The Pacific Corporate Group
Private Equity Fund
Financial Statements
(Unaudited)
For the Nine Months Ended
December 31, 1998
<PAGE>
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
BALANCE SHEET (Unaudited)
December 31, 1998
<TABLE>
ASSETS
<S> <C> <C>
Portfolio investments at fair value (cost $20,234,003) $ 19,867,441
Short-term investments, at amortized cost 28,694,276
Cash and cash equivalents 3,167,879
Deferred organizational costs (net of accumulated amortization of $32,689) 150,582
Accrued interest receivable 12,512
Prepaid expenses 406,055
----------------
TOTAL ASSETS $ 52,298,745
================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 62,949
----------------
Total liabilities 62,949
----------------
Shareholders' equity:
Shares of beneficial interest, 108,659.8075 shares issued and outstanding:
Adviser Trustee (500 shares) 245,079
Beneficial Shareholders (108,159.8075 shares) 51,990,717
Total shareholders' equity 52,235,796
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 52,298,745
================
</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 December 31, 1998
<TABLE>
Fair Value
% of
Cost Fair Value Net Assets
Direct Investments
IRMC Holdings, Inc.
<S> <C> <C> <C>
55,200 shares of Common Stock $ 552,000 $ 552,000 1.06%
22,080 shares of Preferred Stock 2,208,000 2,208,000 4.22%
---------------- ---------------- --------
2,760,000 2,760,000 5.28%
---------------- ---------------- --------
Total Direct Investments 2,760,000 2,760,000 5.28%
---------------- ---------------- --------
Indirect Investments:
Alta California Partners II, L.P. 400,000 400,000 0.77%
$4,000,000 capital commitment
2.15% limited partnership interest
American Securities Partners II, L.P. 1,032,631 1,032,631 1.98%
$5,000,000 capital commitment
1.429% limited partnership interest
Apollo Investment Fund IV, L.P. 1,102,245 1,076,152 2.06%
$5,000,000 capital commitment
.139% limited partnership interest
Aurora Equity Partners II L.P. 364,762 323,613 0.62%
$5,000,000 capital commitment
.693% limited partnership interest
Bedrock Capital Partners I, L.P. 1,064,193 965,144 1.85%
$5,000,000 capital commitment
4.189% limited partnership interest
CVC European Equity Partners II L.P. 1,433,457 1,456,133 2.79%
$7,500,000 capital commitment
.300% limited partnership interest
Exxel Capital Partners V, L.P. 2,500,153 2,500,153 4.79%
$2,500,000 capital commitment
.294% limited partnership interest
</TABLE>
<PAGE>
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS (Unaudited), continued
As of December 31, 1998
<TABLE>
Fair Value
% of
Cost Fair Value Net Assets
<S> <C> <C> <C>
Fenway Partners Capital Fund II, L.P. $ 911,585 $ 911,585 1.75%
$5,000,000 capital commitment
.678% limited partnership interest
First Reserve Fund VIII, L.P. 375,177 343,576 0.66%
$5,000,000 capital commitment
.616% limited partnership interest
Hicks, Muse, Tate & Furst Latin America Fund, L.P. 1,170,725 1,140,655 2.18%
$2,500,000 capital commitment
.260% limited partnership interest
Hicks, Muse, Tate & Furst Equity Fund IV, L.P. 2,575,865 2,575,865 4.93%
$5,000,000 capital commitment
.125% limited partnership interest
Sentinel Capital Partners II, L.P. 700,131 699,801 1.34%
$5,000,000 captial commitment
4.807% limited partnership interest
Sprout Capital VIII, L.P. 850,000 807,308 1.55%
$5,000,000 capital commitment
.667% limited partnership interest
Thomas H. Lee Equity Fund IV, L.P. 1,717,987 1,717,990 3.29%
$10,000,000 capital commitment
.300% limited partnership interest
Triumph Partners III, L.P. 1,275,092 1,156,835 2.21%
$5,000,000 capital commitment
.831% limited partnership interest
---------------- ---------------- ---------------
Total Indirect Investments 17,474,003 17,107,441 32.77%
---------------- ---------------- --------
Total Portfolio Investments $ 20,234,003 $ 19,867,441 38.05%
================ ================ ========
</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 Nine Months
Ended Ended
December 31, December 31,
1998 1998
------------------ ------------------
INVESTMENT INCOME AND EXPENSES
<S> <C> <C>
Interest from short-term investments $ 484,774 $ 1,642,696
------------- --------------
Expenses:
Management fee 345,582 1,069,345
Legal fees 86,317 224,041
Accounting fees 26,138 78,562
Independent Trustee fees 10,875 34,457
Custody fees 7,500 22,500
Insurance expense 48,295 97,957
Amortization of deferred organizational costs 9,165 27,641
Mailing and printing 3,495 5,498
Miscellaneous 969 3,091
------------- --------------
Total expenses 538,336 1,563,092
------------- --------------
NET INVESTMENT (LOSS) INCOME BEFORE
ALLOCATION FROM INDIRECT INVESTMENTS (53,562) 79,604
------------- --------------
Change in fair value of Indirect Investments (93,578) (366,562)
Expenses paid in connection with Indirect Investments (41,566) (135,665)
Realized gains/income received from Indirect Investments 10,381 32,193
------------- --------------
Net change in fair value of Indirect Investments (124,763) (470,034)
------------- --------------
NET LOSS $ (178,325) $ (390,430)
============= ==============
</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 Nine Months Ended December 31, 1998
<TABLE>
Adviser Beneficial
Trustee Shareholders Total
<S> <C> <C> <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 loss (1,695) (388,735) (390,430)
------------ ---------------- ----------------
Balance as of December 31, 1998 $ 245,079 $ 51,990,717 $ 52,235,796
============ ================ ================
</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 Nine Months Ended December 31, 1998
<TABLE>
CASH FLOWS PROVIDED FROM OPERATING ACTIVITIES
<S> <C>
Net loss $ (390,430)
Adjustments to reconcile net loss to net cash provided from operating
activities:
Change in fair value of Indirect Investments 470,034
Amortization of deferred organizational costs 27,641
Decrease in accrued interest receivable 132,431
Increase in prepaid expenses and other receivables (269,333)
Increase in accounts payable and accrued expenses 37,428
---------------
Net cash provided from operating activities 7,771
---------------
CASH FLOWS USED FOR INVESTING ACTIVITIES
Net purchase of short-term investments (28,680,000)
Purchase of Direct Investments (2,760,000)
Capital contributed to Indirect Investments (15,329,376)
Expenses paid in connection with Indirect Investments (135,665)
Realized gains/income received from Indirect Investments 32,193
---------------
Net cash used for investing activities (46,872,848)
---------------
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 (246,000)
---------------
Net cash provided from financing activities 8,450,123
---------------
Increase in cash and cash equivalents (38,414,954)
Cash and cash equivalents at beginning of period 41,582,833
Cash and cash equivalents at end of period $ 3,167,879
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
FINANCIAL HIGHLIGHTS
For the Nine Months Ended December 31, 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 (3.59)
Net asset value, end of period $ 480.68
============
Total investment return (.74%)
Ratios to Average Net Assets:
Investment expenses 4.15%*
Net loss (1.04%)*
Supplemental Data:
Net assets, end of period $ 52,235,796
=============
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 nine months ended December 31, 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.
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 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. 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. 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 December 31, 1998, shareholders had
contributed $55.2 million, or 50% of their total capital commitments to the
Trust. The final 50% of the capital commitments due to the Fund have been called
and are payable 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 December 31, 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 December 31, 1998, the Trust had unfunded investment commitments in the
following Indirect Investments:
<TABLE>
Investment
<S> <C>
Alta California Partners II, L.P. $ 3,600,000
American Securities Partners II, L.P. 3,967,369
Apollo Investment Fund IV, L.P. 3,897,755
Aurora Equity Partners II L.P. 4,692,570
Bedrock Capital Partners I, L.P. 3,935,807
CVC European Equity Partners II L.P. 6,066,543
Exxel Capital Partners V, L.P. 7,326
Fenway Partners Capital Fund II, L.P. 4,088,415
First Reserve Fund VIII, L.P. 4,624,823
Hicks, Muse, Tate & Furst Latin America Fund, L.P. 1,329,275
Hicks, Muse, Tate & Furst Equity Fund IV, L.P. 2,424,135
Providence Equity Partners III L.P. 3,500,000
Sentinel Capital Partners II, L.P. 4,299,869
Sprout Capital VIII, L.P. 4,150,000
Thomas H. Lee Equity Fund IV, L.P. 8,282,013
Triumph Partners III, L.P. 3,724,908
VS&A Communications Partners III, LP 3,000,000
---------------
Total $ 65,590,808
===============
</TABLE>
