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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended October 31, 2003
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: 000-24856
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UST PRIVATE EQUITY INVESTORS FUND, INC.
(Exact Name of Registrant as Specified in Its Charter)
MARYLAND 13-3786385
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
225 High Ridge Road
Stamford, CT 06905
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (203) 352-4400
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK $0.01 PAR VALUE PER SHARE
(Title of Class)
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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[_]
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]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes [_] No[X]
The registrant's common stock is not listed on any exchange nor does it trade on
any established securities market or other market.
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TABLE OF CONTENTS
Item No. Form 10-K
- -------- Report Page
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PART I
1. Business 1
2. Properties 4
3. Legal Proceedings 4
4. Submission of Matters to a Vote of Security Holders 4
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters 4
6. Selected Financial Data 4
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
7A. Quantitative and Qualitative Disclosures About Market
Risk 8
8. Financial Statements and Supplementary Data 8
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 22
9A. Controls and Procedures 22
PART III
10. Directors and Executive Officers of the Registrant 22
11. Executive Compensation 25
12. Security Ownership of Certain Beneficial Owners and
Management 25
13. Certain Relationships and Related Transactions 26
14. Principal Accountant Fees and Services 26
PART IV
15. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 26
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FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company's prospects are subject to certain uncertainties and risks.
This Annual Report on Form 10-K contains certain forward-looking statements
within the meaning of the federal securities laws that also involve substantial
uncertainties and risks. The Company's future results may differ materially from
its historical results and actual results could differ materially from those
projected in the forward-looking statements as a result of certain risk factors.
Readers should pay particular attention to the considerations described in the
section of this report entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations." Readers should also carefully
review the risk factors described in the other documents the Company files, or
has filed, from time to time with the Securities and Exchange Commission.
- --------------------------------------------------------------------------------
PART I
ITEM 1. BUSINESS.
Overview
UST Private Equity Investors Fund, Inc. (the "Company" or the "Fund") is a
Maryland corporation organized on September 16, 1994. The Company is a
non-diversified, closed-end management investment company operating as a
business development company ("BDC") under the Investment Company Act of 1940
("Investment Company Act"), as amended, and, in connection with its initial
offering of shares, registered said offering of shares under the Securities Act
of 1933, as amended. BDCs are a special type of investment company, as defined
and regulated by the Investment Company Act of 1940, which focus primarily on
investing in the privately issued securities of eligible portfolio companies,
as defined by the Investment Company Act. A BDC must also make available
significant managerial assistance to such companies. 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.
U.S. Trust Company, N.A., acting through its registered investment
advisory division, U.S. Trust Company, N.A. Asset Management Division serves
with United States Trust Company of New York, acting through its registered
investment advisory division, U.S. Trust - New York Asset Management Division
(each an "Investment Adviser" and together, the "Managing Investment Adviser"
or "U.S. Trust") provide investment management services to the Company pursuant
to a management agreement dated July 18, 2000 (the "Management Agreement").
U.S. Trust Company, N.A. and United States Trust Company of New York are each a
wholly-owned subsidiary of U.S. Trust Corporation, a registered bank holding
company. U.S. Trust Corporation is an indirect wholly-owned subsidiary of The
Charles Schwab 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 at $1,000 per share. The Company held its initial
and final closings on each of July 31, 1995 and October 31, 1995 representing
over $28.0 million and $12.4 million, respectively. The Company sold a total of
40,463 shares in the public offering for gross proceeds totaling $40,463,000
(including one share purchased for $1,000 as of September 19, 1994 by David I.
Fann, the Company's President and Co-Chief Executive Officer). 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 met the
Company's investor suitability standards.
In connection with the public offering of the Company's shares, the
Managing Investment Adviser paid to the Selling Agent a commission totaling
$10,000. The Company incurred offering costs associated with the public
offering totaling $345,891. Net proceeds to the Company from the public
offering, after offering 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.
The following is a summary of the Company's investment portfolio over its
life.
Investments Held -- Private Investment Funds
1
. Allegra Capital Partners III, L.P. ("Allegra") is a later-stage fund
based in New York City. Allegra invests primarily in companies in the
telecommunications, software and service industries with
Internet-driven strategies. Allegra has drawn all of the Fund's $2
million commitment. At October 31, 2003, the total value (fair market
value plus distributions) of this investment was $3.5 million.
. Brentwood Associates Buyout Fund II, L.P. ("Brentwood") is a buyout
and consolidation fund based in Westwood, CA. Brentwood's strategy is
to identify industries with consolidation characteristics, develop a
strategy for implementation and recruit management to execute that
strategy. Brentwood has drawn all of the Fund's $2 million
commitment. At October 31, 2003, the total value (fair market value
plus distributions) of this investment was $1.5 million.
. Bruckmann, Rosser, Sherrill & Co., L.P. ("BRS") is a leveraged buyout
fund based in New York City. BRS has drawn all of the Fund's $2
million commitment. At October 31, 2003, the total value (fair market
value plus distributions) of this investment was $2.1 million.
. Morgenthaler Venture Partners IV, L.P. ("Morgenthaler") is primarily
an early stage venture capital fund, investing largely in information
technology and healthcare companies, but also investing in buyouts of
basic businesses. Morgenthaler has drawn all of the Fund's $2 million
commitment. At October 31, 2003, the total value (fair market value
plus distributions) of this investment was $3.9 million.
. Sevin Rosen Fund V, L.P. ("Sevin Rosen") invests in early-stage
technology companies, focusing specifically on companies in
communications and eBusiness infrastructure and solutions, as well as
companies with Internet-enabled business models. Sevin Rosen has
drawn all of the Fund's $2 million commitment. At October 31, 2003,
the total value (fair market value plus distributions) of this
investment was $2.3 million.
. Vanguard V, L.P. ("Vanguard") is an early-stage fund investing in
information technology and healthcare. Vanguard has drawn all of the
Fund's $2 million commitment. At October 31, 2003, the total value
(fair market value plus distributions) of this investment was $5.2
million.
Investments Sold
. Accrue Software, Inc. (NASDAQ: ACRU), Cupertino, CA a provider of
customer relationship management software, acquired NeoVista Software
for $140 million of Accrue stock. The Fund had invested $1.0 million
in NeoVista. The Fund liquidated its shares of Accrue, and realized
proceeds of $1.3 million or 1.3x its original investment in NeoVista.
. Best Friends Pet Care, Inc., Norwalk, CT, is the largest operator of
pet kennels in the United States. The company's facilities offer a
wide range of pet services, including boarding, grooming and
training. In June 2001, Best Friends was sold to Brynwood Partners IV
L.P. The Fund realized net proceeds of $.4 million and realized a
loss of $3.1 million.
. CommSite International, Inc., Vienna, VA, is a provider of wireless
towers and construction services. On May 13, 1999, American Tower
Corporation (NYSE: AMT) acquired CommSite. The Fund realized its
investment cost of $2.7 million from this transaction.
. Corsair Communications, Inc. (NASDAQ: CAIR), Palo Alto, CA, is a
wireless communication infrastructure company providing prepaid
cellular handset and fraud detection equipment and software. Corsair
completed its initial public offering in July 1997. The Fund sold all
of its shares in the company and realized proceeds of $5.1 million or
1.5x on its $3.3 million investment.
2
. LogicVision, Inc. (NASDAQ: LGVN), San Jose, CA, is a developer of
built-in self-testing technologies used in semiconductor design,
testing and manufacture. As semiconductors become more complex, the
need to adopt new testing technology becomes critical. LogicVision
completed its initial public offering in October 2001. The Fund
received proceeds of $.5 million in the sale of LogicVision common
stock in 2002 and realized a loss of $1.0 million.
. QuickLogic Corporation (NASDAQ: QUIK), Sunnyvale, CA, designs,
manufactures and markets high-capacity programmable logic
semiconductors, known as field programmable gate arrays, along with
comprehensive design software. The company's products shorten the
design cycle for electronic systems, accelerating time-to-market.
QuickLogic completed its initial public offering in October 1999. The
Fund sold its shares of QuickLogic for $8.2 million or 2.7x the cost
of the original investment.
. Rental Services Corporation (NYSE: RSV), Scottsdale, AZ, is a
consolidator of heavy equipment rental businesses. The Fund invested
$1 million in January 1996. In September 1996, Rental Services Corp.
completed its initial public offering. The Fund sold its shares in
the company for over $3 million and realized a return of 3.1x on its
investment.
. Signius Corporation (formerly known as ProCommunications, Corp.),
Somerset, NJ, provides telemessaging services for small and medium
sized businesses. In March 2000, Signius was sold for a nominal
amount and the Fund realized a $3.4 million loss.
Investments Written Off
. AbTox, Inc., Mundelein, IL, manufactured gas plasma sterilizers. The
company filed for bankruptcy in 1999 due to operating problems
arising from regulatory issues related to one of its products. The
Fund received $250,000 as part of the settlement of claims with the
bankruptcy trustee in 2001. In 2002, the Fund received a nominal
distribution pursuant to AbTox's liquidating plan and realized a $2.6
million loss.
. Cardiopulmonary Corporation, Milford, CT, is a manufacturer of a
smart ventilator, used in the acute and sub-acute hospital market
that adapts to patient's changing breathing patterns. The Fund's $2.2
million investment was written off in 2000 as a result of the
recapitalization of the company.
. P2 Holdings Corporation (formerly known as Plynetic Express), San
Leandro, CA, was a provider of rapid prototyping and rapid tooling
services. The company filed for bankruptcy in 1998 and the Fund
received no recovery of its $2.8 million investment.
. Party Stores Holdings, Inc., Melville, NY, operated the Party
Experience, Paperama, and Paper Cutter retail stores and filed for
bankruptcy in 1998 and the Fund received no recovery of its $2.1
million investment.
For additional information concerning the Company's investments, see the
financial statements beginning on page 10 of this report.
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.
3
Employees
At October 31, 2003, 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 any physical properties.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Market Information
The Company has 50,000 authorized shares. As of December 31, 2003, 40,463
shares were issued and outstanding. There is no established public trading
market for the Company's shares.
Holders
There were 837 holders of the Company's shares as of December 31, 2003.
Dividends and Distributions
Fiscal Year Ended October 31, 2003. There were no dividends or
distributions paid during fiscal year 2003.
Fiscal Year Ended October 31, 2002. On January 7, 2002, the Company paid a
distribution of $71.81 per share of return of capital. On October 31, 2002, the
Company paid a distribution of $34.06 per share of return of capital and a
dividend of $4.77 per share of net investment income.
For additional information concerning the payment of dividends, see
"Significant Accounting Policies" in the notes to the financial statements of
the Company included in Item 8 hereof.
ITEM 6. SELECTED FINANCIAL DATA.
($ in 000's except for per share data)
Fiscal Year Ended 10/31/03 10/31/02 10/31/01 10/31/00 10/31/99
Financial Position
Investments in securities 2,789 3,669 13,554 33,028 47,205
Other Assets 259 483 806 235 561
Total Assets 3,048 4,152 14,360 33,264 47,765
4
Notes Payable -- -- -- -- 7,000
Liabilities 223 171 225 1,795 470
Net Assets 2,825 3,981 14,135 31,469 40,295
Changes in Net Assets
Net investment income (loss) (48) (98) (113) (50) (237)
Net gain (loss) on
investments (1,108) (6,006) (11,363) 13,344 3,220
Net change in incentive fees -- 426 1,136 (1,334) (228)
Dividends -- 4,477 6,994 20,786 368
Per Share Data
Net Assets 69.82 98.39 349.34 777.72 995.85
Dividends Paid -- 110.64 172.84 513.71 9.08
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Liquidity and Capital Resources
At October 31, 2003, the Company held $86,455 in cash and $1,130,706 in
short-term investments as compared to $0 in cash and $412,474 in short-term
investments at October 31, 2002. During fiscal 2003, the Company received
distributions from several of its private investment funds, as well as the
payment of the management incentive fee receivable from the Managing Investment
Adviser at October 31, 2002. The Company held a Special Meeting of Shareholders
on December 23, 2003 for the purpose of seeking shareholder approval of the
Purchase and Sale Agreement (the "Agreement" -- see Note 1(a) to the financial
statements) and the Plan of Liquidation and Dissolution (the "Plan"). The
Agreement and Plan must be approved by a shareholder vote of at least two-thirds
of the Company's shares issued and outstanding. Under the Plan, the Company will
liquidate its assets, make a provision for the satisfaction of its remaining
obligations, and make a final liquidating distribution to its shareholders. At
the December 23, 2003 Special Meeting of Shareholders, 53% of the outstanding
shares of the company were represented by proxy vote. The Plan must be approved
by a shareholder vote of at least two-thirds of the Company's shares issued and
outstanding. Therefore, the Special Meeting of Shareholders was adjourned until
January 21, 2004 in order to permit the further solicitation of proxy votes. At
the January 21, 2004 Special Meeting of Shareholders, the required number of
votes were obtained and the Agreement and Plan were approved. Accordingly, as of
this date, the Company is pursing its plan to liquidate its assets, satisfy its
remaining obligations, and make a final liquidating distribution to
shareholders.
Results of Operations
Investment Income and Expenses
For the fiscal year ended October 31, 2003, the Company had investment
income of $12,246 and operating expenses, net of expenses reimbursed by the
Managing Investment Adviser, of $60,528, resulting in a net investment loss of
($48,282). For the fiscal year ended October 31, 2002, the Company had
investment income of $37,850 and operating expenses, net of expenses reimbursed
by the Managing Investment Adviser, of $135,433, resulting in a net investment
loss of ($97,583). For the fiscal year ended October 31, 2001, the Company had
investment income of $148,317 and operating expenses, net of expenses reimbursed
by the Managing Investment Adviser, of $261,411, resulting in a net investment
loss of ($113,094). The decrease in the Company's net investment income is
attributable to a reduced level of interest-bearing assets, as well as an
overall decrease in short-term interest rates over the period. The decrease in
net operating expenses is primarily attributable to the lower managing
investment advisory fees paid as a result of declining net assets over time. The
Company has reflected in the October 31, 2003 financial statements accrued
liquidation expenses of $65,000 which were estimated to be incurred as part of
its implementation of the Plan. The liquidation expenses were reimbursed to the
Company by the Managing Investment Adviser as part of the voluntary
reimbursement.
5
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 net realized capital gains of
the Company. The management fee is determined and payable quarterly. For the
fiscal years ended October 31, 2003, 2002 and 2001, the Managing Investment
Adviser earned $44,315, $105,251, and $231,165 in management fees, respectively.
For the same periods, the Managing Investment Adviser reimbursed other operating
expenses of the Company in the amount of $295,510, $224,571, and $295,736 as a
result of expenses incurred in excess of these limits. In addition, for the
fiscal years ended October 31, 2002 and 2001, the change in allowance for the
management incentive fee was $425,788 and $1,136,372, respectively, resulting in
receivables to the Company. The Company received recoupment of the management
incentive fee receivables of $425,788 and $680,558 during the fiscal years ended
October 31, 2003 and 2002, respectively. As of October 31, 2003, there was no
incentive fee receivable from the Managing Investment Adviser or payable by the
Company.
Net Assets
At the fiscal year ended October 31, 2003, the Company's net assets were
$2,825,018, a decline of ($1,155,959) from net assets of $3,980,977 at October
31, 2002. The Company's net asset value per common share was $69.82 at October
31, 2003 down ($28.57) per share from the net asset value per common share of
$98.39 at October 31, 2002. At the fiscal year ended October 31, 2002, the
Company's net assets were $3,980,977, a decline of ($10,154,498) from net assets
of $14,135,475 at October 31, 2001. The Company's net asset value per common
share was $98.39 at October 31, 2002 down ($250.95) per share from the net asset
value per common share of $349.34 at October 31, 2001. This decline stemmed from
the Company's net operating loss as well as distributions paid to shareholders
during the fiscal year.
For the fiscal year ended October 31, 2003, the Company had a net decrease
in net assets resulting from operations of ($1,155,959) or ($28.57) per share.
This decline was mainly attributable to declines in the valuation of the
Company's private investment funds, which were valued on a liquidation basis
pursuant to the Plan. For the fiscal year ended October 31, 2002, the Company
had a net decrease in net assets resulting from operations of ($5,677,691) or
($140.31) per share and paid distributions to shareholders during the period
totaling ($4,476,807) or ($110.64) per share. The net loss from operations was
the result of several factors including: 1) realized losses in connection with
the sale of LogicVision, Inc. and QuickLogic Corporation, both public stock
positions, totaling ($1,282,157) or ($31.69) per share, 2) a realized loss in
the amount of ($2,546,640) or ($62.93) per share related to AbTox, Inc., a
private company investment, due to the conclusion of the company's bankruptcy
proceeding, 3) net unrealized losses, primarily related to the Company's third
party private investment funds, totaling ($2,177,099) or ($53.80) per share, and
4) a net investment loss of ($97,583) or ($2.41) per share. The Company also had
a net change in allowance for the management incentive fee of $425,788 or $10.52
per share, a reduction in accumulated management incentive fees payable to the
Managing Investment Adviser, which offset the net realized and unrealized
losses.
Realized and Unrealized Gains and Losses from Portfolio Investments
For the fiscal year ended October 31, 2003, the Company had a ($1,107,677)
net realized and unrealized loss from investments, comprised of a $2,902 net
realized gain on short-term investments and a ($1,110,579) net change in
unrealized depreciation on investments, attributable to declines in the
valuation of the Company's Private Investment Funds. For the fiscal year ended
October 31, 2002, the Company had a ($6,005,896) net realized and unrealized
loss from investments, comprised of a ($3,828,797) net realized loss on
investments and a ($2,177,099) net change in unrealized depreciation on
investments. For the fiscal year ended October 31, 2001, the Company had a
($11,362,833) net realized and unrealized loss from investments, comprised of a
($2,728,413) net realized loss on investments and a ($8,634,420) net change in
unrealized depreciation on investments. The net realized loss on investments for
the fiscal year ended October 31, 2002 is primarily the result of realized
losses on sales of LogicVision, Inc. and QuickLogic Corporation, both public
stock positions, totaling ($1,282,157) and a realized loss in the amount of
($2,546,640) related to AbTox, Inc., a private company investment, due to the
conclusion of the company's bankruptcy proceeding. During fiscal 2002, the
Company also recorded net unrealized losses, primarily attributable to lower
valuations of its private investment funds. The net realized loss on investments
for the fiscal
6
year ended October 31, 2001 is primarily the result of sales of Accrue Software,
Inc. and Best Friends, Inc., offset by the gain on sale of several stock
distributions from private fund investments. The net change in unrealized
depreciation during fiscal 2001 was primarily the result of valuation declines
in the Company's private investment funds.
Application of Critical Accounting Policies
Under the supervision of the Company's Valuation and Audit Committees,
consisting of the independent directors of the Company, the Investment Advisers
make certain critical accounting estimates with respect to the valuation of
private portfolio investments. These estimates could have a material impact on
the presentation of the Company's financial condition, because in total, they
currently represent 58.7% of the Company's net assets at October 31, 2003. For
the private investments held at October 31, changes to these estimates, i.e.
changes in the valuations of these private investments, resulted in a $1.1
million decrease in net asset value.
The value for securities for which no public market exists is difficult to
determine. Generally speaking, such investments will be valued on a "going
concern" basis without giving effect to any disposition costs. There is a range
of values that is reasonable for such investments at any particular time.
Because of the inherent uncertainty of valuation, the estimated values may
differ significantly from the values that would have been used had a ready
market for the securities existed, and the differences could be material.
Initially, direct private company investments are valued based upon their
original cost until developments provide a sufficient basis for use of a
valuation other than cost. Upon the occurrence of developments providing a
sufficient basis for a change in valuation, direct private company investments
will be valued by the "private market" or "appraisal" methods of valuation. The
private market method shall only be used with respect to reliable third party
transactions by sophisticated, independent investors. The appraisal method shall
be based upon such factors affecting the company such as earnings, net worth,
reliable private sale prices of the company's securities, the market prices for
similar securities of comparable companies, an assessment of the company's
future prospects or, if appropriate, liquidation value. The values for the
investments referred to in this paragraph will be estimated regularly by the
Investment Adviser or a committee of the Board, both under the supervision of
the Board, and, in any event, not less frequently than quarterly. However, there
can be no assurance that such value will represent the return that might
ultimately be realized by the Company from the investments.
The valuation of the Company's private funds is based upon its pro-rata
share of the value of the assets of a private fund as determined by such private
fund, in accordance with its partnership agreement, constitutional or other
documents governing such valuation, on the valuation date. If such valuation
with respect to the Company's investments in private funds is not available by
reason of timing or other event on the valuation date, or are deemed to be
unreliable by the Investment Advisers, the Investment Advisers, under
supervision of the Board, shall determine such value based on its judgment of
fair value on the appropriate date, less applicable charges, if any.
The Investment Advisers also make estimates regarding discounts on market
prices of publicly traded securities where appropriate. For securities which
have legal, contractual or practical restrictions on transfer, a discount of 10%
to 40% from the public market price will be applied.
On December 3, 2003, the Company sold its remaining interest in the Private
Investment Fund Bruckmann, Rosser, Sherrill & Co., LP ("BRS") back to BRS. BRS
repurchased the Company's interest in BRS for $885,000 and assumed all of the
Company's commitments with respect to its investment in BRS. The Company has
reflected the value of this investment on the October 31, 2003 Portfolio of
Investments at this $885,000 sales price. On December 5, 2003, the Company sold
its remaining interest in Cardiopulmonary Corp. for one dollar to an unrelated
third party. The Company executed a "Purchase and Sale Agreement" on October 22,
2003 to sell its remaining five private investment fund interests to Landmark
Equity Partners X, L.P. and Landmark IAM Partnership, L.P (the "Purchasers").
This Purchase and Sale Agreement was amended (the "Agreement") to reflect the
impact of the December 3, 2003 sale of BRS. The sales price under the Agreement
is $832,000, with a reduction for any distributions received by the Company
subsequent to June 30, 2003 from these private investment funds. The Company has
received distributions totaling $58,944 from these private investment funds from
July 1, 2003 through October 31, 2003, resulting in an adjusted sales price of
$773,057. The Company has reflected this adjusted sales
7
price as the estimated fair value of the remaining five private investment funds
and has allocated this value among each of the five individual Private
Investment Funds based upon their respective valuations prior to execution of
the Agreement. Because of the inherent uncertainty of valuation and the general
illiquidity of the assets being sold, the values may differ significantly from
the values that would have been used had a ready market for these securities
existed, and the differences could be material. The Purchasers are not related
parties to the Company.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The following discussion includes forward-looking statements. Actual
results could differ materially from those projected in the forward-looking
statements.
Equity Price Risk
At October 31, 2003, the Company's investment portfolio consisted of equity
securities and private investment funds, representing 58.7% of the Company's net
assets, 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 normally associated with public
equity markets. At October 31, 2002, the Company held no investments in the
equity securities of public companies. At October 31, 2001, publicly traded
equity securities were valued at $1,733,075. Thus, there was exposure to equity
price risk, estimated as the potential loss in fair value due to a hypothetical
10% decrease in quoted market prices, of approximately a ($173,308) decrease in
the value of these securities. These securities were subsequently sold during
fiscal 2002.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Independent Auditors' Report
Portfolios of Investments at October 31, 2003 and October 31, 2002
Statements of Assets and Liabilities at October 31, 2003 and October 31, 2002
Statements of Operations for the years ended October 31, 2003, October 31, 2002
and October 31, 2001
Statements of Changes in Net Assets for the years ended October 31, 2003,
October 31, 2002 and October 31, 2001
Statements of Cash Flows for the years ended October 31, 2003, October 31, 2002
and October 31, 2001
Financial Highlights - Selected Per Share Data and Ratios for the years ended
October 31, 2003, October 31, 2002, October 31, 2001, October 31, 2000 and
October 31, 1999
Notes to Financial Statements
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.
8
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
(liquidation basis) of UST Private Equity Investors Fund, Inc. (the "Company"),
including the portfolio of investments (liquidation basis), as of October 31,
2003, the statement of assets and liabilities, including the portfolio of
investments, as of October 31, 2002, the related statements of operations,
changes in net assets and cash flows for each of the three years in the period
ended October 31, 2003, and the financial highlights for each of the five years
in the period ended October 31, 2003. These financial statements and financial
highlights are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 and financial highlights. Our procedures included
confirmation of securities owned as of October 31, 2003 and 2002, by
correspondence with the custodian, the general partners of the private
investment funds and the private investment companies. 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 audits provide a reasonable basis for our opinion.
As described in Notes 1 and 5 to the financial statements, the Company's
Board of Directors adopted the Plan of Liquidation of the Company on October 22,
2003. As a result, the Company has changed its basis of accounting as of October
31, 2003 from a going concern basis to a liquidation basis.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
(liquidation basis) of UST Private Equity Investors Fund, Inc. at October 31,
2003, its financial position at October 31, 2002, the results of its operations,
its changes in nets assets and its cash flows for each of the three years in the
period ended October 31, 2003, and the financial highlights for each of the five
years in the period ended October 31, 2003, in conformity with accounting
principles generally accepted in the United States applied on the basis
described in the preceding paragraph.
/s/ Ernst & Young LLP
Boston, Massachusetts
January 6, 2004
9
UST Private Equity Investors Fund, Inc.
Portfolio of Investments October 31, 2003 (Liquidation Basis)
Principal Acquisition
Amount Date## Value (Note 1)
- ------------ -------------- --------------
AGENCY OBLIGATIONS -- 38.93%
$ 1,100,000 Federal Home Loan Bank Discount Notes, 0.95%,
11/05/03 (Cost $1,099,884) $ 1,099,884
--------------
Percentage
Owned
- ------------
PRIVATE INVESTMENT FUNDS #, @ -- 58.70%
3.88% Allegra Capital Partners III, LP (Cost $1,069,666) 03/96 to 04/00 106,237
1.03% Brentwood Associates Buyout Fund II, LP (Cost $986,605) 01/96 to 04/00 197,863
0.53% Bruckmann, Rosser, Sherrill & Co., LP (Cost $961,263) 12/95 to 04/00 885,000
1.16% Morgenthaler Venture Partners IV, LP (Cost $647,935) 12/95 to 04/00 143,262
1.81% Sevin Rosen Fund V, LP (Cost $1,722,502) 04/96 to 04/00 195,332
2.45% Vanguard V, LP (Cost $1,484,045) 05/96 to 02/99 130,363
--------------
TOTAL PRIVATE INVESTMENT FUNDS (Cost $6,872,016) 1,658,057
--------------
Shares
- ------------
PRIVATE COMPANIES #, @, -- 0.00%
Common Stocks -- 0.00%
Medical Devices -- 0.00%
550,758 Cardiopulmonary Corp. 11/96 to 07/98 --
--------------
TOTAL PRIVATE COMPANIES (Cost $2,150,000) --
INVESTMENT COMPANIES -- 1.09%
30,822 Dreyfus Government Cash Management Fund (Cost $30,822) 30,822
--------------
TOTAL INVESTMENTS (Cost $10,152,722) -- 98.72% 2,788,763
OTHER ASSETS & LIABILITIES (NET) -- 1.28% 36,255
--------------
NET ASSETS -- 100.00% $ 2,825,018
--------------
- ---------
# Restricted as to public resale. Acquired between December 1, 1995
and April 30, 2000. Total cost of restricted securities at October
31, 2003 aggregated $9,022,016. Total value of restricted
securities owned at October 31, 2003 was $1,658,057 or 58.70% of
net assets.
## Required disclosure for restricted securities only.
@ Non-income producing security.
Notes to Financial Statements are an integral part of these Financial
Statements.
10
UST Private Equity Investors Fund, Inc.
Portfolio of Investments at October 31, 2002
Acquisition
Principal Amount/Shares Date## Value (Note 1)
- ------------------------------------------------------------------------------------------- --------------
U.S. TREASURY OBLIGATIONS-- 7.53%
$300,000 U.S. Treasury Bills, 1.49%, 11/29/02 (Cost $299,652) $ 299,652
--------------
PRIVATE INVESTMENT FUNDS #, @ -- 81.80%
3.88% Allegra Capital Partners III, LP.................................... 03/96 to 04/00 401,249
1.03% Brentwood Associates Buyout Fund II, LP............................. 01/96 to 04/00 279,993
0.53% Bruckmann, Rosser, Sherrill & Co., LP............................... 12/95 to 04/00 1,650,860
1.16% Morgenthaler Venture Partners IV, LP ............................... 12/95 to 04/00 455,052
1.81% Sevin Rosen Fund V, LP.............................................. 04/96 to 04/00 208,331
2.45% Vanguard V, LP .................................................... 05/96 to 02/99 261,048
--------------
TOTAL PRIVATE INVESTMENT FUNDS (Cost $7,359,913) 3,256,533
--------------
PRIVATE COMPANIES #, @, + -- 0.00%
Common and Preferred Stocks -- 0.00%
Medical Devices -- 0.00%
515,464 Cardiopulmonary Corp., Series D................................ 11/96 --
35,294 Cardiopulmonary Corp., Series F................................ 07/98 --
--------------
TOTAL PRIVATE COMPANIES (Cost $2,150,000).............. --
INVESTMENT COMPANIES -- 2.83%
112,822 Dreyfus Government Cash Management Fund (Cost $112,822) ....... 112,822
--------------
TOTAL INVESTMENTS (Cost $9,922,387) -- 92.16%.............................. 3,669,007
OTHER ASSETS & LIABILITIES (NET) -- 7.84%................................. 311,970
--------------
NET ASSETS -- 100.00%...................................................... $ 3,980,977
==============
+ At October 31, 2002, the Fund owned 5% or more of Company's outstanding
shares thereby making the Company an affiliate as defined by the Investment
Company Act of 1940. Total market value of affiliated securities owned at
October 31, 2002 was $0.
# Restricted as to public resale. Acquired between December 1, 1995 and April
30, 2000. Total cost of restricted securities owned at October 31, 2002
aggregated $9,509,913. Total market value of restricted securities owned at
October 31, 2002 was $3,256,533 or 81.80% of net assets.
## Required disclosure for restricted securities only.
@ Non-income producing security.
Notes to Financial Statements are an integral part of these Financial
Statements.
11
UST Private Equity Investors Fund, Inc.
Statements of Assets and Liabilities
October 31,
2003
Liquidation
Basis 2002
------------ ------------
ASSETS:
Investments in unaffiliated issuers, at value
(Cost $8,002,722 and $7,772,387, respectively) $ 2,788,763 $ 3,669,007
Investments in affiliates, at value (Cost
$2,150,000 and $2,150,000, respectively) -- --
------------ ------------
Investments, at value (Cost $10,152,722 and
$9,9222,387, respectively) (Note 1) 2,788,763 3,669,007
Cash .......................................... 86,455 --
Receivable from investment adviser (Note 2) ... 172,851 479,962
Interest receivable ........................... 24 274
Prepaid expenses .............................. 88 3,148
------------ ------------
Total Assets ............................... 3,048,181 4,152,391
LIABILITIES:
Professional fees payable ..................... 126,104 83,254
Directors' fees payable (Note 2) .............. 66,000 60,000
Management fees payable (Note 2) .............. 7,277 13,714
Administration fees payable (Note 2) .......... 1,076 1,865
Accrued expenses and other payables ........... 22,706 12,581
------------ ------------
Total Liabilities .......................... 223,163 171,414
------------ ------------
NET ASSETS ....................................... $ 2,825,018 $ 3,980,977
============ ============
NET ASSETS consist of:
Accumulated net realized (loss) on
investments .................................. $ (5,948,268) $ (6,143,142)
Net unrealized (depreciation) on investments .. (7,363,959) (6,253,380)
Par value ..................................... 405 405
Paid-in capital in excess of par value ........ 16,136,840 16,377,094
------------ ------------
Total Net Assets ................................. $ 2,825,018 $ 3,980,977
============ ============
Shares of Common Stock Outstanding ($0.01 par
value, 100,000 Authorized).................... 40,463 40,463
============ ============
NET ASSET VALUE PER SHARE ........................ $ 69.82 $ 98.39
============ ============
Notes to Financial Statements are an integral part of these Financial
Statements.
12
UST Private Equity Investors Fund, Inc.
Statements of Operations
Year Ended October 31,
2003 2002 2001
------------ ------------ ------------
INVESTMENT INCOME:
Interest income ....................... $ 11,702 $ 24,522 $ 148,317
Dividend income ....................... 544 13,328 --
------------ ------------ ------------
Total Income ....................... 12,246 37,850 148,317
EXPENSES:
Managing investment adviser fees
(Note 2) ............................. 44,315 105,251 231,165
Directors' fees and expenses
(Note 2) ............................. 66,000 59,000 88,810
Administration fees (Note 2) .......... 12,927 22,705 58,000
Legal fees ............................ 161,419 111,555 100,000
Audit fees ............................ 30,600 30,600 30,600
Printing fees ......................... 35,600 20,600 20,600
Miscellaneous expenses ................ 5,177 10,293 27,972
------------ ------------ ------------
Total Expenses ..................... 356,038 360,004 557,147
Expenses reimbursed by Managing
Investment Adviser (Note 2) .......... (295,510) (224,571) (295,736)
------------ ------------ ------------
Net Expenses ....................... 60,528 135,433 261,411
------------ ------------ ------------
NET INVESTMENT (LOSS) .................... (48,282) (97,583) (113,094)
------------ ------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
ON INVESTMENTS (Note 1)
Net realized gain (loss)
on investments ....................... 2,902 (3,828,797) (2,728,413)
Net change in unrealized (depreciation)
on Investments ....................... (1,110,579) (2,177,099) (8,634,420)
------------ ------------ ------------
NET REALIZED AND UNREALIZED (LOSS) ....... (1,107,677) (6,005,896) (11,362,833)
ON INVESTMENTS ------------ ------------ ------------
Net change in allowance for management
incentive fee ........................... -- 425,788 1,136,372
------------ ------------ ------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............... $ (1,155,959) $ (5,677,691) $(10,339,555)
============ ============ ============
Notes to Financial Statements are an integral part of
these Financial Statements.
13
UST Private Equity Investors Fund, Inc.
Statements of Changes in Net Assets
Year Ended October 31,
2003 2002 2001
------------ ------------ ------------
OPERATIONS:
Net investment (loss) ................. $ (48,282) $ (97,583) $ (113,094)
Net realized gain (loss) on
investments .......................... 2,902 (3,828,797) (2,728,413)
Net change in unrealized (depreciation)
on investments ....................... (1,110,579) (2,177,099) (8,634,420)
Net change in allowance for management
incentive fee ........................ -- 425,788 1,136,372
------------ ------------ ------------
Net decrease in net assets resulting
from operations ...................... (1,155,959) (5,677,691) (10,339,555)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
In excess of net realized gain ........ -- -- (6,993,802)
From net investment income ............ -- (192,934) --
Return of capital ..................... -- (4,283,873) --
------------ ------------ ------------
Total distributions ................ -- 4,476,807) (6,993,802)
------------ ------------ ------------
Net (decrease) in net assets ............. (1,155,959) (10,154,498) (17,333,357)
NET ASSETS:
Beginning of year ..................... 3,980,977 14,135,475 31,468,832
------------ ------------ ------------
End of year (including undistributed
net investment income of $0, $0, and
$694,997 respectively) ............... $ 2,825,018 $ 3,980,977 $ 14,135,475
============ ============ ============
Notes to Financial Statements are an integral part of
these Financial Statements.
14
UST Private Equity Investors Fund, Inc.
Statements of Cash Flows
Year Ended October 31,
2003 2002 2001
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (decrease) in net assets resulting
from operations ...................... $ (1,155,959) $ (5,677,691) $(10,339,555)
Adjustments to reconcile net
(decrease) in net assets resulting
from operations to net cash
provided by operating activities:
Net change in unrealized depreciation
on investments ....................... 1,110,579 2,177,099 8,634,420
Proceeds received from the sale of
investments and distributions received
from private investment funds ........ 490,799 1,276,895 3,126,890
Net realized loss (gain) on
investments .......................... (2,902) 3,828,797 2,728,413
Net change in short-term investments... (718,232) 2,601,877 5,210,170
Decrease (increase) in receivable from
investment adviser ................... 307,111 303,131 (783,093)
Decrease in interest receivable ....... 250 2,089 2,880
Decrease (increase) in prepaid
expenses ............................. 3,060 1,706 (138)
Decrease in incentive fees payable .... -- -- (1,106,346)
Decrease in deferred incentive
fees payable ......................... -- -- (455,814)
Increase (decrease) in directors' fees
payable .............................. 6,000 (7,000) 311
Increase (decrease) in management
fees payable ......................... (6,437) 13,714 (64,155)
Increase (decrease) in other expenses
payable .............................. 52,186 (60,042) 56,051
------------ ------------ ------------
Net cash provided by operating
activities ........................... 86,455 4,460,575 7,010,034
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to shareholders ......... -- (4,476,807) (6,993,802)
------------ ------------ ------------
Net cash used by financing
activities ........................... -- (4,476,807) (6,993,802)
------------ ------------ ------------
Net increase (decrease) in cash ....... 86,455 (16,232) 16,232
Cash at beginning of year ................ -- 16,232 --
------------ ------------ ------------
Cash at end of year ...................... $ 86,455 $ -- $ 16,232
============ ============ ============
Notes to Financial Statements are an integral part of
these Financial Statements.
15
UST Private Equity Investors Fund, Inc.
Financial Highlights--Selected Per Share Data and Ratios
Per Share Operation Performance(1)
Year Ended October 31,
2003 2002 2001 2000 1999
------------ ------------ ------------ ------------ -----------
NET ASSET VALUE, BEGINNING OF
YEAR .................................... $ 98.39 $ 349.34 $ 777.72 $ 995.85 $ 936.84
------------ ------------ ------------ ------------ -----------
INCOME FROM INVESTMENT
OPERATIONS:
Net Investment (Loss) ................. (1.19) (2.41) (2.79) (1.23) (5.85)
Net Realized and Unrealized Gain
(Loss) on Investments ............... (27.38) (148.42) (280.83) 329.79 79.57
Net Change in Allowance for Management
Incentive fee ........................ -- 10.52 28.08 (32.98) (5.63)
------------ ------------ ------------ ------------ -----------
Total from Investment Operations ... (28.57) (140.31) (255.54) 295.58 68.09
------------ ------------ ------------ ------------ -----------
DISTRIBUTIONS:
Net Investment Income ................. -- (4.77) -- -- --
Net Realized Gain ..................... -- -- -- (276.99) (9.08)
In Excess of Net Realized Gain ........ -- -- (172.84) (17.41) --
Paid-in Capital ....................... (105.87) -- (219.31) --
------------ ------------ ------------ ------------ -----------
Total Distributions ................ -- (110.64) (172.84) (513.71) (9.08)
------------ ------------ ------------ ------------ -----------
NET ASSET VALUE, END OF YEAR ............. $ 69.82 $ 98.39 $ 349.34 $ 777.72 $ 995.85
============ ============ ============ ============ ===========
TOTAL NET ASSET VALUE RETURN(2) .......... (29.04)% (40.17)% (42.98)% 35.41% 7.33%
============ ============ ============ ============ ===========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Year (Thousands) ... $ 2,825 $ 3,981 $ 14,135 $ 31,469 $ 40,295
Ratio of Net Operating Expenses to
Average Net Assets ................... 1.60% 1.50% 1.28% 1.54% 1.62%
Ratio of Gross Operating Expenses to
Average Net Assets(3) ................ 9.40% 3.99% 2.72% 1.92% 2.01%
Ratio of Net Investment (Loss) to
Average Net Assets ................... (1.27)% (1.08)% (0.55)% (0.14)% (0.64)%
Interest Expense Ratio ................ N/A N/A N/A 0.01% 0.04%
Portfolio Turnover Rate ............... 0% 0% 0% 5% 10%
(1) For a share outstanding throughout each year.
(2) 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
Company during the period, and assumes dividends and distributions, if any,
were reinvested. The Company's shares were issued in a private placement
and are not traded. Therefore, market value total investment return is not
presented.
(3) Expense ratio before waiver of fees and reimbursement of expenses by
Managing Investment Adviser.
Notes to Financial Statements are an integral part of
these Financial Statements.
16
UST PRIVATE EQUITY INVESTORS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
Note 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 a
non-diversified, closed-end management investment company that 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 Company's significant accounting
policies. Generally accepted accounting principles in the United States require
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
these estimates.
As a result of the Board of Directors adopting the Plan of Liquidation on
October 22, 2003, the Company adopted the liquidation basis of accounting as of
October 31, 2003. See Note 5 - Subsequent Event: Plan of Liquidation and
Dissolution. The liquidation basis of accounting requires that assets and
liabilities be stated at their estimated fair value and settlement amounts.
Accordingly, the portfolio of investments and the statement of assets and
liabilities as of October 31, 2003 reflect assets and liabilities based on their
estimated fair values and estimated settlement amounts. Changes in the estimated
liquidation value of assets and liabilities subsequent to October 31, 2003 will
be recognized in the period in which such changes are known.
(a) Portfolio valuation:
The Company values portfolio securities quarterly and at such other
times as, in the Board of Directors' view, circumstances warrant.
Investments in securities for which market quotations are readily available
generally will be valued at the last sale price on the date of valuation
or, if no sale occurred, at the mean of the latest bid and ask prices;
provided that, as to such securities that may have legal, contractual or
practical restrictions on transfer, a discount of 10% to 40% from the
public market price will be applied. Securities for which no public market
exists and other assets will be valued at fair value as determined in good
faith by the Managing Investment Adviser (as defined below) or a committee
of the Board of Directors or both under the supervision of the Board of
Directors pursuant to certain valuation procedures summarized below.
Securities having remaining maturities of 60 days or less from the date of
purchase are valued at amortized cost.
The value for securities for which no public market exists is
difficult to determine. Generally, such investments will be valued on a
"going concern" basis without giving effect to any disposition costs. There
is a range of values that is reasonable for such investments at any
particular time. Initially, direct investments are valued based upon their
original cost, until developments provide a sufficient basis for use of a
valuation other than cost. Upon the occurrence of developments providing a
sufficient basis for a change in valuation, direct investments will be
valued by the "private market" or "appraisal" methods of valuation. The
private market method shall only be used with respect to reliable third
party transactions by sophisticated, independent investors. The appraisal
method shall be based upon such factors affecting the investee such as
earnings, net worth, reliable private sale prices of the investee's
securities, the market prices for similar securities of comparable
companies, an assessment of the investee's future prospects or, if
appropriate, liquidation value. The values for the investments referred to
in this paragraph will be estimated regularly by the Managing Investment
Adviser or a committee of the Board of Directors under the supervision of
the Board of Directors and, in any event, not less frequently than
quarterly. However, there can be no assurance that such values will
represent the return that might ultimately be realized by the Company from
the investments.
The valuation of the Company's Private Investment Funds is based upon
its pro-rata share of the value of the net assets of a Private Investment
Fund as determined by such Private Investment Fund, in accordance with its
partnership agreement, constitutional or other documents governing such
valuation, on the valuation date. If
17
such valuation with respect to the Company's investments in Private
Investment Funds is not available by reason of timing or other event on the
valuation date, or are deemed to be unreliable by the Managing Investment
Adviser, the Managing Investment Adviser, under supervision of the Board,
shall determine such value based on its judgment of fair value on the
appropriate date, less applicable charges, if any.
On December 3, 2003, the Company sold its remaining interest in the
Private Investment Fund Bruckmann, Rosser, Sherrill & Co., LP ("BRS") back
to BRS. BRS repurchased the Company's interest in BRS for $885,000 and
assumed all of the Company's commitments with respect to its investment in
BRS. The Company has reflected the value of this investment on the October
31, 2003 Portfolio of Investments at this $885,000 sales price. On December
5, 2003, the Company sold its remaining interest in Cardiopulmonary Corp.
for one dollar to an unrelated third party.
The Company executed a "Purchase and Sale Agreement" on October 22,
2003 to sell its Private Investment Fund interests to Landmark Equity
Partners X, L.P. and Landmark IAM Partnership, L.P (the "Purchasers"). This
Purchase and Sale Agreement was amended (the "Agreement") to reflect the
impact of the December 3, 2003 sale of BRS. The sales price under the
Agreement is $832,000, with a reduction for any distributions received by
the Company subsequent to June 30, 2003 from the five remaining Private
Investment Funds. The Company has received distributions totaling $58,943
from the five remaining Private Investment Funds from July 1, 2003 through
October 31, 2003, resulting in an adjusted sales price of $773,057. The
Company has reflected this adjusted sales price as the estimated fair value
of the remaining five Private Investment Funds as of October 31, 2003 and
has allocated this value among each of the five individual Private
Investment Funds based upon their respective valuations at June 30, 2003.
Because of the inherent uncertainty of valuation and the general
illiquidity of the assets being sold, the values may differ significantly
from the values that would have been used had a ready market for these
securities existed, and the differences could be material. The Purchasers
are not related parties to the Company.
The Agreement must be approved by a shareholder vote of at least
two-thirds of the Company's shares issued and outstanding. See Note 5 -
Subsequent Event: Plan of Liquidation and Dissolution.
At October 31, 2003 and October 31, 2002, market quotations were not
readily available for securities valued at $1,658,057 or 58.70% of net
assets and $3,256,533 or 81.80% of net assets, respectively. Such
securities were valued by the Managing Investment Adviser, under the
supervision of the Board of Directors. Because of the inherent uncertainty
of valuation, the estimated values may differ significantly from the values
that would have been used had a ready market for the securities existed,
and the differences could be material.
(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
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 Company enters into agreements to purchase securities and to
resell them at a future date. It is the Company's policy to take receipt of
securities purchased and to ensure that the market value of the collateral
including accrued interest is sufficient to protect the Company 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 Company may be delayed or
limited.
18
(d) 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.
Dividends from net investment income are declared and paid at least
annually. Any net realized capital gains, unless offset by any available
capital loss carryforwards, are distributed to shareholders at least
annually. Dividends and distributions are determined in accordance with
federal income tax regulations that may differ from generally accepted
accounting principles. These "book/tax" differences are either considered
temporary or permanent and may be reclassified within the capital accounts
based on their federal tax basis treatment. The Company has reclassified
certain amounts of net investment loss and net realized loss on investments
to paid-in capital due to net operating losses and investment partnership
adjustments.
The Company has an unused capital loss carryforward of approximately
$6,986,206 available for income tax purposes, to be applied against future
net realized gains, if any, after October 31, 2003. If not applied,
$2,261,586 of the carryover will expire in 2009, $3,881,556 will expire in
2010, and $843,064 will expire in 2011. At October 31, 2002, the Company
had an unused capital loss carryforward of approximately $6,143,142
available for income tax purposes, to be applied against future net
realized gains, if any, after October 31, 2002. If not applied, $2,261,586
of the carryover will expire in 2009 and $3,881,556 will expire in 2010.
Upon liquidation and dissolution, the unused capital loss carryforward will
expire. See Footnote 5.
The tax character of distributions paid may differ from the character
of distributions shown on the statement of changes in net assets due to tax
treatment of certain distributions. The tax character of distributions paid
during the fiscal years ended October 31, 2003 and 2002 were as follows:
2003 2002
---------- ------------
Ordinary Income $ -- $ 192,934
Return of Capital -- 4,283,873
---------- ------------
Total $ -- $ 4,476,807
---------- ------------
The cost of the Private Investment Funds for federal tax purposes is
based on amounts reported to the Company on Schedule K-1 from the Private
Investment Funds. As of October 31, 2003, the Company has not received
information to determine the tax cost of the Private Investment Funds as of
October 31, 2003, and therefore the Company's unrealized gain or loss on a
tax basis. The cost basis for federal tax purposes of Company shares owned
by its shareholders is determined separately based upon previous Company
distributions and is not affected by the delay in receiving information
from the Private Investment Funds. At both October 31, 2003 and October 31,
2002, the cost and unrealized loss for federal tax purposes of the Private
Companies is $2,150,000. At October 31, 2003 the cost for federal tax
purposes of the Agency Obligations and the Investment Companies is
$1,099,884 and $30,822, respectively, both resulting in no unrealized gain
or loss. At October 31, 2002, the cost of the U.S. Treasury Obligations and
Investment Companies was $299,652 and $112,822, respectively, both
resulting in no unrealized gain or loss.
Note 2 -- Investment Advisory Fee, Administration Fee and Related Party
Transactions
Prior to June 1, 2003, and pursuant to an Investment Management
Agreement ("Agreement"), United States Trust Company of New York ("U.S.
Trust NY") and U.S. Trust Company ("U.S. Trust") served as the Managing
Investment Adviser to the Company. Under the Agreement, for the services
provided, the Managing Investment Adviser is entitled to receive a
management fee at the annual rate of 1.50% of the net assets of the
Company, determined as of the end of each fiscal quarter, that are invested
or committed to be invested in Private Companies or Private Investment
Funds and equal to an annual rate of 0.50% of the net assets of the
Company, determined as of the end of each fiscal quarter, that are invested
in short-term investments and are
19
not committed to Private Companies or Private Investment Funds. Prior to
June 1, 2003, and pursuant to a sub-advisory agreement (the "Sub-Advisory
Agreement") among the Company, U.S. Trust NY, U.S. Trust and U.S. Trust
Company, N.A., U.S. Trust Company, N.A. served during the reporting period
as the investment sub-adviser to the Company and received an investment
management fee from the Managing Investment Adviser. As of October 31, 2003
and October 31, 2002, $7,277, and $13,714, respectively, were payable to
the Managing Investment Adviser.
In addition to the management fee, the Company has agreed to pay the
Managing Investment Adviser 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, the Managing Investment
Adviser will be required to repay the Company all or a portion of the
incentive fee previously paid. During the years ended October 31, 2003,
2002, and 2001, the Company recouped $0, $425,788, and $1,136,372,
respectively, of incentive fees which had been paid by the Company to the
Managing Investment Adviser in prior years.
U.S. Trust NY is a New York state-chartered bank and trust company and
a member bank of the Federal Reserve System. Effective June 1, 2003, U.S.
Trust merged into U.S. Trust Company, N.A., a nationally chartered bank.
Pursuant to an assumption agreement dated June 1, 2003, U.S. Trust Company,
N.A. assumed the duties and obligations of U.S. Trust under the Agreement.
Pursuant to a termination agreement among the Company, U.S. Trust NY, U.S.
Trust and U.S. Trust Company, N.A., the Sub-Advisory Agreement terminated
on June 1, 2003. As a result, U.S. Trust Company, N.A., acting through its
registered investment advisory division, U.S. Trust Company, N.A. Asset
Management Division, now serves with U.S. Trust NY, acting through its
registered investment advisory division, U.S. Trust - New York Asset
Management Division, as Managing Investment Adviser to the Company with no
investment sub-adviser. The merger had no impact on the management or
operations of the investment advisory functions performed for the Company,
and did not constitute a change in control. U.S. Trust NY and U.S. Trust
Company, N.A. are each a wholly-owned subsidiary of U.S. Trust Corporation,
a registered bank holding company. U.S. Trust Corporation is a wholly-owned
subsidiary of The Charles Schwab Corporation.
PFPC, Inc. ("PFPC") provides administrative and accounting services to
the Company pursuant to an Administration and Accounting Services
Agreement. PFPC Trust Company provides custodian services to the Company
pursuant to a Custodian Services Agreement. Also, PFPC provides transfer
agency services to the Company pursuant to a Transfer Agency Agreement. For
the services provided to the Company by PFPC and its affiliates, PFPC is
entitled to an annual fee of 0.02% of average net assets plus reimbursement
of reasonable expenses, subject to a base fee, payable monthly.
The Managing Investment Adviser has voluntarily agreed to waive or
reimburse other operating expenses of the Company, exclusive of management
fees, to the extent they exceed 0.42% of the Company's average net assets,
and will waive or reimburse, exclusive of management fees, all such
expenses with respect to that portion of the Company's net assets,
determined as of the end of each fiscal quarter, that is invested in
short-term investments. This reimbursement amounted to $295,510, $224,571,
and $295,756 for the years ended October 31, 2003, October 31, 2002, and
October 31, 2001, respectively.
Each director of the Company receives an annual fee of $9,000, plus a
meeting fee of $1,500 for each meeting attended, and is reimbursed for
expenses incurred for attending meetings. No person who is an officer,
director or employee of the Managing Investment Adviser, or U.S. Trust
Corporation or its subsidiaries, who serves as an officer, director or
employee of the Company receives any compensation from the Company.
Note 3 -- Purchases and Sales of Securities
Excluding short-term investments, the Company's purchases and sales of
securities for the years ended October 31, 2003, October 31, 2002 and October
31, 2001 were as follows:
20
Year Ended October 31, Purchases ($) Proceeds Received ($)
- ---------------------- ------------- ---------------------
2003 -- 490,799
2002 -- 1,276,895
2001 -- 1,755,513
Note 4 -- Transactions with Affiliated Portfolio Companies
An affiliated company is a company in which the Company has ownership
of over 5% of the voting securities. The Company did not receive dividend
or interest income from affiliated companies during the years ended October
31, 2003 and October 31, 2002. Transactions with companies, which are or
were affiliates were as follows:
For the Year Ended October 31, 2003
Shares Shares
Held at Realized Held at Cumulative
October 31, October 31, Conversion Conversion Gain October 31, Value
Name of Investment 2003 2002 Value Acquisitions Dispositions (Loss) 2003 (Note 1)
- ---------------------------------------------------------- ------------ ------------ ---------------------------------------
Affiliated Companies
Cardiopulmonary Corp.,Inc.,
Series D Preferred 515,464 $ -- $ -- $ 2,000,000 $ -- -- $ --
Cardiopulmonary Corp.,Inc.,
Series F Preferred 35,294 -- -- 150,000 -- -- --
Cardiopulmonary Corp.,Inc.,
Common Stock -- -- 2,150,000 -- -- 550,758 --
------------------------------------------------------- ------------
Total Affiliated Companies $ -- $ 2,150,000 $ 2,150,000 $ -- $ --
For the Year Ended October 31, 2003
Shares Shares
Held at Realized Held at Cumulative
October 31, October 31, Conversion Conversion Gain October 31, Value
Name of Investment 2003 2002 Value Acquisitions Dispositions (Loss) 2003 (Note 1)
- ---------------------------------------------------------- ------------ ------------ ---------------------------------------
Affiliated Companies
Cardiopulmonary Corp.,Inc.,
Series D Preferred 515,464 $ -- $ -- $ -- $ -- 515,464 $ --
Cardiopulmonary Corp.,Inc.,
Series F Preferred 35,294 -- -- -- -- 35,294 --
Total Affiliated Companies $ -- $ -- $ -- $ -- $ --
Note 5 -- Subsequent Event: Plan of Liquidation and Dissolution
The Company held a Special Meeting of Shareholders on December 23, 2003 for
the purpose of seeking shareholder approval of the Purchase and Sale Agreement
(the "Agreement" -- see Note 1(a)) and a Plan of Liquidation and Dissolution
(the "Plan"). The Agreement and Plan must be approved by a shareholder vote of
at least two-thirds of the Company's shares issued and outstanding. Under the
Plan, the Company will liquidate its assets, make a provision for the
satisfaction of its remaining obligations, and make a final liquidating
distribution to its shareholders.
At the December 23, 2003 Special Meeting of Shareholders, 53% of the
outstanding shares of the Company were represented by proxy vote. The Company
adjourned the Special Meeting of Shareholders until January 21, 2004 in order to
permit the further solicitation of proxy votes.
The Company has reflected in the October 31, 2003 financial statements
accrued liquidation expenses of $65,000 which were estimated to be incurred as
part of its implementation of the Plan. The liquidation expenses were reimbursed
to the Company by the Managing Investment Adviser as part of the voluntary
reimbursement described in Note 2.
Unaudited
At the January 21, 2004 Special Meeting of Shareholders, more than
two-thirds of the outstanding shares of the Company were represented by proxy
vote and the Agreement and Plan were approved. Accordingly, as of this date, the
Company is pursing its plan to liquidate its assets, satisfy its remaining
obligations, and make a final liquidating distribution to shareholders.
21
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures. As of October 31,
2003 (the end of the period covered by this report), the Company's principal
executive officers and principal financial officer evaluated the effectiveness
of the Company's disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and have concluded that, based on such
evaluation, the Company's disclosure controls and procedures were adequate and
effective to ensure that material information relating to the Company was made
known to them by others within those entities.
(b) Changes in Internal Controls. There were no significant changes in the
Company's internal controls over financial reporting or in other factors that
could significantly affect these controls subsequent to the date of their
evaluation, nor were there any significant deficiencies or material weaknesses
in the Company's internal controls over financial reporting. Accordingly, no
corrective actions were required or undertaken.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Managers and Officers
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, 2003.
Served in Present Principal Occupation During Past 5 Years
Name and Age Position Capacity Since and Other Affiliations
- --------------------- ------------------- ------------------ ----------------------------------------
David I. Fann, 39 President and July 20, 2000 Mr. Fann is a Managing Director of U.S.
Co-Chief Executive Trust Company, N.A. Mr. Fann is a
Officer director of Curon Medical, Inc. (Nasdaq:
CURN). Mr. Fann also serves as
President and Co-Chief Executive Officer
of Excelsior Private Equity Fund II,
Inc., Excelsior Venture Partners III,
LLC, and Excelsior Venture Investors
III, LLC.
Douglas A. Lindgren, Co-Chief Executive July 20, 2000 Mr. Lindgren is a Managing Director of
42 Officer and Chief U.S. Trust Company. Mr. Lindgren also
Investment Officer serves as Co-Chief Executive Officer of
Excelsior Private Equity Fund II, Inc.,
Excelsior Venture Partners III, LLC, and
Excelsior Venture Investors III, LLC,
Manager of Excelsior Directional Hedge
Fund of Funds, LLC, and Chairman of the
Board of Excelsior Buyout Investors, LLC
and Excelsior Absolute Return Fund of
Funds, LLC.
22
Robert Aufenanger, 50 Treasurer June 3, 2003 Mr. Aufenanger is a Senior Vice
President of U.S. Trust Company, N.A.
Prior to joining U.S. Trust in April
2003, Mr. Aufenanger worked as a
consultant to various clients in the
fund industry and prior to this was
Chief Financial Officer for Icon
Holdings Corp. Mr. Aufenanger also
serves as Treasurer of Excelsior Private
Equity Fund II, Inc., Excelsior Venture
Partners III, LLC, and Excelsior Venture
Investors III, LLC, and Chief Financial
Officer of Excelsior Directional Hedge
Fund of Funds, LLC, Excelsior Buyout
Investors, LLC, and Excelsior Absolute
Return Fund of Funds, LLC.
Lee A. Gardella, 36 Vice President July 20, 2000 Mr. Gardella is a Senior Vice President
of U.S. Trust Company, N.A. Mr. Gardella
also serves as Vice President of
Excelsior Private Equity Fund II, Inc.,
Excelsior Venture Partners III, LLC,
Excelsior Venture Investors III, LLC,
and Excelsior Absolute Return Fund of
Funds, LLC.
James F. Rorer, 33 Vice President July 20, 2000 Mr. Rorer is a Vice President of U.S.
Trust Company, N.A. Prior to joining
U.S. Trust in May 1999, he worked at
Bain & Company. Mr. Rorer also serves as
Vice President of Excelsior Private
Equity Fund II, Inc., Excelsior Venture
Partners III, LLC, Excelsior Venture
Investors III, LLC, and Excelsior Buyout
Investors, LLC.
Cynthia Englert, 39 Chief September 19, 2001 Ms. Englert is a Vice President of U.S.
Administrative Trust Company, N.A. Prior to joining
Officer and U.S. Trust in August 2001, Ms. Englert
Secretary held positions in finance at Whitney &
Co. and Greenwich Capital Markets, Inc.
Ms. Englert also serves as Chief
Administrative Officer and Secretary of
Excelsior Private Equity Fund II, Inc.,
Excelsior Venture Partners III, LLC, and
Excelsior Venture Investors III, LLC,
and Secretary of Excelsior Buyout
Investors, LLC and Excelsior Absolute
Return Fund of Funds, LLC.
John C. Hover II, 60 Director and May 26, 2000 Mr. Hover was an Executive Vice
Chairman of the President of U.S. Trust Company (retired
Board since 1998). Mr. Hover also serves as
chairman of the board of directors or
managers of Excelsior Private Equity
Fund II, Inc., Excelsior Venture
Partners III, LLC, and Excelsior Venture
Investors III, LLC.
23
Gene M. Bernstein, 56 Director and May 26, 2000 Mr. Bernstein is Director of NIC Holding
member of the Audit Corp; Dean of the Skodneck Business
and Valuation Development Center at Hofstra University
Committees from 2000-2001; prior to this Mr.
Bernstein was President and Vice
Chairman at Northville Industries, a
petroleum marketing, distribution,
trading and storage company and
wholly-owned subsidiary of NIC Holding
Corp. Mr. Bernstein also serves as a
director or manager of Excelsior Private
Equity Fund II, Inc., Excelsior Venture
Partners III, LLC, Excelsior Venture
Investors III, LLC, and Excelsior
Directional Hedge Fund of Funds, LLC.
Stephen V. Murphy, 58 Director and May 26, 2000 Mr. Murphy is President of S.V. Murphy &
member of the Audit Co., an investment banking firm. Mr.
and Valuation Murphy also serves as a director or
Committees manager of Excelsior Private Equity Fund
II, Inc., Excelsior Venture Partners
III, LLC, Excelsior Venture Investors
III, LLC, and Excelsior Directional
Hedge Fund of Funds, LLC.
Victor F. Imbimbo, Director and May 26, 2000 Since October 2002, Mr. Imbimbo has been
Jr., 51 member of the Audit head of healthcare marketing in the
and Valuation United States for TBWA, a global
Committees marketing agency. Prior to this, he was
with Bedrock Communications, Inc., a
consulting company addressing the merger
of traditional and digital
communications solutions. From
1995-2002, he also served as
President/CEO of Health Excellence,
Inc., which is in the business of
conducting clinical trials. Mr. Imbimbo
also serves as a director or manager of
Excelsior Private Equity Fund II, Inc.,
Excelsior Venture Partners III, LLC,
Excelsior Venture Investors III, LLC,
and Excelsior Directional Hedge Fund of
Funds, LLC.
Audit Committee Financial Expert
Mr. Murphy is the audit committee financial expert as defined by SEC rules
and is "independent," as the term is used in Item 7(d)(3)(iv) of Schedule 14A
under the Securities Exchange Act of 1934.
Code of Ethics
As of the end of the period, October 31, 2003, the Company has adopted a
code of ethics, which complies with the criteria provided in SEC rules, and
applies to its principal executive officer, the principal financial officer and
any other officers who serve a similar function. A copy of the code of ethics is
filed as Exhibit 14 to this Form 10-K.
Section 16(a) Beneficial Ownership Reporting Compliance
24
Under the federal securities laws, the Company's managers and executive
officers and any persons holding more than 10% of the Company's outstanding
units are required to report their ownership of units and any changes in the
ownership of the Company's units to the Company and the Securities and Exchange
Commission. To the best of the Company's knowledge, the Company's directors and
executive officers have satisfied these filings.
ITEM 11. EXECUTIVE COMPENSATION.
The Company has no full-time employees. Pursuant to the Investment
Agreements, the Managing Investment Adviser employ and compensate all of the
personnel of the Company, and also furnish 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 will pay a management fee based upon average quarterly net
assets and an incentive fee based in part on a percentage of realized capital
gains of the Company.
Directors receive compensation of $9,000 annually and $1,500 per meeting
attended plus reasonable expenses. The Company does not have a stock option
plan, other long-term incentive plan, retirement plan or other retirement
benefits.
The following chart provides certain information about the fees received by
the directors in the fiscal year ended October 31, 2003.
Aggregate Total Compensation
Compensation From the Company
From And Fund Complex *
Name of Person/Position The Company Paid to Directors
- ----------------------- ------------ -------------------
John C. Hover II
Manager $ 19,500 $ 53,750 (4 Funds)
Gene M. Bernstein
Manager $ 19,500 $ 74,250 (5 Funds)
Stephen V. Murphy
Manager $ 19,500 $ 74,250 (5 Funds)
Victor F. Imbimbo, Jr.
Manager $ 19,500 $ 74,250 (5 Funds)
* The "Fund Complex" consists of UST Private Equity Investors Fund, Inc.,
Excelsior Private Equity Fund II, Inc., Excelsior Venture Partners III,
LLC, Excelsior Venture Investors III, LLC and Excelsior Directional Hedge
Fund of Funds, LLC. The parenthetical number represents the number of
investment companies (including the Company) from which such person
receives compensation that is considered a part of the same Fund Complex as
the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
As of October 31, 2003, certain beneficial owners, the directors, the chief
executive officer and the directors and executive officers as a group held of
record the following shares. Except as set forth below, to the Company's
knowledge and based solely on a review of Forms 13D and 13G filed with the
Securities and Exchange Commission (or the lack of such filings, as the case may
be), no other person beneficially owned more than 5% of the Company's shares.
25
Amount and Nature
of Beneficial
Title of Class Name and Address of Beneficial Owner Ownership Percent of Class
- -------------- -------------------------------------------- ----------------- ----------------
Common Shares John C. Hover II 15 shares *
c/o United States Trust Company of New York,
114 West 47th Street, New York, NY 10036
1532.
Common Shares Gene M. Bernstein 200 shares/(1)/ *
c/o United States Trust Company of New York,
114 West 47th Street, New York, NY 10036
1532.
Common Shares Stephen V. Murphy 50 shares *
c/o United States Trust Company of New York,
114 West 47th Street, New York, NY 10036
1532.
Common Shares David I. Fann 21 shares *
Palo Alto Square, 9th Floor, 3000 Camino
Real, Palo Alto, CA 94306.
Common Shares Douglas A. Lindgren 25 shares *
/o U.S. Trust Company, 225 High Ridge Road,
Stamford, CT 06905.
Common Shares Directors and executive officers
as a group (10 persons) 311 shares *
* Less than one percent.
(1) Includes 60 shares beneficially owned by Mr. Bernstein's wife for which Mr.
Bernstein disclaims beneficial ownership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements
The financial statements listed in Item 8, "Financial Statements and
Supplementary Data," beginning on page 9 are filed as part of this
report.
2. Financial Statement Schedules
The financial statement schedules listed in Item 8, "Financial
Statements and Supplementary Data," beginning on page 9 are filed as
part of this report.
3. Exhibits
26
Exhibit Number Description
- -------------- ---------------------------------------------------------------
(3)(i) Articles of Incorporation of the Company/1/
(3)(ii) By-Laws of the Company/1/
(10)(a) Form of Management Agreement/2/
(10)(b) Form of Transfer Agency and Custody Agreement/3/
(10.1) Investment Sub-Advisory Agreement dated as of December 21,
2001, among the Company, United States Trust Company of New
York, U.S. Trust Company and U.S. Trust Company, N.A./4//
(10.2) Administration and Accounting Services Agreement dated January
1, 2002, between the Company and PFPC Inc./4/
(10.2) Custodian Services Agreement dated January 1, 2002, between the
Company and PFPC Trust Company./4/
(10.3) Transfer Agency Services Agreement dated February 1, 2002,
between the Company and PFPC Inc./4/
(14) Code of Ethics
(31.1) Certification of Co-Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
(31.2) Certification of Co-Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
(31.3) Certification of Treasurer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
(32.1) Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
None.
SIGNATURES
- --------
(/1/) Incorporated by reference to the Company's Registration Statement on Form
N-2 (File No. 033-84290), filed with the Securities and Exchange
Commission on September 22, 1994.
(/2/) Incorporated by reference to the Company's Definitive Proxy Statement for
the 2000 Annual Meeting of Stockholders, filed with the Securities and
Exchange Commission on May 25, 2000.
(/3/) Incorporated by reference to the Company's Registration Statement on Form
N-2/A (File No. 033-84290) filed with the Securities and Exchange
Commission on November 1, 1994.
(/4/) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
as filed with the Securities and Exchange Commission on March 18, 2002.
27
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, 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: January 29, 2004 By: /s/DOUGLAS A. LINDGREN
----------------------------------------
Douglas A. Lindgren, Co-Chief Executive
Officer and Chief Investment Officer
(principal executive officer)
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:
Signature Title Date
/s/ DAVID I. FANN President and Co-Chief Executive Officer
- ---------------------------- (principal executive officer) January 29, 2004
David I. Fann
Co-Chief Executive Officer and Chief Investment
/s/ DOUGLAS A. LINDGREN Officer
- ---------------------------- (principal executive officer) January 29, 2004
Douglas A. Lindgren
/s/ ROBERT F. AUFENANGER Treasurer
- ---------------------------- (principal financial and accounting officer) January 29, 2004
Robert F. Aufenanger
/s/ JOHN C. HOVER II
- ---------------------------- Chairman of the Board and Director January 29, 2004
John C. Hover II
/s/ GENE M. BERNSTEIN
- ---------------------------- Director January 29, 2004
Gene M. Bernstein
/s/ STEPHEN V. MURPHY
- ---------------------------- Director January 29, 2004
Stephen V. Murphy
/s/ VICTOR F. IMBIMBO, JR.
- ---------------------------- Director January 29, 2004
Victor F. Imbimbo, Jr
28