPTION>
UST Private Equity Investors Fund, Inc. Fiscal Year End: October 31, 1999
Portfolio of Investments (Unaudited) Quarter Ended: July 31, 1999
- --------------------------------------------------------------------------------------------------------------
July 31, 1999 October 31, 1998
-------------------------------------- ------------------------
PORTFOLIO STRUCTURE
<S> <C> <C> <C> <C>
PORTFOLIO COMPANIES $ 14,209,883 39.89% $ 20,245,817 53.41%
PRIVATE FUNDS 13,831,973 38.83% 10,290,156 27.14%
SHORT-TERM INVESTMENTS:
Commercial Paper 4,335,396 12.17% 1,000,000 2.64%
Corporate Bonds 0 0.00% 386,917 1.02%
U.S. Government & Agency
Obligations 10,887,897 30.56% 11,954,587 31.54%
Investment Companies 1,367,341 3.84% 1,581,913 4.17%
------------------ ---------- ---------------- ----------
TOTAL INVESTMENTS 44,632,490 125.29% 45,459,390 119.92%
OTHER ASSETS & LIABILITIES (9,008,337) -25.29% (7,552,198) -19.92%
(NET)
------------------ ---------- ---------------- ----------
NET ASSETS $ 35,624,153 100.00% $ 37,907,192 100.00%
================== ========== ================ ==========
</TABLE>
869345.1
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<TABLE>
<CAPTION>
UST Private Equity Investors Fund, Inc. Fiscal Year End: October 31, 1999
Statement of Assets and Liabilities (Unaudited) Quarter Ended: July 31, 1999
- ------------------------------------------------------------------------------------------------------------------
ASSETS July 31, 1999 October 31, 1998
- -------------------------------
<S> <C> <C>
Investment Securities, at Cost $ 46,412,631 $ 47,979,593
============== ===============
Investment Securities, at Value 44,632,490 45,459,390
Cash 78 603,540
Receivables:
Interest 124,957 29,488
Prepaid Assets 11,418 19,248
-------------- ---------------
TOTAL ASSETS 44,768,943 46,111,846
-------------- ---------------
LIABILITIES
- ----------------------------------
Loan Payable 9,000,000 8,000,000
Managing Investment Advisory Fees Payable 56,871 91,688
Administration & Shareholder Servicing Fees Payable 15,493 15,531
Directors Fees Payable 32,534 30,000
Accrued Expenses and Other Payables 39,892 67,435
-------------- ---------------
TOTAL LIABILITIES 9,144,790 8,204,654
-------------- ---------------
NET ASSETS $ 35,624,153 $ 37,907,192
============== ===============
NET ASSETS CONSIST OF
- ----------------------------------
Accumulated Undistributed Net Investment Income $ 269,658 $ 417,716
Accumulated Net Realized Gain on Investments (2,635,126) 239,917
Net Unrealized Appreciation/(Depreciation) of Investments (1,780,141) (2,520,203)
Par Value 405 405
Paid In Capital in Excess of Par Value 39,769,357 39,769,357
----- -------- --------------
TOTAL NET ASSETS $ 35,624,153 $ 37,907,192
============== ===============
Shares of Common Stock Outstanding 40,463 40,463
-------------- ---------------
NET ASSET VALUE PER SHARE $ 880.41 $ $936.84
============== ===============
</TABLE>
869345.1
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<TABLE>
<CAPTION>
UST Private Equity Investors Fund, Inc. Fiscal Year End: October 31, 1999
Statement of Operations (Unaudited) Quarter Ended: July 31, 1999
- ------------------------------------------------------------ --- ------------------- ------------------------------------------
Fiscal Prior Fiscal
Quarter Ended Year To Date Quarter Ended Year To Date
July 31, 1999 July 31, 1999 July 31, 1998 July 31, 1998
INVESTMENT INCOME
<S> <C> <C> <C> <C>
Interest Income $ 84,959 266,941 $ 102,933 $ 467,991
----------- ----------- ----------- -----------
TOTAL INCOME 84,959 266,941 102,933 467,991
----------- ----------- ----------- -----------
EXPENSES
Management Investment Advisory Fees 97,568 324,173 127,070 433,055
Administrative Fees & Shareholder Servicing Fees 15,429 45,573 15,179 45,041
Custodial Fees 10,193 13,756 2,061 6,348
Legal Fees 16,425 83,573 17,602 42,397
Audit and Other Professional Service Fees 6,553 19,446 6,553 19,446
Directors' Fees and Expenses 10,964 32,536 7,562 22,438
Shareholder Reports 1,512 4,488 1,260 3,740
Organization Expenses 0 0 0 16,490
Insurance Expense 3,134 9,601 3,370 10,315
Miscellaneous Expense 152 449 0 0
Interest Expense 4,207 10,926 415 28,104
----------- ----------- ----------- -----------
TOTAL EXPENSES 166,137 544,521 181,072 627,374
Fees Waived and Reimbursed by Advisor (42,228) (129,523) (21,857) (50,988)
----------- ----------- ----------- -----------
NET EXPENSES 123,909 414,998 159,215 576,386
----------- ----------- ----------- -----------
NET INVESTMENT INCOME (LOSS) $ (38,950) (148,057) $ (56,282) $ (108,395)
----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS
Net Realized Gain (Loss) on Security Transactions $ (218) (2,507,606) $ 1,283,340 $ 2,275,612
Change in Unrealized Appreciation/
(Depreciation) on Investments
1,418,453 740,061 (4,727,150) (6,756,995)
----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS
1,418,235 (1,767,545) (3,443,810) (4,481,383)
Change in Management Incentive Fee 0 0 144,779 122,095
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS
$ 1,379,285 (1,915,602) $(3,355,313) $(4,467,683)
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
UST Private Equity Investors Fund, Inc. Fiscal Year End: October 31, 1999
Statement of Changes in Net Assets (Unaudited) Quarter Ended: July 31, 1999
- --------------------------------------------------------------------------------------------------------------------
Fiscal Prior Fiscal
Quarter Ended Year To Date Quarter Ended Year To Date
July 31, 1999 July 31, 1999 July 31, 1998 July 31, 1998
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ (38,950) $ (148,057) $ (56,282) $ (108,395)
Net Realized Gain (Loss) on Investments (218) (2,507,606) 1,283,340 2,275,612
Change in Unrealized Appreciation/
(Depreciation) on Investments 1,418,453 740,061 (4,727,150) (6,756,995)
Change in Allowance for Management Incentive Fee 0 0 144,779 122,095
------------ ------------ ------------ ------------
Net Increase (Decrease) in Net Assets
Resulting From Operations 1,379,285 (1,915,602) (3,355,313) (4,467,683)
DISTRIBUTIONS TO SHAREHOLDERS:
From Net Investment Income 0 0 -- --
From Net Realized Gain on Investments 0 (367,437) -- (1,883,686)
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS 1,379,285 (2,283,039) (3,355,313) (6,351,369)
NET ASSETS:
Beginning of Period 34,244,868 37,907,192 44,183,415 47,179,471
------------ ------------ ------------ ------------
End of Period 35,624,153 35,624,153 $ 40,828,102 $ 40,828,102
============ ============ ============ ============
</TABLE>
869345.1
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UST Private Equity Investors Funds, Inc. Fiscal Year Ended: October 31, 1999
Notes to Financial Statements Quarter Ended: July 31, 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
July 31, 1999, excluding short-term investments, for the Company aggregated
$1,106,633 and $0 respectively. At July 31, 1999, the Company had outstanding
investment commitments totaling $1,314,526.
869345.1
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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 JULY 31, 1999 AS COMPARED TO THE SIMILAR PERIOD IN 1998
The Company's net asset value per common share was $880.41 at July 31, 1999, up
$34.08 per share from the net asset value per common share of $846.33 at April
30, 1999. This increase is principally the result of the sale of CommSite
International, Inc. in addition to mark-ups in Allegra Capital Partners III,
Sevin Rosen Fund V and Vanguard V. The Company's net asset value per common
share was $1,009.02 at July 31, 1998, down $82.93 per share from the net asset
value per common share of $1,091.95 at April 30, 1998.
Realized and Unrealized Gains and Losses from Portfolio Investments
- -------------------------------------------------------------------
For the three months ended July 31, 1999 and 1998, the Company had a net
realized gain/(loss) from investments of $(218) and $1,283,340, respectively.
For the three months ended July 31, 1999 and 1998, the Company had a net change
in unrealized appreciation/(depreciation) on investments of $1,418,453 and
$(4,727,150), respectively. The unrealized appreciation resulted primarily from
the mark-ups in Allegra Capital Partners III, Sevin Rosen Fund V and Vanguard V.
Investment Income and Expenses
- ------------------------------
For the three months ended July 31, 1999 the Company had total income of $84,959
and net operating expenses of $123,909 resulting in net investment loss of
$38,950 as compared to total income of $102,933, and net operating expenses of
$159,215, resulting in net investment loss of $56,282 for the quarter ended July
31, 1998. The primary reason for the decline in total 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 July 31, 1999 and 1998, the Managing
Investment Adviser earned $97,568 and $127,070 in management fees, respectively.
In addition, for the quarters ended July 31, 1999 and 1998, the change in
allowance for the Management Incentive Fee was $0 and $144,779, respectively.
For the same periods, the Managing Investment Adviser reimbursed other operating
expenses of the Company in the amount of $(42,228) and $(21,857), respectively,
as a result of expenses incurred in excess of those permitted pursuant to the
Company's Prospectus.
Net Assets
- ----------
At July 31, 1999, the Company's net assets were $35,624,153, an increase of
$1,379,285 from net assets of $34,244,868 at April 30, 1999. The Company's net
assets at July 31, 1998 were $40,828,102, down $3,355,313 from net assets of
$44,183,415 at April 30, 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 July 31, 1999, the Company held $78 in cash and
$44,632,490 in investments. At July 31, 1999, investments included $14,209,883
in portfolio companies, $13,831,973 in private funds, $4,335,396 in commercial
paper, $0 in corporate
869345.1
<PAGE>
bonds, $10,887,897 in U.S. Government and agency obligations, and $1,367,341 in
investment companies. At October 31, 1998, the Company held $603,540 in cash and
$45,459,390 in investments. At October 31, 1998, investments included
$20,245,817 in portfolio companies, $10,290,156 in private funds, $1,000,000 in
commercial paper, $386,917 in corporate bonds, $11,954,587 in U.S. Government
and agency obligations and $1,581,913 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 $10,685,474, representing capital calls,
has been paid by the Company through July 31, 1999.
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.
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 July 31, 1999,
these publicly traded equity securities were valued at $1,625,117. 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.
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.
869345.1
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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, 1999:
None.
869345.1
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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 14, 1999 ----------------------------------
By: David I. Fann
President and Principal
Executive Officer
Date: September 14, 1999 ----------------------------------
By: Brian Schmidt
Chief Financial Officer
869345.1
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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: September 14, 1999 /s/ David I. Fann
--------------------------------
By: David I. Fann
President and Principal
Executive Officer
Date: September 14, 1999 /s/ Brian Schmidt
-------------------------------
By: Brian Schmidt
Chief Financial Officer
869345.1
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 JULY 31,
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>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-1-1998
<PERIOD-END> JUL-31-1999
<INVESTMENTS-AT-COST> 46,412
<INVESTMENTS-AT-VALUE> 44,632
<RECEIVABLES> 125
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