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, 2000
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)
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MARYLAND 13-3786385
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
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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, 2000, there were 40,463 shares of the Registrant's Common
Stock, $.001 par value per share, outstanding.
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.
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INDEX PAGE NO.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
Portfolio of Investments as of April 30, 2000
(Unaudited) and October 31, 1999.
Statement of Assets and Liabilities at April 30, 2000
(Unaudited) and October 31, 1999.
Statement of Operations (Unaudited) for the three month
period ended April 30, 2000, the fiscal year to date
April 30, 2000, the three month period ended April 30,
1999 and the six-month period ended April 30, 1999.
Statement of Changes in Net Assets (Unaudited) for the
three month period ended April 30, 2000, the fiscal year
to date April 30, 2000, the three month period ended
April 30, 1999 and the six-month period ended April 30,
1999.
Statement of Cash Flows (Unaudited) for the six month
period ended April 30, 2000, and the six month period
ended April 30, 1999.
Notes to Financial Statements.
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
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<CAPTION>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
UST PRIVATE EQUITY INVESTORS FUND, INC. FISCAL YEAR END: OCTOBER 31, 2000
PORTFOLIO OF INVESTMENTS QUARTER ENDED: APRIL 30, 2000
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APRIL 30, 2000 OCTOBER 31, 1999
(UNAUDITED)
PORTFOLIO STRUCTURE
<S> <C> <C> <C> <C>
PORTFOLIO COMPANIES $ 5,180,633 15.83% $ 18,734,542 46.49%
PUBLICALLY TRADED COMPANIES 5,479,500 16.78%
PRIVATE FUNDS 20,210,683 61.90% 13,865,235 34.31
SHORT-TERM INVESTMENTS:
COMMERCIAL PAPER -- 0.00% 4,971,281 12.34%
U.S. GOVERNMENT AND AGENCY OBLIGATIONS 16,980,911 52.01% 7,997,462 19.85%
INVESTMENT COMPANIES 2,295,752 7.03% 1,636,176 4.06%
------------ --------- ----------- ----------
TOTAL INVESTMENTS 50,147,479 153.58% 47,204,696 117.05%
OTHER ASSETS & LIABILITIES (NET) (17,495,299) -53.58% (6,909,427) -17.05%
------------ ------- ------------ -------
NET ASSETS $ 32,652,180 100.00% $ 40,295,269 100.00%
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UST PRIVATE EQUITY INVESTORS FUND, INC. FISCAL YEAR END: OCTOBER 31, 2000
STATEMENT OF ASSETS AND LIABILITIES QUARTER ENDED: APRIL 30, 2000
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ASSETS APRIL 30, 2000 OCTOBER 31, 1999
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(UNAUDITED)
<S> <C> <C>
Investment Securities, at Cost $ 41,506,621 $ 44,055,089
============== =============
Investment Securities, at Value 50,147,479 47,204,696
Cash -- 4,993
Receivables:
Interest 116,356 110,457
For Investments Sold 48,750 436,770
Prepaid Assets 2,744 8,522
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TOTAL ASSETS 50,315,329 47,765,438
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LIABILITIES
Loan Payable -- 7,000,000
Managing Investment Advisory Fees Payable 505,074 128,136
Deferred Incentive Fee Payable 864,086 227,752
Administration & Shareholder Servicing Fees Payable 31,785 14,567
Directors Fees Payable 36,591 43,501
Capital Gains Distribution Payable 16,185,200 --
Accrued Expenses and Other Payables 40,413 56,213
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TOTAL LIABILITIES 17,663,149 7,470,169
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NET ASSETS $ 32,652,180 $ 40,295,269
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NET ASSETS CONSIST OF
Accumulated Undistributed Net Investment Income 582,970 565,764
Accumulated Net Realized Loss on Investments (14,751,432) (2,577,254)
Net Unrealized Appreciation/(Depreciation) of Investments 8,640,858 3,149,607
Par Value 405 405
Paid In Capital in Excess of Par Value 39,384,499 39,384,499
Allowance for Management Incentive (1,205,120) (227,752)
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TOTAL NET ASSETS $ 32,652,180 40,295,269
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Shares of Common Stock Outstanding 40,463 40,463
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NET ASSET VALUE PER SHARE $ 806.96 $ 995.85
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UST PRIVATE EQUITY INVESTORS FUND, INC. FISCAL YEAR END: OCTOBER 31, 2000
STATEMENT OF OPERATIONS (UNAUDITED) QUARTER ENDED: APRIL 30, 2000
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QUARTER ENDED FISCAL YEAR TO DATE QUARTER ENDED FISCAL YEAR TO DATE
INVESTMENT INCOME APRIL 30, 2000 APRIL 30, 2000 APRIL 30, 1999 APRIL 30, 1999
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<S> <C> <C> <C> <C>
Interest Income $ 167,931 $ 305,698 $ 84,356 $ 181,982
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TOTAL INCOME 167,931 305,698 84,356 181,982
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EXPENSES
Management Investment Advisory Fees 89,223 231,418 97,728 226,605
Administrative Fees & Shareholder
Servicing Fees 15,123 30,582 14,822 30,144
Custodial Fees 2,236 5,340 1,670 3,563
Legal Fees 14,213 28,742 11,054 67,148
Audit and Other Professional Service Fees 6,393 12,929 6,340 12,893
Directors' Fees and Expenses 25,279 36,590 10,607 21,572
Shareholder Reports 1,475 2,983 1,464 2,976
Insurance Expense 3,331 6,227 3,097 6,467
Miscellaneous Expense 197 398 147 297
Interest Expense -- 1,935 4,068 6,719
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TOTAL EXPENSES 157,470 357,144 150,997 378,384
Fees Waived and Reimbursed by Advisor (47,625) (68,652) (25,692) (87,295)
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NET EXPENSES 109,845 288,492 125,305 291,089
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NET INVESTMENT INCOME/(LOSS) 58,086 17,206 (40,949) (109,107)
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REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS
Net Realized Gain/(Loss) on
Security Transactions 3,072,872 4,011,022 -- (2,507,388)
Change in Unrealized
Appreciation/(Depreciation) on Investments (1,761,414) 5,491,251 (3,188,561) (678,392)
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NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS 1,311,458 9,502,273 (3,188,561) (3,185,780)
Change in Management Incentive Fee (158,287) (977,368) -- --
----------- ------------ ------------ -------------
NET INCREASE/(DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $1,211,257 $ 8,542,111 $ (3,229,510) $(3,294,887)
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UST PRIVATE EQUITY INVESTORS FUND, INC. FISCAL YEAR END: OCTOBER 31, 2000
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED) QUARTER ENDED: APRIL 30, 2000
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QUARTER ENDED FISCAL YEAR TO DATE QUARTER ENDED FISCAL YEAR TO DATE
OPERATIONS: APRIL 30, 2000 APRIL 30, 2000 APRIL 30, 1999 APRIL 30, 1999
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<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ 58,086 $ 17,206 $ (40,949) $ (109,107)
Net Realized Gain/(Loss) of Investments 3,072,872 4,011,022 -- (2,507,388)
Change in Unrealized Appreciation/
(Depreciation) of Investments (1,761,414) 5,491,251 (3,188,561) (678,392)
Change in Allowance for Management
Incentive Fee (158,287) (977,368) -- --
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Net Increase/(Decrease) in Net Assets
Resulting From Operations 1,211,257 8,542,111 (3,229,510) (3,294,887)
DISTRIBUTION TO SHAREHOLDERS
From Net Investment Income -- -- -- --
From Net Realized Gain on Investments (16,185,200) (16,185,200) -- (367,437)
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NET INCREASE/DECREASE IN NET
ASSETS (14,973,943) (7,643,089) (3,229,510) (3,662,324)
NET ASSETS
Beginning of Period 47,626,123 40,295,269 37,474,378 37,907,192
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End of Period $32,652,180 $ 32,652,180 $34,244,868 $34,244,868
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UST PRIVATE EQUITY INVESTORS FUND, INC. FISCAL YEAR END: OCTOBER 31, 2000
STATEMENT OF CASH FLOWS QUARTER ENDED: APRIL 30, 2000
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CASH FLOWS FROM INVESTING FISCAL YEAR TO DATE FISCAL YEAR TO DATE
AND OPERATING ACTIVITIES: APRIL 30, 2000 APRIL 30, 1999
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<S> <C> <C>
Proceeds from Sales of Investments $130,456,365 $ 49,132,167
Purchases of Investments (118,681,740) (42,353,158)
Net Increase in Short Term Investments (4,671,743) (8,327,683)
Investment Income 178,250 29,243
Interest Paid (3,380) (6,636)
Operating Expenses Paid (283,343) (252,597)
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Net Cash Provided for Investing and
Operating Activities 6,994,409 (1,778,664)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions Paid (91) (367,345)
Cash Receipts from (repayments
on) Borrowings (7,000,000) 1,550,000
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Net Cash Used by Financing Activities (7,000,091) 1,182,655
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Net Decrease in Cash (5,682) (596,009)
CASH AT BEGINNING OF YEAR 4,993 603,540
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CASH AT END OF YEAR $ (689) $ 7,531
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UST PRIVATE EQUITY INVESTORS FUND, INC. FISCAL YEAR ENDED: OCTOBER 31, 2000
NOTES TO FINANCIAL STATEMENTS QUARTER ENDED: APRIL 30, 2000
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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 a 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
Adviser, 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" solely for purposes of 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, 2000, excluding short-term investments, for the Company
aggregated $850,190 and $9,104,988, respectively. At April 30, 2000, the
Company had no outstanding investment commitments.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
THREE-MONTH PERIOD ENDED APRIL 30, 2000 AS COMPARED TO THE SIMILAR PERIOD
IN 1999
The Company's net asset value per common share was $806.96 at April 30,
2000, down $188.89 per share from the net asset value per common share of
$995.85 at October 31, 1999. This decrease resulted principally from a
distribution of $16,185,200, or $400.00 per share, made to investors. The
Company's net asset value per common share was $846.33 at April 30, 1999,
down $90.51 per share from the net asset value per common share of $936.84
at October 31, 1998.
REALIZED AND UNREALIZED GAINS AND LOSSES FROM PORTFOLIO INVESTMENTS
For the three months ended April 30, 2000 and 1999, the Company had a net
realized gain/(loss) on security transactions of $3,072,872 and $0,
respectively. For the three months ended April 30, 2000 and 1999, the
Company had a net change in unrealized appreciation/(depreciation) on
investments of $(1,761,414) and $(3,188,561), respectively. The realized
gains were the result of the Company's sale of shares of Quicklogic
Corporation, Corsair Communications and Nortel. The change in unrealized
depreciation was principally the result of a decline in the stock price of
Accrue Software, as well as the decline in value of the Company's interest
in Vanguard V. Offsetting these declines was an increase in the stock price
of Quicklogic.
INVESTMENT INCOME AND EXPENSES
For the three months ended April 30, 2000, the Company had interest income
of $167,931 and net operating expenses of $109,845 resulting in net
investment income of $58,086 as compared to interest income of $84,356 and
net operating expenses of $125,305, resulting in net investment loss of
$(40,949) for the three months ended April 30, 1999. The primary reason for
the increase in interest income was the decline of assets invested in
private companies and private funds and an increase in assets invested in
short-term instruments.
United States Trust Company of New York and U.S. Trust Company of
Connecticut (together, the "Managing Investment Adviser") provide
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, 2000 and
1999, the Managing Investment Adviser earned $89,223 and $97,728 in
management fees, respectively. In addition, for the quarters ended April
30, 2000 and 1999, the change in allowance for the Management Incentive Fee
was $(158,287) and $0, respectively. For the same periods, the Managing
Investment Adviser reimbursed other operating expenses of the Company in
the amount of $47,625 and $25,692, respectively, as a result of expenses
incurred in excess of those permitted pursuant to the Company's Prospectus.
NET ASSETS
At April 30, 2000, the Company's net assets were $32,652,180, a decrease of
$7,670,089 from net assets of $40,295,269 at October 31, 1999. The
Company's net assets at April 30, 1999 were $34,244,868, down $3,662,324
from net assets of $37,907,192 at October 31, 1998.
CASH FLOWS
For the fiscal year to date ended April 30, 2000, the Company's net cost
provided for investing and operating activities was $6,994,409, an increase
of $8,773,073 over the same period in fiscal 1999. This increase was
principally the result of Quicklogic and Corsair Communications, as well as
distributions from the Company's investment in Commsite and its interest in
Vanguard V.
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.
Aside from private fund capital calls, the Company made no follow-up
investments in the recent quarter.
At April 30, 2000, the Company held $0 in cash and $50,147,479 in
investments as compared to $4,993 in cash and $47,204,696 in investments at
October 31, 1999. These changes from October 31, 1999 were primarily the
result of sales of publicly-held securities net of follow-on investments
made by the Company. In connection with the Company's commitments to
private funds in the amount of $12,000,000 since inception, a total of
$12,000,000 representing capital calls, has been paid by the Company
through April 30, 2000.
A dividend of $400 per share was declared by the directors to shareholders
of record on May 2, 2000.
OTHER
Year 2000:
Like other business development companies and investment companies and
other financial and business organizations and individuals around the
world, the Company could be affected adversely if the computer systems used
by the Managing 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 have not had and are not expected to have
a material adverse impact on the Company's financial position, results of
operations or cash flows. The Managing Investment Adviser and the Company's
other service providers have informed the Company that they have taken
steps to address the Year 2000 Problem with respect to the computer systems
that they use and the Company has not been informed of any material
difficulties related to the Year 2000 Problem. 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 DISCLOSURES 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 Managing 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 four public companies. At April 30, 2000, these publicly
traded equity securities were valued at $5,479,500. 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 $547,950 in the value of these
securities. Actual results may differ.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not Applicable
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.
None.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
(27) Financial Data Schedule (for EDGAR filing purposes only).
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 __, 2000 By: /s/ David I. Fann
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David I. Fann, President
(Principal Executive Officer)
Date: June __, 2000 By: /s/ Brian F. Schmidt, Treasurer
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Brian F. Schmidt, Treasurer
(Principal Financial and Accounting
Officer)
