[Federal Register Volume 61, Number 156 (Monday, August 12, 1996)]
[Notices]
[Pages 41813-41814]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-20455]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-22116; 812-10232]


Driehaus International Large Cap Fund, L.P. et al.; Notice of 
Application

August 5, 1996.
agency: Securities and Exchange Commission (``SEC'').

action: Notice of Application for Exemption Under the Investment 
Company Act of 1940 (the ``Act'').

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applicants: Driehaus International Large Cap Fund, L.P. (the 
``Partnership''), Driehaus Mutual Funds (the ``Trust''), Driehaus 
Capital Management, Inc. (the ``Adviser'') and Richard H. Driehaus.

relevant act section: Order requested under section 17(b) of the Act 
for an exemption from section 17(a) of the Act.

summary of application: Applicants request an order that would permit 
the Partnership to transfer substantially all of its assets and 
liabilities to the Trust in exchange for shares of beneficial interest 
of the Trust, which then would be distributed pro rata to the partners 
of the Partnership.

filing dates: The application was filed on July 2, 1996.

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 August 30, 1996, 
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 5th Street, N.W., Washington, DC 20549. 
Applicant, 25 East Erie Street, Chicago, IL 60611.

for further information contact: Suzanne Krudys, Senior Counsel, at 
(202) 942-0641, or Alison E. Baur, Branch Chief, (202) 942-0564 (Office 
of Investment Company Regulation, Division of Investment Management).

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.

Applicant's Representation

    1. The Partnership was organized as a Delaware limited partnership 
on July 1, 1990. The Partnership's investment objective is to seek 
capital appreciation by investing in equity securities of foreign 
companies with a market capitalization of more than $300 million using 
growth style investment criteria. The Partnership is organized as an 
investment partnership allowing investors to purchase limited 
partnership interests (``Interests'') or have them redeemed at net 
asset value on a monthly basis. The offering of the Interests was 
structured as a private placement under section 4(2) of the Securities 
Act of 1933 and Regulation D promulgated thereunder. The Partnership is 
not registered under the Act in reliance on section 3(c)(1) of the Act. 
Interests are sold to institutional investors and high net worth 
individuals. The Partnership has a minimum initial purchase requirement 
of $500,000.
    2. Richard H. Driehaus serves as the sole general partner of the 
Partnership and has exclusive responsibility for its overall 
management, control and administration. The Adviser, which is wholly 
owned by Mr. Driehaus, serves as investment adviser with respect to 
Partnership assets. SEC records indicate that the adviser is registered 
under the Advisers Act.
    3. The trust was organized as a Delaware business trust on June 3, 
1996. The Trust is a registered no-load, open-end management investment 
company. The Trust currently has a single series, the Driehaus 
International Growth Fund (the ``Fund'') with an investment objective 
and policies similar to those of the Partnership. The Trust is managed 
by a board of trustees (the ``Board''), which will include as a 
majority of its members persons who are not ``interested persons'' (as 
defined in the Act) of the Trust (the ``Independent Trustees'').
    4. The Fund proposes to acquire assets and liabilities from the 
Partnership in exchange for series of beneficial interests of the Trust 
relating to the Fund (the ``Fund Shares'') (the ``Exchange''). The 
Exchange will be effected pursuant to an Agreement and Plan of Exchange 
(the ``Plan''). Prior to effecting the Exchange, a memorandum will be 
distributed to each limited partner in the Partnership which will 
describe the nature and reasons for the Exchange.
    5. The shares delivered to the Partnership in the Exchange will 
have an aggregate net asset value equivalent to the net asset value of 
the assets transferred by the Partnership to the Trust (except for the 
effect of certain organizational expenses paid by the Fund). Upon 
consummation of the Exchange, the shares received by the Partnership 
will be distributed by the Partnership to its partners, with each 
partner receiving shares having an aggregate net asset value equivalent 
to the net asset value of the Interests in the Partnership held by such 
partner prior to the Exchange. The Partnership may retain sufficient 
assets to pay any Partnership-accrued expenses that are not transferred 
to the Fund and retain any assets that the Fund is not permitted to 
purchase or that are reasonably determined to be unsuitable for it. 
Assets retained by the Partnership that are not needed to pay accrued 
expenses will be distributed pro rata to the partners of the 
Partnership. The Partnership will be liquidated and dissolved following 
the distribution.
    6. The Partnership Agreement provides that the General Partners, 
upon 60 days advance notice to the Limited Partners, may terminate the 
Partnership. Limited Partners who do not wish to participate in the 
Exchange will have adequate opportunity to redeem their Partnership 
Interests before the Exchange and receive cash.
    7. The expenses of the Exchange will be borne by the Adviser. Trust 
organizational expenses will be paid by the Fund and amortized over 
five years. Any unamortized organizational expenses associated with the 
organization of the Fund at a time Mr. Driehaus withdraws his initial 
investment in the Trust will be borne by Mr. Driehaus and/or the 
Adviser and not the Fund.
    8. The Trust will enter into an advisory agreement with the Adviser 
(the ``Advisory Agreement''), pursuant to which the Adviser will render 
advisory services to the Fund substantially the same as those the

[[Page 41814]]

Adviser currently renders to the Partnership. In return for the 
Adviser's services, the Fund will pay a management fee to the Adviser, 
on a monthly basis, not to exceed 1.5% per annum of the Fund's net 
asset value.
    9. The management fees for the Fund will not exceed the maximum 
fees currently paid by the limited partners in the Partnership. 
Applicants expect that other Fund expenses will generally be higher as 
a percentage of net asset value than the expenses of the Partnership. 
This is primarily because of the increased costs of operating a 
registered investment company and complying with various additional 
regulatory requirements and industry practices. The Adviser will, 
however, place a limit on the annual expenses of the Fund through the 
end of the first year of operation at 2.25%. In addition, the Fund, 
unlike the Partnership, imposes a 1% withdrawal fee upon redemptions.
    10. The effect of the Exchange will be to establish the Trust as a 
successor investment vehicle to the Partnership. The Exchange will 
permit partners to pursue, as shareholders of the Trust, substantially 
the same investment objective and policies they were expecting from the 
partnership without sacrificing the pass-through tax features of the 
Partnership. In addition, shareholders of the Trust will be able to 
purchase and redeem shares on each business day, as opposed to only 
once per month as is currently provided under the Partnership 
Agreement.
    11. The Board of Trustees and Mr. Driehaus as General Partner of 
the Partnership have considered the desirability of the Exchange from 
the respective points of view of the Trust and the Partnership, have 
approved the Exchange, and concluded that: (i) The terms of the 
Exchange meet the criteria contained in section 17(b) of the Act; (ii) 
the Exchange is desirable as a business matter from the respective 
points of view of the Trust and the Partnership; (iii) the Exchange is 
in the best interests of the Trust and the Partnership; (iv) the 
Exchange is reasonable and fair, does not involve overreaching, and is 
consistent with the policies of the Act; (v) the Exchange is consistent 
with the policies of the Trust and the Partnership; and (vi) the 
interests of existing partners of the Partnership will not be diluted 
as a result of the Exchange. Currently, the Board has only one member, 
and this person is an ``interested person'' (as defined in the Act) of 
the Trust. As a condition of the Exchange, the Agreement and Plan of 
Exchange must be approved by the Board, including a majority of the 
independent trustees, at such time as it has a majority of independent 
trustees. The Exchange will not be effected until the Trust and the 
Partnership have received a favorable opinion of counsel with respect 
to the tax consequences of the Exchange and the SEC has issued the 
requested order.

Applicants' Legal Analysis

    1. Section 17(a) prohibits affiliated persons of a registered 
investment company, or affiliated persons of such persons, from selling 
to or purchasing from such company any security or other property. 
Section 2(a)(3) of the Act defines an ``affiliated person'' as, among 
other things, any person directly or indirectly controlling, controlled 
by, or under common control with, such other person. The partnership is 
an affiliated person of an affiliated person of the Trust because Mr. 
Driehaus is the owner of the adviser to the Trust, Mr. Driehaus is the 
general partner of the Partnership, and Mr. Driehaus will provide the 
initial ``seed'' capital investment in the Trust. As a result, the 
proposed Exchange may be deemed to be prohibited under section 17(a) of 
the Act.
    2. Section 17(b) of the Act authorizes the Commission to exempt any 
person from one or more of the provisions of Section 17(a) if evidence 
establishes that (1) the terms of the transaction, including the 
consideration to be paid or received, are reasonable and fair and do 
not involve overreaching on the part of any person concerned; (2) the 
proposed transaction is consistent with the policy of each registered 
investment company concerned; and (3) the proposed transaction is 
consistent with the general purposes of the Act.
    3. The terms of the Exchange should be considered reasonable and 
fair to the Partnership, to the Trust, and to the limited partners who, 
with Mr. Driehaus, will be the initial shareholders of the Fund, and 
should not be considered to involve overreaching on the part of any 
applicant for the following reasons:
    (a) The investment objective and policies of the Fund are 
substantially similar to that of the Partnership.
    (b) No brokerage commission, fee or other enumeration will be paid 
in connection with the Exchange.
    (c) The Exchange will result in no gain or loss being recognized by 
partners of the Partnership. The partners of the Partnership will 
become investors in an entity that offers greater liquidity and other 
advantages, without immediate tax consequences and without having 
incurred transaction and brokerage charges in order to do so.
    (d) A majority of the members of the Board, including a majority of 
the independent trustees, and the general partner of the Partnership 
will have approved the Exchange.
    4. Applicants believe that the terms of the proposed Exchange are 
consistent with the provisions, policies and purposes of the Act in 
that they are reasonable and fair to all parties, do not involve 
overreaching, and are consistent with the investment policies of each 
of the applicants. Accordingly, the applicants submit that the terms of 
the Exchange are consistent with the requirements of section 17(b) of 
the Act.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 96-20455 Filed 8-9-96; 8:45 am]
BILLING CODE 8010-01-M