THE PACIFIC CORPORATE GROUP
PRIVATE EQUITY FUND
Financial Statements
(Unaudited)
For the Nine Months Ended
December 31, 1999
<PAGE>
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
<TABLE>
BALANCE SHEET (Unaudited)
December 31, 1999
ASSETS
<S> <C> <C>
Portfolio investments at fair value (cost $58,461,222) $ 60,798,721
Short-term investments, at amortized cost 49,270,935
Cash and cash equivalents 1,338,521
Accrued interest 7,139
Refundable capital contribution 219,362
Prepaid expenses 458,235
----------------
TOTAL ASSETS $ 112,092,913
================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 59,657
----------------
Total liabilities 59,657
----------------
Shareholders' equity:
Shares of beneficial interest, 108,659.8075 shares issued and outstanding:
Adviser Trustee (500 shares) 515,523
Beneficial Shareholders (108,159.8075 shares) 111,517,733
----------------
Total shareholders' equity 112,033,256
----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 112,092,913
================
</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, 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 1.78%
---------------- ----------------
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 2.68%
---------------- ----------------
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 3.18%
---------------- ----------------
VS&A HW Holding, LLC
Washington, D.C
Business to business publishing trade shows and
related media for residential building industry
2.3077% membership interest 3,000,000 3,000,000 2.68%
Zhone Investors VIII, LLC
La Jolla, CA
Holding company of 1,075,000 shares of Series A-8 Preferred stock of Zhone
Technologies, Inc., a next generation telecommunications equipment, services and
solutions provider located in Oakland, CA 69.8% membership interest
1,200,000 1,200,000 1.07%
---------------- ---------------- ---------
Total Direct Investments 12,760,000 12,760,000 11.39%
---------------- ---------------- ---------
Indirect Investments:
Alta California Partners II, L.P. 1,320,000 1,373,759 1.23%
$4,000,000 original capital commitment
1.783% limited partnership interest
American Securities Partners II, L.P. 2,057,151 2,025,061 1.81%
$5,000,000 original capital commitment
1.429% limited partnership interest
<PAGE>
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS (Unaudited), continued
As of December 31, 1999
Fair Value
% of
Cost Fair Value Net Assets
Apollo Investment Fund IV, L.P. $ 3,185,273 $ 3,476,382 3.10%
$5,000,000 original capital commitment
.139% limited partnership interest
Atlas Venture Fund IV, L.P. 712,751 699,540 .62%
$1,540,000 original capital commitment
.381% limited partnership interest
Aurora Equity Partners II L.P. 1,388,187 1,272,415 1.14%
$5,000,000 original capital commitment
.663% limited partnership interest
Bedrock Capital Partners I, L.P. 3,661,517 3,932,707 3.51%
$5,000,000 original capital commitment
4.189% limited partnership interest
CVC European Equity Partners II L.P. 4,078,701 3,830,322 3.42%
$7,500,000 original capital commitment
.397% limited partnership interest
Exxel Capital Partners V, L.P. 2,500,153 2,503,629 2.23%
$2,500,000 original capital commitment
.294% limited partnership interest
Fenway Partners Capital Fund II, L.P. 1,066,831 986,318 .88%
$5,000,000 original capital commitment
.550% limited partnership interest
First Reserve Fund VIII, L.P. 1,712,628 1,747,000 1.56%
$5,000,000 original capital commitment
.616% limited partnership interest
Hicks, Muse, Tate & Furst Latin America Fund, L.P. 2,526,645 2,467,290 2.20%
$2,500,000 original capital commitment
.260% limited partnership interest
Hicks, Muse, Tate & Furst Equity Fund IV, L.P. 3,926,842 4,415,798 3.94%
$5,000,000 original capital commitment
.124% limited partnership interest
Parthenon Investors, L.P. 1,476,935 1,372,292 1.22%
$3,500,00 original capital commitment
1.000% limited partnership interest
<PAGE>
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS (Unaudited), continued
As of December 31, 1999
Fair Value
% of
Cost Fair Value Net Assets
Providence Equity Partners III, L.P. $ 1,473,727 $ 1,470,723 1.31%
$3,500,000 original capital commitment
.372% limited partnership interest
Sentinel Capital Partners II, L.P. 1,814,755 1,685,307 1.50%
$5,000,000 original capital commitment
3.973% limited partnership interest
Sprout Capital VIII, L.P. (a) 2,855,513 2,791,270 2.50%
$5,000,000 original capital commitment
.667% limited partnership interest
Thomas H. Lee Equity Fund IV, L.P. 6,158,681 8,034,632 7.17%
$10,000,000 original capital commitment
.313% limited partnership interest
Triumph Partners III, L.P. 3,247,146 3,465,322 3.09%
$5,000,000 original capital commitment
.831% limited partnership interest
VS&A Communications Partners III, L.P. 537,786 488,954 .45%
$3,000,000 original capital commitment
.350% limited partnership interest _______
---------------- ----------------
Total Indirect Investments 45,701,222 48,038,721 42.88%
---------------- ---------------- ---------
Total Portfolio Investments $ 58,461,222 $ 60,798,721 54.27%
================ ================ =========
</TABLE>
(a) In October 1999, the Trust received an in-kind distribution of 3,973 common
shares of Tellabs, Inc. from Sprout Capital VIII, L.P. These shares were
subsequently sold for $255,018, resulting in a realized gain of $212,110
for the quarter ended December 31, 1999.
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 and Nine Months Ended December 31, 1999
<TABLE>
Three Months Nine Months
Ended Ended
December 31, December 31,
INVESTMENT INCOME AND EXPENSES 1999 1999
------------------ -----------
<S> <C> <C>
Interest from short-term investments $ 805,774 $ 2,614,137
------------- ---------------
Expenses:
Management fee 345,582 1,036,746
Legal fees 16,586 61,423
Accounting fees 25,447 78,640
Independent Trustee fees 10,875 32,625
Custody fees 12,000 54,000
Insurance expense 18,845 28,403
Miscellaneous 4,444 13,390
------------- ---------------
Total expenses 433,779 1,305,227
------------- ---------------
Net Investment Income 371,995 1,308,910
------------- ---------------
Net Change in Net Assets from Portfolio Investments
Change in unrealized appreciation of Distributed Investments (198,650) (198,650)
Realized gain on Distributed Investments 212,110 212,110
------------- ---------------
Net change in net assets from Distributed Investments 13,460 13,460
------------- ---------------
Change in unrealized appreciation or depreciation of
Indirect Investments 537,943 3,443,821
Expenses paid in connection with Indirect Investments (12,533) (33,672)
Realized gains/income received from Indirect Investments 3,350 248,226
------------- ---------------
Net change in net assets from Indirect Investments 528,760 3,658,375
------------- ---------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 914,215 $ 4,980,745
============= ===============
</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, 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 22,919 4,957,826 4,980,745
------------- ------------------ ------------------
Balance as of December 31, 1999 $ 515,523 $ 111,517,733(A) $ 112,033,256
============= ================== ==================
(A) The net asset value per share of beneficial interest was $1,031.05 as of
December 31, 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 Nine Months Ended December 31, 1999
CASH FLOWS PROVIDED FROM OPERATING ACTIVITIES
Net increase in net assets from operations $ 4,980,745
Adjustments to reconcile net increase in net assets from operations to net cash
provided from operating activities:
Net change in net assets from Distributed Investments (13,460)
Net change in net assets from Indirect Investments (3,658,375)
Increase in accrued interest (89,605)
Decrease in prepaid expenses (10,532)
Decrease in due from affiliates 114,435
Decrease in accounts payable and accrued expenses (35,029)
--------------
Net cash provided from operating activities 1,288,179
--------------
CASH FLOWS USED FOR INVESTING ACTIVITIES
Net purchase of short-term investments 30,020,000
Cost of Direct Investments purchased (9,200,000)
Capital contributed to Indirect Investments (24,136,777)
Return of capital distributions received from Indirect Investments 97,811
Expenses paid in connection with Indirect Investments (33,672)
Realized gains/income received from Indirect Investments 247,744
Proceeds from the sale of Distributed Investments 255,018
--------------
Net cash used for investing activities (2,749,876)
--------------
CASH FLOWS PROVIDED FROM FINANCING ACTIVITIES
Cash contributions from Beneficial Shareholders 50,000
--------------
Net cash provided from financing activities 50,000
--------------
Decrease in cash and cash equivalents (1,411,697)
Cash and cash equivalents at beginning of period 2,750,218
--------------
Cash and cash equivalents at end of period $ 1,338,521
==============
Supplemental disclosure of non-cash investing activities:
In-kind distributions received from Indirect Investments $ 241,558
Refundable capital contribution $ 219,362
</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 Nine Months Ended December 31, 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 $ 12.05
Net change in net assets from Portfolio Investments 33.79
---------
Net increase in net assets from operations 45.84
-------------
Net asset value, end of period $ 1,031.05
=============
Total investment return 6.20%*
=============
Ratios to Average Net Assets:
Investment expenses 1.59%*
=============
Net income 6.07%*
=============
Supplemental Data:
Net assets, end of period $ 112,033,256
=================
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 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. No such adjustments have been
made as of December 31, 1999.
As a result of delays in receiving 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 and securities received in-kind from
Indirect Investments ("Distributed 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 that 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 Indirect Investments in limited partnerships may be illiquid due to
provisions of the limited partnership agreements restricting the sale 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 associated
with selling shares of the Trust totaling $568,126 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. Shareholders' Equity
In connection with the issuance of 108,659.8075 shares of beneficial interest
(the "Shares") of the Trust, shareholders contributed capital totaling $110.6
million, including a $500,000 capital contribution from the Adviser Trustee. The
Trust paid selling commissions of $1.9 million in connection with the sale of
the shares.
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, 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
As of December 31, 1999, the Trust had unfunded investment commitments in the
following Portfolio Investments:
<TABLE>
Investment
<S> <C>
Alta California Partners II, L.P. $ 2,680,000
American Securities Partners II, L.P. 2,942,849
Apollo Investment Fund IV, L.P. 1,814,727
Atlas Venture Fund IV, L.P. 827,249
Aurora Equity Partners II L.P. 3,713,841
Bedrock Capital Partners I, L.P. 1,338,483
CVC European Equity Partners II L.P. 3,419,428
Fenway Partners Capital Fund II, L.P. 3,933,169
First Reserve Fund VIII, L.P. 3,260,372
Hicks, Muse, Tate & Furst Equity Fund IV, L.P. 1,073,158
Integra Telecom, Inc. 4,000,000
Parthenon Investors, L.P. 2,023,065
Providence Equity Partners III L.P. 2,026,273
Sentinel Capital Partners II, L.P. 3,185,245
Sprout Capital VIII, L.P. 2,050,000
Thomas H. Lee Equity Fund IV, L.P. 3,841,319
Triumph Partners III, L.P. 1,752,854
VS&A Communications Partners III, L.P. 2,462,214
Zhone Investors VIII, LLC 1,800,000
---------------
Total $ 48,144,246
===============
</TABLE>
