<PAGE> 1
- ---------------------------------
DRIEHAUS MUTUAL FUNDS
TRUSTEE & OFFICERS
Richard H. Driehaus
Chairman of the Board & President
Arthur B. Mellin
Trustee
Robert F. Moyer
Senior Vice President & Trustee
A.R. Umans
Trustee
Daniel Zemanek DRIEHAUS MUTUAL FUNDS
Trustee
William R. Andersen DRIEHAUS ASIA PACIFIC
Vice President GROWTH FUND
Diane L. Wallace DRIEHAUS EMERGING MARKETS
Vice President & Treasurer GROWTH FUND
Mary H. Weiss
Vice President & Secretary
Robert H. Buchen
Vice President
Martin H. Brown DISTRIBUTED BY:
Vice President DRIEHAUS MUTUAL FUNDS
INVESTMENT ADVISOR
Driehaus Capital Management, Inc. ANNUAL REPORT TO
25 East Erie Street SHAREHOLDERS
Chicago, IL 60611 SEPTEMBER 30, 1998
DISTRIBUTOR
Driehaus Mutual Funds
25 East Erie Street
Chicago, IL 60611 This report has been prepared for the
shareholders of the Fund and is not an
ADMINISTRATOR & TRANSFER AGENT offering to sell or buy any Fund
PFPC, Inc. securities. Such offering is only made
400 Bellevue Parkway by the Fund's prospectus.
Suite 108
Wilmington, DE 19809
CUSTODIAN
Chase Manhattan Bank
One Pierrepont Plaza
Brooklyn, NY 11201
- ---------------------------------
<PAGE> 2
- -------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- -------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
Driehaus Asia Pacific Growth Fund and Driehaus Emerging Markets Growth Fund:
We have audited the accompanying statements of assets and liabilities of
DRIEHAUS ASIA PACIFIC GROWTH FUND and DRIEHAUS EMERGING MARKETS GROWTH FUND (the
"Funds"), including the schedules of investments and investments by industry, as
of September 30, 1998, and the related statements of operations, statements of
changes in net assets, and financial highlights for the periods indicated
thereon. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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
September 30, 1998 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 audits provide 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 positions of
Driehaus Asia Pacific Growth Fund and Driehaus Emerging Markets Growth Fund as
of September 30, 1998, and the results of their operations, changes in their net
assets, and financial highlights for the periods indicated thereon, in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
- -----------------------
Arthur Andersen LLP
Chicago, Illinois
November 20, 1998
1
<PAGE> 3
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S LETTER - DRIEHAUS ASIA PACIFIC GROWTH FUND
- --------------------------------------------------------------------------------
Dear Fellow Shareholders:
The first nine months of 1998 were a difficult time for Asia and for our
investments. Although the Fund outperformed its two benchmarks over this period,
the slow pace of reform in Asia and the widening emerging markets crisis hurt
performance. For the period beginning December 31, 1997, (the Fund's inception
date) through September 30, 1998 (the Fund's fiscal year end), the Driehaus Asia
Pacific Growth Fund returned -17.00%, compared with returns of -19.42% for the
Morgan Stanley Capital International Asia Pacific Index and -24.43% for the
Morgan Stanley Capital International Asia Pacific Index excluding Japan.
Since the beginning of the Asian financial crisis in July 1997, we have
maintained that the current situation is more similar to the Latin American debt
crisis of 1982 than to the crisis in Mexico of 1994. In the former, Latin
American economies took several years to recover because of large foreign debts
and banks' unwillingness to write off debts. In contrast, the 1994 crisis was
actually a currency crash that was fixed relatively easily by the International
Monetary Fund.
Until we see substantial debt write-offs by banks and the closure of insolvent
companies in Southeast Asia, we remain cautious about predicting a recovery in
these markets. So far many Asian governments--notably Japan--have tried to
avoid taking the pain, preferring to push down interest rates to prevent
bankruptcies and widescale unemployment. However, we believe that, over the
next two years, Southeast Asian economies should improve and Japan will probably
accelerate restructuring efforts. This expectation is based on the emergence of
several potentially positive signs, including:
* Current account surpluses in Southeast Asia. In Korea and Thailand, these
surpluses are equivalent to approximately 14% of GDP, leading to significant
declines in interest rates. Currencies have also stabilized.
* Accelerating foreign investment. Multinational companies have taken
advantage of distressed valuations to buy inexpensive assets. In Thailand, for
example, GE Capital recently acquired more than US$500 million of assets.
* Recent movement toward financial reform in Japan. Following electoral defeat
in July, the government abandoned deficit reduction policies and increased
efforts to stimulate the world's second largest economy.
2
<PAGE> 4
* The Chinese economy. China's GDP growth appears to be recovering, as
increased domestic demand has acted to offset the weaker demand from external
sources.
In line with this view of the current environment, the Fund focused on the most
dynamic countries and companies. The Fund's investments in South Korea and
Thailand were based on the fact that these two countries have made the greatest
strides in reform, including relaxing regulations on foreign investments and
establishing new bank restructuring agencies to sell bad debts. In Japan, the
Fund took a more defensive approach by increasing weightings in pharmaceuticals
with strong global products and in food companies that import raw materials,
enabling them to benefit from a stronger yen.
Despite the weak environment for earnings and disappointing performance of many
of our holdings, the Fund did find several corporate success stories during the
past nine months, including:
* Nidec, a manufacturer of spindle drive motors for hard disk drives in Japan
and Southeast Asia, which saw its margins improve significantly due to lower
production costs in Thailand following the devaluation of the baht. For the
most recent fiscal year, the company's sales increased 28%, while operating
profits jumped 93%; and
* Don Quijote, which operates discount retail stores in Japan, pioneered a new
type of convenience store that is open until early morning hours, offering a
wider variety of products than traditional convenience stores. In the most
recent fiscal year, sales rose by 59% and operating profits by 65%. The company
plans to double the number of outlets by the year 2000.
The first reporting period for the Driehaus Asia Pacific Growth Fund has been an
exceptionally volatile time for Asia Pacific markets and for the Fund. We
appreciate your support during this period.
Sincerely,
/s/ Eric J. Ritter
- ------------------
Eric J. Ritter
Portfolio Manager
November 24, 1998
3
<PAGE> 5
- --------------------------------------------------------------------------------
DRIEHAUS ASIA PACIFIC GROWTH FUND
- --------------------------------------------------------------------------------
TOTAL RETURN
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
DRIEHAUS MSCI ASIA / MSCI ASIA /
PACIFIC PACIFIC EX-JAPAN
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
For the Period 12/31/97 (since inception)
through 9/30/98 -17.00% -19.42% -24.43%
- -----------------------------------------------------------------------------------------------
</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>
DRIEHAUS MSCI
ASIA PACIFIC MSCI ASIA PACIFIC
GROWTH ASIA PACIFIC EX-JAPAN
FUND INDEX INDEX
------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/97 $100,000 $100,000 $100,000
3/31/98 -0.50% -0.50% $ 99,500 4.62% 4.62% $104,617 9.75% 9.75% $109,754
6/30/98 -14.57% -15.00% $ 85,000 -11.48% -7.39% $ 92,608 -24.59% -17.23% $ 82,770
9/30/98 -2.35% -17.00% $ 83,000 -12.99% -19.42% $ 80,577 -8.70% -24.43% $ 75,572
</TABLE>
Performance data presented measures change in the value of an investment in the
Fund, assuming reinvestment of all dividends and capital gains.
The Morgan Stanley Capital International All Country Asia Pacific Index is a
recognized benchmark of Asian and Pacific Basin stock markets. It is an
unmanaged index of a sample of companies representative of the market structure
of 15 Asian and Pacific Basin countries. Data is in U.S. dollars and includes
reinvestment of dividends. Source: Morgan Stanley Capital International.
The Morgan Stanley Capital International All Country Asia Pacific ex - Japan
Index is a recognized benchmark of Asian and Pacific Basin stock markets, not
including Japan. It is an unmanaged index of a sample of companies
representative of the market structure of 14 Asian and Pacific Basin countries.
Data is in U.S. dollars and includes reinvestment of dividends. Source: Morgan
Stanley Capital International.
4
<PAGE> 6
================================================================================
DRIEHAUS ASIA PACIFIC GROWTH FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1998
================================================================================
<TABLE>
<CAPTION>
Number Market
of Value
Shares (Note A)
- ---------------------------------------------------------------------------------------
EQUITY SECURITIES ---- 74.8%
- ---------------------------------------------------------------------------------------
<S> <C> <C>
FAR EAST --- 74.8%
JAPAN -- 50.2%
Acom Co., Ltd. ................................. 1,600 $ 86,277
Bellsystem 24 Inc. ............................. 400 63,180
Chugai Pharmaceutical Co., Ltd. ................ 11,000 75,397
Computer Engineering & Consulting Ltd. ......... 2,000 27,344
Don Quijote Co., Ltd. .......................... 1,600 103,438
Fuji Heavy Industries Ltd. ..................... 23,000 120,306
Fuji Soft ABC Inc. ............................. 800 27,623
Fujisawa Pharmaceutical Co., Ltd. .............. 4,000 36,909
Fujitsu Support & Service Inc.** ............... 2,000 76,403
Honda Motor Co., Ltd.- ADR ..................... 700 42,481
Hosiden Corp. .................................. 6,000 82,207
Itoen Ltd. ..................................... 2,400 82,868
Kao Corp. ...................................... 8,000 128,122
Konami Co., Ltd. ............................... 2,800 75,287
Mabuchi Motor Co., Ltd. ........................ 800 50,250
Matsushita Communication Industrial Co., Ltd. .. 2,000 71,995
Mazda Motor Corp.** ............................ 22,000 80,003
Mitsumi Electric Co., Ltd. ..................... 3,000 54,988
Nidec Corp. .................................... 1,000 80,076
Olympus Optical Co., Ltd. ...................... 7,000 77,086
People Co., Ltd. ............................... 1,200 26,888
Ryohin Keikaku Co., Ltd. ....................... 400 40,552
Takefuji Corp. ................................. 1,200 60,652
Terumo Corp. ................................... 3,000 61,820
Toppan Forms Co., Ltd. ......................... 3,000 40,773
Union Tool Co. ................................. 1,500 58,294
Yahoo Japan Corp.** ............................ 2 67,000
---------
1,798,219
=========
</TABLE>
Notes to Financial Statements are an integral part of this Schedule.
5
<PAGE> 7
================================================================================
DRIEHAUS ASIA PACIFIC GROWTH FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1998
================================================================================
<TABLE>
<CAPTION>
Number Market
of Value
Shares (Note A)
- ------------------------------------------------------------------------------------
<S> <C> <C>
AUSTRALIA -- 10.0%
Brambles Industries Ltd. ....................... 2,630 $ 56,741
BRL Hardy Ltd. ................................. 18,000 52,023
Cochlear Ltd. .................................. 15,600 67,445
Computershare Ltd. ............................. 14,500 52,556
Novus Petroleum Ltd. ........................... 27,000 27,984
TABCORP Holdings Ltd. .......................... 8,200 47,593
Woodside Petroleum Ltd. ........................ 10,700 55,893
--------
360,235
--------
HONG KONG -- 7.2%
Cafe De Coral Holdings Ltd. .................... 130,000 40,685
Dairy Farm International Holdings Ltd. ......... 35,000 37,100
IDT International Ltd. ......................... 649,000 67,844
Johnson Electric Holdings Ltd. ................. 27,000 51,223
Road King Infrastructure Ltd. .................. 61,000 33,458
Varitronix International Ltd. .................. 14,000 27,192
-------
257,502
-------
SOUTH KOREA -- 2.7%
Medison Co., Ltd. .............................. 2,870 28,478
Nong Shim Co., Ltd. ............................ 900 35,592
Pohang Iron & Steel Co., Ltd. - ADR ............ 2,400 33,150
-------
97,220
-------
THAILAND -- 2.5%
Advanced Info Service Public Co., Ltd. (Foreign) 10,700 61,174
National Finance Public Co., Ltd. (Foreign)** .. 284,100 28,748
-------
89,922
-------
SINGAPORE -- 1.6%
Natsteel Electronics Ltd. ...................... 13,000 28,551
ST Computer Systems & Services Ltd. ............ 37,500 27,379
-------
55,930
-------
</TABLE>
Notes to Financial Statements are an integral part of this Schedule.
6
<PAGE> 8
================================================================================
DRIEHAUS ASIA PACIFIC GROWTH FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1998
================================================================================
<TABLE>
<CAPTION>
Number Market
of Value
Shares (Note A)
- --------------------------------------------------------------------------------
<S> <C> <C>
PHILIPPINES -- 0.6%
SPI Technologies Inc. .......................... 54,660 $ 21,239
----------
Total Far East ................................. 2,680,267
----------
Total Equity Securities (Cost $2,510,636) ...... 2,680,267
----------
- ----------------------------------------------------------------------------------
RIGHTS ---- 0.0%
- ----------------------------------------------------------------------------------
SOUTH KOREA -- 0.0%
Medison Co., Ltd.** ............................ 266 734
----------
Total Rights (Cost $0) ......................... 734
----------
- ----------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $2,510,636) .............. 74.8% 2,681,001
Other Assets in Excess of Liabilities ............ 25.2% 901,192
------ ----------
Net Assets........................................ 100.0% $3,582,193
==========
==================================================================================
The federal income tax basis and unrealized appreciation (depreciation) for
all securities is as follows:
Basis ............................................................ $2,510,636
==========
Gross Appreciation ............................................... $ 209,270
Gross Depreciation ............................................... (38,905)
----------
Net Appreciation ............................................... $ 170,365
==========
</TABLE>
** Non-income producing security.
Notes to Financial Statements are an integral part of this Schedule.
7
<PAGE> 9
================================================================================
DRIEHAUS ASIA PACIFIC GROWTH FUND
SCHEDULE OF INVESTMENTS BY INDUSTRY
SEPTEMBER 30, 1998
================================================================================
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
INDUSTRY NET ASSETS INDUSTRY NET ASSETS
- -------- ---------- ======== ----------
<S> <C> <C> <C>
Auto Parts Manufacturing......... 3.4% Leisure & Tourism.................... 2.1%
Automotive Manufacturing......... 3.4% Machinery & Engineering.............. 1.6%
Beverages & Tobacco.............. 3.8% Medical Supplies..................... 3.6%
Computer Manufacturing........... 2.1% Merchandising........................ 1.8%
Computer Software & EDP Services. 7.2% Metals - Steel....................... 0.9%
Cosmetics........................ 3.6% Office Products...................... 1.1%
Drugs............................ 2.1% Photo - Optical Equipment............ 3.2%
Electrical & Electronics......... 4.8% Retailing - Foods.................... 2.2%
Electronic Components............ 2.3% Retailing - Goods.................... 4.0%
Electronic Systems/Devices....... 4.9% Telecommunications................... 5.9%
Energy Sources................... 2.3% Transportation/Multi-Industry........ 1.6%
Financial Services............... 4.9% Transportation R & R................. 1.0%
Food Processors.................. 1.0% Other Assets Less Liabilities........ 25.2%
----------
TOTAL................................ 100.0%
==========
</TABLE>
Notes to Financial Statements are an integral part of this Schedule.
8
<PAGE> 10
================================================================================
DRIEHAUS ASIA PACIFIC GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998
================================================================================
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at market value (Cost $2,510,636).............................. $ 2,681,001
Foreign currency (Cost $30).................................................. 27
Cash......................................................................... 771,339
Receivables:
Dividends................................................................... 6,068
Interest.................................................................... 825
Investment securities sold.................................................. 272,396
Due from advisor............................................................ 22,207
Net unrealized appreciation on foreign currency forward contracts
from transaction hedges.................................................... 143
Deferred organizational costs................................................ 24,911
Other assets................................................................. 674
-------------
- --------------------------------------------------------------------------------------------
TOTAL ASSETS............................................................... 3,779,591
-------------
- --------------------------------------------------------------------------------------------
LIABILITIES:
Payables:
Investment securities purchased............................................. 138,331
Net unrealized depreciation on foreign currency forward contracts
from portfolio hedges...................................................... 15,404
Accrued expenses............................................................ 43,663
-------------
- --------------------------------------------------------------------------------------------
TOTAL LIABILITIES.......................................................... 197,398
-------------
- --------------------------------------------------------------------------------------------
NET ASSETS.................................................................... $ 3,582,193
=============
SHARES OUTSTANDING............................................................ 431,617
=============
NET ASSET VALUE PER SHARE..................................................... $ 8.30
=============
============================================================================================
NET ASSETS CONSISTED OF THE FOLLOWING AT SEPTEMBER 30, 1998:
Paid-in capital.............................................................. $ 4,221,749
Undistributed net investment loss............................................ (8,979)
Undistributed net realized loss from security transactions................... (713,834)
Undistributed net realized foreign exchange loss............................. (51,529)
Undistributed net realized foreign exchange loss on portfolio hedges......... (20,494)
Unrealized foreign exchange gain............................................. 319
Unrealized foreign exchange loss on portfolio hedges......................... (15,404)
Unrealized appreciation of investments....................................... 170,365
-------------
NET ASSETS................................................................. $ 3,582,193
=============
============================================================================================
</TABLE>
Notes to Financial Statements are an integral part of this Statement.
9
<PAGE> 11
================================================================================
DRIEHAUS ASIA PACIFIC GROWTH FUND
STATEMENT OF OPERATIONS
For the period December 31, 1997 (commencement of operations)
through September 30, 1998
================================================================================
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME (LOSS):
Income:
Dividends (net of non-reclaimable foreign taxes of $1,712)....... $ 28,808
Interest ........................................................ 21,558
---------
- ------------------------------------------------------------------------------------------
Total income .................................................. 50,366
---------
- ------------------------------------------------------------------------------------------
Expenses:
Investment advisory fee ......................................... 30,175
Administration fee............................................... 85,500
Professional fees ............................................... 32,652
Federal and state registration fees ............................. 5,041
Custodian fees .................................................. 27,796
Transfer agent fees ............................................. 27,084
Trustees' fees .................................................. 3,702
Amortization of organization costs .............................. 4,379
Miscellaneous ................................................... 17,476
- ------------------------------------------------------------------------------------------
Total expenses before fees waived and reimbursements............. 233,805
---------
Administration fee waived ....................................... (82,684)
Transfer agent fee waived ....................................... (23,400)
Expense reimbursement from advisor .............................. (68,376)
---------
Total expenses net of fees waived and reimbursements........... 59,345
---------
- ------------------------------------------------------------------------------------------
Net investment loss.......................................... (8,979)
---------
- ------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss from security transactions .................... (713,834)
Net realized foreign exchange loss .............................. (51,529)
Net realized foreign exchange loss on porfolio hedges............ (20,494)
Net unrealized foreign exchange gain ............................ 319
Net unrealized foreign exchange loss on portfolio hedges......... (15,404)
Change in unrealized appreciation of investments ................ 170,365
---------
- ------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments ............. (630,577)
---------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ................ $(639,556)
=========
==========================================================================================
</TABLE>
Notes to Financial Statements are an integral part of this Statement.
10
<PAGE> 12
================================================================================
DRIEHAUS ASIA PACIFIC GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
For the period December 31, 1997 (commencement of operations)
through September 30, 1998
================================================================================
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN NET ASSETS:
<S> <C>
Operations:
Net investment loss ................................................. $ (8,979)
Net realized and unrealized loss on investments ..................... (630,577)
---------
Net decrease in net assets resulting from operations ........ (639,556)
---------
- ---------------------------------------------------------------------------------------------
Capital share transactions:
Net increase in net assets derived
from capital share transactions* .................................. 4,221,749
---------
Total increase in net assets ...................................... 3,582,193
---------
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period ................................................... 0
---------
End of period ......................................................... $3,582,193
==========
============================================================================================
<CAPTION>
*Capital share transactions are as follows:
SHARES VALUE
------ -----
<S> <C> <C>
For the period ended September 30, 1998
Shares purchased ............................... 442,994 $4,318,619
Shares reinvested .............................. --- ---
Shares redeemed ................................ (11,377) (96,870)
-------- ---------
Net increase from capital share transactions 431,617 $4,221,749
======== ==========
============================================================================================
</TABLE>
Notes to Financial Statements are an integral part of this Statement.
11
<PAGE> 13
<TABLE>
<CAPTION>
===========================================================================================================
DRIEHAUS ASIA PACIFIC GROWTH FUND
FINANCIAL HIGHLIGHTS
FOR THE PERIOD DECEMBER 31, 1997 (COMMENCEMENT OF OPERATIONS) THROUGH SEPTEMBER 30, 1998
===========================================================================================================
The table below sets forth financial data for a share of capital stock outstanding throughout the
period presented.
<S> <C>
Net asset value, beginning of period..................................... $ 10.00
LOSS FROM INVESTMENT OPERATIONS:
Net investment loss........................................... (0.02)
Net loss on securities (both realized and unrealized)......... (1.68)
--------
Total from investment operations............................ (1.70)
--------
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........................................... $ 8.30
========
Total Return............................................................. (17.00) % **
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's).......................... $ 3,582
Ratio of expenses to average net assets....................... 2.95 %*+
Ratio of net investment loss to average net assets............ (0.45) %*+
Portfolio turnover............................................ 283.59 %**
Annualized portfolio turnover................................. 379.16 %*
===========================================================================================================
</TABLE>
* Annualized
** Not Annualized
+ Such ratios are after administrative agent and transfer agent waivers and
Adviser expense reimbursements. PFPC Inc., the administrative agent and transfer
agent, waived a portion of its fees. The Adviser agreed to reduce its fees 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
expense) will not exceed 2.95% of the net assets of the Driehaus Asia Pacific
Growth Fund for the first twenty-four months of its operations.
Notes to Financial Statements are an integral part of this Schedule.
12
<PAGE> 14
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S LETTER - DRIEHAUS EMERGING MARKETS GROWTH FUND
- --------------------------------------------------------------------------------
Dear Fellow Shareholders:
For the period from December 31, 1997, the Fund's inception date, through
September 30, 1998, the Fund's fiscal year end, the Driehaus Emerging Markets
Growth Fund returned -24.40%. This compares with the returns of the Fund's
benchmark, -34.96% for the Morgan Stanley Capital International Emerging Markets
Index, and a -36.69% return for the Lipper Emerging Market Fund Index.
During the first nine months of 1998, economies around the world, including
emerging markets, were characterized by extreme volatility. The major cause for
this volatility could be found in currency contagion effects, which spread from
Southeast Asia to other continents, climaxing in the devaluation of the Russian
ruble in August. Subsequent concerns focused on Latin America, where the
International Monetary Fund is coordinating a multibillion dollar package geared
at preventing the region, in particular Brazil, from following Russia's lead.
The Fund's outperformance relative to its benchmark indices over the first three
quarters of 1998 can be attributed in part to the Fund's overweighting of
countries with strong macroeconomic environments, including Poland, Hungary,
Greece, Thailand, and Israel. Over the past nine months, these countries have
tended to display lower budget deficits, accelerating GDP growth, and low
correlations with commodity prices. Despite the severe problems in Eastern
Europe following the Russian currency devaluation, Poland and Hungary produced
continued growth and benefited from strong economic ties to Western Europe,
enabling them to outperform other markets in their region.
Over the first months of 1998, the Fund increased its positions in Thailand and
South Korea. These countries have experienced current account surpluses
equivalent to approximately 14% of each country's GDP, leading to significant
declines in interest rates. These events, plus strengthening currencies, helped
these Asian markets outperform other emerging sectors during the first three
quarters of 1998 and contributed to Fund performance. Despite some losses,
during the period, South Africa remained an important area for the Fund, and we
continued to allocate the majority of our weighting there to the technology
sector.
13
<PAGE> 15
Overall, our stock selection during the period favored growth companies that
exhibited and, in some cases, benefited from higher revenue and earnings
resilience in the face of deteriorating country fundamentals. Some examples of
these portfolio holdings include Persetel Q Data Holdings (PQH) South Africa,
Delta Informatics of Greece, and SPI Technologies in the Philippines. The Fund
also benefited from our substantial cash position over the period, as we
maintained a minimum allocation of 10% in this category.
The Fund's performance was also helped by our underweighting of Latin American
markets, which produced some of the lowest returns in the emerging markets
sector during this time. This region's poor performance was due in part to a
dependence on commodities prices at a time when slowing economic growth in Asia
and third-world dumping combined to drive the CRB Commodity Index to a 21-year
low. Slumping oil and base metal prices played havoc with external and internal
budgets in Mexico, Chile, Venezuela, and Peru. Our decision to limit the Fund's
exposure in commodity and cyclical stocks also helped in this area.
The first reporting period for the Driehaus Emerging Markets Growth Fund has
been a difficult time for emerging markets and for our investments. We
appreciate your support during this period.
Sincerely,
/s/ Emery R. Brewer
- -------------------
Emery R. Brewer
Portfolio Manager
November 24, 1998
14
<PAGE> 16
- --------------------------------------------------------------------------------
DRIEHAUS EMERGING MARKETS GROWTH FUND
- --------------------------------------------------------------------------------
TOTAL RETURN
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
DRIEHAUS MSCI EMERGING LIPPER EMERGING
MARKET INDEX MARKET FUND INDEX
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
For the Period 12/31/97 (since inception)
through 9/30/98 -24.40% -34.96% -36.69%
- -------------------------------------------------------------------------------------------------------------
</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>
DRIEHAUS
EMERGING MSCI LIPPER
MARKETS EMERGING EMERGING
GROWTH MARKETS MARKETS
FUND INDEX INDEX
------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/97 $100,000 $100,000 $100,000
3/31/98 5.50% 5.50% $105,500 7.22% 7.22% $107,222 5.12% 5.12% $105,120
6/30/98 -9.76% -4.80% $ 95,200 -23.68% -18.17% $ 81,832 -21.04% -17.00% $ 83,000
9/30/98 -20.59% -24.40% $ 75,600 -20.52% -34.96% $ 65,043 -23.72% -36.69% $ 63,313
</TABLE>
Performance data presented measures change in the value of an investment in the
Fund, assuming reinvestment of all dividends and capital gains.
The Morgan Stanley Capital International Emerging Markets Index is a recognized
benchmark of Emerging Markets stock markets. It is an unmanaged index of a
sample of companies representative of the market structure of 26 Emerging
Markets countries. Data is in U.S. dollars and includes reinvestment of
dividends. Source: Morgan Stanley Capital International.
Lipper Analytical Services Indices look at the investment objective of the funds
as determined by both the language in the prospectus and a review of the fund's
investment characteristics as shown in the Lipper-Equity Analysis Report on the
Weighted Average Holdings of large Investment Companies. The Lipper Emerging
Markets Funds seek long-term capital appreciation by investing at least 65% of
total assets in emerging market equity securities, where "emerging market" is
defined by a country's GNP per capita of other economic measures. Source:
Lipper Analytical Services.
15
<PAGE> 17
================================================================================
DRIEHAUS EMERGING MARKETS GROWTH FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1998
================================================================================
<TABLE>
<CAPTION>
Number Market
of Value
Shares (Note A)
- --------------------------------------------------------------------------------
EQUITY SECURITIES ---- 80.1%
- --------------------------------------------------------------------------------
<S> <C> <C>
EUROPE --- 23.1%
GREECE -- 5.8%
Chipita International S. A. .................... 1,870 $ 49,249
Delta Informatics S. A. ........................ 3,780 69,955
Hellenic Telecommunication Organization S. A. .. 4,600 55,103
Intrasoft S. A. ............................... 1,600 29,111
-------
203,418
-------
POLAND -- 5.3%
Art Marketing Syndicate S. A.** ................ 3,500 20,081
ComputerLand S. A.** ........................... 2,231 21,854
Elektrim Spolka Akcyjna S. A. .................. 4,150 42,046
Prokom Software - GDR .......................... 2,500 44,500
Softbank S. A. - GDR ........................... 3,000 55,950
-------
184,431
-------
PORTUGAL -- 4.3%
Corticeira Amorim SGPS S. A. ................... 2,000 25,824
Electricidade de Portugal S. A. ................ 2,200 50,567
Portugal Telecom S. A. - ADR ................... 690 24,840
Telecel-Comunicacoes Pessoais S. A. ............ 375 48,418
-------
149,649
-------
HUNGARY -- 2.8%
Magyar Tavkozlesi RT - ADR ..................... 2,100 45,544
Mol Magyar Olaj-Es Gazipari RT - GDR ........... 2,710 52,167
-------
97,711
-------
TURKEY -- 2.6%
Carsi Buyuk Magazacilik A. S. ..................385,000 19,762
Efes Sinai Yatirim Holding A. S. - GDR**........ 30,450 25,882
Haci Omer Sabanci Holding A. S. -ADR............ 8,250 31,103
Yapi Ve Kredi Bankasi A. S. - GDR .............. 1,185 13,331
-------
90,078
-------
</TABLE>
Notes to Financial Statements are an integral part of this Schedule.
16
<PAGE> 18
================================================================================
DRIEHAUS EMERGING MARKETS GROWTH FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1998
================================================================================
<TABLE>
<CAPTION>
Number Market
of Value
Shares (Note A)
- ---------------------------------------------------------------------------------------
<S> <C> <C>
CZECH REPUBLIC -- 1.9%
Ceske Radiokomunikace- GDR** ................... 1,300 $ 33,573
SPT Telecom A. S. - GDR** ...................... 2,500 31,925
-------
65,498
-------
RUSSIA -- 0.4%
Lukoil Holding - ADR ........................... 900 10,105
Unified Energy Systems - GDR ................... 2,400 4,478
-------
14,583
-------
Total Europe ................................... 805,368
-------
FAR EAST --- 19.8%
HONG KONG -- 5.1%
China Telecom Ltd. - ADR** ..................... 750 22,500
HSBC Holdings PLC .............................. 13 238
IDT International Ltd. ......................... 460,000 48,087
Shanghai Industrial Holdings Ltd. .............. 25,000 50,010
VTech Holdings Ltd. ............................ 14,000 55,830
-------
176,665
-------
THAILAND -- 3.4%
Cogeneration Public Co., Ltd. (Foreign)** ...... 139,000 64,173
National Finance Public Co., Ltd. (Foreign)** .. 300,000 30,357
Thai Storage Battery Public Co., Ltd. (Foreign) 26,000 23,185
-------
117,715
-------
SINGAPORE -- 3.1%
Natsteel Electronics Ltd. ..................... 22,000 48,317
ST Computer Systems & Services Ltd. ............ 82,000 59,868
-------
108,185
-------
</TABLE>
Notes to Financial Statements are an integral part of this Schedule.
17
<PAGE> 19
================================================================================
DRIEHAUS EMERGING MARKETS GROWTH FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1998
================================================================================
<TABLE>
<CAPTION>
Number Market
of Value
Shares (Note A)
- --------------------------------------------------------------------------------
<S> <C> <C>
SOUTH KOREA -- 3.0%
Korea Electric Power Corp. - ADR................ 3,300 $ 29,700
Medison Co., Ltd. .............................. 5,660 56,162
Samsung Heavy Industries** ..................... 4,400 18,666
-------
104,528
-------
INDIA -- 3.0%
BSES Ltd. - GDR ................................ 2,300 30,314
ITC Ltd. - GDR ................................. 3,700 74,000
-------
104,314
-------
PHILIPPINES -- 1.2%
SPI Technologies Inc. ..........................112,000 43,520
-------
TAIWAN -- 1.0%
Asustek Computer Inc. - GDR** .................. 5,100 35,700
-------
Total Far East ................................. 690,627
-------
SOUTH AMERICA --- 12.0%
BRAZIL -- 7.0%
Compania de Minas Buenaventura S. A. - ADR...... 3,000 34,875
Companhia Energetica de Minas Gerais - ADR ..... 1,534 33,922
Petroleo Brasileiro S. A. - ADR ................ 3,600 36,904
Telecomunicacoes Brasileiras S. A (Pref.) - ADR* 665 46,841
Telecomunicacoes de Sao Paulo S. A. (Pref.).....380,000 55,145
Telerj Celular S. A.** .........................720,000 15,794
Telesp Celular S. A.** .........................470,000 20,224
-------
243,705
-------
</TABLE>
Notes to Financial Statements are an integral part of this Schedule.
18
<PAGE> 20
================================================================================
DRIEHAUS EMERGING MARKETS GROWTH FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1998
================================================================================
<TABLE>
<CAPTION>
Number Market
of Value
Shares (Note A)
- --------------------------------------------------------------------------------
<S> <C> <C>
ARGENTINA -- 3.2%
Telefonica de Argentina S. A. - ADR ............ 1,910 $56,226
YPF S. A. - ADR ................................ 2,130 55,380
-------
111,606
-------
CHILE -- 1.3%
Sociedad Quimica y Minera de Chile S. A. - ADR . 1,480 43,105
-------
PERU -- 0.5%
Grana y Montero S. A. .......................... 45,000 18,274
-------
Total South America ............................ 416,690
-------
MIDDLE EAST --- 10.4%
ISRAEL -- 10.4%
Bank Hapoalim Ltd. ............................. 33,000 80,584
Blue Square Israel Ltd. -ADR ................... 2,700 34,931
First International Bank of Israel Ltd. ........ 50,000 51,491
Formula Systems Ltd.** ......................... 1,650 35,014
ForSoft Ltd.** ................................. 2,750 31,625
Gilat Satellite Networks Ltd.** ................ 1,960 88,199
Koor Industries Ltd. - ADR ..................... 2,530 41,429
-------
363,273
-------
Total Middle East .............................. 363,273
-------
</TABLE>
Notes to Financial Statements are an integral part of this Schedule.
19
<PAGE> 21
================================================================================
DRIEHAUS EMERGING MARKETS GROWTH FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1998
================================================================================
<TABLE>
<CAPTION>
Number Market
of Value
Shares (Note A)
- --------------------------------------------------------------------------------
<S> <C> <C>
NORTH AMERICA --- 7.9%
MEXICO -- 6.9%
Biper S. A. de C. V. - B ** ...................... 45,055 $7,738
Coca-Cola Femsa S. A. - ADR ...................... 3,000 36,563
Corporacion Interamericana de Entretenimiento
S. A. - B**...................................... 14,780 23,903
Desc S. A. de C. V. - ADR ....................... 2,400 33,000
Grupo Continental S. A. .......................... 21,000 54,818
Grupo Iusacell S. A. - L - ADR** ................. 2,200 10,862
Grupo Televisa S. A. - GDR** ..................... 1,070 20,664
Telefonos de Mexico S. A. - ADR .................. 1,210 53,542
---------
..................................................... 241,090
---------
UNITED STATES -- 1.0%
Apache Corp. ..................................... 1,260 33,784
---------
Total North America .............................. 274,874
---------
AFRICA --- 6.9%
SOUTH AFRICA -- 6.9%
Liberty Life Association of Africa Ltd. .......... 3,300 50,229
Persetel Q Data Holdings Ltd. .................... 7,500 61,671
Plessey Corp., Ltd. .............................. 24,500 35,000
Softline Ltd.** .................................. 44,000 40,408
South African Breweries Ltd. ..................... 2,200 33,150
Tridelta Magnet Technology Holdings** ............ 23,100 19,643
---------
240,101
---------
Total Africa ..................................... 240,101
---------
Total Equity Securities (Cost $3,314,510)........ 2,790,933
---------
</TABLE>
- --------------------------------------------------------------------------------
Notes to Financial Statements are an integral part of this Schedule.
20
<PAGE> 22
================================================================================
DRIEHAUS EMERGING MARKETS GROWTH FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1998
================================================================================
<TABLE>
<CAPTION>
Number Market
of Value
Shares (Note A)
- --------------------------------------------------------------------------------
RIGHTS ---- 0.0%
- --------------------------------------------------------------------------------
<S> <C> <C>
SOUTH KOREA -- 0.0%
Medison Co., Ltd.** ............................. 526 $1,445
---------
TAIWAN -- 0.0%
Asustek Computer Inc. - GDR** ................... 10 10
---------
Total Rights (Cost $0)........................... 1,455
---------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $3,314,510)............... 80.1% 2,792,388
Other Assets in Excess of Liabilities ............ 19.9% 694,666
----- ---------
Net Assets ....................................... 100.0% $3,487,054
================================================================================
The federal income tax basis and unrealized apprecation (depreciation) for all
securities is as follows:
Basis ........................................................ $3,314,510
==========
Gross Appreciation ........................................... $162,892
Gross Depreciation ........................................... (685,014)
----------
Net Depreciation ............................................. ($522,122)
==========
</TABLE>
** Non-income producing security.
Notes to Financial Statements are an integral part of this Schedule.
21
<PAGE> 23
================================================================================
DRIEHAUS EMERGING MARKETS GROWTH FUND
SCHEDULE OF INVESTMENTS BY INDUSTRY
SEPTEMBER 30, 1998
================================================================================
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
INDUSTRY NET ASSETS INDUSTRY NET ASSETS
- -------- ---------- -------- ----------
<S> <C> <C> <C>
Automobiles .................. 0.7% Electronic Systems/Devices.... 3.0%
Auto Parts Manufacturing ..... 0.9% Energy Sources ............... 1.9%
Banking ...................... 2.7% Financial Services ........... 2.3%
Beverages & Tobacco .......... 6.4% Foods & Household Products ... 2.8%
Broadcast & Publishing ....... 1.4% Industrial Components ........ 0.5%
Capital Goods/Multi-Industry . 1.5% Insurance .................... 1.4%
Chemical ..................... 1.2% Leisure & Tourism ............ 0.7%
Communications Equipment ..... 2.5% Machinery & Engineering ...... 1.2%
Computer Manufacturing ....... 2.3% Oil .......................... 5.4%
Computer Software & EDP Services 8.3% Precious Metals............... 1.0%
Construction ................. 1.3% Retailing - Goods............. 1.6%
Data Processing .............. 1.2% Technology/Multi-Industry..... 1.0%
Electric Utilities ........... 4.3% Telecommunications ........... 9.4%
Electrical & Electronics ..... 1.2% Telephone Utilities .......... 5.5%
Electronic Components ........ 6.5% Other Assets Less Liabilities. 19.9%
------
TOTAL ........................ 100.0%
======
</TABLE>
Notes to Financial Statements are an integral part of this Schedule.
22
<PAGE> 24
================================================================================
DRIEHAUS EMERGING MARKETS GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998
================================================================================
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at market value (Cost $3,314,510)................. $2,792,388
Foreign Currency (Cost $50,609)................................ 50,291
Cash .......................................................... 702,255
Receivables:
Dividends ................................................... 8,524
Interest .................................................... 683
Investment securities sold .................................. 64,006
Due from advisor ............................................ 24,540
Deferred organizational costs ................................. 24,948
Other assets .................................................. 743
-----------
- --------------------------------------------------------------------------------
TOTAL ASSETS .............................................. 3,668,378
-----------
- --------------------------------------------------------------------------------
LIABILITIES:
Payables:
Investment securities purchased ............................... 137,964
Accrued expenses .............................................. 42,944
Net unrealized depreciation on foreign currency forward contracts
from transaction hedges...................................... 416
-----------
- --------------------------------------------------------------------------------
TOTAL LIABILITIES ......................................... 181,324
-----------
- --------------------------------------------------------------------------------
NET ASSETS ...................................................... $3,487,054
===========
SHARES OUTSTANDING .............................................. 461,247
===========
NET ASSET VALUE PER SHARE ....................................... $7.56
===========
================================================================================
NET ASSETS CONSISTED OF THE FOLLOWING AT SEPTEMBER 30, 1998:
Paid-in capital ............................................... $4,727,772
Undistributed net investment loss.............................. (11,861)
Undistributed net realized loss from security transactions..... (662,370)
Undistributed net realized foreign exchange loss .............. (43,420)
Unrealized foreign exchange loss............................... (945)
Unrealized depreciation of investments ........................ (522,122)
------------
NET ASSETS ............................................... $3,487,054
===========
================================================================================
</TABLE>
Notes to Financial Statements are an integral part of this Statement.
23
<PAGE> 25
================================================================================
DRIEHAUS EMERGING MARKETS GROWTH FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD DECEMBER 31, 1997 (COMMENCEMENT OF OPERATIONS) THROUGH
SEPTEMBER 30, 1998
================================================================================
<TABLE>
<CAPTION>
INVESTMENT INCOME (LOSS):
<S> <C>
Income:
Dividends (net of non-reclaimable foreign taxes $2,665)............ $37,001
Interest .......................................................... 17,822
---------
- ---------------------------------------------------------------------------------
Total income .................................................... 54,823
---------
- ---------------------------------------------------------------------------------
Expenses:
Investment advisory fee ........................................... 36,373
Administration fee ................................................ 85,500
Professional fees ................................................. 33,062
Federal and state registration fees ............................... 7,204
Custodian fees .................................................... 32,237
Transfer agent fees ............................................... 27,046
Trustees' fees .................................................... 3,702
Amortization of organization costs ................................ 4,386
Miscellaneous ..................................................... 17,131
- ---------------------------------------------------------------------------------
Total expenses before fees waived and reimbursements................ 246,641
---------
Administration fee waived........................................... (82,105)
Transfer agent fee waived........................................... (23,400)
Expense reimbursement from advisor.................................. (74,452)
---------
Total expenses net of fees waived and reimbursements............. 66,684
---------
- ---------------------------------------------------------------------------------
Net investment loss............................................ (11,861)
---------
- ---------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss from security transactions ...................... (662,370)
Net realized foreign exchange loss ................................ (43,420)
Net unrealized foreign exchange loss............................... (945)
Change in unrealized depreciation of investments .................. (522,122)
---------
- ---------------------------------------------------------------------------------
Net realized and unrealized loss on investments ...............(1,228,857)
---------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS .................$(1,240,718)
============
=================================================================================
</TABLE>
Notes to Financial Statements are an integral part of this Statement.
24
<PAGE> 26
================================================================================
DRIEHAUS EMERGING MARKETS GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD DECEMBER 31, 1997 (COMMENCEMENT OF OPERATIONS) THROUGH
SEPTEMBER 30, 1998
================================================================================
<TABLE>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment loss .............................................$ (11,861)
Net realized and unrealized loss on investments .................(1,228,857)
- --------------------------------------------------------------------------------
Net decrease in net assets resulting from operations ....(1,240,718)
-----------
- --------------------------------------------------------------------------------
Capital share transactions:
Net increase in net assets derived
from capital share transactions* .............................. 4,727,772
-----------
Total increase in net assets .................................. 3,487,054
-----------
- --------------------------------------------------------------------------------
NET ASSETS:
Beginning of period ............................................... 0
-----------
End of period .....................................................$3,487,054
-----------
================================================================================
</TABLE>
*Capital share transactions are as follows:
<TABLE>
<CAPTION>
Shares Value
--------- ----------
<S> <C> <C>
For the period ended September 30, 1998
Shares purchased ................................ 462,301 $4,737,772
Shares reinvested ............................... --- ---
Shares redeemed ................................. (1,054) (10,000)
--------- ----------
Net increase from capital share transactions 461,247 $4,727,772
========= ==========
================================================================================
</TABLE>
Notes to Financial Statements are an integral part of this Statement.
25
<PAGE> 27
================================================================================
DRIEHAUS EMERGING MARKETS GROWTH FUND
FINANCIAL HIGHLIGHTS
FOR THE PERIOD DECEMBER 31, 1997 (COMMENCEMENT OF OPERATIONS) THROUGH
SEPTEMBER 30, 1998
================================================================================
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
-------
LOSS FROM INVESTMENT OPERATIONS:
Net investment loss ................................... (0.03)
Net loss on securities (both realized and unrealized).. (2.41)
-------
Total from investment operations ................... (2.44)
-------
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 ................................ $7.56
=======
Total Return .................................................. (24.40)%**
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) .................. $3,487
Ratio of expenses to average net assets ............... 2.75 %*+
Ratio of net investment loss to average net assets .... (0.49)%*+
Portfolio turnover .................................... 261.21 %**
Annualized portfolio turnover ......................... 349.24 %*
================================================================================
</TABLE>
* Annualized
** Not Annualized
+ Such ratios are after administrative agent and transfer agent waivers and
Adviser expense reimbursements. PFPC Inc., the administrative agent and transfer
agent, waived a portion of its fees. The Adviser agreed to reduce its fees 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
expense) will not exceed 2.75% of the net assets of the Driehaus Emerging
Markets Growth Fund for the first twenty-four months of its operations.
Notes to Financial Statements are an integral part of this Schedule.
26
<PAGE> 28
DRIEHAUS ASIA PACIFIC GROWTH FUND AND
DRIEHAUS EMERGING MARKETS GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD DECEMBER 31, 1997 (COMMENCEMENT OF OPERATIONS) THROUGH
SEPTEMBER 30, 1998
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The Driehaus Asia Pacific Growth Fund and the Driehaus Emerging Markets
Growth Fund (collectively, the "Funds") are each 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 Funds commenced
operations and were initially offered on December 31, 1997. The Funds are
self-distributed.
The investment objective of the Driehaus Asia Pacific Growth Fund is to
maximize capital appreciation by investing primarily in equity securities of
companies in the Asia Pacific region using the growth style investment criteria.
The investment objective of the Driehaus Emerging Markets Growth Fund is to
maximize capital appreciation by investing primarily in the equity securities of
companies in emerging markets around the world using the growth style investment
criteria.
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. At September 30, 1998,
there were no securities for which market quotations were not available.
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 Funds determine 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 Funds' intention
to qualify as regulated investment companies under Subchapter M of the Internal
Revenue Code and to make all the required distributions to shareholders in
amounts sufficient to relieve the Funds from all or substantially all Federal
income and excise taxes.
27
<PAGE> 29
DRIEHAUS ASIA PACIFIC GROWTH FUND AND
DRIEHAUS EMERGING MARKETS GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD DECEMBER 31, 1997 (COMMENCEMENT OF OPERATIONS) THROUGH
SEPTEMBER 30, 1998
The Funds intend to utilize provisions of the federal income tax laws,
which allow them to carry a realized capital loss forward up to eight years
following the year of the loss, and offset such losses against any future
realized gains. At September 30, 1998, the Driehaus Asia Pacific Growth Fund and
the Driehaus Emerging Markets Growth Fund had capital loss carryforwards of
approximately $700,000 and $550,000, respectively, which expire in 2006.
FOREIGN CURRENCY TRANSLATION
Foreign currency is translated into U.S. dollar values based upon the
current rates of exchange on the date of the Funds' valuations.
Net realized foreign exchange gains or losses which are reported by the
Funds result from 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 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 Funds do 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 Funds have been deferred and are
amortized over a period of 60 months from the date the Funds commenced
operations. The Funds' remaining amortization period for these costs is 51
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.
28
<PAGE> 30
DRIEHAUS ASIA PACIFIC GROWTH FUND AND
DRIEHAUS EMERGING MARKETS GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD DECEMBER 31, 1997 (COMMENCEMENT OF OPERATIONS) THROUGH
SEPTEMBER 30, 1998
B. INVESTMENT ADVISORY FEES, TRANSACTIONS WITH AFFILIATES AND ADMINISTRATIVE
FEES
Richard H. Driehaus, the Chairman of the Board and President of the Trust
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 Funds' investment
adviser. In return for its services to the Funds, 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 September 30, 1998 for the Driehaus
Asia Pacific Growth Fund is $30,175. The amount accrued to DCM for the period
ended September 30, 1998 for the Driehaus Emerging Markets Growth Fund is
$36,373. DCM agreed to reduce its fee and absorb other operating expenses of
the Funds 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% and 2.75% of average net assets of the Driehaus Asia Pacific Growth
Fund and the Driehaus Emerging Markets Growth Fund, respectively, on an annual
basis for the first twenty-four months of the Funds' operations after the
effective date of the Funds' registration statement. As of September 30, 1998,
DCM absorbed $68,376 and $74,452 of expenses for the Driehaus Asia Pacific
Growth Fund and the Driehaus Emerging Markets Growth Fund, respectively.
DCM advanced certain organization costs to the Funds. As of September 30,
1998, DCM has been reimbursed for all organizational costs advanced to the
Funds.
For the period ended September 30, 1998, Driehaus Asia Pacific Growth Fund
and Driehaus Emerging Markets Growth Fund paid $72,825 and $58,159,
respectively, in total commissions to all brokers. Driehaus Securities
Corporation ("DSC") acts as a broker for the Funds on certain domestically
traded securities. During the period, DSC traded 42,968 and 265,558 shares for
the Driehaus Asia Pacific Growth Fund and the Driehaus Emerging Markets Growth
Fund, respectively, and received $2,621 and $14,077, respectively, in
commissions. A portion of these commissions are, in turn, paid by DSC to third
parties for clearing and floor brokerage services.
Certain officers of the Trust are also officers of the Adviser. No such
officers received compensation from the Funds.
PFPC Inc., a wholly owned, indirect subsidiary of PNC Bank, serves as the
Funds' administrative and accounting agent. PFPC has agreed to waive its
minimum fees during the first two years of the Funds' operations. For the
period ended September 30, 1998, $82,684 and $82,105 of these fees have been
waived by PFPC Inc. for the Driehaus Asia Pacific Growth Fund and the Driehaus
Emerging Markets Growth Fund, respectively.
PFPC Inc. also acts as the transfer agent and dividend disbursing agent for
both Funds. PFPC Inc. has agreed to waive a portion of its monthly base fee for
transfer agency service for the first two years
29
<PAGE> 31
DRIEHAUS ASIA PACIFIC GROWTH FUND AND
DRIEHAUS EMERGING MARKETS GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD DECEMBER 31, 1997 (COMMENCEMENT OF OPERATIONS) THROUGH
SEPTEMBER 30, 1998
of the Funds. For the period ended September 30, 1998, $23,400 of these fees
have been waived by PFPC Inc. for the Driehaus Asia Pacific Growth Fund and
the Driehaus Emerging Markets Growth Fund.
C. FOREIGN CURRENCY FORWARD CONTRACTS
At September 30, 1998, the Funds had foreign currency forward contracts
outstanding under which they are obligated to exchange currencies at specified
future dates. The Funds' currency transactions are limited to transaction
hedging and portfolio hedging, when applicable, involving either specific
transactions or portfolio positions. The Driehaus Emerging Markets Growth Fund
engaged in no portfolio hedging during the fiscal year ended September 30, 1998.
The contractual amounts of foreign currency forward contracts do not
necessarily represent the amounts potentially subject to risk. The measurement
of the risks associated with these instruments is meaningful only when all
related and offsetting transactions are considered. Risks arise from the
possible inability of counter parties to meet the terms of their contracts and
from movements in currency values.
The Driehaus Asia Pacific Growth Fund had the following outstanding contracts at
September 30, 1998:
Portfolio Hedges:
Foreign Currency Sold:
Unrealized
Appreciation
US Dollars (Depreciation)
Purchased Foreign Currency Sold Settlement Date at September 30,1998
- --------------------------------------------------------------------------------
$500,000 69,800,000 Japanese Yen November 1998 $(15,404)
Net unrealized depreciation ---------
on foreign currency forward
contracts for portfolio hedges $(15,404)
=========
Transaction Hedges:
Foreign Currency Purchases:
Unrealized
Appreciation
US Dollars (Depreciation)
Sold Foreign Currency Purchased Settlement Date at September 30, 1998
- --------------------------------------------------------------------------------
$ 38,362 5,138,560 Japanese Yen October 1998 $ (612)
33,430 4,534,400 Japanese Yen October 1998 (118)
30,488 51,683 Australian Dollar October 1998 121
-----------
$ (609)
30
<PAGE> 32
DRIEHAUS ASIA PACIFIC GROWTH FUND AND
DRIEHAUS EMERGING MARKETS GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD DECEMBER 31, 1997 (COMMENCEMENT OF OPERATIONS) THROUGH
SEPTEMBER 30, 1998
Transaction Hedges:
Foreign Currency Sales:
Unrealized
Appreciation
US Dollars (Depreciation)
Purchased Foreign Currency Sold Settlement Date at September 30, 1998
- --------------------------------------------------------------------------------
$ 39,334 66,455 Singapore Dollar October 1998 $ (112)
121,866 16,529,840 Japanese Yen October 1998 430
3,810 167,434 Philippine Peso October 1998 (17)
63,220 8,544,168 Japanese Yen October 1998 451
-----------
$ 752
-----------
Net unrealized appreciation on foreign currency
forward contracts for transaction hedges $ 143
==========
The Driehaus Emerging Markets Growth Fund had the following outstanding
contracts at September 30, 1998:
Transaction Hedges:
Foreign Currency Purchases:
Unrealized
Appreciation
US Dollars (Depreciation)
Sold Foreign Currency Purchased Settlement Date at September 30,1998
- -------------------------------------------------------------------------------
$ 37,860 220,104 South African Rand October 1998 $ (427)
Transaction Hedges:
Foreign Currency Sales:
Unrealized
Appreciation
US Dollars (Depreciation)
Purchased Foreign Currency Sold Settlement Date at September 30,1998
- -------------------------------------------------------------------------------
$1,683 9,831 South African Rand October 1998 $ 11
---------
Net unrealized depreciation on foreign currency
forward contracts from transaction hedges $ (416)
=========
D. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of investment securities, other than
short-term obligations, for the period ended September 30, 1998, were as
follows:
31
<PAGE> 33
DRIEHAUS ASIA PACIFIC GROWTH FUND AND
DRIEHAUS EMERGING MARKETS GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD DECEMBER 31, 1997 (COMMENCEMENT OF OPERATIONS) THROUGH
SEPTEMBER 30, 1998
Asia Pacific Growth Fund Emerging Markets Growth Fund
------------------------ ----------------------------
Purchases $ 8,795,467 $ 10,580,112
Sales $ 5,570,997 $ 6,603,232
E. 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 September 30, 1998, there were no such securities in
the Funds' portfolios.
F. OFF BALANCE SHEET RISKS
The Funds' 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.
32
