DRIEHAUS MUTUAL FUNDS, 485APOS, 1997-10-31

DRIEHAUS MUTUAL FUNDS
485APOS, 1997-10-31
PREPACKAGED SOFTWARE

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<PAGE> 1
As filed with the Securities and Exchange Commission

on or about October 31, 1997

Registration No. 333-05265 811-07655
______________________________________

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]

Pre-Effective Amendment No. __ [ ]

Post-Effective Amendment No. 2 [X]

and/or

REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]

Amendment No. 5 [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 NORTH LASALLE STREET
CHICAGO, ILLINOIS 60601

It is proposed that this filing will become effective (check appropriate box)

[ ] Immediately upon filing pursuant to paragraph (b)
[ ] On (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a) (1)
[ ] On (date) pursuant to paragraph (a) (1)
[X] 75 days after filing pursuant to paragraph (a) (2)
[ ] On (date) pursuant to paragraph (a) (2) of Rule 485.

If appropriate, check the following box:

[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

<PAGE> 2
DRIEHAUS MUTUAL FUNDS
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)

<TABLE>
<CAPTION>
N-1A
ITEM NO. LOCATION
-------- --------
<S> <C> <C>
PART A
Item 1. Cover Page . . . . . . . . . . . . . . . . . . . . . . Cover Page
Item 2. Synopsis . . . . . . . . . . . . . . . . . . . . . . . Summary
Item 3. Condensed Financial Information . . . . . . . . . . . . Financial Highlights; 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 . . . . . . . . . . . . . . . . . . . . . Inapplicable
Item 22. Calculation of Performance Data . . . . . . . . . . . . Investment Performance
Item 23. Financial Statements . . . . . . . . . . . . . . . . . Financial Information of Fund; Report of Independent
Auditors; Statement of Net Assets

PART C
</TABLE>

Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to the Registration Statement.

<PAGE> 3
TABLE OF CONTENTS

<TABLE>

<S> <C>
SUMMARY...................................

FEE TABLE.................................

FINANCIAL HIGHLIGHTS-INTERNATIONAL
GROWTH FUND..............................

THE PORTFOLIOS............................

INVESTMENT PHILOSOPHY....................

INVESTMENT OBJECTIVES AND POLICIES.......

DRIEHAUS INTERNATIONAL GROWTH FUND......

DRIEHAUS ASIAN GROWTH FUND..............

DRIEHAUS EMERGING MARKETS GROWTH FUND...

PORTFOLIO INVESTMENTS AND STRATEGIES.....

RESTRICTIONS ON INVESTMENTS..............

RISKS AND INVESTMENT CONSIDERATIONS......

HOW TO PURCHASE SHARES....................

HOW TO REDEEM SHARES......................

NET ASSET VALUE...........................

DISTRIBUTIONS AND TAXES...................

INVESTMENT RETURN.........................

MANAGEMENT OF THE FUND....................

ORGANIZATION AND DESCRIPTION OF
SHARES...................................

</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 December 31, 1997, as amended from
time to time, 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. Each portfolio
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
DRIEHAUS ASIAN GROWTH FUND

DRIEHAUS EMERGING MARKETS GROWTH FUND

PROSPECTUS DECEMBER 31, 1997

DRIEHAUS MUTUAL FUNDS
25 East Erie Street
Chicago, Illinois 60611

1-800-560-6111

The objective of the International Growth Fund is to maximize capital
appreciation. The portfolio pursues its objective by investing primarily in
the equity securities of foreign companies.

The objective of the Asian Growth Fund is to maximize capital appreciation.
The portfolio pursues its objective by investing primarily in equity securities
of Asian companies.

The objective of the Emerging Markets Growth Fund is to maximize capital
appreciation. The portfolio pursues its objective by investing primarily in
the equity securities of companies in emerging markets around the world.

There is no assurance that a Portfolio's objective will be achieved.

INVESTMENTS IN THE PORTFOLIOS INVOLVE SIGNIFICANT RISKS. (SEE "RISKS AND
INVESTMENT CONSIDERATIONS.")

<PAGE> 4
SUMMARY
-------

The Driehaus International Growth Fund, the Driehaus Asian Growth Fund and
the Driehaus Emerging Markets Growth Fund (the "Portfolios") are each series
of Driehaus Mutual Funds (the "Fund"), an open-end management investment
company. The Fund is a "no-load" fund. There are no sales charges.

INVESTMENT OBJECTIVES AND POLICIES. Each Portfolio's investment
objective is to maximize capital appreciation. Each Portfolio seeks to achieve
its objective by investing primarily in the equity securities of foreign
companies using growth style investment criteria. The investment adviser's
investment style generally results in a relatively high rate of portfolio
turnover, which generally increases the brokerage costs. See "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
each Portfolio's investment objective will be achieved. See "The Portfolios --
Investment Objectives and Policies."

INVESTMENT RISKS. Each Portfolio 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 each
Portfolio 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, each Portfolio 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 "non-diversified" funds, each Portfolio will
be able to invest a relatively high percentage of its assets in a limited
number of issues, therefore making them more susceptible to a single economic,
political or regulatory occurrence than a diversified fund. See "The
Portfolios -- Risks and Investment Considerations."

PURCHASES AND REDEMPTIONS. The minimum initial investment is $100,000
for the International Growth Fund and $10,000 for the Asian Growth Fund and
Emerging Markets Growth Fund. Additional investments must be $20,000 for the
International Growth Fund and $ _________ for the Asian Growth Fund and the
Emerging Markets Growth Fund. See "Purchases of Shares." For information on
redeeming Portfolio shares see "Redemption of Shares."

NET ASSET VALUE. The purchase and redemption price of each Portfolio'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. Each 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 of each Portfolio. See "Management of the Fund."

FINANCIAL HISTORY. Although the Fund was first established as a
registered investment company on June 5, 1996, the International Growth Fund
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 Portfolio. In addition, the distributions made by the
Portfolio will reflect the basis in the investments carried forward from the
Limited Partnership. See "Distribution and Taxes."

<PAGE> 5

FEE TABLE
---------

<TABLE>
<CAPTION>
Emerging
International Asian Markets
Growth Growth Growth
------------- ------ --------
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C> <C>
Sales Load Imposed on Purchases.................................. None None None

Sales Load Imposed on Reinvested Dividends....................... None None None

Deferred Sales Load.............................................. None None None

Redemption Fees*................................................. None None None

Exchange Fees.................................................... None None None

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)

Management Fees.................................................. 1.50% 1.50% 1.50%

12b-1 Fees....................................................... None None None

Other Expenses................................................... .63% %*** %***
----- ----- -----
Total Fund Operating Expenses.................................... 2.13%** %*** %***
===== ===== =====
</TABLE>

- ----------------

* There is a $25 charge for payments of redemption proceeds by wire.

** Total Fund Operating Expenses does not reflect the transfer agent's
voluntary fee waiver of .02% during the prior fiscal year.

*** The Adviser has 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 extra ordinary
expenses) will not exceed 2.25% of the average net assets of the portfolio
on an annual basis for the first twelve months of the portfolio's
operations. Without expense reimbursement, "Other Expenses" and "Total
Fund Operating Expenses" for the fiscal year ending August 31, 1998 are
estimated to be _____% and _____%, respectively for the Asian Growth Fund
and _____% and _____%, respectively for the Emerging Markets Growth Fund.

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:

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
International Growth $-- $-- $ -- $ --
Asian Growth -- -- -- --
Emerging Markets Growth -- -- -- --
</TABLE>

The purpose of the preceding tables is to assist investors in understanding the
various costs and expenses that an investor in a portfolio will bear directly or
indirectly. As new portfolios, the percentages shown for the Asian Growth Fund
and the Emerging Markets Growth Fund are estimates for the first fiscal year
and the example is completed for only the one and five year periods.
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.

FINANCIAL HIGHLIGHTS - INTERNATIONAL GROWTH FUND
------------------------------------------------

The figures below for the fiscal period from October 28, 1996 through August 31,
1997 have been audited by Arthur Andersen LLP. The Fund's 1997 Annual Report to
Shareholders, which may be obtained without charge by calling or writing to the
Fund, is incorporated by reference into the Statement of Additional
Information. Per share data for an outstanding share throughout the period
is as follows:

2
<PAGE> 6

<TABLE>
<CAPTION>
International Growth Fund
For the period from October 28, 1996
through August 31, 1997
---------------------------
<S> <C>
Net asset value, beginning of period $10.00
INCOME FROM INVESTMENT OPERATIONS:

Net Investment Loss (0.05)
Net gains on securities (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 voluntary transfer agent fee waivers. The ratio
of expenses to average net assets is 2.13% before fees waived.

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.

THE PORTFOLIOS

The Driehaus International Fund Growth Fund, Driehaus Asian Growth Fund and
Driehaus Emerging Markets Growth Fund (individually a "Portfolio" and
collectively the "Portfolios") are each series of the Driehaus Mutual Funds (the
"Fund"), an open-end management investment company. Driehaus Capital
Management, Inc. (the "Adviser") provides management and investment advisory
services to the Fund. Prospective investors should consider an investment in a
Portfolio as long-term investment. There is no assurance that a Portfolio will
meet its investment objective.

INVESTMENT PHILOSOPHY

Each Portfolio'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 identifying growth
companies, The Adviser seeks companies that have demonstrated superior earnings
growth and that, in the opinion of the Adviser, have the potential for superior
earnings growth in the near future.

Each Portfolio'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.

INVESTMENT OBJECTIVE AND POLICIES

Driehaus International Growth Fund. The Portfolio's investment objective is
to maximize capital appreciation. The Portfolio seeks to achieve its
objective by investing primarily in the equity securities of foreign companies.
Under normal market conditions, the Portfolio will invest substantially all
(no less than 65%) of its assets in at least three countries other than the
United States. There are no maximum limitations on the number of countries
in which the Adviser 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 Portfolio
is a non-diversified investment company. (See "Risks and Investment
Considerations" for the risks associated with non- diversification.) Current
income is not a factor in the selection of portfolio securities.

3
<PAGE> 7

The securities markets of less developed economies and of many developing
economies are sometimes referred to as "emerging markets." Although
the amount of the Portfolio's assets invested in emerging markets
will vary over time, the Adviser currently expects that a substantial portion of
the Portfolio's assets will be invested in emerging markets.
Currently, emerging markets generally include every country in the world other
than the United States, Canada, Japan, Australia, New Zealand, Singapore and
most Western European countries. These markets are generally characterized by
limited trading volume and greater volatility and, as a result, the Portfolio
may be subject to greater risks to the extent of its investments in such
markets. Moreover, the Portfolio is not limited to a specific percentage of
assets that may be invested in a single emerging market country. Therefore, to
the extent a substantial portion of the Portfolio's assets are invested in a
specific country, the Portfolio would be particularly subject to the risks
associated with that country. For a discussion of these risks, see "Risks and
Investment Considerations" below.

The Portfolio generally will invest in securities of issuers with market
capitalizations of greater than $300 million and will not invest in securities
of issuers with market capitalizations of less than $200 million. The Portfolio
may also invest in securities of issuers, that, together with any predecessors,
have been in continuous operation for less than three years. Companies with
lower market capitalizations as well as start-up companies 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-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, debt securities that are
convertible into common stock and depositary receipts for those securities. The
Portfolio may purchase foreign securities in the form of sponsored or
unsponsored depositary or other securities representing underlying shares of
foreign issuers. The Portfolio may invest in ADRs. Generally, the Portfolio
would purchase despositary receipts, rather than directly investing in the
underlying shares of a foreign issuer, for liquidity, timing or transaction
cost reasons.

In addition to equities, as a temporary defensive measure, the Portfolio may
hold up to 100% of its assets in 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 Portfolio may also
purchase such securities if the Adviser believes they may be necessary to meet
the Portfolio's liquidity needs.

4
<PAGE> 8

Driehaus Asian Growth Fund. The investment objective of the
Portfolio is to maximize capital appreciation. The Portfolio pursues its
objective by investing in the equity securities of Asian companies. The
Portfolio considers Asian companies to be (i) companies organized under the
laws of an Asian country or having securities which are traded principally on
an exchange or over-the-counter in an Asian country; or (ii) companies which,
regardless of where organized or traded, have a significant amount of assets
located in and/or derive a significant amount of their revenues from goods
purchased or sold, investments made, or services performed in or with Asian
countries. At least 65% of the Portfolio's assets will be invested in Asian
countries. Currently, Asian countries include Australia, China (including
Hong Kong), India, Indonesia, Japan, Korea, Malaysia, New Zealand, Pakistan,
the Philippines, Singapore, SriLanka, Taiwan and Thailand. The Portfolio may
invest significant assets in any single Asian country. The Portfolio may also
invest up to 35% of its assets (measured as of the date of investment) in
equity securities of companies which are not Asian companies. Current dividend
income is not an investment consideration and dividend income is incidental to
the Portfolio's overall investment objective.

The Adviser generally intends to remain fully invested. However, as a
temporary defensive measure, the Portfolio may hold up to 100% of its assets
in 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 Portfolio may also purchase such securities if the
Adviser believes they may be necessary to meet the Portfolio's liquidity needs.

Equity securities that the Portfolio may utilize include common and
preferred stock, depository receipts, convertible debt and warrants, rights
and options to purchase equity securities. Generally, the Portfolio will
purchase depositary receipts rather than directly investing in the underlying
shares of a foreign issuer for liquidity, timing or transaction cost reasons.
The Portfolio may also utilize a wide range of other securities and derivative
instruments to indirectly gain exposure to Asian securities, including but not
limited to foreign investment companies, swap agreements and similar
arrangements. The Portfolio will invest in companies having an aggregate
market capitalization of at least $200 million. The Portfolio may also invest
in securities of issuers, that, together with any predecessors, have been in
continuous operation for less than three years. Companies with lower market
capitalizations as well as start-up companies 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-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. The Portfolio may invest
directly in securities of such companies as well as indirectly through
investments in other pooled investment vehicles (including foreign investment
companies) and through principal transactions with dealers, such as swap
agreements.

The Adviser currently expects that a substantial portion of the Portfolio's
assets will be invested in securities in emerging markets. These markets are
generally characterized by limited trading volume and greater volatility and,
as a result, the Portfolio may be subject to greater risks to the extent of its
investments in such markets. To the extent a substantial portion of the
Portfolio's assets are invested in a specific country, the Portfolio would be
particularly subject to the risks associated with that country. As a general
rule, investments in securities of Asian companies involve greater risks than
U.S. investments. See "Risks and Investment Considerations."

<PAGE> 9

Driehaus Emerging Markets Growth Fund. The investment objective
of the Portfolio is to maximize capital appreciation. The Portfolio pursues
its objective by investing in the equity securities of emerging market
companies. Currently, emerging markets includes every country in the world
other than the United States, Canada, Japan, Australia, New Zealand, Hong Kong,
Singapore and most Western European Countries. At least 65% of the Portfolio's
assets will be invested in emerging markets. Emerging market companies are (i)
companies organized under the laws of an emerging market country or having
securities which are traded principally on an exchange or over-the-counter in
an emerging market country; or (ii) companies which, regardless of where
organized or traded, have a significant amount of assets located in and/or
derive a significant amount of their revenues from goods purchased or sold,
investments made, or services performed in or with emerging market countries.
The Portfolio may invest significant assets in any single emerging market
country. The Portfolio may also invest up to 35% of its assets (measured as of
the date of investment) in equity securities of companies which are not
emerging market companies. Current dividend income is not an investment
consideration and dividend income is incidental to the Portfolio's overall
investment objective.

The Adviser generally intends to remain fully invested. However, as a
temporary defensive measure, the Portfolio may hold up to 100% of its assets
in 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 Portfolio may also purchase such
securities if the Adviser believes they may be necessary to meet the
Portfolio's liquidity needs.

The Portfolio will invest in companies having an aggregate market
capitalization of at least $200 million. The Portfolio may invest directly in
securities of such companies as well as indirectly through investments in
other pooled investment vehicles (including foreign investment companies) and
through principal transactions with dealers, such as swap agreements. The
Portfolio may also invest in securities of issuers, that, together with any
predecessors, have been in continuous operation for less than three years.
Companies with lower market capitalizations as well as start-up companies 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-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.

Emerging markets are generally characterized by limited trading volume and
greater volatility. Moreover, the Portfolio is not limited to a specific
percentage of assets that may be invested in a single emerging market country.
Therefore, to the extent a substantial portion of the Portfolio's assets are
invested in a specific country, the Portfolio would be particularly subject to
the risks associated with that country. See "Risks and Investment
Considerations -- Foreign Investments."

4
<PAGE> 10

PORTFOLIO INVESTMENTS AND STRATEGIES

Each Portfolio 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 Portfolios to reduce such risks.

CURRENCY HEDGING. Most of the Portfolios' assets 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 Portfolios 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 a 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 a Portfolio of unrealized
profits or force the Portfolio 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 Portfolios' 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

<PAGE> 11
foreign currency. (For further information on forward foreign currency exchange
transactions, see the Statement of Additional Information.)

SETTLEMENT TRANSACTIONS. When a Portfolio 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 Portfolio 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 Portfolio 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
Portfolio purchases or sells a specific amount of foreign currency, at a price
set at the time of the contract, for receipt or delivery at either a specified
date or at any time within a specified time period. In so doing, the Portfolio
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
Portfolio seeks to move investments denominated in one currency to investments
denominated in another. The Portfolio 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.

5
<PAGE> 12

CONVERTIBLE SECURITIES. By investing in convertible securities, a Portfolio
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 Portfolio are
frequently rated investment grade, a Portfolio also may purchase unrated
securities or securities rated below investment grade if the securities meet
the Adviser's other investment criteria. Each Portfolio does not currently
intend to invest more than 5% of its total assets in below investment grade
convertible securities. Convertible securities rated below investment grade (a)
tend to be more sensitive to interest 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.

DEBT SECURITIES. In pursuing its investment objective, under normal market
conditions, the Fund may invest up to 35% of its total assets in non-convertible
debt securities. Investments in such 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 Advisor. 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. A Portfolio 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 a Portfolio'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 by the
Portfolios. Securities sold by the Portfolios may be purchased again at a
later date when the Adviser perceives that the securities are again "timely."
In addition, adjustments to portfolio securities will be made when conditions
affecting relevant markets, particular industries or individual issues, warrant
such action. (See "Risks and Investment Considerations -- Portfolio
Turnover.")

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 a Portfolio, the commissions, fees or other
remuneration received by DSC

<PAGE> 13

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 Portfolios each anticipate a higher portfolio
turnover rate (i.e., over 400%, 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
Portfolios each anticipate 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.")

FOREIGN INVESTMENT COMPANIES. The Portfolios may each invest in foreign
investment companies. Some countries may not permit direct investment by
outside investors. Investments in such countries may only be permitted through
foreign government-approved or authorized investment vehicles, which may
include other investment companies. In addition, it may be less expensive and
more expedient for a Portfolio to invest in a foreign investment company in a
country that permits direct foreign investment. Investing through such vehicles
may involve layered fees or expenses. The Portfolios do not intend to invest in
such investment companies unless, in the judgment of the Adviser, the potential
benefits of such investments justify the payment of any associated fees or
expenses.

DERIVATIVES. Consistent with its objective, each Portfolio may invest in a
broad array of financial instruments and securities, including conventional
exchange-traded and non-exchange-traded options, futures contracts and futures
options and may enter into various equity or interest rate transactions, such
as swaps, caps, floors or collars and may enter into various currency
transactions such as currency forward contracts, currency futures contracts,
currency swaps or options on currencies ("Derivatives"). (For these purposes,
forward currency contracts are not considered 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. If types of derivatives other than those described herein
become available in the future, the Portfolios may also use those investment
vehicles, provided the Fund's Board of Trustees determines that their use is
consistent with the Portfolio's investment objective. Each portfolio does
not expect to invest more than 5% of its total assets in Derivatives.

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, however, because of the uncertainties associated with their use
portfolio returns may be decreased by the use of Derivatives. See "Risks and
Investment Considerations."

REPURCHASE AGREEMENTS. Each Portfolio 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. A repurchase agreement involves the sale of securities to a
Portfolio, 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 a
Portfolio 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, a Portfolio 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 Portfolio 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.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES: REVERSE REPURCHASE AGREEMENTS.
Each Portfolio 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 Portfolio 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 Portfolio 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. Each Portfolio 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.

Each Portfolio may enter into reverse repurchase agreements with banks and
securities dealers. A reverse repurchase agreement is a repurchase agreement in
which a Portfolio 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 Portfolio 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 Portfolio 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 Portfolio 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.

LENDING OF PORTFOLIO SECURITIES. Each Portfolio 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, a Portfolio could experience both
delays in liquidating the loan collateral or recovering the loaned securities
and losses.

<PAGE> 14

RESTRICTIONS ON EACH PORTFOLIO'S INVESTMENTS

Each Portfolio 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
each Portfolio'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
a Portfolio 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. EACH PORTFOLIO 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 a Portfolio will achieve its
objective.

Each Portfolio is NON-DIVERSIFIED, meaning that it is not limited in the
proportio of its assets that it may invest in the obligations of a single
issuer or in a single country. Each Portfolio will, however, comply with
diversification requirements imposed by the Internal Revenue Code for
qualification as a regulated investment company. As a non-diversified fund,
each Portfolio 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 a
Portfolio'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;

7
<PAGE> 15

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, other
adverse political, social or diplomatic developments that could affect
investment in these nations and sometimes less advantageous legal,
operational, and financial protections applicable to foreign sub-custodial
arrangements.

The risks described above, including the risks of nationalization and
expropriation of assets, are typically increased to the extent that a Portfolio
invests in issuers located in less developed and developing nations, whose
securities markets are sometimes referred to as "emerging markets". Investments
in securities of issuers located in such countries are speculative and subject
to certain special risks. The political and economic structures 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 Portfolio's assets denominated in such
currencies. Many emerging markets have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Continued inflation
may adversely affect the economies and securities markets of such countries.

In addition, unanticipated political or social developments may affect the
value of a Portfolio's investments in these countries and the availability to
the Portfolio of additional investments in these countries. The small size,
limited trading volume and relative inexperience of the securities markets in
these countries may make a Portfolio's investments in such countries illiquid
and more volatile than investments in more developed countries, and the
Portfolio 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, a Portfolio's investment performance is
affected by the strength or weakness of the U.S. dollar against these
currencies. For example, if the dollar falls 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 the discussion of portfolio and transaction hedging
under "Portfolio Investments and Strategies".)

PORTFOLIO TURNOVER. High portfolio turnover in any year may generate
additional dealer mark-ups or underwriting commissions as well as other
transaction costs, including correspondingly higher annual brokerage
commissions.

DERIVATIVES. Each Portfolio may invest in options on securities and
indexes, futures contracts and options on futures contracts. 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

8
<PAGE> 16

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, each Portfolio 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; (4) purchase other types of forward or
investment contracts linked to individual securities, indexes, or other
benchmarks; and (5) enter into various equity or interest rate transactions,
such as swaps, caps, floors or collars and may enter into various
currency transactions such as currency forward contracts, currency futures
contracts, currency swaps or options on currencies. Each Portfolio may write a
call or put option only if the option is covered. As the writer of a covered
call option, each Portfolio 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 a Portfolio 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. In general, swaps are agreements pursuant to which the Portfolio
contracts with a bank or broker/dealer to receive a return based on or indexed
to the performance of an individual security or a basket of securities. The
use of currency transactions can result in the Portfolio incurring losses as a
result of a number of factors, including the imposition of exchange controls,
suspension of settlements or the inability to deliver or receive a specified
currency. See "Portfolio Investment and Strategies -- Derivatives" in the
Statement of Additional Information for further information regarding the risks
associated with investing in Derivatives.

OTHER INVESTMENT PRACTICES. Each Portfolio may lend portfolio securities.
The risks of such transactions are described more fully in the Statement of
Additional Information under "Portfolio Investment and Strategies."

HOW TO PURCHASE SHARES
----------------------

The initial purchase minimum per account is $100,000 for the International
Growth Fund and $10,000 for the Asian Growth Fund and the Emerging Markets
Growth Fund. Subsequent purchases must be at least $20,000 for the
International Growth Fund and $________ for the Asian Growth Fund and the
Emerging Markets Growth Fund. These minimums may be waived in the discretion
of the Fund.

Shares of the Portfolios 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 a Portfolio
are automatically reinvested in additional shares of the Portfolio.

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, to Driehaus Mutual Funds c/o PFPC, P.O. Box 8855,
Wilmington, DE 19899-8855 or for overnight deliveries, to Driehaus Mutual Funds
c/o PFPC, 400 Bellevue Parkway, Suite 108, Wilmington, DE 19809-3710. 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 and may accept a check initiated by brokers or mutual fund
complexes. A purchase order on behalf of a client who has an investment
advisory account with the Adviser or a brokerage 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).

Certain broker-dealers, financial institutions, or other service providers
that have entered into an agreement with the Fund, may enter purchase orders on
behalf of their customers by phone, with payment to follow within several days
as specified in the agreement. The Fund may effect such purchase orders at
the net asset value next determined after receipt of the telephone purchase
order. It is the responsibility of the broker-dealer, financial institution,
or other service provider to place the order with the Fund on a timely basis.
If payment is not received within the time specified in the agreement, the
broker-dealer, financial institution, or other service provider could be held
liable for any resulting fees or losses.

9
<PAGE> 17

Wire transfer instructions should be as follows: PNC Bank, N.A., ABA #: 031-
000-053, Credit: Driehaus Purchase Account, Bank Account #: 86-1108-2419,
Further Credit: (Shareholders Name/Acct #).

Individual Retirement Accounts ("IRAs") may be set up. For details, call
1-800-560-6111. Investors should also read the IRA Disclosure Statement and Bank
Custodial Agreement for further details on eligibility, service fees and tax
implications.

Each purchase order must be accepted by an authorized officer of the Fund 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.

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 Fund. There are no charges or limitations
imposed by the Fund, other than those described in this prospectus, if shares
are purchased (or redeemed) directly from the Fund.

HOW TO REDEEM SHARES
--------------------

BY WRITTEN REQUEST. Shares of a Portfolio may be redeemed by submitting a
written request in "good order" to the Fund at Driehaus Mutual Funds c/o PFPC,
P.O. Box 8855, Wilmington, DE 19899-8855. 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, in its sole discretion, may acccept telephonic redemption requests
from broker-dealers, financial institutions, or other service providers and,
under certain circumstances, from accounts that contain over $1,000,000 at the
time the redemption request is made. The Fund reserves the right to refuse
a telephone redemption if it believes it advisable to do so. Once a telephone
redemption request is placed it cannot be canceled or modified. Investors will
bear the risk of loss from fraudulent or unauthorized instructions received
over the telephone provided that the Fund reasonably believes that such
instructions are genuine. The Fund and its transfer agent employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
The Fund may incur liability if it does not follow these procedures. Because
of increased telephone volume, investors may experience difficulty in
implementing a telephone redemption during periods of dramatic economic or
market changes.

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
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

10
<PAGE> 18

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 for the International Growth
Fund and $______ for the Asian Growth Fund and the Emerging Markets Growth
Fund. 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 by the Fund
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 each Portfolio's shares is its net
asset value per share. The net asset value of a share of each Portfolio 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 its assets and liabilities by the number of its 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 Portfolio should be determined on any such day, in which case the
determination will be made at 3:00 p.m., Central time.

In computing net asset value, 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 a Portfolio'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 a Portfolio's portfolio may be
significantly affected on days when shares may not be purchased or redeemed.

DISTRIBUTIONS AND TAXES
-----------------------

DISTRIBUTIONS. Income dividends for each Portfolio, if any, are normally
declared and paid annually. Each Portfolio 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, if
any. Each Portfolio, 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 Portfolio 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. Each Portfolio reserves the
right to reinvest the proceeds and future distributions in additional Portfolio
shares if distribution checks are returned as undeliverable or are not
presented for payment within six months.

U.S. FEDERAL INCOME TAXES. Each Portfolio of the Fund is treated as a
separate entity for accounting and tax purposes. The Fund has qualified and
elected to be treated as a regulated investment company under Subchapter M of
the Internal Revenue Code and intends to continue to so qualify.

11
<PAGE> 19

Distributions will be taxable, under federal income tax law, whether received
in cash or reinvested in 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 a Portfolio 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
International Growth 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 the International Growth 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 a Portfolio 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.

Each Portfolio 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 Portfolio 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 each Portfolio 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 each Portfolio 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 a Portfolio's assets to be
invested within various countries will fluctuate and the extent to which tax
refunds will be recovered is uncertain. Each Portfolio intends to operate so
as to qualify for treaty-reduced tax rates where applicable.

To the extent that a Portfolio is liable for foreign income taxes, the
Portfolio also intends to elect and operate so as to meet the requirements of
the U.S. Internal Revenue Code to "pass through" to the Portfolio's
shareholders foreign income taxes paid, but there can be no assurance that the
Portfolio 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 Portfolio to foreign
countries (which taxes relate primarily to investment income). The
shareholders of the Portfolio may claim a credit by reason of the Portfolio'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 Portfolio.

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 Portfolio shares.

<PAGE> 20

BACKUP WITHHOLDING. The Fund 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;

. 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 Fund 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. Each Portfolio must promptly pay to the
IRS allamounts withheld. Therefore, it is usually not possible for a Portfolio
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 each Portfolio 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 a Portfolio's total return with alternative investments should
consider differences between the Portfolio 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.

13
<PAGE> 21

As of August 31, 1997, the International Growth Fund's average annual
total returns for the one-,five- and since inception (July 1, 1990) periods
were ___________, ___________ and ____________, respectively. The returns
for the Morgan Stanley Capital International Europe, Australia and Far East
Index (the "EAFE Index") as of August 31, 1997 for the one-fine-, and since
incepting periods were _____, _____and _____, respectively. The returns for
the Morgan Stanley Capital International Europe, Australia and Far East Index
(the "EAFE Index") as of August 31, 1997 for the one-, five-, and since
inception periods were ____, ____ and ____, respectively. The EAFE Index is
a widely recognized benchmark of non-US stock markets. It is composed of a
sample of companies representative of the market structure of 18 European
and Pacific Basin countries. Performance is historical and does not
represent future results. Investment returns and principal value vary, and
there may be a gain or loss when shares are sold. The International Growth
Fund's performance data includes the performance of the Driehaus
International Large Cap Fund, L.P. (the "Partnership") for the periods
before the Portfolio's registration statement became effective. The
Partnership was established on July 1, 1990 and the International Growth
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 were restated to reflect estimated expenses of the
International Growth Fund.

MANAGEMENT OF THE FUND
----------------------

TRUSTEES AND ADVISER. The Board of Trustees of the Fund has overall
management responsibility. 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. The Adviser is wholly
owned by Richard H. Driehaus.

PORTFOLIO MANAGER - Driehaus International Growth Fund. William R.
Andersen, a Vice President of Adviser, has been the portfolio manager of the
Portfolio since the commencement of operations on October 28, 1996. Prior to
the Portfolio's commencement date, 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
Portfolio. He is assisted by portfolio analysts who specialize in various
markets, including Western Europe, Asia, emerging markets and Canada. In
addition to the Portfolio, Mr. Andersen is the portfolio manager for three
Canadian mutual funds, including a global fund.

14
<PAGE> 22

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.

PORTFOLIO MANAGERS - Driehaus Asian Growth Fund. Mr. Andersen and Mr. Eric J.
Ritter co-manage the Portfolio.

Mr. Ritter, an international securities analyst with the Adviser, has been
co-manager since its inception and has responsibility for making investment
decisions on behalf of the Portfolio. Mr. Ritter was born in 1963 and received
his B.A. in Economics from the State University of New York at Oswego in 1984.
He earned a Masters Degree in International Relations from Columbia University
in 1987. Thereafter, Mr. Ritter worked as a consultant in Hong Kong in
1987-88, consulting primarily with Fortune 500 companies on investment and
market strategy for Asia. From late 1988 to 1990, he worked for Baring
Securities as an equity analyst conducting research on listed companies in
Singapore and Malaysia. Mr. Ritter then moved back to the United States to
work in equity research and sales, covering the Southeast Asia markets, for
Crosby Securities and W.I. Carr, both registered broker-dealers, prior to
joining the Investment Adviser in June 1996.

PORTFOLIO MANAGERS - Driehaus Emerging Markets Growth Fund. Mr. Andersen and
Mr. Emery R. Brewer co-manage the Portfolio.

Mr. Brewer, an international securities analyst with the Adviser, has been
the co-manager of the Portfolio since its inception and has responsibility for
making investment decisions on behalf of the Portfolio. Mr. Brewer was born
in 1963 and received his B.S. in Economics from the University of Utah in 1986.
From 1987 to 1988, he worked as a securities broker at Wilson Davis & Co.,
focusing primarily on NASDAQ listed companies. From 1989 to 1990, he worked
for Dean Witter Reynolds as a broker, focusing primarily on equity and fixed
income investments. After earning his MBA from the University of Rochester in
1992, he worked as an adviser to the capital markets group of Investicini Banka
(the third largest bank in and former investment bank of the Czech Republic),
focusing primarily on valuation and analysis of Czech companies. Mr. Brewer
became a consultant to the Investment Adviser in 1993 prior to joining the
Investment Adviser as an international securities analyst in November 1994.

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 of each Portfolio. 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 Portfolios. In doing so, the Adviser seeks to
obtain the best combination of price and execution, which involves a number of
judgmental factors. The Portfolios have been advised by the Adviser that it
intends to execute most transactions in ADRs through DSC, 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 Fund. In such capacity, PFPC assists the
Fund in all aspects of its administration and operation, including certain
accounting services. In compensation for its services, PFPC receives a monthly
fee based upon average net assets, with a minimum monthly fee of $9,500, plus
out-of-pocket expenses. PFPC has agreed to waive a portion of its fees during
the first year.

TRANSFER AGENT. PFPC is the agent of the Fund for the transfer of shares,
disbursement of dividends, and maintenance of shareholder accounting records.

CUSTODIAN. Morgan Stanley Trust Company (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 Fund is a Delaware business trust organized under an Agreement and
Declaration of Trust ("Declaration of Trust") dated May 31, 1996. The
Declaration of Trust may be amended by a vote of either the Fund's shareholders
or its trustees. The Fund may issue an unlimited number of shares, in one or
more series or classes as the Board may authorize. Currently, three series are
authorized and outstanding.

15
<PAGE> 23

Statement of Additional Information Dated December 31 1997

DRIEHAUS MUTUAL FUNDS
25 East Erie Street
Chicago, Illinois 60611

1-800-560-6111

DRIEHAUS INTERNATIONAL GROWTH FUND

DRIEHAUS ASIAN GROWTH FUND

DRIEHAUS EMERGING MARKETS GROWTH FUND

This Statement of Additional Information is not a prospectus, but
provides additional information that should be read in conjunction with
the Portfolios' prospectus dated December 31, 1997, and any supplements thereto
("Prospectus"). The Prospectus may be obtained at no charge by telephoning
800-560-6111.

TABLE OF CONTENTS
-----------------
Page

General Information and History.........................................
Portfolio Investments and Strategies....................................
Investment Restrictions.................................................
Purchases and Redemptions...............................................
Management..............................................................
Principal Shareholders..................................................
Investment Advisory Services............................................
Administrator...........................................................
Transfer Agent..........................................................
Custodian...............................................................
Independent Public Accountants..........................................
Portfolio Transactions..................................................
Additional Income Tax Considerations....................................
Investment Performance..................................................
Report of Independent Auditors Statement of Net Assets..................
Appendix--Ratings.......................................................

The financial statements appearing in the Driehaus International Growth Fund's
Annual Report to Shareholders are incorporated herein by reference. The Report
accompanies this document.

<PAGE> 24

GENERAL INFORMATION AND HISTORY
-------------------------------

The Driehaus International Growth Fund, the Driehaus Asian Growth Fund and
the Emerging Markets Growth Fund (individually, a "Portfolio" and collectively
"Portfolios") are each series of the Driehaus Mutual Funds (the "Fund"), an
open-end management investment company. Driehaus Capital Management, Inc.
(the "Adviser") provides management and investment advisory services to each
Portfolio.

Each share of a Portfolio 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 Portfolio have equal rights in the event of
liquidation of that series.

As a business trust, the Fund 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
Fund's outstanding shares, the Fund 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 Fund were
subject to Section 16(c) of the Investment Company Act of 1940. All shares of
all series of the Fund 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 October 28, 1996, the Driehaus International Growth Fund succeeded
to the assets of the Driehaus International Large Cap Fund, L.P.

PORTFOLIO INVESTMENTS AND STRATEGIES
------------------------------------

FOREIGN SECURITIES
- ------------------

The Portfolios invest 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 Portfolios may also purchase foreign
securities in the form of American Depositary Receipts (ADRs), European
Depositary Receipts (EDRs), Global Depositary 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 Portfolios may invest in sponsored or
unsponsored ADRs. ln the case of an unsponsored ADR, each Portfolio 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 assets that are issued by foreign issuers or
denominated in foreign currencies, each Portfolio'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> 25

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 Portfolios 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 Portfolios may invest, and serve as hedges against
possible variations in the exchange rate between these currencies. Each
Portfolio'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 each Portfolio
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. Each Portfolio
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 each Portfolio 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, each Portfolio 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 each
Portfolio. The Portfolios may not engage in "speculative" currency exchange
transactions.

At the maturity of a forward contract to deliver a particular currency,
each Portfolio 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.

B-2
<PAGE> 26

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 a Portfolio 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 Portfolio 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 a Portfolio is obligated to deliver.

If a Portfolio retains the portfolio security and engages in an offsetting
transaction, the Portfolio will incur a gain or a loss to the extent that there
has been movement in forward contract prices. If a Portfolio 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 Portfolio'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 Portfolio 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 Portfolio 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 Portfolio of unrealized profits or force the Portfolio 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 a Portfolio to hedge against a devaluation
that is so generally anticipated that the Portfolio is not able to contract to
sell the currency at a price above the devaluation level it anticipates. The
cost to a Portfolio 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. Each Portfolio may invest in
money market instruments denominated in foreign currencies. In addition to, or
in lieu of, such direct investment, each Portfolio 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, each
Portfolio 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, each Portfolio 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 that
Portfolio. Each Portfolio would continue to receive the equivalent of the
interest or dividends

B-3
<PAGE> 27

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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio 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
- ---------------------

Each Portfolio 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 Portfolio 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 Portfolio could experience both losses and delays in liquidating its
collateral.

WARRANTS
- --------

The Portfolio may purchase warrants, which are instruments that give
holders the right, but not the obligation, to buy shares of a company at a
given price during a specified period. Warrants are generally sold by
companies intending to issue stock in the future, or by those seeking to raise
cash by selling shares held in reserve.

B-4
<PAGE> 28

SHORT SALES
- -----------

The Portfolios may make short sales "against the box." In a short sale, a
Portfolio 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 Portfolio already owns an equivalent
security in kind and amount. A short sale "against the box" enables each
Portfolio to obtain the current market price of a security that it desires to
sell but is unavailable for settlement.

RULE 144A SECURITIES
- --------------------

The Portfolios 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
Portfolios, 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 each Portfolio'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,
each Portfolio's holdings of illiquid securities would be reviewed to determine
what, if any, steps are required to assure that each Portfolio 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 a Portfolio'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 Portfolios 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
- ------------------

Each Portfolio 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 each
Portfolio'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 each Portfolio's portfolio. Securities sold by
the Portfolios 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 Portfolios will be made when conditions affecting relevant
markets, particular

B-5
<PAGE> 29

industries or individual issues, warrants such action. High portfolio turnover
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, each Portfolio may invest in a broad array
of financial instruments and securities, commonly known as derivatives. The
Portfolios may enter into conventional exchange-traded and non-exchange-traded
options, futures contracts, futures options, swaps and similar transactions,
such as caps, floors and collars, involving or relating to currencies,
securities, interest rates, prices or other items. 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 intends to use interest rate, currency and index swaps as hedges
and not as speculative investments and will not sell interest rate caps or
floors where it does not own securities or other instruments providing the
income stream the Fund may be obligated to pay. A swap transaction is an
individually negotiated, non-standardized agreement between two parties to
exchange cash flows (and sometimes principal amounts) measured by different
interest rates, exchange rates, indices or prices, with payments generally
calculated by reference to a principal ("notional") amount or quantity.
Interest rate swaps involve the exchange by the Fund with another party of
their respective commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments with respect to a notional
amount of principal. A currency swap is an agreement to exchange cash flows on
a notional amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference indices. The
purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling such cap to the extent that a specified
index exceeds a predetermined interest rate or amount. The purchase of a floor
entitles the purchaser to receive payments on a notional principal amount from
the party selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and
a floor that preserves a certain return within a predetermined range of
interest rates or values.

The Fund usually will enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. The Adviser and the Fund believe
such obligations do not constitute senior securities under the Investment
Company Act of 1940, as amended (the "1940 Act"), and, accordingly, will not
treat them as being subject to its borrowing restrictions. Swap contracts are
not traded on exchanges; rather, banks and dealers act as principals in these
markets. As a result, the Fund will be subject to the risk of the inability or
refusal to perform with respect to such contracts on the part of the
counterparties with which the Fund trades. If there is a default by a
counterparty, the Fund may have contractual remedies pursuant to the agreements
related to the transaction. The swap market is generally not regulated by any
governmental authority. Participants in the swap markets are not required to
make continuous markets in the swap contracts they trade.

With respect to swaps, the Fund will accrue the net amount of the excess,
if any, of its obligations over its entitlements with respect to each swap on a
daily basis and will segregate an amount of cash or liquid securities having a
value equal to the accrued excess. Caps, floors and collars require
segregation of assets with a value equal to the Fund's net obligation, if any.

Each Portfolio does not currently intend to invest more than 5% of its
total assets in derivatives.

OPTIONS ON SECURITIES AND INDEXES
- ---------------------------------

The Portfolios 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 Portfolios 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 Portfolios 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 Portfolio 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 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 a Portfolio expires, the Portfolio realizes a
capital gain equal to the premium received at the time the option was written.
If an option purchased by a Portfolio expires, the Portfolio realizes a
capital loss equal to the premium paid.

B-6
<PAGE> 30

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 a Portfolio desires.

A Portfolio 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, a Portfolio will realize a capital
loss. If the premium received from a closing sale transaction is more than the
premium paid to purchase the option, a Portfolio will realize a capital gain
or, if it is less, a Portfolio 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 a Portfolio is an asset of that
Portfolio, valued initially at the premium paid for the option. The premium
received for an option written by a Portfolio 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 a Portfolio
seeks to close out an option position. If a Portfolio 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 a Portfolio 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, a Portfolio 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 a Portfolio,
the Portfolio would not be able to close out the option. If restrictions on
exercise were imposed, a Portfolio might be unable to exercise an option it has
purchased.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
- --------------------------------------------------

The Portfolios 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
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,

- ----------------
/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.

B-7
<PAGE> 31

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 Portfolios 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. A Portfolio 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 Portfolio's
securities or the price of the securities that the Portfolio intends to
purchase. Although other techniques could be used to reduce or increase the
Portfolio's exposure to stock price, interest rate and currency fluctuations,
the Portfolio may be able to achieve its exposure more effectively and perhaps
at a lower cost by using futures contracts and futures options.

The Portfolio 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, a Portfolio'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 a Portfolio,
the Portfolio 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 Portfolio upon termination of the contract, assuming
all contractual obligations have been satisfied. The Portfolio expects to earn
interest income on its initial margin deposits. A futures contract held by a
Portfolio is valued daily at the official settlement price of the exchange on
which it is traded. Each day a Portfolio 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 a Portfolio does not represent a borrowing or loan by the Portfolio but is
instead settlement between the Portfolio 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, each Portfolio will mark-to-market
its open futures positions.

Each Portfolio 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 (and the related initial margin requirements), the current market
value of the option, and other futures positions held by the Portfolio.

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, a Portfolio realizes a
capital gain, or if it is more, a Portfolio realizes a capital loss.
Conversely, if an offsetting sale price is more than the original purchase
price, a Portfolio realizes a capital gain, or if it is less, a Portfolio
realizes a capital loss. The transaction costs must also be included in these
calculations.

B-8
<PAGE> 32

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 a Portfolio'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 a Portfolio'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
a Portfolio seeks to close out a futures or futures option position. The
Portfolio 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, a Portfolio may also use those
investment vehicles, provided the Board of Trustees determines that their use is
consistent with the Portfolio's investment objective.

A Portfolio 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 Portfolio plus premiums paid by it for open futures option
positions, less the amount by which any such positions are "in-the-money,"/2/
would exceed 5% of the Portfolio's total assets.

- ----------------
/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-9
<PAGE> 33

When purchasing a futures contract or writing a put option on a futures
contract, a Portfolio 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, a
Portfolio 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 Portfolio.

A Portfolio 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 a Portfolio 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," a
Portfolio 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 Portfolio, 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 a Portfolio continues to sell its shares in certain states, the
Portfolio's options and futures transactions will also be subject to certain
nonfundamental investment restrictions set forth under Investment Restrictions
in this Statement of Additional Information.

TAXATION OF OPTIONS AND FUTURES
- -------------------------------

If a Portfolio 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 a Portfolio, 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 a Portfolio 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 a Portfolio, 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 a Portfolio 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 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 a Portfolio writes an equity call option/3/ other than a "qualified
covered call option," as defined in the

- ----------------
/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-10
<PAGE> 34

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 a Portfolio delivers securities under a futures contract,
the Portfolio also realizes a capital gain or loss on those securities.

For federal income tax purposes, each Portfolio 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 a
Portfolio: (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 a Portfolio were to enter into a short index future, short index
futures option or short index option position and the Portfolio's portfolio
were deemed to "mimic" the performance of the index underlying such contract,
the option or futures contract position and the Portfolio's stock positions
would be deemed to be positions in a mixed straddle, subject to the
above-mentioned loss deferral rules.

In order for a Portfolio 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 Portfolio's annual gross income. In order to avoid realizing excessive
gains on securities held less than three months, a Portfolio may be required to
defer the closing out of certain positions beyond the time when it would
otherwise be advantageous to do so.

Each Portfolio 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 Portfolio's
other investments, and shareholders are advised of the nature of the payments.

B-11
<PAGE> 35

INVESTMENT RESTRICTIONS
-----------------------

Each Portfolio 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 a Portfolio'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 a Portfolio's outstanding shares. Each
Portfolio 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, 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 Portfolio
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,/1/ 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.

Each Portfolio is also subject to the following non-fundamental
restrictions and policies, which may be changed by the Board of Trustees. Each
Portfolio may not:

(a) invest in companies for the purpose of exercising control or
management;

- ----------------

/1/ For purposes of this investment restriction, each Portfolio 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> 36

(b) 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 (valued at time of purchase);

(c) 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;

(d) 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 Portfolio 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 Portfolio expects to receive in a recapitalization,
reorganization, or other exchange for securities the Portfolio
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; and

(e) 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.

B-13
<PAGE> 37

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 Fund of any such purchase
order.

Each Portfolio'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 Portfolio should be determined on any such day, in which case the
determination will be made at 3:00 p.m., Central time.

The Fund 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 Fund 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 exchange traded securities. If redemptions were made in
kind, the redeeming shareholders might incur transaction costs in selling the
securities received in the redemptions.

The Fund reserves the right to suspend or postpone redemptions of shares
of a Portfolio 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 a
Portfolio not reasonably practicable.

B-14
<PAGE> 38

MANAGEMENT
----------

The following table sets forth certain information with respect to the
trustees and executive officers of the Fund:

NAME; ADDRESS AGE POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING PAST
FUND FIVE YEARS
<S> <C> <C> <C>
Richard H. Driehaus*/1/ 54 Chairman of the Board; Chairman of the Board and Chief
25 East Erie Street President Executive Officer of the Adviser and
Chicago, IL 60601 DSC

Arthur B. Mellin* 54 Trustee President, Mellin Securities
190 South LaSalle Street Incorporated
Chicago, IL 60603

Robert F. Moyer*/1/ 50 Trustee; Vice President President and Chief Operating Officer
25 East Erie Street of the Adviser and DSC, since 1995;
Chicago, IL 60601 Senior Vice President prior thereto

A.R. Umans/1/,/2/ 70 Trustee President and Chief Executive Officer,
1400 North 25th Avenue RHC/Spacemaster Corporation
Melrose Park, IL 60160 (manufacturing company)

Daniel Zemanek/2/ 54 Trustee President, Santa Fe Chicken and Executive
2301 Leghorn Vice President, Pollo Rey, Inc.
Mountain View, CA (creator of Pollo Rey restaurants),
94043 since 1996; brokered real estate loans
for private and institutional investors
in California from 1991-1996; President Shell
Realty from 1985-1991.

William R. Andersen 38 Vice President Vice President of the Adviser;
25 East Erie Street Portfolio Manager of the Adviser
Chicago, IL 60601 prior thereto

Diane L. Wallace 39 Vice President; Senior Vice President-Operations of the
25 East Erie Street Treasurer Adviser and DSC, since 1996; Vice
Chicago, IL 60601 President 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

Dusko _. Culafic

Jennifer _. Billingsly

</TABLE>

- ----------------

* Trustee who is an "interested person" of the Fund and of the Adviser,
as defined in the Investment Company Act of 1940.

/1/ Member of the Executive Committee of the Board of Trustees, which is
authorized to exercise all powers of the Board with certain statutory
exceptions.

/2/ 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> 39

Officers and trustees affiliated with the Adviser serve without any
compensation from the Fund. In compensation for their services to each
Portfolio, trustees who are not affiliates of the Fund or the Adviser are paid
$2,500 for each Board meeting attended and $500 for each committee meeting
attended, and are reimbursed for out-of-pocket expenses. The Fund has no
retirement or pension plans. The following table sets forth the compensation
paid by the Fund during its first full fiscal year to each of the
non-interested trustees:

<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF TRUSTEE FROM THE FUND
--------------- --------------

<S> <C>
Arthur B. Mellin $10,500
A. R. Umans $10,500
Daniel Zemanek $10,500
</TABLE>

PRINCIPAL SHAREHOLDERS
----------------------

As of October 31, 1997, 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 advisory agreement also provides that neither the Adviser nor any of
its directors, officers, stockholders, agents, or employees shall have any
liability to the Fund or any shareholder of the Fund 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 a Portfolio shall be paid solely out of the Portfolio's assets.
Any expenses incurred by the Fund 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. For
the fiscal year ended August 31, 1997, the International Growth Fund paid fees
under the investment advisory agreement of $________.

B-16
<PAGE> 40

ADMINISTRATOR
-------------

PFPC Inc. ("PFPC") is the administrator for the Fund. The asset based fee
for administrative services is:

.125% of the first $200 million of average net assets;
.09% of the next $200 million of average net assets;
.07% of the next $200 million of average net assets; and
.05% of average net assets in excess of $500 million.

CUSTODIAN
---------

Morgan Stanley Trust Company (the "Bank") at One Pierrepont Plaza,
Brooklyn, NY 11201 is the custodian for the Fund. It is responsible for
holding all securities and cash of the Portfolios, receiving and paying for
securities purchased, delivering against payment securities sold, receiving and
collecting income from investments, making all payments covering expenses of
the Portfolios, 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 Portfolios.

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"). With respect to foreign
sub-custodians, there can be no assurance that a Portfolio, 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

B-17
<PAGE> 41

judgments against, the foreign sub-custodians, or application of foreign law to
a Portfolio'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 Portfolio may invest in obligations of the custodian and may
purchase or sell securities from or to the custodian.

INDEPENDENT PUBLIC ACCOUNTANTS
------------------------------

The independent public accountants for the Fund are Arthur Andersen
LLP. The accountants audit and report on each Portfolio's annual financial
statements, review certain regulatory reports and each Portfolio's federal
income tax returns, and perform other professional accounting, auditing, tax
and advisory services when engaged to do so by the Fund.

PORTFOLIO TRANSACTIONS
----------------------

The Adviser places the orders for the purchase and sale of a
Portfolio's 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, a Portfolio 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. For the fiscal year ended August 31, 1997,
the International Growth Fund paid brokerage commissions of $_______, of which
$_______ were paid to DSC.

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. Each Portfolio has been advised that the
Adviser intends to execute most (or all) transactions in ADRs through DSC. In
order for DSC to effect any such transaction for a Portfolio, 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 a Portfolio, 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

B-18
<PAGE> 42

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 Portfolio, 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 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 Portfolio), 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
Portfolio 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 Portfolio.

With respect to a Portfolio'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 Portfolio.

The Fund 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 a Portfolio's 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.
In order to qualify for such provisions, each Portfolio must maintain a
diversified portfolio, which requires that at the close of each quarter
(i) at least 50% of its total assets be represented by cash or cash items,
Government securities, securities of other investment companies and securities
of other issuers in which not greater than 5% of the Portfolio's assets are
invested and not more than 10% of the outstanding voting securities of such
issuer are held; and (ii) not more than 25% of the total assets of the
Portfolio are invested in the securities (other than Government securities
or the securities of other regulated investment companies) of any one issuer.

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 a Portfolio 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 Portfolio's total assets at the
close of any fiscal year consist of stock or securities of foreign
corporations, the Portfolio may file an election with the Internal Revenue
Service pursuant to which shareholders of the Portfolio 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 Portfolio
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

B-19
<PAGE> 43

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 Portfolio, 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 Portfolio 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 Portfolio 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 Portfolio dividends which represents income
from each foreign country, if the Portfolio qualifies to pass along such
credit.

The Portfolio'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 Portfolio's securities.

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 Portfolios 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 a Portfolio 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 a Portfolio's shares and reinvests in
shares of the Portfolio 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 Portfolio'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. Each Portfolio 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 Portfolio'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 Portfolio holds its investment. In addition, each
Portfolio 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.

B-20
<PAGE> 44

In accordance with tax regulations, each Portfolio's 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.

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 a Portfolio is a result of
conditions in the securities markets, portfolio management, and operating
expenses. Although investment performance information is useful in reviewing
a Portfolio'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.

In advertising and sales literature, each Portfolio 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 Portfolio. Comparison of a Portfolio 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

B-21
<PAGE> 45

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 USA Today
Magazine U.S. News and World Report
Knight-Ridder The Wall Street Journal
Los Angeles Times Working Women
Money Worth
Mutual Fund Letter Your Money
Mutual Fund News Service
Mutual Fund Values (Morningstar)

The Fund may compare its Portfolio performance to the Consumer Price
Index (All Urban), a widely recognized measure of inflation.

Each Portfolio'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 (These indexes generally reflect
recognized indicators of general the performance of stocks traded in the
U.S. stock 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, each Portfolio may compare its 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.

B-22
<PAGE> 46

**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 and rankings provided by another independent service. Should
Lipper or another service reclassify a Portfolio to a different category or
develop (and place a Portfolio into) a new category, the Portfolio 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 a Portfolio's risk score
(which is a function of the Portfolio's monthly returns less the 3-month T-bill
return) from the Portfolio'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

B-23
<PAGE> 47

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
----------------------------------------------
INTEREST RATE 6% 8% 10% 6% 8% 10%
-------------
COMPOUNDING
YEARS TAX-DEFERRED INVESTMENT TAXABLE INVESTMENT
----- ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C>
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>

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> 48

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-25
<PAGE> 49

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-26
<PAGE> 50
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.

<PAGE> 51

- --------------------------------------------------------------------------------
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
/s/ Richard H. Driehaus
President
Driehaus Mutual Funds

1
<PAGE> 52
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
/s/ 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> 53
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> 54

- --------------------------------------------------------------------------------
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> 55

- --------------------------------------------------------------------------------
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> 56
- --------------------------------------------------------------------------------
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> 57
- --------------------------------------------------------------------------------
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> 58
- --------------------------------------------------------------------------------
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> 59
- --------------------------------------------------------------------------------
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> 60
- --------------------------------------------------------------------------------
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> 61
- --------------------------------------------------------------------------------
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> 62
- --------------------------------------------------------------------------------
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> 63
- --------------------------------------------------------------------------------
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> 64
- --------------------------------------------------------------------------------
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> 65
- --------------------------------------------------------------------------------
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> 66

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.

<PAGE> 67

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:

Financial Highlights

(ii) Financial Statements included in Part B of the Registration
Statement:

Driehaus Asian Growth Fund
Driehaus Emerging Markets Growth Fund

Statement of Net Assets at December___, 1997
Report of Independent Auditors

Driehaus International Growth Fund

Report of Independent Public Accountants
Schedule of Investments at August 31, 1997
Schedule of Investments by Industry at August 31, 1997
Statement of Assets and Liabilities at August 31, 1997
Statement of Operations for the period ended August 31, 1997
Statement of Changes in Net Assets for the period ended
August 31, 1997
Notes to financial statements

b. EXHIBITS:

(1) Declaration of Trust of Registrant./1/
(2) Bylaws of Registrant./1/
(3) None.
(4) None.
(5) Management Agreement. /2/

(6) None.
(7) None.
(8) Custodian Services Agreement /2/
(9.1) Transfer Agency Agreement /2/
(9.2) Administration Agreement /2/
(10) Not applicable.
(11) Consent of independent accountants.*
(12) Not applicable.
(13) Investment Letter of initial investor in
Registrant. /2/
(14) None.
(16) Not applicable.
(18) Not applicable.
(19) Powers of attorney.*
(27) Financial Data Schedule.*

/1/ Incorporated by reference to the initial registration statement filed
on June 5, 1996.

/2/ Incorporated by reference to Pre-Effective Amendment No. 1 under the
Securities Act of 1933 (Amendment No. 1 under the Investment Company Act of
1940) filed on October 7, 1996.

* Filed herewith.

C-1
<PAGE> 68
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

Inapplicable.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.

As of September 30, 1997, there were 285 holders of record of
Shares of the International Growth Fund.

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, officers, 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
Legal Officer Officer of DSC
</TABLE>

C-2
<PAGE> 69
ITEM 29. PRINCIPAL UNDERWRITERS.

(a) Not applicable.

(b) 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., 25 East Erie Street, Chicago,
Illinois 60611 and 1 East Erie Street, Chicago, Illinois, or (iii) at the
offices of Registrant's custodian, Morgan Stanley Trust Company, One Pierrepont
Plaza, Brooklyn, NY 11201, 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) Not applicable.

(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> 70
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(a) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment No. 5 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Chicago, State of Illinois, on the 31st day of October, 1997.

DRIEHAUS MUTUAL FUNDS

By: /s/ Richard H. Driehaus
--------------------------------
Richard H. Driehaus, President

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 5 to the Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.
<TABLE>

/s/ Richard H. Driehaus President and Trustee (Principal October 31, 1997
------------------------------------- Executive Officer)
Richard H. Driehaus

/s/ Arthur B. Mellin* Trustee October 31, 1997
-------------------------------------
Arthur B. Mellin

/s/ Robert F. Moyer Trustee October 31, 1997
-------------------------------------
Robert F. Moyer

/s/ A.R. Umans* Trustee October 31, 1997
-------------------------------------
A.R. Umans

/s/ Daniel Zemanek* Trustee October 31, 1997
-------------------------------------
Daniel Zemanek

/s/ Diane L. Wallace Treasurer (Principal Financial and October 31, 1997
------------------------------------- Accounting Officer)
Diane L. Wallace
</TABLE>

* Robert F. Moyer signs this document pursuant to powers of attorney filed in
Registrant's Post-Effective Amendment No. 5 filed herewith.

/s/ Robert F. Moyer
- --------------------------------------
Robert F. Moyer

<PAGE> 71
EXHIBIT INDEX
DRIEHAUS MUTUAL FUNDS
FORM N-1A REGISTRATION STATEMENT

(1) Declaration of Trust of Registrant./1/

(2) Bylaws of Registrant./1/

(3) None.

(4) None.

(5) Management Agreement./2/

(6) None.

(7) None.

(8) Custodian Services Agreement./2/

(9.1) Transfer Agency Agreement./2/

(9.2) Administration Agreement./2/

(10) Not applicable.

(11) Consent of independent accountants.*

(12) Not applicable.

(13) Investment Letter of initial investor in Registrant./2/

(14) None.

(16) Not applicable.

(18) Not applicable.

(19) Powers of attorney.*

(27) Financial Data Schedule.*

- -------------------

* Filed herewith.

/1/ Incorporated by reference to the initial registration statement filed
on June 5, 1996.

/2/ Incorporated by reference to Pre-Effective Amendment No. 1 under the
Securities Act of 1933 (Amendment No. 1 under the Investment Company Act of
1940) filed on October 7, 1996.

<PAGE> 1
EXHIBIT 11

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
report dated October 17, 1997 and to all references to our firm included in or
made a part of this Amendment No. 5 to the Registration Statement on Form N-1A
of Driehaus Mutual Funds.

/s/ Arthur Andersen LLP

ARTHUR ANDERSEN LLP

Chicago, Illinois,
October 30, 1997

C-6

<PAGE> 1
Exhibit 19

LIMITED POWER OF ATTORNEY
-------------------------

KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints Richard H. Driehaus, Robert F. Moyer, or either of them, his true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities to sign the Registration Statement of Driehaus Mutual Funds, a
Delaware business trust, on Form N-1A under the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, and any or all
amendments thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully as all intents and purposes as he might or
could do in person, hereby ratifying and confirming all said attorney-in-fact
and agent may lawfully do or cause to be done by virtue hereof.

DATED: October 23, 1997
----------------

/s/ Arthur Mellin
-----------------------------
Arthur Mellin

<PAGE> 2

LIMITED POWER OF ATTORNEY
-------------------------

DATED: October 23, 1997

/s/ Daniel Zemanek
-----------------------------
Daniel Zemanek

<PAGE> 3

LIMITED POWER OF ATTORNEY
-------------------------

DATED: October 23, 1997

/s/ A. R. Umans
-----------------------------
A. R. Umans

<PAGE> 4

LIMITED POWER OF ATTORNEY
-------------------------

KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints Robert F. Moyer, Mary H. Weiss, or either of them, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities to sign the Registration Statement of Driehaus Mutual Funds, a
Delaware business trust, on Form N-1A under the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, and any or all
amendments thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully as all intents and purposes as he might or
could do in person, hereby ratifying and confirming all said attorney-in-fact
and agent may lawfully do or cause to be done by virtue hereof.

DATED: October 23, 1997

/s/ Richard H. Driehaus
-----------------------------
Richard H. Driehaus

<PAGE> 5

LIMITED POWER OF ATTORNEY
-------------------------

KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints Richard H. Driehaus, Mary H. Weiss, or either of them, his true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities to sign the Registration Statement of Driehaus Mutual Funds, a
Delaware business trust, on Form N-1A under the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, and any or all
amendments thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully as all intents and purposes as he might or
could do in person, hereby ratifying and confirming all said attorney-in-fact
and agent may lawfully do or cause to be done by virtue hereof.

DATED: October 23, 1997

/s/ Robert F. Moyer
-----------------------------
Robert F. Moyer

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