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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
{X} ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1995
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT
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 (I.R.S. Employer
of incorporation or organization) Identification No.)
114 West 47th Street
New York, New York 10036-1332
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(212) 852-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Shares of Common Stock
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or Section 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
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
FORM 10-K. [X]
The number of shares outstanding of the registrant's common stock
as of October 31, 1995 was 40,463 shares. No active market for
the shares of the registrant exists; therefore, the market value
of such shares cannot be determined.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Prospectus of the Registrant dated
December 16, 1994, as supplemented by supplements thereto dated
August 28, 1995 and October 31, 1995, are incorporated by
reference in Part I, Part II and Part III hereof.
PART I
Item 1. Business
Formation
UST Private Equity Investors Fund, Inc. (the "Company" or the
"Registrant") is a Maryland corporation organized on
September 16, 1994. The Fund is a non-diversified, closed-end
management investment company operating as a business development
company under the Investment Company Act of 1940 and has
registered its shares under the Securities Act of 1933. The
Company's investment objective is to achieve long-term capital
appreciation by investing in private later-stage venture capital
and private middle-market companies and in certain venture
capital, buyout and private equity funds that the Managing
Investment Adviser (defined herein) believes offer significant
long-term capital appreciation.
United States Trust Company of New York (the "Managing Investment
Adviser" or "U.S. Trust") provides investment management services
to the Company pursuant to a management agreement dated December 9,
1994, as amended (the "Management Agreement"), between the
Managing Investment Adviser and the Company. The Managing
Investment Adviser is a subsidiary of U.S. Trust Corporation.
All officers of the Company are employees and/or officers of the
Managing Investment Adviser. The Managing Investment Adviser is
responsible for performing the management and administrative
services necessary for the operation of the Company.
Pursuant to a Registration Statement on Form N-2 (File No.
33-84290) which was declared effective on December 16, 1994, the
Company publicly offered up to 50,000 shares of common stock (the
"Shares") at $1,000 per Share. The Company held its initial and
final closings on July 31, 1995, and October 31, 1995,
respectively. The Company sold a total of 40,463 Shares in the
public offering for gross proceeds totaling $40,463,000 (after
taking into account the 1 Share purchased for $1,000 on September
16, 1994, by David I. Fann, the Company's President). Shares of
the Company were made available through U.S. Trust Company of
California, N.A. (the "Selling Agent") to clients of U.S. Trust
and its affiliates who meet the Company's investor suitability
standards.
In connection with the public offering of its Shares, the
Managing Investment Adviser paid to the Selling Agent a
commission totaling $10,000. The Company incurred offering and
organizational costs associated with the public offering totaling
$374,891. Net proceeds to the Company from the public offering,
after offering and organizational costs, totaled $40,117,109.
The Company's articles of incorporation provide that the duration
of the Company will be ten years from the final closing of the
sale of the Shares, subject to the rights of the Managing
Investment Adviser and the investors to extend the term of the
Company. Additional characteristics of the Company's business
are discussed in the "Company", "Risk Factors" and "Investment
Objective and Policies" sections of the Prospectus, which
sections are incorporated herein by reference.
Portfolio Investments
The Company commenced investment operations on August 1, 1995 and
during the year ended October 31, 1995 ("fiscal 1995"), the
Company was invested only in temporary investments in accordance
with the terms and conditions outlined in the Prospectus. At
October 31, 1995, the Company's investment portfolio consisted of
marketable securities with an aggregate cost of $29,563,366 and a
fair value of $29,556,406.
A description of the Company's investments as of October 31, 1995
is set forth in Item 8.
Competition
The Company encounters competition from other entities and
individuals having similar investment objectives. Primary
competition for desirable investments comes from investment
partnerships, venture capital affiliates of large industrial and
financial companies, investment companies and wealthy
individuals. Some of the competing entities and individuals have
investment managers or advisers with greater experience,
resources and managerial capabilities than the Company and may
therefore be in a stronger position than the Company to obtain
access to attractive investments. To the extent that the Company
can compete for such investments, it may not be able to do so on
terms as favorable as those obtained by larger, more established
investors.
Employees
At October 31, 1995, the Company had no full-time employees. All
personnel of the Company are employed by and compensated by the
Managing Investment Adviser pursuant to the Management Agreement.
Item 2. Properties.
The Company does not own or lease physical properties.
Item 3. Legal Proceedings.
The Company is not party to any material pending legal
proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
(Page>
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
The Company has 100,000 Shares authorized, of which 40,463 Shares
were issued and outstanding on October 31, 1995. On October 31,
1995, the Company declared a dividend payable to shareholders of
record on October 27, 1995 in the amount of $11.84 per share.
There is no established public trading market for the Company's
Shares.
Item 6. Selected Financial Data.
All selected financial data for the year ended October 31, 1995
may be found in the financial statements. See Item 8.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity and Capital Resources
During fiscal 1995, the Company focused on raising capital. The
Company began the initial public offering of its Shares on
December 16, 1994. At the end of July 1995, the Company held the
first closing on its Shares, representing over $28.0 million. An
extension of the offering period for the Shares was approved and
at the end of October 1995, the Company held its second and final
closing for an additional $12.4 million. The Company sold a
total of 40,463 Shares at $1,000 per Share in the public offering
(after taking into account the 1 Share purchased for $1,000 on
September 16, 1994, by David I. Fann, the Company's President).
Gross proceeds received by the Company for the sale of its Shares
during 1995 totaled $40,463,000 and net proceeds after the
payment of offering and organizational expenses totaled
$40,117,109. With a total capitalization of $40,463,000, the
Company expects to have access to a greater number of investment
opportunities.
At October 31, 1995, the Company held $10,977,421 in cash and
$29,556,406 in investments. Funds needed to cover future
operating expenses and portfolio investments will be obtained
from the Company's existing cash reserves, from interest income
and from proceeds received from the sale of current investments.
Results of Operations
The Company commenced investment operations on August 1, 1995,
subsequent to the first closing of its Shares. During the period
from August 1, 1995 to October 31, 1995, the Company was invested
in temporary investments in accordance with the terms and
conditions outlined in its Prospectus.
During fiscal 1995, the managers of the Company worked to develop
the Company's presence in the private equity markets with respect
to investment opportunities in (1) other venture capital and
leveraged buyout funds; (2) later-stage venture capital
situations; and (3) middle-market buyouts. The Company reviewed
over 167 investment opportunities in fiscal 1995. Of those
opportunities evaluated, 10 were selected for serious
consideration.
Investment Income and Expenses
For fiscal 1995, the Company had net investment income of
$374,371, attributable to interest on the Company's portfolio of
investments, and total operating expenses of $176,351. Operating
expenses in the amount of $140,226 were reimbursed by the
Managing Investment Adviser, resulting in net operating expenses
of $36,125. The net operating expenses of $36,125 represent the
management fee pursuant to the Management Agreement.
Net Assets
The Company completed the public offering of its Shares in two
separate closings in July and October 1995. The Company sold a
total of 40,463 Shares at a cost of $1,000 per Share, resulting
in gross proceeds raised in the offering of $40,463,000 (after
taking into account the 1 Share purchased for $1,000 on September
16, 1994, by David I. Fann, the Company's President).
For fiscal 1995, the Company had a net increase in net assets
resulting from operations of $367,411 ($12.69 per Share),
comprised of net investment income totaling $374,371 ($12.86 per
Share) and net unrealized depreciation of $6,960 ($0.17 per
Share). Net assets were reduced by offering costs of $344,891
($8.53 per Share) and distributions to shareholders of $333,081
($11.84 per Share).
Item 8. Financial Statements and Supplementary Data.
UST PRIVATE EQUITY INVESTORS FUND, INC.
INDEX
Portfolio of Investments as of October 31, 1995
Statement of Assets and Liabilities as of October 31, 1995
Statement of Operations for the period ended October 31, 1995
Statement of Changes in Net Assets for the period ended
October 31, 1995
Financial Highlights -- Selected Per Share Data and Ratios
Notes to Financial Statements
Independent Auditors' Report
Note - All other schedules are omitted because of the absence
of conditions under which they are required or because
the required information is included in the financial
statements or the notes thereto.
UST PRIVATE EQUITY INVESTORS FUND, INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1995
PRINCIPAL COUPON MATURITY VALUE
AMOUNT/SHARES RATE DATE (NOTE 1)
------------- ------ -------- -------
COMMERCIAL PAPER -- 23.41%
$ 1,000,000 AIG Funding Corp. ..................................... 5.72 % 11/3/95 $ 999,682
1,400,000 American General Finance Corp. ........................ 5.70 11/10/95 1,400,000
1,400,000 Chevron Corp. ......................................... 5.65 12/8/95 1,400,000
1,400,000 Ford Motor Credit Corp. ............................... 5.70 1/2/96 1,400,000
1,400,000 G.E. Capital Corp. .................................... 5.69 12/18/95 1,400,000
1,400,000 G.E. Capital Corp. .................................... 5.66 12/19/95 1,400,000
1,400,000 Toys 'R' Us Corp. ..................................... 5.71 11/3/95 1,399,556
-----------
TOTAL COMMERCIAL PAPER
(Cost $9,399,238).................................... 9,399,238
-----------
CERTIFICATES OF DEPOSIT -- 17.43%
1,400,000 Bank of Hawaii......................................... 5.69 11/1/95 1,400,000
1,400,000 Bank of Scotland....................................... 5.75 11/1/95 1,400,000
1,400,000 Dresdner Bank.......................................... 5.66 11/1/95 1,400,000
1,400,000 Fifth Third Bank....................................... 5.70 11/1/95 1,400,000
1,400,000 Hypo Bank.............................................. 5.69 11/1/95 1,400,000
-----------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $7,000,000).................................... 7,000,000
-----------
CORPORATE BONDS -- 12.22%
500,000 American Express Credit Corp. ......................... 9.45 2/15/96 504,880
500,000 American Express Credit Corp. ......................... 7.00 3/4/96 502,300
1,250,000 J.P. Morgan & Co., Inc. ............................... 8.00 1/24/97 1,280,875
400,000 Merck & Co., Inc. ..................................... 7.75 5/1/96 403,124
1,200,000 Mountain States Telephone & Telegraph Company.......... 7.63 5/15/96 1,204,500
1,000,000 Whirlpool, Inc. ....................................... 8.49 3/15/96 1,009,800
-----------
TOTAL CORPORATE BONDS
(Cost $4,911,768).................................... 4,905,479
-----------
U.S. GOVERNMENT & AGENCY OBLIGATION -- 2.48%
1,000,000 Student Loan Marketing Association'D'
(Cost $994,561)...................................... 4.00 3/1/96 993,890
-----------
BANK NOTES -- 2.47%
1,000,000 Bank of Tokyo (Cost $992,428).......................... 5.80 12/18/95 992,428
-----------
OTHER SHORT-TERM INVESTMENTS -- 6.52%
1,350,609 Dreyfus Treasury Cash Management Fund........................................... 1,350,609
1,268,762 Fidelity Cash Portfolio, U.S. Treasury II....................................... 1,268,762
-----------
TOTAL OTHER SHORT-TERM INVESTMENTS
(Cost $2,619,371)............................................................. 2,619,371
-----------
REPURCHASE AGREEMENT -- 9.08%
3,646,000 Dillon Read & Co., Inc., 5.90%, dated 10/31/95,
due 11/1/95, to be repurchased at $3,646,598,
collateralized by $3,711,237 U.S. Treasury Notes,
5.125%, due 6/30/98, valued at $3,646,290
(Cost $3,646,000)............................................................. 3,646,000
-----------
TOTAL INVESTMENTS
(Cost $29,563,366* )........................................................ 73.61% 29,556,406
OTHER ASSETS & LIABILITIES (NET).................................................. 26.39 10,596,033
------ -----------
NET ASSETS........................................................................ 100.00% $40,152,439
------ -----------
------ -----------
* Aggregate cost for Federal tax and book purposes.
`D' Floating rate security -- rate disclosed is as of
October 31, 1995.
See Notes to Financial Statements
UST PRIVATE EQUITY INVESTORS FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31,
1995
-----------
ASSETS:
Investments, at value (Cost $29,563,366) (Note 1).......................................... $29,556,406
Cash....................................................................................... 10,977,421
Interest receivable........................................................................ 332,614
Receivable from Managing Investment Adviser (Note 2)....................................... 104,101
Prepaid expenses........................................................................... 37,133
Unamortized organization costs (Note 4).................................................... 28,489
-----------
TOTAL ASSETS............................................................................. 41,036,164
LIABILITIES:
Payable for dividends declared............................................................. 333,081
Payable for offering and organization costs................................................ 407,748
Directors fees payable..................................................................... 30,000
Administration fees payable (Note 2)....................................................... 7,541
Accrued expenses and other payables........................................................ 105,355
-----------
TOTAL LIABILITIES........................................................................ 883,725
-----------
NET ASSETS................................................................................... $40,152,439
-----------
-----------
NET ASSETS consist of:
Accumulated undistributed net investment income............................................ $ 42,802
Net unrealized depreciation on investments................................................. (6,960)
Par value.................................................................................. 405
Paid in capital in excess of par value..................................................... 40,116,192
-----------
TOTAL NET ASSETS............................................................................. $40,152,439
-----------
-----------
Shares of Common Stock Outstanding ($0.01 par value, 100,000 authorized)..................... 40,463
NET ASSET VALUE PER SHARE.................................................................... $992.32
-------
-------
See Notes to Financial Statements
UST PRIVATE EQUITY INVESTORS FUND, INC.
STATEMENT OF OPERATIONS
AUGUST 1,
1995*
TO
OCTOBER 31,
1995
-----------
INVESTMENT INCOME:
Interest income............................................................................. $ 410,496
-----------
EXPENSES:
Managing investment advisory fees (Note 2).................................................. 36,125
Directors' fees and expenses (Note 2)....................................................... 30,000
Administration fees (Note 2)................................................................ 7,541
Shareholder servicing fees.................................................................. 4,585
Insurance expenses.......................................................................... 38,065
Audit and other professional service fees................................................... 27,500
Legal fees.................................................................................. 20,000
Shareholder reports......................................................................... 7,500
Custodial fees.............................................................................. 3,523
Organization expenses....................................................................... 1,512
-----------
TOTAL EXPENSES............................................................................ 176,351
Expenses reimbursed by Managing Investment Adviser (Note 2)................................. (140,226)
-----------
NET EXPENSES.............................................................................. 36,125
-----------
NET INVESTMENT INCOME......................................................................... 374,371
-----------
NET CHANGE IN UNREALIZED DEPRECIATION ON INVESTMENTS (Note 1)................................. (6,960)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......................................... $ 367,411
===========
* Commencement of operations
See Notes to Financial Statements
UST PRIVATE EQUITY INVESTORS FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
AUGUST 1,
1995*
TO
OCTOBER 31,
1995
-----------
OPERATIONS:
Net investment income...................................................................... $ 374,371
Net change in unrealized depreciation on investments....................................... (6,960)
-----------
Net increase in net assets resulting from operations..................................... 367,411
-----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income................................................................. (333,081)
-----------
CAPITAL SHARE TRANSACTIONS:
Subscriptions (40,462 shares).............................................................. 40,462,000
Offering costs............................................................................. (344,891)
-----------
Increase in net assets from capital share transactions................................... 40,117,109
-----------
NET INCREASE IN NET ASSETS................................................................... 40,151,439
NET ASSETS:
Beginning of period (1 share).............................................................. 1,000
-----------
End of period (including accumulated undistributed net investment income of $42,802.)...... $40,152,439
===========
* Commencement of operations
See Notes to Financial Statements
UST PRIVATE EQUITY INVESTORS FUND, INC.
FINANCIAL HIGHLIGHTS -- SELECTED PER SHARE DATA AND RATIOS
For a fund share outstanding throughout the period.
AUGUST 1,
1995*
TO
OCTOBER 31,
1995
-----------
NET ASSET VALUE, BEGINNING OF PERIOD............................................................ $1,000.00
-----------
OFFERING COSTS.................................................................................. (8.53)
-----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income......................................................................... 12.86
Net Realized and Unrealized Loss on Investments............................................... (0.17)
-----------
Total From Investment Operations.......................................................... 12.69
-----------
DISTRIBUTIONS
Net Investment Income......................................................................... (11.84)
-----------
NET ASSET VALUE, END OF PERIOD.................................................................. $ 992.32
-----------
-----------
TOTAL NET ASSET VALUE RETURN`D' ............................................................ 0.39%
===========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)......................................................... $ 40,152
Ratio of Net Operating Expenses to Average Net Assets......................................... 0.50%**
Ratio of Gross Operating Expenses to Average Net Assets`D'`D' ............................ 2.44%**
Ratio of Net Investment Income to Average Net Assets.......................................... 5.18%**
Portfolio Turnover Rate....................................................................... 0%
* Commencement of operations
** Annualized
`D' Total investment return based on per share net asset value reflects the
effects of changes in net asset value based on the performance of the
Fund during the period, and assumes dividends and distributions, if
any, were reinvested. The Fund's shares were issued in a private
placement and are not traded, therefore market value total investment
return is not calculated. Total return for periods of less than one
year are unannualized.
`D'`D' Expense ratio before waiver of fees and reimbursement of expenses by
adviser.
See Notes to Financial Statements
UST PRIVATE EQUITY INVESTORS FUND, INC
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
UST Private Equity Investors Fund, Inc. ('the Fund') 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 following is a summary of the Fund's significant accounting
policies.
(A) PORTFOLIO VALUATION:
The Fund values portfolio securities quarterly and at other such
times as in the Board of Directors' view, as circumstances warrant.
Investments in 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 are valued, pursuant to guidelines
adopted by the Investment Adviser, under the supervision of the Board of
Directors.
(B) SECURITY TRANSACTIONS AND INVESTMENT INCOME:
Security transactions are recorded on a trade date basis.
Realized gains and losses on investments sold are recorded on the basis of
identified cost. Interest income, adjusted for amortization of premiums
and, when appropriate, discounts on investments, is earned from settlement
date and is recorded on the accrual basis. Dividend income is recorded on
the ex-dividend date.
(C) REPURCHASE AGREEMENTS:
The Fund enters into agreements to purchase securities and to
resell them at a future date. It is the Fund's policy to take custody of
securities purchased and to ensure that the market value of the collateral
including accrued interest is sufficient to protect the Fund from losses
incurred in the event the counterparty does not repurchase the securities.
If the seller defaults and the value of the collateral declines or if
bankruptcy proceedings are commenced with respect to the seller of the
security, realization of the collateral by the Fund may be delayed or
limited.
(D) FEDERAL INCOME TAXES:
It is the policy of the Fund 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.
Dividends from net investment income are declared and paid at
least annually. Any net realized capital gains, unless offset by any
available capital loss carryforward, are distributed to shareholders at
least annually. Dividends and distributions are determined in accordance
with Federal income tax regulations which may differ from generally
accepted accounting principles. These 'book/tax' differences are either
considered temporary or permanent. To the extent these differences are
permanent, such amounts are reclassified within the capital accounts based
on their federal tax basis treatment; temporary differences do not require
reclassification.
The Fund had permanent book/tax differences primarily attributable to
deferred organizational costs. To reflect reclassifications arising from
permanent book/tax differences as of October 31, 1995, accumulated
undistributed net investment income was credited and paid in capital was
charged $1,512.
At October 31, 1995 the tax basis of the Fund's investments for
Federal income tax purposes amounted to $29,563,366. The net unrealized
depreciation amounted to $6,960, which is comprised of gross unrealized
appreciation of $537 and aggregate gross unrealized depreciation of $7,497.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE, AND RELATED PARTY
TRANSACTIONS
Pursuant to an Investment Management Agreement ('Agreement'), United
States Trust Company of New York ('U.S. Trust') serves as the Managing
Investment Adviser to the Fund. Under the Agreement, for the services
provided U.S. Trust is entitled to receive a fee, at the annual rate of
1.50% of the net assets of the Fund, determined as of the end of each
fiscal quarter, that are invested or committed to be invested in Portfolio
Companies or Private Funds and equal to an annual rate of 0.50% of the net
assets of the Fund, determined as of the end of each fiscal quarter, that
are invested in short-term investments and are not committed to Portfolio
Companies or Private Funds.
In addition to the management fee, the Fund has agreed to pay U.S.
Trust an incentive fee in an amount equal to 10% of the cumulative realized
capital gains (net of realized capital losses and unrealized net capital
depreciation), less the aggregate amount of incentive fee payments in prior
years. If the amount of the incentive fee in any year is a negative number,
or cumulative net realized gains less net unrealized capital depreciation
at the end of any year is less than such amount calculated at the end of
the previous year U.S. Trust will be required to repay the Fund all or a
portion of the incentive fee previously paid.
U.S. Trust has voluntarily agreed to waive or reimburse other
operating expenses of the Fund, exclusive of management fees, to the extent
they exceed 0.42% of the Fund's net assets, and U.S. Trust will waive or
reimburse, exclusive of management fees, all such expenses with respect to
that portion of the Fund's net assets, determined as of the end of each
fiscal quarter, that is invested in short-term investments.
Each Director of the Fund receives an annual fee of $9,000, plus a
meeting fee of $1,500 for each meeting attended, and is reimbursed for
expenses incurred for attending meetings. No person who is an officer,
director or employee of U.S. Trust, or of any parent or subsidiary thereof,
who serves as an officer, director or employee of the Fund receives any
compensation from the Fund.
3. PURCHASES AND SALES OF SECURITIES
Purchases of securities, excluding short-term investments, for the
Fund aggregated $1,280,913. There were no long-term sales.
4. ORGANIZATION COSTS:
The Fund has borne all costs in connection with the initial
organization of the Fund. All such costs are being amortized on a
straight-line basis over a period of five years from the date on which the
Fund commenced operations.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Shareholders and Board of Directors
UST Private Equity Investors Fund, Inc.
We have audited the accompanying statement of assets and liabilities of UST
Private Equity Investors Fund, Inc. including the portfolio of investments,
as of October 31, 1995, and the related statements of operations and
changes in net assets, and financial highlights for the period from
August 1, 1995 (commencement of operations) to October 31, 1995. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1995 by correspondence with the
custodian and others. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of UST Private Equity Investors Fund, Inc. at October 31, 1995, the results
of its operations, the changes in its net assets, and the financial
highlights for the period from August 1, 1995 to October 31, 1995 in
conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
New York, New York
November 22, 1995
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Set forth below are names, ages, positions and certain other information
concerning the current directors and executive officers of the Company as
of October 31, 1995.
Served in Present
Name and Age Position Capacity Since
- ------------ -------- -----------------
David I. Fann [31] President; Chief September 16, 1994
Executive Officer
Douglas A. Lindgren [33] Executive July 6, 1995
Vice President
Lisa A. Cummings [32] Treasurer; Treasurer
Vice President since
September 16,
1994; Vice
President since
July 6, 1995
Ronald A. Schwartz [47] Secretary September 16, 1994
Edith A. Cassidy* [42] Director September 16, 1994
Gene M. Bernstein [48] Director December 1, 1994
Stephen V. Murphy [50] Director December 1, 1994
*Indicates director who is an "interested person" of the Company within the
meaning of the Investment Company Act of 1940.
Additional information concerning the directors and executive officers of
the Company is incorporated herein by reference from the section entitled
"Management -- Directors, Officers and Investment Professionals" in the
Prospectus as modified by the Supplement dated August 28, 1995.
Item 11. Executive Compensation.
At October 31, 1995, the Company had no full-time employees. Pursuant to
the Management Agreement, the Managing Investment Adviser employs and
compensates all of the personnel of the Company, and also furnishes all
office facilities, equipment, management and other 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, For fiscal 1995, the Managing Investment Adviser reimbursed
$140,226 to the Company, representing operating expenses (excluding its
management fee of $36,125). Additional information with respect to the
management fee payable to the Managing Investment Adviser is set forth in
the "Management" section of the Prospectus, as modified by the supplement
thereto dated October 31, 1995, which section is incorporated herein by
reference.
The disinterested directors receive compensation of $9,000 on an annual
basis and $1,500 for each Board of Directors' meeting attended plus
reasonable expenses. For fiscal 1995, and for the period from September
16, 1994 (organization of the Company) to October 31, 1994, the
disinterested directors of the Company each received compensation totaling
$15,000.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Not applicable. As of October 31, 1995, no person or group is known by the
Company to be the beneficial owner of more than 5% of the aggregate number
of Shares held by all shareholders. David I. Fann, Chief Executive Officer
of the Company, owns 22 Shares. The directors and officers of the Company
as a group own 251 Shares.
The Company is not aware of any arrangement which may, at a subsequent
date, result in a change of control of the Company.
Item 13. Certain Relationships and Related Transactions.
The Company has engaged in no transactions with the executive officers or
directors other than as described above, in the notes to the financial
statements, or in the Prospectus.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) 1. Financial Statements
Portfolio of Investments as of October 31, 1995
Statement of Assets and Liabilities as of October 31, 1995
Statement of Operations for the period ended October 31, 1995
Statement of Changes in Net Assets for the period ended
October 31, 1995
Financial Highlights -- Selected Per Share Data and Ratios
Notes to Financial Statements
Independent Auditors' Report
2. Exhibits
(3)(a) Articles of Incorporation of the Company (1)
(3)(b) Amended and Restated By-Laws of the Company (1)
(10)(a) Management Agreement(1)
(10)(b) Transfer Agency and Custody Agreement(1)
(23) Consent of Independent Auditors
(27) Financial Data Schedule
(29) Prospectus of the Company dated December 16, 1994, filed
with the Securities and Exchange Commission, as
supplemented by supplements thereto dated August 28, 1995
and October 31, 1995(1)
(b) No reports on Form 8-K have been filed during the last quarter of the
period for which this report is filed.
(1) Incorporated by reference to the Company's Form N-2, as amended, filed
September 22, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By /s/ David I. Fann
David I. Fann, President and
Chief Executive Officer
By /s/ Lisa A. Cummings
Lisa A. Cummings, Treasurer
and Vice President
By /s/ Edith A. Cassidy
Edith A. Cassidy, Director
By /s/ Gene M. Bernstein
Gene M. Bernstein, Director
By /s/ Stephen V. Murphy
Stephen V. Murphy, Director
Date: January 29, 1996