DRIEHAUS MUTUAL FUNDS, 485BPOS, 1997-12-30

DRIEHAUS MUTUAL FUNDS
485BPOS, 1997-12-30
PREPACKAGED SOFTWARE

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<PAGE> 1

As filed with the Securities and Exchange Commission on or about December 30,
1997

Registration No. 333-05265 and 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. 3 [X]

and/or

REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 6 [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)
[X] On December 31, 1997 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a) (1)
[ ] On (date) pursuant to paragraph (a) (1)
[ ] 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 -- International Growth
Fund; Investment Return

Item 4. General Description of Registrant . . . . . . . . . . The Portfolios; Portfolio Investments and
Risk Considerations; Restrictions on Each
Portfolio's Investments

Item 5. Management of Fund . . . . . . . . . . . . . . . . . Management of the Fund

Item 5A. Management's Discussion of Fund Performance . . . . . Inapplicable

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 Risk
Considerations; 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; Net Asset Value

Item 20. Tax Status . . . . . . . . . . . . . . . . . . . . . Additional Income Tax Considerations

Item 21. Underwriters . . . . . . . . . . . . . . . . . . . . Inapplicable

Item 22. Calculation of Performance Data . . . . . . . . . . . Investment Performance

Item 23. Financial Statements . . . . . . . . . . . . . . . . Cover page of Statement of Additional
Information
</TABLE>
PART C

Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to the Registration Statement.
<PAGE> 3

TABLE OF CONTENTS

<TABLE>
<S> <C>
SUMMARY....................................... 1
FEE TABLE..................................... 3
FINANCIAL HIGHLIGHTS -- INTERNATIONAL GROWTH
FUND........................................ 4
THE PORTFOLIOS................................ 5
Investment Philosophy....................... 5
Investment Objective and Policies........... 5
DRIEHAUS INTERNATIONAL GROWTH FUND........ 5
DRIEHAUS ASIA PACIFIC GROWTH FUND......... 6
DRIEHAUS EMERGING MARKETS GROWTH FUND..... 7
Portfolio Investments and Risk
Considerations..................... 8
Restrictions on Each Portfolio's
Investments........................ 15
HOW TO PURCHASE SHARES........................ 16
HOW TO REDEEM SHARES.......................... 17
NET ASSET VALUE............................... 19
DISTRIBUTIONS AND TAXES....................... 19
INVESTMENT RETURN............................. 21
MANAGEMENT OF THE FUND........................ 22
ORGANIZATION AND DESCRIPTION OF SHARES........ 24
</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 PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

[DRIEHAUS INTERNATIONAL LOGO]

DRIEHAUS INTERNATIONAL
GROWTH FUND

DRIEHAUS ASIA PACIFIC

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 Driehaus 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 Driehaus Asia Pacific Growth Fund is to maximize capital
appreciation. The Portfolio pursues its objective by investing primarily in
equity securities of companies in the Asia Pacific region.

The objective of the Driehaus 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 "THE PORTFOLIOS --
PORTFOLIO INVESTMENTS AND RISK CONSIDERATIONS.")

<PAGE> 4

SUMMARY

The Driehaus International Growth Fund, the Driehaus Asia Pacific Growth
Fund and the Driehaus Emerging Markets Growth Fund (collectively the
"Portfolios," and each individually a "Portfolio") are each a series of the
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-oriented investment criteria. It is anticipated that each Portfolio
will have a relatively high rate of portfolio turnover, which generally
increases the brokerage costs. See "The Portfolios -- Portfolio Investments and
Risk Considerations -- Portfolio Turnover." 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 Objective 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-oriented 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 it
more susceptible to a single economic, political or regulatory occurrence than a
diversified fund. To varying degrees, each of the Portfolios may invest in small
and medium size companies, which may be subject to greater price volatility than
larger companies. See "The Portfolios -- Portfolio Investments and Risk
Considerations."

PURCHASES AND REDEMPTIONS. The minimum initial investment for each
Portfolio is $100,000. The minimum additional investment is $20,000. Shares of
each Portfolio are offered only to residents of states and other jurisdictions
in which the shares are eligible for purchase. See "How to Purchase Shares." For
information on redeeming Portfolio shares, see "How to Redeem 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."
<PAGE> 5

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 "Distributions 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 for the International Growth Fund is based
upon the operations of the Limited Partnership, restated to reflect the
anticipated expenses of the International Growth Fund. The Asia Pacific Growth
Fund and the Emerging Markets Fund commenced operations in December 1997. See
"Distributions and Taxes."

2
<PAGE> 6

FEE TABLE

<TABLE>
<CAPTION>
ASIA EMERGING
INTERNATIONAL PACIFIC MARKETS
GROWTH GROWTH GROWTH
------------- ------- --------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
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% 1.45%*** 1.25%***
---- ---- ----
Total Fund Operating Expenses............... 2.13%** 2.95%*** 2.75%***
</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 extraordinary expenses) will not exceed
2.25% of average net assets during 1998.

*** 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 extraordinary expenses) will
not exceed 2.95% of the average net assets of the Asia Pacific Growth Fund
and 2.75% of the average net assets of the Emerging Markets Growth Fund for
the first twelve months of the respective Portfolio's operations. Without
expense reimbursement, "Other Expenses" and "Total Fund Operating Expenses"
are estimated to be 7.10% and 8.60%, respectively, for the Asia Pacific
Growth Fund and 3.30% and 4.80%, respectively, for the Emerging Markets
Growth Fund for each Portfolio's first fiscal year.

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................................ $22 $71 $124 $281
Asia Pacific Growth................................. 31 98 -- --
Emerging Markets Growth............................. 29 91 -- --
</TABLE>

3
<PAGE> 7

The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in a Portfolio will bear directly or
indirectly. Because they are new portfolios, the percentages shown for the Asia
Pacific 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 three-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 (commencement
of operations) 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:

<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.

4
<PAGE> 8

Average commission rate paid per share on stock transactions for the period
from October 28, 1997 through 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 International Growth Fund, Asia Pacific Growth Fund and Emerging
Markets Growth Fund are each a 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

The Adviser's investment philosophy is that accelerating sales and
earnings, consistent with high earnings quality and market timeliness, are
principal criteria for equity investment. Earnings quality reflects 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 lesser extent, using
macroeconomics or country-specific analyses. While the Adviser seeks companies
that have demonstrated superior earnings growth, the Adviser may also purchase
the stock of companies based on the expectation of capital appreciation where
there is no demonstrable record of earnings growth or increasing sales. This is
more likely to occur in emerging markets.

In evaluating countries for investment and determining country and regional
weights, 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 investment objective of the
Portfolio 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

5
<PAGE> 9

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 fund. Current dividend income is not an
investment consideration, and dividend income is incidental to the Portfolio's
overall investment objective.

The securities markets 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, Hong
Kong, 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 (although at
all times the Portfolio must be invested in the assets of at least three
countries). 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.

Equity securities include common and preferred stock, warrants or rights or
options that are convertible into common 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 receipts or other securities representing underlying
shares of foreign issuers. Generally, the Portfolio would purchase depositary
receipts, rather than directly investing in the underlying shares of a foreign
issuer, for liquidity, timing or transaction cost reasons. The Portfolio also
may utilize a wide range of other securities and derivative instruments to
indirectly gain exposure to foreign securities, including but not limited to
foreign investment companies, swap agreements and similar arrangements. 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.

The Adviser generally intends to remain fully invested. However, as a
temporary defensive measure, the Portfolio may hold some or all 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.

DRIEHAUS ASIA PACIFIC GROWTH FUND. The investment objective of the
Portfolio is to maximize capital appreciation. The Portfolio pursues its
objective by investing primarily in the

6
<PAGE> 10

equity securities of companies in the Asia Pacific region. The Portfolio
considers Asia Pacific companies to be (i) companies organized under the laws of
an Asia Pacific country or having securities which are traded principally on an
exchange or over-the-counter in an Asia Pacific 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 Asia
Pacific countries. Currently, Asia Pacific countries include Australia, The
People's Republic of China (including Hong Kong), India, Indonesia, Japan, South
Korea, Malaysia, New Zealand, Pakistan, the Philippines, Singapore, Sri Lanka,
Taiwan and Thailand. At least 65% of the Portfolio's assets will be invested in
the securities of Asia Pacific companies. There are no minimum limitations on
the number of countries in which the Adviser can or must invest at a given time.
There are 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 may invest significant assets in any single Asia Pacific country.
The Portfolio is a non-diversified fund. Current dividend income is not an
investment consideration, and dividend income is incidental to the Portfolio's
overall investment objective.

Equity securities include common and preferred stock, depositary receipts,
convertible debt and warrants, rights and options to purchase equity securities.
The Portfolio also may utilize a wide range of other securities and derivative
instruments to indirectly gain exposure to Asia Pacific securities, including
but not limited to foreign investment companies, swap agreements and similar
arrangements. The Portfolio may also invest in securities of issuers that,
together with any predecessors, have been in continuous operation for less than
three years.

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 Asia Pacific companies involve greater risks
than U.S. investments.

DRIEHAUS EMERGING MARKETS GROWTH FUND. The investment objective of the
Portfolio is to maximize capital appreciation. The Portfolio pursues its
objective by investing primarily in the equity securities of emerging market
companies. 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

7
<PAGE> 11

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. Currently, emerging markets include 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 the securities of emerging markets
companies. 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 may invest significant assets in any single emerging
market country. The Portfolio is a non-diversified fund. Current dividend income
is not an investment consideration and dividend income is incidental to the
Portfolio's overall investment objective.

Equity securities include common and preferred stock, depositary receipts,
convertible debt and warrants, rights and options to purchase equity securities.
The Portfolio also may utilize a wide range of other securities and derivative
instruments to indirectly gain exposure to emerging market securities, including
but not limited to foreign investment companies, swap agreements and similar
arrangements. The Portfolio may also invest in securities of issuers, that,
together with any predecessors, have been in continuous operation for less than
three years.

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.

PORTFOLIO INVESTMENTS AND RISK CONSIDERATIONS

Each Portfolio may utilize from time to time utilize 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 each Portfolio to help manage such risks.

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 assurance that a Portfolio will achieve its
objective.

8
<PAGE> 12

FOREIGN SECURITIES AND CURRENCIES. 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 (i) which offer different
investment opportunities, (ii) that are affected by different economic trends,
and (iii) 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; the
possibility of expropriation or confiscatory taxation, seizure or
nationalization of foreign bank deposits or other assets, establishment of
exchange controls, the adoption of foreign government restrictions and other
adverse political, social or diplomatic developments that could affect
investment in these nations; and sometimes less advantageous legal, operational
and financial protections applicable to foreign subcustodial arrangements.

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.

EMERGING MARKET RISKS. 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

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<PAGE> 13

market countries have experienced 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.

SMALL AND MEDIUM-SIZED COMPANIES. Each of the Portfolios may invest in the
securities of small and medium-sized companies. While small and medium-sized
companies generally have the potential for rapid growth, the securities of these
companies often involve greater risks than investments in larger, more
established companies because small and medium-sized companies may lack the
management experience, financial resources, product diversification and
competitive strengths of larger companies. In addition, in many instances the
securities of small and medium-sized companies are traded only over-the-counter
or on a regional securities exchange, and the frequency and volume of their
trading is substantially less than is typical of larger companies. Therefore,
the securities of small and medium-sized companies may be subject to greater and
more abrupt price fluctuations. When making large sales, a Portfolio may have to
sell portfolio holdings at discounts from quoted prices or may have to make a
series of small sales over an extended period of time due to the trading volume
of small and medium-sized company securities. Investors should be aware that,
based on the foregoing factors, an investment in a Portfolio may be subject to
greater price fluctuations than an investment in a fund that invests primarily
in larger, more established companies. The Adviser's research efforts may also
play a greater role in selecting securities for a Portfolio than in a fund that
invests in larger, more established companies. The same risk factors apply to
start-up companies.

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) ("forward currency
contract"). 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

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<PAGE> 14

portfolio only during the period of the forward contract. Forward currency
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 forward currency contracts (for transaction or portfolio
hedging) will not eliminate fluctuations in the prices of portfolio securities
or prevent loss if the price of such securities should decline. In addition,
such forward currency contracts will diminish the benefit of the appreciation in
the U.S. dollar value of that foreign currency.

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.
Transaction hedging 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. Transaction hedging also may
be accomplished by purchasing or selling such foreign currencies on a "spot," or
cash, basis. 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. 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.

DERIVATIVES. In seeking to achieve its desired investment objective,
provide additional revenue or 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 forward currency 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

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<PAGE> 15

"derived" from the performance of an underlying asset or a "benchmark" such as a
security index, an interest rate or a currency. 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. 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. For additional information on
derivatives, please refer to the Statement of Additional Information. If types
of derivatives other than those described herein become available in the future,
a Portfolio 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.

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. 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.

ILLIQUID SECURITIES. Each Portfolio may invest up to 15% of its net assets
in illiquid securities. Illiquid securities are those securities that are not
readily marketable, including restricted securities and repurchase obligations
maturing in more than seven days. Certain restricted securities that may be
resold to institutional investors under Rule 144A of the Securities Act of 1933,
and Section 4(2) commercial paper may be determined to be liquid under
guidelines adopted by the Fund's Board of Trustees. The absence of a trading
market can make it difficult to ascertain a market value for illiquid or
restricted securities. Disposing of illiquid or restricted securities may
involve time-consuming negotiations and legal expenses, and it may be difficult
or impossible for a Portfolio to sell them promptly at an acceptable price.

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 security, the Adviser will
consider substantially the same criteria that would be considered in purchasing
the underlying stock. While convertible securities purchased by the Portfolios
are frequently rated investment grade, a Portfolio also may purchase unrated
securities or securities rated below investment grade

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<PAGE> 16

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, each Portfolio may invest up to 35% of its total assets in
nonconvertible 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 Adviser. Securities
in the fourth-highest grade may possess speculative characteristics. If the
rating of a security held by the Portfolio is lost or reduced below investment
grade, the Portfolio is not required to dispose of the security. The Adviser
will, however, consider that fact in determining whether the Portfolio should
continue to hold the security. The risks inherent in a debt security depend
primarily on its term and quality, 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. A Portfolios annual turnover rate indicates changes in
its portfolio investments. A Portfolio will not consider portfolio turnover rate
a limiting factor in making investment decisions consistent with its investment
objective and policies. It is anticipated that the Portfolios will each
experience high rates of portfolio turnover. High portfolio turnover in any year
will result in payment by a Portfolio of above-average amounts of transaction
costs and could result in the payment by Shareholders of above-average amounts
of taxes on realized investment gains. 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 a
Portfolio may be purchased again at a later date if the Adviser perceives that
the securities are again "timely." In addition, portfolio adjustments will be
made when conditions affecting relevant markets, particular industries or
individual issues warrant such action. In light of these factors and the
historical volatility of foreign growth stocks, the Portfolios are likely to
experience high portfolio turnover rates, i.e., over 550% for the Asia Pacific
Growth Fund and over 400% for the Emerging Markets Growth Fund, but portfolio
turnover rates may vary significantly from year to year. The portfolio turnover
rate for the International Growth Fund was 380% during its most recent fiscal
period (not annualized). Portfolio turnover may also be affected by sales of
portfolio securities necessary to meet cash requirements for redemptions of
shares.

PORTFOLIO TRANSACTIONS. The Adviser uses the trading room staff of Driehaus
Securities Corporation ("DSC"), an affiliate of the Adviser, to place the orders
for the purchase and sale of

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<PAGE> 17

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. 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 or fee for their
services. Orders may be directed to any broker including, to the extent and in
the manner permitted by applicable law, DSC. In order for DSC to effect any such
transaction as a broker 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 arm's-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. The Portfolios each
anticipate that most (or all) transactions for the purchase or sale of American
Depositary Receipts will be placed through DSC, so long as the criteria for
using an affiliated broker are met.

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 government-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.

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 period of 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.

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<PAGE> 18

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 a 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 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. Government securities). In the event of bankruptcy or
other default of the borrower, a Portfolio could experience delays in both
liquidating the loan collateral and recovering the loaned securities and losses.

DIVERSIFICATION. Each Portfolio is non-diversified, meaning that it is not
limited in the proportion of its assets that it may invest in the obligations of
a single issuer or in a single country. 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.

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

15
<PAGE> 19

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. Government
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.

HOW TO PURCHASE SHARES

In order to purchase shares, an investor must fill out an Application. The
initial purchase minimum per account is $100,000. The minimum subsequent
purchase is $20,000. These minimums may be waived in the discretion of the Fund.
If an order is placed at or prior to the close of regular trading on the New
York Stock Exchange (the "NYSE") (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. 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 Fund, 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 for
$25,000 or less 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).

Financial institutions designated by the Fund's Board of Trustees
(including Charles Schwab Co., Inc.) may accept purchase and redemption orders
on behalf of the Fund or may appoint a sub-designee to do so. The Fund will be
deemed to have received a purchase or redemption order when a designated
financial institution or its sub-designee accepts such order. All orders will be
priced at a Portfolio's net asset value next computed after they are accepted by
such designated financial institution.

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<PAGE> 20

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.

Wire transfer instructions are as follows:

PNC Bank, N.A., ABA #: 031-000-053, Credit: Driehaus Purchase Account
[Portfolio name], Bank Account #: 86-1108-2419, Further Credit:
(Shareholders Name/Acct #).

Individual Retirement Accounts ("IRAs") may also be established. 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.

Shares of each Portfolio are offered only to residents of states and other
jurisdictions in which the shares are available for purchase. 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 without notice.

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
investors 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;

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<PAGE> 21

(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 others
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 accept 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 request 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 a shareholder $25 for wire
transfers. The shareholder is responsible for any charges imposed by the
shareholder's firm or bank. There is a $50,000 wire redemption minimum.
Redemptions of shares within 15 days after they have been purchased by check may
be delayed until it can be verified that payment for the purchase of those
shares has been (or will be) collected. Such delays may be avoided if shares are
purchased by certified or bank check or by wire transfer.

The Fund reserves the right to redeem shares in any account and send the
proceeds to the owner if immediately after a redemption, the shares in the
account do not have a value of at least $50,000. A shareholder would be notified
that the account is below the minimum and would be allowed 30 days to increase
the account before the redemption is processed.

Shares in any account maintained with the Fund may be redeemed by the Fund
to the extent necessary to reimburse the Fund for any loss it sustains that is
caused by a shareholder

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<PAGE> 22

(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

Purchases and redemptions are made at a Portfolio's net asset value per
share next calculated after receipt of a purchase order and payment or written
redemption request in good form. The net asset value is determined as of the
regular close of the New York Stock Exchange ("NYSE") (3:00 p.m., Central time)
on each day the NYSE is open for trading. Net asset value per share is
determined by dividing the difference between the values of the Portfolio's
assets and liabilities by the number of the Portfolio's shares outstanding.

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 investment income for the calendar
year plus 98% of net capital gains realized from the sale of securities net of
any realized foreign exchange gains or losses during the 12 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. Gains or losses attributable to fluctuations in exchange rates
which occur between the time a Portfolio accrues receivables or liabilities
denominated in a foreign currency and the time the Portfolio actually collects
such receivables, or pays such liabilities, generally are treated as ordinary
income or ordinary loss. Similarly, on disposition of debt securities
denominated in a foreign currency and on disposition of certain futures and
forward contracts, gains or losses attributable to fluctuations in the value of
foreign currency between the date of acquisition of the security or contract and
the date of disposition are also treated as ordinary gain or loss. These gains
or losses, referred to under the Internal Revenue Code as "Section 988" gains or
losses, may increase or decrease the amount of a Portfolio's taxable income to
be distributed to its shareholders as ordinary income.

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 International Growth 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.
The other Portfolios intend to qualify and will elect at the

19
<PAGE> 23

filing of their first tax returns to be treated as regulated investment
companies under Subchapter M of the Internal Revenue Code.

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.

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 gain 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 with regard to sales or
exchanges on or before May 6, 1997 will be taxed at a maximum rate of 28%.
Long-term capital gain distributions received by individual shareholders with
regard to sales or exchanges after May 6, 1997 will be taxed at a maximum rate
of 20% (10% for individuals in the lowest tax bracket) if such sales or
exchanges relate to securities held more than 18 months and at a maximum rate of
28% (15% for individuals in the lowest tax bracket) if such sales or exchanges
relate to securities held more than 12 months but not more than 18 months. 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 intends to operate so as to meet the requirements of the U.S. Internal
Revenue Code to "pass through" to

20
<PAGE> 24

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. If a
Portfolio does not make such an election, the foreign taxes paid by the
Portfolio will reduce the Portfolio's net investment income.

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 the investor's 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; or

- 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 all amounts 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.

The foregoing discussion of U.S. and foreign taxation is not intended to be
a full discussion of income tax laws and their effect on shareholders. U.S. and
foreign shareholders should consult their tax advisers as to the tax
consequences of ownership of any Portfolio shares.

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

21
<PAGE> 25

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 the 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.

The table below shows, as of August 31, 1997, the International Growth
Funds average annual total returns for the one-year, five-year, and since
inception (July 1, 1990) periods. The International Growth Fund's performance
data includes the performance of the Driehaus International Large Cap Fund, L.P.
(the "Limited Partnership") for the periods before the Portfolio's registration
statement became effective. The Limited Partnership, which was established on
July 1, 1990, was managed following substantially the same objective, policies
and philosophies as are currently followed by the International Growth Fund. The
International Growth Fund succeeded to the Partnership's assets on October 28,
1996. The Limited Partnership was not registered under the Investment Company
Act of 1940 ("1940 Act") and thus was not subject to certain investment and
operational restrictions that are imposed by the 1940 Act. If the Limited
Partnership had been registered under the 1940 Act, its performance may have
been adversely affected. The Limited Partnership's performance was restated to
reflect estimated expenses of the International Growth Fund. Also shown for
comparison is the performance for the same time periods for the Morgan Stanley
Capital International Europe, Australia and Far East Index (the "EAFE Index").
The EAFE Index is a widely recognized benchmark of non-U.S. 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.

INTERNATIONAL GROWTH FUND

AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING AUGUST 31, 1997

<TABLE>
<CAPTION>
SINCE
INCEPTION
ONE-YEAR 5-YEAR (JULY 1, 1990)
-------- ------ --------------
<S> <C> <C> <C>
International Growth Fund........................... 18.73% 20.75% 16.67%
EAFE Index (in U.S. dollars)........................ 9.05% 10.67% 5.93%
</TABLE>

As of the date of this prospectus, the other Portfolios do not have
performance records.

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,

22
<PAGE> 26

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 $2.3 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 managed the Portfolio since the
commencement of operations in October of 1996. Prior to the Portfolio's
commencement, 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 Pacific, Canada and emerging markets. In addition to the Portfolio, Mr.
Andersen is the portfolio manager for three Canadian mutual funds, including a
global fund. Mr. Andersen also supervises Mr. Brewer and Mr. Ritter (the
portfolio managers listed below) in their roles as analysts for their respective
regions and markets of the world. He does not, however, supervise or participate
in investment decision-making for the Asia Pacific Growth Fund or the Emerging
Markets Growth Fund.

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 MANAGER -- DRIEHAUS ASIA PACIFIC GROWTH FUND. Mr. Eric J. Ritter
has managed the Portfolio since its inception. Mr. Ritter, an Asia Pacific
analyst with the Adviser, has responsibility for making all 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 master's 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 MANAGER -- DRIEHAUS EMERGING MARKETS GROWTH FUND. Mr. Emery R.
Brewer has managed the Portfolio since its inception. Mr. Brewer, an emerging
markets analyst with the Adviser, has responsibility for making all investment
decisions on behalf of the Portfolio.

23
<PAGE> 27

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 M.B.A. 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.

ADMINISTRATOR. PFPC Inc. ("PFPC") 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.

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 "Custodian") is the custodian
for the Fund. Foreign securities are maintained in the custody of foreign banks
and trust companies that are members of the Custodian's Global Custody Network
or foreign depositories used by such members.

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.

24
<PAGE> 28

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 ASIA PACIFIC 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
1-800-560-6111.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GENERAL INFORMATION AND HISTORY . . . . . . . . . . . . . . . . . . . . . . B-2
PORTFOLIO INVESTMENTS AND RISK CONSIDERATIONS . . . . . . . . . . . . . . . B-2
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . B-10
PURCHASES AND REDEMPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . B-11
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-11
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-13
PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . B-14
INVESTMENT ADVISORY SERVICES . . . . . . . . . . . . . . . . . . . . . . . B-15
ADMINISTRATOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-15
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-15
TRANSFER AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-16
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . B-16
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . B-16
ADDITIONAL INCOME TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . B-17
INVESTMENT PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . B-19
APPENDIX--RATINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>

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

<PAGE> 29
GENERAL INFORMATION AND HISTORY

Driehaus International Growth Fund, Driehaus Asia Pacific Growth Fund
and Driehaus 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 communication 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.

In October 1996, the International Growth Fund succeeded to the assets
of the Driehaus International Large Cap Fund, L.P. The Asia Pacific Growth Fund
and Emerging Markets Growth Fund each commenced operations in December 1997.

PORTFOLIO INVESTMENTS AND RISK CONSIDERATIONS

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. 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 equities 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.")

Risks. Investors should understand and consider carefully the risks
involved in foreign investing. Investing in foreign securities and positions
which are generally denominated in foreign currencies, and utilization of
forward currency 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

B-2
<PAGE> 30

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; investment in securities of companies in
developing as well as developed countries; and sometimes less advantageous
legal, operational and financial protections applicable to foreign subcustodial
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 through forward currency contracts ("forward currency
contracts") or on a spot (i.e., cash) basis at the spot rate for purchasing
currency prevailing in the foreign exchange market. Forward currency 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 currency 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
currency contracts with respect to specific receivables or payables of each
Portfolio accruing in connection with settlement of the purchase and sale of
its portfolio securities. Portfolio hedging is the use of forward currency
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 currency or
currencies 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 currency 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 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.

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

B-3
<PAGE> 31
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, the International Growth Fund will invest
at least 65% of its total assets in at least three countries other than the
United States.

LENDING OF PORTFOLIO SECURITIES

Subject to restriction (3) under "Investment Restrictions" in this
Statement of Additional Information, 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 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.

B-4
<PAGE> 32
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.

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
Securities Act of 1933 (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 will
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 will 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 Fund has established 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. Currently the line of credit
is available to the International Growth Fund.

PORTFOLIO TURNOVER

Portfolio turnover rate is commonly measured by dividing the lesser of
total purchases or sales for the months under consideration in the Portfolio by
the average Portfolio value (i.e., the cumulative total investment in the
account at the end of each month, divided by the number of months under
consideration).

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
nonexchange-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, an index, an interest
rate or a currency.

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 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.

B-5
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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 Portfolios intend 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, nonstandardized 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 a Portfolio 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. 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 Portfolios 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 Portfolios 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.

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,

B-6
<PAGE> 34
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.

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.

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, 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.

- -------------
(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> 35
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.

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

B-8
<PAGE> 36
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.

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%.

- ---------------
(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> 37
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 1940 Act 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,(3)
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 nonfundamental
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;

(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

- ---------------
(3) 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-10
<PAGE> 38
(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.

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
January, 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 will pay cash for
all redemptions orders, limited in amount with respect to each shareholder of
record during any ninety-day period to the lesser of $250,000 or one percent of
the net assets of the relevant Portfolio, as measured at the beginning of such
period. 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.

NET ASSET VALUE

The net asset value of a share of a Portfolio is calculated by
dividing (i) the value of the securities held by the Portfolio (i.e., the value
of its investments), plus any cash or other assets, minus all liabilities
(including accrued estimated expenses on an annual basis), by (ii) the total
number of outstanding shares of the Portfolio. Investment securities, including
ADRs, EDRs and GDRs, that are traded on a stock exchange or on the NASDAQ
National Market System are valued at the last sale price as of the regular
close of business on the New York Stock Exchange ("NYSE") (3:00 p.m. Central
time) on the day the securities are being valued, or lacking any sales, at
either (i) the last bid or ask prices or (ii) the mean between the closing bid
and asked prices. Other over-the-counter securities are valued at the mean
between the closing bid and asked prices. Net asset value will not be
determined on days when the NYSE is closed, unless, in the judgment of the
Board, the net asset values of a Portfolio should be determined on any such
day, in which case the determination will be made at 3:00 P.M. Central time.

In the event that the NYSE or the relevant national securities
exchange adopts different trading hours on a temporary basis, Portfolio net
asset value will be computed at the close of the exchange.

Trading in securities on most foreign securities exchanges and over-
the-counter markets is normally completed well before the close of the NYSE
except securities trading primarily on Central and South American exchanges.
Such securities are valued at the last sale price as of the regular close of
the relevant exchange. For securities that trade primarily on an exchange that
closes after the NYSE, the price of the security will be determined at 1:00
p.m. Central time. In addition, foreign securities trading may not take place
on all business days and may occur in various foreign markets on days which are
not business days in domestic markets and on which net asset value is not
calculated. The calculation of net asset value may not take place
contemporaneously with the determination of the prices of portfolio securities
used in such calculation. Events affecting the values of portfolio securities
that occur between the time their prices are determined and the close of the
NYSE will not be reflected in the calculation of net asset value unless the
Board of Trustees deems that the particular event would materially affect net
asset value, in which case an adjustment will be made. Assets or liabilities
initially expressed in terms

B-11
<PAGE> 39

of foreign currencies are translated prior to the next determination of the net
asset value into U.S. dollars at the spot exchange rates at 10:00 a.m. Central
time or at such other rates as the Adviser may determine to be appropriate in
computing net asset value.

Securities and assets for which market quotations are not readily
available, or for which the Adviser's Pricing Committee determines that the
foregoing methods do not accurately reflect current market value, are valued at
fair value as determined in good faith by or under the direction of the Board
of Trustees. Such valuations and procedures will be reviewed periodically by
the Board of Trustees.

The Fund uses pricing services approved by its Board of Trustees.
Prices of equity securities provided by such services represent the last sale
price on the exchange where the security is primarily traded. Exchange rates of
currencies provided by such services are sourced, where possible, from multi-
contributor quotations. Normally, the rate will be based upon commercial
interbank bid and offer quotes. Representative rates are selected for each
currency based upon the latest quotation taken from contributors at short
intervals prior to pricing. Prices of bonds by such services represent
evaluations of the mean between current bid and asked market prices, may be
determined without exclusive reliance on quoted prices and may reflect
appropriate factors such as institution-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, individual
trading characteristics, indications of values from dealers and other market
data. Such services may use electronic data processing techniques and/or a
matrix system to determine valuations. The procedures of such services are
reviewed periodically by the officers of the Fund under the general supervision
and responsibility of its Board of Trustees, which may replace a service at any
time if it determines that it is in the best interests of the Funds to do so.

Long-term debt obligations are valued at the mean of representative
quoted bid and asked prices for such securities or, if such prices are not
available, at prices for securities of comparable maturity, quality and type;
however, when the Adviser deems it appropriate, prices obtained for the day of
valuation from a bond pricing service will be used, as discussed below. Debt
securities with maturities of 60 days or less are valued at amortized cost if
their term to maturity from date of purchase is less than 60 days, or by
amortizing, from the 61st day prior to maturity, their value on the 61st day
prior to maturity if their term to maturity from date of purchase by a
Portfolio is more than 60 days, unless this is determined by the Fund's Board
of Trustees not to represent fair value. Repurchase agreements are valued at
cost plus accrued interest.

U.S. Government securities are traded in the over-the-counter market
and are valued at the mean between the last available bid and asked prices,
except that securities with a demand feature exercisable within one to seven
days are valued at par. Such valuations are based on quotations of one or more
dealers that make markets in the securities as obtained from such dealers, or
on the evaluation of a pricing service.

Options, futures contracts and options thereon, which are traded on
exchanges, are valued at their last sale or settlement price as of the close of
such exchanges or, if no sales are reported, at the mean between the last
reported bid and asked prices. If an options or futures exchange closes later
than 3:00 p.m. Central time, the options or futures traded on it are valued
based on the sale price, or on the mean between the bid and ask prices, as the
case may be, as of 3:00 p.m. Central time.

B-12
<PAGE> 40

MANAGEMENT

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

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION(S)
NAME; ADDRESS AGE POSITION(S) HELD WITH FUND DURING PAST FIVE YEARS
------------- --- -------------------------- ----------------------
<S> <C> <C> <C>
Richard H. Driehaus*(1) 55 Chairman of the Board; President Chairman of the Board and Chief
25 East Erie Street Executive Officer of the Adviser and
Chicago, IL 60611 Driehaus Securities Corporation;
Portfolio Manager of the Adviser
Arthur B. Mellin(2) 55 Trustee President, Mellin Securities
190 South LaSalle Street Incorporated
Chicago, IL 60603

Robert F. Moyer*(1) 50 Trustee, Senior Vice President President and Chief Operating
25 East Erie Street Officer of the Adviser and Driehaus
Chicago, IL 60611 Securities Corporation since 1995;
Senior Vice President, Vice
President and Secretary prior
thereto

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

Daniel Zemanek(2) 55 Trustee President, Santa Fe Chicken and
2301 Leghorn Executive Vice President, Pollo Rey,
Mountain View, CA 94043 Inc. (creator of Pollo Rey
restaurants), 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 and portfolio manager
25 East Erie Street of the Adviser; portfolio manager of
Chicago, IL 60611 the Adviser prior thereto

Diane L. Wallace 39 Vice President; Treasurer Senior Vice President-Operations of
25 East Erie Street the Adviser and Driehaus Securities
Chicago, IL 60611 Corporation, since 1996; Vice
President prior thereto

Mary H. Weiss 49 Vice President; Secretary Vice President, Secretary and Chief
25 East Erie Street Legal Counsel of the Adviser and
Chicago, IL 60611 Driehaus Securities Corporation
since 1995; prior thereto, Assistant
Regional Director, U.S. Securities
and Exchange Commission

Robert H. Buchen 60 Vice President Vice President of marketing/account
25 East Erie Street management of the Adviser and
Chicago, IL 60611 Driehaus Securities Corporation
since 1990

Martin A. Brown 36 Vice President Vice President of marketing/new
25 East Erie Street business of the Adviser and Driehaus
Chicago, IL 60611 Securities Corporation since 1995;
prior thereto portfolio manager,
Continental Bank.
</TABLE>

B-13
<PAGE> 41

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION(S)
NAME; ADDRESS AGE POSITION(S) HELD WITH FUND DURING PAST FIVE YEARS
------------- --- -------------------------- ----------------------
<S> <C> <C> <C>
Dusko Culafic 39 Assistant Treasurer Vice President and Treasurer of the
25 East Erie Street Adviser and Driehaus Securities
Chicago, IL 60611 Corporation since 1996; Controller
prior thereto
Jennifer L. Billingsley 34 Assistant Secretary Attorney with the Adviser since
25 East Erie Street 1996; prior thereto, associate of
Chicago, IL 60611 Sidley & Austin, a law firm
</TABLE>

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

(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.

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 $15,000
A.R. Umans $15,000
Daniel Zemanek $15,000
</TABLE>

As of November 1, 1997, the Fund's officers and trustees as a group
owned (or held a shared investment or voting power with respect to) 1,209,805
shares or 7.95% of the International Growth Fund.

PRINCIPAL SHAREHOLDERS

As of November 1, 1997, no persons owned of record or beneficially 5%
or more of the shares of a Portfolio except the persons indicated below.

<TABLE>
<CAPTION>
Name and Address Portfolio % Owned
- ---------------- --------- -------
<S> <C> <C>
Mac & Co. International Growth Fund 8.924%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15320-3198

Los Angeles County Museum of Art International Growth Fund 5.620%
5905 Wilshire Blvd.
Los Angeles, CA 90036
</TABLE>

B-14
<PAGE> 42

<TABLE>
<CAPTION>
Name and Address Portfolio % Owned
- ---------------- --------- -------
<S> <C> <C>
US Bancorp Trust Company International Growth Fund 8.370%
P.O. Box 520
Johnston, PA 15907-0520

Richard H. Driehaus International Growth Fund 7.299%
25 East Erie Street
Chicago, IL 60611
</TABLE>

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 its 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 $1,752,344.

ADMINISTRATOR

PFPC Inc. ("PFPC"), 103 Bellevue Parkway, Wilmington, Delaware 19809,
is the administrator for the Fund. The asset-based fee for administrative and
accounting services for the International Growth Fund 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 $600 million.

The asset-based fee for administration and accounting services for the
Asia Pacific Growth Fund and the Emerging Market Growth Fund is:

.14% of first $200 million of average net assets;
.09% of next $200 million of average net assets;
.07% of next $200 million of average net assets; and
.05% of average net assets in excess of $600 million.

There is a minimum monthly fee of $9500 (excluding out of pocket expenses),
which PFPC has agreed to waive for the first two fiscal years of the Asia
Pacific Growth Fund and the Emerging Markets Growth Fund.

CUSTODIAN

Morgan Stanley Trust Company at One Pierrepont Plaza, Brooklyn, NY
11201, is the custodian for the Fund (the "Custodian"). 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 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.

B-15
<PAGE> 43

Portfolio securities purchased in the U.S. are maintained in the
custody of the Custodian 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 Custodian's Global
Custody Network and foreign depositories ("foreign subcustodians"). With
respect to foreign subcustodians, 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
subcustodians, difficulties and costs of obtaining jurisdiction over, or
enforcing judgments against, the foreign subcustodians, or application of
foreign law to a Portfolio's foreign subcustodial 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.

TRANSFER AGENT

PFPC, 103 Bellevue Parkway, Wilmington, Delaware 19809, is the Fund's
transfer agent registrar, dividend-disbursing agent and shareholder servicing
agent. As such, PFPC provides certain bookkeeping and data processing services
and services pertaining to the maintenance of shareholder accounts. PFPC will
also waive a portion of its monthly base fee for transfer agency service for
the first two fiscal years of the Asia Pacific Growth Fund and the Emerging
Markets Growth Fund.

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 uses the trading room staff of Driehaus Securities
Corporation ("DSC"), an affiliate of the Adviser, to place 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 (including the knowledge of the trading room
staff of DSC) 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 (including
the knowledge of the trading room staff of DSC) 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.

Orders may be directed to any broker including, to the extent and in
the manner permitted by applicable law, DSC. 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 arm's-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. For the fiscal year ended August 31,
1997, the International Growth Fund paid brokerage commissions of $3,231,000,
of which $228,000 were paid to DSC.

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

B-16
<PAGE> 44

portfolio transaction for a Portfolio, the Adviser may select a broker or
dealer that furnishes 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,
computer data bases, quotation equipment and services, research-oriented
computer software and services, and services of economic and other consultants.
Selection of brokers or dealers is not made pursuant to an agreement or
understanding with any of the brokers or dealers; however, the Adviser uses an
internal allocation procedure to identify those brokers or dealers who provide
it with research products or services and the amount of research products or
services they provide, and endeavors to direct sufficient commissions generated
by its clients' accounts in the aggregate, including the 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 nonresearch
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 nonresearch 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 Internal Revenue 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 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

B-17
<PAGE> 45

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. If a Portfolio does not make such an
election, the net investment income of that particular Portfolio will be
reduced and the shareholders will not be able to deduct their pro rata share of
foreign taxes paid by the Portfolio.

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. 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 options on futures 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(4) other than a "qualified
covered call option," as defined in the Internal Revenue Code, any loss on such
option transaction, to the extent it does not exceed the unrealized gains on
the securities covering the option, may be subject to deferral until the
securities covering the option have been sold.

A futures contract held until delivery results in capital gain or loss
equal to the difference between the price at which the futures contract was
entered into and the settlement price on the earlier of delivery notice date or
expiration date. If 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.

- ---------------
(4) 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-18
<PAGE> 46

The Portfolios may enter into swaps or other notional principal
contracts. Payments made or received pursuant to the terms of a notional
principal contract are divided into two types--periodic payments and
nonperiodic payments. Periodic payments are payments made or received pursuant
to a notional principal contract that are payable at intervals of one year or
less during the entire term of the contract, that are based on certain types of
specified indices (which include objective financial information), and that are
based on either a single notional principal amount or a notional principal
amount that varies over the term of the contract in the same proportion as the
notional principal amount that measures the other party's payments. A
nonperiodic payment is any payment made or received with respect to a notional
principal contract that is not a periodic payment or a termination payment. All
taxpayers, regardless of their method of accounting, must recognize the ratable
daily portion of a periodic payment for the taxable year to which that portion
relates. In contrast, a nonperiodic payment is required to be amortized over
the term of the swap by the parties and is not deducted or included in income
when made.

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.

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 net of foreign
exchange losses 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 intend 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 nonresident 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.

Each Portfolio 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

B-19
<PAGE> 47
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

<TABLE>
<S> <C> <C> <C>
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).
</TABLE>

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. Of
course, past performance is not indicative of future results.

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 those
of the Portfolios. Comparison of a Portfolio to an alternative investment
should be made with consideration of differences in features and expected
performance. All such indexes and averages will be obtained from sources or
reporting services that the Fund believes to be generally accurate. Each
Portfolio's performance may be compared to indexes or averages, including the
following:

Dow-Jones Industrial Average
Standard & Poor's 500 Stock Index
Standard & Poor's 400 Industrials
Wilshire 5000
New York Stock Exchange Composite Index
American Stock Exchange Composite Index
NASDAQ Composite
NASDAQ Industrials
EAFE Index
Financial Times Actuaries World Index (Ex-U.S.)
Morgan Stanley Capital International World Index
Lipper International & Global Funds Average
Lipper General Equity Funds Average
Lipper Equity Funds Average
Lipper International Fund Index
Lipper Pacific Index
Lipper Emerging Market Index
ICD International Equity Funds Average
ICD All Equity Funds Average
ICD General Equity Funds Average*+
ICD Global Equity Funds Average
ICD International Equity and Global Equity Funds Average
ICD Foreign Securities Index
IFC Emerging Markets 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**
Morgan Stanley All Country Asia Pacific Index

* Includes ICD Aggressive Growth, Growth & Income, Long-Term Growth, and
Total Return Averages.
** Includes Morningstar Aggressive Growth, Growth, Balanced Equity
Income, and Growth & Income Averages.

The ICD Indexes reflect the unweighted average total return of the
largest twenty funds within their respective categories 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

B-20
<PAGE> 48
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.

The Fund may also note its mention or recognition in local, national
or international newspapers, magazines, newsletters, periodicals or other media
from time to time. However, the Fund assumes no responsibility for the accuracy
of such data. Such publications may include, but are not limited to, the
following:

Barron's
Business Week
CNBC
Crain's Chicago Business
Consumer Reports
Consumer Digest
Financial World
Forbes
Fortune
Fund Action
Investor's Business Daily
Kiplinger's Personal Finance
Magazine
Knight-Ridder
Money
Mutual Fund Letter
Mutual Fund News Service
Mutual Fund Values (Morningstar)
Newsweek
The New York Times
No-Load Fund Investor
Pension World
Pensions and Investment
Personal Investor
Smart Money
Stanger's Investment Adviser
United Mutual Fund Selector
USA Today
U.S. News and World Report
The Wall Street Journal
Worth
Your Money

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

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:

<TABLE>
<S> <C>
Common stocks Intermediate-term government bonds
Small company stocks U.S. Treasury bills
Long-term corporate bonds Consumer Price Index
Long-term government bonds
</TABLE>

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.)

B-21
<PAGE> 49
TAX-DEFERRED INVESTMENT VS. TAXABLE INVESTMENT

<TABLE>
<CAPTION>
Interest Rate 6% 8% 10% 6% 8% 10%
-------------
Compounding Years TAX-DEFERRED INVESTMENT Taxable Investment
----------------- -------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 $2,072 $2,097 $2,121 $2,072 $2,097 $ 2,121
5 11,178 11,614 12,072 11,141 11,546 11,965
10 24,798 26,820 29,098 24,453 26,165 28,006
15 41,684 47,304 54,099 40,358 44,675 49,514
20 62,943 75,543 91,947 59,362 68,109 78,351
25 90,053 115,177 150,484 82,067 97,780 117,014
30 124,992 171,554 242,340 109,197 135,346 168,852
</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 an investor to purchase more shares when prices are low
and fewer shares when prices are high. Over time, this tends to lower the
average cost per share. Like any investment strategy, dollar cost averaging
cannot 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-22
<PAGE> 50
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 weights 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 exceptionally stable
margin and principal is secure. Although the various protective elements are
likely to change, such changes as can be visualized are 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.

A-1
<PAGE> 51
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.

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 noncredit 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.

A-2
<PAGE> 52
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> 53

- --------------------------------------------------------------------------------
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> 54
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> 55
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> 56

- --------------------------------------------------------------------------------
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> 57

- --------------------------------------------------------------------------------
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> 58
- --------------------------------------------------------------------------------
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> 59
- --------------------------------------------------------------------------------
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> 60
- --------------------------------------------------------------------------------
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> 61
- --------------------------------------------------------------------------------
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> 62
- --------------------------------------------------------------------------------
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> 63
- --------------------------------------------------------------------------------
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> 64
- --------------------------------------------------------------------------------
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> 65
- --------------------------------------------------------------------------------
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> 66
- --------------------------------------------------------------------------------
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> 67
- --------------------------------------------------------------------------------
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> 68

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> 69
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 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) (a) Management Agreement. /2/
(b) Letter Agreement *

(6) None.

(7) None.

(8) Custodian Services Agreement. /2/

(9.1) Transfer Agency Agreement. /2/

(9.2) Administration Agreement. /2/

(10) Opinion of Counsel.*

(11) Consent of independent accountants.*

(12) Not applicable.

(13) Investment Letter of initial investor in Driehaus
International Growth Fund. /2/

(14) None.

(16) Not applicable.

(18) Not applicable.

(19) Powers of Attorney./3/

C-1
<PAGE> 70
(27) Financial Data Schedule.*

* Filed herewith.

/1/ Incorporated herein by reference to Registrant's initial
registration statement filed on June 5, 1996.

/2/ Incorporated herein by reference to Registrant's Pre-Effective
Amendment No. 1 under the Securities Act of 1933 filed on October 7, 1996.

/3/ Incorporated herein by reference to Registrant's Post-Effective
Amendment No. 2 under the Securities Act of 1933 filed on October 31, 1997.

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, officer, or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

C-2
<PAGE> 71
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

<TABLE>
<CAPTION>
Name Position with Adviser Other Business, Profession, Vocation or Employment
- ---- --------------------- --------------------------------------------------
<S> <C> <C>
Richard H. Driehaus Chairman of Board, CEO Chairman of Board, CEO of Driehaus Securities
Corporation ("DSC")

William R. Andersen Vice President None

Mark Genovise Vice President None

Robert F. Moyer President, COO President, COO of DSC

Diane L. Wallace Senior Vice
President-Operations Senior Vice President-Operations of DSC

Mary H. Weiss Vice President, Secretary, Chief Vice President, Secretary and Chief
Legal Officer Legal Officer of DSC

Robert H. Buchen Vice President Vice President of DSC

Martin A. Brown Vice President Vice President of DSC

Dusko Culafic Vice President and Treasurer Vice President and Treasurer of DSC
</TABLE>

ITEM 29. PRINCIPAL UNDERWRITERS.

(a) Not applicable.

(b) Not applicable.

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.

All 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 60611, or (iii) at
the offices of Registrant's custodian, Morgan Stanley Trust Company, One
Pierrepont Plaza, Brooklyn, NY 11201, transfer agent, PFC., 103 Bellevue
Parkway, Wilmington, Delaware 19809, or administrator, PFC., 103 Bellevue
Parkway, Wilmington, Delaware 19809.

ITEM 31. MANAGEMENT SERVICES.

Not applicable.

ITEM 32. UNDERTAKINGS.

(a) Not applicable.

(b) With respect to the Asia Pacific Growth Fund and the
Emerging Markets Growth Fund, Registrant undertakes
to file a post-effective amendment, using financial
statements which need not be certified, within four
to six months from the effective date of Registrant's
1933 Act registration statement.

C-3
<PAGE> 72
(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-4
<PAGE> 73
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(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment No. 6 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 29th day of December, 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. 6 to the Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.

<TABLE>
<S> <C> <C>
/s/ Richard H. Driehaus President and Trustee December 29, 1997
- ------------------------------- (Principal Executive Officer)
Richard H. Driehaus

/s/ Arthur B. Mellin* Trustee December 29, 1997
- -------------------------------
Arthur B. Mellin

/s/ Robert F. Moyer Trustee December 29, 1997
- -------------------------------
Robert F. Moyer

/s/ A.R. Umans* Trustee December 29, 1997
- -------------------------------
A.R. Umans

/s/ Daniel Zemanek* Trustee December 29, 1997
- -------------------------------
Daniel Zemanek

/s/ Diane L. Wallace Treasurer (Principal Financial December 29, 1997
- ------------------------------- and 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. 2.

/s/ Robert F. Moyer
- -------------------------------
Robert F. Moyer
<PAGE> 74
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) (a) Management Agreement./2/
(b) Letter Agreement.*

(6) None.

(7) None.

(8) Custodian Services Agreement./2/

(9.1) Transfer Agency Agreement./2/

(9.2) Administration Agreement./2/

(10) Opinion of Counsel.*

(11) Consent of independent accountants.*

(12) Not applicable.

(13) Investment Letter of initial investor in Driehaus
International Growth Fund. /2/

(14) None.

(16) Not applicable.

(18) Not applicable.

(19) Powers of Attorney./3/

(27) Financial Data Schedule.*

* Filed herewith.

/1/ Incorporated herein by reference to Registrant's initial registration
statement filed on June 5, 1996.

/2/ Incorporated herein by reference to Registrant's Pre-Effective
Amendment No. 1 under the Securities Act of 1933 filed on October 7, 1996.

/3/ Incorporated herein by reference to Registrant's Post-Effective
Amendment No. 2 under the Securities Act of 1933 filed on October 31, 1997.

<PAGE> 1
Exhibit 5b

LETTER AGREEMENT

Driehaus Mutual Funds
25 East Erie Street
Chicago, Illinois 60611

This Agreement is made as of this 18th day of December 1997 between
DRIEHAUS MUTUAL FUNDS, a Delaware business trust (the "Trust") and DRIEHAUS
CAPITAL MANAGEMENT, INC., an Illinois corporation (the "Adviser").

WHEREAS, the Trust and the Adviser have entered into an Investment
Advisory Agreement dated September 25, 1996 (the "Advisory Agreement") under
which the Trust has agreed to retain the Adviser to render investment advisory
and management services to the Driehaus International Growth Fund (the "Initial
Portfolio"), and the Adviser has agreed to render such services to the Initial
Portfolio, together with any other Trust portfolios that may be established
later (collectively, the "Portfolios" and individually a "Portfolio");

WHEREAS, pursuant to Paragraph 2 of the Advisory Agreement, the Trust
hereby notifies the Adviser of its desire to retain the Adviser to render
investment advisory and management services to two additional portfolios to be
known as the Driehaus Asia Pacific Growth Fund and the Driehaus Emerging
Markets Growth Fund (the "New Portfolios"); and

WHEREAS, by signing this Agreement below, the Adviser agrees to render
such services, whereupon the New Portfolios shall become Portfolios under the
Advisory Agreement.

NOW THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the Trust and the Adviser agree as follows:

1. The Trust hereby appoints the Adviser as investment adviser
and manager for the New Portfolios under the Advisory Agreement and the
Adviser hereby accepts such appointment and agrees to perform the
services and duties set forth in the Advisory Agreement on the terms
set forth therein, except as otherwise provided in this Agreement.

2. This Agreement shall become effective as of the date first
above written and, unless sooner terminated as provided in Paragraph 9
of the Advisory Agreement, shall continue until September 30, 1998.
Thereafter, this Agreement will be extended with respect to a
particular New Portfolio for successive one-year periods ending on
September 30 of each year, subject to the provisions of Paragraph 9 of
the Advisory Agreement.

3. For the services provided and the expenses assumed under
this Agreement, the Trust shall pay the Adviser a fee, computed daily
and payable monthly, at an annual rate of 1.5% of average daily net
assets of each New Portfolio. For the month and year in which this

<PAGE> 2
Agreement becomes effective or terminates, there shall be an
appropriate proration of such fee on the basis of the number of days
that the Agreement is in effect during the month and year,
respectively.

4. All the other terms and conditions of the Advisory Agreement
shall remain in full effect.

5. This Agreement is hereby incorporated by reference into the
Advisory Agreement and is made a part thereof. In case of a conflict
between this Agreement and the Advisory Agreement, the terms of the
Advisory Agreement are controlling.

IN WITNESS WHEREOF, the Trust and the Adviser have caused this Agreement
to be executed as of the day and year first above written.

DRIEHAUS MUTUAL FUNDS

By: ___________________________________
Robert F. Moyer
Senior Vice President
ATTEST: ___________________________
Mary H. Weiss
Secretary
DRIEHAUS CAPITAL MANAGEMENT, INC.

By: ___________________________________
Robert F. Moyer
President

ATTEST: ___________________________
Mary H. Weiss
Secretary

<PAGE> 1
[LETTERHEAD OF VEDDER, PRICE, KAUFMAN & KAMMHOLZ] Exhibit 10

December 30, 1997

Driehaus Mutual Funds
25 East Erie Street
Chicago, Illinois 60611

Board of Trustees:

Reference is made to the Registration Statement on Form N-1A under the
Securities Act of 1933 being filed by Driehaus Mutual Funds (the "Fund") in
connection with the proposed public offering of an indefinite number of shares
of beneficial interest, no par value ("Shares"), in the Driehaus International
Growth Fund, Driehaus Asia Pacific Growth Fund and Driehaus Emerging Markets
Growth Fund (the "Portfolios"), authorized series of the Fund.

We have acted as counsel for the Fund since its inception and in such
capacity have assisted in supervising its organization and have counseled the
Fund regarding subsequent legal matters.

Based upon the foregoing, we advise you and opine that (a) the Fund is a
legally organized and validly existing business trust under the laws of the
State of Delaware (commonly known as a Delaware business trust) which, unless
terminated as provided in its Agreement and Declaration of Trust, shall
continue in existence without limitation of time; and (b) the Fund is
authorized to issue an unlimited number of Shares of the Portfolios and upon
the issue of any thereof for cash at net asset value and receipt by the Fund of
the authorized consideration thereof, the Shares of the Portfolio so issued
will be validly issued, fully paid and nonassessable by the Fund.

We hereby consent to the use of this opinion in connection with said
Registration Statement relating to said Shares and to the listing of our name
as legal counsel therein.

Very truly yours,

VEDDER, PRICE, KAUFMAN & KAMMHOLZ

COK
AEO

<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. 6 to the Registration Statement on Form N-1A
of Driehaus Mutual Funds.

/s/ Arthur Andersen LLP

ARTHUR ANDERSEN LLP

Chicago, Illinois,
December 19, 1997

<ARTICLE> 6
<CIK> 0001016073
<NAME> DRIEHAUS MUTUAL FUNDS
<SERIES>
<NUMBER> 1
<NAME> DRIEHAUS INTERNATIONAL GROWTH FUND

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 161,638,397
<INVESTMENTS-AT-VALUE> 170,959,269
<RECEIVABLES> 2,667,650
<ASSETS-OTHER> 16,104,387
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 189,731,306
<PAYABLE-FOR-SECURITIES> 8,831,763
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 354,449
<TOTAL-LIABILITIES> 9,186,212
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 158,635,869
<SHARES-COMMON-STOCK> 15,172,194
<SHARES-COMMON-PRIOR> 13,015,084
<ACCUMULATED-NII-CURRENT> (784,650)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 15,013,053
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,320,872
<NET-ASSETS> 180,545,094
<DIVIDEND-INCOME> 1,371,638
<INTEREST-INCOME> 312,620
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<EXPENSES-NET> 2,468,908
<NET-INVESTMENT-INCOME> (784,650)
<REALIZED-GAINS-CURRENT> 15,013,053
<APPREC-INCREASE-CURRENT> 9,320,872
<NET-CHANGE-FROM-OPS> 21,909,225
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 15,894,033
<NUMBER-OF-SHARES-REDEEMED> 731,880
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 180,444,682
<ACCUMULATED-NII-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,488,108
<AVERAGE-NET-ASSETS> 138,442,778
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (.05)
<PER-SHARE-GAIN-APPREC> 1.95
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<PER-SHARE-NAV-END> 11.90
<EXPENSE-RATIO> 2.11
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>