<PAGE> 1
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S LETTER
- --------------------------------------------------------------------------------
Dear Fellow Shareholders:
For the period September 1, 1997 through February 28, 1998, the fund's total
return was 12.6%, compared with 8.32% for the Morgan Stanley Capital
International EAFE Index and 7.10% for the Lipper International Fund Index
average. The most important financial event of the period was the crisis in
Asia. Some of you may recall that our 1997 Semi-Annual Report highlighted the
developing problems in Thailand as important warnings for the region. While we
did not expect a crisis of the magnitude that ensued, we reduced our exposure
last year as events unfolded so that our exposure to Southeast Asia was only
3.8% at the beginning of October. Of course, European markets fell at the same
time, but these markets had more than regained their losses by the end of this
February.
As in the past three years, the fund continues to have its heaviest
weighting in Europe, which has been enjoying a sustained bull market. Our
European investments remain focused on banking/financial services and technology
consulting. There are several positive developments in European financial
services. First, interest trends have been generally positive, especially in
Spain, Italy and Portugal, which have made dramatic, positive economic reforms
in anticipation of their participation in the European Economic and Monetary
Union next year. Second, a tremendous wave of restructuring and consolidation
has occurred, all with the intent of improving profitability. Finally, the stock
market strength has sparked a boom in money management, which is dominated by
the banks. Our bank holdings include Credito Italiano, Banca Commerciale
Italiana, and Bank of Scotland.
Information technology consulting continues to flourish in Europe.
Consultants are benefiting from several major factors including corporate
restructuring, preparation for Year 2000 and the upcoming European Economic and
Monetary Union. When we visited a number of these companies, last fall, they all
indicated that, for now, their growth is limited only by their ability to find
qualified employees. As always, we will continue to monitor these companies. Our
holdings include Misys, Cap Gemini, and Computer Management Group.
The fund continues to be very underweighted in the Japanese market. While we
have previously been more optimistic about a recovery in Japan, the economy
continues to flounder, and it now appears the situation will get worse before
improving.
We appreciate your support.
Sincerely,
William R. Anderson
William R. Andersen
Portfolio Manager
April 22, 1998
Investment Philosophy: We seek 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 which, in our judgment, have the
ability to continue or accelerate their growth rates in the future. We manage
our portfolio actively (above average turnover) to insure that we are fully
invested in companies that meet these criteria.
1
<PAGE> 2
AVERAGE ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DRIEHAUS EAFE
-------- ----
<S> <C> <C>
Year ended 2/28/98 20.55% 15.48%
Three Years ended 2/28/98 26.19% 11.68%
Five Years ended 2/28/98 21.61% 13.12%
Since Inception (7/1/90 - 2/28/98) 17.31% 6.64%
</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>
07/01/90 100000.00 100000.00
09/30/90 86601.02 78801.44
12/31/90 89754.80 87098.93
03/31/91 102614.03 93572.94
06/30/91 105602.44 88466.98
09/30/91 105218.54 96051.34
12/31/91 109186.45 97660.58
03/31/92 117066.13 86071.08
06/30/92 125981.92 87890.81
09/30/92 118237.08 89215.53
12/31/92 118560.94 85772.87
03/31/93 135189.08 96054.29
06/30/93 142779.49 105715.74
09/30/93 163310.68 112727.08
12/31/93 205951.97 113701.00
03/31/94 175416.95 117675.75
06/30/94 170317.78 123687.96
09/30/94 190876.43 123807.75
12/31/94 177912.96 122544.75
03/31/95 169278.50 124827.48
06/30/95 186040.29 125733.79
09/30/95 207509.22 130975.58
12/31/95 210088.28 136279.28
03/31/96 239280.38 140217.08
06/30/96 268838.01 142435.56
09/30/96 253344.15 142256.88
12/31/96 261497.17 144520.10
03/31/97 270881.64 142256.54
06/30/97 270881.64 142256.54
09/30/97 320208.32 159585.99
12/31/97 299239.34 147089.51
02/28/98 340122.14 163686.18
</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 compares 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.
2
<PAGE> 3
- --------------------------------------------------------------------------------
DRIEHAUS INTERNATIONAL GROWTH FUND
SCHEDULE OF INVESTMENTS
FEBRUARY 28, 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Market
of Value
Shares (Note A)
- ---------------------------------------------------------
<S> <C> <C>
EQUITY SECURITIES -- 96.4%
- ---------------------------------------------------------
EUROPE -- 79.9%
FRANCE -- 15.6%
Accor SA................. 23,650 $ 5,460,728
Alcatel Alsthom SA....... 21,415 2,785,334
Axa-UAP SA............... 41,875 4,050,458
Cap Gemini Sogeti SA..... 62,924 7,233,499
Pechiney SA.............. 51,902 2,301,346
PSA Peugeot Citroen...... 45,380 6,461,266
Societe Television
Francaise.............. 24,425 2,647,357
Unibail (Union du Credit-
Bail Immobilier)....... 2,576 280,898
Valeo SA................. 27,095 2,318,254
------------
33,539,140
------------
UNITED KINGDOM -- 14.3%
Bank of Scotland......... 529,562 6,038,073
COLT Telecom Group PLC --
ADR**.................. 45,122 3,790,248
Corporate Services Group
PLC.................... 232,905 920,347
Lloyds TSB Group PLC..... 152,205 2,290,535
Misys PLC................ 168,376 7,415,931
Pearson PLC.............. 177,600 2,646,387
PizzaExpress PLC......... 56,923 746,041
Vodafone Group PLC --
ADR.................... 79,535 7,038,848
------------
30,886,410
------------
GERMANY -- 8.1%
Adidas-Salomon AG........ 32,964 5,195,014
Bayerische Motoren Werke
AG..................... 4,017 4,021,958
Porsche AG (Pref.)....... 1,600 2,794,860
SAP AG (Pref.)........... 12,974 5,356,862
------------
17,368,694
------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------
Number Market
of Value
Shares (Note A)
<S> <C> <C>
ITALY -- 7.4%
Banca Commerciale
Italiana SpA........... 898,495 $ 4,102,212
Banca di Roma SpA**...... 1,395,000 1,925,536
Credito Italiano SpA..... 1,475,146 5,663,333
Ericsson SpA............. 32,520 1,735,539
Telecom Italia Mobile
SpA.................... 535,833 2,450,916
------------
15,877,536
------------
IRELAND -- 6.3%
Allied Irish Banks PLC... 75,215 970,917
Bank of Ireland.......... 61,155 1,172,051
CBT Group PLC-ADR **..... 61,466 5,624,139
Saville Systems Ireland
PLC -- ADR**........... 124,865 5,853,047
------------
13,620,154
------------
SWITZERLAND -- 5.3%
Baloise Holding Ltd. .... 1,335 2,906,327
Credit Suisse Group...... 14,030 2,533,354
Jelmoli Holding AG....... 2,100 2,057,645
Novartis AG.............. 2,215 4,040,307
------------
11,537,633
------------
SPAIN -- 5.3%
Tabacalera SA-A.......... 54,800 5,532,838
Tele Pizza SA **......... 51,063 5,785,471
------------
11,318,309
------------
FINLAND -- 5.0%
Nokia Corp. OY -- ADR.... 20,765 2,092,074
Raisio Group PLC......... 29,145 4,855,481
TT Tieto OY-B............ 24,884 3,770,789
------------
10,718,344
------------
SWEDEN -- 3.9%
Ericsson (LM) Telephone
Co. -- ADR............. 46,150 2,091,172
Skandinviska Enskilda
Banken -- A............ 269,620 3,855,832
WM Data AB-B............. 108,575 2,535,899
------------
8,482,903
------------
</TABLE>
Notes to Financial Statements are an integral part of this Schedule.
3
<PAGE> 4
- --------------------------------------------------------------------------------
DRIEHAUS INTERNATIONAL GROWTH FUND
SCHEDULE OF INVESTMENTS
FEBRUARY 28, 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Market
of Value
Shares (Note A)
- ---------------------------------------------------------
<S> <C> <C>
NETHERLANDS -- 3.3%
ASM Lithography Holding
NV -- ADR**............ 34,810 $ 3,250,384
CMG PLC.................. 108,840 3,908,241
------------
7,158,625
------------
NORWAY -- 2.1%
Merkantildata ASA........ 61,105 2,845,769
NCL Holding ASA**........ 447,400 1,684,630
------------
4,530,399
------------
DENMARK -- 1.9%
Novo-Nordisk AS-B........ 27,614 4,131,138
------------
PORTUGAL -- 1.1%
Telecel-Comunicacoes
Pessoais SA**.......... 17,130 2,281,787
------------
TURKEY -- 0.2%
Akbank T.A.S............. 6,198,400 489,965
------------
RUSSIA -- 0.1%
Novosibrisk
Telephone**............ 4,000 235,200
------------
Total Europe............. 172,176,237
------------
FAR EAST -- 7.8%
AUSTRALIA -- 3.6%
Coles Myer Ltd. ......... 524,295 2,721,681
Woolworths Ltd. ......... 1,220,586 5,022,406
------------
7,744,087
------------
JAPAN -- 2.4%
Nintendo Co., Ltd. ...... 28,400 2,607,773
NTT Data Corp. .......... 52 2,523,232
------------
5,131,005
------------
HONG KONG -- 1.8%
CLP Holdings Ltd......... 338,900 1,759,614
HSBC Holdings PLC........ 77,800 2,250,855
------------
4,010,469
------------
Total Far East........... 16,885,561
------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------
Number Market
of Value
Shares (Note A)
<S> <C> <C>
NORTH AMERICA -- 3.7%
MEXICO -- 3.7%
Cifra SA de CV-V......... 678,835 $ 1,314,101
Corporacion Interamerica
de Enterenimiento
SA-B**................. 205,980 1,570,793
Desc SA de CV-C.......... 1 7
Fomento Economico
Mexicano SA
de CV-B................ 118,985 897,602
Grupo Financiero Banamex
Accival SA de CV-B**... 477,997 1,202,910
Grupo Financiero Bancomer
SA
de CV-B**.............. 1,841,105 1,062,733
Grupo Televisa SA --
ADR**.................. 53,945 1,888,075
------------
7,936,221
------------
Total North America...... 7,936,221
------------
MIDDLE EAST -- 1.9%
ISRAEL -- 1.9%
ECI Telecommunications
Ltd.................... 45,293 1,316,328
Nice Systems Ltd. --
ADR**.................. 62,262 2,743,419
------------
4,059,747
------------
Total Middle East........ 4,059,747
------------
AFRICA -- 1.9%
SOUTH AFRICA -- 1.9%
Liberty Life Association
of Africa Ltd.......... 139,285 4,228,009
------------
Total Africa............. 4,228,009
------------
</TABLE>
Notes to Financial Statements are an integral part of this Schedule.
4
<PAGE> 5
- --------------------------------------------------------------------------------
DRIEHAUS INTERNATIONAL GROWTH FUND
SCHEDULE OF INVESTMENTS
FEBRUARY 28, 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Market
of Value
Shares (Note A)
- ---------------------------------------------------------
<S> <C> <C>
SOUTH AMERICA -- 1.2%
BRAZIL -- 1.2%
Telebras -- ADR.......... 16,640 $ 2,037,360
Inepar S.A. -- Industria
E Construcoes.......... 446,315,000 521,290
------------
2,558,650
------------
Total South America........ 2,558,650
------------
- ---------------------------------------------------------
TOTAL INVESTMENTS (COST
$165,731,786)............ 96.4% 207,844,425
Other Assets in Excess of
Liabilities.............. 3.6% 7,740,843
----------- ------------
Net Assets................. 100.0% $215,585,268
=========================================================
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------
of Value
Shares (Note A)
<S> <C> <C>
The federal income tax basis and unrealized
appreciation (depreciation) for all securities is as
follows:
Basis.................................... $165,731,786
============
Gross Appreciation....................... $ 43,972,632
Gross Depreciation....................... (1,859,993)
------------
Net Appreciation..................... $ 42,112,639
============
</TABLE>
** Non-income producing security.
Notes to Financial Statements are an integral part of this Schedule.
5
<PAGE> 6
- --------------------------------------------------------------------------------
DRIEHAUS INTERNATIONAL GROWTH FUND
SCHEDULE OF INVESTMENTS BY INDUSTRY
FEBRUARY 28, 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY NET ASSETS
-------- ----------
<S> <C>
Automobiles........................... 6.2%
Banking............................... 14.5%
Beverages & Tobacco................... 3.0%
Broadcast & Publishing................ 3.3%
Business & Publishing Services........ 3.4%
Computer Software & EDP Services...... 14.8%
Drugs................................. 3.8%
Electrical & Electronics.............. 2.1%
Electronic Systems/Devices............ 2.7%
Energy Equipment...................... 0.2%
Financial Services.................... 1.1%
Food Processors....................... 2.3%
Industrial Components................. 1.1%
Insurance............................. 5.2%
Leisure & Tourism..................... 4.1%
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY NET ASSETS
-------- ----------
<S> <C>
Merchandising......................... 4.5%
Metals Non-Ferrous.................... 1.1%
Multi-Industry........................ 1.3%
Office/Communications Equipment....... 3.2%
Photo-Optical Equipment............... 1.5%
Real Estate........................... 0.1%
Recreation............................ 3.6%
Retailing -- Foods.................... 3.0%
Retailing -- Goods.................... 0.6%
Telecommunications.................... 8.9%
Utilities............................. 0.8%
Other Assets Less Liabilities......... 3.6%
------
TOTAL................................. 100.0%
======
</TABLE>
Notes to Financial Statements are an integral part of this Schedule.
6
<PAGE> 7
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (Cost $165,731,786)........ $207,844,425
Cash.................................................... 6,307,521
Receivables:
Dividends.......................................... 159,398
Interest........................................... 62,479
Investment securities sold......................... 11,458,073
Prepaid insurance....................................... 15,289
Deferred organizational costs........................... 94,112
------------
- ----------------------------------------------------------------------------
TOTAL ASSETS................................... 225,941,297
------------
- ----------------------------------------------------------------------------
LIABILITIES:
Investment securities purchased......................... 9,930,737
Foreign currency forward contracts...................... 21,335
Accrued expenses........................................ 170,124
Payable to affiliates................................... 233,833
------------
- ----------------------------------------------------------------------------
TOTAL LIABILITIES.............................. 10,356,029
------------
- ----------------------------------------------------------------------------
NET ASSETS.................................................. $215,585,268
============
SHARES OUTSTANDING.......................................... 18,000,293
============
NET ASSET VALUE PER SHARE................................... $ 11.98
============
============================================================================
NET ASSETS CONSISTED OF THE FOLLOWING AT FEBRUARY 28, 1998:
Paid-in capital......................................... $182,747,111
Undistributed net investment loss....................... (1,249,277)
Undistributed net realized loss......................... (7,157,468)
Undistributed net realized foreign exchange loss........ (896,882)
Unrealized foreign exchange gain........................ 29,145
Unrealized appreciation on investments.................. 42,112,639
------------
NET ASSETS..................................... $215,585,268
============
============================================================================
</TABLE>
Notes to Financial Statements are an integral part of this Statement.
7
<PAGE> 8
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the period ended February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME (LOSS):
Income:
Dividends (net of non-reclaimable foreign taxes of
$28,911)........................................... $ 220,642
Interest........................................... 363,143
-----------
- ---------------------------------------------------------------------------
Total income..................................... 583,785
-----------
- ---------------------------------------------------------------------------
Expenses:
Investment advisory fee............................ 1,384,537
Administration fee................................. 115,271
Professional fees.................................. 44,629
Federal and state registration fees................ 18,348
Custodian fee...................................... 191,562
Transfer agent fees................................ 19,487
Trustees' fees..................................... 22,315
Amortization of organization costs................. 12,750
Miscellaneous...................................... 24,163
-----------
- ---------------------------------------------------------------------------
Total expenses................................... 1,833,062
-----------
- ---------------------------------------------------------------------------
Net investment loss....................... (1,249,277)
-----------
- ---------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss from security transactions............ (6,731,058)
Net realized foreign exchange loss...................... (896,882)
Net change in unrealized foreign exchange gain.......... 53,216
Net change in unrealized appreciation of investments.... 32,791,767
-----------
- ---------------------------------------------------------------------------
Net realized and unrealized gain on
investments............................... 25,217,043
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $23,967,766
===========
===========================================================================
</TABLE>
Notes to Financial Statements are an integral part of this Statement.
8
<PAGE> 9
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM THE
COMMENCEMENT
OF OPERATIONS
FOR THE PERIOD OCTOBER 28, 1996
ENDED THROUGH
FEBRUARY 28, 1998 AUGUST 31, 1997
(UNAUDITED) (AUDITED)
----------------- ----------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment loss................................ $ (1,249,277) $ (784,650)
Net realized and unrealized gain on investments.... 25,217,043 22,693,875
------------ ------------
Net increase in net assets resulting from
operations....................................... 23,967,766 21,909,225
------------ ------------
- ---------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income.............................. (17,535,705) --
Capital gains...................................... (1,131,486) --
------------ ------------
Total distributions to shareholders................ (18,667,191) --
------------ ------------
- ---------------------------------------------------------------------------------------------------
Capital share transactions:
Shares purchased................................... 19,982,839 166,480,305
Shares reinvested.................................. 18,666,481 --
Shares redeemed.................................... (8,909,721) (7,944,848)
------------ ------------
Net increase in net assets derived from capital
share transactions........................... 29,739,599 158,535,457
------------ ------------
Total increase in net assets................... 35,040,174 180,444,682
------------ ------------
- ---------------------------------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------------------------------
Beginning of period..................................... 180,545,094 100,412
------------ ------------
End of period........................................... $215,585,268 $180,545,094
============ ============
===================================================================================================
</TABLE>
Capital share transactions are as follows:
<TABLE>
<S> <C> <C>
Shares purchased................................... 1,768,972 15,894,033
Shares reinvested.................................. 1,840,876 --
Shares redeemed.................................... (781,749) (731,880)
------------ ------------
Net increase from capital share transactions... 2,828,099 15,162,153
============ ============
===================================================================================================
</TABLE>
Notes to Financial Statements are an integral part of this Statement.
9
<PAGE> 10
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The Table below sets forth financial data for a share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM THE
COMMENCEMENT
OF OPERATIONS
FOR THE PERIOD OCTOBER 28, 1996
ENDED THROUGH
FEBRUARY 28, 1998 AUGUST 31, 1997
(UNAUDITED) (AUDITED)
----------------- ----------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 11.90 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss....................................... $ (0.07) $ (0.05)
Net gains on investments (both realized and unrealized)... 1.35 1.95
-------- --------
Total from investment operations........................ 1.28 1.90
-------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income...................... (1.13) 0.00
Distributions from capital gains.......................... (0.07) 0.00
-------- --------
Total distributions..................................... (1.20) 0.00
-------- --------
Net asset value, end of period.............................. $ 11.98 $ 11.90
======== ========
Total Return................................................ 12.65%** 19.00%**
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's)...................... $215,585 $180,545
Ratio of expenses to average net assets................... 1.99%* 2.11%*+
Ratio of net investment loss to average net assets........ (1.35)%* (0.67)%*+
Portfolio turnover........................................ 154.31%** 380.02%**
Annualized portfolio turnover............................. 311.18%* 450.35%*
</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 February 28, 1998 was $0.009. 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.
10
<PAGE> 11
- --------------------------------------------------------------------------------
DRIEHAUS INTERNATIONAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
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 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.
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.
At February 28, 1998, the Fund made a reclassification of $5,628,357 from
undistributed net realized loss to paid-in capital to reflect the
characterization of certain income and capital gains distributions for federal
income tax purposes in accordance with the American Institute of Certified
Public Accountants' Statement of Position 93-2, "Determination, Disclosure and
Financial Statement Presentation of Income, Capital Gain and Return of Capital
Distributions by Investment Companies." This adjustment is the result of the
realization and distribution of unrealized gains that were transferred into the
Fund from the Partnership at the commencement of operations on October 28, 1996.
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 trans-
11
<PAGE> 12
- --------------------------------------------------------------------------------
DRIEHAUS INTERNATIONAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
- --------------------------------------------------------------------------------
action 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 Fund engaged in no portfolio hedging during
the period ended February 28, 1998.
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, the Chairman of the Board and President of the Trust,
is also 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 during the period ended February 28, 1998 was $1,384,537
of which $233,833 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.
Driehaus Securities Corporation ("DSC") acted as the Fund's distributor
through December 18, 1997. Subsequent to this time Driehaus Mutual Funds became
self-distributed.
DSC acts as a broker for the Fund for domestically traded securities. For
the period ended February 28, 1998, the Fund paid a total of $1,307,567 in
brokerage commissions to all brokers. During that period DSC traded 1,996,858
shares and received $159,749 in commissions. A portion of these commissions is,
in
12
<PAGE> 13
- --------------------------------------------------------------------------------
DRIEHAUS INTERNATIONAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
- --------------------------------------------------------------------------------
turn, paid by DSC to third parties for clearing and floor brokerage services.
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 Inc. receives a monthly fee based upon average net assets plus
out-of-pocket expenses. PFPC Inc. also acts as the Fund's transfer agent and
dividend disbursing agent.
C. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of investment securities, other than
short-term obligations, for the period ended February 28, 1998, were as follows:
Purchases $279,578,351
Sales $268,754,182
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 February 28, 1998, there were no such securities in the
Fund's portfolio.
E. LINES OF CREDIT
Driehaus Mutual Funds 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 February 28, 1998, 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 the
Fund's exposure to these risks.
13
<PAGE> 14
Directors & 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
Trustee
William R. Andersen
Vice President
Diane L. Wallace
Vice President & Treasurer
Mary H. Weiss
Vice President & Secretary
Robert H. Buchen
Vice President
Martin A. Brown
Vice President
Investment Adviser
DRIEHAUS CAPITAL
MANAGEMENT, INC.
25 East Erie Street
Chicago, IL 60611
Distributor
DRIEHAUS MUTUAL
FUNDS
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 MUTUAL FUNDS
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
FEBRUARY 28, 1998
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.
