THE PACIFIC CORPORATE GROUP
PRIVATE EQUITY FUND
Financial Statements
(Unaudited)
For the Three Months Ended
June 30, 1999
<PAGE>
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
BALANCE SHEET (Unaudited)
June 30, 1999
<TABLE>
ASSETS
<S> <C> <C>
Portfolio investments at fair value (cost $35,638,000) $ 34,498,797
Short-term investments, at amortized cost 68,745,038
Cash and cash equivalents 3,927,841
Accrued interest receivable 9,325
Prepaid expenses 382,541
----------------
TOTAL ASSETS $ 107,563,542
================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 47,157
----------------
Total liabilities 47,157
----------------
Shareholders' equity:
Shares of beneficial interest, 108,659.8075 shares issued and outstanding:
Adviser Trustee (500 shares) 494,739
Beneficial Shareholders (108,159.8075 shares) 107,021,646
Total shareholders' equity 107,516,385
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 107,563,542
================
</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, 1999
<TABLE>
Fair Value
% of
Cost Fair Value Net Assets
Direct Investments:
ADCO Global, Inc.
Raleigh, NC
Adhesives, sealants and coatings
10,000 shares of redeemable exchangeable
<S> <C> <C>
cumulative preferred stock $ 1,000,000 $ 1,000,000
100,000 shares of common stock 1,000,000 1,000,000
---------------- ----------------
2,000,000 2,000,000 1.86%
---------------- ----------------
HCS Holdings, Inc.
Beaumont, TX
Home healthcare supplies
27,000 shares of Series A redeemable
preferred stock 2,700,000 2,700,000
30,000 shares of Class A common stock 300,000 300,000
---------------- ----------------
3,000,000 3,000,000 2.79%
---------------- ----------------
IRMC Holdings, Inc.
Columbus, OH
Accounts receivable management and teleservices
28,480 shares of 8% Series A cumulative
redeemable preferred stock 2,848,000 2,848,000
71,200 shares of Class A common stock 712,000 712,000
---------------- ----------------
3,560,000 3,560,000 3.31%
---------------- ---------------- ---------
Total Direct Investments 8,560,000 8,560,000 7.96%
---------------- ---------------- ---------
Indirect Investments:
Alta California Partners II, L.P. 600,000 563,097 0.52%
$4,000,000 original capital commitment
1.783% limited partnership interest
American Securities Partners II, L.P. 1,076,897 1,044,807 0.97%
$5,000,000 original capital commitment
1.429% limited partnership interest
Apollo Investment Fund IV, L.P. 2,045,072 2,061,552 1.92%
$5,000,000 original capital commitment
.139% limited partnership interest
Atlas Venture Fund IV, L.P. 129,591 127,429 0.12%
$1,540,000 original capital commitment
.381% limited partnership interest
Aurora Equity Partners II L.P. 919,737 839,823 0.78%
$5,000,000 original capital commitment
.663% limited partnership interest
</TABLE>
<PAGE>
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS (Unaudited), continued
As of June 30, 1999
<TABLE>
Fair Value
% of
Cost Fair Value Net Assets
<S> <C> <C> <C>
Bedrock Capital Partners I, L.P. $ 2,111,501 $ 1,964,759 1.83%
$5,000,000 original capital commitment
4.189% limited partnership interest
CVC European Equity Partners II L.P. 2,618,054 2,257,247 2.10%
$7,500,000 original capital commitment
.397% limited partnership interest
Exxel Capital Partners V, L.P. 2,500,153 2,503,629 2.33%
$2,500,000 original capital commitment
.294% limited partnership interest
Fenway Partners Capital Fund II, L.P. 826,094 795,886 0.74%
$5,000,000 original capital commitment
.615% limited partnership interest
First Reserve Fund VIII, L.P. 1,208,933 1,038,084 0.97%
$5,000,000 original capital commitment
.616% limited partnership interest
Hicks, Muse, Tate & Furst Latin America Fund, L.P. 1,250,004 1,194,953 1.11%
$2,500,000 original capital commitment
.260% limited partnership interest
Hicks, Muse, Tate & Furst Equity Fund IV, L.P. 2,848,814 2,969,403 2.76%
$5,000,000 original capital commitment
.124% limited partnership interest
Parthenon Investors, L.P. 689,056 646,801 0.60%
$3,500,00 original capital commitment
1.400% limited partnership interest
Providence Equity Partners III, L.P. 514,646 449,282 0.42%
$3,500,000 original capital commitment
.372% limited partnership interest
Sentinel Capital Partners II, L.P. 601,663 508,230 0.47%
$5,000,000 original capital commitment
4.807% limited partnership interest
Sprout Capital VIII, L.P. 1,448,421 1,402,865 1.31%
$5,000,000 original capital commitment
.667% limited partnership interest
Thomas H. Lee Equity Fund IV, L.P. 3,629,472 3,701,427 3.44%
$10,000,000 original capital commitment
.313% limited partnership interest
</TABLE>
<PAGE>
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS (Unaudited), continued
As of June 30, 1999
<TABLE>
Fair Value
% of
Cost Fair Value Net Assets
<S> <C> <C> <C>
Triumph Partners III, L.P. $ 1,999,913 $ 1,832,035 1.70%
$5,000,000 original capital commitment
.831% limited partnership interest
VS&A Communications Partners III, L.P. 59,979 37,488 .04%
$3,000,000 original capital commitment
.350% limited partnership interest _______
---------------- ----------------
Total Indirect Investments 27,078,000 25,938,797 24.13%
---------------- ---------------- ---------
Total Portfolio Investments $ 35,638,000 $ 34,498,797 32.09%
================ ================ =========
</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 Three Months Ended June 30, 1999
<TABLE>
INVESTMENT INCOME AND EXPENSES
<S> <C>
Interest from short-term investments $ 922,470
------------
Expenses:
Management fee 345,582
Legal fees 30,788
Accounting fees 27,886
Independent Trustee fees 10,875
Custody fees 15,000
Insurance expense 19,978
Miscellaneous 1,621
------------
Total expenses 451,730
NET INVESTMENT INCOME BEFORE ALLOCATION
FROM INDIRECT INVESTMENTS 470,740
Change in unrealized depreciation of Indirect Investments (231,531)
Expenses paid in connection with Indirect Investments (13,470)
Realized gains/income received from Indirect Investments 238,135
------------
Net change in net assets from Indirect Investments (6,866)
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 463,874
============
</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 Three Months Ended June 30, 1999
<TABLE>
Adviser Beneficial
Trustee Shareholders Total
<S> <C> <C> <C> <C> <C>
Balance as of March 31, 1999 $ 492,604 $ 106,559,907 $ 107,052,511
Net increase in net assets from operations 2,135 461,739 463,874
------------- ------------------ ------------------
Balance as of June 30, 1999 $ 494,739 $ 107,021,646(A) $ 107,516,385
============= ================== ==================
</TABLE>
(A) The net asset value per share of beneficial interest was $989.48 as of June
30, 1999.
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 Three Months Ended June 30, 1999
<TABLE>
CASH FLOWS PROVIDED FROM OPERATING ACTIVITIES
<S> <C>
Net increase in net assets from operations $ 463,874
Adjustments to reconcile net increase in net assets from operations to net cash
provided from operating activities:
Net change in net assets from Indirect Investments 6,866
Decrease in accrued interest receivable 21,106
Decrease in prepaid expenses 65,162
Decrease in due from affiliates 114,435
Decrease in accounts payable and accrued expenses (47,529)
--------------
Net cash provided from operating activities 623,914
--------------
CASH FLOWS PROVIDED FROM INVESTING ACTIVITIES
Net return of short-term investments 10,433,000
Purchase of Direct Investments (5,000,000)
Capital contributed to Indirect Investments (5,205,840)
Return of capital distributions received from Indirect Investments 51,884
Expenses paid in connection with Indirect Investments (13,470)
Realized gains/income received from Indirect Investments 238,135
--------------
Net cash provided from for investing activities 503,709
--------------
CASH FLOWS PROVIDED FROM FINANCING ACTIVITIES
Cash contributions from Beneficial Shareholders 50,000
Net cash provided from financing activities 50,000
Increase in cash and cash equivalents 1,177,623
Cash and cash equivalents at beginning of period 2,750,218
Cash and cash equivalents at end of period $ 3,927,841
==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
FINANCIAL HIGHLIGHTS (Unaudited)
For the Three Months Ended June 30, 1999
<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 $ 985.21
Net investment income $ 4.33
Net change in net assets from Indirect Investments (.06)
---------
Net increase in net assets from operations 4.27
-------------
Net asset value, end of period $ 989.48
=============
Total investment return 1.73%*
Ratios to Average Net Assets:
Investment expenses 1.68%*
Net income 1.73%*
Supplemental Data:
Net assets, end of period $107,516,385
Portfolio turnover 0.00%
* Annualized
</TABLE>
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 seeks 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.
In determining the fair value of the Trust's Indirect Investments, the Adviser
Trustee considers, among other things, the valuations provided by the general
partner managers of such investments. The valuations provided by the general
partner managers are reflected by the fair value of the Trust's capital account
balance for each such Indirect Investment. The capital account balance for each
Indirect Investment includes capital contributed by the Trust, distributions
received by the Trust and the Trust's allocated share of the Indirect
Investment's 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. The Trust's
capital account balance for each Indirect Investment is reviewed by the Adviser
Trustee for reasonableness and the fair value of each Indirect Investment 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.
<PAGE>
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited), continued
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.
The values assigned to portfolio investments are based on available information
and do not necessarily represent amounts that might ultimately be realized,
since such amounts depend on future circumstances and cannot be determined until
the investments are actually liquidated. Because of the inherent uncertainty of
valuation, the assigned values may differ significantly from the values that
would have been used had a ready market for the investments existed, and the
differences could be material.
The Trust's direct investments are restricted as to resale. Additionally, the
Trust's investments in limited partnerships may be illiquid due to provisions of
the limited partnership agreements restricting transfers of partnership
interests.
Security Transactions and Investment Income - Security transactions are
accounted for on the date the security is purchased or sold (trade date). Costs
used in determining realized gains and losses on the sale of investment
securities are those of the specific securities sold. Interest income is
recorded on the accrual basis.
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 - In accordance with Statement of Position
98-5 "Reporting on the Cost of Start-up Activities" organizational and start-up
costs are expensed as incurred. Since the inception of the Trust, organizational
and start-up costs totaling $183,271 have been expensed.
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 since the inception of the Trust.
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.
<PAGE>
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited), continued
3. Capital Commitments
The Trust has issued 108,659.8075 shares of beneficial interest (the "Shares"),
accepting capital commitments from shareholders totaling $110.6 million,
including a capital commitment of $500,000 from the Adviser Trustee. All such
commitments have been fully contributed to the Trust.
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
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), concluded
7. Investment Commitments
<TABLE>
As of June 30, 1999, the Trust had unfunded investment commitments in the
following Indirect Investments:
Investment
<S> <C>
Alta California Partners II, L.P. $ 3,400,000
American Securities Partners II, L.P. 3,923,103
Apollo Investment Fund IV, L.P. 2,954,928
Atlas Venture Fund IV, L.P. 1,410,409
Aurora Equity Partners II L.P. 4,182,291
Bedrock Capital Partners I, L.P. 2,888,499
CVC European Equity Partners II L.P. 4,881,641
Fenway Partners Capital Fund II, L.P. 4,173,906
First Reserve Fund VIII, L.P. 3,764,067
Hicks, Muse, Tate & Furst Latin America Fund, L.P. 1,249,996
Hicks, Muse, Tate & Furst Equity Fund IV, L.P. 2,151,186
Parthenon Investors, L.P. 2,810,944
Providence Equity Partners III L.P. 2,985,354
Sentinel Capital Partners II, L.P. 4,398,337
Sprout Capital VIII, L.P. 3,500,000
Thomas H. Lee Equity Fund IV, L.P. 6,370,528
Triumph Partners III, L.P. 3,000,087
VS&A Communications Partners III, L.P. 2,940,021
---------------
Total $ 60,985,297
===============
</TABLE>
