[Federal Register Volume 65, Number 84 (Monday, May 1, 2000)]
[Notices]
[Pages 25408-25410]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-10730]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-24402, 812-11650]


The Pacific Corporate Group Private Equity Fund, et al., Notice 
of Application

April 24, 2000.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of application for an order under section 17(d) of the 
Investment Company Act of 1940 (``Act'') and rule 17d-1 under the Act 
to permit certain joint transactions.

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SUMMARY OF APPLICATION: The Pacific Corporate Group Private Equity 
Fund, formerly known as The Alternative Investment Fund (the ``Fund''), 
and Pacific Corporate Group, Inc., formerly known as Pacific Corporate 
Advisors, Inc. (the ``Adviser''), seek to amend a prior order (``Prior 
Order'') that permits the Fund to co-invest with other investment 
vehicles managed by the Adviser or its affiliates and/or, under certain 
circumstances, with the Adviser or its affiliates. The amended order 
(``Amended Order'') would revise certain conditions of the Prior Order.

Applicants: The Fund and the Adviser.

FILING DATES: The application was filed on June 9, 1999, and amended on 
February 7, 2000. Applicants agree to file an amendment during the 
notice period, the substance of which is reflected in this notice.

Hearing or Notification of Hearing: An order granting the application 
will be issued unless the SEC orders a hearing. Interested persons may 
request a hearing by writing to the SEC's Secretary and serving 
applicants with a copy of the request, personally or by mail. Hearing 
requests should be received by the SEC by 5:30 p.m. on May 19, 2000, 
and should be accompanied by proof of service on applicants, in the 
form of an affidavit, or, for lawyers, a certificate of service. 
Hearing requests should state the nature of the writer's interest, the 
reason for the request, and the issues contested. Persons who wish to 
be notified of a hearing may request notification by writing to the 
SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, NW., Washington, DC 20549-
0609. Applicants, c/o Brown & Wood LLP, One World Trade Center, New 
York, New York 10048.

FOR FURTHER INFORMATION CONTACT: Paula L. Kashtan, Senior Counsel, at 
(202) 942-0615, or Mary Kay Frech, Branch Chief, at (202) 942-0564 
(Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
SEC's Public Reference Branch, 450 Fifth Street, NW., Washington, DC 
20549-0102 (telephone (202) 942-8090).

Applicants' Representations

    1. The Fund is a closed-end management investment company 
registered under the Act. The Adviser serves as investment adviser to 
the Fund and is registered under the Investment Advisers Act of 1940. 
The Fund invests in private equity investments either directly or 
indirectly through underlying partnerships managed by an adviser not 
affiliated with the Adviser.
    2. On December 4, 1996, the SEC issued the Prior Order to 
applicants under section 6(c) of the Act exempting applicants from 
section 12(d)(1)(A) of the Act and pursuant to section 17(d) of the Act 
and rule 17d-1 under the Act.\1\ The Prior Order permits the Fund and 
Subsequent Funds, as defined in the Prior Order (together with the 
Fund, the ``Funds''), to: (i) invest in unaffiliated private investment 
companies exempt from the definition of an investment company by 
section 3(c)(1) of the Act; and (ii) co-invest with Private Funds, as 
defined in the Prior Order, managed by the Adviser or its affiliates 
and/or, under certain circumstances, with the Adviser or its affiliates 
(``Co-Investments'').
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    \1\ Investment Company Act Release Nos. 22324 (Nov. 6, 1996) 
(notice) and 22370 (Dec. 4, 1996) (order).
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    3. Applicants state that, as a result of amendments to section 
3(c)(1) of the Act that became effective in 1997, relief from the 
provisions of section 12(d)(1)(A) of the Act granted in the Prior Order 
is no longer required. Accordingly, applicants request that conditions 
2 through 7 of the Prior Order be deleted. Applicants represent and 
understand that, except as requested in the application, the 
representation set forth in and the terms and provisions of the Prior 
Order remain unchanged.

Applicants' Conditions

    Applicants agree that the Amended Order granting the requested 
relief shall be subject to the following conditions:
    1. A majority of the trustees of each Fund (``Trustees'') will not 
be ``interested persons,'' as defined in section 2(a)(19) of the Act, 
of the Fund (``Non-Interested Trustees'').
    2. No Co-Investments (except for follow-on investments made 
pursuant to condition 9 below) will be made pursuant to the requested 
order with respect to portfolio companies in which the Adviser, any 
Fund or Private Fund, or any of their affiliates has previously 
acquired an interest.
    3. The Trustees of each Fund participating in a Co-Investment, 
including a majority of the Non-Interested Trustees, will approve Co-
Investments in advance. To facilitate the Trustees' determinations, the 
Adviser will provide the Trustees of a Fund with periodic information 
listing all investments made by the other Funds, the Private Funds, 
and/or the Adviser or its affiliate, as applicable, that would be 
suitable for investment by a Fund.
    4. (a) Before making a Co-Investment, the Adviser will make a 
preliminary

[[Page 25409]]

determination as to whether each particular Co-Investment opportunity 
meets the Fund's investment objective, policies, and restrictions. Co-
Investment opportunities will be offered to eligible Funds and Private 
Funds in amounts proportionate to capital available for investment at 
the time of such opportunities. The Adviser will maintain written 
records of the factors considered in any preliminary determination.
    (b) Following the making of the determination referred to in (a), 
information concerning the proposed Co-Investment will be distributed 
to the Trustees. Such information will be presented in written form and 
will include the name of each Fund and each Private Fund that may 
participate and, if permitted by condition 5 below, the Adviser or its 
affiliate and the maximum amount offered to each entity.
    (c) Information regarding the Adviser's preliminary determinations 
referred to in (a) will be reviewed by the Trustees, including the Non-
Interested Trustees. The Trustees, including a majority of the Non-
Interested Trustees, will make an independent decision as to whether to 
participate and the extent of participation in a Co-Investment based on 
such factors as are deemed appropriate under the circumstances. If a 
majority of the Non-Interested Trustees of the Fund determines that the 
amount proposed to be invested by the Fund is not sufficient to obtain 
an investment position that they consider appropriate under the 
circumstances, the Fund will not participate in the Co-Investment. 
Similarly, the Fund will not participate in a Co-Investment if a 
majority of the Non-Interested Trustees of the Fund determines that the 
amount proposed to be invested is an amount in excess of that which is 
determined to be appropriate under the circumstances, although the Non-
Interested Trustees may make a determination that the Fund take other 
than their allotted portion of an investment, pursuant to condition 6 
below. A Fund will only make a Co-Investment if a majority of the Non-
Interested Trustees of the Fund prior to making the Co-Investment 
conclude, after consideration of all information deemed relevant 
(including the extent to which such participation is on a basis 
different from or less advantageous than that of other participants), 
that the investments by any Private Fund and/or the Adviser or its 
affiliates, as applicable, would not disadvantage the Fund in the 
making of such investment, in maintaining its investment position or in 
disposing of such investment, and that participation by the Fund would 
not be on a basis different from or less advantageous than that of such 
Private fund and/or the Adviser or its affiliate, as applicable. The 
Non-Interested Trustees will maintain at the Fund's office written 
records of the factors considered in any decision regarding the 
proposed Co-Investment.
    (d) The Non-Interested Trustees will, for purposes of reviewing 
each recommendation of the Adviser, request such additional information 
from the Adviser as they deem necessary for the exercise of their 
reasonable business judgment, and they will also employ such experts, 
including lawyers and accountants, as they deem appropriate for the 
reasonable exercise of this oversight function.
    5. The Trustees, including a majority of the Non-Interested 
Trustees, will make their own decision and have the right to decide not 
to participate in a particular Co-Investment. There will be no 
consideration paid to the Adviser or its affiliates, directly or 
indirectly, including without limitation any type of brokerage 
commission, in connection with a Co-Investment. However, the Adviser 
and its affiliates (i) may seek reimbursement from direct investment 
issuers for documented out-of-pocket expenses approved by the Trustees 
incurred by the Adviser or its affiliates in connection with a direct 
investment, (ii) will continue to receive advisory and other fees from 
the Fund and the Private Funds, and (iii) may participate in any Co-
Investment that is a direct investment wherein the Adviser or its 
affiliate is required by the placement agent offering shares of the 
Fund or a Subsequent Fund at the time of the offering or by a Private 
Fund to commit to co-invest in all direct investments with such entity 
in the amount of 1% of the investment of each such entity participating 
in the offering.
    6. The Fund will be entitled to purchase a portion of each Co-
Investment equal to the ratio of its capital available for investment 
to the capital available for investment of each other Co-Investment 
participant (including the interest of the Adviser or its affiliate). 
Any Co-Investment participant may determine not to take its full 
allocation, as long as, in the case of a Fund, a majority of the Non-
Interested Trustees determines that not doing so would be in the best 
interest of the Fund. All follow-on investments (as defined in 
condition 9 below), including the exercise of warrants or other rights 
to purchase securities of the issuer, will be allocated in the same 
manner as initial Co-Investments. If a Fund or Private Fund decides to 
participate in a Co-Investment opportunity to a lesser extent than its 
full allocation, that entity's portion may be allocated to the other 
Co-Investment participants based on their respective capital available 
for investment. If one or more Funds decline to participate in a Co-
Investment opportunity, the remaining Funds and the Private Funds shall 
have the right to pursue such investment independently. Similarly, if 
one or more Private Funds decline to participate in a Co-Investment 
opportunity, the remaining Private Funds and the Funds shall have the 
right to pursue such investment independently.
    7. Co-Investments in securities by a Fund with any other Fund, any 
Private Fund, and/or the Adviser or its affiliate, as applicable, will 
consist of the same class of securities, including the same 
registration rights (if any), and other rights related thereto, 
purchased at the same unit consideration, and the approval of such 
transactions, including the determination of the terms of the 
transactions by the Fund's Non-Interested Trustees, will be made in the 
same time period.
    8. Except as described below, the Funds, the Private Funds and/or 
the Adviser or its affiliate, as applicable, will participate in the 
disposition of securities held by them as Co-Investments on a 
proportionate basis at the same time and on the same terms and 
conditions (a ``lock-step'' disposition). For this purpose, a 
distribution of securities to the partners or shareholders of a Private 
Fund upon dissolution shall not be deemed a ``disposition'' of 
securities. (However, to the extent that a Private Fund distributes 
securities in dissolution to partners or shareholders who are 
affiliates of the Funds, such partners or shareholders will be bound by 
the lock-step disposition procedures established herein.) If a Fund or 
a Private Fund elects to dispose of a security purchased in a Co-
Investment with one or more Funds or Private Funds, notice of the 
proposed sale will be given to the Non-Interested Trustees of the 
relevant Fund(s) and to the relevant Private Fund(s) at the earliest 
practical time. The Funds, the Private Funds, and/or the Adviser or its 
affiliate, as applicable, will participate in the disposition of such 
security on a lock-step basis, unless the Non-Interested Trustees of a 
Fund determine that the Fund should not participate in such sale or not 
participate on a lock-step basis. A Fund need not participate on a 
lock-step basis in the disposition of securities sold by any other Fund 
or a Private Fund if the Non-Interested Trustees of the Fund find that 
the retention or sale, as the

[[Page 25410]]

case may be, of the securities is fair to the Fund and that the Fund's 
participation or choice not to participate in the sale on a lock-step 
basis is not the result of overreaching by any other Fund, and Private 
Fund, and/or the Adviser or its affiliate, as applicable. If such a 
finding is not made, then the relevant Fund must participate in such 
sale on the basis of lock-step disposition. Like a Fund, a Private Fund 
may elect not to participate in a sale of securities held as Co-
Investments or not to participate on a lock-step basis. If at any time 
the result of a proposed disposition of any portfolio security held by 
a Fund or a Private Fund would alter the proportionate holdings of each 
class of securities held by the other Funds, Private Funds, and/or the 
Adviser or its affiliate, as applicable, holding the Co-Investment, 
then the Non-Interested Trustees of the Fund or Funds involved must 
determine that such a result is fair to the relevant Fund(s) and is not 
the result of overreaching by any other Fund, any Private Fund, and/or 
the Adviser or its affiliate, as applicable. The Non-Interested 
Trustees will record in the records of the Fund the basis for their 
decisions as to whether to participate in such sale.
    9. If a Fund or a Private Fund determines that it should make a 
``follow-on'' investment (i.e., an additional investment in a portfolio 
company in which a Co-Investment has been made pursuant to the order 
requested hereby) in a particular portfolio company whose securities 
are held by it and one or more Funds, or to exercise warrants or other 
rights to purchase securities of such an issuer, notice of such 
transaction will be provided to such other Fund(s), including its or 
their Non-Interested Trustees at the earliest practical time. The 
Adviser will formulate a recommendation as to the proposed 
participation by a Fund in a follow-on investment and provide the 
recommendation to the Non-Interested Trustees of the Fund along with 
notice of the total amount of the follow-on investment. Each Fund's 
Non-Interested Trustees will make their own determination with respect 
to follow-on investments. Follow-on investments will be entered into on 
the same basis as initial Co-investments and will be subject to the 
same approval procedure as those required for initial Co-Investments. 
Assuming that the amount of a follow-on investment available to a Fund 
is not based on the amount of the fund's initial Co-Investment, the 
relative amount of investment by each Fund participating in a follow-on 
investment will be based on a ratio derived by comparing the capital 
available for investment of each participating Fund, Private Fund and/
or the Adviser or its affiliate, as applicable, with the total amount 
of the available follow-on investment. Each Fund will participate in 
such investment if a majority of its Non-Interested Trustees determines 
that such action is in the best interest of the Fund. The Non-
Interested Trustees of each Fund will record in their records the 
recommendation of the Adviser and their decision as to whether to 
engage in a follow-on transaction with respect to that portfolio 
company, as well as the basis for such decision.
    10. A decision by the Trustees of a Fund (i) not to participate in 
a Co-Investment, (ii) to take less or more than the Fund's full pro 
rata allocation, or (iii) not to sell, exchange, or otherwise dispose 
of a Co-Investment in the same manner and at the same time as another 
Fund or a Private Fund shall include a finding that such decision is 
fair and reasonable to the Fund and not the result of overreaching of 
the Fund or its securityholders by the Private Funds and/or the Adviser 
or its affiliate, as applicable. The Non-Interested Trustees of each 
Fund will be provided quarterly for review all information concerning 
Co-Investments made by the Funds, the Private Funds, and/or the Adviser 
or its affiliate, as applicable, including Co-Investments in which the 
Fund declined to participate, so they may determine whether all Co-
Investments made during the preceding quarter, including those Co-
Investments they declined, complied with the conditions set forth 
above. In addition, the Non-Interested Trustees of each Fund will 
consider at least annually the continuing appropriateness of the 
standards established for Co-Investments by the Fund, including whether 
use of such standards continues to be in the best interest of the Fund 
and its securityholders and does not involve overreaching of the Fund 
or its securityholders on the part of any party concerned.
    11. No Non-Interested Trustee of a Fund will be an affiliated 
person of a Private Fund or have had, at any time since the beginning 
of the last two completed fiscal years of any Private Fund, a material 
business or professional relationship with any Private Fund.
    12. A Fund, each Private Fund, and/or the Adviser or its affiliate, 
as applicable, will each bear its own expenses associated with the 
disposition of portfolio securities. The expenses, if any, of 
distributing and registering securities under the Securities Act sold 
by the Fund, one or more Private funds, and/or the Adviser or its 
affiliate, as applicable, at the same time will be shared by the Fund, 
the selling Private Fund(s), and/or the Adviser or its affiliate, as 
applicable, in proportion to the relative amounts they are selling.
    13. Other than as provided in condition 5, neither the Adviser nor 
any of its affiliates (other than the Private Funds pursuant to any 
order issued on this application) nor any director of the Fund will 
participate in a Co-Investment with the Fund unless a separate 
exemptive order with respect to such Co-Investment has been obtained. 
For this purpose, the term ``participate'' shall not include either the 
existing interests of the Adviser or its affiliates in, or their 
management fee and expense reimbursement arrangements with, Private 
Funds, and the term ``participate'' shall also not include any 
reimbursement from direct investment issuers described in condition 5 
above.
    14. The Fund will maintain all records required of it by the Act, 
and all records referred to or required under these conditions will be 
available for inspection by the SEC. The Fund will also maintain the 
records required by section 57(f)(3) of the Act as if the Fund was a 
business development company and the Co-Investments were approved by 
the Non-Interested Trustees under section 57(f).

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-10730 Filed 4-28-00; 8:45 am]
BILLING CODE 8010-01-M