THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
BALANCE SHEET (Unaudited)
June 30, 1998
<TABLE>
ASSETS
<S> <C> <C>
Portfolio investments at fair value (cost $5,329,285) $ 5,098,261
Short-term investments, at amortized cost 43,250,772
Cash and cash equivalents 3,469,802
Deferred organizational costs (net of accumulated amortization of $14,359) 168,912
Accrued interest receivable 17,683
Prepaid expenses 405,501
Due from affiliates 5,786
----------------
TOTAL ASSETS $ 52,416,717
================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 113,410
Due to Independent Trustees 3,000
----------------
Total liabilities 116,410
Shareholders' equity:
Shares of beneficial interest, 108,659.8075 shares issued and outstanding:
Adviser Trustee (500 shares) 245,376
Beneficial Shareholders (108,159.8075 shares) 52,054,931
Total shareholders' equity 52,300,307
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 52,416,717
================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS (Unaudited)
As of June 30, 1998
<TABLE>
Cost Fair Value
Indirect Investments:
<S> <C> <C>
Apollo Investment Fund IV, L.P. $ 192,177 $ 178,249
$5,000,000 capital commitment
.172% limited partnership interest
Aurora Equity Partners II, L.P. 15,523 70
$5,000,000 capital commitment
.707% limited partnership interest
Bedrock Capital Partners I, L.P. 750,000 671,482
$5,000,000 capital commitment
4.189% limited partnership interest
Exxel Capital Partners V, L.P. 2,489,772 2,489,677
$2,500,000 capital commitment
.310% limited partnership interest
First Reserve Fund VIII, L.P. 165,448 154,000
$5,000,000 capital commitment
.616% limited partnership interest
Sprout Capital VIII, L.P. 250,000 232,018
$5,000,000 capital commitment
.667% limited partnership interest
Thomas Lee Equity Fund IV, L.P. 607,042 604,024
$10,000,000 capital commitment
.313% limited partnership interest
Triumph Partners III, L.P. 859,323 768,741
---------------- ---------------
$5,000,000 capital commitment
.831% limited partnership interest
Total Portfolio Investments $ 5,329,285 $ 5,098,261
================ ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
STATEMENT OF OPERATIONS (Unaudited)
For the Period from February 9, 1998 (Commencement of Operations)
to June 30, 1998
<TABLE>
INVESTMENT INCOME AND EXPENSES
<S> <C>
Interest from short-term investments $ 777,931
--------------
Expenses:
Management fee 541,414
Legal fees 129,279
Accounting fees 45,925
Independent Trustee fees 25,918
Custody fees 11,786
Insurance expense 38,596
Amortization of deferred organizational costs 14,359
--------------
Total expenses 807,277
--------------
NET INVESTMENT LOSS BEFORE ALLOCATION
FROM INDIRECT INVESTMENTS (29,346)
Change in fair value of Indirect Investments (231,024)
Expenses paid in connection with Indirect Investments (176,604)
Realized gain/income distributions received from Indirect Investments 100
--------------
Net change in fair value of Indirect Investments (407,528)
--------------
NET LOSS $ (436,874)
==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND STATEMENT OF CHANGES IN
SHAREHOLDERS' EQUITY (Unaudited) For the Period from February 9, 1998
(Commencement of Operations) to June 30, 1998
<TABLE>
Adviser Beneficial
Trustee Shareholders Total
<S> <C> <C> <C>
Capital contributions $ 250,000 $ 54,981,875 $ 55,231,875
Selling commissions - (1,926,568) (1,926,568)
Other syndication costs (2,614) (565,512) (568,126)
------------ ---------------- -----------------
Net capital contributions 247,386 52,489,795 52,737,181
Net loss (2,010) (434,864) (436,874)
------------ ---------------- -----------------
Balance as of June 30, 1998 $ 245,376 $ 52,054,931 $ 52,300,307
============ ================ =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
STATEMENT OF CASH FLOWS (Unaudited)
For the Period from February 9, 1998 (Commencement of Operations)
to June 30, 1998
<TABLE>
CASH FLOWS USED FOR OPERATING ACTIVITIES
<S> <C>
Net loss $ (436,874)
Adjustments to reconcile net loss to net cash used for operating activities:
Net change in fair value of Indirect Investments 407,528
Amortization of deferred organizational costs 14,359
Increase in accrued interest receivable (50,753)
Increase in prepaid expenses and other receivables (411,287)
Increase in accounts payable and accrued expenses 89,410
----------------
Net cash used for operating activities (387,617)
----------------
CASH FLOWS USED FOR INVESTING ACTIVITIES
Net purchase of short-term investments (43,217,702)
Capital contributed to Indirect Investments (5,365,759)
Return of capital distributions received from Indirect Investments 36,474
Expenses paid in connection with Indirect Investments (176,604)
Realized gain/income distributions received from Indirect Investments 100
----------------
Net cash used for investing activities (48,723,491)
----------------
CASH FLOWS PROVIDED FROM FINANCING ACTIVITIES
Cash contributions from Beneficial Shareholders 54,981,875
Cash contribution from Adviser Trustee 250,000
Payment of deferred organizational costs (183,271)
Payment of selling commissions (1,926,568)
Payment of other syndication costs (541,126)
----------------
Net cash provided from financing activities 52,580,910
----------------
Increase in cash and cash equivalents 3,469,802
Cash and cash equivalents at beginning of period -
----------------
Cash and cash equivalents at end of period $ 3,469,802
================
Supplemental disclosure of non-cash investing and financing activities:
Accrual of other syndication costs $ 27,000
================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
FINANCIAL HIGHLIGHTS
For the Period from February 9, 1998 (Commencement of Operations)
to June 30, 1998
<TABLE>
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN DERIVED FROM INFORMATION
PROVIDED IN THE FINANCIAL STATEMENTS.
Increase (Decrease) in Net Asset Value
Per Share Operating Performance:
<S> <C>
Net asset value, beginning of period $ 0.00
Net capital contributions 485.30
Net investment loss (4.02)
Net asset value, end of period $ 481.28
============
Total investment return (0.83)%
Ratios to Average Net Assets:
Investment expenses 6.37 %*
Net loss (3.45)%*
Supplemental Data:
Net assets, end of period $ 52,300,307
=============
Portfolio turnover 0.00 %
</TABLE>
* Annualized
The accompanying notes are an integral part of these financial statements.
<PAGE>
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. Organization and Purpose
The Pacific Corporate Group Private Equity Fund (the "Trust") is a Delaware
business trust, formed on September 22, 1997. The Trust, which began operations
on February 9, 1998 ("Commencement of Operations"), is registered under the
Investment Company Act of 1940, as amended, as a closed-end, management
investment company. Pacific Corporate Group, Inc., the Adviser Trustee of the
Trust (the "Adviser Trustee"), manages the investment policies and operations of
the Trust. The Adviser Trustee and four individual Trustees (collectively the
"Trustees"), three of whom are not affiliated with the Adviser Trustee (the
"Independent Trustees"), are responsible for the overall supervision of the
Trust. The objective of the Trust is to achieve, through selected private market
equity and equity-related investments, rates of return superior to public market
investment alternatives, while reducing risks through the diversification of
investments within the private market. The Trust will seek to achieve this
objective through investments primarily in a portfolio of partnerships
("Indirect Investments") and, with respect to up to 25% of committed capital,
direct investment in private or public operating companies ("Direct
Investments").
The Trust is scheduled to terminate on December 31, 2009, subject to extension
in the sole discretion of the Trustees, for up to three additional one-year
periods.
2. Summary of Significant Accounting Policies
Valuation of Investments - Short-term investments are valued at amortized cost,
which approximates market. Portfolio investments are carried at fair value as
determined quarterly by the Adviser Trustee in accordance with procedures
established by the Trustees.
The fair value of the Trust's Indirect Investments is based on the fair value of
the Trust's capital account balance in each such Indirect Investment. The
capital account balance of each Indirect Investment includes capital contributed
by the Trust and its allocated share of the Indirect Investment's undistributed
profits and losses, including unrealized profits and losses. Such allocations
reflect certain fees and expenses incurred by the Indirect Investment entity and
drawn against that entity's cash position. These capital account balances are
reviewed by the Adviser Trustee for reasonableness and may be adjusted in the
discretion of the Adviser Trustee.
As a result of delays in receipt of quarterly financial statements from certain
of the Trust's Indirect Investments, the Trust's capital account balances in
such Indirect Investments used to determine certain fair values may not be as of
the same date as the Trust's financial statements. Any adjustments to such fair
values, which would have been recorded had current capital account balances been
available, will be reflected in subsequent financial statements of the Trust.
The Adviser Trustee is unable to estimate whether such adjustments to the
Indirect Investments' fair values would be material.
The fair value of Direct Investments is determined by the Adviser Trustee as
follows: (i) unrestricted publicly-held securities for which market quotations
are readily available are valued at the closing public market price for the last
trading day of the accounting period, (ii) restricted publicly-held securities
may be valued at a discount from the closing public market price, depending on
the circumstances; and (iii) privately-held securities are valued at cost until
significant developments affecting the portfolio company provide a basis for
change in valuation. Factors to be considered in arriving at a change in
valuation of such privately-held securities include the price of recent
transactions in the company's securities and the company's earnings, sales and
book value.
<PAGE>
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited), continued
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Organizational and Start-Up Costs - Organizational and start-up costs of
$183,271 are being amortized over a period of sixty months from the date of the
Trust's initial closing.
Syndication Costs - Selling commissions of $1,926,568 and other costs of
$568,126 associated with selling shares of the Trust have been recorded as a
direct reduction to shareholders' equity.
Income Taxes - No provision for income taxes has been made since all income and
losses are allocable to the shareholders for inclusion in their respective tax
returns.
Statement of Cash Flows - The Trust considers its interest-bearing account to be
a cash equivalent.
Financial Instruments - The Trust carries its financial instruments at amounts
which approximate fair value.
3. Capital Commitments
At the initial closing, held on February 9, 1998, the Trust sold 62,813 shares
of beneficial interest (the "Shares"), accepting capital commitments from
shareholders totaling $64.1 million. The Trust held additional closings during
1998, with the final closing held on April 30, 1998, selling an additional
45,847 Shares and accepting additional capital commitments from shareholders
totaling $46.5 million. As of June 30, 1998, the shareholders had contributed
$55.2 million, or 50% of their total capital commitments to the Trust. The
shareholders' remaining capital commitments to the Trust are scheduled to be
called on February 9, 1999. Of the total Shares outstanding, the Adviser Trustee
owns 500 Shares and has a capital commitment of $500,000, of which $250,000 was
contributed as of June 30, 1998.
4. Management Fee
The Adviser Trustee receives a management fee at the annual rate of 1.25% of the
aggregate capital commitments to the Trust, reduced by capital returned and
realized investment losses. Such fee is determined and payable quarterly in
advance. The management fee is reduced by 100% of directors' fees or other cash
remuneration received by the Adviser Trustee from any portfolio company of the
Trust.
5. Independent Trustee Fees
As compensation for services rendered to the Trust, each Independent Trustee
receives $10,000 annually in quarterly installments and $500 for each meeting of
the Independent Trustees attended, plus out-of-pocket expenses. Additionally,
the Independent Trustees also are members of the Audit Committee. As
compensation for services rendered to the Trust as members of the Audit
Committee, each of the Independent Trustees receives an additional $2,500
annually in quarterly installments and $250 for each Audit Committee meeting
attended.
<PAGE>
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited), continued
6. Allocation of Net Income and Net Loss
Net income and net loss from Indirect Investments, and all other net income and
net loss, other than net income and net loss from Direct Investments, is
allocated to all shareholders, including the Adviser Trustee, pro rata based on
Shares held.
Additionally, the Adviser Trustee will be allocated, on a cumulative basis over
the life of the Trust, 20% of the Trust's aggregate net income and net loss from
Direct Investments, other than "pari passu co-investments", and 15% from Direct
Investments in "pari passu co-investments" (as described below), provided that
such amount is positive. The remaining 80% and/or 85% of such amounts is
allocated to all shareholders including the Adviser Trustee, pro rata based on
Shares held. If the aggregate net income and net loss from Direct Investments
(including "pari passu co-investments") is negative, such net income and net
loss is allocated to all shareholders, including the Adviser Trustee, pro rata
based on Shares held.
"Pari passu co-investments" refers to Direct Investments that are co-investments
in the same securities and on the same terms alongside general partner managers
of Indirect Investments held by the Trust, in transactions involving issuers
held by investment vehicles in which the Trust has invested.
7. Investment Commitments
As of June 30, 1998, the Trust had unfunded investment commitments in the
following Indirect Investments:
<TABLE>
Investment
<S> <C>
American Securities Partners II $ 5,000,000
Apollo Investment Fund IV, L.P. 4,807,823
Aurora Equity Partners II, L.P. 4,984,477
Bedrock Capital Partners I, L.P. 4,250,000
CVC European Equity Partners II, L.P. 7,500,000
Exxel Capital Partners V, L.P. 10,228
First Reserve Fund VIII, L.P. 4,834,552
Sprout Capital VII, L.P. 4,750,000
Thomas Lee Equity Fund IV, L.P. 9,392,958
Triumph Partners III, L.P. 4,140,677
----------------
Total $ 49,670,715
================
</TABLE>
