<PAGE> 1
- --------------------------------------------------------------------------------
PRESIDENT'S LETTER
- --------------------------------------------------------------------------------
Dear Fellow Shareholders:
As we come to the close of the first year for the Driehaus International
Growth Fund, I would like to take this opportunity to personally welcome each of
you to the Fund. This first year was a very successful one, with the details of
our accomplishments provided in Bill Andersen's portfolio manager letter and the
accompanying report. In my role as chief executive officer of Driehaus Capital
Management, Inc., the adviser to the Fund, I'm pleased to see that we are
continuing our tradition of outstanding performance to the international equity
markets.
I have been a long-time believer in growth investing and in the superiority
of our assertive, growth-oriented investment philosophy, whether we are
analyzing U.S. or international markets. Clearly, entrepreneurship and a belief
in the market economy do not stop at American borders. In fact, since we first
turned our attention to the international arena in 1989, economic development
has flourished worldwide. At the same time, while we were preparing to expand
our scope globally, I was aware of the demands of managing an international
portfolio and the need to maintain performance levels for the clients of our
small and mid-cap U.S. funds. It was for these reasons that I asked Bill, one of
our senior portfolio managers, to undertake the responsibility of international
management for Driehaus. As the record shows, he has done an outstanding job.
This success in applying the Driehaus investment philosophy internationally
further affirms the success that I have had in the U.S. market for more than 25
years. It gives me added confidence in our philosophy and confirms my belief
that we can grow as successfully as the companies in which we invest.
I join you in looking forward to reports of continued achievement.
Sincerely,
Richard H. Driehaus
Richard H. Driehaus
President
Driehaus Mutual Funds
1
<PAGE> 2
Dear Fellow Shareholders:
I am pleased to report that our first fiscal year, ended August 31, 1997, was
successful, with the value of an investment in the Driehaus International Growth
Fund (and its predecessor partnership) rising 18.73% versus 9.05% for the Morgan
Stanley Capital International EAFE Index. Our performance also compared
favorably against the Lipper International Fund Index average of 15.44% for the
period August 29, 1996 through August 28, 1997 (when Lipper Analytical Services,
Inc. published the return).
Over the 12 months ending August 31, 1997, leadership in the international
markets was provided mainly by European large-cap issues, especially financial
service stocks and companies benefiting from restructuring efforts. Among
emerging markets, Latin America and Eastern Europe--particularly Russia--also
provided strong performance. This was countered by Japan's dramatic under-
performance of the world market and by Southeast Asia, which started off well
but then collapsed. By identifying and leveraging these international trends, we
were able to make investment decisions for the Fund that resulted in excellent
performance over the past year.
I thought I would take this opportunity to discuss some of the themes we have
identified that we believe are relevant to managing international portfolios at
this time. While our investment management approach is primarily "bottom up,"
such a discussion should prove helpful in understanding the context in which we
are managing the Fund.
Shift in market leadership worldwide to growth companies. While much has been
written about the narrow, large-cap leadership in the United States, a similar
phenomenon has also taken place internationally in the past few years. As in the
U. S., this trend has been particularly pronounced since the second half of
1996. Beginning in mid-1997, we believe that leadership has shifted back to
faster growing, more dynamic companies.
Very strong economic recovery expected in Europe. A number of very exciting
changes are happening in Europe. Many companies have undertaken substantial
restructuring programs with the intent of improving efficiency and
profitability. Just as it did in the United States in the early '90s, this
undertaking should set the stage for an economic upswing. In addition, the
planned adoption of a single currency in 1999 has led several countries
(including Italy, Spain, and Portugal) to undertake very positive changes in
their economic policies. We are also encouraged by the development of new stock
exchanges throughout Europe, which will focus on financing small and medium
sized growth companies.
Japanese economic recovery still on hold. After another false start, the
Japanese economy has slowed dramatically in the second half of 1997. The
slowdown has been attributed in part to a tax increase in April. On a more
positive note, Japan has recently committed to a massive deregulation program
that targets industries including financial services, airlines, energy and
retailing.
Slower growth in Southeast Asia. In our last letter, we highlighted the
economic situation in Thailand. Subsequently, this situation worsened
dramatically, resulting in a currency devaluation and stock market crash that
then spread around the region. While we are positive on this region over the
very long term, we think growth rates will remain much below historical levels
for several years, and the Fund remains under-weighted.
Continued boom in other emerging markets. As much as we expect Asia to
continue to disappoint investors, we believe other emerging markets will
continue to boom. The Mexican economy appears to be back on track, and Brazil
has maintained a strong privatization program despite many obstacles. China is
attempting to combine two economic systems in a way never attempted before, but
with surprising success. The emergence of this economy should prove to be one of
the most significant events of the next 20 years.
Little threat of inflation in developed economies. As more data shows that
inflation has fallen to levels unseen since the 1960s, it is beginning to seem
that the high inflation levels of the 1970s and 1980s were just a historical
aberration. This should continue to create a positive environment for financial
issues.
Given this backdrop, it is no wonder that we are so optimistic about the
prospects for economic growth and, over time, for equity investing. It is also
no surprise that this environment continues to provide so many companies that
are showing strong growth and outstanding prospects. We believe it is an
exceptional time for international equity investment.
Sincerely,
WILLIAM R. ANDERSON
William R. Andersen
Portfolio Manager
October 15, 1997
Investment Philosophy: Driehaus Capital Management, Inc. seeks to achieve
superior investment returns primarily by investing in companies outside the U.S.
that are currently demonstrating rapid growth in their sales and earnings and
that, in our judgment, have the ability to continue or accelerate their growth
rates in the future. Driehaus manages the Fund actively (above average turnover)
to ensure that it is fully invested in companies that meet these criteria.
2
<PAGE> 3
AVERAGE ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DRIEHAUS EAFE
-------- ----
<S> <C> <C>
Year ended 8/31/97 18.73% 9.05%
Three Years ended 8/31/97 16.82% 5.74%
Five Years ended 8/31/97 20.75% 10.67%
Since Inception (7/1/90 - 8/31/97) 16.67% 5.93%
</TABLE>
Performance is historical and does not represent future results. Investment
returns and principal value vary, and you may have a gain or loss when you sell
shares.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) DRIEHAUS EAFE
<S> <C> <C>
Jul 1990 100000 100000
Jun 1991 105602.44 88466.98
Jun 1992 125981.92 87890.81
Jun 1993 142779.49 105715.74
Jun 1994 170317.78 123687.96
Jun 1995 186040.29 125733.79
Jun 1996 268838.01 142435.56
Jun 1997 270881.64 142256.54
Aug 1997 301940 151120
</TABLE>
The "Driehaus" performance data shown above includes the performance of the
Driehaus International Large Cap Fund, L.P. (the "Partnership"), the Fund's
predecessor, for the periods before the Fund's registration statement became
effective. The Partnership was established on July 1, 1990 and the Fund
succeeded to the Partnership's assets on October 28, 1996. The Partnership was
not registered under the Investment Company Act of 1940 and thus was not subject
to certain investment and operational restrictions that are imposed by the 1940
Act. If the Partnership had been registered under the 1940 Act, its performance
may have been adversely affected. The Partnership's performance has been
restated to reflect the expenses of the Fund.
Performance data presented measures change in the value of an investment in
the Fund, assuming reinvestment of all dividends and capital gains. Average
annual total return reflects annualized change.
The graph comparing the results of a $100,000 investment in the Fund, on
July 1, 1990 (the date of the Partnership's inception), with all dividends and
capital gains reinvested, with the EAFE Index with dividends reinvested.
The EAFE Index (Morgan Stanley Capital International, Europe, Australia, Far
East Index) is an unmanaged index that is a generally accepted benchmark for
major overseas markets. Data is in U.S. dollars and includes reinvestment of
dividends. Source: Morgan Stanley Capital International.
3
<PAGE> 4
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
Driehaus International Growth Fund:
We have audited the accompanying statement of assets and liabilities of
DRIEHAUS INTERNATIONAL GROWTH FUND (the "Fund"), including the schedule of
investments, as of August 31, 1997, and the related statement of operations,
statement of changes in net assets, and financial highlights for the period
indicated thereon. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1997, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Driehaus International Growth Fund as of August 31, 1997, and the results of its
operations, changes in its net assets, and financial highlights for the period
indicated thereon, in conformity with generally accepted accounting principles.
Arthur Anderson LLP
Chicago, Illinois
October 17, 1997
4
<PAGE> 5
- --------------------------------------------------------------------------------
DRIEHAUS INTERNATIONAL GROWTH FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Market
of Value
Shares (Note A)
<S> <C> <C>
- ---------------------------------------------------------
EQUITY SECURITIES -- 94.7%
- ---------------------------------------------------------
EUROPE -- 47.8%
ITALY -- 6.1%
Bulgari SpA.............. 400,000 $ 2,367,601
Credito Italiano SpA..... 1,456,800 3,011,793
Mediolanum SpA........... 244,129 2,917,656
Telecom Italia Mobile
SpA.................... 786,500 2,717,445
------------
11,014,495
------------
SPAIN -- 5.5%
Banco Bilbao Vizcaya
SA..................... 78,375 2,059,523
Banco Santander SA....... 98,360 2,736,345
Tele Pizza SA**.......... 86,500 5,130,634
------------
9,926,502
------------
FRANCE -- 5.4%
Cap Gemini Sogeti S.A.... 40,751 2,482,403
Coflexip S.A. -- ADR..... 66,650 3,328,334
Dassault Systemes S.A. --
ADR.................... 60,000 3,900,000
------------
9,710,737
------------
SWITZERLAND -- 4.3%
Ares-Serono Group B...... 2,337 3,642,975
Sulzer Medica -- ADR**... 40,000 1,027,500
Zuerich Versicherungs-
Gesellschaft........... 8,695 3,154,808
------------
7,825,283
------------
UNITED KINGDOM -- 3.5%
Corporate Services
Group PLC.............. 191,160 605,610
Misys PLC................ 121,509 3,130,795
Norwich Union PLC**...... 200,000 1,105,181
Sema Group PLC........... 6,241 141,590
Stolt Comex Seaway
SA**................... 26,493 1,414,064
------------
6,397,240
------------
NETHERLANDS -- 3.7%
ASM Lithograph Holding
NV**................... 40,520 3,444,200
Baan Co. NV.............. 24,282 1,462,991
Fugro NV................. 52,995 1,811,862
------------
6,719,053
------------
</TABLE>
<TABLE>
<CAPTION>
Number Market
of Value
Shares (Note A)
<S> <C> <C>
- ---------------------------------------------------------
SWEDEN -- 3.7%
Ericsson (LM) Telephone
Co. -- ADR............. 38,000 $ 1,584,125
Hennes & Mauritz
AB -- B................ 88,400 3,337,121
Spectra Physics AB --
A...................... 71,580 1,701,361
------------
6,622,607
------------
IRELAND -- 4.3%
CBT Group PLC --
ADR**.................. 39,190 2,547,350
Ryanair Holdings PLC --
ADR**.................. 42,621 1,172,078
Saville Systems Ireland
PLC -- ADR**........... 59,591 3,985,148
------------
7,704,576
------------
FINLAND -- 3.3%
Nokia Corp. OY -- ADR.... 10,285 797,088
Nokia Corp. OY -- A...... 10,065 777,263
Raision Tehtaat OY....... 20,410 2,139,059
TT Tieto OY -- B......... 24,884 2,241,925
------------
5,955,335
------------
GERMANY -- 3.2%
Deutsche Lufthansa AG.... 121,840 2,464,074
SAP AG (Pref.)........... 14,999 3,399,042
------------
5,863,116
------------
RUSSIA -- 3.1%
Novosibrisk
Telephone**............ 4,000 384,000
Surgutneftegaz........... 1,200,000 1,224,000
Tatneft -- ADR........... 16,000 2,024,000
Unified Energy System.... 5,000,000 1,985,000
------------
5,617,000
------------
DENMARK -- 1.2%
SAS Danmark AS........... 136,424 2,104,022
------------
PORTUGAL -- 0.5%
Electric de Portugal
SA -- ADR**............ 30,000 918,750
------------
Total Europe............. 86,378,716
------------
</TABLE>
Notes to Financial Statements are an integral part of this Schedule.
5
<PAGE> 6
- --------------------------------------------------------------------------------
DRIEHAUS INTERNATIONAL GROWTH FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Market
of Value
Shares (Note A)
<S> <C> <C>
- ---------------------------------------------------------
FAR EAST -- 28.1%
HONG KONG -- 11.5%
CCT Telecom Holdings
Ltd.**................. 2,056,000 $ 749,474
Chengdu Telecom Cable Co.
-- H**................. 1,164,000 739,732
China Everbrite -- IHD
Pac Ltd.**............. 1,563,000 4,406,822
China Foods Holdings
Ltd.................... 1,100,000 738,093
China Merchants
International
Holdings............... 1,276,800 4,036,492
China Southern
Airlines -- ADR**...... 75,000 2,357,813
CNPC Hong Kong Ltd.**.... 3,900,000 2,591,713
Top Glory International
Holdings............... 1,650,000 777,127
Tsingtao Brewery Co.,
Ltd. -- H**............ 1,378,000 849,059
Yizheng Chemical
Fibre Co. -- H......... 3,955,000 2,883,434
Zhenhai Refining
and Chemical Co.,
Ltd. -- H.............. 1,320,000 762,223
------------
20,891,982
------------
JAPAN -- 6.6%
Advantest Corp........... 14,500 1,319,545
Fujitsu Ltd.............. 155,100 1,847,727
Furukawa Electric Co.,
Ltd.................... 367,000 2,064,612
Meitec Corp.............. 55,200 1,507,011
Nippon System
Development............ 600 12,608
NTT Data Corp............ 45 1,991,727
Rohm Co., Ltd............ 20,000 2,068,252
Tokyo Electron Ltd....... 19,000 1,029,576
------------
11,841,058
------------
</TABLE>
<TABLE>
<CAPTION>
Number Market
of Value
Shares (Note A)
<S> <C> <C>
- ---------------------------------------------------------
TAIWAN -- 5.3%
ASE Test Ltd.**.......... 32,000 $ 2,336,000
Acer Inc. 144A --
GDR**+................. 41,936 562,991
Acer Inc. -- GDR**....... 23,750 322,406
Asustek Computer Inc. --
GDR**.................. 48,620 1,028,313
Synnex Technology
International Corp.
144A -- GDR**+......... 90,000 3,375,000
Synnex Technology
International Corp.
-- GDR**............... 52,900 1,983,750
------------
9,608,460
------------
SINGAPORE -- 2.0%
Datacraft Asia Ltd....... 1,071,000 3,534,300
------------
INDONESIA -- 1.7%
PT Daya Guna Samudera
(Foreign).............. 328,500 453,103
PT Putra Surya Multidana
(Foreign)**............ 1,121,300 589,649
PT Ramayana Lestari
Sentosa (Foreign)...... 1,094,500 2,000,293
------------
3,043,045
------------
INDIA -- 0.9%
Reliance Industries
Ltd. -- GDR**.......... 86,300 1,708,740
------------
MALAYSIA -- 0.1%
Lityan Holdings BHD...... 27,500 150,608
------------
THAILAND -- 0.0%
Shinawatra Computer
Public Co., Ltd.
(Foreign).............. 3,800 19,000
------------
Total Far East........... 50,797,193
------------
</TABLE>
Notes to Financial Statements are an integral part of this Schedule.
6
<PAGE> 7
- --------------------------------------------------------------------------------
DRIEHAUS INTERNATIONAL GROWTH FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Market
of Value
Shares (Note A)
<S> <C> <C>
- ---------------------------------------------------------
NORTH AMERICA -- 9.2%
MEXICO -- 7.1%
Apasco SA de CV.......... 212,610 $ 1,571,144
Corporacion
Interamericana de
Enterenimiento SA --
B**.................... 238,009 1,292,363
Desc SA de CV -- C....... 1 8
Fomento Economico
Mexicano SA de
CV -- B................ 406,800 2,786,588
Grupo Accion SA --
ADR**.................. 15,000 223,622
Grupo Financiero Banamex
Accival SA de CV --
B**.................... 457,037 1,233,489
Grupo Financiero Bancomer
SA de
CV -- B**.............. 1,819,505 1,127,106
Grupo Televisa SA --
ADR**.................. 60,783 1,983,045
TV Azteca SA -- ADR**.... 140,050 2,520,900
------------
12,738,265
------------
UNITED STATES OF AMERICA --
2.1%
Santa Fe International
Corp................... 85,000 3,803,750
------------
Total North America...... 16,542,015
------------
MIDDLE EAST -- 5.2%
ISRAEL -- 5.2%
ECI Telecommunications
Limited Designs........ 53,400 1,591,988
Nice Systems, Ltd. --
ADR**.................. 104,339 4,167,039
Orbotech, Ltd.**......... 40,900 2,039,888
Teledata Communications,
Ltd.**................. 43,750 1,509,375
------------
9,308,290
------------
Total Middle East........ 9,308,290
------------
</TABLE>
<TABLE>
<CAPTION>
Number Market
of Value
Shares (Note A)
<S> <C> <C>
- ---------------------------------------------------------
AFRICA -- 3.0%
SOUTH AFRICA -- 3.0%
Dimension Data Holdings
Ltd.**................. 718,400 $ 3,054,904
Investec Group Ltd....... 63,930 2,326,771
------------
5,381,675
------------
Total Africa............. 5,381,675
------------
SOUTH AMERICA -- 1.4%
BRAZIL -- 1.4%
Ericsson
Telecommunicacoes S.A.
(Pref.)................ 31,716,000 1,580,424
Inepar S.A. -- Industria
E Construcoes
(Pref.)................ 471,021,500 970,956
------------
2,551,380
------------
Total South America...... 2,551,380
------------
Total Equity Securities
(cost $161,638,397).... 170,959,269
------------
- ---------------------------------------------------------
TOTAL INVESTMENTS (COST
$161,638,397)............ 94.7% 170,959,269
Other Assets in Excess of
Liabilities.............. 5.3% 9,585,825
----------- ------------
Net Assets................. 100.0% $180,545,094
=========================================================
The federal income tax basis and unrealized
appreciation (depreciation) for all securities is as
follows:
Basis.................................... $161,638,397
============
Gross Appreciation....................... $ 15,963,014
Gross Depreciation....................... (6,642,142)
------------
Net Appreciation..................... $ 9,320,872
============
</TABLE>
** Non-income producing security.
+ Restricted security (Note D).
Notes to Financial Statements are an integral part of this Schedule.
7
<PAGE> 8
- --------------------------------------------------------------------------------
DRIEHAUS INTERNATIONAL GROWTH FUND
SCHEDULE OF INVESTMENTS BY INDUSTRY
AUGUST 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY NET ASSETS
- -------- ----------
<S> <C>
Airlines............................... 3.3%
Banking................................ 5.6%
Beverages & Tobacco.................... 2.0%
Bio-Technology......................... 0.6%
Business Services...................... 0.3%
Broadcast & Publishing................. 2.5%
Chemicals.............................. 3.0%
Communications......................... 1.4%
Computer Manufacturers................. 1.5%
Computer Software...................... 16.3%
Computer Other......................... 1.1%
Drugs.................................. 2.0%
Electric Components.................... 4.7%
Electric Equipment..................... 5.2%
Energy Equipment....................... 0.5%
Energy Sources......................... 8.0%
Financial Services..................... 1.6%
Food Processors........................ 1.8%
Industrial Components.................. 1.1%
Insurance.............................. 4.0%
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY NET ASSETS
- -------- ----------
<S> <C>
Leisure & Tourism...................... 0.7%
Machinery.............................. 1.0%
Merchandising.......................... 1.1%
Miscellaneous Materials................ 0.9%
Multi-Industry......................... 2.2%
Multi-Industry Finance................. 2.4%
Office Equipment....................... 4.9%
Photo-Optical Equipment................ 1.9%
Real Estate............................ 0.6%
Retailing -- Foods..................... 2.8%
Retailing -- Goods..................... 3.2%
Semi Conductors/Components............. 0.6%
Telecommunications..................... 3.0%
Telecommunications Equipment........... 0.1%
Transportation......................... 1.2%
Utilities.............................. 1.6%
Other Assets Less Liabilities.......... 5.3%
------
TOTAL.................................. 100.0%
======
</TABLE>
Notes to Financial Statements are an integral part of this Schedule.
8
<PAGE> 9
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
August 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (Cost $161,638,397)........ $170,959,269
Foreign currency, at market value (Cost $2,542,490)..... 2,541,577
Cash.................................................... 13,452,048
Receivables:
Dividends.......................................... 224,050
Interest........................................... 20,601
Fund shares sold................................... 115,421
Investment securities sold......................... 2,307,578
Prepaid insurance....................................... 3,900
Deferred organizational costs........................... 106,862
------------
- ----------------------------------------------------------------------------
TOTAL ASSETS................................... 189,731,306
------------
- ----------------------------------------------------------------------------
LIABILITIES:
Investment securities purchased......................... 8,831,763
Accrued expenses........................................ 121,722
Payable to affiliates................................... 232,727
------------
- ----------------------------------------------------------------------------
TOTAL LIABILITIES.............................. 9,186,212
------------
- ----------------------------------------------------------------------------
NET ASSETS.................................................. $180,545,094
============
SHARES OUTSTANDING.......................................... 15,172,194
============
NET ASSET VALUE PER SHARE................................... $ 11.90
============
============================================================================
NET ASSETS CONSISTED OF THE FOLLOWING AT AUGUST 31, 1997:
Paid-in capital......................................... $158,635,869
Undistributed net investment loss....................... (784,650)
Undistributed net realized gain......................... 15,013,053
Undistributed net realized foreign exchange loss........ (1,541,435)
Undistributed net realized foreign exchange loss on
portfolio hedges....................................... (74,544)
Unrealized foreign exchange loss........................ (24,071)
Unrealized appreciation on investments.................. 9,320,872
------------
NET ASSETS..................................... $180,545,094
============
============================================================================
</TABLE>
Notes to Financial Statements are an integral part of this Statement.
9
<PAGE> 10
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the period October 28, 1996 (commencement of operations) through August 31,
1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (net of non-reclaimable foreign taxes of
$81,983)........................................... $ 1,371,638
Interest........................................... 312,620
-----------
- ---------------------------------------------------------------------------
Total income..................................... 1,684,258
-----------
- ---------------------------------------------------------------------------
Expenses:
Investment advisory fee............................ 1,752,344
Administration fee................................. 146,029
Professional fees.................................. 104,369
Federal and state registration fees................ 38,365
Custodian fee...................................... 300,379
Transfer agent fees................................ 35,708
Trustees' fees..................................... 45,000
Amortization of organization costs................. 20,000
Miscellaneous...................................... 45,914
-----------
- ---------------------------------------------------------------------------
Total expenses before fees waived................ 2,488,108
-----------
Transfer agent fees waived....................... (19,200)
-----------
Total expenses net of fees waived................ 2,468,908
-----------
- ---------------------------------------------------------------------------
Net investment loss............................ (784,650)
-----------
- ---------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from security transactions............ 15,013,053
Net realized foreign exchange loss...................... (1,541,435)
Net realized foreign exchange loss on portfolio
hedges................................................. (74,544)
Net unrealized foreign exchange loss.................... (24,071)
Change in unrealized appreciation of investments........ 9,320,872
-----------
- ---------------------------------------------------------------------------
Net gain on investments........................ 22,693,875
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $21,909,225
===========
===========================================================================
</TABLE>
Notes to Financial Statements are an integral part of this Statement.
10
<PAGE> 11
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the period October 28, 1996 (commencement of operations) through August 31,
1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment loss................................ $ (784,650)
Net realized gain from security transactions....... 15,013,053
Net realized foreign exchange loss................. (1,541,435)
Net realized foreign exchange loss on portfolio
hedges........................................... (74,544)
Net unrealized foreign exchange.................... (24,071)
Change in unrealized appreciation of investments... 9,320,872
------------
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from
operations................................... 21,909,225
------------
- -----------------------------------------------------------------------------------------------
Capital share transactions:
Net increase in net assets derived from capital
share transactions............................... 158,535,457
------------
Total increase in net assets....................... 180,444,682
------------
- -----------------------------------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------------------------------
Beginning of period..................................... 100,412
------------
End of period........................................... $180,545,094
============
===============================================================================================
</TABLE>
Capital share transactions are as follows:
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C>
Shares purchased................................... 15,894,033 $166,480,305
Shares reinvested.................................. -- --
Shares redeemed.................................... (731,880) (7,944,848)
---------- ------------
Net increase from capital share transactions... 15,162,153 $158,535,457
========== ============
=============================================================================================
</TABLE>
Notes to Financial Statements are an integral part of this Statement.
11
<PAGE> 12
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FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For the period October 28, 1996 (commencement of operations) through August 31,
1997
- --------------------------------------------------------------------------------
The Table below sets forth financial data for a share of capital stock
outstanding throughout the period presented.
<TABLE>
<S> <C>
Net asset value, beginning of period........................ $ 10.00
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss....................................... (0.05)
Net gains on investments (both realized and unrealized)... 1.95
--------
Total from investment operations........................ 1.90
--------
LESS DISTRIBUTIONS:
Dividends from net investment income...................... 0.00
Distributions from capital gains.......................... 0.00
--------
Total distributions..................................... 0.00
--------
Net asset value, end of period.............................. $ 11.90
========
Total Return................................................ 19.00%**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)...................... $180,545
Ratio of expenses to average net assets***................ 2.11%*
Ratio of net investment loss to average net assets***..... (0.67)%*
Portfolio turnover........................................ 380.02%**
</TABLE>
- --------------------------------------------------------------------------------
* Annualized
** Not Annualized
*** Such ratios are after transfer agent waivers. The transfer agent voluntarily
waived a portion of its fees. The ratio of expenses, before fees waived, to
average net assets is 2.13%.
Average commission rate paid per share on stock transactions for the period
ended August 31, 1997 was $0.0016. Foreign commissions usually are lower than
U.S. commissions when expressed as cents per share due to the lower per share
price of many non-U.S. securities.
Notes to Financial Statements are an integral part of this Schedule.
12
<PAGE> 13
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DRIEHAUS INTERNATIONAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The Driehaus International Growth Fund (the "Fund") is a series of the
Driehaus Mutual Funds (the "Trust"), a registered management investment company.
The Trust is a Delaware business trust organized under an Agreement and
Declaration of Trust dated May 31, 1996 and may issue an unlimited number of
full and fractional units of beneficial interest (shares) without par value. The
Fund was seeded on September 13, 1996 with the sale and issuance of 10,000
shares of its common stock to Richard H. Driehaus, the Chairman of the Board and
President of the Trust. The Fund commenced operations on October 28, 1996, as
the successor to the assets of the Driehaus International Large Cap Fund, L.P.
(the "Partnership"), a limited partnership organized on July 1, 1990, through a
transfer of $85,727,972 of assets in exchange for 8,572,797.2 shares of the
Fund. Included in these assets transferred was a net unrealized taxable gain of
$5,628,357, all of which was realized during the Fund's fiscal year.
The Fund's investment objective is to maximize capital appreciation by
investing primarily in the equity securities of foreign companies with market
capitalizations of more than $300 million (U.S.) using growth style investment
criteria. The Fund will not invest in securities with market capitalizations of
less than $200 million.
SECURITIES VALUATION AND TRANSACTIONS
Depending upon local convention or regulation, equity securities may be
valued at 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. Securities for which market quotations are
not readily available are valued at fair value as determined in good faith by or
under the direction of the Trust's Board of Trustees.
Securities transactions are accounted for on trade date. The cost of
investments sold is determined by the use of specific identification method for
both financial reporting and income tax purposes. Interest income is recorded on
an accrual basis. Dividend income, net of non-reclaimable foreign taxes
withheld, is recorded on the ex-dividend date.
The Fund accrues income and expenses daily. This change in net asset value
is allocated daily.
FEDERAL INCOME TAXES
No provision is made for Federal income taxes as it is the Fund's intention
to qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code and to make all the required distributions to its shareholders in
amounts sufficient to relieve the Fund from all or substantially all Federal
income and excise taxes.
FOREIGN CURRENCY TRANSLATION
Foreign currency is translated into U.S. dollar values based upon the
current rates of exchange on the date of the Fund's valuation.
Net realized foreign exchange gains or losses which are reported by the Fund
result from sales of foreign currencies, currency gains and losses on
transaction hedges arising from changes in exchange rates between the trade and
settlement dates on forward contracts underlying securities transactions, and
the difference between the amounts accrued for dividends, interest, and
reclaimable foreign withholding taxes and the amounts actually received or paid
in U.S. dollars for these items. Net unrealized foreign exchange gains and
losses result from changes in the U.S. dollar value of assets and liabilities,
(other than investments in securities) which are denominated in
13
<PAGE> 14
- --------------------------------------------------------------------------------
DRIEHAUS INTERNATIONAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
foreign currencies, as a result of changes in exchange rates.
Net realized foreign exchange gains or losses on portfolio hedges result
from the non-speculative use of forward contracts with respect to portfolio
positions denominated or quoted in a particular currency in order to reduce or
limit exposure in that currency. The Fund had no outstanding portfolio hedges at
August 31, 1997.
The Fund does not isolate that portion of the results of operations which
results from fluctuations in foreign exchange rates on investments held. These
fluctuations are included with the net realized and unrealized gains or losses
which result from changes in the market prices of investments.
DEFERRED ORGANIZATION COSTS
Organization costs incurred by the Fund have been deferred and are being
amortized over a period of 60 months.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of net increases or decreases in net assets
from operations during the reporting period. Actual results could differ from
those estimates.
B. INVESTMENT ADVISORY FEES, ADMINISTRATIVE FEES AND TRANSACTIONS WITH
AFFILIATES
Richard H. Driehaus is also the Chairman of the Board, sole director, and
sole shareholder of Driehaus Capital Management, Inc., a registered investment
adviser, and of Driehaus Securities Corporation, a registered broker-dealer.
Driehaus Capital Management, Inc. ("DCM") serves as the Fund's investment
adviser. In return for its services to the Fund, DCM receives a monthly fee,
computed and accrued daily at an annual rate of 1.5% of average net assets. The
amount accrued to DCM for the period ended August 31, 1997 was $1,752,344 of
which $232,727 is included in Payable to affiliates. DCM agreed to reduce its
fee and absorb other operating expenses to the extent necessary to ensure that
the total Fund operating expenses (other than interest, taxes, brokerage
commissions and other portfolio transaction expenses, capital expenditures and
extraordinary expenses) will not exceed 2.25% 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. As of August 31,
1997, no fees have yet been absorbed.
DCM advanced certain organization costs to the Fund. As of August 31, 1997,
DCM has been reimbursed for all organizational costs advanced to the Fund.
Driehaus Securities Corporation ("DSC") acts as the Fund's distributor. In
addition, DSC executes all domestic exchange agency trades for the Fund in
American Depository Receipts (ADR'S) or other publicly traded equity interests
representing shares in foreign companies and, if applicable, any U.S. securities
the Fund might trade. For the period ended August 31, 1997, DSC traded 7,727,602
shares and received $227,518 in commissions. A portion of these commissions is
paid to DSC's clearing broker for clearing charges.
Certain officers of the Trust are also officers of DCM and DSC. No such
officers received compensation from the Fund.
PFPC Inc., a wholly owned, indirect subsidiary of PNC Bank, serves as the
Fund's administrative and accounting agent. In compensation for its services,
PFPC receives a monthly fee based upon average net
14
<PAGE> 15
- --------------------------------------------------------------------------------
DRIEHAUS INTERNATIONAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
assets plus out-of-pocket expenses. PFPC Inc. also acts as the Fund's transfer
agent and dividend disbursing agent. PFPC has agreed to waive a portion of its
transfer agent fees during the first year of the Fund's operation.
C. INVESTMENT TRANSACTIONS
The aggregate purchases, excluding the securities transferred from the
Partnership, and sales of investments securities, other than short-term
obligations, for the period October 28, 1996 through August 31, 1997, were as
follows:
<TABLE>
<S> <C>
Purchases $568,722,871
Sales $504,653,281
</TABLE>
D. RESTRICTED SECURITIES
The Fund may purchase securities that have been privately placed but that
are eligible for purchase and sale under Rule 144A under the Securities and
Exchange Act of 1933. At August 31, 1997, the aggregate value of these
securities was equal to $4,403,313 and represented 2.4% of net assets.
E. LINES OF CREDIT
The Fund has a $5 million committed line of credit and a $5 million
un-committed line of credit. These lines of credit are available primarily to
meet large, unexpected shareholder withdrawals. For the period ended August 31,
1997, no borrowing was made on these lines of credit.
F. OFF BALANCE SHEET RISKS
The Fund's investments in foreign securities may entail risks due to the
potential for political and economic instability in the countries where the
issuers of these securities are located. In addition, foreign exchange
fluctuations could affect the value of positions held. These risks are generally
intensified in emerging markets. It is DCM's policy to continuously monitor its
exposure to these risks.
15
<PAGE> 16
Directors & Officers
Richard H. Driehaus
Chairman of the Board & President
Arthur B. Mellin
Trustee
Robert F. Moyer
Vice President & Trustee
A.R. Umans
Trustee
Daniel Zemanek
Trustee
William R. Andersen
Vice President
Diane L. Wallace
Vice President & Treasurer
Mary H. Weiss
Vice President & Secretary
Jennifer Billingsley
Assistant Vice President & Secretary
Dusko Culafic
Assistant Vice President & Treasurer
Investment Adviser
DRIEHAUS CAPITAL
MANAGEMENT, INC.
25 East Erie Street
Chicago, IL 60611
Distributor
DRIEHAUS SECURITIES
CORPORATION
25 East Erie Street
Chicago, IL 60611
Administrator & Transfer Agent
PFPC INC.
400 Bellevue Parkway
Suite 108
Wilmington, DE 19809
Custodian
MORGAN STANLEY
TRUST COMPANY
One Pierrepont Plaza
Brooklyn, NY 11201
DRIEHAUS MUTUAL FUNDS LOGO
DRIEHAUS INTERNATIONAL GROWTH FUND
Distributed by:
DRIEHAUS SECURITIES CORPORATION
ANNUAL REPORT
TO SHAREHOLDERS
AUGUST 31, 1997
This report has been prepared for the shareholders
of the Fund and is not an offering to sell or buy
any Fund securities. Such offering is only made
by the Fund's prospectus.
