SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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by Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
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UST PRIVATE EQUITY INVESTORS FUND, INC.
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UST PRIVATE EQUITY INVESTORS FUND, INC.
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036-1532
Dear Shareholder:
You are cordially invited to attend the Annual Meeting (the
"Meeting") of Shareholders of Excelsior Private Equity Fund II, Inc. (the
"Company") to be held on Monday, May 8, 2000 at 10:00 a.m., Eastern time,
at the offices of United States Trust Company of New York, 114 West 47th
Street, New York, New York 10036.
On January 12, 2000, The Charles Schwab Corporation and U.S.
Trust Corporation, the parent corporation of the United States Trust
Company of New York, entered into a definitive merger agreement. Following
the merger, U.S. Trust Corporation will be a wholly owned subsidiary of The
Charles Schwab Corporation. The merger is anticipated to close by July
2000, but is subject to a number of conditions including regulatory and
shareholder approvals. The merger may be considered an assignment under the
Investment Company Act of 1940 and may have the effect of terminating the
existing investment advisory agreement between UST Private Equity
Investors Fund, Inc. and the United States Trust Company of New York,
which would result in termination of the Agreement. Consequently, the Board
of Directors of UST Private Equity Investors Fund, Inc. has called an
annual meeting of the shareholders to approve the following items.
At the Meeting, shareholders of the Company will be asked to
vote on the following matters: (1) approval or disapproval of a new
investment advisory agreement between the Company and United States Trust
Company of New York, (2) election of directors and (3) ratification or
rejection of the selection of Ernst & Young LLP as the Company's
independent accountants for the fiscal year ending October 31, 2000.
Whether or not you plan to be present at the Meeting, your vote
is needed. If you do not plan to be present at the Meeting, please
complete, sign and return the enclosed proxy card promptly. A postage paid
envelope is enclosed for this purpose.
We look forward to seeing you at the Meeting or receiving your
proxy card so your shares may be voted at the Meeting.
Sincerely yours,
David I. Fann
President and Chief Executive Officer
SHAREHOLDERS ARE URGED TO SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE.
[PRELIMINARY COPY]
UST PRIVATE EQUITY INVESTORS FUND, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
March___, 2000
To the Shareholders of UST Private Equity Investors Fund, Inc.:
The Annual Meeting of shareholders of UST Private Equity
Investors Fund, Inc. (the "Company") will be held on Monday, May 8, 2000 at
10:00 a.m. Eastern time, at the offices of United States Trust Company of
New York, 114 West 47th Street, New York, New York 10036.
The meeting will be held for the following purposes:
(1) to approve or disapprove a new investment advisory
agreement between the Company and United States Trust
Company of New York;
(2) to elect each of Mr. Bernstein, Mr. Hover, Mr. Murphy and
Mr. Imbimbo as directors of UST Private Equity Investment
Fund, Inc.;
(3) to ratify or reject the selection of Ernst & Young LLP as
the Company's independent accountants for the fiscal year
ending October 31, 2000; and
(4) the transaction of such other business as may properly
come before the Meeting or any adjournments thereof.
The proposals referred to above are discussed in the Proxy
Statement attached to this Notice. Each shareholder is invited to attend
the Annual Meeting of Shareholders in person. Shareholders of record at
the close of business on March 9, 2000 have the right to vote at the
Meeting. If you cannot be present at the Meeting, we urge you to fill in,
sign and promptly return the enclosed proxy in order that the Meeting can
be held and a maximum of shares may be voted.
By Order of the Board of Directors
of UST Private Equity Investors Fund, Inc.
Ronald A. Schwartz
Secretary
WE NEED YOUR PROXY VOTE IMMEDIATELY
A SHAREHOLDER MAY THINK HIS OR HER VOTE IS NOT IMPORTANT, BUT IT IS VITAL.
BY LAW, THE ANNUAL MEETING OF SHAREHOLDERS OF THE COMPANY SCHEDULED FOR
MAY 8, 2000 WILL HAVE TO BE ADJOURNED WITHOUT CONDUCTING ANY BUSINESS IF
LESS THAN A MAJORITY OF THE SHARES ELIGIBLE TO VOTE ARE REPRESENTED AT THE
COMPANY'S MEETING. IN THAT EVENT, THE COMPANY WOULD CONTINUE TO SOLICIT
VOTES IN AN ATTEMPT TO ACHIEVE A QUORUM. CLEARLY, YOUR VOTE COULD BE
CRITICAL IN ALLOWING THE COMPANY TO HOLD THE MEETING AS SCHEDULED, SO
PLEASE RETURN YOUR PROXY CARD IMMEDIATELY.
[PRELIMINARY COPY]
UST PRIVATE EQUITY INVESTORS FUND, INC.
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
PROXY STATEMENT
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of UST Private Equity
Investors Fund, Inc. (the "Company"). The Annual Meeting will be held at
the offices of United States Trust Company of New York, 114 West 47th
Street, New York, New York 10036 on Monday, May 8, 2000 at 10:00 a.m.
Eastern time (the "Meeting"). This Proxy Statement and the accompanying
proxy card are first being sent to Shareholders on or about March __, 2000.
It is expected that the solicitation of proxies will be
primarily by mail. The Company's officers, investment adviser and
administrator may also solicit proxies by telephone, telegraph, facsimile,
personal interview or the internet. United States Trust Company of New York
will bear the proxy solicitation costs of approximately $__________, and
all costs in connection with the Meeting. Any shareholder giving a proxy
may revoke it at any time before it is exercised by submitting to the
Company a written notice of revocation or a subsequently executed proxy or
by attending the Meeting and electing to vote in person.
The following summarizes the proposals to be voted on at the
Meeting.
Proposal
1. To approve or disapprove a new investment advisory agreement between
the Company and United States Trust Company of New York to take effect
upon the merger of The Charles Schwab Corporation and U.S. Trust
Corporation.
2. To elect each of Mr. Bernstein, Mr. Hover, Mr. Murphy and Mr. Imbimbo
as directors of UST Private Equity Investors Fund, Inc.
3. To ratify or reject the selection of Ernst & Young LLP as the
Company's independent accountants for the fiscal year ending October
31, 2000.
A Proxy is enclosed with respect to the shares you own in the
Company. If the Proxy is executed properly and returned, the shares
represented by it will be voted at the Meeting in accordance with the
instructions thereon. Each full share is entitled to one vote and each
fractional share to a proportionate fractional vote. If you do not expect
to be present at the Meeting and wish your shares to be voted, please
complete the enclosed Proxy and mail it in the enclosed reply envelope.
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THE BOARD OF UST PRIVATE EQUITY INVESTORS FUND, INC. RECOMMENDS A VOTE IN
FAVOR OF EACH PROPOSAL DESCRIBED IN THIS PROXY STATEMENT.
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INTRODUCTION
The Company has been organized as a Maryland corporation to
engage in the business of a closed-end management company that has elected
to be treated as a business development company under the Investment
Company Act of 1940, as amended (the "1940 Act"). This meeting constitutes
an annual meeting of shareholders that has been called to consider
proposals relating to the following transaction.
On January 12, 2000, The Charles Schwab Corporation ("Schwab")
and U.S. Trust Corporation entered into a definitive agreement to merge
(the "Merger"). Through its principal subsidiary Charles Schwab & Co.,
Inc., Schwab is the nation's fourth largest financial services firm and the
nation's largest electronic brokerage firm, in each case measured by
customer assets. At December 31, 1999, Schwab served 6.6 million active
accounts with $725 billion in customer assets through 340 branch offices,
four regional customer telephone service centers and automated telephonic
and online channels. Approximately 30% of Schwab's customer assets and
approximately 13% of its customer accounts are managed by 5,800
independent, fee-based investment advisors served by Schwab's institutional
investor segment. After the Merger, U.S. Trust Corporation will be a wholly
owned subsidiary of Schwab. The merger is anticipated to close by July
2000; however, it is subject to a number of conditions including certain
regulatory and shareholder approvals.
United States Trust Company of New York ("U.S. Trust" or the
"Investment Adviser") is the managing investment adviser of the Company and
is responsible for the Company's private equity investments. U.S. Trust, a
subsidiary of U.S. Trust Corporation, intends to continue to serve as the
investment adviser to the Company after the Merger. U.S. Trust has advised
the Company that it does not have any plans to materially alter the
investment advisory services provided to the Company as a result of the
Merger or to make any change in key personnel responsible for overseeing
the investment activities of the Company. The Merger, however, represents a
change in ownership of the parent corporation of U.S. Trust and, as such,
may have the effect under the 1940 Act of terminating the existing
Management Agreement dated December 9, 1994 and amended October 30, 1995,
between the Company and U.S. Trust (the "Existing Agreement") at the date
of the consummation of the Merger.
As a consequence of the Merger, and in order to provide
continuity of investment advisory services, the Board of Directors of UST
Private Equity Investors Fund, Inc. (the "Board of Directors" or the
"Board") has proposed for the approval of its shareholders a new advisory
agreement with U.S. Trust to take effect upon the consummation of the
Merger (the "New Agreement"). Except as described below, the terms of the
New Agreement are identical to those of the Existing Agreement. In
addition, the advisory fees provided for in the Existing Agreement will
remain the same and not change in the New Agreement. The election of
directors of UST Private Equity Investors Fund, Inc. and the ratification
or rejection of Ernst & Young LLP as the Company's independent accountants
for the year ending October 31, 2000 are also on the agenda for the
Meeting.
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PROPOSAL 1: APPROVAL OF NEW AGREEMENT
At the Meeting, shareholders of the Company will be asked to vote
on the approval of the New Agreement. The principal terms of the New
Agreement are summarized below and a copy of the New Agreement is attached
to this Proxy Statement as Appendix A. The description of the New Agreement
that follows is qualified in its entirety by reference to Appendix A.
As required by the 1940 Act, the Existing Agreement provides
for automatic termination upon "assignment." Consummation of the Merger
between U.S. Trust Corporation and Schwab may be deemed to be an assignment
(as defined in the 1940 Act) of the Existing Agreement resulting in the
termination of the Existing Agreement in accordance with its terms. In
anticipation of the consummation of the Merger, and to provide continuity
in investment advisory services, the Board of Directors, including a
majority of the Board members who are not "interested persons" (as defined
in the 1940 Act), at a meeting held on March 7, 2000, approved and directed
that there be submitted to the shareholders of the Company for approval, a
new investment advisory agreement between the Company and U.S. Trust.
If the Merger is not completed but the proposed New Agreement
is approved by the shareholders, U.S. Trust will operate under the New
Agreement. If the Merger is not completed, the New Agreement would become
effective upon termination of the definitive merger agreement. In the event
the proposed New Agreement is not approved by shareholders of the Company,
the Board will promptly consider alternatives to ensure continuing
investment management services for the Company. If the New Agreement is not
approved and the Merger is not completed, the Company will continue to
operate under the Existing Agreement.
COMPLIANCE WITH SECTION 15(F) OF THE 1940 ACT
Section 15(f) of the 1940 Act provides that when a change in the
control of an investment adviser occurs, the investment adviser or any of
its affiliated persons may receive an amount or benefit in connection
therewith as long as two conditions are satisfied. First, no "unfair
burden" may be imposed on the business development company as a result of
the transaction relating to the change of control, or any express or
implied terms, conditions or understandings applicable thereto. Second,
during the three-year period immediately following consummation of the
transaction, at least 75% of the business development company's board of
directors must not be "interested persons" of the investment adviser within
the meaning of the 1940 Act.
With respect to the first condition, the term "unfair burden," as
defined in the 1940 Act, includes any arrangement during the two-year
period after the change in control whereby the investment adviser (or
predecessor or successor adviser), or any interested person of any such
adviser, receives or is entitled to receive any compensation, directly or
indirectly, from the business development company or its security holders
(other than fees for bona fide investment advisory or other services) or
from any person in connection with the purchase or sale of securities or
other property to, from or on behalf of the business development
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company (other than fees for bona fide principal underwriting services).
The Company is not aware of any such compensation arrangements.
With respect to the second condition, in order to meet the
requirements of Section 15(f) of the 1940 Act, a new director who is not an
interested person of U.S. Trust or of Schwab has been selected and proposed
for election by a majority of the directors who are not interested persons
of U.S. Trust or Schwab.
DESCRIPTION OF THE EXISTING AND NEW AGREEMENTS
The Existing Agreement was last approved by the sole shareholder
on December 9, 1994 and was subsequently amended October 30, 1995. In the
Existing Agreement, subject to Board oversight, U.S. Trust is responsible
for identifying, evaluating, structuring, monitoring and disposing of the
Company's investments. U.S. Trust is also responsible for performing, or
arranging for suitable third parties to provide the management and
administrative services necessary for the operation of the Company.
TERMS AND CONDITIONS.
As previously noted, the terms and conditions of the New Agreement
are substantially the same as those of the Existing Agreement, except that:
o the New Agreement will be dated as of the date of the Merger if the
Merger is completed, or upon termination of the Existing Agreement if
the Merger is not completed;
o the New Agreement provides that U.S. Trust may provide advisory
services through its own employees or the employees of an affiliated
company as long as such employees function as part of an organized
group of persons, the use of such employees does not result in a
change of actual control or management of the Investment Adviser and
the use of such employees has been approved by the Board;
o the New Agreement provides that an affiliate may assume the
obligations of U.S. Trust, under the New Agreement so long as:
o the affiliate is qualified to act as an investment adviser to the
Company under applicable law;
o the assumption will not result in a change of actual control or
management of U.S. Trust under the 1940 Act; and
o the assumption of U.S. Trust's obligations has been approved by
the Company.
UNLESS A DIFFERENCE IS SPECIFICALLY DISCUSSED ABOVE, THE TERMS
OF THE NEW AGREEMENT ARE SUBSTANTIALLY THE SAME AS THOSE IN THE EXISTING
AGREEMENT AND THERE ARE NO OTHER MATERIAL DIFFERENCES. THE ADVISORY FEES
PROVIDED FOR IN THE EXISTING AGREEMENT WILL REMAIN THE SAME AND NOT CHANGE
IN THE NEW AGREEMENT.
-5-
DESCRIPTION OF THE PROPOSED ADVISORY AGREEMENT
The Existing Agreement and New Agreement provide that, subject to
the general supervision of the Company's Board of Directors, U.S. Trust
will, among other things, (1) prepare and evaluate any pertinent research,
statistical, financial and economic data and other information necessary or
appropriate for the performance of its duties under the agreement; (2)
identify, evaluate, structure, monitor and dispose of the Company's
investments in portfolio companies, private funds and short-term
investments; (3) render managerial assistance to entities in which the
Company has invested or is proposing to invest; (4) determine whether and
how to exercise warrants, voting rights or other rights with respect to the
Company's portfolio's securities; (5) provide valuations with respect to
the securities held by the Company (if so requested by the Board); (6)
render regular reports to the Company's officers and the Company's Board
concerning the investment performance of the Company, the discharge by U.S.
Trust of its responsibilities and any other subject that the Company's
officers or Board reasonably may request; and (7) assist the Company's
officers in connection with the operation of the Company and perform any
further acts that may be necessary to effectuate the purposes of the
agreement.
The Existing Agreement and New Agreement provide that U.S. Trust
will furnish at its own expense all office space, office facilities,
supplies, equipment and personnel necessary or appropriate to the
performance of its duties thereunder. U.S. Trust will also pay the salaries
and fees of all personnel of the Company or U.S. Trust performing services
related to U.S. Trust's duties under the Existing Agreement and New
Agreement.
The Existing Agreement and New Agreement provide that U.S. Trust
may place orders for portfolio securities either directly with the issuer
or with any broker or dealer selected by U.S. Trust. In placing orders with
brokers and/or dealers under the Agreements, U.S. Trust is obligated,
subject to the considerations set forth below, to use its best efforts to
obtain the best net price and most favorable execution of orders after
taking into account all factors it deems relevant, including the breadth of
the market in the security, the price of the security, the financial
condition and execution capability of the broker and/or dealer and the
reasonableness of the commission, if any, both for the specific transaction
and on a continuing basis. Consistent with this obligation, U.S. Trust may,
to the extent permitted by law, purchase and sell portfolio securities from
and to brokers who provide brokerage and research services (within the
meaning of Section 28(e) of the Securities Exchange Act of 1934) to or for
the benefit of the Company and/or other accounts over which U.S. Trust
exercises investment discretion. U.S. Trust is authorized under the
Agreements to pay a broker who provides such brokerage and research
services a commission for effecting a securities transaction which is in
excess of the amount of the commission another broker would have charged
for effecting that transaction if U.S. Trust determines in good faith that
such commission is reasonable in relation to the value of the brokerage and
research services provided by the broker viewed in terms of either that
particular transaction or the overall responsibilities of U.S. Trust with
respect to the accounts as to which it exercises investment discretion.
Under the Existing Agreement and New Agreement, U.S. Trust may
execute transactions through itself and its affiliates on a securities
exchange provided that the commissions paid by the Company are "reasonable
and fair" compared to commissions received by other
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brokers having comparable execution capability, and provided
that the transactions are effected pursuant to procedures established by
the Board of Directors. In each case, an affiliated broker may transmit,
clear and settle transactions for the Company that are executed on a
securities exchange provided that the affiliated broker arranges for
unaffiliated brokers to execute the transactions. Such commissions may not
exceed the usual and customary broker's commission.
In addition, the Board of Directors, in its discretion, may
instruct U.S. Trust to effect all or a portion of its securities
transactions with one or more brokers and/or dealers selected by the Board
of Directors if the Board of Directors determines that the use of such
brokers and/or dealers is in the best interest of the Company.
Under the Existing Agreement and New Agreement, when U.S. Trust
deems the purchase or sale of a security to be in the best interest of the
Company as well as other customers, U.S. Trust may, to the extent permitted
by applicable law, aggregate the securities to be so sold or purchased in
order to obtain the best execution or lower brokerage commissions. Under
the Existing and New Agreement, U.S. Trust may also purchase or sell a
particular security for one or more customers in different amounts.
Allocation of the securities purchased or sold in either manner, as well as
the expenses incurred in the transactions, will be made by U.S. Trust in a
manner that it believes is equitable and consistent with applicable law and
regulations and with its fiduciary obligations to the Company and to such
other customers.
The Existing Agreement and New Agreement require U.S. Trust to
give the Company the benefit of its best judgment and efforts in rendering
services to the Company. Under the Existing Agreement and New Agreement,
U.S. Trust will not be liable to the Company or to any shareholder of the
Company for any act or omission in the course of, or connected with,
rendering services under such agreement or for any losses that may be
sustained in the purchase, holding or sale of any security. The Company
will indemnify U.S. Trust against all losses, claims, damages, liabilities
or expenses that were not the result of U.S. Trust's bad faith, negligence,
misconduct or a breach of fiduciary duty owed to the Company.
Indemnification shall be made only following a final decision on the merits
or a reasonable determination by a quorum of the directors or counsel to
the Company that U.S. Trust was not liable by reason of bad faith,
negligence, misconduct, or breach of fiduciary duty owed to the Company.
U.S. Trust is entitled to advancement of expenses incurred in seeking
indemnification upon providing a written affirmation of its good faith
belief that it meets the requisite standard for indemnification and an
undertaking to repay the advance if it is ultimately determined that the
standard was not met.
No provision of this agreement shall be construed to protect any
director or officer of the Company or U.S. Trust from liability in
violation of Section 17(i) of the 1940 Act which prohibits protection from
liability in the event of willful misfeasance, bad faith, gross negligence,
or reckless disregard of one's duties or obligations under a contract.
EFFECTIVE DATE OF NEW AGREEMENT. If approved by a majority of
the outstanding shares (as defined below) of the Company and the Merger is
completed, the New Agreement will become effective at the time of the
consummation of the Merger, and will continue in effect for two years from
the date of effectiveness (unless terminated sooner). If the New Agreement
is approved by a majority of the outstanding shares, but the Merger is not
completed, the New Agreement will be dated as of the date of termination of
the Existing Agreement. Thereafter, if not terminated, the New Agreement
will continue in effect for successive annual periods, provided that such
continuance is specifically
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approved at least annually by the vote of a majority of those
members of the Board who are not parties to the New Agreement or
"interested persons" (as defined in the 1940 Act) of any such party, and
either: (i) the vote of a majority of the outstanding shares of the
Company; or (ii) the vote of a majority of the full Board of Directors.
TERMINATION. The Existing Agreement and New Agreement provide that
they may be terminated at any time, without the payment of any penalty,
either by: (i) the Company, by action of the Board or by the vote of a
majority of the Company's outstanding shares, on 60 days' written notice to
U.S. Trust; or (ii) U.S. Trust, on 90 days' written notice to the Company.
The Existing Agreement and New Agreement provide that they will terminate
immediately in the event of an "assignment" (as defined in the 1940 Act).
FEES. For the services provided and the expenses assumed pursuant
to the Existing Agreement and New Agreement, U.S. Trust is entitled to a
fee, payable quarterly, at the following rates: (i) 1.5% per annum 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 portfolio companies or
private funds and (ii) 0.5% 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 not committed to portfolio companies or private funds.
In addition to the management fee, pursuant to the Existing
Agreement and New Agreement, the Company has agreed to pay the Investment
Adviser an incentive fee in an amount equal to 10% of the 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 capital 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 Investment Adviser will be required to
repay to the company all or a portion of the incentive fee previously paid.
For the fiscal year ended October 31, 1999, UST Private Equity Investors
Fund, Inc. paid U.S. Trust advisory fees in the amount of $321,323 and
$227,752 as an incentive carried interest and U.S. Trust waived fees in the
amout of $146,907.
THERE WILL BE NO CHANGE IN THE CONTRACTUAL ADVISORY FEES PAYABLE
BY THE COMPANY AS A RESULT OF APPROVAL OF THE NEW AGREEMENT. The New
Agreement, like the Existing Agreement, entitles U.S. Trust to receive
management and incentive fees, paid quarterly, at the annual rate described
above. U.S. Trust may from time to time voluntarily waive all or a portion
of the advisory fee payable by the Company, which waiver may be terminated
at any time.
EVALUATION BY THE BOARD OF DIRECTORS OF THE COMPANY. The New
Agreement was unanimously approved by the Board of Directors of the Company
and of those members of the Board of Directors who were not "interested
persons" (as that term is defined in the 1940 Act) of any party to the
Company's New Agreement, at a meeting held on March 7, 2000. The Board
considered the Merger, that the New Agreement is substantially the same as
the Company's Existing Agreement (except as noted above) and that the
contractual advisory fee rate payable by the Company under the New
Agreement for the Company would be identical to that payable under the
Company's Existing Agreement. The Board considered that U.S. Trust does not
have any plans to materially alter the investment advisory services provided
to the Company as a result of the Merger or to make any change in the key
personnel responsible for overseeing the investment activities of the
Company. The Board also considered the benefits that U.S. Trust may derive
from the Merger and the New Agreement. Based on its evaluation, the Board of
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Directors concluded that approval of the New Agreement would be in the
best interests of the Company and its shareholders. With respect to the
provisions of the New Agreement regarding use of the employees and
affiliates of U.S. Trust, the Board considered that this provision would
allow U.S. Trust to use the best talent within its organization to operate
the Company.
INFORMATION ABOUT THE INVESTMENT ADVISER. U.S. Trust, which has
its principal offices at 114 West 47th Street, New York, New York 10036, is
a New York State-chartered bank and trust company and a member bank of the
Federal Reserve System. U.S. Trust serves as investment adviser to the
Company under the Existing Agreement and is a wholly owned subsidiary of
U.S. Trust Corporation, a registered bank holding company, which has its
principal offices at 114 West 47th Street, New York, New York 10036. U.S.
Trust provides wealth management, fiduciary and banking services to
individuals, corporations and institutions, both nationally and
internationally, including investment management and consulting, trust and
estate services, financial and estate planning, corporate trust and agency
services, custodial services and personal and corporate banking. On
December 31, 1999 the Asset Management Groups of U.S. Trust had
approximately $51.2 billion in aggregate assets under management.
The principal executive officers and directors of U.S. Trust and
their principal occupations as of December 31, 1999 are set forth in Annex
I hereto.
U.S. Trust also currently serves as investment adviser to
Excelsior Private Equity Fund II, Inc. The approximate net assets (as of
October 31, 1999), the annual advisory fees rate paid to U.S. Trust and
fees waived by U.S. Trust for the most recently ended fiscal year are as
follows:
<TABLE>
<CAPTION>
Advisory Fees
Approximate Net Waived for the
Name of Investment Assets as of Advisory Fiscal year ended
Company October 31, 1999 Fees Rate October 31, 1999
- ------------------ ---------------- --------- -----------------
<S> <C> <C> <C>
Excelsior Private Equity $245,106,914 1.5% of the net assets of the $0
Fund II, Inc. Company invested or
committed to be invested in
portfolio companies or
private funds and 0.5% of
the net assets of the
Company invested in
short-term investments plus
an incentive fee in an
amount equal to 20% of the
realized capital gains (net
of realized capital losses
and unrealized net capital
depreciation) on
investments other than
investments in private
funds.*
- -------------------
* 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 Company all
or a portion of the incentive fee previously paid.
</TABLE>
The approval of the New Agreement requires the affirmative vote of
the holders of a "majority of the outstanding shares" of the Company (as
defined by the 1940 Act), which means the lesser of (a) the holders of 67%
or more of the shares of the Company present at the Meeting if the holders
of more than 50% of the outstanding shares of the Company are present in
person or by proxy
-9-
or (b) more than 50% of the outstanding shares of the
Company. This voting requirement is referred to herein as a "majority of
the outstanding shares." For more information, see "Voting Information -
Quorum."
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" THE NEW INVESTMENT ADVISORY AGREEMENT
-10-
PROPOSAL 2: ELECTION OF DIRECTORS
The second proposal to be considered at the Meeting is the
election of the directors of the Company.
Section 15(f) of the 1940 Act provides that when a change in the
control of an investment adviser occurs, the investment adviser or any of
its affiliated persons may receive an amount or benefit in connection
therewith as long as two conditions are satisfied, as mentioned above.
Section 15(f) provides, in pertinent part, that for a period of three years
after the change in control at least 75% of the members of the Board of
Directors may not be "interested persons" (as defined in the 1940 Act) of
the Investment Advisor or its predecessor. In order to meet the
requirements of Section 15(f), a person who is not an interested person of
either U.S. Trust or Schwab, Victor F. Imbimbo, Jr., has been selected and
proposed for election to the Board by the current disinterested directors.
The nominee has consented to serve as a director.
At the Meeting, shareholders will be asked to consider the
election of four board members who will constitute the entire Board of
Directors of UST Private Equity Investment Fund, Inc. Each Board member so
elected will hold office until his or her successor is elected and
qualifies, or until his or her term as a director is terminated as provided
in the Company's by-laws. The persons named as proxies in the accompanying
Proxy have been designated by the Company's Board and intend to vote for
the nominees named below. Mr. Bernstein, Mr. Hover and Mr. Murphy are
incumbent directors. Mr. Bernstein and Mr. Murphy were appointed as
directors of UST Private Equity Investors Fund, Inc. on December 1, 1994.
Mr. Hover was appointed as a director on December 9, 1998 by the then
current directors in order to fill a vacancy on the Board of Directors. Mr.
Imbimbo was selected and proposed for election as a Director on March 7,
2000 to fill a newly created vacancy resulting from a recent expansion of
the size of the Board from three (3) to four (4) directors.
All shares represented by valid Proxies will be voted in the
election of directors for each nominee named below unless authority to vote
for a particular nominee is withheld. The four nominees who receive the
highest number of votes cast at the Meeting will be elected as directors.
Cumulative voting is not permitted. Should any nominee withdraw from the
election or otherwise be unable to serve, the named proxies will vote for
the election of such substitute nominee as the Boards of Directors may
recommend unless a decision is made to reduce the number of directors. The
following table sets forth certain information about each of the nominees:
-11-
<TABLE>
<CAPTION>
Director Principal Occupation During
Name Age Since Past 5 Years and Other Affiliations
- ---- --- ----- -----------------------------------
<S> <C> <C> <C>
John C. Hover, II* 56 December 9, 1998 Mr. Hover retired as Executive Vice President of the
United States Trust Company of New York in 1998 after
22 years of service. He was responsible for the
Personal Asset Management and Private Banking Group,
and served as Chairman of U. S. Trust International.
Prior to joining U.S. Trust he was a commercial
banker with Chemical Bank. Mr. Hover is a trustee of
the University of Pennsylvania, and is Chairman of
the Board of Overseers of the University's Museum of
Archaeology and Anthropology. He is a director and
Vice President of the Penn Club of New York. Mr.
Hover serves as a director of UST Private Equity
Investors Fund, Inc. Mr. Hover serves as a director
of Excelsior Private Equity Fund II, Inc.
Gene M. Bernstein 52 March 20, 1997 Mr. Bernstein has been the President of BIG Venture
Inc., a privately held golf equipment marketing firm
since March 1994. From 1990 until 1994 he was the
President of Northville Industries Corp., a privately
held corporation engaged in petroleum, marketing,
distribution and trading. Mr. Bernstein was
Executive Vice President of Northville Industries
Corp. from 1982 to 1989. Mr. Bernstein serves as a
director of Excelsior Private Equity Fund II, Inc.
Stephen V. Murphy 54 March 20, 1997 Since 1991, Mr. Murphy has been President of S.V.
Murphy & Co., Inc., an investment banking firm which
specializes in mergers and acquisitions, divestitures
and strategic and capital-related advisory services
for financial institutions. From 1988 until 1990, he
was Managing Director of Merrill Lynch Capital
Markets in charge of the Financial Institutions
Mergers and Acquisitions Department. Prior to 1988,
Mr. Murphy was Managing Director of The First Boston
Corporation where he headed up its Investment Banking
Department's Commercial Bank Group. Mr. Murphy
serves as a director of Excelsior Private Equity Fund
II, Inc.
Victor F. Imbimbo, Jr 47 Nominee Mr. Imbimbo was the founder of Bedrock Communications,
Inc. a consulting company addressing the merger of
traditional and digital communications solutions in
1996. He was also the founder of the Hadley Group, a
promotional marketing company, in 1985, which he ran
until 1996.
- --------------
* This director is considered to be an "interested person" of the Company as defined in the 1940 Act.
</TABLE>
In the fiscal year of the Company ended October 31, 1999, the
Directors met 4 times. Each of the current Directors attended all of the
meetings of the Board.
-12-
The Company does not have a compensation or nominating
committee. The Company has an audit committee that met once during the
fiscal year ended October 31, 1999. The Company's Board of Directors has
not adopted a written charter for the audit committee. Messrs. Murphy and
Bernstein are the only members of the audit committee. The audit committee
has reviewed and discussed the audited financial statements with management
and the matters required to be discussed by SAS 61 (Codification of
Statements on Auditing Standards) with the independent auditors. The audit
committee has received written disclosures from the independent accountants
and has discussed with the independent accountant the independent
accountant's independence. Based on the foregoing, the audit committee
recommended to the Board of Directors that the audited financial statements
be included in the Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1999.
Each Director receives an annual fee of $9,000, and a meeting fee
of $1,500 for each meeting attended and is reimbursed for expenses incurred
for attending meetings. The Company does not have a stock option plan, other
long-term incentive plan, retirement plan or other retirement benefits. 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 Company receives any compensation from the Company.
As of March 7, 2000 the board members and officers of the Company
owned beneficially less than 1% of the outstanding shares of the Company,
and less than 1% of the outstanding shares of the Company in the aggregate.
The following chart provides certain information about the fees
received by the Company's directors in the most recently completed fiscal
year.
Total
Compensation
from the
Pension or Company and
Aggregate Retirement Benefits Fund Complex(*)
Name of Compensation Accrued As Part Paid to
Person/Position from the Company Of Fund Expenses Directors
- --------------- ---------------- ------------------- ---------------
John C. Hover $15,000 None $30,000(2)**
Director
Gene M. Bernstein $15,000 None $30,000(2)**
Director
Steven V. Murphy $15,000 None $30,000(2)**
Director
- ---------------
(*) The "Fund Complex" consists of Excelsior Private Equity Funds II, Inc.
and UST Private Equity Investors Fund Inc.
(**) Number of investment companies in the Fund Complex for which each
individual served as a director.
-13-
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
EACH OF THE FOREGOING NOMINEES FOR DIRECTOR NAMED IN THIS PROPOSAL 2.
PROPOSAL 3: RATIFICATION OF INDEPENDENT ACCOUNTANTS
Shareholders of the Company are also being asked to vote upon the
ratification or rejection of the selection of Ernst & Young LLP ("Ernst &
Young") as independent accountants for the Company's fiscal year ending
October 31, 2000.
The Board, including all of the Directors who are not "interested
persons" of the Company (as defined in the 1940 Act), selected Ernst &
Young as the Company's independent accountants at a meeting held on
November 30, 1999 and ratified on March 7, 2000. Ernst & Young has stated
that it has no material direct or indirect financial interest in the
Company. Ernst & Young, with offices at 200 Clarendon Street, Boston,
Massachusetts 02116 has served as the Company's independent accountants
since the date of inception of the Company.
A representative of Ernst & Young is expected to be available by
telephone at the Meeting should any matter arise requiring consultation
with the accountants, and Ernst & Young will be given the opportunity to
make a statement if it chooses.
In order for Proposal 3 to be adopted by the Company, it must be
approved by a "majority of the outstanding shares" of the Company. For more
information, see "Voting Information - Quorum." Unless instructed
otherwise, the persons named as proxies in the accompanying Proxy will vote
for Ernst & Young.
THE BOARD OF THE COMPANY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
RATIFICATION OF THE SELECTION OF ERNST & YOUNG AS INDEPENDENT ACCOUNTANTS
OF THE COMPANY.
-14-
VOTING INFORMATION
RECORD DATE. Only shareholders of record at the close of business
on March 9, 2000 will be entitled to vote at the Meeting. On that date, the
number of outstanding shares of the Company was 40,463. All shares of the
Company will vote in the aggregate.
If you do not plan to be present at the Meeting, you should send
your vote in by one of the following methods:
1. Complete, sign and return the enclosed proxy card promptly in
the postage-paid envelope; or
2. Vote by calling 1-800-690-6903; or
3. Vote through the Internet at www.proxyvote.com.
QUORUM. A quorum is constituted with respect to the Company by the
presence in person or by proxy of the holders of more than 50% of the
outstanding shares entitled to vote. For purposes of determining the
presence of a quorum, abstentions and broker "non-votes" (that is, proxies
from brokers or nominees indicating that such persons have not received
instructions from the beneficial owners or other persons entitled to vote
shares on a particular matter with respect to which the brokers or nominees
do not have discretionary power), will be treated as shares that are
present at the Meeting but which have not been voted. Abstentions and
broker "non-votes" will have the effect of a "no" vote for purposes of
obtaining the requisite approval for proposal one and three, but will have
no effect for proposal two.
In the event that a quorum is not present at the Meeting, or at
any adjournment thereof, or in the event that a quorum is present at the
Meeting but sufficient votes to approve any of the proposals are not
received, the persons named as proxies, or their substitutes, may propose
and vote for one or more adjournments of the Meeting to permit the further
solicitation of proxies. Any such adjournment will require the affirmative
vote of a majority of those shares affected by the adjournment that are
represented at the Meeting in person or by proxy. If a quorum is present,
the persons named as proxies will vote those proxies which they are
entitled to vote FOR any of the proposals in favor of such adjournments,
and will vote those proxies required to be voted AGAINST all proposals
against any such adjournments. A shareholder vote may be taken with respect
to the Company on any (but not all) of the Proposals prior to any such
adjournment as to which sufficient votes have been received for approval.
OTHER SHAREHOLDER INFORMATION. No person possessed sole or shared
voting or investment power with respect to more than 5% of the Company's
outstanding shares on March 9, 2000.
As of March 7, 2000, the Directors' and Executive Officers'
share ownership in the Company was as follows:
-15-
<TABLE>
<CAPTION>
Amount And Nature
Of Beneficial Percent Of
Title Of Class Name of Beneficial Owner Ownership Class(1)
- -------------- ------------------------ ----------------- ----------
<S> <C> <C> <C>
Common Shares i) Directors and Director Nominee
John C. Hover, II 15 shares 0.04%
Gene M. Bernstein 200 shares(2) 0.49%
Stephen V. Murphy 50 shares 0.12%
Victor F. Imbimbo, Jr. 0 shares 0%
ii) Executive Officers
David I. Fann 21 shares 0.05%
- ---------------
(1) Directly owned unless otherwise indicated.
(2) Includes 60 shares owned by Mr. Bernstein's spouse, for which
Mr. Bernstein disclaims beneficial ownership.
</TABLE>
All directors and officers as a group owned 251 shares (0.62%) as
of March 7, 2000.
ADDITIONAL INFORMATION
OFFICERS. Officers of the Company are elected by the directors and
hold office until they resign, are removed or are otherwise disqualified to
serve. The following table sets forth certain information about the
Company's officers:
-16-
<TABLE>
<CAPTION>
Principal Occupation
Position with During Past 5 Years and
Name and Address Age the Company Other Affiliations
- ---------------- --- -------------- -----------------------
<S> <C> <C> <C>
David I. Fann 35 President Managing Director of United States Trust Company
United States Trust and Chief Executive of New York. Mr. Fann serves as President and
Company of New York Officer Chief Executive Officer of Excelsior Private
114 West 47th Street Equity Investors Fund II, Inc. and UST Private
New York, NY 10036 Equity Investors Fund, Inc. He is focused on
direct investments in healthcare, consumer
services and e-commerce. Prior to joining U.S.
Trust in April of 1994, Mr. Fann served in various
capacities for Citibank from 1986 through 1994,
including, as a Vice President of Citibank and its
small business investment company subsidiary,
Citicorp Venture Capital Ltd. from 1991 until
1994. While at Citicorp Venture Capital Ltd., Mr.
Fann invested in buyout and venture capital
transactions and venture capital funds and served
on the Board of Directors of several of its
portfolio companies. Mr. Fann holds a B.A.S.
degree in industrial engineering and economics
from Stanford University. Mr. Fann serves on the
United States Trust Company of New York Portfolio
Policy Committee, Strategy Review Committee, and
the Special Fiduciary Committee. Mr. Fann is on
the Board of the Somerset Exchange Fund, Classroom
Connect, Inc., Conway Stuart Medical, Inc.,
SurVivaLink Corp. and Protogene Laboratories, Inc.
Douglas A. Lindgren 38 Executive Vice Managing Director of United States Trust Company
United States Trust President of New York. Mr. Lindgren is Chief Investment
Company of New York Officer of UST Private Equity Investment Fund,
114 West 47th Street Inc. and Executive Vice President of UST Private
New York, NY 10036 Equity Investors Fund, Inc. He is focused on
direct investments in information technology,
Internet services, and communications. Prior to
joining U.S. Trust in April 1995, Mr. Lindgren
served in various capacities for Inco Venture
Capital Management ("IVCM") from January 1988
through March of 1995, including President and
Managing Principal from January 1993 through March
of 1995. While at IVCM, Mr. Lindgren invested in
venture capital and buyout transactions and served
on the board of directors of several of its
portfolio companies. Before joining IVCM, Mr.
Lindgren was employed by Salomon Brothers Inc and
Smith Barney, Harris Upham & Co., Inc. He is an
Adjunct Professor of Finance at Columbia
University's Graduate School of Business, where he
has taught courses on venture capital since 1993.
Mr. Lindgren holds a M.B.A. and B.A. from Columbia
University. He serves on the United States Trust
Company of New York Portfolio Policy Committee.
Mr. Lindgren is on the Board of Powersmart Inc.,
MarketFirst Software, Inc., Managemark, Inc.,
Constellar Corporation, ReleaseNow.com, Inc.,
LifeMinders.com, Inc., Zeus Wireless, Inc. and
firstsource.
Ronald A. Schwartz 51 Secretary Mr. Schwartz is Vice President and Assistant
United States Trust General Counsel of United States Trust Company of
Company of New York New York. Prior to joining U.S. Trust in 1991,
114 West 47th Street Mr. Schwartz was associated with the firm of
New York, NY Walter, Conston, Alexander & Green from 1985
through 1990, with a focus on securities law as
well as mergers and acquisitions. Mr. Schwartz
received a BA and an MA degree from the University
of California at Berkeley, and a JD from Boalt
Hall, University of California.
Brian F. Schmidt 41 Chief Financial Senior Vice President at U.S. Trust Company. Mr.
U.S. Trust Company Officer Schmidt is the Chief Financial Officer of
225 High Ridge Road Chief Accounting Excelsior Private Equity Investors Fund II, Inc.
Stamford, CT 06905 Officer and UST Private Equity Investors Fund, Inc. He is
Treasurer the Division Manager for the Mutual Funds
Administration Department. He is responsible for the
operation and Department Administrator administration
of the Excelsior Family of Funds and the U.S. Trust
Common Trust Funds. Mr. Schmidt joined U.S. Trust in
1991 from Prudential Insurance Company of America,
where he was Director of Accounting. Prior to that he
was a senior accounting manager at Dreyfus
Corporation. Mr. Schmidt has 16 years of
experience in financial services, concentrating in
mutual funds. He received his BS degree from
Marist College. He is on the accountant's and
treasurer's committee of the Investment Company
Institute.
Frank D. Bruno 40 Assistant Treasurer Mr. Bruno is a Vice President in the Mutual Funds
U.S. Trust Company Administration. Prior to joining U.S. Trust, he
225 High Ridge Road worked for the Dreyfus Corporation and Price
Stamford, CT 06905 Waterhouse. Mr. Bruno received his BS degree from
The Pennsylvania State University.
Frank J. Hearn, Jr. 35 Assistant Secretary
U.S. Trust Company
of New York
114 West 47th Street
New York, NY 10036
</TABLE>
All officers of the Company are employees and/or officers of the
Investment Adviser.
PAYMENTS TO AFFILIATES. For the fiscal year ended October 31, 1999
there were no payments made to affiliates.
-18-
ADMINISTRATOR. Chase Global Funds Services Company, which is
located at 73 Tremont Street, Boston, MA 02108, is the administrator for
the Company. The Company paid Chase Global Funds Services Company $58,000
in fees for the fiscal year ended October 31, 1999.
OTHER MATTERS
Shareholder proposals intended for inclusion in the Company's proxy
statement in connection with the Company's 2001 annual meeting of
shareholders pursuant to Rule 14a-8 under the Securities Exchange Act of
1934 (the "Exchange Act") must be received by the Company at the Company's
principal executive offices by , 200_. In order for proposals
made outside of Rule 14a-8 under the Exchange Act to be considered "timely"
within the meaning of Rule 14a-4(c) under the Exchange Act, such proposals
must be received by the Company at the Company's principal executive
offices not later than , 200_. Any shareholder who wishes to
submit a proposal for consideration at a meeting of shareholders should
send such proposal to the Company at 114 West 47th Street, New York, New
York 10036.
No business other than the matters described above is expected to
come before the Meeting, but should any other matter requiring a vote of
shareholders arise, including any question as to an adjournment of the
Meeting, the person named in the enclosed Proxy will vote thereon according
to their best judgment in the interests of the Company.
Dated: March __, 2000
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING AND
WHO WISH TO HAVE THEIR SHARES VOTED ARE REQUESTED TO COMPLETE THE ENCLOSED
PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF
MAILED IN THE UNITED STATES.
THE COMPANY WILL FURNISH, WITHOUT CHARGE, COPIES OF THE COMPANY'S
ANNUAL REPORT TO SHAREHOLDERS DATED JANUARY 31, 2000 TO ANY SHAREHOLDER
UPON REQUEST. THE COMPANY'S REPORT TO SHAREHOLDERS MAY BE OBTAINED FROM THE
COMPANY BY WRITING TO THE COMPANY AT 114 WEST 47th STREET, NEW YORK, NEW
YORK 10036, BY CALLING (800) 446-1012 (FROM OVERSEAS, CALL (617) 557-8280)
OR BY THE INTERNET: http://www.excelsiorfunds.com
-19-
ANNEX I
<TABLE>
<CAPTION>
Position with
U.S. Trust Name Principal Occupation Type of Business
- ------------- ---- -------------------- ----------------
<S> <C> <C> <C>
Director Eleanor Baum Dean of School of Engineering at Academic
4 Arleigh Road The Cooper Union for the
Great Neck, NY 11021 Advancement of Science & Art
Director Samuel C. Butler Partner in Cravath, Swaine & Moore Law Firm
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Director Peter O. Crisp Retired Chairman of Venrock, Inc. Venture Capital
103 Horseshoe Road
Mill Neck, NY 11765
Director Antonia M. Grumbach Partner in Patterson, Belknap, Law Firm
Patterson, Belknap, Webb & Web & Tyler, LLP
Tyler, LLP
1133 Avenue of the Americas
New York, NY 10036
Director, Chairman of H. Marshall Schwarz Chairman of the Board & Chief Asset Management,
the Board and Chief United States Trust Company Executive Officer of U.S. Trust Investment and
Executive Officer of New York Corporation and U.S. Trust Fiduciary Services
114 West 47th Street
New York, NY 10036
Director Philippe de Montebello Director of the Metropolitan Art Museum
The Metropolitan Museum of Art Museum of Art
1000 Fifth Avenue
New York, NY 10028
Director Robert E. Denham Partner in Munger, Tolles & Law Firm
Munger, Tolles & Olson LLP Olson LLP
355 South Grand Avenue
35th Floor
Los Angeles, CA 90071
Director John H. Stookey Chairman of Suburban Propane Pts. Petrochemicals and
Suburban Propane Pts. Propane
P.O. Box 455
Sheffield, MA 01257
Director Robert N. Wilson Vice Chairman of the Board of Health Care Products
Johnson & Johnson Johnson & Johnson
One Johnson & Johnson Plaza
New Brunswick, NJ 08933
Director Peter L. Malkin Chairman of Wien & Malkin LLP Law Firm
Wien & Malkin LLP
Lincoln Building
60 East 42nd Street
New York, NY 10165
Director David A. Olsen Retired Chairman of Risk & Insurance
1120 Park Avenue Johnson & Higgins Services
New York, NY 10128
Director Carl H. Pforzheimer, II Managing Partner Broker-Dealer
Carl H. Pforzheimer & Co. Investment Adviser
650 Madison Avenue
New York, NY 10022
Director Ruth A. Wooden President & CEO Not-for- Profit
60 Gramercy Park North National Parenting Association
Apt. 2m
New York, NY 10016
Director Philip L. Smith Corporate Director and Trustee Consumer Goods
P.O. Box 386
Ponte Verde Beach, FL 32004
Executive Vice President Paul K. Napoli Executive Vice President of U.S. Asset Management,
United States Trust Company Trust Corporation and U.S. Trust Investment and
of New York Private Banking
114 West 47th Street
New York, NY 10036
Director and Maribeth S. Rahe Vice Chairman of U.S. Trust Asset Management,
Vice Chairman United States Trust Company Corporation and U.S. Trust Investment and
of New York Fiduciary Services
114 West 47th Street
New York, NY 10036
Director, Vice Chairman Frederick B. Taylor Vice Chairman and Chief Investment Asset Management,
and Chief Investment United States Trust Company Officer of U.S. Trust Corporation Investment and
Officer of New York and U.S. Trust Fiduciary Services
114 West 47th Street
New York, NY 10036
Director, President and Jeffrey S. Maurer President and Chief Operating Asset Management,
Chief Operating Officer United States Trust Officer of U.S. Trust Corporation Investment and
Company of New York and U.S. Trust Fiduciary Services
114 West 47th Street
New York, NY 10036
Executive Vice President John L. Kirby Executive Vice President and Chief Asset Management,
and Chief Financial United States Trust Company Financial Officer of U.S. Trust Investment and
Officer of New York Corporation and U.S. Trust Fiduciary Services
114 West 47th Street
New York, NY 10036
Executive Vice President Kenneth G. Walsh Executive Vice President of U.S. Asset Management,
United States Trust Trust Corporation and U.S. Trust Investment and
Company of New York Fiduciary Services
114 West 47th Street
New York, NY 10036
Executive Vice President John M. Deignan Executive Vice President Private Banking,
United States Trust Company Investment
of New York Management and
114 West 47th Street Fiduciary Services
New York, NY 10036
</TABLE>
Exhibit B
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
UST PRIVATE EQUITY INVESTORS FUND, INC. (THE "COMPANY")
THIS PROXY IS SOLICITED BY THE BOARD OF THE COMPANY for use at
an annual meeting of shareholders to be held on May 6, 2000, at 10:00 a.m.
Eastern time at the offices of United States Trust Company of New York,
114 West 47th Street, New York, New York 10036.
The undersigned hereby appoints Frank D. Bruno, Brian F. Schmidt
and Ronald A. Schwartz, and each of them, with full power of substitution,
as proxies of the undersigned to vote at the above-stated annual meeting,
and at all adjournments or postponements thereof, all shares representing
interests in the Company held of record by the undersigned on March 9,
2000, the record date for the meeting, upon the following matters AND UPON
ANY OTHER MATTER THAT MAY COME BEFORE THE MEETING, IN THEIR DISCRETION.
Every properly signed proxy will be voted in the manner specified
thereon and, in the absence of specification, will be treated as GRANTING
authority to vote FOR Proposal 1, Proposal 2 and Proposal 3.
[Name and Address of Shareholder] _______ Shares of ______________ UST Private
Equity
Investors
Fund, Inc.
PLEASE SIGN AND RETURN PROMPTLY IN
ENCLOSED ENVELOPE. NO POSTAGE IS
REQUIRED.
____________________________________
(Signature(s) of Shareholder(s))
____________________
Date
PLEASE SIGN EXACTLY AS NAME APPEARS
HEREON. WHEN SHARES ARE HELD BY
JOINT TENANTS, BOTH SHOULD SIGN.
WHEN SIGNING AS ATTORNEY OR
EXECUTOR, ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL TITLE AS
SUCH. IF A CORPORATION, PLEASE SIGN
IN FULL CORPORATE NAME BY PRESIDENT
OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED
PERSON.
[VOTING ON REVERSE SIDE]
B-1
Please vote by filling in the appropriate box below, as shown, using blue
or black ink or dark pencil.
(1) Proposal to approve or disapprove a new Investment Advisory Agreement
between the Company and United States Trust Company of New York.
[ ] For [ ] Against [ ] Abstain
(2) Election of Directors of the Company:
[ ] For all nominees listed below (except as marked to the contrary
below).
[ ] Withhold authority to vote for all nominees listed below.
INSTRUCTION: To withhold authority to vote for any individual
nominee, strike a line through his name in the list below:
John C. Hover
Gene M. Bernstein
Steven V. Murphy
Victor F. Imbimbo
(3) Proposal to ratify or reject the selection of Ernst & Young, LLP as
independent accountants for the Company's fiscal year ending October
31, 2000.
[ ] For [ ] Against [ ] Abstain
The proxies are authorized in their discretion on any other
business which may properly come before the Meeting and any adjournments
thereof.
(Please Date and SIGN REVERSE SIDE.)
B-2
EXHIBIT A
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT, dated as of _________, 2000 by and between
UST Private Equity Investors Fund, Inc., a Maryland corporation (the
"Company") and United States Trust Company of New York, a New York
corporation ("U.S. Trust" or the "Managing Investment Adviser").
W I T N E S S E T H
WHEREAS, the Company has been organized as a Maryland corporation
to engage in the business of a closed-end management investment company
registered under the Securities Act of 1933, as amended, and has elected to
be regulated as a business development company under the Investment Company
Act of 1940, as amended; and
WHEREAS, the Company seeks to retain U.S. Trust to provide
certain investment advisory and administrative services; and
WHEREAS, U.S. Trust is willing to furnish such investment
advisory and administrative services to the Company on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
promises herein contained and other good and valuable consideration, the
Company and U.S. Trust hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms
have the meanings set forth below:
(a) "Board of Directors" means the board of directors of
the Company;
(b) "Company" means UST Private Equity Investors Fund, Inc.;
(c) "Director" means any member of the Board of Directors;
(d) "Disabling Conduct" means, on the part of the Managing
Investment Adviser, any bad faith, negligence, misconduct or any breach of
fiduciary duty owed to the Company;
(e) "Exchange Act" means the Securities Exchange Act of
1934, as amended;
(f) "Investment Company Act" means the Investment Company
Act of 1940, as amended;
(1)
(g) "Managing Investment Adviser" means United States Trust
Company of New York;
(h) "Portfolio Companies" means Later-Stage Venture Capital
Companies and Middle-Market Companies, each as defined in the Registration
Statement;
(i) "Private Funds" has the meaning set forth in the
Registration Statement;
(j) "Registration Statement" means the Registration
Statement of the Company which is effective under the Securities Act;
(k) "Securities Act" means the Securities Act of 1933, as
amended;
(l) "Short-Term Investments" has the meaning set forth in
the Registration Statement;
(m) "U.S. Trust" means United States Trust Company of New York.
2. Appointment. The Company hereby appoints U.S. Trust to act
as the managing investment adviser and administrator to the Company for the
period and on the terms set forth in this Agreement. U.S. Trust accepts
such appointment and agrees to be responsible for finding, evaluating,
structuring, and monitoring the Company's investments in Portfolio
Companies, Private Funds and Short-Term Investments and performing the
management and administrative services necessary for the operation of the
Company for the compensation provided by this Agreement. The Managing
Investment Adviser may, in its discretion, provide such services through
its own employees or the employees of one or more affiliated companies that
are qualified to act as investment adviser to the Company under applicable
law and are under the common control of U.S. Trust Corporation provided (i)
that all persons, when providing services hereunder, are functioning as
part of an organized group of persons, and (ii) that such organized group
of persons is managed at all times by authorized officers of the Managing
Investment Adviser.
3. Duties of the Managing Investment Adviser. Subject to the
direction and control of the Board of Directors, the Managing Investment
Adviser shall:
(a) prepare (or otherwise obtain) and evaluate on both a
macroeconomic and microeconomic level any pertinent research; statistical,
financial and economic data; and other information necessary or appropriate
for the performance of its duties under this Agreement;
(2)
(b) identify, evaluate, structure, monitor and dispose of
the Company's investments in Portfolio Companies, Private Funds and Short-
Term Investments;
(c) make available and, if requested by entities in which
the Company has invested or is proposing to invest, render managerial
assistance to and exercise management rights in, such entities;
(d) determine the securities to be purchased by the
Company, and continuously monitor such securities and the issuers thereof
to determine whether and when to sell, exchange or take any other action
concerning such securities including the making of follow-on investments in
Portfolio Companies when appropriate;
(e) determine whether and how to exercise warrants, voting
rights or other rights with respect to the Company's portfolio securities;
(f) select broker-dealers to carry out the Company's
securities transactions, including broker-dealers who are affiliated with
the Managing Investment Adviser or the Company;
(g) provide valuations with respect to the securities held
by the Company as provided in the Registration Statement;
(h) provide, at its expense, office space, equipment,
facilities and supplies and clerical services necessary for the operation
of the Company;
(i) keep and maintain the books and records of the Company;
(j) administer stockholders' accounts and handle
communications and correspondence with stockholders;
(k) prepare accounting, management and other reports;
(l) conduct relations with custodians, depositories,
transfer agents, accountants, attorneys, any selling agent, any escrow
agent, insurers, banks and such other persons in any such other capacity
deemed necessary or desirable for the operation of the Company;
(m) render regular reports to the Company's officers and
the Board of Directors concerning the investment performance of the
Company, the Managing Investment Adviser's discharge of its
responsibilities under this Agreement and any other subject as the
Company's officers or the Board of Directors reasonably may request; and
(3)
(n) assist the Company's officers in connection with the
operation of the Company and perform any further acts that may be necessary
to effectuate the purposes of this Agreement or that may be requested by
the Company.
4. Supervision and Compliance. The activities of the Managing
Investment Adviser shall be subject at all times to the direction and
control of the Board of Directors and shall comply with: (a) the Articles
of Incorporation of the Company and the By-Laws of the Company, as such
documents are amended from time to time; (b) the Registration Statement,
including the investment objective and policies set forth therein; (c) the
applicable provisions of the Investment Company Act and the applicable
regulations thereunder; (d) the Internal Revenue Code of 1986, as amended,
and the regulations thereunder applicable to regulated investment
companies; (e) any other applicable laws or regulations; and (f) such other
limitations as the Board of Directors may adopt.
5. Delegation. In performing its duties under this Agreement
and assuming the obligations set forth herein, the Managing Investment
Adviser may, at its own expense, employ certain of its affiliates of other
entities; provided that the Managing Investment Adviser understands and
agrees that it shall remain fully responsible for the performance of all
the duties set forth in this Agreement and that it shall supervise the
activities of each such affiliate or other entity. Any agreement between
the Managing Investment Adviser and an affiliate or other such entity shall
be subject to the renewal, termination and amendment provisions applicable
to this Agreement.
6. Purchase and Sale of Securities. The Managing Investment
Adviser shall, at its own expense, place orders for the purchase, sale or
loan of securities by the Company either directly with the issuer or with
any broker and/or dealer who deals in such securities.
(a) In placing orders with brokers and/or dealers, the
Managing Investment Adviser shall use its best efforts to obtain the best
net price and the most favorable execution of its orders, after taking into
account all factors it deems relevant, including the breadth of the market
in the security, the price of the security, the financial condition and
execution capability of the broker and/or dealer and the reasonableness of
the commission, if any, both for the specific transaction and on a
continuing basis. Consistent with this obligation, the Managing Investment
Adviser may, to the extent permitted by law, purchase and sell portfolio
securities to and from brokers who provide brokerage and research services
(within the meaning of Section 28(e) of the Exchange Act) to or for the
benefit of the Company and/or other accounts over which the Managing
Investment Adviser exercises investment discretion. The Managing
Investment Adviser is authorized to pay a broker who provides such
brokerage and research services a commission for effecting a securities
transaction which is in excess of the amount of commission another broker
would have charged for effecting that transaction, if the Managing
Investment Adviser determines in good faith that such commission was
reasonable in relation to the value of brokerage and research services
provided by such broker. This determination may be viewed in terms of
either that particular transaction or of the overall responsibilities
(4)
of the Managing Investment Adviser with respect to the accounts as to
which it exercises investment discretion.
(b) The Managing Investment Adviser may execute
transactions through itself and its affiliates on a securities exchange
provided that the commissions paid by the Company are "reasonable and fair"
compared to commissions received by other brokers having comparable
execution capability and provided that the transactions are effected
pursuant to procedures established by the Board of Directors. An
affiliated broker may transmit, clear and settle transactions for the
Company that are executed on a securities exchange provided that the
affiliated broker arranges for unaffiliated brokers to execute the
transactions.
(c) Notwithstanding the foregoing, the Board of Directors
periodically shall review the commissions paid by the Company and determine
whether those commissions were reasonable in relation to the brokerage and
research services received. In addition, the Board of Directors, in its
discretion, may instruct the Managing Investment Adviser to effect all or a
portion of its securities transactions with one or more brokers and/or
dealers selected by the Board of Directors, if it determines that the use
of such brokers and/or dealers is in the best interest of the Company.
(d) When the Managing Investment Adviser deems the purchase
or sale of a security to be in the best interest of the Company as well as
other customers, the Managing Investment Adviser, to the extent permitted
by applicable law, may aggregate the securities to be so sold or purchased
in order to obtain the best execution or lower brokerage commissions. The
Managing Investment Adviser also may purchase or sell a particular security
for one or more customers in different amounts. Allocation of the
securities purchased or sold in either manner, as well as the expenses
incurred in the transactions, will be made by the Managing Investment
Adviser in a manner that is equitable and consistent with applicable law
and regulations, any guidelines adopted by the Board of Directors and with
its fiduciary obligations to the Company and to such other customers.
7. Expenses.
(a) The Managing Investment Adviser shall furnish, at its
own expense, all office space, office facilities, equipment and personnel
necessary or appropriate to the performance of its duties under this
Agreement. The Managing Investment Adviser also shall pay the salaries
and fees of all personnel of the Company or the Managing Investment Adviser
performing services related to the Managing Investment Adviser's duties
under this Agreement.
(b) It is understood that the Company will pay all of its
expenses and liabilities, including fees of the Directors; fees of the
Managing Investment Adviser; expenses of registering the Company's shares
under federal and state securities laws; interest; taxes; fees and expenses
of the Company's legal counsel and independent accountants; fees and
expenses of the Transfer Agent; expenses of printing and mailing share
certificates, stockholder reports, notices
(5)
to stockholders and proxy statements; reports to regulatory bodies;
brokerage and other expenses in connection with the execution, recording
and settlement of portfolio security transactions; expenses in connection
with the acquisition and disposition of portfolio securities of the
registration of privately issued portfolio securities; costs of third
party evaluations or appraisals of the Company (or its assets) or its
actual investments; expenses of membership in investment company
associations; expenses of fidelity bonding and other insurance premiums;
expenses of stockholders' meetings; Securities and Exchange Commission and
state blue sky registration fees; fees payable to the National Association
of Securities Dealers, Inc., if any, in connection with the offering of
the Company's shares; and the Company's other business and operating
expenses.
8. Compensation of the Managing Investment Adviser. In
consideration of the services to be rendered by the Managing Investment
Adviser under this Agreement, the Company shall pay the Managing Investment
Adviser:
(a) quarterly and payable in arrears on the last day of
each fiscal quarter, a management fee equal to 1.5% per annum 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 Portfolio Companies or
Private Funds, and equal to 0.5% 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 not committed to Portfolio Companies or
Private Funds; and
(b) an incentive fee in an amount equal to 10% of the
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 capital 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 agrees to repay to the Company all or a portion of the incentive
fee previously paid.
9. Services to Others. The services of the Managing Investment
Adviser to the Company are not to be deemed exclusive and the Managing
Investment Adviser is free to render services to others and to engage in
other activities; provided, however, that those services and activities do
not adversely affect the Managing Investment Adviser's ability to perform
its obligations under this Agreement.
10. Books, Records, and Information. The Managing Investment
Adviser shall provide the Company with all records concerning the Managing
Investment Adviser's activities that the Company is required by law to
maintain. Any records required to be maintained and preserved pursuant to
the provisions of Rule 31a-1 and Rule 31a-2 under the Investment Company
Act which are prepared or maintained by the Managing Investment Adviser on
behalf of the Company are the property of the Company and will be
surrendered promptly to the Company on request. The Company also shall
comply with all reasonable requests for information
(6)
by the Company's officers or Board of Directors, including information
required for the Company's filings with the Securities and Exchange
Commission and state securities commissions.
11. Limitations on Liability.
(a) The Managing Investment Adviser hereby is notified
expressly of the limitation of directors' liability as set forth in the
Articles of Incorporation and the Bylaws of the Company and agrees that any
obligation of the Company arising in connection with this Agreement shall
be limited in all cases to the Company and its assets, and the Managing
Investment Adviser shall not seek satisfaction of any such obligation from
any Director of the Company.
(b) The Managing Investment Adviser shall give the Company
the benefit of its best judgment and efforts in rendering services under
this Agreement. In the absence of Disabling Conduct, the Managing
Investment Adviser shall not be liable to the Company or to any shareholder
for any act or omission in the course of, or connected with, rendering
services under this Agreement or for any losses that may be sustained in
the purchase, holding or sale of any security.
12. Indemnification. The Company will indemnify the Managing
Investment Adviser against, and hold it harmless from, any and all losses,
claims, damages, liabilities or expenses (including reasonable counsel fees
and expenses) not resulting from Disabling Conduct by the Managing
Investment Adviser. Indemnification shall be made only following: (i) a
final decision on the merits by a court or other body before whom the
proceeding was brought that the Managing Investment Adviser was not liable
by reason of Disabling Conduct or (ii) in the absence of such a decision, a
reasonable determination, based upon a review of the facts, that the
Managing Investment Adviser was not liable by reason of Disabling Conduct
by (a) the vote of a majority of a quorum of Directors of the Company who
are neither "interested persons" of the Company nor parties to the
proceeding ("disinterested non-party Directors") or (b) independent legal
counsel in a written opinion. The Managing Investment Adviser shall be
entitled to advances from the Company for payment of the reasonable
expenses incurred by it in connection with the matter as to which it is
seeking indemnification in the manner and to the fullest extent permissible
under the Maryland General Corporation Law. The Managing Investment
Adviser shall provide to the Company a written affirmation of its good
faith belief that the standard of conduct necessary for indemnification by
the Company has been met and a written undertaking to repay any such
advance if it should ultimately be determined that the standard of conduct
has not been met. In addition, at least one of the following additional
conditions shall be met: (a) the Managing Investment Adviser shall provide
security in form and amount acceptable to the Company for its undertaking;
(b) the Company is insured against losses arising by reason of the advance;
or (c) a majority of a quorum of disinterested non-party Directors, or
independent legal counsel, in a written opinion, shall have determined,
based on a review of facts readily available
(7)
to the Company at the time the advance is proposed to be made, that there
is reason to believe that the Managing Investment Adviser will ultimately
be found to be entitled to indemnification.
No provision of this Agreement shall be construed to protect any
Director or officer of the Company or the Managing Investment Adviser from
liability in violation of Section 17(i) of the Investment Company Act.
13. Effective Date; Termination; Amendments.
(a) This Agreement shall be effective as of the date first
above written and, unless terminated sooner as provided herein, shall
continue until the second anniversary of the execution of this Agreement.
Thereafter, unless terminated sooner as provided herein, this Agreement
shall continue in effect for successive annual periods, provided that such
continuance is specifically approved at least annually by the vote of a
majority of the Board of Directors of the Company who are not parties to
this Agreement or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such continuance, and either:
(i) the vote of a majority of the outstanding voting securities of the
Company; or (ii) the vote of a majority of the full Board of Directors.
(b) This Agreement may be terminated at any time, without
the payment of any penalty, either by: (i) the Company, by the vote of a
majority of the Board of Directors who are not parties to this Agreement or
interested persons if any such party or by vote of a majority of the
outstanding voting securities of the Company, on 60 days' written notice to
the Managing Investment Adviser; or (ii) the Managing Investment Adviser,
on 90 days' written notice to the Company. This Agreement shall terminate
immediately in the event of its assignment.
(c) An affiliate of the Investment Adviser may assume the
Investment Adviser's obligations under this Agreement provided that (i) the
affiliate is qualified to act as an investment adviser to the Company under
applicable law; (ii) the affiliate is under the common control of U.S.
Trust Corporation; (iii) the assumption will not result in a change of
actual control or management of the Investment Adviser and (iv) the
assumption of the Investment Adviser's obligations by the affiliate is
approved by the Board of Directors of the Company.
(d) This Agreement may be amended only if such amendment is
approved, to the extent required by the Investment Company Act, by the vote
of a majority of the outstanding voting securities of the Company and by
vote of a majority of the Board of Directors who are not parties to this
Agreement or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such amendment.
(e) As used in this Agreement, the terms "specifically
approved at least annually," "majority of the outstanding voting
securities," "interested persons" and "assignment" shall have the same
meanings as such terms have in the Investment Company Act and the
regulations thereunder.
(8)
14. Notices. All notices and other communications hereunder
shall be in writing or by confirm in telegraph, cable, telex, or facsimile
sending device. Notices shall be addressed (a) if to U.S. Trust, at U.S.
Trust's address, 114 W. 47th Street, New York, New York 10036; or (b) if to
the Company, at the address of the Company, Attn: David I. Fann.
15. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York without giving effect to
the choice of law provisions thereof, to the extent that such laws are
consistent with the provisions of the Investment Company Act and the
regulations thereunder.
16. Miscellaneous. The captions in this Agreement are included
for the convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect.
Should any part of this Agreement be held or made invalid by a court
decision, statute, regulation, or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be binding
and shall inure to the benefit of the parties hereto and their respective
successors, to the extent permitted by law.
(9)
IN WITNESS WHEREOF, the Company and the Managing Investment
Adviser have caused this Agreement to be executed and delivered in their
names and on their behalf by the undersigned, duly authorized officers, all
as of the day and year first above written.
UST PRIVATE EQUITY INVESTORS FUND, INC.
By: _____________________________________
Name:
Title: President
UNITED STATES TRUST COMPANY
OF NEW YORK
By: _____________________________________
Name:
Title:
