THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
BALANCE SHEET (Unaudited)
September 30, 1998
<TABLE>
ASSETS
<S> <C> <C>
Portfolio investments at fair value (cost $9,224,200) $ 8,951,216
Short-term investments, at amortized cost 38,548,689
Cash and cash equivalents 4,420,565
Deferred organizational costs (net of accumulated amortization of $23,524) 159,747
Accrued interest receivable 15,978
Prepaid expenses 408,005
Due from affiliates 5,786
----------------
TOTAL ASSETS $ 52,509,986
================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 94,865
Due to Independent Trustees 1,000
----------------
Total liabilities 95,865
Shareholders' equity:
Shares of beneficial interest, 108,659.8075 shares issued and outstanding:
Adviser Trustee (500 shares) 245,899
Beneficial Shareholders (108,159.8075 shares) 52,168,222
Total shareholders' equity 52,414,121
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 52,509,986
================
</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 September 30, 1998
<TABLE>
Fair Value
% of
Cost Fair Value Net Assets
Indirect Investments:
<S> <C> <C> <C>
American Securities Partners II, L.P. $ 617,006 $ 617,006 1.18%
$5,000,000 capital commitment
1.429% limited partnership interest
Apollo Investment Fund IV, L.P. 394,103 380,175 0.72%
$5,000,000 capital commitment
.172% limited partnership interest
Aurora Equity Partners II, L.P. 349,032 332,880 0.63%
$5,000,000 capital commitment
.693% limited partnership interest
Bedrock Capital Partners I, L.P. 750,000 670,163 1.28%
$5,000,000 capital commitment
4.189% limited partnership interest
CVC European Equity Partners II, L.P. 1,378,028 1,375,171 2.62%
$7,500,000 capital commitment
.397% limited partnership interest
Exxel Capital Partners V, L.P. 2,409,806 2,394,501 4.57%
$2,500,000 capital commitment
.294% limited partnership interest
Fenway Partners Capital Fund II, L.P. 151,724 151,724 0.29%
$5,000,000 capital commitment
.690% limited partnership interest
First Reserve Fund VIII, L.P. 313,601 302,153 0.58%
$5,000,000 capital commitment
.616% limited partnership interest
Hicks, Muse, Tate & Furst Latin America Fund, L.P. 737,628 737,628 1.41%
$2,500,000 capital commitment
.260% limited partnership interest
</TABLE>
<PAGE>
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS (Unaudited), continued
As of September 30, 1998
<TABLE>
Fair Value
% of
Cost Fair Value Net Assets
<S> <C> <C> <C>
Sprout Capital VIII, L.P. $ 350,000 $ 307,308 0.59%
$5,000,000 capital commitment
.667% limited partnership interest
Thomas Lee Equity Fund IV, L.P. 616,538 616,355 1.18%
$10,000,000 capital commitment
.313% limited partnership interest
Triumph Partners III, L.P. 1,156,734 1,066,152 2.03%
-------------- --------------- --------
$5,000,000 capital commitment
.831% limited partnership interest
Total Portfolio Investments $ 9,224,200 $ 8,951,216 17.08%
============== =============== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
STATEMENT OF OPERATIONS (Unaudited)
<TABLE>
Three Months Six Months
Ended Ended
September 30, September 30,
1998 1998
------------------ ------------------
INVESTMENT INCOME AND EXPENSES
<S> <C> <C>
Interest from short-term investments $ 607,303 $ 1,159,328
------------- --------------
Expenses:
Management fee 345,582 723,763
Legal fees 15,966 137,724
Accounting fees 27,624 52,424
Independent Trustee fees 10,875 23,250
Custody fees 7,500 15,000
Insurance expense 24,831 49,662
Amortization of deferred organizational costs 9,165 18,476
Mailing and printing 2,003 2,003
Miscellaneous 954 2,454
------------- --------------
Total expenses 444,500 1,024,756
------------- --------------
NET INVESTMENT INCOME BEFORE ALLOCATION
FROM INDIRECT INVESTMENTS 162,803 134,572
------------- --------------
Change in fair value of Indirect Investments (41,960) (272,984)
Expenses paid in connection with Indirect Investments (27,335) (94,099)
Realized gain/income distributions received from
Indirect Investments 20,306 20,406
------------- --------------
Net change in fair value of Indirect Investments (48,989) (346,677)
------------- --------------
NET INCOME (LOSS) $ 113,814 $ (212,105)
============= ==============
</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 Six Months Ended September 30, 1998
<TABLE>
Adviser Beneficial
Trustee Shareholders Total
<S> <C> <C> <C>
Balance as of March 31, 1998 $ 246,280 $ 43,542,296 $ 43,788,576
Capital contributions - 9,177,625 9,177,625
Selling commissions - (334,975) (334,975)
Other syndication costs 494 (5,494) (5,000)
------------ ---------------- ----------------
Net capital contributions 494 8,837,156 8,837,650
Net loss (875) (211,230) (212,105)
------------ ---------------- ----------------
Balance as of September 30, 1998 $ 245,899 $ 52,168,222 $ 52,414,121
============ ================ ================
</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 Six Months Ended September 30, 1998
<TABLE>
CASH FLOWS PROVIDED FROM OPERATING ACTIVITIES
<S> <C>
Net loss $ (212,105)
Adjustments to reconcile net loss to net cash provided from operating
activities:
Change in fair value of Indirect Investments 346,677
Amortization of deferred organizational costs 18,476
Decrease in accrued interest receivable 114,964
Increase in prepaid expenses and other receivables (277,069)
Increase in accounts payable and accrued expenses 43,344
---------------
Net cash provided from operating activities 34,287
---------------
CASH FLOWS USED FOR INVESTING ACTIVITIES
Net purchase of short-term investments (38,520,412)
Capital contributed to Indirect Investments (7,079,573)
Expenses paid in connection with Indirect Investments (94,099)
Realized gain/income distributions received from Indirect Investments 20,406
---------------
Net cash used for investing activities (45,673,678)
---------------
CASH FLOWS PROVIDED FROM FINANCING ACTIVITIES
Cash contributions from Beneficial Shareholders 9,177,625
Payment of deferred organizational costs (146,527)
Payment of selling commissions (334,975)
Payment of other syndication costs (219,000)
---------------
Net cash provided from financing activities 8,477,123
---------------
Increase in cash and cash equivalents (37,162,268)
Cash and cash equivalents at beginning of period 41,582,833
---------------
Cash and cash equivalents at end of period $ 4,420,565
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
FINANCIAL HIGHLIGHTS
For the Six Months Ended September 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 $ 483.39
Net capital contributions 488.98
Net loss (1.95)
Net asset value, end of period $ 482.33
============
Total investment return (.40%)
Ratios to Average Net Assets:
Investment expenses 4.14%*
Net loss (.86%)*
Supplemental Data:
Net assets, end of period $ 52,414,121
=============
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 required to file certain financial information, including its
annual audited financial statements with the Securities and Exchange Commission.
The Trust's annual audited financial statements are based in part on information
derived from the audited financial statements of the Trust's Indirect
Investments and the Trust generally does not receive the financial statements of
its Indirect Investments in time to meet its own filing requirements with the
SEC. Therefore, in order to include information in the Trust's annual audited
financial statements derived from the audited financial statements of its
Indirect Investments and meet its SEC filing requirements, the Trust has
determined to change its fiscal year-end from December 31 to March 31.
Accordingly, these financial statements reflect the Trust's results of
operations and cash flows for the six months ended September 30, 1998. The Trust
will continue to report for tax purposes using a fiscal year ending on December
31.
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.
<PAGE>
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited), continued
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.
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
As of March 31, 1998, the Trust had sold 90,587 shares of beneficial interest
(the "Shares"), accepting capital commitments from shareholders totaling $92.2
million, and had received capital contributions of $46.1 million. In April 1998,
the Trust sold 18,073 Shares, accepting additional capital commitments
<PAGE>
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited), continued
from shareholders totaling $18.4 million, and received additional capital
contributions of $9.2 million. As of September 30, 1998, shareholders had
contributed $55.2 million, or 50% of their total capital commitments to the
Trust. The remaining capital commitments 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 September 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.
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.
<PAGE>
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited), continued
7. Investment Commitments
As of September 30, 1998, the Trust had unfunded investment commitments in the
following Indirect Investments:
<TABLE>
Investment
<S> <C>
American Securities Partners II, L.P. $ 4,382,994
Apollo Investment Fund IV, L.P. 4,605,897
Aurora Equity Partners II, L.P. 4,650,968
Bedrock Capital Partners I, L.P. 4,250,000
CVC European Equity Partners II, L.P. 6,121,972
Exxel Capital Partners V, L.P. 90,194
Fenway Partners Capital Fund II, L.P. 4,848,276
First Reserve Fund VIII, L.P. 4,686,399
Hicks, Muse, Tate & Furst Latin America Fund, L.P. 1,769,124
Sentinel Capital Partners, L.P. 5,000,000
Sprout Capital VIII, L.P. 4,650,000
Thomas Lee Equity Fund IV, L.P. 9,383,462
Triumph Partners III, L.P. 3,843,266
---------------
Total $ 58,282,552
===============
</TABLE>
