<PAGE>
As filed with the Securities and Exchange Commission
on June 5, 1996
Registration No. 333-_____ 811-____
____________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __ [_]
Post-Effective Amendment No. __ [_]
and/or
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
(Check appropriate box or boxes)
DRIEHAUS MUTUAL FUNDS
(Exact Name of Registrant as Specified in Charter)
25 EAST ERIE STREET
CHICAGO, ILLINOIS 60611
(Address of Principal Executive Offices, including Zip Code)
Mary H. Weiss, Secretary
Driehaus Mutual Funds
25 EAST ERIE STREET
CHICAGO, ILLINOIS 60611
(Name and Address of Agent for Service)
COPY TO:
CATHY G. O'KELLY
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 N. LASALLE
CHICAGO, ILLINOIS 60601
APPROXIMATE DATE OF PROPOSED OFFERING: As soon as practicable after the
effective date of this Registration Statement.
Pursuant to Reg. (S)270.24f-2 under the Investment Company Act of 1940,
Registrant hereby declares that an indefinite number or amount of shares are
being registered under the Securities Act of 1933. A registration filing fee of
$500 is being paid with this filing.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS
EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL
THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE.
<PAGE>
DRIEHAUS MUTUAL FUNDS
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)
<TABLE>
<CAPTION>
N-1A
ITEM NO. LOCATION
-------- --------
<S> <C>
PART A
Item 1. Cover Page.......................................... Cover Page
Item 2. Synopsis............................................ Summary
Item 3. Condensed Financial Information..................... Investment Return
Item 4. General Description of Registrant................... The Fund; Portfolio Investments and Strategies;
Restrictions on the Fund's Investments; Risks and
Investment Considerations
Item 5. Management of Fund.................................. Management of the Fund
Item 5A. Management's Discussion of Fund
Performance..................................... Not Applicable
Item 6. Capital Stock and Other Securities.................. Distributions and Taxes; Organization and Description
of Shares
Item 7. Purchase of Securities Being Offered................ How to Purchase Shares; Net Asset Value
Item 8. Redemption or Repurchase............................ How to Redeem Shares
Item 9. Pending Legal Proceedings........................... Not Applicable
PART B
Item 10. Cover Page.......................................... Cover Page
Item 11. Table of Contents................................... Cover Page
Item 12. General Information and History..................... General Information and History
Item 13. Investment Objectives and Policies.................. Portfolio Investments and Strategies; Investment
Restrictions
Item 14. Management of the Fund.............................. Management
Item 15. Control Persons and Principal Holders of
Securities...................................... Principal Shareholders
Item 16. Investment Advisory and Other Services.............. Investment Advisory Services; Administrator;
Custodian; Independent Public Accountants
Item 17. Brokerage Allocation and Other Practices............ Portfolio Transactions
Item 18. Capital Stock and Other Securities.................. General Information and History
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered........................ Purchases and Redemptions
Item 20. Tax Status.......................................... Additional Income Tax Considerations
Item 21. Underwriters........................................ Distributor
Item 22. Calculation of Performance Data..................... Investment Performance
Item 23. Financial Statements................................ Report of Independent Auditors; Statement of Net Assets
PART C
Information required to be included in Part C is set forth
under the appropriate item, so numbered, in Part C to
the Registration Statement.
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ Information contained herein is subject to completion or amendment. A +
+ registration statement relating to these securities has been filed with +
+ the Securities and Exchange Commission. These securities may not be sold +
+ nor may offers to buy be accepted prior to the time the registration +
+ statement becomes effective. This prospectus shall not constitute an offer +
+ to sell or the solicitation of an offer to buy nor shall there be any sale +
+ of these securities in any State in which such offer, solicitation or sale +
+ would be unlawful prior to registration or qualification under the +
+ securities laws of any such State. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
JUNE 5, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
SUMMARY.......................... 1
FEE TABLE........................ 2
THE FUND......................... 3
PORTFOLIO INVESTMENTS AND
STRATEGIES...................... 4
RESTRICTIONS ON THE FUND'S
INVESTMENTS..................... 7
RISKS AND INVESTMENT
CONSIDERATIONS.................. 7
HOW TO PURCHASE SHARES........... 8
HOW TO REDEEM SHARES............. 9
NET ASSET VALUE.................. 10
DISTRIBUTIONS AND TAXES.......... 10
INVESTMENT RETURN................ 12
MANAGEMENT OF THE FUND........... 12
ORGANIZATION AND DESCRIPTION OF
SHARES.......................... 13
</TABLE>
This prospectus contains information about the Fund that a prospective investor
should know before investing and should be retained for future reference. A
Statement of Additional Information dated , 1996, has been filed
with the Securities and Exchange Commission and is incorporated herein by
reference. It is available upon request without charge from the Fund at the
address or telephone number on this cover. The Fund is a series of the Driehaus
Mutual Funds.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
DRIEHAUS
INTERNATIONAL
GROWTH
FUND
PROSPECTUS __________, 1996
DRIEHAUS MUTUAL FUNDS
25 East Erie Street
Chicago, Illinois 60611
1-800-_______________
The objective of the Fund is to maximize capital appreciation. The Fund pursues
its objective by investing primarily in the equity securities of foreign
companies.
There is no assurance that the Fund's objective will be achieved.
<PAGE>
SUMMARY
-------
The Driehaus International Growth Fund (the "Fund") is a series of the Driehaus
Mutual Funds, an open-end management investment company. The Fund is a "no-
load" fund. There are no sales charges.
INVESTMENT OBJECTIVES AND POLICIES. The Fund's investment objective is to
maximize capital appreciation. The Fund seeks to achieve its objective by
investing primarily in the equity securities of foreign companies. Under normal
market conditions, the Fund will invest substantially all its assets in at least
three countries other than the United States. The Fund invests primarily in
foreign companies with market capitalizations of more than $300 million (U.S.)
using growth style investment criteria. The investment adviser's investment
philosophy of considering "market timeliness" when making investment decisions
generally results in a relatively high rate of portfolio turnover, which
generally increases the brokerage costs of the Fund. See "The Fund -- Portfolio
Investments and Strategy -- Portfolio Turnover and Transactions." The
investment adviser believes that over time the costs associated with such
turnover will be offset by higher performance. There can be no assurance that
the Fund's investment objective will be achieved. See "The Fund -- Investment
Objectives and Policies."
INVESTMENT RISKS. The Fund is intended for long-term investors who can accept
the risks entailed in investing in foreign securities following the investment
adviser's growth style investment philosophy. Since the Fund invests primarily
in foreign securities, investors should understand and consider carefully the
risks involved in foreign investing. Investing in foreign securities involves
certain considerations involving both risks and opportunities not typically
associated with investing in U.S. securities. Such risks include fluctuations
in exchange rates on foreign currencies, less public information, less
government supervision, less liquidity and greater price volatility. In
addition, the Fund expects to have substantial investments in emerging markets,
which may be subject to greater risks than other foreign investments, including
the risks of expropriation or other adverse political, social or diplomatic
developments that could affect investment in these nations. As a "non-
diversified" fund, the Fund will be able to invest a relatively high percentage
of its assets in a limited number of issues, therefore making the Fund more
susceptible to a single economic, political or regulatory occurrence than a
diversified fund. The Fund's investment adviser currently acts as portfolio
manager for Canadian investment companies, but does not have prior experience
managing a U.S. registered investment company. See "The Fund -- Risks and
Investment Considerations" and "Management of the Fund."
PURCHASES AND REDEMPTIONS. The minimum initial investment is $100,000.
Additional investments must be $20,000. See "Purchases of Shares." The Fund
imposes a 1% redemption fee on the redemption price of the Fund's shares that
are redeemed. For information on redeeming Fund shares see "Redemption of
Shares."
NET ASSET VALUE. The purchase and redemption price of the Fund's shares is its
net asset value per share. The net asset value is determined as of the close of
regular trading on the New York Stock Exchange. See "Net Asset Value."
DIVIDENDS. The Fund normally distributes dividends of net investment income and
any net realized short-term and long-term capital gains annually. Distributions
will be reinvested automatically in additional Fund shares, unless the investor
makes a different election. See "Dividends and Taxes."
INVESTMENT ADVISER. Driehaus Capital Management, Inc. (the "Adviser") provides
management and investment advisory services to the Fund. For its services to
the Fund, the Adviser is paid a fee at the annual rate of 1.5% of average net
assets. See "Management of the Fund."
FINANCIAL HISTORY. Although the Fund was first established as a registered
investment company on ___________, 1996, it has succeeded to the assets of the
Driehaus International Large Cap Fund, L.P., a limited partnership organized on
July 1, 1990 (the "Limited Partnership"). The performance history included
herein is based upon the operations of the Limited Partnership, restated to
reflect the anticipated expenses of the Fund. In addition, the distributions
made by the Fund will reflect the basis in the investments carried forward from
the Limited Partnership. See "Distribution and Taxes."
1
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FEE TABLE
---------
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases...................................... None
Sales Load Imposed on Reinvested Dividends........................... None
Deferred Sales Load.................................................. None
Redemption Fees*..................................................... 1%
Exchange Fees........................................................ None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees...................................................... 1.50%
12b-1 Fees........................................................... None
Other Expenses....................................................... .75%
-----
Total Fund Operating Expenses (after expense reimbursements**) 2.25%
=====
* The Fund imposes a 1% redemption fee on the redemption price of the Fund's
shares that are redeemed.
** The Adviser has agreed to reduce its fee and absorb other operating
expenses to ensure that the operating expenses (other than interest,
taxes, brokerage commissions and other portfolio transaction expenses,
capital expenditures and extra ordinary expenses) will not exceed .75% of
the average net assets of the Fund on an annual basis for the first twelve
months of the Fund's operations after the effective date of the Fund's
registration statement. Absent expense reimbursement, "Other Expenses" for
the fiscal year ending __________ are estimated to be _____% and "Total
Fund Operating Expenses" are estimated to be _____%.
EXAMPLE. The following example illustrates the expenses that an investor would
pay on a $1,000 investment assuming (1) 5% annual return and (2) redemption at
the end of each time period:
1 year 3 years
------ -------
[ ] [ ]
The purpose of the preceding tables is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. As a new Fund, the percentages shown are estimates for the current
first year. NEITHER THE 5% RATE OF RETURN NOR THE FEES AND EXPENSES SHOWN ABOVE
SHOULD BE CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS, FEES OR EXPENSES.
ACTUAL, RETURNS, FEES AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
2
<PAGE>
THE FUND
--------
The Driehaus International Growth Fund (the "Fund") in a series of the Driehaus
Mutual Funds (the "Trust"), an open-end management investment company. Driehaus
Capital Management, Inc. (the "Adviser") provides management and investment
advisory services to the Fund.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to maximize capital appreciation. The Fund
seeks to achieve its objective by investing primarily in the equity securities
of foreign companies. Under normal market conditions, the Fund will invest
substantially all its assets (and in no case less than 65%) in at least three
countries other than the United States. The Fund is a non-diversified
investment company. Current income is not a factor in the selection of
portfolio securities.
The Fund's investments in equity securities will principally be in growth
stocks. Growth stocks are stocks of companies whose earnings per share are
expected to grow faster than the market average. In selecting securities for
the Fund, the Adviser employs analyses identifying companies that have
demonstrated superior earnings growth potential and that, in the opinion of the
Adviser, have the potential for continued gains in the near future. Growth
stocks tend to trade at higher price to earnings (P/E) ratios than the general
market.
The Fund's investments will be based on the Adviser's investment philosophy that
accelerating sales and earnings, consistent with high earnings quality and
market timeliness, are principal criteria for equity investment. Earnings
quality considers the extent to which current earnings are indicative of future
results. Market timeliness reflects the expectation of an upward movement in
the price of a particular stock in the near future. Information that may alert
the Adviser to such situations includes strong company earnings reports,
evidence of increased order backlogs, new product introductions, and industry
developments. This fundamental information is combined with technical analyses
(price and volume charts, rating services where available, etc.) in order to
reach an overall judgment about a security's attractiveness. The Adviser's
security selection will be made primarily using these company-specific criteria
and, to a significantly lesser extent, using macroeconomics or country specific
analyses.
In evaluating countries for investment and determining country and region
weightings, the Adviser considers numerous criteria including the current and
prospective growth rates of various economies, interest rate trends, inflation
rates, trade balances and currency trends. The Adviser also reviews technical
information on stock markets. The analysis may also include considerations
specific to a certain country or region of the world. For example, a rapid
increase in the middle class in a developing economy may signal increased demand
for consumer goods such as soft drinks, convenience foods or clothes.
Similarly, a decline in the value of a country's currency may increase demand
for its exports and reduce operating margins for companies which import most of
their products. Although, under normal market conditions, the Fund will be
invested in at least three countries other than the United States, there are no
maximum limitations on the number of countries in which the manager can or must
invest at a given time. There are also no specific limitations on the
percentage of assets that may be invested in securities of issuers located in
any one country at a given time.
The securities markets of less developed economies and of many developing
economies are sometimes referred to as "emerging securities markets." Although
the amount of the Fund's assets invested in emerging securities markets will
vary over time, the Adviser currently expects that a substantial portion of the
Fund's assets will be invested in emerging securities markets. These markets
are generally characterized by limited trading volume and greater volatility
and, as a result, the Fund may be subject to greater risks to the extent of its
investments in such markets. For a discussion of these risks, see "Risks and
Investment Considerations" below.
The Fund's investments in equity securities will generally be in companies with
market capitalizations of more than $300 million, although the Fund may invest a
significant amount in companies with lower market capitalizations. Companies
with lower market capitalizations may present greater opportunities for capital
appreciation, but may also involve greater risk. They may have limited product
lines, markets or financial resources, or may depend on a limited management
group. Their securities may trade less frequently and in limited volume, and
only in the over-
3
<PAGE>
the-counter market or on a regional securities exchange. As a result, these
securities may fluctuate in value more than those of larger, more established
companies.
Equity securities include common stocks, warrants or rights that are convertible
into common stock, preferred stock and depository receipts for those securities.
The Fund may purchase foreign securities in the form of American Depository
Receipts (ADRs), Global Depository Receipts (GDRs), European Depository Receipts
(EDRs), or other securities representing underlying shares of foreign issuers.
The Fund may invest in sponsored or unsponsored ADRs. (For a description of
ADRs, GDRs and EDRs, see the Statement of Additional Information.) Generally,
the Adviser would purchase ADRs, GDRs or EDRs, rather than directly investing in
the underlying shares of a foreign issuer, for liquidity, timing or transaction
cost reasons. For example, the Adviser may purchase an ADR if the foreign
market on which the underlying security trades is not open for trading at the
time the investment decision is made.
In addition to equities, as a temporary defensive measure, the Fund may also
hold cash or cash equivalents in domestic and foreign currencies, invest in
domestic and foreign money market securities (including repurchase agreements),
and purchase short-term debt securities of U.S. or foreign government or
corporate issuers. The Fund may also purchase such securities if the Adviser
believes they may be necessary to meet Fund liquidity needs.
PORTFOLIO INVESTMENTS AND STRATEGIES
The Fund may utilize from time to time one or more of the investment practices
described below to assist it in reaching its investment objective. These
practices involve potential risks which are summarized below. In addition, the
Statement of Additional Information contains more detailed or additional
information about certain of these practices, the potential risks and/or the
limitations adopted by the Fund to reduce such risks.
CURRENCY HEDGING. Most of the Fund's portfolio will be invested in foreign
securities. As a result, in addition to the risk of change in the market value
of portfolio securities, the value of the portfolio in U.S. dollars is subject
to fluctuations in the exchange rate between the foreign currencies and the U.S.
dollar. When, in the opinion of the Adviser, it is desirable to limit or reduce
exposure in a foreign currency to moderate potential changes in the U.S. dollar
value of the portfolio, the Fund may enter into a forward currency exchange
contract to sell or buy such foreign currency (or another foreign currency that
acts as a proxy for that currency). Through the contract, the U.S. dollar value
of certain underlying foreign portfolio securities can be approximately matched
by an equivalent U.S. dollar liability. This technique is known as "currency
hedging." By locking in a rate of exchange, currency hedging is intended to
moderate or reduce the risk of change in the U.S. dollar value of the Fund's
portfolio only during the period of the forward contract. Forward contracts
usually are entered into with banks and broker-dealers; are not exchange traded;
and while they are usually for less than one year, may be renewed. A default on
a contract would deprive the Fund of unrealized profits or force the Fund to
cover its commitments for purchase or sale of currency, if any, at the current
market price.
The use of foreign currency contracts (for settlement or hedging) will not
eliminate fluctuations in the prices of the Fund's portfolio securities or
prevent loss if the price of such securities should decline. In addition, such
forward currency exchange contracts will diminish the benefit of the
appreciation in the U.S. dollar value of that foreign currency. (For further
information on forward foreign currency exchange transactions, see the Statement
of Additional Information.)
SETTLEMENT TRANSACTIONS. When the Fund enters into a contract for the purchase
or sale of a foreign portfolio security, it usually is required to settle the
purchase transaction in the relevant foreign currency or receive the proceeds of
the sale in that currency. In either event, the Fund is obliged to acquire or
dispose of an appropriate amount of foreign currency by selling or buying an
equivalent amount of U.S. dollars. At or near the time of the purchase or sale
of the foreign portfolio security, the Fund may wish to lock in the U.S. dollar
value of a transaction at the exchange rate or rates then prevailing between the
U.S. dollar and the currency in which the security is denominated. Known as
"transaction hedging," this may be accomplished by purchasing or selling such
foreign securities on a "spot," or cash, basis. Transaction hedging also may be
accomplished on a forward basis, whereby the Fund purchases or sells a specific
amount of foreign currency, at a price set at the time of the contract,
4
<PAGE>
for receipt or delivery at either a specified date or at any time within a
specified time period. In so doing, the Fund will attempt to insulate itself
against possible losses and gains resulting from a change in the relationship
between the U.S. dollar and the foreign currency during the period between the
date the security is purchased or sold and the date on which payment is made or
received and the transaction settled. Similar transactions may be entered into
by using other currencies if the Fund seeks to move investments denominated in
one currency to investments denominated in another. The Fund may also settle
certain trades in U.S. dollars, in which case the broker will engage in any
transaction hedging necessary and will build the cost of the hedging into the
cost of the securities traded.
DEBT SECURITIES. In pursuing its investment objective, under normal market
conditions, the Fund may invest up to 35% of its total assets in debt
securities. Investments in debt securities are limited to those that are rated
within the four highest grades (generally referred to as "investment grade")
assigned by a nationally or internationally recognized statistical rating
organization. Investments in unrated debt securities are limited to those
deemed to be of comparable quality by the Adviser. Securities in the fourth
highest grade may possess speculative characteristics. If the rating of a
security held by the Fund is lost or reduced below investment grade, the Fund is
not required to dispose of the security--the Adviser will, however, consider
that fact in determining whether the Fund should continue to hold the security.
The risks inherent in debt securities depend primarily on the term and quality
of the obligations in the Fund's portfolio, as well as on market conditions. A
decline in the prevailing levels of interest rates generally increases the value
of debt securities. Conversely, an increase in rates usually reduces the value
of debt securities.
PORTFOLIO TURNOVER AND TRANSACTIONS. The Fund will not consider portfolio
turnover rate a limiting factor in making investment decisions consistent with
its investment objective and policies. Portfolio turnover is commonly measured
by dividing the cost of purchases in a portfolio by the average investment
(i.e., the cumulative total investment in the account at the end of each month,
divided by the number of months under consideration). High portfolio turnover
should result from the Fund's investment strategy, which considers market
timeliness (i.e., the likelihood or expectation that value of any stock
purchased will increase in the immediate future). Under normal market
conditions, only securities that increase in value shortly after purchase and
that generally continue to increase in value (although they may experience
temporary stagnant or declining periods) will be retained in the Fund's
portfolio. Securities sold by the Fund may be purchased again at a later date
when the Adviser perceives that the securities are again "timely." In addition,
adjustments to the portfolio of the Fund will be made when conditions affecting
relevant markets, particular industries or individual issues, warrant such
action. High portfolio turnover in any year may make it more difficult to
comply with the requirements of Subchapter M of the Internal Revenue Code, may
result in the payment by shareholders of greater amounts of taxes, and may
generate additional dealer mark-ups or underwriting commissions as well as other
transaction costs, including correspondingly higher annual brokerage
commissions.
Purchases and sales of securities, futures or options on futures on an exchange
(including a board of trade), and options on securities may be effected through
securities brokers or futures commissions merchants that charge a commission for
their services. Orders may be directed to any broker including, to the extent
and in the manner permitted by applicable law, Driehaus Securities Corporation
("DSC"), an affiliate of the Adviser. In order for DSC to effect any such
transaction for the Fund, the commissions, fees or other remuneration received
by DSC must be reasonable and fair, compared to the commissions, fees or other
remuneration paid to other brokers in connection with comparable transactions
involving similar securities, futures or options on futures being purchased or
sold on an exchange during a comparable period of time. This standard would
allow DSC to receive no more than the remuneration that would be expected to be
received by an unaffiliated broker in a commensurate arms-length transaction.
Furthermore, the Board of Trustees, including a majority of the Trustees who are
not "interested" Trustees, has adopted procedures that are reasonably designed
to provide that any commissions, fees or other remuneration paid to DSC are
consistent with the foregoing standard. Brokerage transactions with DSC are
also subject to such fiduciary standards as may be imposed upon DSC by
applicable law. In light of these factors and the historical volatility of
foreign growth stocks, the Fund anticipates a higher portfolio turnover rate
(i.e., 200% to 300%, but may vary significantly from year to year). Portfolio
turnover may also be affected by sales of portfolio securities necessary to meet
cash requirements for redemptions of shares. The Fund anticipates
5
<PAGE>
that most transactions for the purchase or sale of ADRs will be placed through
DSC, so long as the criteria for using an affiliated broker are met. (See
"Management of the Fund -- Portfolio Transactions".)
DERIVATIVES. Consistent with its objective, the Fund may invest in a broad
array of financial instruments and securities, including conventional exchange-
traded and non-exchange-traded options, futures contracts, securities
collateralized by underlying pools of mortgages or other receivables, floating
rate instruments, and other instruments that securitize assets of various types
("Derivatives"). In each case, the value of the instrument or security is
"derived" from the performance of an underlying asset or a "bench mark" such as
a security index, an interest rate, or a currency. The Fund does not expect to
invest more than 5% of its net assets in any type of Derivative except for
options, futures contracts, futures options, and forward contracts.
Derivatives are most often used to manage investment risk or to create an
investment position indirectly because they are more efficient or less costly
than direct investment. They also may be used in an effort to enhance portfolio
returns.
The successful use of Derivatives depends on the Adviser's ability to correctly
predict changes in the levels and directions of movements in currency exchange
rates, security prices, interest rates and other market factors affecting the
Derivative itself or the value of the underlying asset or benchmark. In
addition, correlations in the performance of an underlying asset to a Derivative
may not be well established. Finally, privately negotiated and over-the-counter
Derivatives may not be as well regulated and may be less marketable than
exchange-traded Derivatives. For additional information on Derivatives, please
refer to the Statement of Additional Information.
In seeking to achieve its desired investment objective, provide additional
revenue, or to hedge against changes in security prices, interest rates or
currency fluctuations, the Fund may: (1) purchase and write both call options
and put options on securities, indexes and foreign currencies; (2) enter into
interest rate, index and foreign currency futures contracts; (3) write options
on such futures contracts; and (4) purchase other types of forward or investment
contracts linked to individual securities, indexes, or other benchmarks. The
Fund may write a call or put option only if the option is covered. As the
writer of a covered call option, the Fund forgoes, during the option's life, the
opportunity to profit from increases in market value of the security covering
the call option above the sum of the premium and the exercise price of the
call. There can be no assurance that a liquid market will exist when the Fund
seeks to close out a position. In addition, because futures positions may
require low margin deposits, the use of futures contracts involves a high degree
of leverage and may result in losses in excess of the amount of the margin
deposit.
LENDING OF PORTFOLIO SECURITIES. The Fund may lend its portfolio securities to
broker-dealers and banks, provided that it may not lend securities if, as a
result, the aggregate value of all securities loaned would exceed 33 1/3% of its
total assets. Any such loan must be continuously secured by collateral (cash or
U.S. Governmental Securities). In the event of bankruptcy or other default of
the borrower, the Fund could experience both delays in liquidating the loan
collateral or recovering the loaned securities and losses.
OTHER TECHNIQUES. The Fund may purchase or sell securities on a when-issued or
delayed-delivery basis. Although the payment terms of these securities are
established at the time the Fund enters into the commitment, the securities may
be delivered and paid for a month or more after the date of purchase, when their
value may have changed. The Fund will make such purchase commitments only with
the intention of actually acquiring the securities, but may sell the securities
before settlement date if it is deemed advisable for investment reasons. The
Fund may utilize spot and forward foreign exchange transactions to reduce the
risk caused by exchange rate fluctuations between one currency and another when
securities are purchased or sold on a when-issued or delayed-delivery basis.
The Fund may invest in repurchase agreements, provided that it will not invest
more than 15% of its net assets in repurchase agreements' maturing in more than
seven days and any other illiquid securities. (See the Statement of Additional
Information).
6
<PAGE>
RESTRICTIONS ON THE FUND'S INVESTMENTS
The Fund will not: (1) act as an underwriter for securities; (2) purchase or
sell real estate or commodities (except futures contracts and forward currency
contracts); (3) make loans (except that it may purchase debt obligations, invest
in repurchase agreements and loan portfolio securities, subject to certain
limitations); (4) borrow money (except that it may borrow up to 33 1/3% of its
total assets as a temporary measure for extraordinary or emergency purposes);
(5) invest 25% or more of its total assets in securities of issuers of any
particular industry (excluding U.S. Governmental securities); or (6) issue any
senior security (except to the extent permitted under the Investment Company Act
of 1940). The policies summarized in this paragraph and the Fund's investment
objective along with any investment policies designated as fundamental are
fundamental policies and, as such, can be changed only with the approval of a
"majority of the outstanding voting securities" of the Fund as defined in the
Investment Company Act of 1940. All of the investment restrictions are set
forth in the Statement of Additional Information.
RISKS AND INVESTMENT CONSIDERATIONS
All investments, including those in mutual funds, have risks. No investment is
suitable for all investors. THE FUND IS INTENDED FOR LONG-TERM INVESTORS WHO
CAN ACCEPT THE RISKS ENTAILED IN INVESTING IN FOREIGN SECURITIES. Of course,
there can be no guarantee that the Fund will achieve its objective.
The Fund is NON-DIVERSIFIED, meaning that it is not limited in the proportion of
its assets that it may invest in the obligations of a single issuer or in a
single country. The Fund will, however, comply with diversification
requirements imposed by the Internal Revenue Code for qualification as a
regulated investment company. As a non-diversified fund, the Fund may invest a
greater proportion of its assets in the obligations of a small number of
issuers, and, may be subject to greater risk and substantial losses as a result
of changes in the financial condition or the market's assessment of the issuers.
FOREIGN INVESTING. Investing outside the United States involves different
opportunities and different risks than domestic investments. The Adviser
believes that it may be possible to obtain significant returns from the Fund's
portfolio of foreign investments and to achieve increased diversification in
comparison to a personal investment portfolio invested solely in United States
securities. An investor may gain increased diversification by adding securities
from various foreign countries which offer different investment opportunities,
are affected by different economic trends and whose stock markets do not move in
a manner parallel to United States markets. At the same time, these
opportunities and trends involve risks that may not be encountered in United
States investments.
Investors should understand and consider carefully the greater risks involved in
foreign investing. Investing in foreign securities--positions which are
generally denominated in foreign currencies--and utilization of forward foreign
currency exchange contracts involve certain considerations comprising both risks
and opportunities not typically associated with investing in U.S. securities.
These considerations include: fluctuations in exchange rates of foreign
currencies; possible imposition of exchange control regulations or currency
restrictions that would prevent cash from being brought back to the United
States; less public information with respect to issuers of securities; less
governmental supervision of stock exchanges, securities brokers, and issuers of
securities; lack of uniform accounting, auditing, and financial reporting
standards; lack of uniform settlement periods and trading practices; less
liquidity and frequently greater price volatility in foreign markets than in the
United States; possible imposition of foreign taxes; possible investment in the
securities of companies in developing as well as developed countries; and
sometimes less advantageous legal, operational, and financial protections
applicable to foreign sub-custodial arrangements. These risks are greater for
emerging market countries.
Although the Fund will try to invest in companies and governments of countries
having stable or improving political environments, there is the possibility of
expropriation or confiscatory taxation, seizure or nationalization of foreign
bank deposits or other assets, establishment of exchange controls, the adoption
of foreign government restrictions, and other adverse political, social or
diplomatic developments that could affect investment in these nations.
The risks described above, including the risks of nationalization and
expropriation of assets, are typically increased to the extent that the fund
invests in issuers located in less developed and developing nations, whose
securities
7
<PAGE>
markets are sometimes referred to as "emerging securities markets." Investments
in securities located in such countries are speculative and subject to certain
special risks. Political and economic structure in many of these countries may
be in their infancy and developing rapidly, and such countries may lack the
social, political and economic characteristic of more developed countries.
Certain of these countries have in the past failed to recognize private property
rights and have at times nationalized and expropriated the assets of private
companies.
The currencies of certain emerging market countries have experienced a steady
devaluation relative to the U.S. dollar, and continued devaluations may
adversely affect the value of a fund's assets denominated in such currencies.
Many emerging market companies have experienced substantial, and in some periods
extremely high, rates of inflation for many years, and continued inflation may
adversely affect the economies and securities markets of such countries.
In addition, unanticipated political or social developments may affect the
values of the Fund's investments in these countries and the availability to the
fund of additional investments in these countries. The small size, limited
trading volume and relative inexperience of the securities markets in these
countries may make the Fund's investments in such countries illiquid and more
volatile than investments in more developed countries, and the Fund may be
required to establish special custodial or other arrangements before making
investments in these countries. There may be little financial or accounting
information available with respect to issuers located in these countries, and it
may be difficult as a result to assess the value or prospects of an investment
in such issuers.
The price of securities of small, rapidly growing companies is expected to
fluctuate more widely than the general market due to the difficulty in assessing
financial prospects of companies developing new products or operating in
countries with developing markets.
To the extent portfolio securities are issued by foreign issuers or denominated
in foreign currencies, the Fund's investment performance is affected by the
strength or weakness of the U.S. dollar against these currencies. If the dollar
falls relative to the Japanese yen, for example, the dollar value of a yen-
denominated stock held in the portfolio will rise even though the price of the
stock remains unchanged. Conversely, if the dollar rises in value relative to
the yen, the dollar value of the yen-denominated stock will fall. (See the
discussion of portfolio and transaction hedging under "The Fund -- Portfolio
Investments and Strategies".)
HOW TO PURCHASE SHARES
----------------------
The initial purchase minimum per Fund account is $100,000. Subsequent purchases
must be at least $20,000. These minimums may be waived for employees and their
families of the Adviser and Driehaus Securities Corporation.
Shares of the Fund are sold at the net asset value next calculated after receipt
of a purchase order and payment in good form. If an order is placed at or prior
to the close of regular trading on the New York Stock Exchange (the "NYSE")
(normally 3:00 p.m., Central time) on any business day, the purchase of shares
is executed at the net asset value determined as of the closing time that day.
If the order is placed after that time, it will be effected on the next business
day.
In order to purchase shares, an investor must fill out an Application. All
purchases are confirmed to the investor in writing except purchases made by
reinvestment of dividends, which will be confirmed quarterly. If no indication
is made on the Application, dividends and distributions payable by the Fund are
automatically reinvested in additional shares of the Fund.
Purchase orders must be submitted to the Fund together with payment for the
purchase price of the shares ordered and, in the case of a new account, a
completed Application, at __________________________________________. Payment
may be made by check or wire transfer. Checks must be made payable to the Fund.
Checks from persons who are not advisory clients of the Adviser or who do not
have a brokerage account with Driehaus Securities Corporation must be bank or
certified checks. The Fund, at its option, may accept a check that is not a bank
or certified check. A purchase order on behalf of a client who has an investment
advisory account with the Adviser or a brokerage
8
<PAGE>
account with Driehaus Securities Corporation is effected upon confirmation of a
verified credit balance at least equal to the amount of the purchase order
(subject to the minimum investment requirements set forth above).
Wire transfer instructions should be as follows: ________________________.
Each purchase order must be accepted by an authorized officer of the Trust and
is not binding until accepted and entered on the books of the Fund. The Fund
reserves the right not to accept any purchase order that it determines not to be
in the best interests of the Fund or its shareholders. The Fund also reserves
the right to change its investment minimums for any reason.
Shares of the Fund will not be offered in any state where the Fund is not
registered.
PURCHASES THROUGH THIRD PARTIES. Investors may purchase (or redeem) shares
through investment dealers or other financial institutions. These institutions
may charge for their services or place limitations on the extent to which you
may use the services offered by the Trust. There are no charges or limitations
imposed by the Trust, other than those described in this prospectus, if shares
are purchased (or redeemed) directly from the Trust.
HOW TO REDEEM SHARES
--------------------
BY WRITTEN REQUEST. Shares of the Fund may be redeemed by submitting a written
request in "good order" to the Fund at
__________________________________________. A redemption request will be
considered to have been received in good order if the following conditions are
satisfied:
(1) The request must be in writing, and must indicate the number of shares or
dollar amount to be redeemed and identify the shareholder's account number;
(2) The request must be signed by the shareholder(s) exactly as the shares are
registered;
(3) Unless the proceeds of the redemption are $50,000 or less and the proceeds
are payable to the shareholder of record at the address of record, the
signatures on the written redemption request must be guaranteed by a
commercial bank, trust company, savings and loan association, federal
savings bank, member firm of a national securities exchange or other
eligible financial institution.
(4) Corporations and associations must submit with each request a completed
certificate of authorization in a form of resolution acceptable to the
Fund; and
(5) The request must include other supporting legal documents as required from
organizations, executors, administrators, trustees, or other acting on
accounts not registered in their names.
GENERAL REDEMPTION POLICIES. A shareholder may not cancel or revoke a
redemption order once instructions have been received and accepted. The Fund
cannot accept a redemption request that specifies a particular date or price for
redemption or any special conditions.
The price at which a redemption order will be executed is the net asset value
next determined after proper redemption instructions are received. (See "Net
Asset Value".) Because the redemption price received depends upon the Fund's
net asset value per share at the time of redemption, it may be more or less than
the price originally paid for the shares and may result in a realized capital
gain or loss. The Fund imposes a 1% redemption fee on the redemption price of
the Fund's shares that are redeemed. The redemption fee is payable to the Fund
out of the redemption price otherwise payable to a shareholder. The proceeds of
the redemption fee may be used by the Fund to cover direct expenses associated
with the redemption, such as transfer agent fees, and indirect expenses, such as
brokerage or other transaction costs associated with the disposition of
portfolio securities.
The Fund will generally mail payment for shares redeemed within seven days after
proper instructions are received. If so requested, the Fund will pay proceeds by
wire, usually on the next business day. The Fund is not responsible
9
<PAGE>
for the efficiency of the federal wire system or the shareholder's financial
services firm or bank. The Fund currently charges the shareholder $25 for wire
transfers. The shareholder is responsible for any charges imposed by the
shareholder's firm or bank. There is a $5,000 wire redemption minimum.
Redemptions of shares within 15 days after they have been purchased by check may
be delayed until it can be verified that payment for the purchase of those
shares has been (or will be) collected. Such delays may be avoided if shares
are purchased by certified or bank check or by wire transfer.
The Fund reserves the right to redeem shares in any account and send the
proceeds to the owner if immediately after a redemption, the shares in the
account do not have a value of at least $50,000. A shareholder would be
notified that the account is below the minimum and would be allowed 30 days to
increase the account before the redemption is processed.
Shares in any account maintained with the Fund may be redeemed to the extent
necessary to reimburse the Fund for any loss it sustains that is caused by a
shareholder (such as losses from uncollected checks for the purchase of shares,
or any Fund liability under the Internal Revenue Code provisions on backup
withholding).
NET ASSET VALUE
---------------
The purchase and redemption price of the Fund's shares is its net asset value
per share. The net asset value of a share of the Fund is determined as of the
close of regular trading on the New York Stock Exchange ("NYSE") (normally 3:00
p.m., Central time) by dividing the difference between the values of the Fund's
assets and liabilities by the number of shares outstanding. Net asset value
will not be determined on days when the NYSE is closed unless, in the judgment
of the Board of Trustees, the net asset value of the Fund should be determined
on any such day, in which case the determination will be made at 3:00 p.m.,
Central time.
In computing the net asset value of the Fund, the values of portfolio securities
are generally based upon market quotations. Depending upon local convention or
regulation, these market quotations may be the last sale price, last bid or
asked price, or the mean between the last bid and asked prices as of, in each
case, the close of the appropriate exchange or other designated time. Trading
in securities on European and Far Eastern Securities exchanges and over-the-
counter markets is normally completed at various times before the close of
business on each day on which the NYSE is open. Trading of these securities may
not take place on every NYSE business day. In addition, trading may take place
in various foreign markets on Saturdays or on other days when the NYSE is not
open and on which the Fund's net asset value is not calculated. Therefore, such
calculation does not take place contemporaneously with the determination of the
prices of many of the portfolio securities used in such calculation and the
value of the Fund's portfolio may be significantly affected on days when shares
of the fund may not be purchased or redeemed.
DISTRIBUTIONS AND TAXES
-----------------------
DISTRIBUTIONS. Income dividends for the Fund are normally declared and paid
annually. The Fund intends to distribute by the end of each calendar year at
least 98% of any net capital gains realized from the sale of securities during
the twelve-month period ended October 31 in that year. The Fund intends to
distribute any undistributed net investment income and net realized capital
gains in the following year.
All income dividends and capital gain distributions will be reinvested in
additional shares unless an investor elects to have distributions either (1)
paid by check; or (2) deposited by electronic transfer into a bank checking
account. Reinvestment into the same Fund account normally occurs one business
day after the record date. If an investor chooses to receive distributions in
cash, a distribution check normally will be mailed approximately 15 days after
the record date. The Fund reserves the right to reinvest the proceeds and
future distributions in additional Fund shares if distribution checks are
returned as undeliverable or are not presented for payment within six months.
U.S. FEDERAL INCOME TAXES. The Fund intends to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code so that it
will not be subject to federal income tax to the extent its earnings are
distributed. Distributions will be taxable, under federal income tax law,
whether received in cash or reinvested in
10
<PAGE>
additional shares. For federal income tax purposes, any distribution that is
paid in January but was declared in October, November, or December of the prior
calendar year is deemed paid in the prior calendar year. When buying shares of
the Fund on or before the record date of a dividend, shareholders should be
aware that the amount of any forthcoming dividend payment, although in effect a
return of capital to that particular shareholder, will be taxable as described
below. Moreover, because the Fund succeeded to the tax basis of the assets of
the Limited Partnership, shareholders should be aware that as portfolio
securities with pre-existing capital gains are sold, the gains recognized will
be distributed to Fund shareholders as dividends and will be taxable.
Dividends derived from net investment income and net short-term capital gain
will be subject to federal income tax at ordinary rates. Distributions of net
long-term capital gains will be taxable as long-term capital gain regardless of
the length of time the shares have been held. Long-term capital gain
distributions received by individual shareholders will be taxed at a maximum
rate of 28%. It is not anticipated that dividends paid by the Fund will qualify
for the dividends received deduction available to corporate shareholders.
Gains and losses attributable to fluctuations on the value of foreign currencies
will be generally characterized as ordinary gain or loss.
The Fund will advise shareholders annually as to the source of distributions for
tax purposes. If a shareholder is not subject to tax on income, the shareholder
will not be required to pay federal income tax on these amounts.
If a loss is realized on the sale of Fund shares held for six months or less,
any short-term loss resulting from the sale is recharacterized as long-term to
the extent of any long-term capital gain distributions received with respect to
those shares.
FOREIGN INCOME TAXES. Investment income received by the Fund from sources
within foreign countries may be subject to foreign income taxes withheld at the
source. The United States has entered into tax treaties with many foreign
countries that entitle the Fund to a reduced rate of tax or exemption from tax
on such income. It is impossible to determine the effective rate of foreign tax
in advance since the amount of the Fund's assets to be invested within various
countries will fluctuate and the extent to which tax refunds will be recovered
is uncertain. The Fund intends to operate so as to qualify for treaty-reduced
tax rates where applicable.
To the extent that the Fund is liable for foreign income taxes, the Fund also
intends to elect and operate so as to meet the requirements of the U.S. Internal
Revenue Code to "pass through" to the Fund's shareholders foreign income taxes
paid, but there can be no assurance that the Fund will be able to do so. If
this election is made, shareholders will be able to claim a credit or deduction
on their income tax returns for, and will be required to treat as part of the
amounts distributed to them, their pro rata portion of the income taxes paid by
the Fund to foreign countries (which taxes relate primarily to investment
income). The shareholders of the Fund may claim a credit by reason of the
Fund's election, subject to certain limitations imposed by the Code. Also,
under the Code, no deduction for foreign taxes may be claimed by individual
shareholders who do not elect to itemize deductions on their federal income tax
returns; although such a shareholder may claim a credit for foreign taxes and in
any event will be treated as having taxable income in the amount of the
shareholder's pro rata share of foreign taxes paid by the Fund.
This discussion of U.S. and foreign taxation is not intended to be a full
discussion of income tax laws and their effect on shareholders. Investors may
wish to consult their own tax advisor. The foregoing information applies to
U.S. shareholders. Foreign shareholders should consult their tax advisors as to
the tax consequences of ownership of Fund shares.
BACKUP WITHHOLDING. The Trust may be required to withhold federal income tax
("backup withholding") at a 31% rate from taxable dividend and redemption
proceeds paid to certain shareholders. Backup withholding may be required if:
. An investor fails to furnish your properly certified social security or
other tax identification number;
11
<PAGE>
. An investor fails to certify that the investor's tax identification number
is correct or that the investor is not subject to backup withholding due to
the under-reporting of certain income;
. The Internal Revenue Service informs the Trust that the investor's tax
identification number is incorrect.
These certifications are contained in the Application that should be completed
and returned when opening an account. The Fund must promptly pay to the IRS all
amounts withheld. Therefore, it is usually not possible for the Fund to
reimburse a shareholder for amounts withheld. A shareholder may, however, claim
the amount withheld as a credit on the shareholder's federal income tax return.
INVESTMENT RETURN
-----------------
The total return from an investment in the Fund is measured by the distributions
received (assuming reinvestment), plus or minus the change in the net asset
value per share for a given period. A total return percentage may be calculated
by dividing the value of a share at the end of the period (including
reinvestment of distributions) by the value of the share at the beginning of the
period and subtracting one. For a given period, an average annual total return
may be calculated by finding the average annual compounded rate that would
equate a hypothetical $1,000 investment to the ending redeemable value.
Comparison of the Fund's total return with alternative investments should
consider differences between the Fund and the alternative investments, the
periods and methods used in calculation of the return being compared, and the
impact of taxes on alternative investments. Of course, past performance is not
necessarily indicative of future results.
Although the Fund has been in existence only since ____________, 1996, it
succeeded to the assets of the Limited Partnership, which was managed following
substantially the same investment objective, policies and philosophies as are
currently followed by the Fund. The investment returns of the Limited
Partnership, restated to reflect the expenses of the Fund as shown in the Fee
Table, for the period from inception of the Limited Partnership through [June
30, 1996] are shown below. The Limited Partnership was not registered under the
Investment Company Act of 1940 (the "1940 Act") and thus was not subject to
certain investment and operational restrictions imposed by the 1940 Act. If the
Limited Partnership had been registered under the 1940 Act, its performance
might have been adversely affected.
[Insert Chart]
MANAGEMENT OF THE FUND
----------------------
TRUSTEES AND ADVISER. The Board of Trustees of the Trust has overall management
responsibility for the Fund. See the Statement of Additional Information for
the names of and additional information about the trustees and officers. The
Fund's Adviser, Driehaus Capital Management, Inc., 25 East Erie Street, Chicago,
Illinois 60611, is responsible for managing the Fund, subject to the direction
of the Board of Trustees. The Adviser is registered as an investment adviser
under the Investment Advisers Act of 1940. The Adviser was organized in 1982,
and currently manages $_____________ billion in assets. Although the Adviser
acts as portfolio manager for four Canadian registered investment companies, it
has not previously served as an investment adviser for a U.S. registered
investment company, which is a risk factor that an investor should consider.
The Adviser is wholly owned by Richard H. Driehaus.
PORTFOLIO MANAGER. William R. Andersen, a Vice President of Adviser, has been
the portfolio manager of the Fund since its inception on ______________, 1996.
Prior to the Fund's inception data, Mr. Andersen was the portfolio manager for
the Limited Partnership since its inception in July 1990. Mr. Andersen has
primary responsibility for making all investment decisions on behalf of the
Fund. He is assisted by portfolio analysts who specialize in various markets,
including Western Europe, Asia, emerging markets and Canada. In addition to the
Fund, Mr. Andersen is the portfolio manager for three Canadian mutual funds,
including a global fund.
12
<PAGE>
Mr. Andersen was born in 1959 and is a graduate of Stanford University, where he
received a B.A. in economics in 1981. In 1985, Mr. Andersen received his M.B.A.
from the University of Chicago, where he concentrated in finance. Mr. Andersen
is a Chartered Financial Analyst. Mr. Andersen has been employed by DSC and the
Adviser since 1985. From 1985 to 1989, Mr. Andersen was employed by DSC as a
security analyst and, as such, was responsible for several industry groups in
which DSC maintained investments for clients. In May 1989, while continuing to
act as a senior investment analyst for DSC, Mr. Andersen became a portfolio
manager for the Adviser.
FEES AND EXPENSES. In return for its services, the Adviser receives a monthly
fee from the Fund, computed and accrued daily, at an annual rate of 1.5% of
average net assets. This fee is higher than the fees paid by most mutual funds.
PORTFOLIO TRANSACTIONS. The Adviser places the orders for the purchase and sale
of portfolio securities and sale of portfolio securities and options and futures
transactions for the Fund. In doing so, the Adviser seeks to obtain the best
combination of price and execution, which involves a number of judgmental
factors. The Fund has been advised by the Adviser that it intends to execute
most transactions in ADRs through Driehaus Securities Corporation, a registered
broker-dealer and an affiliate of the Adviser, to the extent that the
combination of price and execution are comparable to that of other broker-
dealers. See also, "Portfolio Investments and Strategies -- Portfolio Turnover
and Transactions."
ADMINISTRATOR. PFPC Inc. ("PFPC"), 103 Bellevue Parkway, Wilmington, Delaware
19809, is the administrator for the Trust. In such capacity, PFPC assists the
Trust in all aspects of its administration and operation. As compensation for
its services, PFPC receives _____________________________.
TRANSFER AGENT. PFPC is the agent of the Trust for the transfer of shares,
disbursement of dividends, and maintenance of shareholder accounting records.
DISTRIBUTOR. The shares of the Fund are offered for sale through Driehaus
Securities Corporation ("DSC") without any sales commissions or charges to the
Fund or to its shareholders. All distribution and promotional expenses are paid
by the Adviser, including any payments to DSC for sales of Fund shares.
CUSTODIAN. _________________________ (the
"Bank"),____________________________________, is the custodian for the Fund.
Foreign securities are maintained in the custody of foreign banks and trust
companies that are members of the Bank's Global Custody Network or foreign
depositories used by such members. (See Custodian in the Statement of Additional
Information.)
ORGANIZATION AND DESCRIPTION OF SHARES
--------------------------------------
The Trust is a Delaware business trust organized under an Agreement and
Declaration of Trust ("Declaration of Trust") dated _________________, 1996.
The Declaration of Trust may be amended by a vote of either the Trust's
shareholders or its trustees. The Trust may issue an unlimited number of
shares, in one or more series or classes as the Board may authorize. Currently,
one series is authorized and outstanding.
13
<PAGE>
SUBJECT TO COMPLETION
June 5, 1996
Statement of Additional Information Dated __________, 1996
DRIEHAUS MUTUAL FUNDS
25 East Erie Street
Chicago, Illinois 60611
1-800- ___________
DRIEHAUS INTERNATIONAL GROWTH FUND
The Driehaus International Growth Fund is a series of the Driehaus Mutual Funds
(the "Trust"). This Statement of Additional Information is not a prospectus,
but provides additional information that should be read in conjunction with the
Fund's prospectus dated _______________________, 1996, and any supplements
thereto ("Prospectus"). The Prospectus may be obtained at no charge by
telephoning 800-___________.
TABLE OF CONTENTS
-----------------
Page
General Information and History............................................
Portfolio Investments and Strategies.......................................
Investment Restrictions....................................................
Purchases and Redemptions..................................................
Management.................................................................
Principal Shareholders.....................................................
Investment Advisory Services...............................................
Administrator..............................................................
Distributor................................................................
Transfer Agent.............................................................
Custodian..................................................................
Independent Public Accountants.............................................
Portfolio Transactions.....................................................
Additional Income Tax Considerations.......................................
Investment Performance.....................................................
Report of Independent Auditors Statement of Net Assets.....................
Appendix--Ratings..........................................................
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may any offers to buy be accepted prior to the time the registration
statement becomes effective. This Statement of Additional Information does
not constitute a prospectus.
<PAGE>
GENERAL INFORMATION AND HISTORY
-------------------------------
As used herein, "the Fund" refers to the series of the Trust designated Driehaus
International Growth Fund. Currently, the Fund is the only series of the Trust
that is authorized and outstanding.
Driehaus Capital Management, Inc. (the "Adviser") provides management and
investment advisory services to the Fund.
Each share of a series is entitled to participate pro rata in any dividends and
other distributions declared by the Board on shares of that series, and all
shares of a series have equal rights in the event of liquidation of that series.
As a business trust, the Trust is not required to hold annual shareholder
meetings. However, special meetings may be called for purposes such as electing
or removing trustees, changing fundamental policies, or approving an investment
advisory contract. If requested to do so by the holders of at least 10% of the
Trust's outstanding shares, the Trust will call a special meeting for the
purpose of voting upon the question of removal of a trustee or trustees and will
assist in the communications with other shareholders as if the Trust were
subject to Section 16(c) of the Investment Company Act of 1940. All shares of
all series of the Trust are voted together in the election of trustees. On any
other matter submitted to a vote of shareholders, shares are voted in the
aggregate and not by individual series, except that shares are voted by
individual series when required by the Investment Company Act of 1940 or other
applicable law, or when the Board of Trustees determines that the matter affects
only the interests of one or more series, in which case shareholders of the
unaffected series are not entitled to vote on such matters.
On ___________________, 1996, the Fund succeeded to the assets of the
Driehaus International Large Cap Fund, L.P.
PORTFOLIO INVESTMENTS AND STRATEGIES
------------------------------------
FOREIGN SECURITIES
- ------------------
The Fund invests primarily in foreign securities, which may entail a
greater degree of risk (including risks relating to exchange rate fluctuations,
tax provisions, or expropriation of assets) than does investment in securities
of domestic issuers. The Fund may also purchase foreign securities in the form
of American Depositary Receipts (ADRs), European Depositary Receipts (EDRs),
Global Depository Receivables (GDRs), or other securities representing
underlying shares of foreign issuers. Positions in these securities are not
necessarily denominated in the same currency as the common stocks into which
they may be converted. ADRs are receipts typically issued by an American bank
or trust company evidencing ownership of the underlying securities. EDRs and
GDRs are European receipts evidencing a similar arrangement. Generally, ADRs
are designed for the U.S. securities markets and EDRs and GDRS are designed for
use in European and other foreign securities markets. EDRs and GDRs are not
necessarily denominated in the currency of the underlying security. The Fund
may invest in sponsored or unsponsored ADRs. ln the case of an unsponsored ADR,
the Fund is likely to bear its proportionate share of the expenses of the
depository and it may have greater difficulty in receiving shareholder
communications than it would have with a sponsored ADR.
With respect to portfolio securities that are issued by foreign
issuers or denominated in foreign currencies, the Fund's investment performance
is affected by the strength or weakness of the U.S. dollar against these
currencies. For example, if the dollar falls in value relative to the Japanese
yen, the dollar value of a yen-denominated stock held in the portfolio will rise
even though the price of the stock remains unchanged. Conversely, if the dollar
rises in value relative to the yen, the dollar value of the yen-denominated
stock will fall. (See discussion of transaction hedging and portfolio hedging
under Currency Exchange Transactions.)
B-1
<PAGE>
Investors should understand and consider carefully the risks involved
in foreign investing. Investing in foreign securities, positions in which are
generally denominated in foreign currencies, and utilization of forward foreign
currency exchange contracts involve certain considerations comprising both risks
and opportunities not typically associated with investing in U.S. securities.
These considerations include: fluctuations in exchange rates of foreign
currencies; possible imposition of exchange control regulation or currency
restrictions that would prevent cash from being brought back to the United
States; less public information with respect to issuers of securities; less
governmental supervision of stock exchanges, securities brokers, and issuers of
securities; lack of uniform accounting, auditing, and financial reporting
standards; lack of uniform settlement periods and trading practices; less
liquidity and frequently greater price volatility in foreign markets than in the
United States; possible imposition of foreign taxes; possible investment in
securities of companies in developing as well as developed countries; and
sometimes less advantageous legal, operational, and financial protections
applicable to foreign sub-custodial arrangements.
Although the Fund will try to invest in companies and governments of
countries having stable political environments, there is the possibility of
expropriation or confiscatory taxation, seizure or nationalization of foreign
bank deposits or other assets, establishment of exchange controls, the adoption
of foreign government restrictions, or other adverse political, social or
diplomatic developments that could affect investment in these nations.
Currency Exchange Transactions. Currency exchange transactions may be
conducted either on a spot (i.e., cash) basis at the spot rate for purchasing or
selling currency prevailing in the foreign exchange market or through forward
currency exchange contracts ("forward contracts"). Forward contracts are
contractual agreements to purchase or sell a specified currency at a specified
future date (or within a specified time period) and price set at the time of the
contract. Forward contracts are usually entered into with banks and broker-
dealers, are not exchange traded, and are usually for less than one year, but
may be renewed.
Forward currency transactions may involve currencies of the different
countries in which the Fund may invest, and serve as hedges against possible
variations in the exchange rate between these currencies. The Fund's currency
transactions are limited to transaction hedging and portfolio hedging involving
either specific transactions or portfolio positions, except to the extent
described below under "Synthetic Foreign Money Market Positions." Transaction
hedging is the purchase or sale of forward contracts with respect to specific
receivables or payables of the Fund accruing in connection with the purchase and
sale of its portfolio securities. Portfolio hedging is the use of forward
contracts with respect to portfolio security positions denominated or quoted in
a particular currency. Portfolio hedging allows the Adviser to limit or reduce
exposure in a foreign currency by entering into a forward contract to sell or
buy such foreign currency (or another foreign currency that acts as a proxy for
that currency) so that the U.S. dollar value of certain underlying foreign
portfolio securities can be approximately matched by an equivalent U.S. dollar
liability. The Fund may not engage in portfolio hedging with respect to the
currency of a particular country to an extent greater than the aggregate market
value (at the time of making such sale) of the securities held in its portfolio
denominated or quoted in that particular currency, except that the Fund may
hedge all or part of its foreign currency exposure through the use of a basket
of currencies or a proxy currency where such currencies or currency act as an
effective proxy for other currencies. In such a case, the Fund may enter into a
forward contract where the amount of the foreign currency to be sold exceeds the
value of the securities denominated in such currency. The use of this basket
hedging technique may be more efficient and economical than entering into
separate forward contracts for each currency held in the Fund. The Fund may not
engage in "speculative" currency exchange transactions.
At the maturity of a forward contract to deliver a particular
currency, the Fund may either sell the portfolio security related to such
contract and make delivery of the currency, or it may retain the security and
either acquire the currency on the spot market or terminate its contractual
obligation to deliver the currency by purchasing an offsetting contract with the
same currency trader obligating it to purchase on the same maturity date the
same amount of the currency.
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It is impossible to forecast with absolute precision the market value
of portfolio securities at the expiration of a forward contract. Accordingly,
it may be necessary for the Fund to purchase additional currency on the spot
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of currency the Fund is obligated to deliver
and if a decision is made to sell the security and make delivery of the
currency. Conversely, it may be necessary to sell on the spot market some of
the currency received upon the sale of the portfolio security if its market
value exceeds the amount of currency the Fund is obligated to deliver.
If the Fund retains the portfolio security and engages in an
offsetting transaction, the Fund will incur a gain or a loss to the extent that
there has been movement in forward contract prices. If the Fund engages in an
offsetting transaction, it may subsequently enter into a new forward contract to
sell the currency. Should forward prices decline during the period between the
Fund's entering into a forward contract for the sale of a currency and the date
it enters into an offsetting contract for the purchase of the currency, the Fund
will realize a gain to the extent the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should
forward prices increase, the Fund will suffer a loss to the extent the price of
the currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell. A default on the contract would deprive the Fund of unrealized
profits or force the Fund to cover its commitments for purchase or sale of
currency, if any, at the current market price.
Hedging against a decline in the value of a currency does not
eliminate fluctuations in the prices of portfolio securities or prevent losses
if the prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. The cost to the Fund of
engaging in currency exchange transactions varies with such factors as the
currency involved, the length of the contract period, and prevailing market
conditions. Since currency exchange transactions are usually conducted on a
principal basis, no fees or commissions are involved.
Synthetic Foreign Money Market Positions. The Fund may invest in
money market instruments denominated in foreign currencies. In addition to, or
in lieu of, such direct investment, the Fund may construct a synthetic foreign
money market position by (a) purchasing a money market instrument denominated in
one currency, generally U.S. dollars, and (b) concurrently entering into a
forward contract to deliver a corresponding amount of that currency in exchange
for a different currency on a future date and at a specified rate of exchange.
For example, a synthetic money market position in Japanese yen could be
constructed by purchasing a U.S. dollar money market instrument, and entering
concurrently into a forward contract to deliver a corresponding amount of U.S.
dollars in exchange for Japanese yen on a specified date and at a specified rate
of exchange. Because of the availability of a variety of highly liquid short-
term U.S. dollar money market instruments, a synthetic money market position
utilizing such U.S. dollar instruments may offer greater liquidity than direct
investment in foreign currency money market instruments. The result of a direct
investment in a foreign currency and a concurrent construction of a synthetic
position in such foreign currency, in terms of both income yield and gain or
loss from changes in currency exchange rates, in general should be similar, but
would not be identical because the components of the alternative investments
would not be identical. Except to the extent a synthetic foreign money market
position consists of a money market instrument denominated in a foreign
currency, the synthetic foreign money market position shall not be deemed a
"foreign security" for purposes of the policy that, under normal conditions, the
Fund will invest at least 65% of its total assets in at least three countries
other than the United States.
LENDING OF PORTFOLIO SECURITIES
- -------------------------------
Subject to restriction (3) under Investment Restrictions in this
Statement of Additional Information, the Fund may lend its portfolio securities
to broker-dealers and banks. Any such loan must be continuously secured by
collateral in cash or cash equivalents maintained on a current basis in an
amount at least equal to the market value of the securities loaned by the Fund.
The Fund would continue to receive the equivalent of the interest or dividends
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paid by the issuer on the securities loaned, and would also receive an
additional return that may be in the form of a fixed fee or a percentage of the
collateral. The Fund would have the right to call the loan and obtain the
securities loaned at any time on notice of not more than five business days.
The Fund would not have the right to vote the securities during the existence of
the loan but would call the loan to permit voting of the securities if, in the
Adviser's judgment, a material event requiring a shareholder vote would
otherwise occur before the loan was repaid. In the event of bankruptcy or other
default of the borrower, the Fund could experience both delays in liquidating
the loan collateral or recovering the loaned securities and losses, including
(a) possible decline in the value of the collateral or in the value of the
securities loaned during the period while the Fund seeks to enforce its rights
thereto, (b) possible subnormal levels of income and lack of access to income
during this period, and (c) expenses of enforcing its rights.
REPURCHASE AGREEMENTS
- ---------------------
The Fund may invest in repurchase agreements, provided that it will
not invest more than 15% of net assets in repurchase agreements maturing in more
than seven days and any other illiquid securities. A repurchase agreement is a
sale of securities to the Fund in which the seller agrees to repurchase the
securities at a higher price, which includes an amount representing interest on
the purchase price, within a specified time. In the event of bankruptcy of the
seller, the Fund could experience both losses and delays in liquidating its
collateral.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES: REVERSE REPURCHASE AGREEMENTS
- --------------------------------------------------------------------------
The Fund may purchase or sell securities on a when-issued or delayed-
delivery basis. Although the payment and interest terms of these securities are
established at the time the Fund enters into the commitment, the securities may
be delivered and paid for a month or more after the date of purchase, when their
value may have changed. The Fund makes such purchase commitments only with the
intention of actually acquiring the securities, but may sell the securities
before settlement date if the Adviser deems it advisable for investment reasons.
The Fund may utilize spot and forward foreign currency exchange transactions to
reduce the risk inherent in fluctuations in the exchange rate between one
currency and another when securities are purchased or sold on a when-issued or
delayed-delivery basis.
The Fund may enter into reverse repurchase agreements with banks and
securities dealers. A reverse repurchase agreement is a repurchase agreement in
which the Fund is the seller of, rather than the investor in, securities and
agrees to repurchase them at an agreed-upon time and price. Use of a reverse
repurchase agreement may be preferable to a regular sale and later repurchase of
securities because it avoids certain market risks and transaction costs.
At the time the Fund enters into a binding obligation to purchase
securities on a when-issued basis or enters into a reverse repurchase agreement,
liquid assets (cash, U.S. Government securities or other "high-grade" debt
obligations) of the Fund having a value at least as great as the purchase price
of the securities to be purchased will be segregated on the books of the Fund
and held by the custodian throughout the period of the obligation. The use of
these investment strategies, as well as borrowing under a line of credit as
described below, may increase net asset value fluctuation.
CONVERTIBLE SECURITIES
- ----------------------
By investing in convertible securities, the Fund obtains the right to
benefit from the capital appreciation potential in the underlying stock upon
exercise of the conversion right, while earning higher current income than would
be available if the stock were purchased directly. In determining whether to
purchase a convertible, the Adviser will consider substantially the same
criteria that would be considered in purchasing the underlying stock. While
convertible securities purchased by the Fund are frequently rated investment
grade, the Fund also may purchase unrated securities or securities rated below
investment grade if the securities meet the Adviser's other investment criteria.
Convertible securities rated below investment grade (a) tend to be more
sensitive to interest
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rate and economic changes, (b) may be obligations of issuers who are less
creditworthy than issuers of higher quality convertible securities, and (c) may
be more thinly traded due to such securities being less well known to investors
than either common stock or conventional debt securities. As a result, the
Adviser's own investment research and analysis tends to be more important in the
purchase of such securities than other factors.
SHORT SALES
- -----------
The Fund may make short sales "against the box." In a short sale, the
Fund sells a borrowed security and is required to return the identical security
to the lender. A short sale "against the box" involves the sale of a security
with respect to which the Fund already owns an equivalent security in kind and
amount. A short sale "against the box" enables the Fund to obtain the current
market price of a security that it desires to sell but is unavailable for
settlement.
RULE 144A SECURITIES
- --------------------
The Fund may purchase securities that have been privately placed but
that are eligible for purchase and sale under Rule 144A under the 1933 Act.
That Rule permits certain qualified institutional buyers, such as the Fund, to
trade in privately placed securities that have not been registered for sale
under the 1933 Act. The Adviser, under the supervision of the Board of
Trustees, will consider whether securities purchased under Rule 144A are
illiquid and thus subject to the Fund's restriction of investing no more than
15% of its net assets in illiquid securities. A determination of whether a Rule
144A security is liquid or not is a question of fact. In making this
determination, the Adviser will consider the trading markets for the specific
security, taking into account the unregistered nature of a Rule 144A security.
In addition, the Adviser could consider the (1) frequency of trades and quotes,
(2) number of dealers and potential purchasers, (3) dealer undertakings to make
a market, and (4) nature of the security and of marketplace trades (e.g., the
time needed to dispose of the security, the method of soliciting offers, and the
mechanics of transfer). The liquidity of Rule 144A securities would be
monitored and, if as a result of changed conditions, it is determined that a
Rule 144A security is no longer liquid, the Fund's holdings of illiquid
securities would be reviewed to determine what, if any, steps are required to
assure that the Fund does not invest more than 15% of its assets in illiquid
securities. Investing in Rule 144A securities could have the effect of
increasing the amount of the Fund's assets invested in illiquid securities if
qualified institutional buyers are unwilling to purchase such securities.
LINE OF CREDIT
- --------------
Subject to restriction (4) under Investment Restrictions in this
Statement of Additional Information, the Fund may establish and maintain a line
of credit with a major bank in order to permit borrowing on a temporary basis to
meet share redemption requests in circumstances in which temporary borrowing may
be preferable to liquidation of portfolio securities.
PORTFOLIO TURNOVER
- ------------------
The Fund will not consider portfolio turnover rate a limiting factor
in making investment decisions consistent with its investment objective and
policies. Portfolio turnover is commonly measured by dividing the cost of
purchases in a portfolio by the average investment (i.e., the cumulative total
investment in the account at the end of each month, divided by the number of
months under consideration). High portfolio turnover should result from the
Fund's investment strategy, which considers market timeliness (i.e., the
likelihood or expectation that value of any stock purchased will increase in the
immediate future). Under normal market conditions, only securities that
increase in value shortly after purchase and that generally continue to increase
in value (although they may experience temporary stagnant or declining periods)
will be retained in the Fund's portfolio. Securities sold by the Fund may be
purchased again at a later date when the Adviser perceives that the securities
are again "timely." In addition, adjustments to the portfolio of the Fund will
be made when conditions affecting relevant markets, particular
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industries or individual issues, warrants such action. High portfolio turnover
in any year may make it more difficult to comply with the requirements of
Subchapter M of the Internal Revenue Code, may result in the payment by
shareholders of greater amounts of taxes, and may generate additional dealer
mark-ups or underwriting commissions as well as other transaction costs,
including correspondingly higher annual brokerage commissions.
DERIVATIVES
- -----------
Consistent with its objective, the Fund may invest in a broad array of
financial instruments and securities, including conventional exchange-traded and
non-exchange-traded options, futures contracts, futures options, forward
contracts, securities collateralized by underlying pools of mortgages or other
receivables, floating rate instruments, and other instruments that securitize
assets of various types ("Derivatives"). In each case, the value of the
instrument or security is "derived" from the performance of an underlying asset
or a "benchmark" such as a security index, an interest rate, or a currency.
Derivatives are most often used to manage investment risk or to create
an investment position indirectly because it is more efficient or less costly
than direct investment that cannot be readily established directly due to
portfolio size, cash availability, or other factors. They also may be used in
an effort to enhance portfolio returns.
The successful use of Derivatives depends on the Adviser's ability to
correctly predict changes in the levels and directions of movements in currency
exchange rates, security prices, interest rates and other market factors
affecting the Derivative itself or the value of the underlying asset or
benchmark. In addition, correlations in the performance of an underlying asset
to a Derivative may not be well established. Finally, privately negotiated and
over-the-counter Derivatives may not be as well regulated and may be less
marketable than exchange-traded Derivatives.
The Fund does not currently intend to invest more than 5% of its net
assets in any type of Derivative, except for options, futures contracts, futures
options, and forward contracts. (See discussion of options and futures below.)
OPTIONS ON SECURITIES AND INDEXES
- ---------------------------------
The Fund may purchase and sell put options and call options on
securities, indexes or foreign currencies in standardized contracts traded on
recognized securities exchanges, boards of trade, or similar entities, or quoted
on NASDAQ. The Fund may purchase agreements, sometimes called cash puts, that
may accompany the purchase of a new issue of bonds from a dealer.
An option on a security (or index) is a contract that gives the
purchaser (holder) of the option, in return for a premium, the right to buy from
(call) or sell to (put) the seller (writer) of the option the security
underlying the option (or the cash value of the index) at a specified exercise
price at any time during the term of the option (normally not exceeding nine
months). The writer of an option on an individual security or on a foreign
currency has the obligation upon exercise of the option to deliver the
underlying security or foreign currency upon payment of the exercise price or to
pay the exercise price upon delivery of the underlying security or foreign
currency. Upon exercise, the writer of an option on an index is obligated to
pay the difference between the cash value of the index and the exercise price
multiplied by the specified multiplier for the index option. (An index is
designed to reflect specified facets of a particular financial or securities
market, a specific group of financial instruments or securities, or certain
economic indicators.)
The Fund will write call options and put options only if they are
"covered." For example, in the case of a call option on a security, the option
is "covered" if the Fund owns the security underlying the call or has an
absolute and immediate right to acquire that security without additional cash
consideration (or, if additional cash
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consideration is required, cash or cash equivalents in such amount are held in a
segregated account by its custodian) upon conversion or exchange of other
securities held in its portfolio.
If an option written by the Fund expires, the Fund realizes a capital
gain equal to the premium received at the time the option was written. If an
option purchased by the Fund expires, the Fund realizes a capital loss equal to
the premium paid.
Prior to the earlier of exercise or expiration, an option may be
closed out by an offsetting purchase or sale of an option of the same series
(type, exchange, underlying security or index, exercise price, and expiration).
There can be no assurance, however, that a closing purchase or sale transaction
can be effected when the Fund desires.
The Fund will realize a capital gain from a closing purchase
transaction if the cost of the closing option is less than the premium received
from writing the option, or, if it is more, the Fund will realize a capital
loss. If the premium received from a closing sale transaction is more than the
premium paid to purchase the option, the Fund will realize a capital gain or, if
it is less, the Fund will realize a capital loss. The principal factors
affecting the market value of a put or a call option include supply and demand,
interest rates, the current market price of the underlying security or index in
relation to the exercise price of the option, the volatility of the underlying
security or index, and the time remaining until the expiration date.
A put or call option purchased by the Fund is an asset of the Fund,
valued initially at the premium paid for the option. The premium received for
an option written by the Fund is recorded as a deferred credit. The value of an
option purchased or written is marked-to-market daily and is valued at the
closing price on the exchange on which it is traded or, if not traded on an
exchange or no closing price is available, at the mean between the last bid and
asked prices.
Risks Associated with Options. There are several risks associated
with transactions in options. For example, there are significant differences
between the securities markets, the currency markets, and the options markets
that could result in an imperfect correlation between these markets, causing a
given transaction not to achieve its objectives. A decision as to whether, when
and how to use options involves the exercise of skill and judgment, and even a
well-conceived transaction may be unsuccessful to some degree because of market
behavior or unexpected events.
There can be no assurance that a liquid market will exist when the
Fund seeks to close out an option position. If the Fund were unable to close
out an option that it had purchased on a security, it would have to exercise the
option in order to realize any profit or the option would expire and become
worthless. If the Fund were unable to close out a covered call option that it
had written on a security, it would not be able to sell the underlying security
until the option expired. As the writer of a covered call option on a security,
the Fund forgoes, during the option's life, the opportunity to profit from
increases in the market value of the security covering the call option above the
sum of the premium and the exercise price of the call.
If trading were suspended in an option purchased or written by the
Fund, the Fund would not be able to close out the option. If restrictions on
exercise were imposed, the Fund might be unable to exercise an option it has
purchased.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
- --------------------------------------------------
The Fund may use interest rate futures contracts, index futures
contracts, and foreign currency futures contracts. An interest rate, index or
foreign currency futures contract provides for the future sale by one party and
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<PAGE>
purchase by another party of a specified quantity of a financial instrument or
the cash value of an index/1/ at a specified price and time. A public market
exists in futures contracts covering a number of indexes (including, but not
limited to: the Standard & Poor's 500 Index, the Value Line Composite Index, and
the New York Stock Exchange Composite Index) as well as financial instruments
(including, but not limited to: U.S. Treasury bonds, U.S. Treasury notes,
Eurodollar certificates of deposit, and foreign currencies). Other index and
financial instrument futures contracts are available and it is expected that
additional futures contracts will be developed and traded.
The Fund may purchase and write call and put futures options. Futures
options possess many of the same characteristics as options on securities,
indexes and foreign currencies (discussed above). A futures option gives the
holder the right, in return for the premium paid, to assume a long position
(call) or short position (put) in a futures contract at a specified exercise
price at any time during the period of the option. Upon exercise of a call
option, the holder acquires a long position in the futures contract and the
writer is assigned the opposite short position. In the case of a put option,
the opposite is true. The Fund might, for example, use futures contracts to
hedge against or gain exposure to fluctuations in the general level of stock
prices, anticipated changes in interest rates or currency fluctuations that
might adversely affect either the value of the Fund's securities or the price of
the securities that the Fund intends to purchase. Although other techniques
could be used to reduce or increase the Fund's exposure to stock price, interest
rate and currency fluctuations, the Fund may be able to achieve its exposure
more effectively and perhaps at a lower cost by using futures contracts and
futures options.
The Fund will only enter into futures contracts and futures options
that are standardized and traded on an exchange, board of trade, or similar
entity, or quoted on an automated quotation system.
The success of any futures transaction depends on the Adviser
correctly predicting changes in the level and direction of stock prices,
interest rates, currency exchange rates and other factors. Should those
predictions be incorrect, the Fund's return might have been better had the
transaction not been attempted; however, in the absence of the ability to use
futures contracts, the Adviser might have taken portfolio actions in
anticipation of the same market movements with similar investment results but,
presumably, at greater transaction costs.
When a purchase or sale of a futures contract is made by the Fund, the
Fund is required to deposit with its custodian (or broker, if legally permitted)
a specified amount of cash or U.S. Government securities or other securities
acceptable to the broker ("initial margin"). The margin required for a futures
contract is set by the exchange on which the contract is traded and may be
modified during the term of the contract. The initial margin is in the nature
of a performance bond or good faith deposit on the futures contract, which is
returned to the Fund upon termination of the contract, assuming all contractual
obligations have been satisfied. The Fund expects to earn interest income on
its initial margin deposits. A futures contract held by the Fund is valued
daily at the official settlement price of the exchange on which it is traded.
Each day the Fund pays or receives cash, called "variation margin," equal to the
daily change in value of the futures contract. This process is known as
"marking-to-market." Variation margin paid or received by the Fund does not
represent a borrowing or loan by the Fund but is instead settlement between the
Fund and the broker of the amount one would owe the other if the futures
contract had expired at the close of the previous day. In computing daily net
asset value, the Fund will mark-to-market its open futures positions.
The Fund is also required to deposit and maintain margin with respect
to put and call options on futures contracts written by it. Such margin
deposits will vary depending on the nature of the underlying futures contract
- ----------------
/1/ A futures contract on an index is an agreement pursuant to which two
parties agree to take or make delivery of an amount of cash equal to the
difference between the value of the index at the close of the last trading day
of the contract and the price at which the index contract was originally
written. Although the value of a securities index is a function of the value of
certain specified securities, no physical delivery of those securities is made.
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(and the related initial margin requirements), the current market value of the
option, and other futures positions held by the Fund.
Although some futures contracts call for making or taking delivery of
the underlying securities, usually these obligations are closed out prior to
delivery by offsetting purchases or sales of matching futures contracts (same
exchange, underlying security or index, and delivery month). If an offsetting
purchase price is less than the original sale price, the Fund realizes a capital
gain, or if it is more, the Fund realizes a capital loss. Conversely, if an
offsetting sale price is more than the original purchase price, the Fund
realizes a capital gain, or if it is less, the Fund realizes a capital loss.
The transaction costs must also be included in these calculations.
RISKS ASSOCIATED WITH FUTURES
- -----------------------------
There are several risks associated with the use of futures contracts
and futures options. A purchase or sale of a futures contract may result in
losses in excess of the amount invested in the futures contract. In trying to
increase or reduce market exposure, there can be no guarantee that there will be
a correlation between price movements in the futures contract and in the
portfolio exposure sought. In addition, there are significant differences
between the securities and futures markets that could result in an imperfect
correlation between the markets, causing a given transaction not to achieve its
objectives. The degree of imperfection of correlation depends on circumstances
such as: variations in speculative market demand for futures, futures options
and the related securities, including technical influences in futures and
futures options trading and differences between the securities markets and the
securities underlying the standard contracts available for trading. For
example, in the case of index futures contracts, the composition of the index,
including the issuers and the weighting of each issue, may differ from the
composition of the Fund's portfolio, and, in the case of interest rate futures
contracts, the interest rate levels, maturities, and creditworthiness of the
issues underlying the futures contract may differ from the financial instruments
held in the Fund's portfolio. A decision as to whether, when and how to use
futures contracts involves the exercise of skill and judgment, and even a well-
conceived transaction may be unsuccessful to some degree because of market
behavior or unexpected stock price or interest rate trends.
Futures exchanges may limit the amount of fluctuation permitted in
certain futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of the
current trading session. Once the daily limit has been reached in a futures
contract subject to the limit, no more trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses because the
limit may work to prevent the liquidation of unfavorable positions. For
example, futures prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some holders of futures contracts to
substantial losses. Stock index futures contracts are not normally subject to
such daily price change limitations.
There can be no assurance that a liquid market will exist at a time
when the Fund seeks to close out a futures or futures option position. The Fund
would be exposed to possible loss on the position during the interval of
inability to close, and would continue to be required to meet margin
requirements until the position is closed. In addition, many of the contracts
discussed above are relatively new instruments without a significant trading
history. As a result, there can be no assurance that an active secondary market
will develop or continue to exist.
LIMITATIONS ON OPTIONS AND FUTURES
- ----------------------------------
If other options, futures contracts, or futures options of types other
than those described herein are traded in the future, the Fund may also use
those investment vehicles, provided the Board of Trustees determines that their
use is consistent with the Fund's investment objective.
The Fund will not enter into a futures contract or purchase an option
thereon if, immediately thereafter, the initial margin deposits for futures
contracts held by the Fund plus premiums paid by it for open futures option
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<PAGE>
positions, less the amount by which any such positions are "in-the-money,"/2/
would exceed 5% of the Fund's total assets.
When purchasing a futures contract or writing a put option on a
futures contract, the Fund must maintain with its custodian (or broker, if
legally permitted) cash or cash equivalents (including any margin) equal to the
market value of such contract. When writing a call option on a futures
contract, the Fund similarly will maintain with its custodian cash or cash
equivalents (including any margin) equal to the amount by which such option is
in-the-money until the option expires or is closed out by the Fund.
The Fund may not maintain open short positions in futures contracts,
call options written on futures contracts or call options written on indexes if,
in the aggregate, the market value of all such open positions exceeds the
current value of the securities in its portfolio, plus or minus unrealized gains
and losses on the open positions, adjusted for the historical relative
volatility of the relationship between the portfolio and the positions. For
this purpose, to the extent the Fund has written call options on specific
securities in its portfolio, the value of those securities will be deducted from
the current market value of the securities portfolio.
In order to comply with Commodity Futures Trading Commission ("CFTC")
Regulation 4.5 and thereby avoid being deemed a "commodity pool operator," the
Fund will use commodity futures or commodity options contracts solely for bona
fide hedging purposes within the meaning and intent of CFTC Regulation 1.3(z),
or, with respect to positions in commodity futures and commodity options
contracts that do not come within the meaning and intent of CFTC Regulation
1.3(z), the aggregate initial margin and premiums required to establish such
positions will not exceed 5% of the fair market value of the assets of the Fund,
after taking into account unrealized profits and unrealized losses on any such
contracts it has entered into. In the case of an option that is in-the-money at
the time of purchase, the in-the-money amount (as defined in Section 190.01(x)
of the CFTC Regulations) may be excluded in computing such 5%.
As long as the Fund continues to sell its shares in certain states,
the Fund's options and futures transactions will also be subject to certain non-
fundamental investment restrictions set forth under Investment Restrictions in
this Statement of Additional Information.
TAXATION OF OPTIONS AND FUTURES
- -------------------------------
If the Fund exercises a call or put option that it holds, the premium
paid for the option is added to the cost basis of the security purchased (call)
or deducted from the proceeds of the security sold (put). For cash settlement
options and futures options exercised by the Fund, the difference between the
cash received at exercise and the premium paid is a capital gain or loss.
If a call or put option written by the Fund is exercised, the premium
is included in the proceeds of the sale of the underlying security (call) or
reduces the cost basis of the security purchased (put). For cash settlement
options and futures options written by the Fund, the difference between the cash
paid at exercise and the premium received is a capital gain or loss.
Entry into a closing purchase transaction will result in capital gain
or loss. If an option written by the Fund was in-the-money at the time it was
written and the security covering the option was held for more than the long-
term holding period prior to the writing of the option, any loss realized as a
result of a closing purchase
- ----------------
/2/ A call option is "in-the-money" if the value of the futures contract
that is the subject of the option exceeds the exercise price. A put option is
"in-the-money" if the exercise price exceeds the value of the futures contract
that is the subject of the option.
B-10
<PAGE>
transaction will be long-term. The holding period of the securities covering an
in-the-money option will not include the period of time the option is
outstanding.
If the Fund writes an equity call option/3/ other than a "qualified
covered call option," as defined in the Internal Revenue Code, any loss on such
option transaction, to the extent it does not exceed the unrealized gains on the
securities covering the option, may be subject to deferral until the securities
covering the option have been sold.
A futures contract held until delivery results in capital gain or loss
equal to the difference between the price at which the futures contract was
entered into and the settlement price on the earlier of delivery notice date or
expiration date. If the Fund delivers securities under a futures contract, the
Fund also realizes a capital gain or loss on those securities.
For federal income tax purposes, the Fund generally is required to
recognize as income for each taxable year its net unrealized gains and losses as
of the end of the year on futures, futures options and non-equity options
positions ("year-end mark-to-market"). Generally, any gain or loss recognized
with respect to such positions (either by year-end mark-to-market or by actual
closing of the positions) is considered to be 60% long-term and 40% short-term,
without regard to the holding periods of the contracts. However, in the case of
positions classified as part of a "mixed straddle," the recognition of losses on
certain positions (including options, futures and futures options positions, the
related securities and certain successor positions thereto) may be deferred to a
later taxable year. Sale of futures contracts or writing of call options (or
futures call options) or buying put options (or futures put options) that are
intended to hedge against a change in the value of securities held by the Fund:
(1) will affect the holding period of the hedged securities; and (2) may cause
unrealized gain or loss on such securities to be recognized upon entry into the
hedge.
If the Fund were to enter into a short index future, short index
futures option or short index option position and the Fund's portfolio were
deemed to "mimic" the performance of the index underlying such contract, the
option or futures contract position and the Fund's stock positions would be
deemed to be positions in a mixed straddle, subject to the above-mentioned loss
deferral rules.
In order for the Fund to qualify for federal income tax treatment as a
regulated investment company, gains realized on the sale or other disposition of
securities held for less than three months must be limited to less than 30% of
the Fund's annual gross income. In order to avoid realizing excessive gains on
securities held less than three months, the Fund may be required to defer the
closing out of certain positions beyond the time when it would otherwise be
advantageous to do so.
The Fund distributes to shareholders annually any net capital gains
that have been recognized for federal income tax purposes (including year-end
mark-to-market gains) on options and futures transactions. Such distributions
are combined with distributions of capital gains realized on the Fund's other
investments, and shareholders are advised of the nature of the payments.
- ----------------
/3/ An equity option is defined to mean any option to buy or sell stock,
and any other option the value of which is determined by reference to an index
of stocks of the type that is ineligible to be traded on a commodity futures
exchange (e.g., an option contract on a sub-index based on the price of nine
hotel/casino stocks). The definition of equity option excludes options on broad-
based stock indexes (such as the Standard & Poor's 500 index).
B-11
<PAGE>
INVESTMENT RESTRICTIONS
-----------------------
The Fund operates under the following fundamental investment
restrictions, which, together with the investment objective and fundamental
policies, cannot be changed without the approval of a "majority of the
outstanding voting securities," which is defined in the Investment Company Act
of 1940 to mean the lesser of (i) 67% of the Fund's shares present at a meeting
where more than 50% of the outstanding shares are present in person or by proxy
or (2) more than 50% of the Fund's outstanding shares. The Fund may not:
(1) act as an underwriter of securities, except insofar as it may be
deemed an underwriter for purposes of the Securities Act of 1933 on disposition
of securities acquired subject to legal or contractual restrictions on resale;
(2) purchase or sell real estate (although it may purchase securities
secured by real estate or interests therein, or securities issued by companies
which invest in real estate or interests therein), commodities, or commodity
contracts, except that it may enter into (a) futures and options on futures and
(b) forward currency contracts;
(3) make loans, but this restriction shall not prevent the Fund from
(a) buying a part of an issue of bonds, debentures, or other obligations, (b)
investing in repurchase agreements,/4/ or (c) lending portfolio securities,
provided that it may not lend securities if, as a result, the aggregate value of
all securities loaned would exceed 33 1/3% of its total assets (taken at market
value at the time of such loan);
(4) borrow, except that it may (a) borrow up to 33 1/3% of its total
assets, taken at market value at the time of such borrowing, as a temporary
measure for extraordinary or emergency purposes, but not to increase portfolio
income (the total of reverse repurchase agreements and such borrowings will not
exceed 33 1/3% of its total assets, and the Fund will not purchase additional
securities when its borrowings, less proceeds receivable from sales of portfolio
securities, exceed 5% of its total assets) and (b) enter into transactions in
options, futures, and options on futures;
(5) invest in a security if 25% or more of its total assets (taken at
market value at the time of a particular purchase) would be invested in the
securities of issuers in any particular industry,/5/ except that this
restriction does not apply to securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities; or
(6) issue any senior security except to the extent permitted under the
Investment Company Act of 1940.
The Fund is also subject to the following non-fundamental restrictions
and policies, which may be changed by the Board of Trustees. The Fund may not:
- ----------------
/4/ A repurchase agreement involves the sale of securities to the Fund,
with the concurrent agreement of the seller to repurchase the securities at the
same price plus an amount representing interest at an agreed-upon interest rate,
within a specified time, usually less than one week, but, on occasion, at a
later time. Repurchase agreements entered into by the Fund will be fully
collateralized and will be marked-to-market daily. In the event of a bankruptcy
or other default of a seller of a repurchase agreement, the Fund could
experience both delays in liquidating the underlying securities and losses,
including: (a) possible decline in the value of the collateral during the period
while the Fund seeks to enforce its rights thereto; (b) possible subnormal
levels of income and lack of access to income during this period; and (c)
expenses of enforcing its rights.
/5/ For purposes of this investment restriction, the Fund uses industry
classifications contained in Institutional Brokers Estimate System ("I/B/E/S")
Sector Industry Group Classification, published by I/B/E/S, an institutional
research firm.
B-12
<PAGE>
(a) invest in any of the following: (i) interests in oil, gas, or
other mineral leases or exploration or development programs (except readily
marketable securities, including but not limited to master limited partnership
interests, that may represent indirect interests in oil, gas, or other mineral
exploration or development programs); (ii) puts, calls, straddles, spreads, or
any combination thereof (except that the Fund may enter into transactions in
options, futures, and options on futures); and (iii) limited partnerships in
real estate unless they are readily marketable;
(b) invest in companies for the purpose of exercising control or
management;
(c) purchase, except for securities acquired as part of a merger,
consolidation or acquisition of assets, more than 3% of the stock of another
investment company or purchase stock of other investment companies equal to more
than 5% of the Fund's total assets (valued at time of purchase) in the case of
any one other investment company and 10% of such assets (valued at time of
purchase) in the case of all other investment companies in the aggregate;
(d) purchase or hold securities of an issuer if 5% of the securities
of such issuer are owned by those officers, trustees, or directors of the Trust
or of its investment adviser, who each own beneficially more than 1/2 of 1% of
the securities of that issuer;
(e) mortgage, pledge, or hypothecate its assets, except as may be
necessary in connection with permitted borrowings or in connection with options,
futures, and options on futures;
(f) invest more than 5% of its net assets (valued at time of purchase)
in warrants, nor more than 2% of its net assets in warrants that are not listed
on the New York or American stock exchange or a recognized foreign exchange;
(g) purchase a put or call option if the aggregate premiums paid for
all put and call options exceed 20% of its net assets (less the amount by which
any such positions are in-the-money), excluding put and call options purchased
as closing transactions;
(h) purchase securities on margin (except for use of short-term
credits as are necessary for the clearance of transactions), or sell securities
short unless (i) the Fund owns or has the right to obtain securities equivalent
in kind and amount to those sold short at no added cost or (ii) the securities
sold are "when issued" or "when distributed" securities which the Fund expects
to receive in a recapitalization, reorganization, or other exchange for
securities the Fund contemporaneously owns or has the right to obtain and
provided that transactions in options, futures, and options on futures are not
treated as short sales;
(i) invest more than 5% of its total assets (taken at market value at
the time of a particular investment) in securities of issuers (other than
issuers of federal agency obligations or securities issued or guaranteed by any
foreign country or asset-backed securities) that, together with any predecessors
or unconditional guarantors, have been in continuous operation for less than
three years ("unseasoned issuers");
(j) invest more than 15% of its net assets (taken at market value at
the time of a particular investment) in illiquid securities, including
repurchase agreements maturing in more than seven days.
Notwithstanding the foregoing investment restrictions, the Fund may
purchase securities pursuant to the exercise of subscription rights, subject to
the condition that such purchase will not result in the Fund's ceasing to be a
diversified investment company. Far Eastern and European corporations
frequently issue additional capital stock by means of subscription rights
offerings to existing shareholders at a price substantially below the market
price of the shares. The failure to exercise such rights would result in the
Fund's interest in the issuing company being diluted. The market for such
rights is not well developed in all cases and, accordingly, the Fund may not
always realize full value on the sale of rights. The exception applies in cases
where the limits set forth in the investment restrictions would otherwise be
exceeded by exercising rights or would have already been exceeded as
B-13
<PAGE>
a result of fluctuations in the market value of the Fund's portfolio securities
with the result that the Fund would be forced either to sell securities at a
time when it might not otherwise have done so, to forego exercising the rights.
PURCHASES AND REDEMPTIONS
-------------------------
Purchases and redemptions are discussed in the Prospectus under the
headings How to Purchase Shares, How to Redeem Shares and Net Asset Value, and
that information is incorporated herein by reference. The Prospectus discloses
that you may purchase (or redeem) shares through investment dealers or other
institutions. It is the responsibility of any such institution to establish
procedures insuring the prompt transmission to the Trust of any such purchase
order.
The Fund's net asset value is determined on days on which the New York
Stock Exchange (the "NYSE") is open for trading. The NYSE is regularly closed
on Saturdays and Sundays and on New Year's Day, the third Monday in February,
Good Friday, the last Monday in May, Independence Day, Labor Day, Thanksgiving,
and Christmas. If one of these holidays falls on a Saturday or Sunday, the NYSE
will be closed on the preceding Friday or the following Monday, respectively.
Net asset value will not be determined on days when the NYSE is closed unless,
in the judgment of the Board of Trustees, net asset value of the Fund should be
determined on any such day, in which case the determination will be made at 3:00
p.m., Central time.
The Trust intends to pay all redemptions in cash and is obligated to
redeem shares solely in cash up to the lesser of $250,000 or one percent of the
net assets of the Trust during any 90-day period for any one shareholder.
However, redemptions in excess of such limit may be paid wholly or partly by a
distribution in kind of securities. If redemptions were made in kind, the
redeeming shareholders might incur transaction costs in selling the securities
received in the redemptions.
Due to the relatively high cost of maintaining smaller accounts, as
described in the Prospectus, the Trust reserves the right to redeem shares in
any account that does not have a value of at least $50,000 immediately after a
redemption. The Agreement and Declaration of Trust also authorizes the Trust to
redeem shares under certain other circumstances as may be specified by the Board
of Trustees.
The Trust reserves the right to suspend or postpone redemptions of
shares of the Fund during any period when: (a) trading on the NYSE is
restricted, as determined by the Securities and Exchange Commission, or the NYSE
is closed for other than customary weekend and holiday closings; (b) the
Securities and Exchange Commission has by order permitted such suspension; or
(c) an emergency, as determined by the Securities and Exchange Commission,
exists, making disposal of portfolio securities or valuation of net assets of
the Fund not reasonably practicable.
B-14
<PAGE>
MANAGEMENT
----------
The following table sets forth certain information with respect to the trustees
and officers of the Trust:
<TABLE>
<CAPTION>
NAME; ADDRESS AGE POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING PAST
TRUST FIVE YEARS
<S> <C> <C> <C>
William R. Andersen [37] Vice President Vice President of the Adviser since 19 ;
25 East Erie Street Portfolio Manager of the Adviser, prior
Chicago, IL 60601 thereto
Richard H. Driehaus/6/, /7/ [53] President; Trustee Chairman of the Board and CEO of the
25 East Erie Street Adviser and DSC
Chicago, IL 60601
Robert F. Moyer [49] Vice President President and Chief Operating Officer
25 East Erie Street of the Adviser and DSC since 19 ;
Chicago, IL 60601 prior thereto
Diane L. Wallace [37] Vice President; Treasurer Senior Vice President-Operations of
25 East Erie Street the Adviser and DSC since 19 ;
Chicago, IL 60601 prior thereto
Mary H. Weiss [48] Vice President; Secretary Vice President, Secretary and Chief
25 East Erie Street Legal Counsel of the Adviser and DSC
Chicago, IL 60601 since February 1995; prior thereto,
Assistant Regional Director, U.S.
Securities and Exchange Commission
[Independent Trustee]/8/ [__] Trustee _________________________________
____________________
____________________
</TABLE>
Officers and trustees affiliated with the Adviser serve without any
compensation from the Trust. In compensation for their services to the Trust,
trustees who are not "interested persons" of the Trust or the Adviser are paid
[describe fee schedule]. The Trust has no retirement or pension plans. The
following table sets forth estimated compensation to be paid by the Trust during
the Fund's first full fiscal year to each of the non-interested trustees:
- ----------------
/6/ Trustee who is an "interested person" of the Trust and of the Adviser,
as defined in the Investment Company Act of 1940.
/7/ Member of the Executive committee of the Board of Trustees, which is
authorized to exercise all powers of the Board with certain statutory
exceptions.
/8/ Member of the Audit Committee of the Board, which makes
recommendations to the Board regarding the selection of auditors and confers
with the auditors regarding the scope and results of the audit.
B-15
<PAGE> AGGREGATE
COMPENSATION
FROM THE TRUST
--------------
NAME OF TRUSTEE
- ---------------
________________ _____________
________________ _____________
________________ _____________
________________ _____________
PRINCIPAL SHAREHOLDERS
----------------------
As of [______________], 1996, the following persons owned of record or
beneficially five percent or more of the shares of the Fund:
INVESTMENT ADVISORY SERVICES
----------------------------
The Adviser provides office space and executive and other personnel to
the Fund and bears any sales or promotional expenses. The Fund pays all
expenses other than those paid by the Adviser, including but not limited to
printing and postage charges and securities registration and custodian fees and
expenses incidental to its organization.
The investment advisory agreement provides that the Adviser shall
reimburse the Fund to the extent that total annual expenses of the Fund
(including fees paid to the Adviser, but excluding taxes, interest, brokers'
commissions and other normal charges incident to the purchase and sale of
portfolio securities and expenses of litigation to the extent permitted under
applicable state law) exceed the applicable limits prescribed by any state in
which shares of the Fund are being offered for sale to the public; provided,
however, that the Adviser shall not be required to reimburse the Fund an amount
in excess of the management fee from the Fund for such year. Currently the Fund
is not offered for sale in any state that imposes an expense limitation.
The advisory agreement also provides that neither the Adviser nor any
of its directors, officers, stockholders, agents, or employees shall have any
liability to the Trust or any shareholder of the Trust for any error of
judgment, mistake of law or any loss arising out of any investment, or for any
other act or omission in the performance by the Adviser of its duties under the
agreement, except for liability resulting from willful misfeasance, bad faith or
gross negligence on their part in the performance of its duties or from reckless
disregard by it of its obligations and duties under the agreement.
Any expenses that are attributable solely to the organization,
operation, or business of the Fund shall be paid solely out of the Fund's
assets. Any expenses incurred by the Trust that are not solely attributable to
a particular series are apportioned in such manner as the Adviser determines is
fair and appropriate, unless otherwise specified by the Board of Trustees.
ADMINISTRATOR
-------------
PFPC Inc. ("PFPC") is the administrator for the Trust.
B-16
<PAGE>
DISTRIBUTOR
-----------
Shares of the Fund are distributed by Driehaus Securities Corporation
("DSC") under a Distribution Agreement as described under Management of the Fund
in the Prospectus. The Distribution Agreement continues in effect from year to
year, provided such continuance is approved annually (i) by a majority of the
trustees or by a majority of the outstanding voting securities of the Trust, and
(ii) by a majority of the trustees who are not parties to the Agreement or
interested persons of any such party. The Trust has agreed to pay all expenses
in connection with registration of its shares with the Securities and Exchange
Commission and auditing and filing fees in connection with registration of its
shares under the various state blue sky laws and assumes the cost of preparation
of prospectuses and other expenses. The Adviser bears all sales and promotional
expenses, including any payments to DSC for the sales of Fund shares.
As agent, DSC offers shares of the Fund to investors in states where the shares
are qualified for sale, at net asset value, without sales commissions or other
sales load to the investor. In addition, no sales commission or "12b-1" payment
is paid by the Fund. DSC offers the Fund's shares only on a best-efforts basis.
CUSTODIAN
---------
________________ (the "Bank"), _______________________, is the
custodian for the Trust. It is responsible for holding all securities and cash
of the Fund, receiving and paying for securities purchased, delivering against
payment securities sold, receiving and collecting income from investments,
making all payments covering expenses of the Fund, and performing other
administrative duties, all as directed by authorized persons. The custodian
does not exercise any supervisory function in such matters as purchase and sale
of portfolio securities, payment of dividends, or payment of expenses of the
Fund.
Portfolio securities purchased in the U.S. are maintained in the
custody of the Bank or of other domestic banks or depositories. Portfolio
securities purchased outside of the U.S. are maintained in the custody of
foreign banks and trust companies that are members of the Bank's Global Custody
Network and foreign depositories ("foreign sub-custodians"). Each of the
domestic and foreign custodial institutions holding portfolio securities has
been approved by the Board of Trustees in accordance with regulations under the
Investment Company Act of 1940.
The Board of Trustees reviews, at least annually, whether it is in the
best interest of the Fund and its shareholders to maintain Fund assets in each
of the countries in which the Fund invests with particular foreign sub-
custodians in such countries, pursuant to contracts between such respective
foreign sub-custodians and the Bank. The review includes an assessment of the
risks of holding Fund assets in any such country (including risks of
expropriation or imposition of exchange controls), the operational capability
and reliability of each such foreign sub-custodian, and the impact of local laws
on each such custody arrangement. The Board of Trustees is aided in its review
by the Bank, which has assembled the network of foreign sub-custodians utilized
by the Fund, as well as by the Adviser and counsel. However, with respect to
foreign sub-custodians, there can be no assurance that the Fund, and the value
of its shares, will not be adversely affected by acts of foreign governments,
financial or operational difficulties of the foreign sub-custodians,
difficulties and costs of obtaining jurisdiction over, or enforcing judgments
against, the foreign sub-custodians, or application of foreign law to the Fund's
foreign sub-custodial arrangements. Accordingly, an investor should recognize
that the non-investment risks involved in holding assets abroad are greater than
those associated with investing in the United States.
The Fund may invest in obligations of the custodian and may purchase
or sell securities from or to the custodian.
B-17
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
------------------------------
The independent public accountants for the Trust are Arthur Andersen
LLP. The accountants audit and report on the Fund's annual financial
statements, review certain regulatory reports and the Fund's federal income tax
returns, and perform other professional accounting, auditing, tax and advisory
services when engaged to do so by the Trust.
PORTFOLIO TRANSACTIONS
----------------------
The Adviser places the orders for the purchase and sale of the Fund's
portfolio securities and options and futures contracts. The Adviser's
overriding objective in effecting portfolio transactions is to seek to obtain
the best combination of price and execution. The best net price, giving effect
to brokerage commissions, if any, and other transaction costs, normally is an
important factor in this decision, but a number of other judgmental factors may
also enter into the decision. These include: the Adviser's knowledge of
negotiated commission rates currently available and other current transaction
costs; the nature of the security being traded; the size of the transaction; the
desired timing of the trade; the activity existing and expected in the market
for the particular security; confidentiality; the execution, clearance and
settlement capabilities of the broker or dealer selected and others which are
considered; the Adviser's knowledge of the financial stability of the broker or
dealer selected and such other brokers or dealers; and the Adviser's knowledge
of actual or apparent operational problems of any broker or dealer. Recognizing
the value of these factors, the Fund may pay a brokerage commission in excess of
that which another broker or dealer may have charged for effecting the same
transaction. Evaluations of the reasonableness of brokerage commissions, based
on the foregoing factors, are made on an ongoing basis by the Adviser's staff
while effecting portfolio transactions. The general level of brokerage
commissions paid is reviewed by the Adviser, and reports are made annually to
the Board of Trustees.
Orders may be directed to any broker including, to the extent and in
the manner permitted by applicable law, Driehaus Securities Corporation ("DSC"),
an affiliate of the Adviser. The Fund has been advised the Adviser that it
intends to execute most (or all) transactions in ADRs through DSC. In order for
DSC to effect any such transaction for the Fund, the commissions, fees or other
remuneration received by DSC must be reasonable and fair, compared to the
commissions, fees or other remuneration paid to other brokers in connection with
comparable transactions involving similar securities, futures or options on
futures being purchased or sold on an exchange during a comparable period of
time. This standard would allow DSC to receive no more than the remuneration
that would be expected to be received by an unaffiliated broker in a
commensurate arms-length transaction. Furthermore, the Board of Trustees,
including a majority of the Trustees who are not "interested" Trustees, has
adopted procedures that are reasonably designed to provide that any commissions,
fees or other remuneration paid to DSC are consistent with the foregoing
standard.
With respect to issues of securities involving brokerage commissions,
when more than one broker or dealer (other than DSC) is believed to be capable
of providing the best combination of price and execution with respect to a
particular portfolio transaction for the Fund, the Adviser often selects a
broker or dealer that has furnished it with research products or services such
as research reports, subscriptions to financial publications and research
compilations, compilations of securities prices, earnings, dividends, and
similar data, and computer data bases, quotation equipment and services,
research-oriented computer software and services, and services of economic and
other consultants. Selection of brokers or dealers is not made pursuant to an
agreement or understanding with any of the brokers or dealers; however, the
Adviser uses an internal allocation procedure to identify those brokers or
dealers who provide it with research products or services and the amount of
research products or services they provide, and endeavors to direct sufficient
commissions generated by its clients' accounts in the aggregate, including the
Fund, to such brokers or dealers to ensure the continued receipt of research
products or services the Adviser feels are useful. In certain instances, the
Adviser may receive from brokers and dealers products or services that are used
both as investment research and for administrative, marketing, or other non-
research purposes. In such instances, the Adviser will make a good faith effort
to determine the relative proportions of such products or
B-18
<PAGE>
services which may be considered as investment research. The portion of the
costs of such products or services attributable to research usage may be
defrayed by the Adviser (without prior agreement or understanding, as noted
above) through brokerage commissions generated by transactions by clients
(including the Fund), while the portions of the costs attributable to non-
research usage of such products or services is paid by the Adviser in cash. No
person acting on behalf of the Fund is authorized, in recognition of the value
of research products or services, to pay a commission in excess of that which
another broker or dealer might have charged for effecting the same transaction.
Research products or services furnished by brokers and dealers may be used in
servicing any or all of the clients of the Adviser and not all such research
products or services are used in connection with the management of the Fund.
With respect to the Fund's purchases and sales of portfolio securities
transacted with a broker or dealer on a net basis, the Adviser may also consider
the part, if any, played by the broker or dealer in bringing the security
involved to the Adviser's attention, including investment research related to
the security and provided to the Fund.
The Trust may arrange for its custodian to act as a soliciting dealer
to accept any fees available to the custodian as a soliciting dealer in
connection with any tender offer for Fund portfolio securities, to the extent
consistent with best price and execution. If such arrangements are made the
custodian will credit any such fees received against its custodial fees.
ADDITIONAL INCOME TAX CONSIDERATIONS
------------------------------------
The Fund intends to comply with the special provisions of the Internal
Revenue Code that relieve it of federal income tax to the extent its net
investment income and capital gains are currently distributed to shareholders.
Because dividend and capital gain distributions reduce net asset
value, a shareholder who purchases shares shortly before a record date will, in
effect, receive a return of a portion of his investment in such distribution.
The distribution would nonetheless be taxable to him, even if the net asset
value of shares were reduced below his cost. However, for federal income tax
purposes the shareholder's original cost would continue as his tax basis.
To the extent the Fund invests in foreign securities, it may be
subject to withholding and other taxes imposed by foreign countries. Tax
treaties between certain countries and the United States may reduce or eliminate
such taxes. Investors may be entitled to claim U.S. foreign tax credits with
respect to such taxes, subject to certain provisions and limitations contained
in the Code. Specifically, if more than 50% of the Fund's total assets at the
close of any fiscal year consist of stock or securities of foreign corporations,
the Fund may file an election with the Internal Revenue Service pursuant to
which shareholders of the Fund will be required to (i) include in ordinary gross
income (in addition to taxable dividends actually received) their pro rata
shares of foreign income taxes paid by the Fund even though not actually
received, (ii) treat such respective pro rata shares as foreign income taxes
paid by them, and (iii) deduct such pro rata shares in computing their taxable
incomes, or, alternatively, use them as foreign tax credits, subject to
applicable limitations, against their United States income taxes. Shareholders
who do not itemize deductions for federal income tax purposes will not, however,
be able to deduct their pro rata portion of foreign taxes paid by the Fund,
although such shareholders will be required to include their share of such taxes
in gross income. Shareholders who claim a foreign tax credit may be required to
treat a portion of dividends received from the Fund as separate category income
for purposes of computing the limitations on the foreign tax credit available to
such shareholders. Tax-exempt shareholders will not ordinarily benefit from
this election relating to foreign taxes. Each year, the Fund will notify
shareholders of the amount of (i) each shareholder's pro rata share of foreign
income taxes paid by the Fund and (ii) the portion of Fund dividends which
represents income from each foreign country, if the Fund qualifies to pass along
such credit.
The Fund's options, futures and foreign currency transactions are
subject to special tax provisions that may accelerate or defer recognition of
certain gains or losses, change the character of certain gains or losses, or
alter the holding periods of certain of the Fund's securities.
B-19
<PAGE>
The market-to-market rules of the Code may require the Fund to
recognize unrealized gains and losses on certain options and futures held by the
Fund at the end of the fiscal year. Under these provisions, 60% of any capital
gain net income or loss recognized will generally be treated as long-term and
40% as short-term. However, although certain forward contracts and futures
contracts on foreign currency are market-to-market, the gain or loss is
generally ordinary under Section 988 of the Code. In addition, the straddle
rules of the Code would require deferral of certain losses realized on positions
of a straddle to the extent that the Fund had unrealized gains in offsetting
positions at year end.
A 4% excise tax is imposed on the excess of the required distribution
for a calendar year over the distributed amount for such calendar year. The
required distribution is the sum of 98% of the Fund's net investment income for
the calendar year plus 98% of its capital gain net income for the one-year
period ending October 31, plus any undistributed net investment income from the
prior calendar year, plus any undistributed capital gain net income from the one
year period ended October 31 in the prior calendar year, minus any
overdistribution in the prior calendar year. For purposes of calculating the
required distribution, foreign currency gains or losses occurring after October
31 are taken into account in the following calendar year. The Fund intends to
declare or distribute dividends during the appropriate periods of an amount
sufficient to prevent imposition of the 4% excise tax.
A shareholder who redeems shares of the Fund will recognize capital
gain or loss for federal income tax purposes measured by the difference between
the value of the shares redeemed and the basis of the shares. If a shareholder
realizes a loss on the redemption of the Fund's shares and reinvests in shares
of the Fund within 30 days before or after the redemption, the transactions may
be subject to the wash sale rules resulting in a postponement of the recognition
of such loss for federal income tax purposes.
Investment income derived from foreign securities may be subject to
foreign income taxes withheld at the source. Because the amount of the Fund's
investments in various countries will change from time to time, it is not
possible to determine the effective rate of such taxes in advance.
Shareholders who are non-resident aliens are subject to U.S.
withholding tax on ordinary income dividends (whether received in cash or
shares) at a rate of 30% or such lower rate as prescribed by an applicable tax
treaty.
PASSIVE FOREIGN INVESTMENT COMPANIES. The Fund may purchase the
securities of certain foreign investment funds or trusts called passive foreign
investment companies ("PFICs"). In addition to bearing their proportionate
share of the Fund's expenses (management fees and operating expenses),
shareholders will also indirectly bear similar expenses of such PFICs. Capital
gains on the sale of PFIC holdings will be deemed to be ordinary income
regardless of how long the Fund holds its investment. In addition, the Fund may
be subject to corporate income tax and an interest charge on certain dividends
and capital gains earned from PFICs, regardless of whether such income and gains
are distributed to shareholders.
In accordance with tax regulations, the Fund intends to treat PFICs as
sold on the last day of the Fund's fiscal year and recognize any gains for tax
purposes at that time; losses will not be recognized. Such gains will be
considered ordinary income which the Fund will be required to distribute even
though it has not sold the security and received cash to pay such distributions.
INVESTMENT PERFORMANCE
----------------------
The Fund may quote certain total return figures from time to time. A
"Total Return" on a per share basis is the amount of dividends distributed per
share plus or minus the change in the net asset value per share for a period. A
"Total Return Percentage" may be calculated by dividing the value of a share at
the end of a period by the value of the share at the beginning of the period and
subtracting one. For a given period, an "Average Annual Total Return" may be
computed by finding the average annual compounded rate that would equate a
hypothetical initial amount invested of $1,000 to the ending redeemable value.
B-20
<PAGE>
Average Annual Total Return is computed as follows: ERV = P(1+T)n
Where: P= a hypothetical initial payment of $1,000
T= average annual total return
n= number of years
ERV= ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period at the end
of the period (or fractional portion thereof).
Investment performance figures assume reinvestment of all dividends
and distributions and do not take into account any federal, state, or local
income taxes which shareholders must pay on a current basis. They are not
necessarily indicative of future results. The performance of the Fund is a
result of conditions in the securities markets, portfolio management, and
operating expenses. Although investment performance information is useful in
reviewing the Fund's performance and in providing some basis for comparison with
other investment alternatives, it should not be used for comparison with other
investments using different reinvestment assumptions or time periods.
[Insert performance record.]
In advertising and sales literature, the Fund may compare its
performance with that of other mutual funds, indexes or averages of other mutual
funds, indexes of related financial assets or data, and other competing
investment and deposit products available from or through other financial
institutions. The composition of these indexes or averages differs from that of
the Fund. Comparison of the Fund to an alternative investment should be made
with consideration of differences in features and expected performance.
All of the indexes and averages noted below will be obtained from the
indicated sources or reporting services, which the Fund believes to be generally
accurate. The Fund may also note its mention or recognition in newspapers,
magazines, or other media from time to time. However, the Fund assumes no
responsibility for the accuracy of such data. Newspapers and magazines which
might mention the Fund include, but are not limited to, the following:
Architectural Digest Atlanta Constitution
Arizona Republic Barron's
Boston Herald Newsweek
Business Week The New York Times
Chicago Tribune No-Load Fund Investor
Chicago Sun-Times Pension World
Cleveland Plain Dealer Pensions and Investment
CNBC Personal Investor
Crain's Chicago Business Physicians Financial News
Consumer Reports Jane Bryant Quinn (syndicated column)
Consumer Digest The San Francisco Chronicle
Financial World Smart Money
Forbes Smithsonian
Fortune Stanger's Investment Adviser
Fund Action Time
Gourmet Travel & Leisure
Investor's Business Daily United Mutual Fund Selector
Kiplinger's Personal Finance Magazine USA Today
Knight-Ridder U.S. News and World Report
Los Angeles Times The Wall Street Journal
Money Working Women
Mutual Fund Letter Worth
Mutual Fund News Service Your Money
Mutual Fund Values (Morningstar)
B-21
<PAGE>
The Fund may compare its performance to the Consumer Price Index (All
Urban), a widely recognized measure of inflation.
The Fund's performance may be compared to the following indexes or
averages:
Dow-Jones Industrial Average New York Stock Exchange Composite Index
Standard & Poor's 500 Stock Index American Stock Exchange Composite Index
Standard & Poor's 400 Industrials NASDAQ Composite
Wilshire 5000 NASDAQ Industrials
(These indexes are widely recognized (These indexes generally reflect the
indicators of general U.S. stock performance of stocks traded in the
market results.) indicated markets.)
EAFE Index
Financial Times Actuaries World Index (Ex-U.S.)
Morgan Stanley Capital International World Index
(These indexes are widely recognized indicators
of the international markets)
In addition, the Fund may compare performance to the indices indicated
below:
Lipper International & Global Funds Average
Lipper General Equity Funds Average
Lipper Equity Funds Average
Lipper International Fund Index
(The Lipper averages are unweighted averages of total return
performance as classified, calculated, and published by Lipper.)
ICD International Equity Funds Average
ICD All Equity Funds Average
ICD General Equity Average*
ICD Global Equity Funds Average
ICD International Equity and Global Equity Funds Average
ICD Foreign Securities Index
Morningstar International Stock Average
Morningstar U.S. Diversified Average
Morningstar Equity Fund Average
Morningstar Hybrid Fund Average
Morningstar All Equity Funds Average
Morningstar General Equity Average**
*Includes ICD Aggressive Growth, Growth & Income, Long-Term Growth, and
Total Return Averages.
**Includes Morningstar Aggressive Growth, Growth, Balanced Equity Income,
and Growth & Income Averages.
The ICD Indexes reflect the unweighted average total return of the largest
twenty funds within their respective category as calculated and published by
ICD.
The Lipper International Fund index reflects the net asset value weighted
return of the ten largest international funds.
The Lipper, ICD, and Morningstar averages are unweighted averages of total
return performance of mutual funds as classified, calculated, and published by
these independent services that monitor the performance of mutual funds. The
Fund may also use comparative performance as computed in a ranking by Lipper or
category averages
B-22
<PAGE>
and rankings provided by another independent service. Should Lipper or another
service reclassify the Fund to a different category or develop (and place the
Fund into) a new category, the Fund may compare its performance or ranking with
those of other funds in the newly assigned category, as published by the
service.
The Fund may also cite its rating, recognition, or other mention by
Morningstar or any other entity. Morningstar's rating system is based on risk-
adjusted total return performance and is expressed in a star-rating format. The
risk-adjusted number is computed by subtracting the Fund's risk score (which is
a function of the Fund's monthly returns less the 3-month T-bill return) from
the Fund's load-adjusted total return score. This numerical score is then
translated into rating categories, with the top 10% labeled five star, the next
22.5% labeled four star, the next 35% labeled three star, the next 22.5% labeled
two star, and the bottom 10% one star. A high rating reflects either above-
average returns or below-average risk, or both.
Of course, past performance is not indicative of future results.
To illustrate the historical returns on various types of financial
assets, the Fund may use historical data provided by Ibbotson Associates, Inc.
("Ibbotson"), a Chicago-based investment firm. Ibbotson constructs (or obtains)
very long-term (since 1926) total return data (including, for example, total
return indexes, total return percentages, average annual total returns and
standard deviations of such returns) for the following asset types:
Common stocks
Small company stocks
Long-term corporate bonds
Long-term government bonds
Intermediate-term government bonds
U.S. Treasury bills
Consumer Price Index
The Fund may also use hypothetical returns to be used as an example in
a mix of asset allocation strategies. One such example is reflected in the chart
below, which shows the effect of tax deferral on a hypothetical investment. This
chart assumes that an investor invested $2,000 a year on January 1, for any
specified period, in both a Tax-Deferred Investment and a Taxable Investment,
that both investments earn either 6%, 8% or 10% compounded annually, and that
the investor withdrew the entire amount at the end of the period. (A tax rate of
39.6% is applied annually to the Taxable Investment and on the withdrawal of
earnings on the Tax-Deferred Investment.)
<TABLE>
<CAPTION>
TAX-DEFERRED INVESTMENT VS. TAXABLE INVESTMENT
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST RATE 6% 8% 10% 6% 8% 10%
- ---------------
COMPOUNDING
YEARS TAX-DEFERRED INVESTMENT TAXABLE INVESTMENT
- --------------- ---------------------------------------- --------------------
30 $124,992 $171,554 $242,340 $109,197 $135,346 $168,852
25 90,053 115,177 82,067 97,780 97,780 117,014
20 62,943 75,543 59,362 68,109 68,109 78,351
15 41,684 47,304 40,358 44,675 44,675 49,514
10 24,797 26,820 24,453 26,165 26,165 28,006
5 11,178 11,613 11,141 11,546 11,546 11,965
1 2,072 2,096 2,072 2,096 2,096 2,121
</TABLE>
B-23
<PAGE>
Dollar Cost Averaging. Dollar cost averaging is an investment strategy
that requires investing a fixed amount of money in Fund shares at set intervals.
This allows you to purchase more shares when prices are low and fewer shares
when prices are high. Over time, this tends to lower your average cost per
share.
Like any investment strategy, dollar cost averaging can't guarantee a
profit or protect against losses in a steadily declining market. Dollar cost
averaging involves uninterrupted investing regardless of share price and
therefore may not be appropriate for every investor.
B-24
<PAGE>
REPORT OF INDEPENDENT AUDITORS
------------------------------
[TO BE FILED BY PRE-EFFECTIVE AMENDMENT]
B-25
<PAGE>
STATEMENT OF NET ASSETS, _______________, 1996
DRIEHAUS MUTUAL FUNDS
DRIEHAUS INTERNATIONAL GROWTH FUND
[TO BE FILED BY PRE-EFFECTIVE AMENDMENT]
B-26
<PAGE>
APPENDIX--RATINGS
-----------------
RATINGS IN GENERAL
A rating of a rating service represents the service's opinion as to
the credit quality of the security being rated. However, the ratings are general
and are not absolute standards of quality or guarantees as to the
creditworthiness of an issuer. Consequently, the Adviser believes that the
quality of debt securities in which the Fund invests should be continuously
reviewed and that individual analysts give different weightings to the various
factors involved in credit analysis. A rating is not a recommendation to
purchase, sell or hold a security because it does not take into account market
value or suitability for a particular investor. When a security has received a
rating from more than one service, each rating should be evaluated
independently. Ratings are based on current information furnished by the issuer
or obtained by the rating services from other sources which they consider
reliable. Ratings may be changed, suspended or withdrawn as a result of changes
in or unavailability of such information, or for other reasons.
The following is a description of the characteristics of ratings of
corporate debt securities used by Moody's Investors Service, Inc. ("Moody's")
and Standard & Poor's Corporation ("S&P").
RATINGS BY MOODY'S
Aaa. Bonds rated Aaa are judged to be the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or an exceptionally stable margin and
principal is secure. Although the various protective elements are likely to
change, such changes as can be visualized are more unlikely to impair the
fundamentally strong position of such bonds.
Aa. Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa bonds or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long-
term risks appear somewhat larger than in Aaa bonds.
A. Bonds rated A possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa. Bonds rated Baa are considered as medium grade obligations; i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba. Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B. Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa. Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
B-27
<PAGE>
Ca. Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
NOTE: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
RATINGS BY S&P
AAA. Debt rated AAA has the highest rating. Capacity to pay interest and repay
principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A. Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB. Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.
BB, B, CCC, CC, and C. Debt rated BB, B, CCC, CC, or C is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
C1. This rating is reserved for income bonds on which no interest is being
paid.
D. Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears. The D rating is also used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.
NOTES:
The ratings from AA to CCC may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories.
Foreign debt is rated on the same basis as domestic debt measuring the
creditworthiness of the issuer; ratings of foreign debt do not take into account
currency exchange and related uncertainties.
The "r" is attached to highlight derivative, hybrid, and certain other
obligations that S&P believes may experience high volatility or high variability
in expected returns due to non-credit risks. Examples of such obligations are:
securities whose principal or interest return is indexed to equities,
commodities, or currencies; certain swaps and options; and interest only and
principal only mortgage securities. The absence of an "r" symbol should not be
taken as an indication that an obligation will exhibit no volatility or
variability in total return.
B-28
<PAGE>
DRIEHAUS MUTUAL FUNDS
FORM N-1A
PART C: OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
A. FINANCIAL STATEMENTS:
(i) Financial Statements included in Part A of the Registration
Statement: None
(ii) Financial Statements included in Part B of the Registration
Statement:
Statement of Net Assets*
Report of Independent Auditors*
Schedules I, II, III, IV and V have been omitted as the required
information is not present.
B. EXHIBITS:
(1) Declaration of Trust of Registrant.
(2) Bylaws of Registrant.
(3) None.
(4) None.
(5) Management Agreement.*
(6) Distribution Agreement.*
(7) None.
(8) Custodian Services Agreement*
(9.1) Transfer Agency Agreement*
(9.2) Administration Agreement*
(10) Legal opinion and consent of Vedder, Price, Kaufman & Kammholz*
(11) Consent of independent accountants.*
(12) Not applicable.
(13) Investment Letter of initial investor in Registrant.*
(14) None.
(16) Not applicable.
(18) Not applicable.
(19) Not applicable.
(27) Inapplicable.
*To be filed before the effective date of the Registrant.
C-1
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Inapplicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of May 31, 1996, there were no holders of record of any Shares of
Registrant.
ITEM 27. INDEMNIFICATION.
Article V of Registrant's Declaration of Trust, filed herewith as
Exhibit 1, provides for the indemnification of Registrant's trustees, officers,
employees and agents against liabilities incurred by them in connection with the
defense or disposition of any action or proceeding in which they may be involved
or with which they may be threatened, while in office or thereafter, by reason
of being or having been in such office, except with respect to matters as to
which it has been determined that they acted with willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of their office ("Disabling Conduct").
Registrant has obtained from a major insurance carrier a trustees' and
officers' liability policy covering certain types of errors and omissions.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
<TABLE>
<CAPTION>
Name Position with Adviser Other Business, Profession, Vocation or Employment
- ---------------------------------- -------------------------------- --------------------------------------------------
<S> <C> <C>
Richard H. Driehaus Chairman of Board, CEO Chairman of Board, CEO of
Driehaus Securities Corporation
("DSC")
William R. Andersen Vice President None
Mark Genovise Vice President None
Robert F. Moyer President, COO President, COO of DSC
Diane L. Wallace Senior Vice President-Operations Senior Vice President-Operations of
DSC
Mary H. Weiss Vice President, Secretary, Chief Vice President, Secretary and Chief
Legal Officer Legal Officer of DSC
</TABLE>
C-2
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Not applicable.
(b) Information for officers and directors of Driehaus Securities
Corporation ("DSC") is set forth below. The principal business address of each
is 25 East Erie Street, Chicago, Illinois 60611:
<TABLE>
<CAPTION>
NAME POSITION WITH DSC POSITION WITH REGISTRANT
- --------------------- -------------------------------- -------------------------
<S> <C> <C>
Richard H. Driehaus Chairman of Board; CEO President
Robert F. Moyer President; COO Vice President; Trustee
Diane L. Wallace Senior Vice President-Operations Vice President; Treasurer
Mary H. Weiss Vice President; Secretary; Vice President; Secretary
Chief Legal Officer
</TABLE>
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All such accounts, books and other documents are maintained (i) at the
offices of the Registrant, (ii) at the offices of Registrant's investment
adviser, Driehaus Capital Management, Inc., and the Registrant's distributor,
Driehaus Securities Corporation, Inc., 25 East Erie Street, Chicago, Illinois,
60611, or (iii) at the offices of Registrant's custodian,_____________________
__________________________________________, transfer agent, PFPC, 103 Bellevue
Parkway, Wilmington, Delaware 19809, or administrator, PFPC, 103 Bellevue
Parkway, Wilmington, Delaware 19809.
ITEM 31. MANAGEMENT SERVICES.
Not Applicable.
ITEM 32. UNDERTAKINGS.
(a) Not applicable.
(b) The Registrant undertakes to file a Post-Effective Amendment using
financial statements of Registrant, which need not be certified, within four to
six months from the effective date of the Registration Statement.
(c) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of Registrant's latest annual report to
shareholders, upon request and without charge.
C-3
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Chicago, State of Illinois, on the 4th day of June, 1996.
DRIEHAUS MUTUAL FUNDS
By: /s/ Richard H. Driehaus
-----------------------
Richard H. Driehaus, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
/s/ Richard H. Driehaus President (Principal June 4, 1996
- ------------------------- Executive Officer)
Richard H. Driehaus
/s/ Diane L. Wallace Treasurer (Principal June 4, 1996
- ------------------------- Financial and
Diane L. Wallace Accounting Officer)
/s/ Robert F. Moyer Trustee June 4, 1996
- -------------------------
Robert F. Moyer
<PAGE>
EXHIBIT INDEX
DRIEHAUS MUTUAL FUNDS
FORM N-1A REGISTRATION STATEMENT
(1) Declaration of Trust of Registrant.
(2) Bylaws of Registrant.
(3) None.
(4) None.
(5) Management Agreement.*
(6) Distribution Agreement.*
(7) None.
(8) Custodian Services Agreement*
(9.1) Transfer Agency Agreement*
(9.2) Administration Agreement*
(10) Legal opinion and consent of Vedder, Price, Kaufman & Kammholz*
(11) Consent of independent accountants.*
(12) Not applicable.
(13) Investment Letter of initial investor in Registrant.*
(14) None.
(16) Not applicable.
(18) Not applicable.
(19) Not applicable.
(27) Inapplicable.
*To be filed before the effective date of the Registrant.
<PAGE>
DECLARATION OF TRUST
OF
DRIEHAUS MUTUAL FUNDS
A Delaware Business Trust
May 31, 1996
<PAGE>
<TABLE>
<CAPTION>
DECLARATION OF TRUST
OF
DRIEHAUS MUTUAL FUNDS
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
The Trust
- ---------
<S> <C>
1.1 Name....................................................... 1
1.2 Trust Purpose.............................................. 1
1.3 Definitions................................................ 2
ARTICLE II
Trustees 3
- --------
2.1 Number and Qualification................................... 3
2.2 Term and Election.......................................... 4
2.3 Resignation and Removal.................................... 4
2.4 Vacancies.................................................. 5
2.5 Meetings................................................... 5
2.6 Officers; Chairperson of the Board......................... 6
2.7 By-Laws.................................................... 6
ARTICLE III
Powers of Trustees........................................................ 7
- ------------------
3.1 General.................................................... 7
3.2 Investments................................................ 7
3.3 Legal Title................................................ 8
3.4 Sale of Interests.......................................... 8
3.5 Borrow Money............................................... 8
3.6 Delegation; Committee...................................... 8
3.7 Collection and Payment..................................... 8
3.8 Expenses................................................... 9
3.9 Miscellaneous Powers....................................... 9
3.10 Further Powers............................................. 9
ARTICLE IV
Investment Advisory, Administrative,
and Placement Agent Services.............................................. 10
- ----------------------------
4.1 Investment Advisory and Other Services..................... 10
4.2 Parties to Contract........................................ 10
</TABLE>
i
<PAGE>
<TABLE>
ARTICLE V
Limitations of Liability 11
- ------------------------
<C> <S> <C>
5.1 No Personal Liability of Trustees, Officers,
Employees or Agents........................................ 11
5.2 Indemnification of Trustees, Officers, Employees
and Agents................................................. 11
5.3 Liability of Holders; Indemnification...................... 12
5.4 No Bond Required of Trustees............................... 12
5.5 No Duty of Investigation; Notice in Trust
Instruments, Etc........................................... 12
5.6 Reliance on Experts, Etc................................... 13
5.7 Assent to Declaration...................................... 13
ARTICLE VI
Interests in the Trust.................................................... 13
- ----------------------
6.1 General Characteristics.................................... 13
6.2 Establishment of Series of Interests....................... 14
6.3 Establishment of Classes................................... 15
6.4 Assets of Series........................................... 15
6.5 Liabilities of Series...................................... 16
6.6 Dividends and Distributions................................ 16
6.7 Voting Rights.............................................. 17
6.8 Record Dates............................................... 18
6.9 Transfer................................................... 18
6.10 Equality................................................... 18
6.11 Fractions.................................................. 18
6.12 Class Differences.......................................... 18
6.13 Conversion of Interests.................................... 18
6.14 Investments in the Trust................................... 19
6.15 Trustees and Officers as Holders........................... 19
6.16 No Preemptive Rights; Derivative Suits..................... 19
6.17 No Appraisal Rights........................................ 19
6.18 Status of Interests and Limitation of Personal
Liability.................................................. 19
ARTICLE VII
Purchases and Redemptions................................................. 20
- -------------------------
7.1 Purchases.................................................. 20
7.2 Redemption by Holder....................................... 20
7.3 Redemption by Trust........................................ 21
7.4 Net Asset Value............................................ 21
ARTICLE VIII
Holders................................................................... 22
- -------
8.1 Rights of Holders.......................................... 22
8.2 Register of Interests...................................... 22
8.3 Notices.................................................... 22
8.4 Meetings of Holders........................................ 22
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
8.5 Notice of Meetings......................................... 23
8.6 Record Date................................................ 23
8.7 Proxies, Etc............................................... 24
8.8 Reports.................................................... 24
8.9 Inspection of Records...................................... 24
8.10 Voting Powers.............................................. 24
8.11 Holder Action by Written Consent........................... 25
8.12 Holder Communications...................................... 25
ARTICLE IX
Duration; Termination of Trust;
Amendment; Mergers; Etc................................................... 26
- ------------------------
9.1 Duration................................................... 26
9.2 Termination of Trust....................................... 26
9.3 Amendment Procedure........................................ 27
9.4 Merger, Consolidation and Sale of Assets................... 28
9.5 Incorporation.............................................. 28
ARTICLE X
Miscellaneous 29
- -------------
10.1 Certificate of Designation; Agent for Service of
Process.................................................... 29
10.2 Governing Law.............................................. 29
10.3 Counterparts............................................... 29
10.4 Reliance by Third Parties.................................. 29
10.5 Provisions in Conflict With Law or Regulations............. 30
10.6 Trust Only................................................. 30
10.7 Withholding................................................ 30
10.8 Headings and Construction.................................. 30
</TABLE>
iii
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DECLARATION OF TRUST
OF
DRIEHAUS MUTUAL FUNDS
This DECLARATION OF TRUST OF DRIEHAUS MUTUAL FUNDS is made on the 31st
day of May, 1996 by the party signatory hereto, as Trustee.
WHEREAS, the Trustee desires to form a business trust under the law of
Delaware for the investment and reinvestment of its assets; and
WHEREAS, it is proposed that the Trust assets be composed of cash,
securities and other assets contributed to the Trust by the Holders of Interests
in the Trust entitled to ownership rights in the Trust;
NOW, THEREFORE, the Trustee hereby declares that the Trustees will
hold in trust all cash, securities and other assets which they may from time to
time acquire in any manner as Trustees hereunder, and manage and dispose of the
same for the benefit of the Holders of Interests in the Trust, and subject to
the following terms and conditions.
ARTICLE I
The Trust
---------
1.1 Name. The name of the Trust created hereby (the "Trust") shall
be "DRIEHAUS MUTUAL FUNDS," and so far as may be practicable the Trustees shall
conduct the Trust's activities, execute all documents and sue or be sued under
that name, which name (and the word "Trust" wherever hereinafter used) shall not
refer to the Trustees in their individual capacities or to the officers, agents,
employees or Holders of Interest in the Trust. However, should the Trustees
determine that the use of the name of the Trust is not advisable, they may
select such other name for the Trust as they deem proper and the Trust may hold
its property and conduct its activities under such other name. Any name change
shall become effective upon the execution by a majority of the then Trustees of
an instrument setting forth the new name and the filing of a certificate of
amendment pursuant to Section 3810(b) of the DBTA. Any such instrument shall
not require the approval of the Holders of Interests in the Trust, but shall
have the status of an amendment to this Declaration.
1.2 Trust Purpose. The purpose of the Trust is to conduct, operate
and carry on the business of an open-end
<PAGE>
management investment company registered under the 1940 Act. In furtherance of
the foregoing, it shall be the purpose of the Trust to do everything necessary,
suitable, convenient or proper for the conduct, promotion and attainment of any
businesses and purposes which at any time may be incidental or may appear
conducive or expedient for the accomplishment of the business of an open-end
management investment company registered under the 1940 Act and which may be
engaged in or carried on by a trust organized under the DBTA, and in connection
therewith, the Trust shall have and may exercise all of the powers conferred by
the laws of the State of Delaware upon a Delaware business trust.
1.3 Definitions. As used in this Declaration, the following terms
shall have the following meanings:
(a) "1940 Act" shall mean the Investment Company Act of 1940, as
amended from time to time, and the rules and regulations thereunder, as adopted
or amended from time to time.
(b) "Affiliated Person," "Assignment" and "Interested Person"
shall have the meanings given such terms in the 1940 Act.
(c) "Administrator" shall mean any party furnishing services to
the Trust pursuant to any administrative services contract described in Section
4.1.
(d) "By-Laws" shall mean the By-Laws of the Trust as amended from
time to time.
(e) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the rules and regulations thereunder, as adopted
or amended from time to time.
(f) "Commission" shall mean the Securities and Exchange
Commission.
(g) "Declaration" shall mean this Declaration of Trust, as
amended from time to time. References in this Declaration to "Declaration,"
"hereof," "herein" and "hereunder" shall be deemed to refer to the Declaration
rather than the article or section in which such words appear. This Declaration
shall, together with the By-Laws, constitute the governing instrument of the
Trust under the DBTA.
(h) "DBTA" shall mean the Delaware Business Trust Act, Delaware
Code Annotated Title 12, Sections 3801, et seq., as amended from time to time.
(i) "Fiscal Year" shall mean an annual period as determined by
the Trustees unless otherwise provided by the Code or applicable regulations.
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<PAGE>
(j) "Holders" shall mean as of any particular time any or all
holders of record of Interests in the Trust or in Trust Property, as the case
may be, at such time.
(k) "Interest" shall mean a Holder's units of interest into which
the beneficial interest in the Trust and each series and class of the Trust
shall be divided from time to time.
(l) "Investment Adviser" shall mean any party furnishing services
to the Trust pursuant to any investment advisory contract described in Section
4.1 hereof.
(m) "Majority Interests Vote" shall mean the vote, at a meeting
of the Holders of Interests, of the lesser of (i) 67% or more of the Interests
present or represented at such meeting, provided the Holders of more than 50% of
the Interests are present or represented by proxy or (ii) more than 50% of the
Interests.
(n) "Person" shall mean and include an individual, corporation,
partnership, trust, association, joint venture and other entity, whether or not
a legal entity, and a government and agencies and political subdivisions
thereof.
(o) "Registration Statement" as of any particular time shall mean
the Registration Statement of the Trust which is effective at such time under
the 1940 Act.
(p) "Trust Property" shall mean as of any particular time any and
all property, real or personal, tangible or intangible, which at such time is
owned or held by or for the account of the Trust or the Trustees or any series
of the Trust established in accordance with Section 6.2.
(q) "Trustees" shall mean such persons who are indemnified as
trustees of the Trust on the signature page of this Declaration, so long as they
shall continue in office in accordance with the terms of this Declaration of
Trust, and all other persons who at the time in question have been duly elected
or appointed as trustees in accordance with the provisions of this Declaration
of Trust and are then in office, in their capacity as trustees hereunder.
ARTICLE II
Trustees
--------
2.1 Number and Qualification. The number of Trustees shall initially
be one and shall thereafter be fixed from time to time by written instrument
signed by a majority of the Trustees so fixed, then in office, provided,
however, that the number of Trustees shall in no event be less than one. A
Trustee shall be an
3
<PAGE>
individual at least 21 years of age who is not under a legal disability.
(a) Any vacancy created by an increase in Trustees shall be
filled by the appointment or election of an individual having the qualifications
described in this Article as provided in Section 2.4. Any such appointment shall
not become effective, however, until the individual appointed or elected shall
have accepted in writing such appointment or election and agreed in writing to
be bound by the terms of the Declaration. No reduction in the number of Trustees
shall have the effect of removing any Trustee from office.
(b) Whenever a vacancy in the number of Trustees shall occur,
until such vacancy is filled as provided in Section 2.4 hereof, the Trustees in
office, regardless of their number, shall have all the powers granted to the
Trustees and shall discharge all the duties imposed upon the Trustees by this
Declaration.
2.2 Term and Election. Each Trustee named herein, or elected or
appointed prior to the first meeting of the Holders, shall (except in the event
of resignations or removals or vacancies pursuant to Section 2.3 or 2.4 hereof)
hold office until his or her successor has been elected at such meeting and has
qualified to serve as Trustee. Beginning with the Trustees elected at the first
meeting of Holders, each Trustee shall hold office during the lifetime of this
Trust and until its termination as hereinafter provided unless such Trustee
resigns or is removed as provided in Section 2.3 below or his term expires
pursuant to Section 2.4 hereof.
2.3 Resignation and Removal. Any Trustee may resign (without need
for prior or subsequent accounting) by an instrument in writing signed by him or
her and delivered or mailed to the Chairperson, if any, the President or the
Secretary and such resignation shall be effective upon such delivery, or at a
later date according to the terms of the instrument.
(a) Any of the Trustees may be removed with or without cause by
the affirmative vote of the Holders of two-thirds (2/3) of the Interests or
(provided the aggregate number of Trustees, after such removal and after giving
effect to any appointment made to fill the vacancy created by such removal,
shall not be less than the number required by Section 2.1 hereof) with cause, by
the action of two-thirds (2/3) of the remaining Trustees, or without cause, by
the action of eighty percent (80%) of the remaining Trustees. Removal with cause
shall include, but not be limited to, the removal of a Trustee due to physical
or mental incapacity.
4
<PAGE>
(b) Upon the resignation or removal of a Trustee, or his or her
otherwise ceasing to be a Trustee, he or she shall execute and deliver such
documents as the remaining Trustees shall require for the purpose of conveying
to the Trust or the remaining Trustees any Trust Property held in the name of
the resigning or removed Trustee. Upon the death of any Trustee or upon removal
or resignation due to any Trustee's incapacity to serve as trustee, his or her
legal representative shall execute and deliver on his or her behalf such
documents as the remaining Trustees shall require as provided in the preceding
sentence.
2.4 Vacancies. The term of office of a Trustee shall terminate and a
vacancy shall occur in the event of the earliest to occur of the following: the
Trustee's attainment of age 72, the Trustee's death, resignation, adjudicated
incompetence or other incapacity to perform the duties of the office, or the
removal of the Trustee. A vacancy shall also occur in the event of an increase
in the number of Trustees as provided in Section 2.1. No such vacancy shall
operate to annul this Declaration or to revoke any existing trust created
pursuant to the terms of this Declaration. In the case of a vacancy, the
Holders of a plurality of the Interests entitled to vote, acting at any meeting
of the Holders held in accordance with Article VIII hereof, or, to the extent
permitted by the 1940 Act, a majority vote of the Trustees continuing in office
acting by written instrument or instruments, may fill such vacancy, and any
Trustee so elected by the Trustees or the Holders shall hold office as provided
in this Declaration. There shall be no cumulative voting by the Holders in the
election of Trustees.
2.5 Meetings. Meetings of the Trustees shall be held from time to
time within or without the State of Delaware upon the call of the Chairperson,
if any, the President, the Chief Operating Officer, the Secretary, an Assistant
Secretary or any two Trustees.
(a) Regular meetings of the Trustees may be held without call or
notice at a time and place fixed by the By-Laws or by resolution of the
Trustees. Notice of any other meeting shall be given not later than 72 hours
preceding the meeting by United States mail or by electronic transmission to
each Trustee at his or her business address as set forth in the records of the
Trust or otherwise given personally not less than 24 hours before the meeting
but may be waived in writing by any Trustee either before or after such meeting.
The attendance of a Trustee at a meeting shall constitute a waiver of notice of
such meeting except where a Trustee attends a meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting has
not been lawfully called or convened.
(b) A quorum for all meetings of the Trustees shall be one-third
of the total number of Trustees, but (except at such time as there is only one
Trustee) no less than two Trustees.
5
<PAGE>
Unless provided otherwise in this Declaration, any action of the Trustees may be
taken at a meeting by vote of a majority of the Trustees present (a quorum being
present) or without a meeting by written consent of a majority of the Trustees,
which written consent shall be filed with the minutes of proceedings of the
Trustees or any such committee. If there be less than a quorum present at any
meeting of the Trustees, a majority of those present may adjourn the meeting
until a quorum shall have been obtained.
(c) Any committee of the Trustees, including an executive
committee, if any, may act with or without a meeting. A quorum for all meetings
of any such committee shall be two or more of the members thereof, unless the
Board shall provide otherwise. Unless provided otherwise in this Declaration,
any action of any such committee may be taken at a meeting by vote of a majority
of the members present (a quorum being present) or without a meeting by written
consent of a majority of the members, which written consent shall be filed with
the minutes of proceedings of the Trustees or any such committee.
(d) With respect to actions of the Trustees and any committee of
the Trustees, Trustees who are Interested Persons of the Trust or are otherwise
interested in any action to be taken may be counted for quorum purposes under
this Section 2.5 and shall be entitled to vote to the extent permitted by the
1940 Act.
(e) All or any one or more Trustees may participate in a meeting
of the Trustees or any committee thereof by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to such
communications system shall constitute presence in person at such meeting,
unless the 1940 Act specifically requires the Trustees to act "in person," in
which case such term shall be construed consistent with Commission or staff
releases or interpretations.
2.6 Officers; Chairperson of the Board. The Trustees shall, from
time to time, elect officers of the Trust, including a President, a Secretary
and a Treasurer. The Trustees shall elect or appoint, from time to time, a
Trustee to act as Chairperson of the Board who shall preside at all meetings of
the Trustees and carry out such other duties as the Trustees shall designate.
The Trustees may elect or appoint or authorize the President to appoint such
other officers or agents with such powers as the Trustees may deem to be
advisable. The President, Secretary and Treasurer may, but need not, be a
Trustee. The Chairperson of the Board and such officers of the Trust shall
serve in such capacity for such time and with such authority as the Trustees
may, in their discretion, so designate or as provided for in the By-Laws.
2.7 By-Laws. The Trustees may adopt and, from time to time, amend or
repeal the By-Laws for the conduct of the business
6
<PAGE>
of the Trust not inconsistent with this Declaration, and such By-Laws are hereby
incorporated in this Declaration by reference thereto.
ARTICLE III
Powers of Trustees
------------------
3.1 General. The Trustees shall have exclusive and absolute control
over management of the business and affairs of the Trust, but with such powers
of delegation as may be permitted by this Declaration and the DBTA. The
Trustees may perform such acts as in their sole discretion are proper for
conducting the business and affairs of the Trust. The enumeration of any
specific power herein shall not be construed as limiting the aforesaid power.
Such powers of the Trustee may be exercised without order of, or recourse to,
any court.
3.2 Investments. The Trustees shall have power to:
(a) conduct, operate and carry on the business of an investment
company; and
(b) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute or otherwise
deal in or dispose of United States and foreign currencies and related
instruments including forward contracts, and securities, including common and
preferred stock, warrants, bonds, debentures, time notes and all other evidences
of indebtedness, negotiable or non-negotiable instruments, obligations,
certificates of deposit or indebtedness, commercial paper, repurchase
agreements, reverse repurchase agreements, convertible securities, forward
contracts, options, futures contracts, and other securities, including, without
limitation, those issued, guaranteed or sponsored by any state, territory or
possession of the United States and the District of Columbia and their political
subdivisions, agencies and instrumentalities, or by the United States
Government, any foreign government, or any agency, instrumentality or political
subdivision of the United States Government or any foreign government, or
international instrumentalities, or by any bank, savings institution,
corporation or other business entity organized under the laws of the United
States or under foreign laws; and to exercise any and all rights, powers and
privileges of ownership or interest in respect of any and all such investments
of every kind and description, including, without limitation, the right to
consent and otherwise act with respect thereto, with power to designate one or
more persons, firms, associations, or corporations to exercise any of said
rights, powers and privileges in respect of any of said instruments; and the
Trustees shall be deemed to have
7
<PAGE>
the foregoing powers with respect to any additional securities in which the
Trustees may determine to invest.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
3.3 Legal Title. Legal title to all the Trust Property shall be
vested in the Trust as a separate legal entity under the DBTA, except that the
Trustees shall have the power to cause legal title to any Trust Property to be
held by or in the name of one or more of the Trustees or in the name of any
other Person on behalf of the Trust on such terms as the Trustees may determine.
In the event that title to any part of the Trust Property is vested in
one or more Trustees, the right, title and interest of the Trustees in the Trust
Property shall vest automatically in each person who may hereafter become a
Trustee upon his or her due election and qualification. Upon the resignation,
removal or death of a Trustee he or she shall automatically cease to have any
right, title or interest in any of the Trust Property, and the right, title and
interest of such Trustee in the Trust Property shall vest automatically in the
remaining Trustees. To the extent permitted by law, such vesting and cessation
of title shall be effective whether or not conveyancing documents have been
executed and delivered.
3.4 Sale of Interests. Subject to the more detailed provisions set
forth in Article VII, the Trustees shall have the power to permit persons to
purchase Interests and to add or reduce, in whole or in part, their Interest in
the Trust.
3.5 Borrow Money. The Trustees shall have power to borrow money or
otherwise obtain credit and to secure the same by mortgaging, pledging or
otherwise subjecting as security the assets of the Trust, including the lending
of portfolio securities, and to endorse, guarantee or undertake the performance
of any obligation, contract or engagement of any other person, firm, association
or corporation.
3.6 Delegation; Committee. The Trustees shall have the power,
consistent with their continuing exclusive authority over the management of the
Trust and the Trust Property, to delegate from time to time to such of their
number or to officers, employees or agents of the Trust the doing of such things
and the execution of such instruments, either in the name of the Trust or the
names of the Trustees or otherwise, as the Trustees may deem expedient.
3.7 Collection and Payment. The Trustees shall have the power to
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend,
8
<PAGE>
compromise or abandon any claims relating to the Trust Property; to foreclose
any security interest securing any obligations, by virtue of which any property
is owed to the Trust; and to enter into releases, agreements and other
instruments.
3.8 Expenses. The Trustees shall have the power to incur and pay any
expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of this Declaration, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees. The
Trustees shall fix the compensation of all officers, employees and Trustees.
The Trustees may pay themselves such compensation for special services,
including legal and brokerage services, as they in good faith may deem
reasonable (subject to any limitations in the 1940 Act), and reimbursement for
expenses reasonably incurred by themselves on behalf of the Trust. There shall
be no retirement compensation plan for the Trustees; provided, however, that the
Trustees may adopt a deferred compensation plan consistent with industry and
regulatory standards.
3.9 Miscellaneous Powers. The Trustees shall have the power to: (a)
employ or contract with such Persons as the Trustees may deem desirable for the
transaction of the business of the Trust and terminate such employees or
contractual relationships as they consider appropriate; (b) enter into joint
ventures, partnerships and any other combinations or associations; (c) purchase,
and pay for out of Trust Property, insurance policies (including, but not
limited to, fidelity bonding and errors and omission policies) insuring the
Investment Adviser, Administrator, distributor, Holders, Trustees, officers,
employees, agents, or independent contractors of the Trust against all claims
arising by reason of holding any such position or by reason of any action taken
or omitted by any such Person in such capacity, whether or not the Trust would
have the power to indemnify such Person against liability; (d) establish
pension, profit-sharing and other retirement, incentive and benefit plans for
any officers, employees and agents of the Trust; (e) to the extent permitted by
law, indemnify any Person with whom the Trust has dealings, including the
Investment Adviser, Administrator, distributor, Holders, Trustees, officers,
employees, agents or independent contractors of the Trust, to such extent as the
Trustees shall determine; (f) guarantee indebtedness or contractual obligations
of others; (g) determine and change the Fiscal Year of the Trust and the method
by which its accounts shall be kept; and (h) adopt a seal for the Trust, but the
absence of such seal shall not impair the validity of any instrument executed on
behalf of the Trust.
3.10 Further Powers. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices, whether within or without the State of Delaware, in any
and all states of the United States of America, in the District of Columbia, in
any foreign
9
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countries, and in any and all commonwealths, territories, dependencies,
colonies, possessions, agencies or instrumentalities of the United States of
America and of foreign countries, and to do all such other things and execute
all such instruments as they deem necessary, proper or desirable in order to
promote the interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the interests of the
Trust made by the Trustees in good faith shall be conclusive and shall be
binding upon the Trust and the Holders, past, present and future. In construing
the provisions of this Declaration, the presumption shall be in favor of a grant
of power to the Trustees. The Trustees shall not be required to obtain any
court order to deal with Trust Property.
ARTICLE IV
Investment Advisory, Administrative,
and Placement Agent Services
----------------------------
4.1 Investment Advisory and Other Services. The Trustees may in
their discretion, from time to time, enter into contracts or agreements for
investment advisory services, administrative services (including transfer and
dividend disbursing agency services), distribution services, fiduciary
(including custodian) services, placement agent services, Holder servicing and
distribution services, or other services, whereby the other party to such
contract or agreement shall undertake to furnish the Trustees such services as
the Trustees shall, from time to time, consider desirable and all upon such
terms and conditions as the Trustees may in their discretion determine.
Notwithstanding any other provisions of this Declaration to the contrary, the
Trustees may authorize any Investment Adviser (subject to such general or
specific instructions as the Trustees may, from time to time, adopt) to effect
purchases, sales, loans or exchanges of Trust Property on behalf of the Trustees
or may authorize any officer, employee or Trustee to effect such purchases,
sales, loans or exchanges pursuant to recommendations of any such Investment
Adviser (all without further action by the Trustees). Any such purchases,
sales, loans or exchanges shall be binding upon the Trust.
4.2 Parties to Contract. Any contract or agreement of the character
described in Section 4.1 of this Article IV or in the By-Laws of the Trust may
be entered into with any Person, although one or more of the Trustees or
officers of the Trust or any Holder may be an officer, director, trustee,
shareholder, or member of such other party to the contract or agreement, and no
such contract or agreement shall be invalidated or rendered voidable by reason
of the existence of any such relationship, nor shall any person holding such
relationship be liable merely by reason of such relationship for any loss or
expense to the Trust under or by
10
<PAGE>
reason of such contract or agreement or held accountable for any profit realized
directly or indirectly therefrom, provided that the contract or agreement when
entered into was reasonable and fair and not inconsistent with the provisions of
this Article IV or the By-Laws. Any Trustee or officer of the Trust or any
Holder may be the other party to contracts or agreements entered into pursuant
to Section 4.1 hereof or the By-Laws of the Trust, and any Trustee or officer of
the Trust or any Holder may be financially interested or otherwise affiliated
with Persons who are parties to any or all of the contracts or agreements
mentioned in this Section 4.2.
ARTICLE V
Limitations of Liability
------------------------
5.1 No Personal Liability of Trustees, Officers, Employees or Agents.
No Trustee, officer, employee or agent of the Trust when acting in such capacity
shall be subject to any personal liability whatsoever, in his or her individual
capacity, to any Person, other than the Trust or its Holders, in connection with
Trust Property or the affairs of the Trust; and all such Persons shall look
solely to the Trust Property for satisfaction of claims of any nature against a
Trustee, officer, employee or agent of the Trust arising in connection with the
affairs of the Trust. No Trustee, officer, employee or agent of the Trust shall
be liable to the Trust, Holders of Interests therein, or to any Trustee,
officer, employee, or agent thereof for any action or failure to act (including,
without limitation, the failure to compel in any way any former or acting
Trustee to redress any breach of trust), except for his or her own bad faith,
willful misfeasance, gross negligence or reckless disregard of his or her
duties.
5.2 Indemnification of Trustees, Officers, Employees and Agents. The
Trust shall indemnify each of its Trustees, officers, employees, and agents
(including Persons who serve at its request as directors, officers or trustees
of another organization in which it has any interest, as a shareholder, creditor
or otherwise) against all liabilities and expenses (including amounts paid in
satisfaction of judgments, in compromise, as fines and penalties, and as counsel
fees) reasonably incurred by him or her in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
in which he or she may be involved or with which he or she may be threatened,
while in office or thereafter, by reason of his or her being or having been such
a Trustee, officer, employee or agent, except with respect to any matter as to
which he or she shall have been adjudicated to have acted in bad faith, willful
misfeasance, gross negligence or reckless disregard of his or her duties;
provided, however, that as to any matter disposed of by a compromise payment by
such Person, pursuant to a consent decree or otherwise, no indemnification
either for said payment or for any other expenses shall be provided
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unless there has been a determination that such Person did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office by the court or other body
approving the settlement or other disposition or by a reasonable determination,
based upon review of readily available facts (as opposed to a full trial-type
inquiry), that he or she did not engage in such conduct or by a reasonable
determination, based upon a review of the facts, that such Person was not liable
by reason of such conduct, by (a) the vote of a majority of a quorum of Trustees
who are neither "interested persons" of the Trust as defined in Section 2(a)(19)
of the 1940 Act nor parties to the proceeding, or (b) a written opinion from
independent legal counsel approved by the Trustees. The rights accruing to any
Person under these provisions shall not exclude any other right to which he or
she may be lawfully entitled; provided that no Person may satisfy any right of
indemnity or reimbursement granted herein or in Section 5.1 or to which he or
she may be otherwise entitled except out of the Trust Property. The Trustees
may make advance payments in connection with indemnification under this Section
5.2, provided that the indemnified Person shall have given a written undertaking
to reimburse the Trust in the event it is subsequently determined that he or she
is not entitled to such indemnification.
5.3 Liability of Holders; Indemnification. The Trust shall indemnify
and hold each Holder harmless from and against any claim or liability to which
such Holder may become subject solely by reason of his or her being or having
been a Holder and not because of such Holder's acts or omissions or for some
other reason, and shall reimburse such Holder for all legal and other expenses
reasonably incurred by him or her in connection with any such claim or liability
(upon proper and timely request by the Holder); provided, however, that no
Holder shall be entitled to indemnification by any series established in
accordance with Section 8.8 unless such Holder is a Holder of Interests of such
series. The rights accruing to a Holder under this Section 5.3 shall not
exclude any other right to which such Holder may be lawfully entitled, nor shall
anything herein contained restrict the right of the Trust to indemnify or
reimburse a Holder in any appropriate situation even though not specifically
provided herein.
5.4 No Bond Required of Trustees. No Trustee shall, as such, be
obligated to give any bond or surety or other security for the performance of
any of his or her duties hereunder.
5.5 No Duty of Investigation; Notice in Trust Instruments, Etc. No
purchaser, lender, or other Person dealing with the Trustees or any officer,
employee or agent of the Trust shall be bound to make any inquiry concerning the
validity of any transaction purporting to be made by the Trustees or by said
officer, employee or agent or be liable for the application of money or property
paid, loaned, or delivered to or on the order of
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the Trustees or of said officer, employee or agent. Every obligation, contract,
instrument, certificate or other interest or undertaking of the Trust, and every
other act or thing whatsoever executed in connection with the Trust, shall be
conclusively relied upon as having been executed or done by the executors
thereof only in their capacities as Trustees, officers, employees or agents of
the Trust. Every written obligation, contract, instrument, certificate or other
interest or undertaking of the Trust made by the Trustees or by any officer,
employee or agent of the Trust, in his or her capacity as such, shall contain an
appropriate recital to the effect that the Trustee, officer, employee or agent
of the Trust shall not personally be bound by or liable thereunder, nor shall
resort be had to their private property or the private property of the Holders
for the satisfaction of any obligation or claim thereunder, and appropriate
references shall be made therein to the Declaration, and may contain any further
recital which they may deem appropriate, but the omission of such recital shall
not operate to impose personal liability on any of the Trustees, officers,
employees or agents of the Trust. The Trustees may maintain insurance for the
protection of the Trust Property, Holders, Trustees, officers, employees and
agents in such amount as the Trustees shall deem advisable.
5.6 Reliance on Experts, Etc. Each Trustee and officer or employee
of the Trust shall, in the performance of his or her duties, be fully and
completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other records
of the Trust, upon an opinion of counsel, or upon reports made to the Trust by
any of its officers or employees or by any Investment Adviser, Administrator,
accountant, appraiser or other experts or consultants selected with reasonable
care by the Trustees, officers or employees of the Trust, regardless of whether
such counsel or expert may also be a Trustee.
5.7 Assent to Declaration. Every Holder, by virtue of having become
a Holder in accordance with the terms of this Declaration, shall be held to have
expressly assented and agreed to the terms hereof and to have become a party
hereto.
ARTICLE VI
Interests in the Trust
----------------------
6.1 General Characteristics. (a) The Trustees shall have the power
and authority, without Holder approval, to issue Interests in one or more series
from time to time as they deem necessary or desirable. Each series shall be
separate from all other series in respect to the assets and liabilities
allocated to that series and shall represent a separate investment portfolio of
the Trust. The Trustees shall have exclusive power, without Holder
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approval, to establish and designate such separate and distinct series, as set
forth in Section 6.2, and to fix and determine the relative rights and
preferences as between the Interests of the separate series as to right of
redemption, special and relative rights as to dividends and other distributions
and on liquidation, conversion rights, and conditions under which the series
shall have separate voting rights or no voting rights.
(b) The Trustees may, without Holder approval, divide Interests
of any series into two or more classes, Interests of each such class having such
preferences and special or relative rights and privileges (including conversion
rights, if any) as the Trustees may determine as provided in Section 6.3. The
fact that a series shall have been initially established and designated without
any specific establishment or designation of classes, shall not limit the
authority of the Trustees to divide a series and establish and designate
separate classes thereof.
(c) The number of Interests authorized shall be unlimited, and
the Interests so authorized may be represented in part by fractional Interests.
From time to time, the Trustees may divide or combine the Interests of any
series or class into a greater or lesser number without thereby changing the
proportionate beneficial interests in the series or class. The Trustees may
issue Interests of any series or class thereof for such consideration and on
such terms as they may determine (or for no consideration if pursuant to an
Interest dividend or split-up), all without action or approval of the Holders.
All Interests when so issued on the terms determined by the Trustees shall be
fully paid and non-assessable. The Trustees may classify or reclassify any
unissued Interests or any Interests previously issued and reacquired of any
series or class thereof into one or more series or classes thereof that may be
established and designated from time to time. The Trustees may hold as treasury
Interests, reissue for such consideration and on such terms as they may
determine, or cancel, at their discretion from time to time, any Interests of
any series or class thereof reacquired by the Trust.
6.2 Establishment of Series of Interests. (a) Without limiting the
authority of the Trustees set forth in Section 6.2(b) to establish and designate
any further series, the Trustees hereby establish and designate one series, as
follows:
Driehaus International Growth Fund
The provisions of this Article VI shall be applicable to the above
designated series and any further series that may from time to time be
established and designated by the Trustees as provided in Section 6.2(b).
(b) The establishment and designation of any series of Interests
other than the one set forth above shall be effective
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upon the execution, by a majority of the Trustees, of an instrument setting
forth such establishment and designation and the relative rights and preferences
of such series, or as otherwise provided in such instrument. At any time that
there are no Interests outstanding of any particular series previously
established and designated, the Trustees may by an instrument executed by a
majority of their number abolish that series and the establishment and
designation thereof. Each instrument referred to in this paragraph shall have
the status of an amendment of this Declaration.
(c) Section 9.2 of this Agreement shall apply also with respect
to each such series as if such series were a separate trust.
6.3 Establishment of Classes. The division of any series into two or
more classes and the establishment and designation of such classes shall be
effective upon the execution by a majority of the Trustees of an instrument
setting forth such division, and the establishment, designation, and relative
rights and preferences of such classes, or as otherwise provided in such
instrument. The relative rights and preferences of the classes of any series
may differ in such respects as the Trustees may determine to be appropriate,
provided that such differences are set forth in the aforementioned instrument.
At any time that there are no Interests outstanding of any particular class
previously established and designated, the Trustees may by an instrument
executed by a majority of their number abolish that class and the establishment
and designation thereof. Each instrument referred to in this paragraph shall
have the status of an amendment to this Declaration.
6.4 Assets of Series. All consideration received by the Trust for
the issue or sale of Interests of a particular series together with all Trust
Property in which such consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series for all purposes, subject only to the rights
of creditors of such series and except as may otherwise be required by
applicable tax laws, and shall be so recorded upon the books of account of the
Trust. Separate and distinct records shall be maintained for each series and
the assets associated with a series shall be held and accounted for separately
from the other assets of the Trust, or any other series. In the event that
there is any Trust Property, or any income, earnings, profits, and proceeds
thereof, funds, or payments which are not readily identifiable as belonging to
any particular series, the Trustees shall allocate them among any one or more of
the series established and designated from time to time in such manner and on
such basis as they, in their sole discretion, deem fair and
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equitable. Each such allocation by the Trustees shall be conclusive and binding
upon the Holders of all Interests for all purposes.
6.5 Liabilities of Series. (a) The Trust Property belonging to each
particular series shall be charged with the liabilities of the Trust in respect
to that series and all expenses, costs, charges and reserves attributable to
that series, and any general liabilities, expenses, costs, charges or reserves
of the Trust which are not readily identifiable as belonging to any particular
series shall be allocated and charged by the Trustees to and among any one or
more of the series established and designated from time to time in such manner
and on such basis as the Trustees in their sole discretion deem fair and
equitable. Each allocation of liabilities, expenses, costs, charges and
reserves by the Trustees shall be conclusive and binding upon the Holders of all
Interests for all purposes. The Trustees shall have full discretion, to the
extent not inconsistent with the 1940 Act, to determine which items shall be
treated as income and which items as capital, and each such determination and
allocation shall be conclusive and binding upon the Holders.
(b) Without limitation of the foregoing provisions of this
Section, but subject to the right of the Trustees in their discretion to
allocate general liabilities, expenses, costs, charges or reserves as herein
provided, the debts, liabilities, obligations and expenses incurred, contracted
for or otherwise existing with respect to a particular series shall be
enforceable against the assets of such series only, and not against the assets
of any other series. Notice of this limitation on interseries liabilities shall
be set forth in the certificate of trust of the Trust (whether originally or by
amendment) as filed or to be filed in the Office of the Secretary of State of
the State of Delaware pursuant to the DBTA, and upon the giving of such notice
in the certificate of trust, the statutory provisions of Section 3804 of the
DBTA relating to limitations on interseries liabilities (and the statutory
effect under Section 3804 of setting forth such notice in the certificate of
trust) shall become applicable to the Trust and each series. Every note, bond,
contract or other undertaking issued by or on behalf of a particular series
shall include a recitation limiting the obligation represented thereby to that
series and its assets.
6.6 Dividends and Distributions. (a) Dividends and distributions on
Interests of a particular series or any class thereof may be paid with such
frequency as the Trustees may determine, which may be daily or otherwise,
pursuant to a standing resolution or a resolution adopted only once or with such
frequency as the Trustees may determine, to the Holders of Interests in that
series or class, from such of the income and capital gains, accrued or realized,
from the Trust Property belonging to that series, or in the case of a class,
belonging to that series and allocable to
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that class, as the Trustees may determine, after providing for actual and
accrued liabilities belonging to that series. All dividends and distributions
on Interests in a particular series or class thereof shall be distributed pro
rata to the Holders of Interests in that series or class in proportion to the
total outstanding Interests in that series or class held by such Holders at the
date and time of record established for the payment of such dividends or
distribution, except to the extent otherwise required or permitted by the
preferences and special or relative rights and privileges of any series or
class. Such dividends and distributions may be made in cash or Interests of
that series or class or a combination thereof as determined by the Trustees or
pursuant to any program that the Trustees may have in effect at the time for the
election by each Holder of the mode of the paying of such dividend or
distribution to that Holder. Any such dividend or distribution paid in
Interests will be paid at the net asset value thereof as determined in
accordance with Section 7.4.
(b) The Interests in a series or a class of the Trust shall
represent beneficial interests in the Trust Property belonging to such series or
in the case of a class, belonging to such series and allocable to such class.
Each Holder of Interests in a series or a class shall be entitled to receive its
pro rata share of distributions of income and capital gains made with respect to
such series or such class. Upon reduction or withdrawal of its Interests or
indemnification for liabilities incurred by reason of being or having been a
Holder of Interests in a series or a class, such Holder shall be paid solely out
of the funds and property of such series or in the case of a class, the funds
and property of such series and allocable to such class of the Trust. Upon
liquidation or termination of a series or class of the Trust, Holders of
Interests in such series or class shall be entitled to receive a pro rata share
of the Trust Property belonging to such series or in the case of a class,
belonging to such series and allocable to such class.
6.7 Voting Rights. Notwithstanding any other provision hereof, on
each matter submitted to a vote of the Holders, each Holder shall be entitled to
one vote for each whole Interest standing in his name on the books of the Trust,
and each fractional Interest shall be entitled to a proportionate fractional
vote, irrespective of the series thereof or class thereof, and all Interests of
all series and classes thereof shall vote together as a single class; provided,
however, that (a) as to any matter with respect to which a separate vote of one
or more series or classes thereof is permitted or required by the 1940 Act or
the provisions of the instrument establishing and designating the series or
class, such requirements as to a separate vote by such series or class thereof
shall apply in lieu of all Interests of all series and classes thereof voting
together; and (b) as to any matter which affects only the interests of one or
more particular series or classes thereof, only the Holders of the one or more
affected
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series or classes shall be entitled to vote, and each such series or class shall
vote as a separate series or class.
6.8 Record Dates. The Trustees may from time to time close the
transfer books or establish record dates and times for the purposes of
determining the Holders entitled to be treated as such, to the extent provided
or referred to in Section 8.6.
6.9 Transfer. All Interests of each particular series or class
thereof shall be transferable, but transfers of Interests of a particular series
or class thereof will be recorded on the Interest transfer records of the Trust
applicable to that series or class only at such times as Holders shall have the
right to require the Trust to redeem Interests of that series or class and at
such other times as may be permitted by the Trustees.
6.10 Equality. Except as provided herein or in the instrument
designating and establishing any class or series, all Interests of each
particular series or class thereof shall represent an equal proportionate
interest in the assets belonging to that series, or in the case of a class,
belonging to that series and allocable to that class, subject to the liabilities
belonging to that series, and each Interest of any particular series or class
shall be equal to each other Interest of that series or class; but the
provisions of this sentence shall not restrict any distinctions permissible
under Section 6.6 that may exist with respect to dividends and distributions on
Interests of the same series or class. The Trustees may from time to time
divide or combine the Interests of any particular series or class into a greater
or lesser number of Interests of that series or class without thereby changing
the proportionate beneficial interest in the assets belonging to that series or
class or in any way affecting the rights or Interests of any other series or
class.
6.11 Fractions. Any fractional Interest of any series or class, if
any such fractional Interest is outstanding, shall carry proportionately all the
rights and obligations of a whole Interest of that series or class, including
rights and obligations with respect to voting, receipt of dividends and
distributions, redemption of Interests, and liquidation of the Trust.
6.12 Class Differences. Subject to Section 6.3, the relative rights
and preferences of the classes of any series may differ in such other respects
as the Trustees may determine to be appropriate in their sole discretion,
provided that such differences are set forth in the instrument establishing and
designating such classes and executed by a majority of the Trustees.
6.13 Conversion of Interests. Subject to compliance with the
requirements of the 1940 Act, the Trustees shall have the authority to provide
that Holders of Interests of any series shall
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have the right to convert said Interests into one or more other series in
accordance with such requirements and procedures as may be established by the
Trustees. The Trustees shall also have the authority to provide that Holders of
Interests of any class of a particular series shall have the right to convert
said Interests into one or more other classes of that particular series or any
other series in accordance with such requirements and procedures as may be
established by the Trustees.
6.14 Investments in the Trust. The Trustees may accept investments in
the Trust from such persons and on such terms and for such consideration, not
inconsistent with the provisions of the 1940 Act, as they from time to time
authorize. The Trustees may authorize any distributor, principal underwriter,
custodian, transfer agent or other person to accept orders for the purchase of
Interests that conform to such authorized terms and to reject any purchase
orders for Interests whether or not conforming to such authorized terms.
6.15 Trustees and Officers as Holders. Any Trustee, officer or other
agent of the Trust, and any organization in which any such person is interested,
may acquire, own, hold and dispose of Interests of the Trust to the same extent
as if such person were not a Trustee, officer or other agent of the Trust; and
the Trust may issue and sell or cause to be issued and sold and may purchase
Interests from any such person or any such organization subject only to the
general limitations, restrictions or other provisions applicable to the sale or
purchase of Interests generally.
6.16 No Preemptive Rights; Derivative Suits. Holders shall have no
preemptive or other right to subscribe to any additional Interests or other
securities issued by the Trust. No action may be brought by a Holder on behalf
of the Trust unless Holders owning no less than 10% of the then outstanding
Interests, or series or class thereof, join in the bringing of such action. A
Holder of Interests in a particular series or a particular class of the Trust
shall not be entitled to participate in a derivative or class action lawsuit on
behalf of any other series or any other class or on behalf of the Holders of
Interests in any other series or any other class of the Trust.
6.17 No Appraisal Rights. Holders shall have no right to demand
payment for their Interests or to any other rights of dissenting Holders in the
event the Trust participates in any transaction which would give rise to
appraisal or dissenters' rights by a stockholder of a corporation organized
under the General Corporation Law of Delaware, or otherwise.
6.18 Status of Interests and Limitation of Personal Liability.
Interests shall be deemed to be personal property giving only the rights
provided in this Amended and Restated Declaration of Trust. Every Holder by
virtue of acquiring
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Interests shall be held to have expressly assented and agreed to the terms
hereof and to be bound hereby. The death, incapacity, dissolution, termination
or bankruptcy of a Holder during the continuance of the Trust shall not operate
to dissolve or terminate the Trust or any series thereof nor entitle the
representative of such Holder to an accounting or to take any action in court or
elsewhere against the Trust or the Trustees, but shall entitle the
representative of such Holder only to the rights of such Holder under this
Trust. Ownership of Interests shall not entitle the Holder to any title in or
to the whole or any part of the Trust Property or right to call for a partition
or division of the same or for an accounting, nor shall the ownership of
Interests constitute the Holders as partners. Neither the Trust nor the
Trustees, nor any officer, employee or agent of the Trust, shall have any power
to bind personally any Holder, nor except as specifically provided herein to
call upon any Holder for the payment of any sum of money or assessment
whatsoever other than such as the Holder may at any time personally agree to
pay.
ARTICLE VII
Purchases and Redemptions
-------------------------
7.1 Purchases. The Trustees, in their discretion, may, from time to
time, without a vote of the Holders, permit the purchase of Interests by such
party or parties (or increase in the Interests of a Holder), for such type of
consideration, including, without limitation, cash or property, at such time or
times (including, without limitation, each business day), and on such terms as
the Trustees may deem best, and may in such manner acquire other assets
(including, without limitation, the acquisition of assets subject to, and in
connection with the assumption of, liabilities) and businesses.
7.2 Redemption by Holder. Each Holder of Interests of the Trust or
any series or class thereof shall have the right at such times as may be
permitted by the Trust to require the Trust to redeem all or any part of his or
her Interests of the Trust, or series or class thereof, at a redemption price
equal to the net asset value per Interest of the Trust or series or class
thereof, next determined in accordance with Section 7.4 hereof after the
Interests are properly tendered for redemption, subject to any contingent
deferred sales charge or redemption charge in effect at the time of redemption.
Payment of the redemption price shall be in cash; provided, however, that if the
Trustees determine, which determination shall be conclusive, that conditions
exist which make payment wholly in cash unwise or undesirable, the Trust may,
subject to the requirements of the 1940 Act, make payment wholly or partly in
securities or other assets belonging to the Trust or series or class thereof of
which the Interests being redeemed are
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part of the value of such securities or assets used in such determination of the
net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the Holders of Interests of the
Trust, or series or class thereof, to require the Trust to redeem Interests of
the Trust, or of any series or class thereof, during any period or at any time
when and to the extent permissible under the 1940 Act.
7.3 Redemption by Trust. Each Interest of the Trust, or series or
class thereof that has been established and designated is subject to redemption
by the Trust at the redemption price which would be applicable if such Interest
was then being redeemed by the Holder pursuant to Section 7.2 hereof: (a) at any
time, if the Trustees determine in their sole discretion and by majority vote
that it is in the best interest of the Trust, or any series or class thereof, to
abolish any series or class of the Trust, or (b) upon such other conditions as
may from time to time be determined by the Trustees and set forth in the then
current Prospectus of the Trust with respect to maintenance of Holder accounts
of a minimum amount. Upon such redemption the Holders of the Interests so
redeemed shall have no further right with respect thereto other than to receive
payment of such redemption price.
7.4 Net Asset Value. The net asset value per Interest of any series
shall be (a) in the case of a series whose Interests are not divided into
classes, the quotient obtained by dividing the value of the net assets of that
series (being the value of the assets belonging to that series less the
liabilities belonging to that series) by the total number of Interests of that
series outstanding, and (b) in the case of a class of Interests of a series
whose Interests are divided into classes, the quotient obtained by dividing the
value of the net assets of that series allocable to such class (being the value
of the assets belonging to that series allocable to such class less the
liabilities belonging to such class) by the total number of Interests of such
class outstanding; all determined in accordance with the methods and procedures,
including without limitation those with respect to rounding, established by the
Trustees from time to time.
The Trustees may determine to maintain the net asset value per
Interest of any series or any class at a designated constant dollar amount and
in connection therewith may adopt procedures consistent with the 1940 Act for
continuing declarations of income attributable to that series or that class as
dividends payable in additional Interests of that series at the designated
constant dollar amount and for the handling of any losses attributable to that
series or that class. Such procedures may provide that in the event of any loss
each Holder shall be deemed to have contributed to the capital of the Trust
attributable to that series his or her pro rata portion of the total number of
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Interests required to be cancelled in order to permit the net asset value per
Interest of that series or class to be maintained, after reflecting such loss,
at the designated constant dollar amount. Each Holder of the Trust shall be
deemed to have agreed, by his or her investment in any series or class with
respect to which the Trustees shall have adopted any such procedure, to make the
contribution referred to in the preceding sentence in the event of any such
loss.
ARTICLE VIII
Holders
-------
8.1 Rights of Holders. The right to conduct any business
hereinbefore described is vested exclusively in the Trustees, and the Holders
shall have no rights under this Declaration or with respect to the Trust
Property other than the beneficial interest conferred by their Interests and the
voting rights accorded to them under this Declaration.
8.2 Register of Interests. A register shall be kept by the Trust
under the direction of the Trustees which shall contain the names and addresses
of the Holders and the number of Interests held by each Holder. Each such
register shall be conclusive as to the identity of the Holders of the Trust and
the Persons who shall be entitled to payments of distributions or otherwise to
exercise or enjoy the rights of Holders. No Holder shall be entitled to receive
payment of any distribution, nor to have notice given to it as herein provided,
until it has given its address to such officer or agent of the Trustees as shall
keep the said register for entry thereon. No certificates certifying the
ownership of interests need be issued except as the Trustees may otherwise
determine from time to time.
8.3 Notices. Any and all notices to which any Holder hereunder may
be entitled and any and all communications shall be deemed duly served or given
if presented personally to a Holder, left at his or her residence or usual place
of business, or sent via United States mail or by electronic transmission to a
Holder at his or her address as it is registered with the Trust, as provided in
Section 8.2. If mailed, such notice shall be deemed to be given when deposited
in the United States mail addressed to the Holder at his or her address as it is
registered with the Trust, as provided in Section 8.2, with postage thereon
prepaid.
8.4 Meetings of Holders. Meetings of the Holders may be called at
any time by a majority of the Trustees and shall be called by any Trustee upon
written request of Holders holding, in the aggregate, not less than 10% of the
Interests (or series or class thereof), such request specifying the purpose or
purposes for which such meeting is to be called. Any such meeting shall be held
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within or without the State of Delaware on such day and at such time as the
Trustees shall designate. Holders of one-third of the Interests in the Trust,
present in person or by proxy, shall constitute a quorum for the transaction of
any business, except as may otherwise be required by the 1940 Act or other
applicable law or by this Declaration or the By-Laws of the Trust. If a quorum
is present at a meeting, an affirmative vote by the Holders present, in person
or by proxy, holding more than 50% of the total Interests (or series or class
thereof) of the Holders present, either in person or by proxy, at such meeting
constitutes the action of the Holders, unless the 1940 Act, other applicable
law, this Declaration or the By-Laws of the Trust require a greater number of
affirmative votes. Notwithstanding the foregoing, the affirmative vote by the
Holders present, in person or by proxy, holding less than 50% of the Interests
(or class or series thereof) of the Holders present, in person or by proxy, at
such meeting shall be sufficient for adjournments. Any meeting of Holders,
whether or not a quorum is present, may be adjourned for any lawful purpose
provided that no meeting shall be adjourned for more than six months beyond the
originally scheduled meeting date. Any adjourned session or sessions may be
held, within a reasonable time after the date set for the original meeting
without the necessity of further notice.
8.5 Notice of Meetings. Written or printed notice of all meetings of
the Holders, stating the time, place and purposes of the meeting, shall be given
as provided in Section 8.3. At any such meeting, any business properly before
the meeting may be considered, whether or not stated in the notice of the
meeting. Any adjourned meeting held as provided in Section 8.4 shall not
require the giving of additional notice.
8.6 Record Date. For the purpose of determining the Holders who are
entitled to notice of any meeting, to vote at any meeting, to participate in any
distribution, or for the purpose of any other action, the Trustees may from time
to time fix a date, not more than 90 calendar days prior to the date of any
meeting of the Holders or payment of distributions or other action, as the case
may be, as a record date for the determination of the persons to be treated as
Holders of record for such purposes, and any Holder who was a Holder at the date
and time so fixed shall be entitled to vote at such meeting or to be treated as
a Holder of record for purposes of such other action, even though he or she has
since that date and time disposed of his or her Interests, and no Holder
becoming such after that date and time shall be so entitled to vote at such
meeting or to be treated as a Holder of record for purposes of such other
action. If the Trustees shall divide the Interests into two or more series in
accordance with Section 6.2 herein, nothing in this Section shall be construed
as precluding the Trustees from setting different record dates for different
series and if the Trustees shall divide any series into two or more classes in
accordance with Section 6.3 herein, nothing in this
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Section 8.6 shall be construed as precluding the Trustees from setting different
record dates for different classes.
8.7 Proxies, Etc. At any meeting of Holders, any Holder entitled to
vote thereat may vote by proxy, provided that no proxy shall be voted at any
meeting unless it shall have been placed on file with the Secretary, or with
such other officer or agent of the Trust as the Secretary may direct, for
verification prior to the time at which such vote shall be taken.
(a) Pursuant to a resolution of a majority of the Trustees,
proxies may be solicited in the name of one or more Trustees or one or more of
the officers of the Trust. Only Holders of record shall be entitled to vote.
Each Holder shall be entitled to a vote proportionate to its Interest in the
Trust.
(b) When Interests are held jointly by several persons, any one
of them may vote at any meeting in person or by proxy in respect to such
Interest, but if more than one of them shall be present at such meeting in
person or by proxy, and such joint owners or their proxies so present disagree
as to any vote to be cast, such vote shall not be received in respect to such
Interest.
(c) A proxy purporting to be executed by or on behalf of a Holder
shall be deemed valid unless challenged at or prior to its exercise, and the
burden of proving invalidity shall rest on the challenger. If the Holder is a
minor or a person of unsound mind, and subject to guardianship or to the legal
control of any other person regarding the charge or management of his or her
Interest, he or she may vote by his or her guardian or such other person
appointed or having such control, and such vote may be given in person or by
proxy.
8.8 Reports. The Trustees shall cause to be prepared, at least
annually, a report of operations containing a balance sheet and statement of
income and undistributed income of the Trust prepared in conformity with
generally accepted accounting principles and an opinion of an independent public
accountant on such financial statements. The Trustees shall, in addition,
furnish to the Holders at least semi-annually an interim report containing an
unaudited balance sheet as of the end of such period and an unaudited statement
of income and surplus for the period from the beginning of the current Fiscal
Year to the end of such period.
8.9 Inspection of Records. The records of the Trust shall be open to
inspection by Holders during normal business hours and for any purpose not
harmful to the Trust.
8.10 Voting Powers. (a) The Holders shall have power to vote only
(i) for the election of Trustees as contemplated by
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Section 2.2 hereof, (ii) with respect to any investment advisory contract as
contemplated by Section 4.1 hereof, (iii) with respect to termination of the
Trust as provided in Section 9.2 hereof, (iv) with respect to amendments to the
Declaration of Trust as provided in Section 9.3 hereof, (v) with respect to any
merger, consolidation or sale of assets as provided in Section 9.4 hereof, (vi)
with respect to incorporation of the Trust to the extent and as provided in
Section 9.5 hereof, and (vii) with respect to such additional matters relating
to the Trust as may be required by the 1940 Act, DBTA, or any other applicable
law, the Declaration, the By-Laws or any registration of the Trust with the
Commission (or any successor agency) or any state, or as and when the Trustees
may consider necessary or desirable.
(b) Each Holder shall be entitled to vote based on the ratio his
or her Interest bears to the Interests of all Holders entitled to vote. Until
Interests are issued, the Trustees may exercise all rights of Holders and may
take any action required by law, the Declaration or the By-Laws to be taken by
Holders. The By-Laws may include further provisions for Holders' votes and
meetings and related matters not inconsistent with this Declaration.
8.11 Holder Action by Written Consent. Any action which may be taken
by the Holders may be taken without notice and without a meeting if Holders
holding more than 50% of the total Interests entitled to vote (or such larger
proportion thereof as shall be required by any express provision of this
Declaration) shall consent to the action in writing and the written consents
shall be filed with the records of the meetings of Holders. Such consents shall
be treated for all purposes as votes taken at a meeting of the Holders.
8.12 Holder Communications. (a) Whenever ten or more Holders who
have been such for at least six months preceding the date of application, and
who hold in the aggregate at least 1% of the total Interests, shall apply to the
Trustees in writing, stating that they wish to communicate with other Holders
with a view to obtaining signatures for a request for a meeting of Holders and
accompanied by a form of communication and request which they wish to transmit,
the Trustees shall within five business days after receipt of such application
either (i) afford to such applicants access to a list of the names and addresses
of all Holders as recorded on the books of the Trust; or (ii) inform such
applicants as to the approximate number of Holders, and the approximate cost of
transmitting to them the proposed communication and form of request.
(b) If the Trustees elect to follow the course specified in
clause (ii) above, the Trustees, upon the written request of such applicants,
accompanied by a tender of the material to be transmitted and of the reasonable
expenses of transmission,
25
<PAGE>
shall, with reasonable promptness, transmit, by United States mail or by
electronic transmission, such material to all Holders at their addresses as
recorded on the books, unless within five business days after such tender the
Trustees shall transmit, by United States mail or by electronic transmission, to
such applicants and file with the Commission, together with a copy of the
material to be transmitted, a written statement signed by at least a majority of
the Trustees to the effect that in their opinion either such material contains
untrue statements of fact or omits to state facts necessary to make the
statements contained therein not misleading, or would be in violation of
applicable law, and specifying the basis of such opinion. The Trustees shall
thereafter comply with any order entered by the Commission and the requirements
of the 1940 Act and the Securities Exchange Act of 1934.
ARTICLE IX
Duration; Termination of Trust;
Amendment; Mergers; Etc.
------------------------
9.1 Duration. Subject to possible termination in accordance with the
provisions of Section 9.2, the Trust created hereby shall continue perpetually
pursuant to Section 3808 of DBTA.
9.2 Termination of Trust. (a) The Trust may be terminated (i) by
the affirmative vote of the Holders of not less than two-thirds of the Interests
in the Trust at any meeting of the Holders, or (ii) by an instrument in writing,
without a meeting, signed by a majority of the Trustees and consented to by the
Holders of not less than two-thirds of such Interests, or (iii) by the Trustees
by written notice to the Holders. Upon any such termination,
(i) The Trust shall carry on no business except for the
purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the
Trust and all of the powers of the Trustees under this Declaration shall
continue until the affairs of the Trust shall have been wound up, including
the power to fulfill or discharge the contracts of the Trust, collect its
assets, sell, convey, assign, exchange, or otherwise dispose of all or any
part of the remaining Trust Property to one or more Persons at public or
private sale for consideration which may consist in whole or in part of
cash, securities or other property of any kind, discharge or pay its
liabilities, and do all other acts appropriate to liquidate its business;
provided that any sale, conveyance, assignment, exchange, or other
disposition of all or substantially all of the Trust Property shall require
approval of the principal terms of the
26
<PAGE>
transaction and the nature and amount of the consideration by the Holders
with a Majority Interests Vote.
(iii) After paying or adequately providing for the payment
of all liabilities, and upon receipt of such releases, indemnities and
refunding agreements, as they deem necessary for their protection, the
Trustees may distribute the remaining Trust Property, in cash or in kind or
partly each, among the Holders according to their respective rights.
(b) Upon termination of the Trust and distribution to the Holders
as herein provided, a majority of the Trustees shall execute and lodge among the
records of the Trust an instrument in writing setting forth the fact of such
termination and file a certificate of cancellation in accordance with Section
3810 of the DBTA. Upon termination of the Trust, the Trustees shall thereon be
discharged from all further liabilities and duties hereunder, and the rights and
interests of all Holders shall thereupon cease.
9.3 Amendment Procedure.
(a) All rights granted to the Holders under this Declaration of
Trust are granted subject to the reservation of the right of the Trustees to
amend this Declaration of Trust as herein provided, except as set forth herein
to the contrary. Subject to the foregoing, the provisions of this Declaration of
Trust (whether or not related to the rights of Holders) may be amended at any
time, so long as such amendment is not in contravention of applicable law,
including the 1940 Act, by an instrument in writing signed by a majority of the
Trustees (or by an officer of the Trust pursuant to the vote of a majority of
such Trustees). Any such amendment shall be effective as provided in the
instrument containing the terms of such amendment or, if there is no provision
therein with respect to effectiveness, upon the execution of such instrument and
of a certificate (which may be a part of such instrument) executed by a Trustee
or officer of the Trust to the effect that such amendment has been duly adopted.
(b) No amendment may be made, under Section 9.3(a) above, which
would change any rights with respect to any Interest in the Trust by reducing
the amount payable thereon upon liquidation of the Trust, by repealing the
limitations on personal liability of any Holder or Trustee, or by diminishing or
eliminating any voting rights pertaining thereto, except with a Majority
Interests Vote.
(c) A certification signed by a majority of the Trustees setting
forth an amendment and reciting that it was duly adopted by the Holders or by
the Trustees as aforesaid or a copy of the Declaration, as amended, and executed
by a majority of the Trustees, shall be conclusive evidence of such amendment
when lodged among the records of the Trust.
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(d) Notwithstanding any other provision hereof, until such time
as Interests are first sold, this Declaration may be terminated or amended in
any respect by the affirmative vote of a majority of the Trustees or by an
instrument signed by a majority of the Trustees.
9.4 Merger, Consolidation and Sale of Assets. The Trust may merge or
consolidate with any other corporation, association, trust or other organization
or may sell, lease or exchange all or substantially all of its property,
including its good will, upon such terms and conditions and for such
consideration when and as authorized by no less than a majority of the Trustees
and by a Majority Interests Vote of the Trust or by an instrument or instruments
in writing without a meeting, consented to by the Holders of not less than 50%
of the total Interests of the Trust or such series, as the case may be, and any
such merger, consolidation, sale, lease or exchange shall be deemed for all
purposes to have been accomplished under and pursuant to the statutes of the
State of Delaware. In accordance with Section 3815(f) of DBTA, an agreement of
merger or consolidation may effect any amendment to the Declaration or By-Laws
or effect the adoption of a new declaration of trust or by-laws of the Trust if
the Trust is the surviving or resulting business trust. A certificate of merger
or consolidation of the Trust shall be signed by a majority of the Trustees.
9.5 Incorporation. Upon a Majority Interests Vote, the Trustees may
cause to be organized or assist in organizing a corporation or corporations
under the laws of any jurisdiction or any other trust, partnership, association
or other organization to take over all of the Trust Property or to carry on any
business in which the Trust shall directly or indirectly have any interest, and
to sell, convey and transfer the Trust Property to any such corporation, trust,
association or organization in exchange for the equity interests thereof or
otherwise, and to lend money to, subscribe for the equity interests of, and
enter into any contracts with any such corporation, trust, partnership,
association or organization, or any corporation, partnership, trust, association
or organization in which the Trust holds or is about to acquire equity
interests. The Trustees may also cause a merger or consolidation between the
Trust or any successor thereto and any such corporation, trust, partnership,
association or other organization if and to the extent permitted by law, as
provided under the law then in effect. Nothing contained herein shall be
construed as requiring approval of the Holders for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or transferring a
portion of the Trust Property to such organizations or entities.
28
<PAGE>
ARTICLE X
Miscellaneous
-------------
10.1 Certificate of Designation; Agent for Service of Process. The
Trust shall file, in accordance with Section 3812 of DBTA, in the office of the
Secretary of State of Delaware, a certificate of trust, in the form and with
such information required by Section 3810 of DBTA and executed in the manner
specified in Section 3811 of DBTA. In the event the Trust does not have at
least one Trustee qualified under Section 3807(a) of DBTA, then the Trust shall
comply with Section 3807(b) of DBTA by having and maintaining a registered
office in Delaware and by designating a registered agent for service of process
on the Trust, which agent shall have the same business office as the Trust's
registered office. The failure to file any such certificate, to maintain a
registered office, to designate a registered agent for service of process, or to
include such other information shall not affect the validity of the
establishment of the Trust, the Declaration, the By-Laws or any action taken by
the Trustees, the Trust officers or any other Person with respect to the Trust
except insofar as a provision of the DBTA would have governed, in which case the
Delaware common law governs.
10.2 Governing Law. This Declaration is executed by all of the
Trustees and delivered with reference to DBTA and the laws of the State of
Delaware, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to DBTA and
the laws of the State of Delaware (unless and to the extent otherwise provided
for and/or preempted by the 1940 Act or other applicable federal securities
laws); provided, however, that there shall not be applicable to the Trust, the
Trustees or this Declaration (a) the provisions of Section 3540 of Title 12 of
the Delaware Code, or (b) any provisions of the laws (statutory or common) of
the State of Delaware (other than the DBTA) pertaining to trusts which are
inconsistent with the rights, duties, powers, limitations or liabilities of the
Trustees set forth or referenced in this Declaration.
10.3 Counterparts. This Declaration may be simultaneously executed
in several counterparts, each of which shall be deemed to be an original, and
such counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
10.4 Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust or of any recording office
in which this Declaration may be recorded, appears to be a Trustee hereunder,
certifying to (a) the number or identity of Trustees or Holders, (b) the due
authorization of the execution of any instrument or writing, (c) the form of any
vote
29
<PAGE>
passed at a meeting of Trustees or Holders, (d) the fact that the number of
Trustees or Holders present at any meeting or executing any written instrument
satisfies the requirements of this Declaration, (e) the form of any By-Laws
adopted by or the identity of any officers elected by the Trustees, or (f) the
existence of any fact or facts which in any manner relate to the affairs of the
Trust, shall be conclusive evidence as to the matters so certified in favor of
any person dealing with the Trustees and their successors.
10.5 Provisions in Conflict With Law or Regulations. (a) The
provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the DBTA, or with other applicable laws and
regulations, the conflicting provisions shall be deemed never to have
constituted a part of this Declaration; provided, however, that such
determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
10.6 Trust Only. It is the intention of the Trustees to create only
a business trust under DBTA with the relationship of trustee and beneficiary
between the Trustees and each Holder from time to time. It is not the intention
of the Trustees to create a general partnership, limited partnership, joint
stock association, corporation, bailment, or any form of legal relationship
other than a Delaware business trust except to the extent such trust is deemed
to constitute a corporation under the Code and applicable state tax laws.
Nothing in this Declaration of Trust shall be construed to make the Holders,
either by themselves or with the Trustees, partners or members of a joint stock
association.
10.7 Withholding. Should any Holder be subject to withholding
pursuant to the Code or any other provision of law, the Trust shall withhold all
amounts otherwise distributable to such Holder as shall be required by law and
any amounts so withheld shall be deemed to have been distributed to such Holder
under this Declaration of Trust. If any sums are withheld pursuant to this
provision, the Trust shall remit the sums so withheld to and file the required
forms with the Internal Revenue Service, or other applicable government agency.
10.8 Headings and Construction. Headings are placed herein for
convenience of reference only and shall not be taken as
30
<PAGE>
a part hereof or control or affect the meaning, construction or effect of this
instrument. Whenever the singular number is used herein, the same shall include
the plural; and the neuter, masculine and feminine genders shall include each
other, as applicable.
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IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.
/s/ Robert F. Moyer May 31, 1996
- --------------------
Robert F. Moyer
Trustee
32
<PAGE>
CERTIFICATE OF TRUST
OF
DRIEHAUS MUTUAL FUNDS
The undersigned, constituting the sole member of the Board of Trustees
of DRIEHAUS MUTUAL FUNDS (the "Trust"), in order to form a Delaware business
trust pursuant to Section 3810 of the Delaware Business Trust Act, does hereby
certify the following:
1. The name of the Delaware business trust is
DRIEHAUS MUTUAL FUNDS.
2. Prior to the issuance of beneficial interests, the Trust will
become a registered investment company under the Investment Company Act of 1940,
as amended.
3. Notice is hereby given that pursuant to Section 3804 of the
Delaware Business Trust Act, the debts, liabilities, obligations and expenses
incurred, contracted for or otherwise existing with respect to a particular
series of the Trust shall be enforceable against the assets of such series only
and not against the assets of the Trust generally.
4. The registered office of the Trust in Delaware is DRIEHAUS MUTUAL
FUNDS, c/o Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware
19801.
5. The registered agent for service of process on the Trust is
Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801.
6. This Certificate of Trust shall be effective on the date it is
filed with the Office of the Delaware Secretary of State.
IN WITNESS WHEREOF, the undersigned Trustee of DRIEHAUS MUTUAL FUNDS
has executed this Certificate as of the 31st day of May 1996.
/s/ Robert F. Moyer
--------------------
Robert F. Moyer
Trustee
<PAGE>
DRIEHAUS MUTUAL FUNDS
---------------------
BY-LAWS
-------
These By-Laws are made as of the 4th day of June, 1996 and adopted pursuant
to Section 2.7 of the Declaration of Trust establishing DRIEHAUS MUTUAL FUNDS
dated May 31, 1996, as from time to time amended (hereinafter called the
"Declaration"). All words and terms capitalized in these By-Laws shall have the
meaning or meanings set forth for such words or terms in the Declaration.
ARTICLE I
---------
Meetings of Holders
-------------------
Section 1.1 Annual Meeting. An annual meeting of the Holders of Interests
in the Trust, which may be held on such date and at such hour as may from time
to time be designated by the Trustees and stated in the notice of such meeting,
is not required to be held unless certain actions must be taken by the Holders
as set forth in Section 8.10 of the Declaration, or except when the Trustees
consider it necessary or desirable.
Section 1.2 Chairperson. The President or, in his or her absence, the
Chairman of the Board shall act as chairperson at all meetings of the Holders
and, in the absence of both of them, the Trustee or Trustees present at the
meeting may elect a temporary chairperson for the meeting, who may be one of
them or an officer of the Trust.
Section 1.3 Proxies; Voting. Holders may vote either in person or by
duly executed proxy and each Holder shall be entitled to a vote proportionate to
his or her Interest in the Trust, all as provided in Article VIII of the
Declaration. No proxy shall be valid after eleven (11) months from the date of
its execution, unless a longer period is expressly stated in such proxy.
Section 1.4 Fixing Record Dates. For the purpose of determining the
Holders who are entitled to notice of or to vote or to act at a meeting,
including any adjournment thereof, or who are entitled to participate in any
distributions, or for any other proper purpose, the Trustees may from time to
time fix a record date in the manner provided in Section 8.6 of the Declaration.
If the Trustees do not, prior to any meeting of the Holders, so fix a record
date, then the date of mailing notice of the meeting shall be the record date.
Section 1.5 Inspectors of Election. In advance of any meeting of the
Holders, the Trustees may appoint inspectors of
<PAGE>
election to act at the meeting or any adjournment thereof. If inspectors of
election are not so appointed, the chairperson, if any, of any meeting of the
Holders may, and on the request of any Holder or his or her proxy shall, appoint
inspectors of election of the meeting. The number of inspectors shall be either
one or three. If appointed at the meeting on the request of one or more Holders
or proxies, a Majority Interests Vote shall determine whether one or three
inspectors are to be appointed, but failure to allow such determination by the
Holders shall not affect the validity of the appointment of inspectors of
election. In case any person appointed as inspector fails to appear or fails or
refuses to act, the vacancy may be filled by appointment made by the Trustees in
advance of the convening of the meeting or at the meeting by the person acting
as chairperson. The inspectors of election shall determine the Interests owned
by Holders, the Interests represented at the meeting, the existence of a quorum
and the authenticity, validity and effect of proxies; shall receive votes,
ballots or consents; shall hear and determine all challenges and questions in
any way arising in connection with the right to vote; shall count and tabulate
all votes or consents and determine the results; and shall do such other acts as
may be proper to conduct the election or vote with fairness to all Holders. If
there are three inspectors of election, the decision, act or certificate of a
majority is effective in all respects as the decision, act or certificate of
all. On request of the chairperson, if any, of the meeting, or of any Holder or
his or her proxy, the inspectors of election shall make a report in writing of
any challenge or question or matter determined by them and shall execute a
certificate of any facts found by them.
Section 1.6 Records of Meetings of Holders. At each meeting of the
Holders there shall be open for inspection the minutes of the last previous
meeting of Holders of the Trust and a list of the Holders of the Trust,
certified to be true and correct by the Secretary or other proper agent of the
Trust, as of the record date of the meeting. Such list of Holders shall contain
the name of each Holder in alphabetical order, the Holder's address, and the
Interests owned by such Holder. Holders shall have the right to inspect books
and records of the Trust during normal business hours for any purpose not
harmful to the Trust.
Section 1.7 Place of Meetings. All meetings of Holders shall be held at
the principal office of the Trust, or to the extent permitted by the Declaration
of Trust, at such other place within the United States as shall be designated by
the Trustees or the President of the Trust. The principal office of the Trust
is located at 25 East Erie Street, Chicago, Illinois 60611-2703.
2
<PAGE>
ARTICLE II
----------
Trustees
--------
Section 2.1 Annual and Regular Meetings. The Trustees shall hold an
annual meeting of the Trustees for the election of officers and the transaction
of other business which may come before such meeting. Regular meetings of the
Trustees may be held without call or notice at such place or places and times as
the Trustees may by resolution provide from time to time.
Section 2.2 Special Meetings. Special meetings of the Trustees shall
be held upon the call of the Chairperson, if any, the President, the Secretary,
or any two Trustees, at such time, on such day and at such place, as shall be
designated in the notice of the meeting.
Section 2.3 Notice. Notice of a meeting shall be given by mail
(which term shall include overnight mail) or by telegram (which term shall
include a cablegram or telefacsimile) or delivered personally (which term shall
include notice by telephone). If notice is given by mail, it shall be mailed
not later than 72 hours preceding the meeting and if given by telegram or
personally, such notice shall be delivered not later than 24 hours preceding the
meeting. Notice of a meeting of Trustees may be waived before or after any
meeting by signed written waiver. Neither the business to be transacted at, nor
the purpose of, any meeting of the Trustees need be stated in the notice or
waiver of notice of such meeting, and no notice need be given of action proposed
to be taken by written consent. The attendance of a Trustee at a meeting shall
constitute a waiver of notice of such meeting, except where a Trustee attends a
meeting for the express purpose of objecting, at the commencement of such
meeting, to the transaction of any business on the ground that the meeting has
not been lawfully called or convened.
Section 2.4 Chairperson; Records. The Trustees shall appoint a
Chairperson of the Board from among their number. Such Chairperson of the Board
shall act as chairperson at all meetings of the Trustees; in his or her absence,
the Trustees present shall elect one of their number to act as temporary
chairperson. The results of all actions taken at a meeting of the Trustees, or
by written consent of the Trustees, shall be recorded by the Secretary.
Section 2.5 Audit Committee. The Trustees may, by the affirmative
vote of a majority of the entire Board, appoint from its members an audit
committee composed of two or more Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Trust, as the Board may from time to time
determine. The audit committee shall (a) recommend independent public
accountants for selection by the Board, (b) review the scope of audit,
accounting and financial internal controls and the quality and adequacy of the
3
<PAGE>
Trust's accounting staff with the independent public accountants and such other
persons as may be deemed appropriate, (c) review with the accounting staff and
the independent public accountants the compliance of transactions of the Trust
with its investment adviser, administrator or any other service provider with
the financial terms of applicable contracts or agreements, (d) review reports of
the independent public accountants and comment to the Board when warranted, (e)
report to the Board at least once each year and at such other times as the
committee deems desirable, and (f) be directly available at all times to
independent public accountants and responsible officers of the Trust for
consultation on audit, accounting and related financial matters.
Section 2.6 Nominating Committee of Trustees. The Board of Trustees
may, by the affirmative vote of a majority of the entire Board, appoint from its
members a trustee nominating committee composed of two or more Trustees. The
trustee nominating committee shall recommend to the Board a slate of persons to
be nominated for election as Trustees by the Holders at a meeting of the Holders
and a person to be elected to fill any vacancy occurring for any reason in the
Board. Notwithstanding anything in this Section to the contrary, if the Trust
has in effect a plan pursuant to Rule 12b-1 under the 1940 Act, the selection
and nomination of those Trustees who are not "interested persons" (as defined in
the Act) shall be committed to the discretion of such disinterested Trustees.
Section 2.7 Executive Committee. The Board of Trustees may appoint
from its members an executive committee composed of those Trustees as the Board
may from time to time determine, of which committee the Chairperson of the Board
shall be a member. In the intervals between meetings of the Board, the
executive committee shall have the power of the Board to (a) determine the value
of securities and assets owned by the Trust, (b) elect or appoint officers of
the Trust to serve until the next meeting of the Board, and (c) take such action
as may be necessary to manage the portfolio security loan business of the Trust.
All action by the executive committee shall be recorded and reported to the
Board at its meeting next succeeding such action.
Section 2.8 Other Committees. The Board of Trustees may appoint from
among its members other committees composed of two or more of its Trustees which
shall have such powers as may be delegated or authorized by the resolution
appointing them.
Section 2.9 Committee Procedures. The Board of Trustees may at any
time change the members of any committee, fill vacancies or discharge any
committee. In the absence of any member of any committee, the member or members
thereof present at any meeting, whether or not they constitute a quorum, may
unanimously appoint to act in the place of such absent member a member of the
Board who, except in the case of the executive committee, is not an
4
<PAGE>
"interested person" of the Trust as the Board may from time to time determine.
Each committee may fix its own rules of procedure and may meet as and when
provided by those rules. Copies of the minutes of all meetings of committees
other than the nominating committee and the executive committee shall be
distributed to the Board unless the Board shall otherwise provide.
ARTICLE III
-----------
Officers
--------
Section 3.1 Officers of the Trust; Compensation. The officers of the
Trust shall consist of a President, a Secretary, a Treasurer and such other
officers or assistant officers, including Vice Presidents, as may be elected by
the Trustees. Any two or more of the offices may be held by the same person.
The Trustees may designate a Vice President as an Executive Vice President and
may designate the order in which the other Vice Presidents may act. No officer
of the Trust need be a Trustee. The Board of Trustees may determine what, if
any, compensation shall be paid to officers of the Trust.
Section 3.2 Election and Tenure. At the initial organizational
meeting and thereafter at each annual meeting of the Trustees, the Trustees
shall elect the President, Secretary, Treasurer and such other officers as the
Trustees shall deem necessary or appropriate in order to carry out the business
of the Trust. Such officers shall hold office until the next annual meeting of
the Trustees and until their successors have been duly elected and qualified.
The Trustees may fill any vacancy in office or add any additional officers at
any time.
Section 3.3 Removal of Officers. Any officer may be removed at any
time, with or without cause, by action of a majority of the Trustees. This
provision shall not prevent the making of a contract of employment for a
definite term with any officer and shall have no effect upon any cause of action
which any officer may have as a result of removal due to breach of a contract of
employment. Any officer may resign at any time, by notice in writing signed by
such officer and delivered or mailed to the President or Secretary, and such
resignation shall take effect immediately, or at a later date according to the
terms of such notice in writing.
Section 3.4 Bonds and Surety. Any officer may be required by the
Trustees to be bonded for the faithful performance of his or her duties in such
amount and with such sureties as the Trustees may determine.
Section 3.5 President and Vice-Presidents. The President shall be
the chief executive officer of the Trust and, subject to the control of the
Trustees, shall have general
5
<PAGE>
supervision, direction and control of the business of the Trust and of its
employees and shall exercise such general powers of management as are usually
vested in the office of president of a corporation. The President shall preside
at all meetings of the Holders. Subject to the direction of the Trustees, the
President shall have the power, in the name and on behalf of the Trust, to
execute any and all loan documents, contracts, agreements, deeds, mortgages, and
other instruments in writing, and to employ and discharge employees and agents
of the Trust. Unless otherwise directed by the Trustees, the President shall
have full authority and power, on behalf of all of the Trustees, to attend, and
to act and to vote on behalf of the Trust at, any meetings of business
organizations in which the Trust holds an interest, or to confer such powers
upon any other persons, by executing any proxies duly authorizing such persons.
The President shall have such further authorities and duties as the Trustees
shall from time to time determine. In the absence or disability of the
President, the Vice Presidents in order of their rank, or the Vice President
designated by the Trustees, shall perform all of the duties of President, and
when so acting shall have all the powers of and be subject to all of the
restrictions upon the President. Subject to the direction of the President, the
Treasurer and each Vice President shall have the power in the name of and on
behalf of the Trust to execute any and all loan documents, contracts,
agreements, deeds, mortgages and other instruments in writing, and, in addition,
shall have such other duties and powers as shall be designated from time to time
by the Trustees, the Chairperson, or the President.
Section 3.6 Secretary. The Secretary shall keep the minutes of all
meetings of, and record all votes of, Holders, Trustees, and any committees of
Trustees, provided that, in the absence or disability of the Secretary, the
Holders or Trustees or committees may appoint any other person to keep the
minutes of a meeting and record votes. The Secretary shall attest the signature
or signatures of the officer or officers executing any instrument on behalf of
the Trust. The Secretary shall also perform any other duties commonly incident
to such office in a Delaware business trust and shall have such other
authorities and duties as the Trustees shall from time to time determine.
Section 3.7 Treasurer. Except as otherwise directed by the Trustees,
the Treasurer shall have the general supervision of the monies, funds,
securities, notes receivable and other valuable papers and documents of the
Trust, and shall have and exercise under the supervision of the Trustees and of
the Chairperson and the President all powers and duties normally incident to his
or her office. He or she may endorse for deposit or collection all notes,
checks and other instruments payable to the Trust or to its order. He or she
shall deposit all funds of the Trust as may be ordered by the Trustees, the
Chairperson or the President. He or she shall keep accurate account of the
books of the Trust's transactions which shall be the property of the Trust
6
<PAGE>
and which, together with all other property of the Trust in his or her
possession, shall be subject at all times to the inspection and control of the
Trustees. Unless the Trustees shall otherwise determine, the Treasurer shall be
the principal accounting officer of the Trust and shall also be the principal
financial officer of the Trust. He or she shall have such other duties and
authorities as the Trustees shall from time to time determine. Notwithstanding
anything to the contrary herein contained, the Trustees may authorize any
adviser or administrator to maintain bank accounts and deposit and disburse
funds on behalf of the Trust.
Section 3.8 Other Officers and Duties. The Trustees may elect such
other officers and assistant officers as they shall from time to time determine
to be necessary or desirable in order to conduct the business of the Trust.
Assistant officers shall act generally in the absence of the officer whom they
assist and shall assist that officer in the duties of his or her office. Each
officer, employee and agent of the Trust shall have such other duties and
authority as may be conferred upon him or her by the Trustees or delegated to
him or her by the President.
ARTICLE IV
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Custodian
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Section 4.1 Appointment and Duties. The Trustees shall at all times
employ a custodian or custodians with authority as their agent, but subject to
such restrictions, limitations and other requirements, if any, as may be
contained in these By-Laws:
(1) to hold the securities owned by the Trust and deliver the same
upon written order;
(2) to receive and receipt for any moneys due to the Trust and
deposit the same in its own banking department or elsewhere as the Trustees
may direct;
(3) to disburse such funds upon orders or vouchers;
(4) if authorized by the Trustees, to keep the books and accounts
of the Trust and furnish clerical and accounting services; and
(5) if authorized to do so by the Trustees, to compute the net
income and net assets of the Trust;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. The Trustees may also authorize the custodian to employ one
or more subcustodians, from time to time, to perform such of the acts and
services of the custodian and upon such terms and conditions as may be agreed
upon between the custodian and such sub-custodian and approved by the Trustee.
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Section 4.2 Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or any such other person
or entity with which the Trustees may authorize deposit in accordance with the
1940 Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and may
be transferred or pledged by bookkeeping entry without physical delivery of such
securities. All such deposits shall be subject to withdrawal only upon the
order of the Trust.
ARTICLE V
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Miscellaneous
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Section 5.1 Depositories. In accordance with Article IV of these
By-Laws, the funds of the Trust shall be deposited in such depositories as the
Trustees shall designate and shall be drawn out on checks, drafts or other
orders signed by such officer, officers, agent or agents (including any adviser
or administrator), as the Trustees may from time to time authorize.
Section 5.2 Signatures. All contracts and other instruments shall
be executed on behalf of the Trust by such officer, officers, agent or agents,
as provided in these By-Laws or as the Trustees may from time to time by
resolution or authorization provide.
Section 5.3 Seal. The seal of the Trust shall, subject to alteration by
the Trustees, consist of a flat-faced, circular die with the word "Delaware,"
together with the name of the Trust and the year of its organization, cut or
engraved thereon; but, unless otherwise required by the Trustees, the seal shall
not be necessary to be placed on, and its absence shall not impair the validity
of, any document, instrument or other paper executed and delivered by or on
behalf of the Trust.
Section 5.4 Fiscal Year. The fiscal year of the Trust shall end on
June 30 of each year, subject, however, to change from time to time by the Board
of Trustees.
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ARTICLE VI
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Interests
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Section 6.1 Interests. Except as otherwise provided by law, the Trust
shall be entitled to recognize the exclusive right of a person in whose name
Interests stand on the record of Holders as the owners of such Interests for all
purposes, including, without limitation, the rights to receive distributions,
and to vote as such owner, and the Trust shall not be bound to recognize any
owner, and the Trust shall not be bound to recognize any equitable or legal
claim to or interest in any such Interests on the part of any other person.
Section 6.2 Regulations. The Trustees may make such additional
rules and regulations, not inconsistent with these By-Laws, as they may deem
expedient concerning the sale and purchase of Interests of the Trust.
Section 6.3 Distribution Disbursing Agents and the Like. The
Trustees shall have the power to employ and compensate such distribution
disbursing agents, warrant agents and agents for the reinvestment of
distributions as they shall deem necessary or desirable. Any of such agents
shall have such power and authority as is delegated to any of them by the
Trustees.
ARTICLE VII
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Amendment of By-Laws
--------------------
Section 7.1 Amendment and Repeal of By-Laws. In accordance with
Section 2.7 of the Declaration, the Trustees shall have the power to alter,
amend or repeal the By-Laws or adopt new By-Laws at any time. The Trustees
shall in no event adopt By-Laws which are in conflict with the Declaration,
DBTA, the 1940 Act or applicable federal securities laws.
Section 7.2 No Personal Liability. The Declaration establishing
DRIEHAUS MUTUAL FUNDS provides that the name DRIEHAUS MUTUAL FUNDS does not
refer to the Trustees as individuals or personally; and no Trustee, officer,
employee or agent of, or Holder of Interest in, DRIEHAUS MUTUAL FUNDS shall be
held to any personal liability, nor shall resort be had to their private
property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of DRIEHAUS MUTUAL FUNDS (except to the extent of a
Holder's Interest in the Trust).
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